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Swisscanto Asset Management AG Short Duration Global High Yield An Attractive Carry Strategy Shahzada Omar Saeed, Head of High Yield Citywire Conference, Cologne 21-22 June 2012

2012 06 09 swisscanto (lu) bond invest global high yield citywire

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Page 1: 2012 06 09 swisscanto (lu) bond invest global high yield citywire

Swisscanto Asset Management AG

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Short Duration Global High Yield

An Attractive Carry Strategy

Shahzada Omar Saeed, Head of High Yield

Citywire Conference, Cologne 21-22 June 2012

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Agenda

1. High Yield at Swisscanto

2. The Case for Short Duration High Yield

3. Investment Process

4. Product(s) and Performance

5. Appendix – The Case for High Yield

© Swisscanto Asset Management AG

2

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Lead Manager's Profile

Shahzada Omar Saeed

Head of High Yield

Omar Saeed (1975), MBA in Financial Management, is the lead

manager for the Swisscanto (CH) Institutional Bond Fund -

Global High Yield I and Swisscanto (LU) Bond Invest Global

High Yield H CHF/EUR/USD B and J

Previously he worked for Western Asset Management Company

in London as a High Yield Portfolio Manager, where he was

responsible to co-manage euros800m in High Yield and

leverage loan portfolios. He gained similar experience at

Foreign & Colonial Asset Management where he was Deputy

Manager for the Global High Yield retail fund. In addition Omar

gained industry experience at Standard & Poor’s Rating

Services in London. Omar received his MBA from Greenwich

University, Pakistan Campus of Southeastern University,

Washington D.C. in 1998 with Distinction in Financial

Management.

Joined Swisscanto: 2009 Professional experience: 13

years

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

F&C MaximumIncome Fund

(Apr 06-Apr 07)

Western AssetEuropean HighYield Portfolios(Jun 07-Jul 09)

Western AssetEuropean

Leverage LoanFund

(Oct 07-Jul 09)

Swisscanto (CH)InstitutionalGlobal High

YieldBond Fund(Jan 10 - to date)

Swisscanto (LU)Bond Invest

Short DurationGlobal High Yield

Fund(Jan 11 - to date)

Consistent & Solid Track Record of Alpha Generation

950bps

1080bps

242bps 246bps

Before fees & expenses

462bps

© Swisscanto Asset Management AG

3

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Swisscanto – High Yield Team

Hansueli Gasser

Senior Portfolio Manager

Hansueli Gasser (1959), lic. oec. HSG, is a member of the Senior Management and works as Credit Analyst and

Portfolio Manager in the High Yield team. As Portfolio Manager, he co-manages the Swisscanto (CH) Institutional

Bond Fund - Global High Yield I.

He began working in the securities business at UBS in 1985. In the course of his professional career, he has

acquired in-depth knowledge in corporate finance and M&A, and also in the credit, issuing and investment

business.

Joined Swisscanto: 2003 Professional experience: 27 years

Roland Hausheer

Senior Portfolio Manger

Roland Hausheer, (1973), lic. oec. et lic. iur. HSG, is a Director and member of the Senior Management. As a

senior portfolio manager within the high yield team he covers the airlines, energy and transportation sectors.

Roland began his career in the financial industry as credit analyst at RMF Investment Management, Pfaeffikon

(SZ) and London.

Prior to that, Roland was part of the Global Proprietary Trading team at Credit Suisse, London and as Credit

Analyst/Portfolio manager responsible for trading fundamental credit strategies in both high yield and investment

grade names.

Joined Swisscanto: 2011 Professional experience: 10 years

© Swisscanto Asset Management AG

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High Yield at Swisscanto –

Now a Top Quartile High-Yield Manager By Assets

High Yield AuM’s almost tripled since 2010 --- Committed & Growing Set of Investors

High Yield AUM ($m) at Swisscanto

$475.0

$215.0

$315.0

$0

$200

$400

$600

$800

$1'000

$1'200

$1'400

June 2007 June 2008 June 2009 June 2010 June 2012

Swisscanto (CH) Institutional

Bond Fund - Global High Yield I

Swisscanto (LU) - Short Duration

Global High Yield H

High Yield Investments in

Credit/Absolute Return Funds

© Swisscanto Asset Management AG

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B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

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Agenda

1. High Yield at Swisscanto

2. The Case for Short Duration High Yield

3. Investment Process

4. Product(s) and Performance

5. Appendix – The Case for High Yield

© Swisscanto Asset Management AG

6

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Case for Short Duration High Yield

Key Investment Highlights

• Significantly reduces exposure to interest rate risk

• Significantly reduces volatility

• The sub-asset class makes an excellent substitute vs equities

• Significantly lowers credit risk

• Forms a strong alternative vs the leverage loan asset class/funds

Swisscanto is Currently the Only Provider for a Global High Yield Short Duration Fund

© Swisscanto Asset Management AG

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B: 127

R: 1

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B: 69

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B: 198

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B: 132

R: 36

G: 192

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B: 245

Source: J.P. Morgan; S&P/LCD

Investment Rationale – Short Duration High Yield versus Interest

Rate Sensitive Products

High Yield serves as a strong hedge against rising treasury yields

© Swisscanto Asset Management AG

8

Short Duration High Yield’s negative correlation to interest rates would be at least similar to leveraged loans

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9

© Swisscanto Asset Management AG

Investment Rationale – Short Duration High Yield Currently Generates

50%-55% of Volatility, but Investors Realise 90% of the Regular High Yield

Short Duration High-Yield offers an Exceptional Risk Reward

Stabile Phase

X

Regular High Yield Generates 50%

Volatility for Similar Returns as Equities

Short Duration High Yield Generates 50%

Volatility for 85% of The Regular Yield – In

Other Terms Short Duration High Yield

Generates a Quarter of Volatility for 85% of

Equities Returns

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Investment Rationale –

Asset class performance during recent periods of market stress

Merril Lynch Benchmark

Indices data as of the 8th

June 2012

Benchmark

Credit

ratings

Benchmark

Duration

Benchmark

Spread

Benchmark

Yield

Aug-Oct

2011

sell-off

Systemic

crisis

returns

March 2011

(Fukushima

, rising

treasuires,

ME

uprising)

May 2010

(European

peripheral

crisis)

FY 2008

(peak of

systemic

crisis)

SWC Glb High Yield

(Q432)

SWC Global Short

Duration high-yield (Q471)

Global IG (G0BC)

Sub Financial (Q510)

Global EM (IM00)

Equities (S&P 500)

B+

B+

A-

BBB

BB-

n.a.

