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© All rights reserved. Lombard Odier Investment Managers. December 2012. Lombard Odier – Convertible bond expertise Lombard Odier Investment Managers (LOIM) December 2012

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Page 1: 2012 11 15   general cb presentation including cb school

© All rights reserved. Lombard Odier Investment Managers. December 2012.

Lombard Odier – Convertible bond expertise

Lombard Odier Investment Managers (LOIM)December 2012

Page 2: 2012 11 15   general cb presentation including cb school

Please see important information at the end of the document. Lombard Odier Investment Managers. December 2012.

Contents

� Introduction to convertible bonds

� Convertible bonds’ interest in 2013

– Attraction of convertible bonds

– Convertible bond universe

– Convertible bond valuation

– Convertible bond primary market

� LO Funds – Our offering in convertible bonds

– Macro outlook

– LOF CB FUND : Seeking asymmetrical returns in a global portfolio

– LOF CB ASIA FUND : Seeking Asian growth with limited volatility

– LOF III RECOVERY CB FUND : Seeking high yield returns through CBs.

� Team and investment process

� Investment examples

� Appendices & Glossary

2

Page 3: 2012 11 15   general cb presentation including cb school

Lombard Odier Investment Managers. December 2012.

Introduction to convertible bonds

Lombard Odier Investment Managers (LOIM)

3

Page 4: 2012 11 15   general cb presentation including cb school

Please see important information at the end of the document. Lombard Odier Investment Managers. December 2012.

The opportunity: a defensive and performing asset

Definition:

� Convertibles are credit obligations with an embedded call option

� Convertible bonds are senior to common stock, on par with bonds

Characteristics:

� Capital preservation : downside protection from bond characteristics

� Performance : providing a compelling upside / downside asymmetry

� Convertible bonds offer investors attractive risk-adjusted returns

LONG TERM AIM: TO GENERATE HEALTHY RETURNS, WHILE LIMITING RISK-TAKING

Page 5: 2012 11 15   general cb presentation including cb school

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What factors affect their value?

STRAIGHT BOND EQUITY OPTION

• Investor’s option to convert

• Upon conversion, bond is cancelled

Terms of the instrument

• Conversion price

• Pricing Inputs

• Volatility, Stock price

• Dividend yield, interest rates

• Stream of coupons

• Principal at maturity

Terms of the instrument

• Maturity Date, Put Date

• Coupon

• Redemption / Put Value

Pricing Inputs

• Risk-free rates

• Credit spread

• Investor’s option to convert

• Upon conversion, bond is cancelled

Terms of the instrument

• Conversion price

Pricing Inputs

• Volatility, Stock price

• Dividend yield, interest rates

ISSUER’S EARLY REDEMPTION OPTION

Page 6: 2012 11 15   general cb presentation including cb school

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Focus: balanced candidates with a high bond floor

6

40 70 120SHARE PRICE

Bond floor

CO

NVE

RTI

BLE

BO

ND

PR

ICE

“BUSTED”INCOME-STYLE CB

"OUT OF THE MONEY“EQUITY-STYLE CB"IN THE MONEY“

Convertible bondShare/parity

Premium

BALANCED CONVERTIBLE BONDS“AT THE MONEY“

Delta

Conversion ratio

Source: Lombard Odier Investment Managers.

Page 7: 2012 11 15   general cb presentation including cb school

Please see important information at the end of the document. Lombard Odier Investment Managers. December 2012.

Example : Shui on Land 4.5% 2015 CNY - Description

Shui on Land is a Hong-Kong-based company engaged in the development, sale, leasing, management and ownership of residential, office, retail, entertainment and cultural properties in China. Market cap: HKD 22bn (~ USD 2.8bn)

Page 8: 2012 11 15   general cb presentation including cb school

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Example : Shui on Land 4.5% 2015 CNY - Valuation

Page 9: 2012 11 15   general cb presentation including cb school

Please see important information at the end of the document. Lombard Odier Investment Managers. December 2012.

Conversion ratio =

nominal value / conversion price

� Conversion price: strike price of the option

� Conversion ratio: The fixed number of ordinary shares that the investor receives if he chooses to convert his bond into stock, per “unit”

� The option to convert is one-time only : once converted, shares cannot be changed back to bonds

Basic terms: CONVERSION FEATURES

Example

For this security, the conversion ratio is 25’590 :1 which means that one bond (with a CNY 100’000 par value) can be exchanged for 25’590 shares of the Shui on Land stock.

Conversion ratio =

100’000 / 3.9077

= 25’590 shares

Page 10: 2012 11 15   general cb presentation including cb school

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Parity =

share price * no. of shares / nominal

Basic terms: PARITY

� Parity: the current value of the shares that would be received upon immediate conversion

Example

• Shui on Land CB price: 102.75%

• Shui on Land Stock price: HKD 3.67

• The CB has a conversion ratio of 25’590

(with a nominal of CNY 100’000). It means

that one unit of Shui on Land CB gives

investors the right to get 25’590 stocks of

Shui on Land:

Parity =

3.67 * 0.8029 * 25’590 / 100’000

= 75.4 %

(with FX 0.8029 HKD/CNY or 1.2452

CNY/HKD)

Page 11: 2012 11 15   general cb presentation including cb school

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Conversion premium =

(convertible price – conversion parity)

/ conversion parity

Basic terms: PREMIUM

�Conversion premium: the amount that the convertible price exceeds parity

�A low conversion premium implies a high degree of equity sensitivity, usually expressed in percent

�Premium is key for equity investors : it is a measure of how much they are paying for the bond and its protection relative to the equity

Example

� Shui on Land convertible price: 102.75%

� Conversion parity: 75.4%

Conversion premium =

(102.813% - 75.4%) / 75.4%

= 36%

CB

pric

e

Share

Convertible bond

Conversion premium

Share price

Page 12: 2012 11 15   general cb presentation including cb school

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Basic terms: DELTA / GAMMA

� Delta: the sensitivity to changes in the underlying equity price. Defined as change in fair value for a one point move in the parity

� Delta is only constant for small changes in stock price

� If the stock price keeps moving, the delta will change

� As the stock price rises, delta rises; as stock price falls, delta falls.

� The change in delta is known as gamma

Delta=80%Bon

d pr

ice

Share price

Delta= 30%

Delta

Share price

Bon

d pr

ice

Page 13: 2012 11 15   general cb presentation including cb school

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Basic terms : INVESTMENT VALUE / BOND FLOOR

� Investment value / Bond floor is the current value of a vanilla fixed rate bond:

– Issued by the same issuer

– Same maturity

– Same coupon

� Investment value is determined by current interest rates and credit spread of the issuer

� Investment value is equal to the present value of the coupons and final redemption of the bond, also expressed in percentage terms

� Premium to investment value is the amount by which the convertible exceeds that value : low premium to bond floor � low equity sensitivity

� Premium to investment value tells an investor how much they are paying for the equity option if they sell or hedge the bond part

Page 14: 2012 11 15   general cb presentation including cb school

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Basic terms : VOLATILITY

� Implied volatility is a valuation indicator for the option as a measure of the underlying expected volatility (reflected from the market price)

� Implied volatility is the volatility that would justify an option’s price. It is therefore used to measure the richness or cheapness of an option vs the expected level of volatility on the shares going forward.

� Convertible users will typically draw assumed volatility levels from historical stock volatility levels or implied volatility levels from single stock options

� This reflects the market’s expectations for volatility looking forward

Example

� Shui on Land 2015

� Implied volatility: 25%

� 1y historical volatility on CB stock : 35%

� Option is at a slight discount

Page 15: 2012 11 15   general cb presentation including cb school

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Equity Investors

Convertible

BondStock

Put Option[ to exchange stockfor a straight bond ]

Income Swap[ sacrificing stock dividends in

return for bond coupon payments ]+ +

Fixed-Income Investors

Convertible

Bond

StraightBond=

Call Option[ to exchange the straight bond for a fixed number of shares ]

+

� Equity investors : some will occasionally seek to use convertibles where they wish to have a defensive bias

� Outright Convertible Investors : still a dominant feature in our market, they watch for solid fundamentals, good upside/ downside dynamic and yield enhancement

=

� Fixed income investors : The choice of corporate credits in the convertible market is broad and therefore appealing to fixed-income investors, who either purchase the bond outright or purchase asset-swaps

� Distressed Debt Investors : The body of sub investment-grade issues fluctuates ( having been a key component a couple of years ago) but can attract specialists’ attention.

How they look to investors

Page 16: 2012 11 15   general cb presentation including cb school

Lombard Odier Investment Managers. December 2012.

