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  • 1. Equity Income In Emerging Markets –A Route To Outperformance?Citywire Maastricht18-19 April 2013This presentation is for one-on-one use with non-US professional investors onlywww.polarcapital.co.uk
  • 2. Fund SummaryThe Fund aims to generate an attractive and growing dividend incomethrough a portfolio of Emerging Market equities, without sacrificing thegrowth characteristics of the asset class• An attractive and growing dividend (3.6% yield on launch price in FY11, 3.9% in FY12 giving 8.3% growth in 2012)1• Twice yearly dividend distribution in January and July• Low concentration of income sources• Broad geographic sectoral exposure to emerging markets• Portfolio has high returns on equity with low debt• Multi-cap with domestic growth focus1. At end 31 December 2012 NAV for Retail distribution units.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 2
  • 3. Why Equity Income In Emerging Markets?• Dividend payout ratios in emerging markets are still low• Emerging market corporate debt levels are low• Returns on equity are higher than in developed markets• Withholding tax rates are relatively low• Improving corporate governance reflected in higher number of companies paying dividends• Demand for income from emerging market companies is rising• Attitudes to dividends are improving• Emerging market currencies are undervalued on PPP basis• Income strategies in emerging markets have worked well historicallyFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 3
  • 4. Income In Emerging MarketsMSCI Emerging Markets dividend yield (%): Dividend yield by country (%): 5.0 8 4.5 7 4.0 6 3.5 5 3.0 2.5 4 2.0 3 1.5 2 1.0 1 0.5 0.0 0 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13MSCI EM dividend yield relative to developed markets (%): Dividend yield by sector (%): 2.5 4.5 4.0 3.5 2.0 3.0 2.5 1.5 2.0 1.5 1.0 1.0 0.5 0.0 0.5 0.0 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13Source: Polar Capital and Bloomberg, 29 March 2013.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 4
  • 5. Dividend Payout Ratios Are Low GEMs historic payout ratio1 GEM vs DM180 8070 70 6060 5050 4040 30 2030 1020 0 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Payout ratio Long term average Developed Markets Emerging markets Dividend payout ratio by sector2 Dividend payout ratio by country2 60 80% 70% 50 60% 40 50% 30 40% 30% 20 20% 10 10% 0 0% 1. Source: Polar Capital and Bloomberg, 29 March 2013. 2. Source: Polar Capital and Bloomberg, 31 December 2012. For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 5
  • 6. Balance Sheets Are Strong… Total debt to total equity (%)1: 300• Debt levels have remained at reasonable levels 250• Interest costs relative to EBITDA have fallen 200 150• Scope for payout ratios to increase 100• Corporate governance is improving so increased 50 chance of this happening 0 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13• In countries where payout low – India and Russia – Emerging Markets Developed Markets oligarch/promoter debt levels suggest need for income Net debt to EBITDA 1 : 6 5 4 3 2 1 0 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Emerging Markets Developed Markets1. Source: Polar Capital and Bloomberg, 29 March 2013.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 6
  • 7. …But Returns On Equity Have Deteriorated 2004 2005 2006 2007 2008 2009 2010 2011 2012(e) Sales Growth (%) 13.0 22.2 19.5 16.9 -6.1 27.2 15.0 7.2 Capex Growth (%) 8.6 25.2 19.9 16.8 -4.9 17.7 13.0 7.6 Capex/Sales (%) 13.1 12.6 12.9 13.0 13.0 13.1 12.2 12.0 12.0 Capex/Depreciation (%) 166.7 169.9 175 185.1 198.4 180.2 191.0 195.5 191.9 Net margin (%) 12.7 11.6 10.7 10.5 7.9 8.7 9.8 8.4 7.8 Net Income growth (%) 3.4 12.7 16.9 -12.2 4.1 42.1 -1.3 0.1 Net debt to equity (%) 25.9 23.1 23.6 23.9 31.3 27.9 25.4 28.5 30.5 MSCI Emerging Markets ROE1 MSCI EM ROE vs DM ROE1 18 1.7 16 1.6 14 1.5 12 1.4 10 1.3 8 1.2 6 1.1 4 1 2 0.9 0 0.8 Jun - 08 Jan - 13 Oct - 04 May - 09 Apr - 10 Dec - 02 Nov - 03 Sep - 05 Aug - 06 Mar - 11 Feb - 12 Jul - 07 Jul-07 Jun-08 Jan-13 Oct-04 Apr-10 Dec-02 Nov-03 Sep-05 Aug-06 Mar-11 Feb-12 May-09Source: UBS, 18 January 2013 unless otherwise stated.1. Source: Bloomberg, 29 March 2013.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 7