4.2yrs

1.95yrs

5.8yrs

5.0yrs

5.7yrs

800bps

735bps

250bps

1030bps

815bps

8.88%

7.91%

3.39%

11.375%

9.125%

2.1%

(div yield)

-11.8%

-6.8%

-1.6%

-21%

-8.5%

-22%

-0.34%

+0.24%

-0.12%

+0.64%

+1.70%

-0.15%

(intra

month

-6%)

-3.23%

-1.44%

-0.39%

-2.95%

-2.62%

-8.25%

(intra

month

-18%)

-28.6%

-13.1%

-4.9%

-25.7%

-19.0%

-39.1%

Only in a systemic crisis, investors are at risk of significant underperformance

© Swisscanto Asset Management AG

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B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

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B: 245

Investment Rationale –

Lower Credit Risk: A Case of Temporal Seniority

Despite MGM’s low credit ratings of B3/CCC+, this is not reflective of the group’s adequate

liquidity profile (We Hold the 10.375% May 2014 secured bonds)

© Swisscanto Asset Management AG

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Investment Rationale –

Short Duration Global High Yield vs Leverage Loans

Key data points as at 8th June 2012 Swisscanto Short Duration Global High Yield

Benchmark

US Leverage Loans Index

Income 7.5% 4.0%

Yield 7.9% 6.87%

Final maturity <2.5 years 5 years

Credit Spread Duration 1.95 yrs 3 yrs

Spread vs Treasury 735bps 584 bps

Leverage 3.8x 3.9x

Average issuer ratings BB- B

Average issue (Benchmark Credit Ratings) B+ B+

Interest Rate Risk low none (FRN structure)

Liquidity (bid/offer) 1.5pts 2.0pts

A. Total return expectations 1st June 2012 Approx 10% Approx 6%

B. Default rate consensus (for next 2 years) 3.0% 2.5%

C. Recovery rate 35% 65%

D. Default loss (B x (100%-C)) 1.9% 0.88%

Total return after default loss (A-D) Approx 8% approx 5.125%

Short Duration High-Yield offers a strong alternative to Leverage Loans

© Swisscanto Asset Management AG

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Investment Rationale – High Yield Fundamentals In Far Better

Shape, Despite an on-going EU Zone Recession

• Corporate balance sheets are

in solid shape, cash to debt

ratios well above average

• Cash levels can cover all debt

maturities for 2012, however

from H2 2013 - 2015 a

maturity wall does exist in

Europe

• Fundamental Picture amongst

US High Yield Corporates

remains solid

© Swisscanto Asset Management AG

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B: 198

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• High Yield issuers on aggregate still focused on improving credit metrics & generating

free cash flow

• Stress levels in covenants are very low compared to prior recessions

Investment Rationale – High Yield Fundamentals in Far Better

Shape, despite an on-going EU Zone Recession

© Swisscanto Asset Management AG

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B: 198

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S&P, Moody’s and the market forecasts 2012 defaults approx 2.5% & recoveries at 40%

Default Outlook – Swisscanto’s Conservative Outlook...

Source: Swisscanto

Inverse Correlation of Defaults and Recoveries

1.5%

3.9% 4.0%

10.4%

18.2%

5.5%

1.4% 2.4%

0.7% 0.6%

7.3%

12.7%

0.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

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

0%

10%

20%

30%

40%

50%

60%

Aggregate Default Rate (LHS) Aggregate recovery (RHS)

1.7%

4.0%

market estimates default

Rates circa 2.5%

at recovery of 40%

© Swisscanto Asset Management AG

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…leaving room for spread tightening

Swisscanto Forecasts Fair Value for Short Duration high yield market approx 500bps-550bps

What Swisscanto short duration global high yield customised benchmark spread implies for future default rates:

Actual Spread - Excess Spread* Default loss par- recovery rate Default Rate

735 bps - 300 bps = 435 bps / (100%-40%) = 7.3%

Lets assume conservatively a recovery rate of 35% and a 4% default rate, our spread forecast:

Default Rate x par-recovery rate = Default loss + Excess Spread* Forecast

4.0% x (100% - 35%) = 260 bps + 300 bps = 560 bps

as of 8th June 2012 *Excess spread = past 25 year premium for liquidity & volatility ranges between 150bps-380bps (For Regular High Yield)

*Excess spread = past 25 year premium for liquidity & volatility ranges between 150bps-380bps (For Regular High Yield) as of 8th June 2012

Our fund offers a spread carry of 840bps, hence tightening potential stronger than the market

© Swisscanto Asset Management AG

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B: 198

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G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Spread Tightening Potential for Short Duration High-Yield –

Assessed from a Volatility Perspective

• With shorter business cycles and a

prevailing debt crisis volatility likely to

remain elevated for the medium term

• We assume an average VIX level of mid-

20's over the coming years on an

average basis

• Taking into account Short Duration High

Yield sub-asset class generating 50%

lower volatility than regular high-yield,

minimum excess spread investors should

be compensated for conservatively is

250bps-300bps range

© Swisscanto Asset Management AG

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R: 255

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B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

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B: 185

R: 164

G: 236

B: 245

Source: Swisscanto

Total Return Forecast for 12 months

Running income unhedged

(May 30th 2012 onwards) 7.90%

Swisscanto short duration HY benchmark

Yield

Hedging costs + yield differential -0.06% Interest rate differential + hedging transaction

costs of 12bps p.a.