Convertible bonds’ interest in 2013

Lombard Odier Investment Managers (LOIM)

16

Page 17: 2012 11 15   general cb presentation including cb school

Please see important information at the end of the document. Lombard Odier Investment Managers. December 2012.

75

125

175

225

275

325

375

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Aggregate bond portfolio

Cash

Convertible bonds

Equities

Good to remember: CBs are an all-weather vehicle

17

In rising markets, convertible bonds participate well. In falling markets they offer downside protection.

5-year rolling annualized volatility is 8% for convertible bonds, compared to 21% for equities.

Performance based on: Cash (1 month libor), Aggregate Bond portfolio (JP Morgan Global aggregate bond index USD), Equities (MSCI World USD), Convertibles (UBS global convertible index USD).

CONVERTIBLE BONDS IMPROVE A DIVERSIFIED PORTFOLIO IN THE MEDIUM-TO-LONG TERM

BULL MARKET BULL MARKETBEAR MARKET DISLOCATION & RECOVERY

(31.10.2012)

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One certainty: CBs are useful in a diversified portfolio

18

Convertible bonds in a diversified portfolio have the double advantage of increasing performanceover the medium term and reducing volatility.

3 YRS 5 YRS 10 YRS

EQUITIES CBS EQUITIES CBS EQUITIES CBS

Performance 16.4 19.2 -19.7 9.9 77.7 111.4

Volatility 17.8 9.6 22.8 11.2 18.1 9.0

PORTFOLIO ALLOCATION (IN %)

Equities 50 45 40 35

Bonds 50 45 40 35

CB s 0 10 20 30

10 yrs perf 46.5 53.0 59.5 66.0

Volatility 12.0 11.7 11.4 11.1

HISTORICAL PERFORMANCE AND VOLATILITY (IN %)

PORTFOLIO ILLUSTRATION

INCREASING PERFORMANCE ����

DECREASING VOLATILITY ����

Source: Lombard Odier. Equities: MSCI World (USD); CBs: UBS Global Index (USD); Bonds: JP Morgan Global Aggregate Bond Index (USD) – 30/09/02 to 30/09/12.

3 yrs perf 15.8 16.2 16.5 16.9

Volatility 11.3 11.1 11.0 10.8

5 yrs perf 8.6 8.8 8.9 9.0

Volatility 14.3 14.0 13.7 13.4

(30.09.2012)

Page 19: 2012 11 15   general cb presentation including cb school

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30%

25%

46%

Investment grade

Speculative grade

Not rated

GLOBAL CONVERTIBLE BOND MARKET: USD 393 BN

CB Universe: a worldwide and diversified market

19

USA: USD 195 BN (49%)

OTHERS: USD 10 BN (3%)

EUROPE: USD 104 BN (26%)

ASIA PACIFIC: USD 59 BN(15%)

JAPAN: USD 26 BN(7%)

CB UNIVERSE: CREDIT QUALITY BREAKDOWN CB UNIVERSE: CAPITALISATION BREAKDOWN

Source: Deutsche Bank.

(31.10.2012)

Source: BoA Merrill Lynch.

69%

27%

4%

Large Cap (MC > $5bn)

Mid Cap ($1bn < MC < $5bn)

Small Cap (MC < $1bn)

Page 20: 2012 11 15   general cb presentation including cb school

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0%

10%

20%

30%

40%

50%

60%

>10% Rich 5%-10% Rich 1%-5% Rich 1% Rich - 1%

Cheap

1%-5% Cheap 5%-10% Cheap >10% Cheap

Asia

Europe

US

CB Valuation

20

Source: BoA Merrill Lynch.

THE SUM-OF-THE-PARTS ANALYSIS SHOWS THAT EUROPEAN AND US CONVERTIBLE BONDS APPEAR CLOSE TO FAIR-VALUE WHEREAS ASIAN CONVERTIBLE BONDS STILL APPEAR ATTRACTIVE.

(31.10.2012)

Page 21: 2012 11 15   general cb presentation including cb school

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0%

20%

40%

60%

>10% Rich 5% -10%

Rich

1%-5% Rich 1% Rich -

1% Cheap

1%-5%

Cheap

5%-10%

Cheap

>10% Cheap

31-12-201028-02-201131-10-2012

0%

20%

40%

60%

>10% Rich 5%-10%

Rich

1%-5% Rich 1% Rich -

1% Cheap

1%-5%

Cheap

5%-10%

Cheap

>10% Cheap

31-12-201028-02-201131-10-2012

0%

20%

40%

60%

>10% Rich 5% -10%

Rich

1%-5% Rich 1% Rich -

1% Cheap

1%-5%

Cheap

5%-10%

Cheap

>10% Cheap

31-12-201028-02-201131-10-2012

CB Valuation by region

21

42% of Asian CBs are cheap vs. 26% in Europe and 35% in US.

Source: BoA Merrill Lynch.

ASIA

EUROPE

US

Asia 31-12-2010 28-2-2011 31-12.2011 31-10-2012

Expensive 23.9% 32.8% 4.3% 15.9%

Fair value 36.7% 37.0% 18.1% 41.7%

Cheap 39.3% 30.2% 77.6% 42.4%

Europe 31-12-2010 28-2-2011 31-12-2011 31-10-2012

Expensive 34.8% 58.4% 7.6% 36.9%

Fair value 33.0% 26.1% 23.4% 37.0%

Cheap 32.3% 15.5% 69.0% 26.1%

US 31-12-2010 28-2-2011 31-12-2011 31-10-2012

Expensive 36.0% 42.4% 34.1% 34.1%

Fair value 36.0% 34.3% 30.2% 30.9%

Cheap 28.0% 23.3% 35.6% 35.1%

(31.10.2012)

Page 22: 2012 11 15   general cb presentation including cb school

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020

406080100

120140160180

200220

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

US$

BN

US Europe Asia ex-Japan Japan Other

Of Note, some of the largest recent issues:

Siemens ($3bn), Priceline ($1bn), Adidas ($655m), Teliasonera ($800m), Tibco Software ($600m), Subsea ($600m + $445m), Steinhoff ($523m), Severstal ($475m), Jarden ($500m), Unibail-Rodamco ($960m), British Land ($636m), Hong-Kong Stock Exchange ($500m), Jaiprakash ($150m) or TPK ($230m)

CB Primary market

22

Source: UBS.

ANNUAL CB ISSUANCE BY REGION SINCE 1998-2012

EXPECTED REDEMPTION

-150

-130

-110

2012 2013 2014 2015

-90

-70

-50

-30

-10

(31.10.2012)

Page 23: 2012 11 15   general cb presentation including cb school

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Why should you invest in convertible bonds in the current market?

Why invest in convertible bonds now ?

� The asymmetrical profile of CBs is particularly interesting in periods of limited visibility and high volatility

� The valuation of CBs, both in terms of remuneration of risk and of the pricing of the option, remains attractive

� Many CBs offer investors an asymmetrical return AND a positive yield

Why Lombard Odier ?

� A continuous commitment to the CB asset class since 1987

� An experienced team of professionals, 100% dedicated to convertible bonds

� A performance objective which reflects the natural asymmetry of the asset class

� A continuous search for the best return/risk profiles within the convertible bonds universe

� A high conviction approach, which has demonstrated its capacity to outperform over time

23

Page 24: 2012 11 15   general cb presentation including cb school

Lombard Odier Investment Managers. December 2012.

LO Funds – Our offering in convertible bonds

24

Page 25: 2012 11 15   general cb presentation including cb school

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What we all agree on

� Corporate balance sheets are, on average, in excellent shape and cash flow generation is strong

� … but Government spending is likely to drop…

� …and private consumption growth is flat

� Capex is still rising, but capacity utilisation is still too low for widespread equipment spending.

� Growth rates in the Asia-Pacific region will remain higher than in developed economies

� Attempts at competitive currency devaluations will continue (currency wars)

What we’d all love to know

� Can the ECB “save” the Euro? How deep will the European recession be?

� Some US economic data (notably on housing) is encouraging, but the economy is still very fragile and vulnerable to external shocks. Will employment and consumption improve?

� Will global economic governance improve, to avoid periods of panic in the markets?

� Can China avoid a hard landing?

� Will rising tensions in the middle east affect oil prices?

� What about the unknown unknowns?

Our Macro outlook - What to expect for the next 6 months?

Our core scenario for the next 6 months

� Continued monetary easing by Fed, ECB, BoJ and probably from the Bank of China also.

� Slow growth at best in developed economies

� Uncertainty remains. Volatility in equity and credit markets likely to be a key factor in coming months.