  • 8. Stronger Macro-economic Environment Emerging Market debt spreads (%)1: 12%• Low debt to GDP (average 36% in GEM’s versus 93% 10% in the US) 8%• Low budget deficits (average 3.3% in GEM’s versus 6% 9% in the US) 4%• Inflation at low levels 2% 0%• Historically low bond yields Jul 00 Jul 01 Jul 02 Jul 03 Jul 04 Jul 05 Jul 06 Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13• Superior productivity growth driven by rural Inflation (%)2: urban migration 16 14• Underleveraged private sector (credit to GDP is 77% 12 in GEM’s versus 173% in the US) 10 8• Currencies remain undervalued 6 4 2 0 -2 -41. Source: Polar Capital and Bloomberg, 5 April 2013. Indonesia Turkey Russia Brazil South Africa China2. Source: Polar Capital and Bloomberg, 28 February 2013.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 8
  • 9. Demand For Income Is Set To Rise Pension fund assets as a % of GDP1:• Pension funds assets in emerging markets still low 60 50• Chile has set example which is being replicated 40• Weightings to equities still low 30 20• Low bond yields and rising fund sizes suggest shift to 10 equities will occur 0 Pension fund growth in selected EMs2: 18 16 14 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 2009 2010 20111. Source: OECD, July 2011.2. Source: OECD Global Pension Statistics 2012. Turkey Korea Czech Rep Mexico PolandFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 9
  • 10. Attitudes To Dividends Are ImprovingThe example of Russia2012: President Putin pushes for state owned companies to increase dividend payout ratio to25%. Rosneft complies in FY12, raising dividend 173%. Gazprom increases dividend 133% andindicates they will reach government target in FY142013: Federal Law No 282-FZ:• No more backdated record dates for dividends• Dividends to be paid to shareholders within 25 days of record date (previously 60 days from approval by General Meeting)• both to be effective from 1 January 2014For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 10
  • 11. Dividends As A Source Of AlphaBuying EM stocks with top quintile dividend yields generates outperformance800700600500400300200100 0 Jul-08 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-09 Jul-10 Jul-11 Jul-12 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Top Quintile with High Dividend Yield Stocks MSCI EM Bottom Quintile with Low Dividend Yield StocksSource: MSCI, FactSet, Morgan Stanley Research. Date: 31 December 2012. Past performance is not a guarantee of future results.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 11
  • 12. Income In Emerging MarketsHigh yield vs income and growth• A high dividend yield in emerging markets is only possible with a skewed sectoral allocation % of stocks with yield >3% >5% Benchmark1 Consumer discretionary 7.4% 5.9% 7.9% Consumer staples 4.8% 0.0% 8.7% Financials 23.7% 20.0% 26.5% Healthcare 0.7% 0.0% 1.3% Industrials 8.1% 3.5% 6.5% Energy 10.0% 4.7% 12.7% Materials 13.0% 11.8% 11.7% Telecommunications 11.1% 25.9% 7.7% Utilities 9.6% 16.5% 3.4% IT 11.5% 11.8% 13.7%1. Benchmark: MSCI Emerging Markets Index.Source: MSCI. Date: January 2013. Past performance is not indicative or a guarantee of future results.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 12
  • 13. Creating An Investment FrameworkFramework for stock selection Domestic cycle Government Government Economy Top-down Top-down Investible Preferred Penetration macro sector Countries Sectors rates analysis analysis Currency Competitive environment Regulatory framework Comparative advantage“When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of thebusiness that remains intact.”Warren BuffettSource: Polar Capital.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 13
  • 14. Top-down Macro Analysis • Nature of economic model Government • Degree of political instability • Level of government interference • Level of current account and budget deficit Economy • Structural level of inflation • Degree of Central Bank Independence • Floating, fixed or managed? Currency • Risk of capital outflows/dependence on external financing • Degree of over/undervaluation • Nature of financial and corporate regulations? Regulatory framework • Enforceability of the rule of law? • Acceptability of corruption? Exclude countries where perceived risks are too highFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 14