Current Positive carry over benchmark +1.00% Typically ranges averages 60 bps +

benchmark

Running income EUR hedged 8.84%

Expected impact of change in 2yr treasury

yields -1.00%

Assume 2 year treasury/bunds yields rise a

further 50 bps (0.625%)

Expected impact of change in spreads +2.6% That is 135bps tightening x duration of the

benchmark (1.95 yrs) to 600 bps

Expected return before fees 10.46%

We Forecast Short Duration High Yield Total Returns of

8%-10%% p.a. (EUR hedged) in 2012-2013

© Swisscanto Asset Management AG

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R: 1

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B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

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R: 36

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Agenda

1. High Yield at Swisscanto

2. The Case for Short Duration High Yield

3. Investment Process

4. Product(s) and Performance

5. Appendix – The Case for High Yield

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High Yield Investment Process – An Integrated Approach

Equal emphasis applied to Top Down and Bottom up Process

Portfolio Construction

approx. 100 issuers

50%

Credit

Analysis

50%

Beta

Analysis

• High Yield Team are members & contributors to the Credit,

Equity & Alternative Investment Tracks

• Objective of these tracks is to gauge "Risk-off" &

"Risk-on" nature of the market

• Opinions and conclusion reached aren't necessarily

binding, as nature of the asset class would demand

a varying Portfolio Strategy implemented by Lead PM

• Bottom up emphasis of 50% does not imply 50% time

spent on bottom up process, almost 80% of time

consumed by High Yield team is on stock selection

& trade idea generation;

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• Vertically integrated

• Apart from the Macro

strategy, the high-yield team

are contributors within the

alpha tracks for the credit,

equity and alternative

investments strategy(s)

• Pragmatic and systematic

Strategy

Issuer Analysis &

Portfolio

construction

• Consistent and efficient

implementation

• Solid platform

• Best execution

• Multi-level management of all

relevant risks

High Yield Investment Process – An Integrated Approach

Simple, Systematic and Replicable

Control

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• Apart from the Macro

strategy, the high-yield

team are contributors

within the alpha tracks for

the credit, sector, equity

and alternative

investments strategy(s)

• Pragmatic and systematic

Credit Beta

• In-depth Credit

analysis

• Relative Value

Analysis

• Challenged by co-

manager, and sector

specialist from Investment

Grade side during daily

and weekly reviews

• Decisions are immediately

binding for HY portfolio &

Investment grade PM’s

holding High Yield bonds

• Systematic documentation

High Yield Investment Process – An integrated approach

Simple, Systematic and Replicable

Ratification

• Solid platform

• Best execution via

trading desk

Execution

Bottom up

Analysis &

Portfolio

Construction

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High Yield Issuer Analysis –

An equal emphasis on bottom-up process

Experience managing leverage

Reporting style – transparency, accessibility

Quality and depth of experience

Free cash flow (FCF) generation (EBITDA – cash interest- taxes- working capital adjustments-

capital expenditures-dividends; (FCF/Sales, FCF total debt), net debt to EBITDA, Interest cover ratios

Liquidity and covenant analysis (average debt maturity, borrowing capacity, headroom within

Covenants, bondholder protection

Seniority of debt

Across capital structure, (loans, senior secured, senior sub, sub, holdco etc

Compare value vs market and vs peers, convexity of the bond

Analysing default probabilities via assessing Compensation per turn of leverage & implied equity cushion

Fundamental rating (analog rating agencies) - Trading recommendations (over-/underweight).

In Depth & Traditional Credit Analysis

Relative competitive position

Key profitability drivers

Cyclicality of business

Calculate asset values based on total enterprise value (TEV) to EBITDA, its comparability with to public

comparables, near term market transactions

Management

Company Analysis

Financial Profile

Asset Valuation

Relative Value

Analysis

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High Yield strategy – Ratification process

Analysts

recommendation

Responsible PM / Analyst

gives recommendations

based on secondary

analysis and market

observations

Ratification

Challenged by co-

manager, and sector

specialist from

Investment Grade side

during daily and weekly

reviews

Objectives

Decisions are

communicated and

immediately binding for the

High Yield portfolio &

Investment grade portfolio

managers holding High

Yield bonds

Systematic documentation

Vertical integrated Analysts/Investment Manager Model

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R: 1

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B: 198

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Portfolio Surveillance – Adequate Resources to Systematically

Cover 130-140 Issuers

Global High Yield fund: 86 High Yield

11 Investment Grade

Short Duration Global High Yield: 71 High Yield

12 Investment Grade

Total High Yield Issuers: 111 Significant Overlap

Total Investment Grade Issuers: 15 Significant Overlap

Total Issuers: 126 HY and IG Issuers

Hansueli Gasser: 35-40 HY issuers

(Capital Goods, Consumer cyclical,

Technology, Commodities )

S.Omar Saeed: 30 HY issuers

(Telecoms, Services Cyclical,

Paper & Packaging)

Roland Hausheer: 35-40 Issuers

(Energy, airlines, transportation)

Investment Grade & Xover Coverage

Stefan Eichenberger (autos): 6 (Xover Issuers)

Blaise Roduit Pharma/Consumer Staple): 4 (Xover Issues)

Jerome Benathan (Energy & Telecoms): 8 (IG/Xover Issuers)

Mirko Santucci (IG Financials): 11 (IG Issuers)

Total Issuer Coverage: 29 (24% of issuers)

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Investment Process – Sell discipline an Absolute Key

Relative value target

Revised credit opinion

• Valuation of bond, meets or exceeds our fair value target

• And/or the credit risk associated with holding a bond is no longer compensating for the expected

returns ; for e.g. entire CCC overweight sold on April 21st 2010 (5 days prior to the recent market sell-off

relating to soverign debt fears);

During May-July 2011 we built upto c19% cash and government bonds, anticipating a sell-off

• Analyst/PM changes his original premise that effects our fundamental valuation

We outperformed the benchmark 4 out of 5 times during periods of market stress

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Investment Process – Strong Sell Discipline Evidenced by

Outperformance during times of Market Stress

Strong Investment Process Ensures Consistent Outperformance during Periods of "Risk-off"

-4.00%

-3.50%

-3.00%

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

Feb 10 May 2010 Nov 10 Mar 2011 July-Oct2011

Benchmark (CHF 100% hedged)

Swisscanto CH Inst Global High Yield Fund

+7bps

+15bps

-47bps

+22bps

+96bps

* Before fees & expenses * Before fees & expenses

16.00%

16.50%

17.00%

17.50%

18.00%

18.50%

19.00%

19.50%

20.00%

20.50%

Benchmark (CHF 100%hedged)