� We continue to see attractive investment opportunities in the convertible bond space:

– Both attractive positive yields and cheaply priced options are available

– Focusing on the most asymmetricalprofiles in the asset class maximises risk-adjusted returns

THE KNOWN UNKNOWNS THE LIKELY OUTCOME

25

THE KNOWN KNOWNS

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Our view : attractive opportunities within the convertible bonds asset class

26

Investment grade CBs� Solid bond floors

� Lesser volatility

� Better remuneration of risk than in normal market conditions

High-yield CBs� Very high level of fixed-income yields,

even on short maturity instruments

� High volatility and reduced liquidity in some cases

Balanced CBs� Increased convexity

� Embedded options are often under-valued

� Many of these asymmetrical instruments also have positive yields

Page 27: 2012 11 15   general cb presentation including cb school

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Our CB expertise - A high conviction approach

27

1 32LOF – Convertible Bond

� Proven track record in both bull and bear markets

� Focus on conviction ideas with asymmetrical return profiles

� Global exposure with bias towards good quality credit

LOF – Convertible Bond Asia

� Exposure to Asian stock markets while limiting downside and volatility

� Benefit from dynamic new CB market, still attractively valued

� Benefit through a team of investors with regional expertise

LO Funds III – Recovery Convertible Bond

� Exposure to high-yield CBs

� Opportunity to leverage the recovery in both credit and equity markets

� Access to sub-investment grade instruments, globally under-owned and likely to generate superior return

Page 28: 2012 11 15   general cb presentation including cb school

Lombard Odier Investment Managers. December 2012.

LO Funds – Convertible Bond

Lombard Odier Investment Managers (LOIM)

28

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1 2 3 4 5

Key investment beliefs

An objective which reflects the asymmetry of the asset class delivers performance while protecting capital during downtrends

(Medium to long term objective: 60% of the upside, 40% of the downside)

Focusing on the best reward/risk profilesof the asset class means investing in balanced convertible bonds

Out-performance is possible when portfolio is structured around strong convictions (in regions, sectors, style)

Long term performance adjusted to volatility is better achieved with a strong bias towards good quality names: minimum B credit rating

Currency movements should not affect fund performance: Portfolio is minimum 90% currency hedged

29

A high conviction approach and a focus on balanced convertible bonds lie at the heart of our investment strategy.

Page 30: 2012 11 15   general cb presentation including cb school

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Focus: balanced candidates with a high bond floor

30

40 70 120SHARE PRICE

Bond floor

CO

NVE

RTI

BLE

BO

ND

PR

ICE

“BUSTED”INCOME-STYLE CB

"OUT OF THE MONEY“EQUITY-STYLE CB"IN THE MONEY“

Convertible bondShare/parity

Premium

BALANCED CONVERTIBLE BONDS“AT THE MONEY“

Delta

Conversion ratio

Source: Lombard Odier Investment Managers.

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Historical performance of the global fund (EUR)

31

* UBS Global Convertible Composite index (EUR-hedged).

Performance contribution 2012Sectors:(+)- Media sector (especially, overweight position in Time Warner, Aegis, WPP)

- Consumer sector (overweight Steinhoff, PPR)

- Pharma sector (overweight Gilead Sciences, Lincare, Illumina)

- Property sector (good credit plays on high quality Asian names: New World Development, China overseas / Good stock picking in US: Health Care REIT)

(-)- Financials (avoidance of PIGS' related name like BES/Bradesco or Orix Corp in Japan)

- Tech (underweight stance in general, and in high delta names like Verisign or Novellus)

Regions:(+)- overweight Asia Pacific (credit bets on hightquality & low delta Property names)

(=)- Japan: neutral contribution from domestic names except from the avoided Orix Corp, a Financial services' company

Credit:(+)- Credit bets (especially on the High Yield segment)

(15.11.2012)

50

75

100

125

150

12.04 07.05 01.06 07.06 01.07 08.07 02.08 08.08 02.09 08.09 03.10 09.10 03.11 09.11 03.12 10.12

Benchmark * MSCI World (EUR-hedged) LOF Convertible bond fund I A EUR

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Fund outlook : How to position the fund for the likely scenario?

32

Expected market conditions Positioning of LOF CB funds

Overall economy � Sluggish global growth, with low inflation in the US and Japan

� Continued difficulties in Europe

� Stronger growth in Asia, with rising inflation

� Continued currency wars

� Focus on asymmetry. Preference for early-cycle recovery and defensive sectors in developed economies.

� Substantial overweight of Asia-Pacific region. Aim for short/medium duration with more equity sensitivity than current level

Equity markets � Periods of high volatility consistent with market panic due to macro-economic uncertainty

� Debt monetisation from the ECB & Fed. Support for risky assets through increased liquidity

� Selective delta exposure. The overall delta to remain within “balanced range” (30%-45%)

� High sensitivity on high conviction names

� Overweight companies with high CF visibility. Substantial underweight of financials and basic resources.

Credit markets � Little change in credit dynamics� Spreads have tightened considerably already,

but global search for yield continues� In some cases, the remuneration of risk is

challening

� Favour medium term duration� Credit-picking essential. Focus on issuers with

strong balance sheets� Concentrate on positions where we have

strong fundamental views

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What if we’re wrong?

33

Return to growth � Impact: A return to high levels of GDP growth (> 3% YoY) in the US and Europe would boost equity markets (and particularly the financial and real-estate sectors), as well as high-yield credit

� Our response: We will increase the fund’s equity sensitivity and reposition the portfolio further towards more cyclical sectors, once we are convinced of the viability of a strong recovery (sustained rise in domestic spending and capex, capacity utilisation >80%, substantial increase in employment levels)

� Expected performance of LOF CB funds: Substantially more than bonds. The fund should reflect a substantial amount of the equity rally with a fraction of the volatility

Double dip � Impact: Market panic over sovereign debt levels, geo-political instability leading to an energy crisis, or deteriorating macro data in the US and Europe will likely lead to a sharp correction in equity valuations and a widening of credit spreads

� Our response: In a deteriorating economic environment, the LOF Portfolio would be positioned to maximise capital protection (raise bond floor, focus on yield plays)

� Expected performance of LOF CB funds: Substantially more than equities. The fund should protect investors from a drop in equities (40% maximum participation)

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LO FUNDS – CONVERTIBLE BOND (I EUR)

BENCHMARK (UBS GLOBAL CONVERTIBLE COMPOSITE

INDEX HDGD IN EUR)MSCI WORLD

(HDGD IN EUR)PARTICIPATION IN THE

PERFORMANCE OF EQUITIESPerformance*2012 YTD 6.7% 7.1% 5.3% 1.26 x

2011 -3.7% -3.3% -7.8% 0.48 x

2010 6.8% 7.8% 6.3% 1.08 x

2009 18.8% 21.5% 22.1% 0.85 x

2008 -18.7% -25.5% -40.7% 0.46 x

2007 8.5% 6.1% 2.3% 3.64 x

2006 7.9% 12.0% 12.2% 0.64 x

2005 13.3% 4.0% 12.9% 1.03 x

Since launch (09.12.2002) 47.9% - 22.9%

Volatility (ex pos / ann)** 4.8% 8.2% 21.4%Duration 4.0 4.2

Avg maturity / distance to best 4.8yrs / 4.3yrs 5.0yrs / 4.9yrs

Yield-to-maturity / best -2.0% / -2.0% -3.1% / -3.1%

Current yield 1.66% 1.67%

Modified yield *** 0.62% -0.04%

Premium 32% 30%

Bond floor 89% 89%

Delta 40% 39%

Gamma 0.7 0.9

Rho 1.7 1.9

Performance & risk characteristics

34

* net of fee.** 5 years annualised, based on daily performances.*** Modified yield is the delta-adjusted average yield (using YTM and current yield).