  • 15. Top-down Macro AnalysisKey macroeconomic variables Govt debt Country Fiscal deficit as % of GDP to GDP Current a/c as % of GDP Inflation 2011 2012 2013 2011 2011 2012 2013 2011 2012 2013 Brazil -2.6 -2.6 -2.1 58.6 -2.1 -2.4 -2.7 6.5 5.8 5.6 Chile 1.3 0.5 0.5 10.9 -1.3 -3.7 -4.3 4.4 1.5 2.2 Mexico -2.5 -2.6 -2.1 38.9 -0.8 -0.8 -1.0 3.8 3.6 3.9 Czech Rep -3.3 -3.0 -2.0 40.8 -2.9 -1.1 -0.9 2.8 3.2 2.0 Hungary -5.6 -2.4 -3.0 78.6 0.9 1.2 1.2 4.1 5.0 2.8 Poland -5.0 -3.5 -3.4 55.8 -4.9 -3.6 -4.1 4.5 2.4 1.7 Russia 1.6 0.4 -0.6 9.3 5.3 4.0 2.1 6.1 6.6 5.4 South Africa -3.9 -5.2 -4.8 41.3 -3.4 -6.3 -6.2 6.1 5.7 5.2 Turkey -1.6 -2.3 -2.3 37.0 -9.7 -5.8 -6.5 10.4 6.2 6.6 China -1.1 -1.5 -2.0 51.8 2.8 2.6 2.9 4.1 2.5 4.0 India -8.2 -7.8 -7.3 67.5 -4.3 -4.6 -3.5 7.5 6.2 6.2 Indonesia -1.9 -2.0 -2.3 23.0 0.2 -2.8 -3.5 5.4 4.3 6.3 Korea -0.4 -0.5 -0.5 39.4 2.3 3.7 3.0 4.2 1.4 2.8 Malaysia -5.0 -5.0 -4.9 52.5 11.6 6.4 7.8 3.0 1.2 2.9 Philippines -2.0 -2.1 -2.1 47.5 3.1 3.3 2.2 4.2 3.0 3.5 Taiwan -2.2 -2.5 -2.5 50.9 8.9 10.5 9.7 2.0 1.6 2.3 Thailand -2.7 -2.8 -2.5 43.5 3.5 0.7 -0.2 3.5 3.6 3.9Source: Credit Suisse, Bloomberg March 2013.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 15
  • 16. Top-down Sector Analysis • Is the economy expanding or contracting? Domestic cycle • Is fiscal policy expansionary or contractionary? • Are interest rates rising or falling? • What is the government trying to promote? Government policy • What sectors does the government handicap? • Where is regulatory risk greatest? • Best long-term growth opportunities Penetration rates • Sector position on “S” curve • Trade-off between growth and returns Competitive • Barriers to entry environment • Degree to which sectors are oligopolies • Investment opportunities unique to each country Comparative advantage • Structural strengths Be wary of price takers and government regulatory changesFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 16
  • 17. Top-down Sector AnalysisFinancial sector penetration ratesMortgage penetration as % of GDP1 80% 60% 40% 20% 0%Total loans as % of GDP2 200% 160% 120% 80% 40% 0%1. Source: Bank of America Merrill Lynch, 14 October 2011.2. Source: Bank of America Merrill Lynch, 14 October 2011 and Polar Capital.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 17
  • 18. Framework For Stock Selection • Prospects and opportunity for growth Growth • Competitive environment • Potential to increase margins • Earnings multiple relative to expected growth Valuation • Valuation versus emerging markets peers • Growth versus emerging markets peers • Return on capital employed Use of capital • Level of cash flow generation • How surplus cash is used • Balance sheet strength Financial strength • Debt structure and maturity profile • Working capital cycle/cash flow generation • Management track record Management • Incentives • Consideration of minority shareholders • Relative strength indicators Timing/sentiment • Investor sentimentFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 18
  • 19. Portfolio Construction• Bottom-up driven flat portfolio – Circa 60–80 stocks with active weights circa 1 to 1.5% – Multi-cap approach, driven by stock opportunity• Self-imposed risk controls – No more than 20% in any one country – No more than 30% in any broad sector – No more than 3% in any individual stock• Structure – 10-20% High yield, limited growth – 60-80% Income and Growth – 10-20% Growth• Strong sell discipline – Valuation has peaked / forecast of downward price trend – Management disappoints and / or fundamentals deteriorate – Better opportunities elsewhereFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 19
  • 20. Portfolio % Energy Materials Financials Industrials Cons stap. Cons disc. Utilities Healthcare Telecom Technology Total BenchmarkChina 1.26 1.17 1.51 2.93 1.51 1.50 1.45 2.95 14.3 18.5India 3.48 0.98 4.5 6.7Indonesia 1.34 0.74 1.58 3.7 3.0Korea 1.42 0.29 1.45 1.41 1.50 3.12 9.2 14.8Malaysia 1.41 1.24 1.20 3.8 3.3Philippines 0.0 1.0Taiwan 1.50 1.28 1.45 3.08 7.3 10.7Thailand 2.79 1.64 4.4 2.7ASIA 1.26 4.01 10.60 6.48 1.45 6.55 3.08 0.00 4.60 9.15 47.2 60.6Brazil 1.44 6.02 2.93 2.87 2.96 1.47 17.7 13.0Chile 0.0 2.0Colombia 0.0 1.2Mexico 3.11 1.66 1.70 6.5 5.3Peru 0.0 0.6LATIN AMERICA 0.00 0.00 4.55 7.68 4.62 2.87 2.96 0.00 1.47 0.00 24.2 22.1Egypt 0.0 0.3Morocco 0.0 0.1GCC 1.48 1.5 0.0MIDDLE EAST 0.00 0.00 1.48 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.5 0.4Russia 3.52 1.27 1.39 1.30 7.5 5.9Czech Rep 0.0 0.3Hungary 0.0 0.2Turkey 1.40 1.97 1.52 4.9 1.5Poland 0.97 1.0 2.0E EUROPE 4.93 0.00 2.24 3.35 0.00 0.00 0.00 0.00 2.82 0.00 13.3 9.9SOUTH AFRICA 1.36 1.34 2.66 0.00 1.30 2.73 0.00 1.34 0.00 0.00 10.7 7.1Total 7.6 5.4 21.5 17.5 7.4 12.2 6.0 1.3 8.9 9.2 96.9 100Benchmark 12.6 12.5 24.8 6.8 8.5 7.8 3.9 1.1 8.2 13.8 100Vs Bmk -5.0 -7.1 -3.3 10.7 -1.1 4.4 2.1 0.2 0.7 -4.6 -3.1Source: Bloomberg, Polar Capital and Morgan Stanley, 4 April 2013.Benchmark Index: MSCI Emerging Market Index..For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 20