Swisscanto CH Inst GlobalHigh Yield Fund

Cumulative Outperformance

Alpha

+242bps

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B: 198

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Investment Process – Consistent Implementation of Strategy

Portfolio Positioning Since April 2012

Lowered duration, increased cash levels , improved credit ratings and increased allocations to secured bonds

© Swisscanto Asset Management AG

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Portfolio Construction

• Optimal diversification – we target issuers concentration at about 100 issuers (+/- 10) with

High Yield accounting for 85 names (+/- 10) with the remainder comprising of top 15

(+/- 5) picks in the investment grade space

• Allocate 5%-7% of portfolio for tactical capital structure and relative value arbitrage trades

on a monthly basis

• Consistent implementation of the macro- and credit-strategy

• Neutral positioning of currencies

• Efficient implementation through state-of-the-art tools

• Cost-efficient execution of trades through own execution desk

Optimal Diversification, Consistent and Efficient Implementation

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Risk Management

PM risk quantification (Risk Manager IV)

Ongoing quantification by CRO (Risk Metrics)

Risk monitoring committe identifies new risks

Management of counterparty limits

Independent controlling of all investment guidelines.

Automated control of limits in SimCorp Dimension.

Market risks

Counterparties

Compliance

Ongoing performance control by performance analyst Performance

Operational risk committee

Internal and external audit

Op risk

Comprehensive Management of all Relevant Risks

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• Depiction of the

benchmarks at securities

level

• Daily updated

representation of the

positioning as per

investment policy in the

Simcorp portfolio

management system

• Breakdown of the tracking

error using Risk Manager IV

Control – Investment Controlling

Portfolio Manager Team leader

CIO

• Monthly reviews

• Continuous performance

monitoring

• Limit monitoring by

independent controlling

• Automatic reporting carried

out by the system

Independent Investment Controlling

Investment

Controlling

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R: 1

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Agenda

1. High Yield at Swisscanto

2. The Case for Short Duration High Yield

3. Investment Process

4. Product(s) and Performance

5. Appendix – The Case For High Yield

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Swisscanto (CH) Institutional Bond Fund – Global High Yield I

(Global High Yield Fund)

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Swisscanto (CH) Institutional Bond Fund – Global High Yield I

Product Strategy

• Benchmark:

Customized Global High Yield Benchmark: 66.67% Merril Lynch European currency 2%

constrained, excluding financials + 33.33% Merril Lynch US HY 2% constrained, excluding

financials

• Merrill Lynch Global High Yield hedged in CHF (Q432) from 01.02.2010

• Actively managed and well-diversified multi-currency Global High Yield bond fund

• Minimum average ratings allowed : B-/B3

• Min. 85% invested in High Yield bonds (non-sovereign and non-government issuers)

• Maximal bond weight:

Weight in the benchmark index + max 3.0% (max 1% if rated CCC and below)

• Tracking Error ex ante <3%-4%

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R: 1

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B: 198

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R: 36

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R: 255

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R: 164

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Performance – Remains Comfortably Top Quartile (in local

currency terms) versus peers

Minimum 9.8%

is the

cumulative

differential in

interest rates &

hedging costs

b/w CHF & USD

Implying Our

Top Ranking

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R: 164

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Performance – Performance vs Relevant European Peers

(in LC terms), Since Takeover

Minimum

2.6%

Cumulative interest

rate & hedging

cost difference

b/w CHF & EUR

& GBP

Implying we

rank #2

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

01.0

2.2

010

01.0

4.2

010

01.0

6.2

010

01.0

8.2

010

01.1

0.2

010

01.1

2.2

010

01.0

2.2

011

01.0

4.2

011

01.0

6.2

011

01.0

8.2

011

01.1

0.2

011

01.1

2.2

011

01.0

2.2

012

01.0

4.2

012

High Yield - Total Return Profile

SWISSCANTO CH INS BD-GL HY-I ALLIANZ EURO HIGH YIELD-C ABERDEEN GL-SL EURO HY BD-A2PICTET-EUR HIGH YIELD-P HERMES GLB HIGH YLD BD-Z£A HENDERSON HIGH YLD M IN-A-INBLUEBAY-HIGH YIELD BOND-B€ NEWTON GLBL HI YLD BD-£-INC F&C MAXIMUM INCOME BD-1-INCING L RENTA-GL HI YLD-PC€H HSBC GIF-EURO H/Y BOND-IC ROBECO HIGH YLD BD-E€ KAMES HIGH YIELD GLOBL BD-A€

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R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

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B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

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B: 245

Swisscanto (CH) Institutional Bond Fund – Global High Yield I

Consistent Investment Style and Strategy

• Better than benchmark credit ratings in our fund:

Fund BB- vs Benchmark B+

• Shorter duration than the benchmark, 0.4yrs-

0.5yrs, allowing to reduce volatility & retain pull to

par feature

• Retain a greater security and recovery profile for

our fund. The benchmark consists of 30% secured

bonds, we maintain 43% secured bonds

(exceeding our 35%-40% targeted range)

• Retain NO active exposure to toxic & illiquid high

yield rated financial tier-1 securities

• Retain a running yield of approx 100bps above

the benchmark coupon of 7.78% we plan to

maintain this level, implying a cumulative income

of approx 8.6% on a cumulative basis (unhedged);

Higher Quality, Higher Carry, High Security & Yet Market Beating Performance

8th June, 2012 Key Portfolio Statistics Global High Yield Benchmark Cash 8.00% 0.00%

Investment Grade 10.20% 4.25%

BB 25.40% 50.50%

B 44.00% 33.75%

CCC 12.4%* 11.50%

Average credit ratings BB- B+

Average Duration 3.54yrs 4.15yrs

Average Yield 10.12% 8.875%

Par weighted coupon 8.60% 7.75%

Secured bonds 43.4% 31.6%

Cumulative Performance** 20.0% 17.58% * 1.4% CCC bonds to be redeemed by end of June 2012 due to an IPO

**since internal implementation of new benchmark internally 1st feb 2010 & before costs, fees,

© Swisscanto Asset Management AG

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R: 1

G: 138

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R: 198

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B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