(15.11.2012)

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Performance vs. Peer group – over 1, 2, 3 and 7 years

35

(31.10.2012)

Sorted by volatility-adjusted-performance (Perf/Vol)

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REGIONAL WEIGHTINGS & CASH (IN %) DELTA & BOND FLOOR SINCE 2005 (IN %)

Actively managed and balanced throughout

36

FUND BREAKDOWN BY REGION (%) BENCHMARK BREAKDOWN BY REGION (%)WEIGHT SENSI YTB PREMIUM EXPECTATIONS WEIGHT SENSI YTB PREMIUM

US 28 57 -5.2 29 Neutral 40 37 -5.6 29

Europe 30 34 -1.4 34 Neutral 31 26 -0.9 34

Japan 8 55 -6.7 9 Underweight/Neutral 10 54 -6.6 14

Asia Pacific 19 25 1.8 62 Overweight 13 23 0.0 39

Africa 1 31 6.0 31 Neutral 2 35 3.4 38

Others 2 13 1.7 23 Neutral 5 37 0.3 30

Cash 11

0%

10%

20%

30%

40%

50%

01/08 05/08 10/08 03/09 08/09 12/09 05/10 10/10 03/11 07/11 12/11 05/12 10/12

US EuropeJapan Asia PacificCash

0%

10%

20%

30%

40%

50%

60%

01/05 01/06 01/07 12/07 12/08 11/09 11/10 10/11 10/12

70%

80%

90%

100%

110%Delta Bond Floor

(31.10.2012)

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11.2%

1.3%

1.8%

19.1%

7.9% 30.5%

28.1%

Americas Europe

Japan Asia Pacific

Africa Other

Cash

Portfolio details (sectors and regions)

37

FUND BENCHMARKSENSI-WEIGHTED

POSITIONWEIGHT SENSI WEIGHT SENSI

Basic Materials 3.0% 47% 8.7% 49% -2.8%

Communications 7.8% 62% 9.2% 35% 1.6%

Consumer Non-cyclical 8.6% 39% 7.3% 27% 1.4%

Consumer Cyclical 9.4% 41% 9.4% 32% 0.8%

Energy 6.0% 48% 8.6% 46% -1.0%

Financial 3.9% 36% 6.6% 52% -2.0%

Industrial 6.8% 52% 9.0% 32% 0.6%

Pharmaceutical 14.2% 57% 12.0% 40% 3.3%

Property 10.9% 33% 9.3% 29% 1.0%

Technology 11.3% 42% 19.1% 48% -4.4%

Utilities 2.0% 59% 0.8% 22% 1.0%

(31.10.2012)

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Portfolio details (technical features)

38

The portfolio is concentrated around the balanced area of the curve, reflecting a more normalisedCB market. The high-yield portion is focused on the better quality names.

TYPE WEIGHTSENSI

RANGEAVERAGE

SENSIAVERAGE PREMIUM YTM

Equities 0.7%

Derivatives 0.5%

Equity-linked names 19.9% 60% < S < 100% 76% 5% -11.9%

Balanced names 22.4% 35% < S < 60% 45% 19% -1.8%

Bond-linked names 27.4% 15% < S < 35% 26% 43% 1.1%

Credit names 15.1% S < 15% 6% 82% 3.0%

Fixed income 2.7% 3.4%

Cash 11.2%

AAA 0.7%

AA 1.2%

A 17.5%

BBB 48.6%

BB 15.5%

B 5.3%

Cash (AAA) 11.2%

Average rating BBB-

<1 year 17.1%

1-3 years 31.1%

3-4 years 11.4%

4-5 years 16.5%

5-7 years 10.6%

7-10 years 0.7%

>10 years 12.5%

Average maturity to best 4.3 years

FINAL MATURITY BREAKDOWN

(31.10.2012)

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Lombard Odier Investment Managers. December 2012.

LO Funds – Convertible Bond Asia

Lombard Odier Investment Managers (LOIM)

39

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1 2 3 4 5

Key investment beliefs

An objective which reflects the asymmetry of the asset class delivers performance while protecting capital during downtrends

Focusing on the best reward/risk profilesof the asset class means investing in balanced convertible bonds

Out-performance is possible when portfolio is structured around strong convictions (in regions, sectors, style)

Long term performance adjusted to volatility is better achieved with a strong bias towards good quality names:minimum B credit rating

No currency hedge vs. USD as we bet on local currencies’ appreciation in the medium term

40

A high conviction approach and a focus on balanced convertible bonds lie at the heart of our investment strategy.

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The attraction of Asian convertible bonds

Why Asia?

� Even in economic turmoil periods, emerging Asia economies have shown positive economic growth

� Consumption in Asia will continue growing in the long term

� Economy growth will be supported by fiscal measures

� Inflation fears largely explain the poor recent equity performance in Asia

� … but the inflation trend now appears to have reversed

� Medium-term, the inflation/growth trade-off is still attractive, in our view

� A Chinese hard-landing scenario seems extreme, we rather bet on a soft-landing scenario

Why Asian Convertible bonds?

� Cheap options

� An exposure with reduced risk to Asian stock markets

� Ideal solution in terms of return/risk ratio in volatile markets

41

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0.6% 0.5% 6.4%

27.4%

24.3%

7.9%

0.7%

5.2%1.0%

2.1%

10.7%

13.2%

Australia

China

Hong Kong

India

Indonesia

Korea

Malaysia

Philippines

Singapore

Taiwan

Thailand

Vietnam

1. A dynamic and diversified market

All sectors of the economy are represented, with a notably high proportion of real estate

All large economies of the region are represented, with Hong-Kong and China representing half of the universe

Four reasons we like Asian convertible bonds

42

ASIA-PACIFIC BY COUNTRY ASIA-PACIFIC BY SECTOR

Source: Deutsche Bank.

4.7%

12.1%

2.0%

4.2%

5.6%

0.9%

48.9%

11.3%5.0%

5.3%

Financial / Property

Consumer, Cyclical

Energy

Technology

Communications

Consumer, Non-cyclical

Basic Materials

Industrial

Utilities

Diversified

(31.10.2012)

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2. CBs with attractive technical features

� Perfect combination of quality companies, attractive yields, short duration, long dated and cheap options

� Generally investor-friendly characteristics (dividend protection, ratchet protection, short maturities)

Four reasons we like Asian convertible bonds (cont.)

43

3. CBs with attractive valuations

0%

10%

20%

30%

40%

50%

60%

Greater than 10% rich 5% to 10% rich 1% to 5% rich 1% rich to 1% cheap 1% to 5% cheap 5% to 10% cheap Greater than 10%

cheap

Asia-Pacific

Worldwide

(31.10.2012)

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4. A dynamic region

Four reasons we like Asian convertible bonds (cont.)

44

2011 EST. GDPGROSS FIXED INVESTMENT

(% OF 2011 EST. GDP)PUBLIC DEBT

(% OF 2011 EST. GDP)

Indonesia 6.4% 32.0% 24.5%

South Korea 3.9% 27.4% 22.9%

Malaysia 5.2% 20.3% 57.9%

Taiwan 5.2% 22.4% 34.9%

Hong Kong 6.0% 21.7% 10.1%

Autralia 1.8% 27.4% 30.3%

US 1.5% 12.4% 69.4%

European Union 1.6% 18.6% n.a

Japan -0.5% 20.9% 208.2%

Source: CIA World Fact Book, February 2012.

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Historical** performance of the Asia fund (USD)

45

* UBS Global Convertible Asia (USD unhedged)

This year, the fundsucceeded in capturing60% of Asian equitiesperformance (8.9% vs. 13.7%)

… despite a delta close to 25%

… with a fraction of itsvolatility(3.7% vs. 15.7%)

… thanks to good creditbets in high qualityProperty & Utilities names

… and good equity playsin Property, Industrial and Utilities names

(15.11.2012)

95

105

115

125

135

145

155

165

05.09 08.09 11.09 02.10 05.10 08.10 11.10 02.11 05.11 08.11 11.11 02.12 05.12 08.12

LOF II Convertible bond Asia I A USD MSCI Asia ex Japan (USD) Benchmark *

** Since inception of the institutional share class (May 2009)

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Performance

46

Performance and technical features.

LO FUNDS II - CBASIA (I USD)

UBS CONVERTIBLES ASIA

EX - JAPAN (USD)MSCI

ASIA EX – JAPAN (USD)LO FUNDS - CB

ASIA (P EUR)LO FUNDS - CB

ASIA (P CHF)Performance*

2012 YTD 8.9% 8.7% 13.7% 7.8% 7.3%2011 -8.5% -7.3% -17.3% -9.6% -10.7%

2010 15.5% 15.6% 19.6% 14.8% 13.1%

2009 23.2%** 38.6% 72.1% 22.6% 21.2%

Duration 2.72 2.55 2.72 2.72Average maturity (best) 5.5 2.1 5.5 5.5Yield-to-best 1.5% 2.1% 1.5% 1.5%Average maturity 2.9 2.7 2.9 2.9Yield-to-maturity 1.2% 1.6% 1.2% 1.2%Current yield 2.0% 1.3% 2.0% 2.0%Modified yield**** 1.9% 2.1% 1.9% 1.9%Premium 46% 75% 46% 46%Bond floor 92% 97% 92% 92%Delta 29% 23% 29% 29%Gamma 0.7 0.7 0.7 0.7 Volatility*** 5.8% 6.2% 21.8% 5.7% 5.7%Number of issues 63 63 63 63

* Net of fees (110bp).** Class P USD.*** Annualised since inception, based on daily performances.**** Modified yield is the delta-adjusted average yield (using YTM and current yield).