  • 21. Independent Risk ManagementComprehensive risk management measures in place• Risk management is integrated at every step of our process, from initial liquidity and country screening to portfolio construction and monitoring• Polar Capital has an independent risk control process managed by the Chief Risk Officer – Process is independent of the portfolio managers – Quantitative controls used to ensure that risk is managed to a level consistent with clients’ investment objectives – Risk profile of each portfolio discussed at a monthly Risk Management Committee• Monthly Risk Management Committee meeting – General overview of the current risk profile of each fund – Any significant recent changes in this profile, any concerns and/or breaches are discussed• Monthly performance attribution – Ensures that the principal risk factors previously identified are indeed producing a commensurate level of return• Quarterly portfolio reviews – All fund managers are subject to a formal quarterly review where their portfolios are discussed in depthFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 21
  • 22. Risk ManagementWe have a very proactive stance on risk management the aim of which is to minimise business risk, limit portfoliorisk and eliminate dealing risk. This function is performed by both Fund Manager and the risk team at Polar Capital.There are 3 stages: 1. Due Diligence 2. Execution 3. Monitoring (performed by Fund Managers “FM”) (FM and trade support) (FM and risk team) • Business risk • Use Bloomberg • Fund Management – Market position Compliance Manager – Business risk: is the – Margins company continuing – Management • All compulsory limits (i.e. to execute? – Balance sheet 5-10-40 rule) entered on – Stock risk: is there – Business returns/cash system as well as Fund still upside? generation Manager guidelines so any ‘fat finger’ trades are • Risk Management • Stock risk flagged) – Formal monthly risk – Absolute valuation committee meetings – Relative valuation to history, – Quarterly reviews peers etc with Fund Manager • Portfolio risk – Diversification by country, sector and stock – 60-80 holdings – Initial weights 1-1.5% – LiquidityFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 22
  • 23. AppendicesFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 23
  • 24. Investment Team ProfileWilliam Calvert – Fund Manager (EMEA / India)William joined Polar Capital in October 2010 as a Fund Manager to establish the Emerging Markets investment team. William has over 20years’ experience in emerging markets and prior to joining Polar Capital he spent thirteen years at AXA Framlington, where he was head of theemerging markets desk, working on both dedicated emerging markets portfolios and as part of the global investment team. He was portfoliomanager for the AXA Framlington emerging markets fund from 2004 until his departure. He joined AXA Framlington from LCF Edmond deRothschild Securities where he was part of the country fund broking team. Prior to this he was a fund manager with Citibank, Municipal MutualInsurance and English Association. William has a degree in Economics from Bristol University.Ming Kemp – Fund Manager (Asia)Ming joined Polar Capital in October 2010 as a Fund Manager. Prior to joining Polar Capital, Ming spent 5 years at AXA Framlington as anAsian specialist, managing Asian equity portfolios for global emerging market funds and global balanced funds. Following a post graduatecareer in China, Ming moved to London in 1990. Ming took up a position as an equity investment analyst at American Express AssetManagement in 1995. She moved to Sarasin Investment Management in 1999 as a senior equity analyst for the Asia Pacific Market, beforejoining AXA Framlington in 2005. Ming has a Masters in Business Administration.Neil Denman – Fund Manager (Latin America)Neil joined Polar Capital in October 2010 as a Fund Manager. Prior to joining Polar Capital, Neil spent 2 years at AXA Framlington, where hewas a portfolio manager within the emerging markets team. Previously he worked at Hexam Capital Partners from 2006 until 2008 as co-manager of the global resources absolute return fund. Between 2004 and 2006 he was UK investment analyst at Baring Asset Management.Neil began his career as a graduate trainee at Framlington between 2001 and 2004. Neil has a degree in Environmental Biogeoscience fromLeeds University. Additional internal sectoral expertise: technology, healthcare and financialsFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 24