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B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Swisscanto (CH) Institutional Bond Fund – Global High Yield I

Key Sector Positioning

• Emphasis still primarily based upon

issuer selection and bottom-up

analysis

• Overweight, TMT, Healthcare,

Consumer & services cyclical,

Packaging, Building materials & IG

subordinated (Tier-1, UT2, LT2)

financials with short calls (<2 years)

• Retain underweight Energy &

Utilities, Basic Industries, Airlines,

Housing & construction sectors

• Current emerging markets exposure

(on a commercial basis) of approx

18%, (main exposures to South

Africa, Latin America, Russia,

China/HK,)

Paper & Forestry; 5.4%

Investment Grade Financials; 4.6%

Chemicals; 2.8%

Utilities; 1.0%

Healthcare; 7.2%

Real Estate; 1.6%

Automotive; 3.4%

Energy; 4.1%

Cyclical services; 9.6%

Consumer Staples; 5.0%

Telecoms; 15.9%

Media; 5.1%

Technology; 0.9%

Transport; 7.5%

Machinery; 2.5%

Building Materials; 7.5%

Packaging; 3.2% Metals & Mining;

3.7%

Aerospace & Defense; 1.4%

Retailers; 3.3%

Sector breakdown

© Swisscanto Asset Management AG

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Swisscanto (CH) Institutional Bond Fund – Global High Yield I

Key Data

Name Swisscanto (CH) Institutional Bond Fund - Global High Yield I

Currencies CHF (global portfolio all currencies are hedged)

Tranches I (Institutional)

Security number 3095586

ISIN CH0030955865

Domicile Switzerland

Distribution Distributing

Registration CH

All-in fee 0.80% p.a.

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Swisscanto (LU) Bond Invest Short Duration Global High Yield H

CHF/EUR/USD B and J

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Swisscanto (LU) Short Duration Global High Yield H –

Key Investment Guidelines

Name Swisscanto (LU) Bond Invest Global High Yield H (Short Duration)

Portfolio Maturity 3 years – 4years (Current 2.7years)

Total Single Positions Max 10% > 4 years

Portfolio (credit) spread duration Benchmark 1.9years +/- 0.5years or <2.5 years

Portfolio Instruments Fixed & Floating rate notes + CDS

Target Issuers Minimum 70 issuers

Reference Index 50% Merril Lynch US HY (1-3 year) + 50% Merril Lynch EU HY (1-3 year), ex-financials

Current Yield to Maturity 9.2% (dynamic)

Average Credit Ratings

Strictly maintained between B+ to BB- (Benchmark B+)

Per Issuer BB & B max 5%

Per Issuer >CCC max 2.5%

Secured Bonds Exposure >30% of portfolio

Sectors Max weight per sector 20%

Max weight Financials 10% (incl: Max weight subordinated financials 5%)

Risk Tracking error ex ante >3%-4% ex-post (4%-5%)

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Swisscanto (LU) Short Duration Global High Yield H –

Consistent Investment Style & Strategy

8th June, 2012 Key Portfolio Statistics Short Duration High Yield Fund Benchmark Cash 11.50% 0.00%

Investment Grade 6.90% 2.80%

BB 20.30% 49.00%

B 55.60% 32.60%

CCC 5.70% 12.30%

Average Credit Ratings BB B+

Average Credit Spread Duration 1.79yrs 1.90yrs

Average Yield 9.20% 7.91%

Secured bonds 48.2% 19.6%

EU High Yield 43.5% 50.0%

US High Yield 56.5% 50.0%

Total Positions 116 273

Cumulative Performance* 7.29% 4.83% CHF J *H initiated 31st January 2011 before fees, hedging costs

Higher Quality, Higher Carry & High Security Yet Market Beating Performance

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Swisscanto (LU) Short Duration Global High Yield H:

Pull to Par Effect – "Hard-Wired" Commitment to Lower Duration to

1.5yrs from 1.8yrs by YE 2012

• Pull to Par effect to become very

strong in the next 6 months

• Investors entering in the strategy now,

are effectively entering the sweet-spot of

the portfolio ---almost 75% of portfolio

will have a duration less than 2 years

• Volatility in the fund is likely to decrease

further and the highest yield amongst

peers of 9.2% will allow superior risk

adjusted returns

• Focus is to maintain our superior

track record of ZERO defaults and

ZERO near defaults

Investors Taking Exposure Now Are Close to Entering The Sweet Spot of the Portfolio

*As at June 8th 2012

23.0%

31.0%

9.0%

22.0%

15.0% Credit Spread Duration<1 year (incl Cash)

Credit Spread Duration 1-2 years

Credit Spread Duration 2-2.5 years

Credit Spread Duration2.5-3 years

Credit Spread Duration>3 years

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Swisscanto (LU) Short Duration Global High Yield H –

Sector Diversification

Key Highlights

• Portfolio consists of 86 issuers,

diversified in 15 sectors

• 55% of sector positioning is

defensive

• Financial subordinated issues

exposure below the max 5% limit

• No sector exposure beyond 20%

Financials - Subordinated; 4.20%

Financials - Senior ; 1.20%

Real Estate; 1.10%

Paper & Forestry; 6.90%

Chemcials; 3.30%

Metals & Minings;

3.70%

Packaging; 1.50%

Building Materials; 7.20%

Auto; 3.30%

Pharma/HealthCare; 14.90%

Retailers; 5.60% Consumer

Staples; 2.90% Energy & Utilities;

6.30%

Telecom/Media; 9.30%

Transport; 7.30%

Cyclical Services; 9.80%

Cash; 11.50%

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Swisscanto (LU) Short Duration Global High Yield H – Global Strategy &

Expertise Allows For us to Efficiently Invest Across Geographic Areas

US High Yield 57%

EU High Yield 43%

US High

Yield ; 45%

EU High Yield; 55%

• Sovereign related stress

& recession in peripheral

Europe = underweight EU

Geographic Strategy at

Launch (31st January

2011)

Geographic Strategy

(Dec 2011 – March 2012)

Geographic Strategy at

Present

(June 15th 2012)