(15.11.2012)

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Portfolio details

47

TYPE WEIGHT IN PORTFOLIO SENSI RANGEAVERAGE

SENSIAVERAGE PREMIUM YTM

Equities 3.3%

Equity-linked names 4.0% 60% < S < 100% 72% -1% -2.1%

Balanced names 24.2% 35% < S < 60% 49% 9% -2.5%

Bond-linked names 23.0% 15% < S < 35% 25% 35% 1.1%

Credit names 33.6% S < 15% 3% 88% 4.7%

Fixed Income 6.7% 4.3%

Cash 5.2%

AAA 2.5%

AA 2.0%

A 17.7%

BBB 44.4%

BB 22.0%

B 6.2%

Cash (AAA) 5.2%

Average rating BBB-

<1 year 9.9%

1-3 years 53.7%

3-4 years 14.5%

4-5 years 17.8%

5-7 years 2.7%

7-10 years 0.5%

>10 years 0.9%

Average maturity to best 2.3 years

FINAL MATURITY BREAKDOWN

(31.10.2012)

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Portfolio details (countries)

48

31%

16%

16%

9%

5%

2%

7%

4%

7%2%

Hong Kong Singapore

China India

Cash Korea

Malaysia Philippines

Taiwan Australia

(31.10.2012)

FUND

WEIGHT SENSI YIELD

Hong Kong 31.03% 20.4% 1.2%

China 16.28% 25.1% 0.4%

Singapore 16.00% 25.9% 1.4%

India 8.60% 14.0% 4.8%

Korea 1.62% 34.1% -4.3%

Malaysia 7.27% 62.5% -1.2%

Philippines 4.26% 56.0% 0.0%

Taiwan 7.39% 21.2% 2.7%

Australia 2.34% 7.2% 5.4%

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Portfolio details (sectors)

49

FUND BENCHMARKSENSI-WEIGHTED

POSITIONWEIGHT SENSI YTM WEIGHT SENSI YTM

Basic Materials 2.9% 7% 4.3% 3.4% 4% 5.2% 0.1%

Communications 8.2% 52% -1.7% 8.7% 34% -2.0% 1.3%

Consumer Non-cyclical 6.9% 11% 3.4% 8.4% 14% 3.1% -0.4%

Consumer Cyclical 8.8% 17% 3.3% 10.6% 6% 2.1% 0.8%

Energy 3.2% 3% 4.0% 6.3% 3% 6.5% -0.1%

Financial 2.8% 12% 1.8% 1.0% 23% -1.4% 0.1%

Industrial 15.1% 34% -0.5% 11.4% 37% 0.0% 1.0%

Pharmaceutical 0.0% 0% 0.0% 0.0% 0% 0.0% 0.0%

Property 29.8% 22% 1.2% 29.7% 16% 1.5% 1.8%

Technology 7.4% 21% 2.7% 15.4% 14% 1.7% -0.6%

Utilities 9.8% 48% 0.6% 5.1% 37% 1.2% 2.7%

The portfolio is overweight consumer sectors in Asia Pacific. (31.10.2012)

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LO Funds III – Recovery Convertible Bond

Lombard Odier Investment Managers (LOIM)

50

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High-yielding convertible bonds offer an opportunity to leverage the recovery in both credit and equity markets.

They often combine positive return profile with superior risk/reward characteristics to other credit instruments.

The extra yield can be captured without buying companies in difficulty

� While there is a wide range of credit quality in high yield, there are companies which offer the extra yield beyond investment grade, but have healthy enough credit quality that envisages repayment without difficulty.

It is critical to differentiate within high yield

� We avoid issues whose sole sources of repayment are:

– Refinancing : in the current environment, the lack of bank liquidity and tight capital markets limit the ability to refinance.

– Asset sales : we are not in the liquidation business.

It is possible to buy the higher quality within high yield

� Focus on companies which generate positive free cash flow with manageable maturity schedules and do not have too much leverage.

� We demand strength and stability of cash flow, and reliable company management with a viable strategy.

Why High-Yield Convertible Bonds?

51

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Long-only investors have neglected sub-investment grade instruments, at a time when arbitrage strategies struggle to raise funds…

...leaving more value opportunities across capital structure and versus options.

Some issuers are 'fallen angels'

� These companies have made mistakes, but are on the path to notable financial improvement, usually through cutting capex, and changing strategy to focus on cash.

Many CBs trade at wider spreads than their straight bond counterparts

� Fewer investors understand the convertible bond market, and a CB may not have an official credit rating.

� Many hedge funds are no longer able to raise money. As a result, there are attractive values for outright investors with the funds to deploy.

� Our objective is to determine if the convertible is pari passu (equal recovery) to a straight bond, and capture it at that greater yield, if available.

Tight capital markets mean fewer companies are able to issue new bonds

� Existing bonds in secondary will continue to tighten as a result.

Why Now?

52

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A reputable manager

� Lombard Odier as a continuous commitment to convertible bonds since 1987.

� LOIM has a strong focus on risk management and transparency

A convertible bonds team with a proven track record

� A team of 9 dedicated professionals, 100% focused on the asset class.

� A total of 120 years investment experience.

� A continuous search for the best risk/reward profiles in the convertible bonds' universe.

� A strong conviction approach to investing, which has showed its capacity to out-perform over the years.

A growing expertise in High Yield Convertible bonds

� Recruitment in 2011 of a Senior Credit Analyst within the CB team, with extensive experience of HY Convertible bonds worldwide.

Why the LOF III Recovery fund?

53

As of 15.11.2012, the performance of the LOF III recovery fund since inception in July 2009 is 40.4%.

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1 2 3

A different type of fund

Investors in the fund must have an investment horizonof 3-5 years.

The risk profile of the investments is very different from the Global or Asian funds.

The liquidity of the fund is weekly, compared to daily for our other funds

54

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1 2 3 4

Key investment beliefs

Successfully investing in high-yielding convertible bondsrequires a very strong team of professionals with a long and distinguished track record

A focus on fundamentals to avoid the landmines of the high-yield universe

The fund management team seeks to maximize returns through an actively managed portfolio (focusing on yields and capital appreciation to benefit from macro trends)

We are targeting an annual return of 7%-10% at the time of launch with a 5 year horizon, and a substantial portion of the returns from current cash yields

55

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LOF III - RECOVERY CB FUND

Performance

56

95

105

115

125

135

145

06-2009 11-2009 03-2010 08-2010 12-2010 05-2011 09-2011 01-2012 06-2012 10-2012

LOF III - Recovery CB fund

* Net of fees.** Inception date 08.07.2009.

LOF III RECOVERY CB (I EUR)

Performance*

2012 YTD 14.3%

2011 -4.4%

2010 13.3%

2009** 13.2%

Since launch** 40.2%

Duration 3.9

Average maturity (best) 3.84

Yield-to-best 5.9%

Average maturity 4.56

Yield-to-maturity 5.8%

Current yield 5.0%

Premium 77%

Bond floor 99%

Delta 14%

Number of issues 39

(31.10.2012)

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Portfolio details

57

TYPE WEIGHT IN PORTFOLIO SENSI RANGE

Cash 7.3%

Fixed income 30.4%

Credit names 32.7% S < 15%

Bond-linked names 29.7% 15% < S < 35%

Balanced names 0.0% 35% < S < 65%

AAA 0.0%

AA 0.0%

A 0.0%

BBB 12.7%

BB 30.4%

B 49.6%

Cash (AAA) 7.3%

Average rating B

33.4%

24.6%

24.7%

3.8%

6.1%

7.3%

Americas

Europe

Asia Pacific

Africa

Other

Cash

(31.10.2012)

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Team and investment process

Lombard Odier Investment Managers (LOIM)

58

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Team: entrepreneurial, experienced and dedicated

59

MAXIME PERRIN, PRODUCT SPECIALIST / ANALYST13 year investment experienceEXPERIENCE2007 – to date Lombard Odier – Geneva/London2001 – 2007 Deutsche Bank – London1999 – 2000 Credit Suisse – LondonQUALIFICATIONSDegree in Finance, ESCEM Business School (1994),MBA Lehigh University, Pennsylvania (1996)

NATHALIA BARAZAL, HEAD OF CONVERTIBLE BONDS MANAGEMENT15 year investment experience, 11 year portfolio management of convertiblesEXPERIENCE2008 – to date Lombard Odier – London2004 – 2007 Lombard Odier – Hong-Kong1999 – 2004 Cyril Finance AM – Paris 1997 – 1999 JP Morgan IM – ParisQUALIFICATIONSMaster in Finance and Economics, Audencia Nantes Business School, France (1997)