  • 25. Emerging Market Income Fund Performance Polar Capital Emerging Market Income Fund performance since launch 12 11.5 11 10.5Comparative returns 10 9.5 9 8.5 8 7.5 7 Jul - 12 Jul - 11 May - 12 Feb - 11 Mar - 11 Apr - 11 May - 11 Oct - 11 Feb - 12 Mar - 12 Apr - 12 Oct - 12 Feb - 13 Mar - 13 Jan - 11 Jun - 11 Aug - 11 Sep - 11 Nov - 11 Dec - 11 Jan - 12 Jun - 12 Aug - 12 Sep - 12 Nov - 12 Dec - 12 Jan - 13 Polar Capital Emerging Markets Income Fund MSCI Emerging Markets Total Return Index Source: Northern Trust, 4 April 2013. Basis: Class R Accumulation, Net of fees, income reinvested, US Dollar. Launch date: 20 January 2011. Past performance is not indicative or a guarantee of future results. For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 25
  • 26. William Calvert’s Performance Track RecordAXA Framlington Emerging Markets Fund 350 300 250 Comparative returns 200 150 100 50 0 2004 2005 2006 2007 2008 2009 2010 Axa Framlington Emerging Markets Fund (GBP) MSCI Emerging Markets Index (GBP)Source: Bloomberg, 30 September 2004 to 30 September 2010.Basis: Net of fees, Sterling.Total return GBP (%): 1 year 2 years 3 years 5 years 6 years Total return Quartile Total return Quartile Total return Quartile Total return Quartile Total return Quartile 26.2% 1 68.5% 1 22.6% 2 116.8% 1 227.7% 1Source: Lipper, 30 September 2004 to 30 September 2010.Past performance is not indicative or a guarantee of future results.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 26
  • 27. Vtech• Vtech is a world leading supplier of telephony equipment and E-learning products (ELP) for children• Whilst telephony business is stable the ELP business provides a growth opportunity due to low penetration rates in Asia• The company has maintained a high dividend payout ratio in excess of 75% and this is expected to continue given the strong cash balance sheet and high ROE of c.40%• The company trades on a current indicative yield of 7.5% and this should grow in line with consensus earnings growth of 10% CAGR FY10–15Source: Vtech, Bloomberg and Polar Capital 2011.It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12 monthsis available upon request.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 27
  • 28. Globaltrans Investment Freight rail transport (Russia)• Second largest private freight rail transport company in Owned fleet development (units, at period end) Russia with 7% share of cargo volumes 62,000• Main freight operator, Russian Railways, has no capital +55% for expansion and needs to scrap obsolete stock +18% 38,173 +5% 39,910 32,384• Stock trades on P/E of 8.6x 2012 and 7.2x 2013. On EV/EBITDA trades at 20% discount to global peers 2009 2010 2011 Dec 2012 estimated• RoE in high 20’s with stock trading close to post MMK acquisition replacement value Revenue and EBITDA growth 2009-13(e)1• Pro-forma debt to EBITDA of 1.3x following acquisition of Metalloinvest and MMK fleets 2009 2010 2011 2012(e) 2013 (e) Adj Revenue2 ($mn) 685.3 903 1177 1680 1970• Dividend increased 73% for FY11 to gross yield of 3.7% EBITDA ($mn) 284 391 505 674 784• Strong cashflow and minimum dividend payout ratio of 30% EPS 0.74 1.12 1.68 1.87 2.21 DPS 0.15177 0.37 0.64 0.78Source: Polar Capital, Globaltrans and Bloomberg unless otherwise stated, January 2013.1. Source: Bloomberg, based on consensus estimates. 2. Revenue less infrastructure and locomotive tariffs.It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12months is available upon request.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 28
  • 29. Marcopolo Auto parts (Brazil)• Market leader in bus body production in Brazil Total fleet & average age• Benefiting from growth in bus rapid transit systems which are being built for World Cup• Internationally competitive with plants in South Africa, Egypt and India• Strong focus on return on equity and cost structure• 15.2x 2013 P/E, for earnings growth of 16% Earnings and dividend history• Dividend yield of 2.5%, and average payout ratio of 48%Source: Marcopolo, Bloomberg and Polar Capital 2013.It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12months is available upon request.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 29