US High Yield 57%

EU High Yield 43%

• Prior to LTRO1 program

implementation, on the 19th

December 2011, we cut our

entire overweight in US HY and

moved overweight in EU HY

• Since April 2012 , tight

valuations and profit

taking on EU short

duration high-yield

positions , move back to

underweight EU

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Swisscanto (LU) Short Duration Global High Yield H –

Performance vs Peers with >1 year Track Record

Maintain zero exposure in GIP, significant underweight in peripheral Europe (companies earnings range 15%-28%

on domestic regions), zero defaults & zero near defaults in our portfolio

Relative underperformance during stress period purely due to differences in product & geographic area of focus

(peers are focusing on >B and 100% US HY short duration benchmarks

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

02.2

011

04.2

011

06.2

011

08.2

011

10.2

011

12.2

011

02.2

012

04.2

012

Swisscanto Short Duration High Yield vs Peers (Euro (Inst) Tranche)

SWISSCANTO LU BD-GL H/Y-H€J AXA IM FIIS-US SH DUR HY-EH€ MUZINICH SHORT DUR HG YD-H€A

PETERCAM L-BONDS EUR HY ST-F UBS LUX-SH DUR HIGH YLD-€HPA WFA SHRT TRM HI YLD-INV

© Swisscanto Asset Management AG

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Swisscanto (LU) Bond Invest Global High Yield H –

Performance vs More Recent & European Short Duration Peers

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

09

.03.2

01

1

09

.05.2

01

1

09

.07.2

01

1

09

.09.2

01

1

09

.11.2

01

1

09

.01.2

01

2

09

.03.2

01

2

09

.05.2

01

2

Swisscanto Short Duration High Yield vs Nordea Short Duration High Yield

SWISSCANTO LU BD-GL H/Y-H€J NORDEA 1 LOW DUR US HY-HBI€

-1%

0%

1%

2%

3%

4%

5%

6%

01

.02.2

01

2

01

.04.2

01

2

01

.06.2

01

2

Swisscanto Short Duration High Yield vs Peers (Euro (Inst) Tranche)

SWISSCANTO LU BD-GL H/Y-H€J PICTET-EUR SHRTRM HI YLD-P

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

02

.06.2

01

1

02

.08.2

01

1

02

.10.2

01

1

02

.12.2

01

1

02

.02.2

01

2

02

.04.2

01

2

02

.06.2

01

2

Swisscanto Short Duration High Yield vs Peers (Euro (Inst) Tranche)

SWISSCANTO LU BD-GL H/Y-H€J WESTLB-EUR CRED SH DUR-RF-B

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

19

.08.2

01

1

19

.10.2

01

1

19

.12.2

01

1

19

.02.2

01

2

19

.04.2

01

2

Swisscanto Short Duration High Yield vs Axa EUR Short Duration High-Yield

SWISSCANTO LU BD-GL H/Y-H€J AXA IM FIIS-EUR SH DUR H-B€I

© Swisscanto Asset Management AG

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Swisscanto (LU) Short Duration Global High Yield H –

Superior Alpha Generation versus Peers

Substantiates our Superior Alpha Generation Capacity versus Competitors Globally

100% of our investments reported earnings better than and/or in line earnings results during

Q1 2012, showcasing our superior stock selection capacity

* Before Fees & Expenses

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

US HY (BB-B) 1-3 year 2% Cap (EUR H) EU High Yield (ex financial) 2% Cap (EURH)

Swisscanto Short Duration HYBenchmark (ex-financial) 2% cap (EUR H)

Swisscanto Global HY Short DurationFUND (EUR J Tranche H)

+236bps vs BM

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Swisscanto (LU) Short Duration Global High Yield H –

Quality of Excess Performance

• Information ratio as per tracking

error ex-post is 0.53

• Tracking error ex-ante within

stipulated >3%-<4% range

* Before Fees & Expenses

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Why Swisscanto High Yield?

• Swisscanto is the only provider of a truly global high yield short duration fund

• Experienced Manager with a strong track record of consistent alpha generation --- lead manager's

solid track record of generating only 1 default and 1 near default in 13 years

• A well diversified portfolio a result of a implementing a strong investment process

• Portfolio Strategy geared towards consistently maintaining higher quality, higher carry, higher security

bias, and still generate higher returns than its benchmark

• Swisscanto short duration high yield fund, offers the highest yield (of 9.2%) versus all short

duration peers Globally

An Unrivalled Investment Philosphy and Product Strategy at Present

© Swisscanto Asset Management AG

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Swisscanto (LU) Short Duration Global High Yield H –

Key Data

Name Swisscanto (LU) Bond Invest Global High Yield H

Currencies CHF / EUR / USD (global portfolio all currencies are hedged)

Tranches B (Retail) J (Institutional)

Security number H CHF B: 11963041 H CHF J: 12353466

H EUR B: 11963062 H EUR J: 12353467

H USD B: 12353464 H USD J: 12353468

ISIN H CHF B: LU0556184884 H CHF J: LU0582724935

H EUR B: LU0556185345 H EUR J: LU0582725072

H USD B: LU0582725312 H USD J: LU0582725403

Domicile Luxemburg

Distribution Reinvesting

Registration CH, FL, D, A, LUX

All-in fee B-Tranche: 1.30% p.a. / J-Tranche: 0.80% p.a.