ARNAUD GERNATH, INVESTMENT MANAGER 16 year investment experienceEXPERIENCE2011 - to date Lombard Odier - London 2002 - 2011 Fund management and market-making - London1996 - 2002 Schelcher-Prince Finance - ParisQUALIFICATIONSCertified Actuary, ISFA, Lyon, France (1996)

JÉRÔME HÉMARD, INVESTMENT MANAGER 12 year investment experience, 6 year dedicated to convertiblesEXPERIENCE2008 – to date Lombard Odier – Paris/London 2005 – 2007 Covea Finance – Paris2000 – 2004 Calyon – ParisQUALIFICATIONSMaster of Science in Finance, Université Paris IX – Dauphine (2000)Graduate Engineer EISTI, Paris (1996)

GIULIANO MAZZONI, INVESTMENT MANAGER26 year investment experience, 17 year investment experience in convertiblesEXPERIENCE1990 – to date Lombard Odier – Geneva1972 – 1990 Union Bank of Switzerland, Bellinzona, Chiasso,

Zurich, Geneva

LOUIS BOPPE, ASSISTANT INVESTMENT MANAGER3 year experienceEXPERIENCE2012 - to date Lombard Odier - London2010 - 2012 Lombard Odier - Geneva & New York2009 – 2010 Edmond de Rothschild – ParisQUALIFICATIONSMaster of Science in applied mathematics, EPFL (Ecole Polytechnique Fédérale de Lausanne - 2008)

LARRY PUN, ANALYST ASIA, CFA15 year equity analysis and portfolio management in AsiaEXPERIENCE2001 – to date Lombard Odier – Hong-Kong1997 – 2000 Financial institutions – TaiwanQUALIFICATIONSMaster of Engineering, University of Toronto (1995)

LORI WOODLAND, CREDIT ANALYST20 year credit experience, specialty in high yield and emerging marketsEXPERIENCE2011 – to date Lombard Odier – London2007 - 2011 Ferox Capital LLP, London2003 - 2007 Schroders, London and New YorkQUALIFICATIONSMaster of Management, JL Kellogg School of Management, Northwestern University USABachelor of Arts in Economics, Northwestern University USA

SANDRA REMTOULAH, ANALYST4 year experienceEXPERIENCE2010 – to date Lombard Odier – Geneva 2009 – 2010 Banque Heritage – Geneva 2007 – 2008 Société Générale CIB – ParisQUALIFICATIONSMaster in Market Finance, ESCP Europe (Ecole Supérieure de Commerce de Paris – 2009)

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A team surrounded by in-house expertise

60

Investment committeeJ. Straatman global CIO & head of equities

S. Monier head of fixed income

J. L. Nakamura head of asset allocation

Rates & Currencies(2 PMs, 1 analyst)

G. MacIntosh, F.Belak

Emerging Markets (2 PMs + 4 analysts)M Wozniak, G Maciel de Barros

CREDITBB-AAA(2 PMs + 6 analysts)K. Corrigan, Y.Zufferey

US high yield (1 PM, 3 analysts)G. Lehrman

Europe high yield(1 PM, 2 analysts)E.Pellumbi

EQUITIESHealthcare (2 PMs, 3 analysts)J. Utterman, X Lagrandie

TMT (2 PMs, 2 analysts)B. Hohaus, E. Uppington

Pan-Europe (1 PM, 3 analysts)M. Bataillon

Consumer (2 PMs, 4 analysts)B. Mattson, D. Rabattu

Energy (1 PM, 2 analysts)M.Hulme

Industrials (2 PMs, 2 analysts)E.Lambrecht, M. Stapleton

+ 8 LO PB equity analysts

CB Arbitrage(1 PM, 1 analyst)

M. Fish

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Overview of investment process

61

Risk management

Team

� Dedicated convertible bonds team

� In-house & external research

1 32Screening of universe

� Preference for “balanced” convertibles

� Minimum credit quality: B

� Liquid investment only

Fundamental analysis & technical review

� Fundamental review:

– Analysis of underlying instrument

– Credit analysis

� Technical review:

– Purely technical criteria

Portfolio construction

� Strategic and tactical bias

� Sector / Country weightings

� Steering of fund’s sensitivity

Team

� Dedicated convertible bonds team

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Investment examples

Lombard Odier Investment Managers (LOIM)

62

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Investment opportunities – LO Funds Convertible Bond

63

Balanced plays STEINHOFF 4.5% 2018� Delta: 41% / Premium: 31% / YTM: 6.0%� BB level credit� Steinhoff is a home furnishing company based in South Africa

ARTEMIS/PPR 3.25% 2016� Delta: 51% / Premium: 21% / YTM: 0.4%� B+ rated� The security is issued by Artemis and exchangeable into PPR,

a French consumer and luxury goods’ company

Balanced plays with more equity sensitivity

UNICHARM 0% 2015� Delta: 69% / Premium: 4% / YTM: -5.1%� BBB level credit� Unicharm is a manufacturer of women and baby products in

Japan

AEON CREDIT 0% 2017� Delta: 77% / Premium: 3% / YTM: -5.0%� A level credit� Aeon Credit is a Japanese credit card company

Equity plays LIBERTY MEDIA/TWX 3.125 % 2023� Delta: 97% / Premium: 1% / YTM: -0.5%� BB- rated� The security is issued by Liberty Global and exchangeable

into the US entertainment company Time Warner

WPP 5.75% 2014� Delta: 85% / Premium: 4% / YTM: -16.8%� BBB level credit� WPP is a UK-based company that operates a communications

services group

Moving towards higher yields SGL CARBON 2.75% 2018� Delta: 35% / Premium: 45% / YTM: 2.5%� BB level credit� SGL Carbon is a German company focused on the

development, production and sales of carbon products.

ARES CAPITAL 4.75% 2018� Delta: 37% / Premium: 14% / YTM: 4.8%� BBB level credit� Ares Capital is a US business development company focused

on alternative credit-based strategies, including private equity, private debt, and capital markets activities

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Investment opportunities – LO Funds Convertible Bond Asia

64

Balanced plays CHINA OVERSEAS 0% 2014� Delta: 49% / Premium: 9% / YTM: -5.5%� BBB level credit� China Overseas Land & Investment is a property company

based in Hong Kong

TPK 0% 2017� Delta: 37% / Premium: 33% / YTM: -0.7%� BBB- level credit� TPK is a Taiwanese company that manufactures touch

screens for computers, smart phones, tablets etc…

Balanced plays with more equity sensitivity

SAN MIGUEL 2% 2014� Delta: 60% / Premium: 2% / YTM: -0.3%� BBB- level credit� San Miguel is a brewery company in Philippines

CHINA POWER 2.25% 2016� Delta: 62% / Premium: 8% / YTM: -3.8%� BB level credit� China Power operates large power plants in China

Moving towards higher yields SHUI ON LAND 4.5% 2015� Delta: 24% / Premium: 46% / YTM: 5.0%� BB- level credit� Shui on Land is a property company in China

JAIPRAKASH POWER VENTURES 5% 2015� Delta: 2% / Premium: 157% / YTM: 10.5%� BB level credit� Jaiprakash Power generates electricity in India

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Investment opportunities – LO Funds III Recovery

65

SUNPOWER 4.5% 2015 – CB

� Delta : 18% / Premium : 377% / YTM : 8.0%� B+ rated� Sunpower is an integrated solar products &

services company that manufactures high-performance solar electric power technologies.

PEUGEOT 4.45% 2016 – CB

� Delta : 0% / Premium : 312% / YTM : 7.1%� BB+ rated� Peugeot is a French company that manufactures

automobiles and light comercial vehicles.

HOMEX 9.75% 2020 – Straight Bond

� YTM: 9.4%� BB- rated� Desarrolladora Homex operates as a vertically

integrated home builder in Mexico

PALADIN ENERGY 3.625% 2015 – CB

� Delta: 4% / Premium: 276% / YTM: 8.6%� B+ rated� Paladin Energy is an Australian uranium producer

ARES CAPITAL 4.875% 2017 – CB

� Delta: 36% / Premium: 15% / YTM: 4.3%� BBB rated � Ares Capital is a US business development

company focused on alternative credit-based strategies

JAIPRAKASH POWER VENTURES 5% 2015 – CB

� Delta : 2% / Premium : 164% / YTM : 12.0%

� BB rated � Jaiprakash Power generates electricity in India

STEINHOFF FINANCE HOLDING 4.5% 2018 – CB

� Delta : 39% / Premium : 32% / YTM : 6.9%� BB rated � Steinhoff is a home furnishing company in South

Africa

KAISA 12.875% 2017 – Straight bond

� YTM : 12.3%� B+ rated � Kaisa is a real-estate company based in Hong

Kong

US

EUROPE

ASIA

CAMFIN / PIRELLI 5.625% 2017 EUR – CB

� Delta : 38% / Premium : 44% / YTM : 4.1%� BB- rated � This security is issued by Camfin and

exchangeable into Pirelli, a tire manufacturer based in Italy.