  • 30. Valid• Security for ID Systems, Payment Means, Market share Telecommunication Services and Digital Certification Identification Driver’s Identification Employment Voter Passport System License Documents Booklet Registration• ID contracts last for 3 to 5 years and are adjusted for Governments - 73% 100% - 100% inflation in each year Valid 80% 17% - 6% -• Opportunities to grow in National ID card, broadening of Mint - - - 94% - online tax submission and chip and pin uptake Montreal - 10% - - -• Strong focus on ROE and balance sheet strength Thomas Gregg 10% - - - - ICE 10% - - - -• 16x 2013 P/E, for earnings growth of 17%-20% Total 100% 100% 100% 100% 100%• Dividend yield of 4.2%, and average payout ratio of Net Income Growth (R$ Million) 80%Source: Valid, Bloomberg and Polar Capital 2013.It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12months is available upon request.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 30
  • 31. Digital China• Digital China (DC) is an integrated IT distribution and services China – IT spending forcast1 provider to both corporates and consumers in China• Market research firm IDC estimates China’s IT spending will increase 17% in 2013, while Gartner forecasts its IT services spending to rise 19%• The Company has grown its sales at a CAGR of 24% over the past seven years• Margins have remained steady but should improve as the weighting of higher value added services increases China – IT services spending forcast2• The company has generated return on equity of 20%+ with very limited debt• The payout ratio has been kept between 30-35% earnings giving 24% CAGR in DPS over the last seven years• The stock trades on a P/E of 10.4x March 2013 earnings and has a yield of 3.1%Source: Digital China and Polar Capital, 2012. 1. Source: IDC. 2. Source: Gartner.It should not be assumed that recommendations made in future will be profitable or will equal performance of the securities in this document. A list of all recommendations made within the immediately preceding 12months is available upon request.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 31
  • 32. Polar Capital OverviewAs at 31 December 2012 Total assets under Management management Strategies Fund managers AUMPolar Capital was Tim Woolley Technology Ben Rogoff 2 fundsestablished in 2001 and US$6.0bn CEO/Co-Founder Nick Evans US$1,274mhas US$6.0bn AUM, Tom Bartlam Japan James Salter 2 fundswith 86 employees. Non-Executive Chairman Business infrastructure Gerard Cawley US$1,654mThe Firm was listed on John Mansell • Distribution and marketing UK Philip Hardy US$300m Chief Operating Officer European Robert Gurner 2 fundsthe London Stock • Operational support Andrew Marsh US$692mExchange (AIM) in Ownership • Risk management Healthcare Dan Mahony 2 fundsFebruary 2007. The Gareth Powell US$463m Polar Capital • ComplianceFirm offers managers a 41% Financials John Yakas 4 fundslevel of infrastructure • Technology Alec Foster US$569m XLand corporate 10% • Finance Nick Martin Nick Brindgovernance normally Caledonia 10% Emerging William Calvert 2 fundsfound in much larger Market US$424m Free Floatorganisations. 39% Convertibles David Keetley US$41m Stephen McCormick North American Andrew Holliman US$531m Richard Wilson European MN Ton Tjia 2 funds US$62m Global Equity Andrew Holliman US$10m Christophe Liégeois- WilliamsSource: Polar Capital. Andrew MacKirdyFor non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 32
  • 33. Important Information Polar Capital 4 Matthew Parker Street London SW1H 9NPHouse viewThis document has been produced based on Polar Capital research and analysis and represents our house view. All sources are Polar Capital unless otherwise stated.Important informationThe information provided in this presentation is for the sole use of those attending the presentation it shall not and does not constitute an offer or solicitation of an offer to make an investment into any fund managedby Polar Capital. It may not be reproduced in any form without the express permission of Polar Capital and is not intended for private investors. Notwithstanding anything to the contrary herein, such person (and eachemployee, representative or other agent of such person) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of (i) the fund and (ii) any of its transactions, and allmaterials of any kind (including opinions or other tax analyses) that are provided to the recipient relating to such tax treatment and tax structure.This presentation is only made available to professional clients and eligible counterparties. Shares in the fund should only be purchased by professional investors. Any other person who receives this presentationshould not rely upon it. The law restricts distribution of this document in certain jurisdictions, therefore, persons into whose possession