lazard asset management

The Case forYour Emerging M

Octobe

Jai JaJ JManaging Director, Port

For Professional

r De-RiskingMarkets Allocation

er 2012

acobrtfolio Manager/Analyst

l Investors Only

C t tContents

A. The Case For Emerging Markets Multi-Stg g

B. Company Lifecycle

C. Lazard Emerging Market Allocation Fund

trategy Investmentgy

d

Lazard Asset ManagementLazard Asset Management1

TATATATAABABABAB

The Case for Emerging Marke

Drawdown Comparison

-10%

0%

-20%

-39%-26%

39 th

-40%

-30%

28 months

39 months

-50% -56%

77 months

-70%

-60%

1995 1996 1996 1997 1998 1999 2000 2001 2002

Return3 Volatility3

Emerging Markets Equity¹ 7.8% 24.8%

Emerging Markets Equity and Debt² 9.7% 14.4%

1995 1996 1996 1997 1998 1999 2000 2001 2002

1 MSCI Emerging Markets Index

A balanced approach can reduce entr

g g2 50% MSCI Emerging Markets Index, 25% J.P. Morgan ELMI+ Index, 25% J.P. Morgan EMBI Global

Diversified Index3 Annualized over the period from 2/8/1995 to 03/28/2012

ets Multi-Strategy Investment

41%

62%

-41%

-62% 22 months

2003 2004 2005 2006 2007 2008 2009 2010 2011 201

Ongoing for 54 months

2003 2004 2005 2006 2007 2008 2009 2010 2011 201

As of 28 March 2012

ry point risk by curtailing drawdowns

Lazard Asset ManagementLazard Asset Management

Source: Lazard, J.P. Morgan, MSCIThe information in the charts above is for illustrative purposes only and does not represent any product offered by Lazard. 2

E l ti f E i M k tEvolution of Emerging Market

2004

Rolling 4-quarter Holdings-based Equity Style Map for 5 Years Ended 31 December 2004

Mega

Large

Mega

Large

MidMid EM Relative Value

EM CoreEM Growth

Value Core Growth

Small

MicroValue Core Growth

Small

Micro

EM Deep Value EM GARP

By 2011 distinct style

The information in the chart above is for illustrative purposes only and does not represent any product offered by Source: Lazard, Callan Associates

t St lts Styles

2011

Rolling 4-quarter Holdings-based Equity Style Map for 5 Years Ended 30 June 2011

Mega

Large

Mega

Large

EM Relative Value

EM Core EM Growth

MidMid

EM Relative Value

EM Deep Value EM GARP

Value Core Growth

Small

MicroValue Core Growth

Small

Micro

groups had emerged

Lazard Asset ManagementLazard Asset ManagementLazard.

3

TATATATAABABABAB

C Lif lCompany Lifecycle

What are The Key Metrics and Appropriate Valuatpp p

Capital structure, growth, and cash flowlife cycl

Incubate Grow

Small Cap Stock Growth Stock

For illustrative purposes only.

tion Methodology to Identify Winners in each Stage?g g

w are key determinants when assessing e phase

Mature

k Value Stock


S ll C St kSmall Cap Stocks

Focus on financial productivity and valuationoc s o a c a p od ct v ty a d va at o

Seeking increasing or high growth in sales and ea

Metrics:• Earnings• Price to Earnings/Sales• EPS Growth• EPS Growth

Activities? Resources:• On-site company visitp y• Company financials

Small Cap specific risks• Lower liquidity• Less information flow• Subject to swings in risk aversionj g

arnings per share


G th St kGrowth Stock

Focus on growth of revenue, EBITDA and Net

Valuing high or improving returns on invested c

Metrics:• EPS Growth• PEG• Returns on Invested Capital (RoIC)Returns on Invested Capital (RoIC)• EV/ Invested Capital• EV/ EBITDA• FCFF

Activities/Resources:• On-site company visitOn site company visit• Off-site meeting with management• Company financials• Sell-side research

Risks• Sustainability of growthSustainability of growth

t Income

capital


V l St kValue Stock

Focus on financial productivity and valuationoc s o a c a p od ct v ty a d va at o

Identifying high improving or sustainable return

Metrics:• Returns on Equity (ROE)• EV/ EBITDA• Price to Book• Price to Book• Dividend Yield• FCFE

Activities/Resources:• On-site company visit• Off sit m tin ith m n m nt• Off-site meeting with management• Company financials• Sell-side research