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Appendices & Glossary

Lombard Odier Investment Managers (LOIM)

66

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Our offering

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FUND NAME LO FUNDS – CONVERTIBLE BOND LO FUNDS II – CONVERTIBLE BOND

Currency EUR CHF / EUR / USD

Fee structure Class P: mgt: 0.65% per year, dist: 0.65% per year Class I: mgt: 0.65% per year, dist: N/A

Class P: mgt: 0.65% per year, dist: 0.65% per year Class I: mgt: 0.65% per year, dist: N/A

ISIN number EUR: Class Pa: LU0159201655 Class Pd: LU0159202463Class Ia: LU0209988657Class Id: LU0357533461

CHF: Class Pa: LU0437702334; Class Pd: LU0437702417Class Ia: LU0437702508; Class Id: LU0437702680

EUR: Class Pa: LU0437701799; Class Pd: LU0437701955Class Ia: LU0437702094; Class Id: LU0437702177

USD: Class Pa: LU0437702847; Class Pd: LU0437702920Class Ia: LU0437703068; Class Id: LU0437703142

Telekurs EUR: Class Pa: 0015208020Class Pd: 0015208120Class Ia: 0020382160Class Id: 0039241970

CHF: Class Pa: 0103014030; Class Pd: 0103014080Class Ia: 0103014110; Class Id: 0103014150

EUR: Class Pa: 0103013860; Class Pd: 0103013890Class Ia: 0103013940; Class Id: 0103013990

USD: Class Pa: 0103014950; Class Pd: 0103015010Class Ia: 0103015070; Class Id: 0103015120

Legal structure SICAV Luxembourg

Custodian bank CACEIS Bank Luxembourg SA

NAV calc. agency Fastnet Luxembourg

Liquidity Daily

Subscriptions / redemption details NAV calculation: T+1 (based on T0 closing prices) / Subscription: 15h Luxembourg (T-1) / Payment: T+ 3Europe / Asia / Americas price: T Close / Frequency: Daily

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Our offering

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FUND NAME LO FUNDS – CONVERTIBLE BOND ASIA LO FUNDS II – CONVERTIBLE BOND ASIA

Currency CHF / EUR / USD CHF(*) / EUR (*) / USD

Fee structure Class P: mgt: 0.75% per year, dist: 0.75% per year Class I: mgt: 0.75% per year, dist: N/A

Class P: mgt: 0.75% per year, dist: 0.75% per year Class I: mgt: 0.75% per year, dist: N/A

ISIN number CHF: Class Pa: LU0394779473; Class Pd: LU0394779556Class Ia: LU0394779630; Class Id: LU0394779713

EUR: Class Pa: LU0394780216; Class Pd: LU0394780307Class Ia: LU0394780489; Class Id: LU0394780562

USD: Class Pa: LU0394778582; Class Pd: LU0394778665Class Ia: LU0394778749; Class Id: LU0394778749

CHF: Class Pa: LU0428697832; Class Pd: LU0428698053Class Ia: LU0428697329; Class Id: LU0428697675

EUR: Class Pa: LU0428697915; Class Pd: LU0426898137Class Ia: LU0428697592; Class Id: LU0428697758

USD: Class Pa: LU0428696198; Class Pd: LU0428696354Class Ia: LU0428695893; Class Id: LU0428695976

Telekurs CHF: Class Pa: 004681406; Class Pd: 004681413Class Ia: 004681433; Class Id: 004681436

EUR: Class Pa: 004681654; Class Pd: 004681657Class Ia: 004681659; Class Id: 004681662

USD: Class Pa: 004681369; Class Pd: 004681381Class Ia: 004681382; Class Id: 004681389

CHF: Class Pa: 0101638180; Class Pd: 0101638190Class Ia: 0101638230; Class Id: 0101638260

EUR: Class Pa: 0101638100; Class Pd: 0101638110Class Ia: 0101638120; Class Id: 0101638150

USD: Class Pa: 0101637970; Class Pd: 0101638010Class Ia: 0101638050; Class Id: 0101638070

Legal structure SICAV Luxembourg

Custodian bank CACEIS Bank Luxembourg SA

NAV calc. agency Fastnet Luxembourg

Liquidity Daily

Subscriptions / redemption details NAV calculation: T+1 (based on T0 closing prices) / Subscription: 15h Luxembourg (T-1) / Payment: T+ 3Europe / Asia / Americas price: T Close / Frequency: Daily

(*) Not yet opened

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Glossary

69

AT-THE-MONEY A convertible is said to be at-the-money if the current share price is close to the conversion price

BALANCED CONVERTIBLE A balanced convertible is a convertible that trades at a price where it is neither a pure equity substitute nor rading on its bond floor, but is balanced between the two

BOND FLOOR (OR INVESTMENT VALUE) The bond floor is the value of the fixed income element of the convertible if rights of conversion are ignored

CALL (OR CALL OPTION) A call feature gives a convertible issuer the right to redeem a convertible bond prior to maturity at a price determined at issue. Holders of convertibles who receive a call notice will generally have time to exercise their rights of conversionbefore repayment takes place; thus a call option can frequently be interpreted as required early conversion

CONTINGENT CONVERSION A contingent conversion feature makes a convertible investor’s ability to convert contingent upon the share price attaining a specified level

CONVERSION PREMIUM The conversion premium is the amount that the convertible price exceeds parity

CONVERSION PRICE At issue, the conversion price is the price at which shares are effectively ‘bought’ upon conversion, if the convertible is purchased at the issue price. It is calculated by dividing the issue price of the bond by the conversion ratio. It is market convention to define conversion price at maturity for a single currency bond as the principal amount divided by the conversion ratio, even for even for bond with above par redemption

CONVERSION RATIO The conversion ratio is the number of shares into which each bond can be converted

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Glossary (cont.)

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COUPON The coupon is the interest payment per bond. It is normally quoted as a percentage of the face value

DELTA Delta is a measure of the sensitivity of the convertible bond price to share price movements. It is defined as the expected change in the convertible price for a small absolute change in parity

GAMMA Gamma measures the sensitivity of the convertible bond’s delta to share price movements. It is the change in delta for a one-point change in parity

IMPLIED VOLATILITY Implied volatility is the convertible pricing model volatility input that brings the fair value of a convertible into line with its market price

IN-THE-MONEY A convertible is said to be in-the-money if the current share price is greater than the conversion price

ISSUE PRICE The issue price is the price at which convertible bonds are sold to investors at issue

MATURITY The maturity date is the final redemption date of the bond

NOMINAL VALUE This is the face value of the bond. It is often 1,000 of the relevant currency in the Euroconvertible market and ¥1,000,000 in the Japanese and Euroyen markets. The current price, issue price and redemption price of most convertibles are expressed as a percentage of the nominal value

OUT-OF-THE-MONEY A convertible is said to be out-of-the-money if the current share price is below the conversion price

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Glossary (cont.)