this document comes should inform themselves about and observe any suchrestrictions. It is the responsibility of any person or persons in possession of this document to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction.This document does not provide all information material to an investor’s decision to invest in the Polar Capital Funds Plc – Global Emerging Markets Income Fund, including, but not limited to, risk factors.PROSPECTIVE INVESTORS SHOULD REVIEW THE FUNDS OFFER DOCUMENT, INCLUDING THE RISK FACTORS, BEFORE MAKING A DECISION TO INVEST.In the United States the fund shall only be available to or for the account of U.S. persons (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")) who are"qualified purchasers" (as defined in the United States Investment Company Act of 1940, as amended (the "Company Act")) and "accredited investors" (as defined in Rule 501(a) under the Securities Act). The fund isnot, and will not be, registered under the Securities Act or the securities laws of any of the states of the United States and interests therein may not be offered, sold or delivered directly or indirectly into the UnitedStates, or to or for the account or benefit of any US person, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of such securities laws. The securities will be subjectto restrictions on transferability and resale. The Fund will not be registered under the Company Act.Statements/Opinions/ViewsAll opinions and estimates in this report constitute the best judgment of Polar Capital as of the date hereof, but are subject to change without notice, and do not necessarily represent the views of Polar Capital. PolarCapital is not rendering legal or accounting advice through this material; readers should contact their legal and accounting professionals for such information.Third-party dataSome information contained herein has been obtained from other third party sources and has not been independently verified by Polar Capital. Polar Capital makes no representations as to the accuracy or thecompleteness of any of the information herein. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representationswith respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particularpurpose with respect to any of such data.HoldingsThis portfolio data is “as at” the date indicated and should not be relied upon as a complete or current listing of the holdings (or top holdings) of the fund. The holdings may represent only a small percentage of theaggregate portfolio holdings, are subject to change without notice, and may not represent current or future portfolio composition. Information on particular holdings may be withheld if it is in the fund’s best interest todo so. A complete list of the portfolio holdings may be made available upon request. It should not be assumed that any of the securities transactions or holdings discussed was or will prove to be profitable, or that theinvestment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein. The information provided in this document should not beconsidered a recommendation to purchase or sell any particular security.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 33
  • 34. Important Information Cont. Polar Capital 4 Matthew Parker Street London SW1H 9NPBenchmarksThe following benchmark indices are used: MSCI Emerging Markets Index TR. These benchmarks are generally considered to be representative of the global emerging market universe. These benchmarks are broad-based indices which are used for comparative/illustrative purposes only and have been selected as they are well known and are easily recognizable by investors. Please refer to www.mscibarra.com for furtherinformation on these indices. Comparisons to benchmarks have limitations because benchmarks have volatility and other material characteristics that may differ from the fund. For example, investments made for thefund may differ significantly in terms of security holdings, industry weightings and asset allocation from those of the benchmark. Accordingly, investment results and volatility of the fund may differ from those of thebenchmark. Also, the indices noted in this presentation are unmanaged, are not available for direct investment, and are not subject to management fees, transaction costs or other types of expenses that the fund mayincur. In addition, the performance of the indices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investors should carefully consider these limitations and differenceswhen evaluating the comparative benchmark