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Agenda

1. High Yield at Swisscanto

2. The Case for Short Duration High Yield

3. Investment Process

4. Product(s) and Performance

5. Appendix – The Case For High Yield

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High Yield versus Equities

Source: Barclays, J.P. Morgan, S&P/LCD

6 Market Crisis and 27 years on, High Yield asset class has experienced 5 negative returns only

9.7

25.6

17.4

5.0

12.5

0.8

-9.6

46.2

15.7 17.1

-1.0

19.2

11.4 12.8

1.9 2.4

-5.9

5.3

-1.4

29.0

11.1

2.7

11.9

1.9

15.1

3.0

Even after big gains, returns historically remain healthy in subsequent years

Stabile Phase Stabile Phase Stabile Phase

84‘ 85‘ 86‘ 87‘ 89‘ 91‘ 93‘ 92‘ 00‘ 98‘ 97‘ 96‘ 95‘ 94‘ 04‘ 03‘ 02‘ 01‘ 99‘ 90‘ 05‘ 06‘ 07‘ 08‘ 10‘ 88‘ 09‘

Stabile Phase

10.5%

11'‘

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….and returns have been generated with significantly lower

volatility

An efficient portfolio should have consistently higher allocations to the High Yield asset class

Realized returns

Standard Deviation (Risk)

0.0 22.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0

-7.0

8.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

GOBC CHF hedged HPIC1 CHF hedged

JCNF CHF hedged

Cust Aktien Schweiz

Hedged MSCI North America Hdg USD

Hedged MSCI UK GBP

Hedged MSCI EMU EUR

Hedged Russell 2000 TR USD

Cust High Yield SW BM

At 35% exposure to Swisscanto’s customised High Yield benchmark allows credit only or credit/equity portfolios

to maximize the sharpe ratio of the fund and boost weighted total returns by 50bps

100% Global

Investment Grade

JCNF is US HY

HPIC1 is EUR HY

Source: Swisscanto

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R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

High-Yield versus Equities, Similar Returns at 50% Volatility

High-Yield offers an Attractive Risk Reward

Stabile Phase

© Swisscanto Asset Management AG

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G: 153

B: 0

R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Source: J.P. Morgan; S&P/LCD

High Yield versus Interest Rate Sensitive Products

High Yield Serves as a Hedge against Rising Treasury yields

© Swisscanto Asset Management AG

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G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

High Yield versus Investment Grade

High Yield performs well versus Investment Grade in a rising rate environment

12 months ending 10 Year Treasury yield

move

High Yield bonds total

returns (CHF hedged)

Investment-grade bonds

total returns (CHF

hedged)

Sep 87

Feb 89

Dec 1994

Dec 1999

May 2004

Jun 06

Sep 10- Apr 2011

220 bps

117 bps

204 bps

179 bps

130 bps

120 bps

approx 90bps

3.93%

6.87%

-0.19%

-1.58%

11.65%

2.80%

5.35%

-3.74%

0.97%

-2.74%

-5.67%

1.49%

-4.80%

-1.05%

High Yield has Consistently Outperformed Investment Grade

Over the Past 6 cycles of Treasury Yield Increases

Source: Swisscanto, Bloomberg, Merril Lynch

during the past 25 years High Yield has out-

performed investment grade bonds in each treasury

rate hike cycle by 630bps on a CHF hedged basis

© Swisscanto Asset Management AG

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R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Lending Standards a Primary Indicator for Default Outlook

Central Banks Globally via Respective Liquidity Programs to Ensure that Lending Standards Continue to Improve & Corporate Defaults Remain Low

© Swisscanto Asset Management AG

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G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Outlook for Recoveries – Strong Correlation to ISM Index

Source: DB, Federal Reserve, Moody's

Global ISM Data to Remain Soft or circa 50 Level Corresponding to Recovery Values Ranging 35%-40%

10

20

30

40

50

60

70

30 40 50 60 70

ISM Manufacturing

Recovery

Rate

(%

)

Swisscanto's expectations For Europe

10

20

30

40

50

60

70

30 40 50 60 70

ISM Manufacturing

Recovery R

ate

(%

)

10

20

30

40

50

60

70

30 40 50 60 70

ISM Manufacturing

Recovery

Rate

(%

)

Swisscanto's expectations For USA

© Swisscanto Asset Management AG

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B: 0

R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Source: Swisscanto

Resulting in greater protection and significantly higher and sustainable recovery rates through a default cycle

..recoveries to be further aided as corporates offer new

issuances increasingly with better security packages

12% 20% 23% 26.7% 30.4% 33% 34.5%

0%

20%

40%

60%

80%

100%

120%

avg b/w 1982-2007

2008 2009 2010 2011 2012E 2013E

Unsecured Bonds Secured Bonds

© Swisscanto Asset Management AG

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B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Investment Rationale – High Yield Fundamentals in Far Better

Shape, Despite an on-going EU Zone Recession

• Corporate balance sheets are

in solid shape, cash to debt

ratios well above average

• Cash levels can cover all debt

maturities for 2012, however

from H2 2013 - 2015 a

maturity wall does exist in

Europe

• Fundamental Picture amongst

US High Yield Corporates

remains solid

© Swisscanto Asset Management AG

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R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

• High Yield issuers on aggregate still focused on improving credit metrics & generating

free cash flow

• Stress levels in covenants are very low compared to prior recessions

High Yield Fundamentals in Far Better Shape, despite an on-

going EU Zone Recession

© Swisscanto Asset Management AG

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R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Post 2009, Where do High Yield Primary Issues Stand From a

Credit Quality Perspective?

High Yield issuer leverage 25% lower and proportion

of CCC’s 50% lower than peak for new issues

© Swisscanto Asset Management AG

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B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

From a Structural Perspective?

• New issuance has secured bonds 2x higher than 2006 providing downside protection

• Defaults will be low as excessive LBO style lending experienced during 2004-2007 did not

take place since 2009, i.e. four times lower

© Swisscanto Asset Management AG

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R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Expect More of the Same Over the Next 3 years

Above average primary issuance required between

2012-2013 to fund the maturity wall between 2013-2015

European Leverage

Finance Market is estimated

to generate yearly cash flows

(coupons & redemptions) of approx.

e20bn not enough to

cover itself the refinancing needs

b/w H2 2013 – H1 2016

US Leverage Finance Market no longer

has a "Maturity wall"

but rather a "hump in 2014"

plus yearly cash flows

(coupons + redemptions = est $120bn)

more than adequate

© Swisscanto Asset Management AG

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G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

And be Paid a Significant New Issue Premium

© Swisscanto Asset Management AG

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G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Recent Sell-off, Creates a Significant Opportunity for Spread

Tightening

Swisscanto forecasts fair value for high yield spread to range between 625bps-675bps

What today’s Swisscanto global high yield customised benchmark spread implies for future default rates:

Actual Spread - Excess Spread* Default loss par- recovery rate Default Rate

800bps - 400 bps = 400 bps / (100%-40%) = 6.7%

Lets assume conservatively a recovery rate of 35% and a 4% default rate, our spread forecast:

Default Rate x par-recovery rate = Default loss + Excess Spread* Forecast

4.0% x (100% - 35%) = 260 bps + 400 bps = 660 bps

Forecasts as of 8th June 2012 *Excess spread = past 25 year premium for liquidity & volatility ranges between 150bps-380bps

*Excess spread = past 25 year premium for liquidity & volatility ranges between 150bps-380bps Forecasts as of 8th June 2012

© Swisscanto Asset Management AG

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B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Spread Tightening Potential Assessed Further from a Volatility

Perspective

• With shorter business cycles and a

prevailing debt crisis volatility likely to

remain elevated for the medium term

• We assume a VIX level average mid 20's

over the coming years on an average

basis

• Therefore, minimum excess spread

investors should be compensated for

should range average 350bps-420bps

(2x the 26 yr historical average or 14bps

of excess spread per unit of VIX)

© Swisscanto Asset Management AG

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R: 229

G: 229

B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

We Forecast Medium Duration High Yield Total Returns of 10%-12%

p.a. (CHF Hedged)

Source: Swisscanto

Total Return Forecast for 12 months

Running income unhedged

(June, 2012 onwards) 8.875% Swisscanto customised benchmark yield

Hedging costs + yield differential -0.69% Interest rate differential + hedging transaction

costs of 12 bps

Positive carry +0.88% To range between +50 bps & 100 bps + BM

Running income CHF hedged 9.06%

Expected impact of change in 5-7yr

treasury yields -2.08%

Assume 7year bunds/US treasuries rise a

further 50bps to 1.6% US treasuries

Expected impact of change in spreads +4.2% That is 100bps tightening x duration of the

benchmark (4.2 yrs) to 700 bps

Expected return before fees 11.2%

Market Forecasts 5%-7% total returns in USD hedged terms (before fees) for 2012

© Swisscanto Asset Management AG

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B: 229

R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Should High Yield be Ignored?

We call for an allocation of approximately 10% to High Yield (medium and short)

Increasing allocations by institutional & private wealth managers at the expense of govt bonds, investment grade bonds

32%

European + US High Yield

(ex-financials)

8%

56%

4%

EUR + US

Investment Grade

European + US

Leverage loans

EUR + US

Treasuries

Increasing convergence

between Leverage Loans

& High Yield asset

classes

© Swisscanto Asset Management AG

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R: 102

G: 102

B: 102

R: 255

G: 121

B: 127

R: 1

G: 138

B: 69

R: 198

G: 236

B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Contacts

Account Management

Portfolio Management

Karsten Marzinzik

Senior Account Manager

Manager

E-Mail: [email protected]

Andreas Rothmer

Senior Account Manager

Director

E-Mail: [email protected]

Jan Sobotta

Senior Account Manager

Director

E-Mail: [email protected]

Shahzada Omar Saeed

Head of High Yield

Director

+41 58 344 49 11

[email protected]

© Swisscanto Asset Management AG

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R: 1

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R: 198

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B: 198

Standardreihenfolge für Grafiken aller Art (inkl. entsprechende Beschriftungsfarbe): R: 132

G: 214

B: 132

R: 36

G: 192

B: 218

R: 255

G: 185

B: 185

R: 164

G: 236

B: 245

Disclaimer

Diese Unterlagen sind ausschliesslich für den Gebrauch durch qualifizierte Intermediäre von Swisscanto bestimmt.

Jegliche anderweitige Verwendung oder Vervielfältigung ist untersagt. Die Unterlagen dürfen unter keinen Umständen

als Werbematerial für den öffentlichen Vertrieb verwendet und ohne vorherige schriftliche Zustimmung der Swisscanto

Asset Management AG weder direkt noch indirekt einer Drittpartei zur Verfügung gestellt werden. Der Intermediär ist für

die Verwendung von Informationen aus diesen Unterlagen insbesondere dem Anleger wie auch Swisscanto gegenüber

allein verantwortlich. Die vergangene Performance ist kein Indikator für die zukünftige Wertentwicklung und bietet keine

Garantie für den Erfolg in der Zukunft. Die Performancedaten wurden ohne Berücksichtigung der bei Ausgabe und

Rücknahme der Anteile erhobenen Kommissionen und Kosten und auf der Basis der Wiederanlage etwaiger

Ausschüttungen berechnet. Der Inhalt wurde sorgfältig recherchiert und zusammengestellt. Provisionen, Gebühren und

andere Entgelte wirken sich negativ auf die Performance aus. Gleichwohl kann Swisscanto Asset Management AG nicht

die Gewähr der Richtigkeit, Vollständigkeit sowie der Aktualität der gemachten Angaben übernehmen. Alleinverbindliche

Grundlage für den Erwerb von Swisscanto Anlagefonds sind die jeweiligen Verkaufsprospekte und Jahresberichte. Für

allfällige Rückfragen kontaktieren Sie bitte schriftlich die Swisscanto Asset Management AG, Nordring 4, 3000 Bern 25.

Diese Publikation ist für die Verbreitung in Deutschland bestimmt und richtet sich nicht an Anleger in anderen Ländern.

Alle hier veröffentlichten Angaben dienen ausschliesslich Werbezwecken und stellen keine Anlageberatung oder

sonstige Empfehlung dar. Alleinverbindliche Grundlage für den Erwerb von Swisscanto Fonds sind die jeweiligen

Verkaufsprospekte und Rechenschaftsberichte. Dies ist ein Fonds luxemburgischen Rechts. Verkaufsprospekte,

wesentliche Anlegerinformationen, Vertragsbedingungen sowie letzte Jahres- und Halbjahresberichte können bei der

Zahl- und Informationsstelle DekaBank, Mainzer Landstrasse 16, 60235 Frankfurt a.M. kostenlos und in Papierform oder

unter www.swisscanto.com bezogen werden. Mit der Anlage sind Risiken, insbesondere diejenigen von Wert- und

Ertragsschwankungen, verbunden. Die Risiken sind im Einzelnen im Verkaufsprospekt und in den wesentlichen

Anlegerinformationen dargelegt.

© Swisscanto Asset Management AG

72