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PAR Par is the face value of a bond

PARITY Parity is the market value of the shares into which the bond may be converted. It is calculated by multiplying the conversion ratio by the current share price expressed in bond currency terms. It is normally expressed as a percentage of a bond’s nominal value

PREMIUM A convertible’s premium is the percentage by which the market price of the convertible bond exceeds parity. It represents the extra cost an investor must pay to buy the shares a bond converts into via a convertible. It is calculated by subtracting parity from the convertible price and is expressed as a percentage of parity

PUTS Investors have the right to sell the bond back to the issuer at a pre-determined time and price. It gives investors added downside protection

REDEMPTION PRICE The redemption price is the price at which the issuer must redeem bonds at maturity

REFIXES The conversion price may be reset lower if parity has declined prior to the refix period. Usually, the conversion price can only be reset to a minimum (floor) level, e.g. 80% of the initial conversion price

SOFT CALL (OR PROVISIONAL CALL) This is a period of time during which the issuer may only call the bond if the share price has traded above a predetermined level for a set period of time

VOLATILITY Share price volatility is a measure of the dispersion of share price returns. It is defined as the annualized standard deviation of returns. The extent to which the underlying share price has fluctuated over a certain period determines the historical or observed volatility. The assumption for future share price volatility is an input for convertible valuation

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LOIM disclaimer & Legal Notice

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This document is issued by Lombard Odier Asset Management (Europe) Limited (hereinafter LOAM). LOAM is a private limited company incorporated in England and Wales with registered number 07099556, having its registered office at Queensberry House, 3 Old Burlington Street, London, United Kingdom, W1S 3AB. LOAM is authorised and regulated by the Financial Services Authority (the "FSA") and is entered on the FSA register with registration number 515393. LOAM is part of the Lombard Odier Investment Managers Holding SA group (hereinafter LOIMG). GLOIM is a trade name.The LO Fund and LO Fund III mentioned in this document (hereinafter the “Fund”) is Luxembourg investment company with variable capital (SICAV). The Fund is authorised and regulated by the Luxembourg Supervisory Authority of the Financial Sector (CSSF) as a UCITS within the meaning of EU Directive 2009/65/EC, as amended. The LO Fund II mentioned in this document (hereinafter the “Fund”) is a Luxembourg investment company with variable capital (SICAV). The Fund is authorised and regulated by the Luxembourg Supervisory Authority of the Financial Sector (CSSF) as an “other UCI” governed by Part 2 of the law of 17 December 2010. The management company of the Fund is Lombard Odier Funds (Europe) S.A. (hereinafter the “Management Company”), a Luxembourg based public limited company (SA), having its registered office at 5, Allée Scheffer, L-2520 Luxembourg, authorized and regulated by the CSSF as a Management Company within the meaning of EU Directive 2009/65/EC, as amended.The Fund is only registered for public offering in certain jurisdictions. This document is not a recommendation to subscribe to and does not constitute an offer to sell or a solicitation or an offer to buy the Fund’s shares nor shall there be any sale of the Fund’s shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. Consequently, the offering of the Fund’s shares may be restricted in certain jurisdictions. Prospective investors must inform themselves of, and observe, such restrictions, including legal, tax, foreign exchange or other restrictions in their relevant jurisdictions. Neither this document nor any part of it shall form the basis of, or be relied on in connection with, any contract to purchase or subscription for the Fund’s shares. Any such acquisition may only be made on the basis of the official documents of the Fund each in their final form. The articles of association, the prospectus, the Key Investor Information Document, the subscription form and the most recent annual and semi-annual reports are the only official offering documents of the Fund’s shares (the “Offering Documents”). They are available on https://funds.lombardodier.com or can be requested free of charge at the registered office of the Fund or of the Management Company, from the distributors of the Fund or from the local representatives as mentioned below. Austria. Supervisory Authority: Finanzmarktaufsicht (FMA), Representative: Erste Bank der österreichischen Sparkassen AG, Graben 21, A-1010 Wien - Belgium. Supervisory Authority: Autorité des services et marchés financiers (FSMA), Representative: Fastnet Belgium S.A.,Avenue du Port 86C, b320, 1000 Brussels - France. Supervisory Authority: Autorité des marchés financiers (AMF), Representative: CACEIS Bank, place Valhubert 1-3, F-75013 Paris - Germany. Supervisory Authority: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), Representative: DekaBank Deutsche Girozentrale, MainzerLandstraße 16, D-60325 Frankfurt am Main - Italy. Supervisory Authority: Banca d’Italia (BOI), Paying Agents: Société Générale Securities Services S.p.A., Via Benigno Crespi, 19/A - MAC 2, 20159 Milano, State Street Bank S.p.A. Via Ferrante Aporti, 10, 20125 Milano, Banca Sella Holding S.p.A., Piazza Gaudenzio Sella, 1, 13900 Biella, Allfunds Bank S.A., filiale italianaVia Santa Margherita 7, 20121 Milano, - Liechtenstein. Supervisory Authority: Finanzmarktaufsicht Liechtenstein ("FMA"), Representative: Verwaltungs- und Privat-Bank Aktiengesellschaft, Aeulestrasse 6, LI-9490 Vaduz - Netherlands. Supervisory Authority: Autoriteit Financiële Markten (AFM). Representative: Lombard Odier Darier Hentsch & Cie (Nederland) N.V., Weteringschans 109, 1017 SB Amsterdam (telephone: +31 20 522 0 522) - Spain. Supervisory Authority: Comisión Nacional del Mercado de Valores (CNMV). Representative: Allfunds Bank S.A. C/Nuria, 57 Madrid - Switzerland. Supervisory Authority: FINMA (Autorité fédérale de surveillance des marchés financiers), Representative: Lombard Odier Asset Management (Switzerland) SA, 6 av. des Morgines, 1213 Petit-Lancy; Paying agent: Lombard Odier Darier Hentsch & Cie, 11 rue de la Corraterie, CH-1204 Geneva. UK. Supervisory Authority: Financial Services Authority (FSA), Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London W1S3AB, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the FSA. NOTICE TO RESIDENTS OF THE UNITED KINGDOM: The Fund is a Recognised Scheme in the United Kingdom under the Financial Services & Markets Act 2000. Potential investors in the United Kingdom are advised that none of the protections afforded by the United Kingdom regulatory system will apply to an investment in LO Funds and that compensation will not generally be available under the Financial Services Compensation Scheme. This document does not itself constitute an offer to provide discretionary or non-discretionary investment management or advisory services, otherwise than pursuant to an agreement in compliance with applicable laws, rules and regulations. Representative: Lombard Odier Asset Management (Europe) Limited, Queensberry House, 3 Old Burlington Street, London W1S3AB, which has approved this document for issuance in the UK to professional clients or eligible counterparties and is authorised and regulated by the Financial Services Authority.An investment in the Fund is not suitable for all investors. Making an investment in a Fund is speculative. There can be no assurance that the Fund's investment objective will be achieved or that there will be a return on capital. Past or estimated performance is not necessarily indicative of future results and not assurance can be made that profits will be achieved or that substantial losses will not be incurred. This document does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before making an investment in the Fund, an investor should read the entire Offering Documents, and in particular the risk factors pertaining to an investment in the Fund, consider carefully the suitability of such investment to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful.This document contains the opinions of LOIM, as at the date of issue. The information and analysis contained herein are based on sources believed to be reliable. However, LOIM does not guarantee the timeliness, accuracy, or completeness of the information contained in this document, nor does it accept any liability for any loss or damage resulting from its use. All information and opinions as well as the prices indicated may change without notice.The contents of this document are intended for persons who are sophisticated investment professionals and who are either authorised or regulated to operate in the financial markets or persons who have been vetted by LOIM as having the expertise, experience and knowledge of the investment matters set out in this document and in respect of whom LOIM has received an assurance that they are capable of making their own investment decisions and understanding the risks involved in making investments of the type included in this document or other persons that LOIM has expressly confirmed as being appropriate recipients of this document. If you are not a person falling within the above categories you are kindly asked to either return this document to LOIM or to destroy it and are expressly warned that you must not rely upon its contents or have regard to any of the matters set out in this document in relation to investment matters and must not transmit this document to any other person.Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.Important information on performance: Past performance is not a guarantee of future results. Where the fund is denominated in a currency other than an investor's base currency, changes in the rate of exchange may have an adverse effect on price and income. All performance figures reflect thereinvestment of interest and dividends and do not take account the commissions and costs incurred on the issue and redemption of shares/units; performance figures are estimated and unaudited. Net performance shows the performance net of fees and expenses for the relevant fund/share class over the reference period. Source of the figures: Unless otherwise stated, figures are prepared by LOIM. Important information on benchmarks: Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of a fund. The performance of a benchmark shall not be indicative of past or future performance of any fund. It should not be assumed that the relevant fund will invest in any specific securities that comprise any index, nor should it be understood to mean that there is a correlation between such fund’s returns and any index returns. Important information on target performance/risk: Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk. Important information on portfolio composition: The portfolio information provided in this document is for illustrative purposes only and does not purport to be recommendation of an investment in, or a comprehensive statement of all of the factors or considerations which may be relevant to an investment in, the referenced securities. They illustrate the investment process undertaken by the manager in respect of a certain type of investment, but may not be representative of the Fund's past or future portfolio of investments as a whole and it should be understood that they will not of themselves be sufficient to give a clear and balanced view of the investment process undertaken by the manager or of the composition of the investment portfolio of the Fund. As the case my be, further information regarding the calculation methodology and the contribution of each holding in the representative account to the overall account’s performance can be obtained by the Fund or the Management Company.© 2012 Lombard Odier Investment Managers – all rights reserved