data performance. The information regarding the indices are included merely to show the general trends in the periods indicated and is not intended to imply that the fundwas similar to any of the indices in composition or risk.Information subject to changeThe information contained herein is subject to change, without notice, at the discretion of Polar Capital and Polar Capital does not undertake to revise or update this information in any way.Regulatory statusPolar Capital LLP is a limited liability partnership number OC314700. It is authorised and regulated by the UK Financial Services Authority (”FSA”) and is registered as an investment adviser with the US Securities &Exchange Commission (“SEC”). A list of members is open to inspection at the registered office, 4 Matthew Parker Street, London SW1H 9NP.Investment managers which are authorised and regulated by the FSA are expected to write to investors in funds they manage with details of any side letters they have entered into. The FSA considers a side letter tobe an arrangement known to the investment manager which can reasonably be expected to provide one investor with more favourable rights, which are material, than those afforded to other investors. These rightsmay, for example, include enhanced redemption rights, capacity commitments or the provision of portfolio transparency information which are not generally available. The Fund and the Investment Manager are notaware of, or party to, any such arrangement whereby an investor has any preferential redemption rights. However, in exceptional circumstances, such as where an investor seeds a new fund or expresses a wish toinvest in the Fund over time, certain investors have been or may be provided with portfolio transparency information and/or capacity commitments which are not generally available. Investors who have any questionsconcerning side letters or related arrangements should contact the Polar Capital Desk at the Administrator on (+353) 1 434 5007. The Fund is prepared to instruct the custodian of the Fund, upon request, to makeavailable to investors portfolio custody position balance reports monthly in arrears.ForecastsReferences to future returns are not promises or even estimates of actual returns Polar Capital may achieve, and should not be relied upon. The forecasts contained herein are for illustrative purposes only and arenot to be relied upon as advice or interpreted as a recommendation. In addition, the forecasts are based upon subjective estimates and assumptions about circumstances and events that may not yet have takenplace and may never do so.PerformancePerformance is shown net of fees and expenses and includes the reinvestment of dividends and capital gain distributions. Many factors affect fund performance including changes in market conditions and interestrates and in response to other economic, political, or financial developments. Investment return and principal value of your investment will fluctuate, so that when your investment is sold, the amount you receive couldbe less than what you originally invested. Past performance is not a guide to or indicative of future results. Future returns are not guaranteed and a loss of principal may occur. Investments are not insured by the FDIC(or any other state or federal agency), are not guaranteed by any bank, and may lose value.Investment process – riskNo investment process or strategy is free of risk and there is no guarantee that the investment process or strategy described herein will be profitable. Investors may lose all of their investments.AllocationsThe strategy allocation percentages set forth in this document are estimates and actual percentages may vary from time-to-time. The types of investments presented herein will not always have the same comparablerisks and returns. Please see the private placement memorandum for a description of the investment allocations as well as the risks associated therewith. Please note that the fund may elect to invest assets indifferent investment sectors from those depicted herein, which may entail additional and/or different risks. The actual performance of the fund will depend on the Investment Manager’s ability to identify and accessappropriate investments, and balance assets to maximize return to the fund while minimizing its risk. The actual investments in the fund may or may not be the same or in the same proportion as those shown herein.For non-US professional investor use only. Please refer to the Important Information at the end of this presentation. 34