Risks• Value trap

ns on equity and dividends


C Lif lCompany Lifecycle

Pacific Rubiales Energy is a company that is movingy p y

Incubate Grow

For illustrative purposes only.This information should not be considered a recommendation or solicitation to purchase or sell any security.

ng through the three phases g g p

Mature


2000

1600

1800

1200

1400

800

1000

404400

600

281

47 8318 34

268 276

0

200

400

02008 2009

CAPEX (MM$) Gross Field Production (Mboe/d)

Source: Pacific Rubiales Investor Presentation, October 2012Mboe/d= Million barrels of oil equivalent / day This information should not be considered a recommendation or solicitation to purchase or sell any security.

1947

1096

954

1096

921

144219

57 87

2010 2011

Net After Royalties Production (Mboe/d) EBITDA (MM$)


TATATATAABABABAB

L d E i M k t AllLazard Emerging Market Allo

Objective: Capitalise on Emergin

Dynamic asset allocation

Objective: Capitalise on Emergin

Specialist Emerging Markets investment teams

Alpha generation via security selection and asset

Fund: EmeFund: Eme

Benchmark: MSC

Objective Over Market Cycle: Equ

Volatility: ¾ t

1 Target returns do not represent a promise or guarantee of future results.2 Implementation can be customised for clients investing $100+ million.The information above is being shown for illustrative purposes only.

ti F dcation Fund

ng Markets growth with lower riskng Markets growth with lower risk

t allocation

erging Markets Allocation Funderging Markets Allocation Fund

CI Emerging Markets Index

uity-like returns with considerably lower volatility

the volatility of the benchmark


Ri k/R S Ch (AHistorical Performance RevieRisk/Return Scatter Chart (Annua

Annualised Return (%)

18

20

12

14

16

8

10

12Lazard EM Multi-Strategy (Equity + Debt)

4

6

8

BarCap US Agg Index

BarCap Euro Agg Index

0

2

0 5 10

JP Morgan ELMI + Ind

Source: Lazard, MSCI, JPMorgan, BloombergOver the period from 1 July 2009 to 30 June 2012.Performance is preliminary and presented gross of fees and was derived from a portfolio that represents the prop

0 5 10

Performance is preliminary and presented gross of fees and was derived from a portfolio that represents the propStrategy - Emerging Markets (Equity Only) and Lazard Multi Strategy - Emerging Markets (Equity+Debt) strategiPlease refer to the disclosure sections for additional performance information, including net-of-fees results and a past performance. Past performance is not a reliable indicator of future results.

li d)walised)

S&P 500 IndexS&P 500 Index

S SFTSE All Share Index

MSCI EM Index

MSCI Europe Index

15 20 25 30

dex

posed investment for a fully discretionary account for the Lazard Multi

15 20 25 30

Annualised Standard Deviation of Return (%)


posed investment for a fully discretionary account for the Lazard Multi ies, which include the allocation to the discounted assets strategy. description of the composite. The performance quoted represents

11

L d M l i S E iComposite Performance SumLazard Multi Strategy – Emerging

Lazard Multi Strategy - Emerging Markets (Equity + Debt

MSCI E i M k t I dMSCI Emerging Markets Index

Excess Return (bps)

JP Morgan GBI-EM Global Diversified Index

Excess Return (bps)

Lazard Multi Strategy - Emerging Markets (Equity + Debt

MSCI Emerging Markets Index

Excess Return (bps)

JP Morgan GBI-EM Global Diversified Index

Excess Return (bps)

As of 30 September 2012All data in US Dollars. The strategy inception date is 1 July 2009.The Lazard Multi Strategy - Emerging Markets (Equity+Debt) strategy includes an allocation to the emerging margy g g ( q y ) gy g gPerformance is preliminary and presented gross of fees. Please refer to the attached disclosures for performancecomposite. The performance quoted represents past performance. Past performance is not a reliable indicator ofSource: Lazard Asset Management

M k (E i D b )mmaryg Markets (Equity + Debt)

Annualised

3 Months 1 Year 3 Years

SinceInception

01 Jul 2009

t) 5.01 13.46 6.72 11.50

7 74 16 93 5 63 11 527.74 16.93 5.63 11.52

-273 -347 +109 -2

4.80 12.66 9.43 11.48

+21 +80 -271 +2

YTDYTD30 Sep 12 2011 2010

t) 9.90 -11.95 17.23

11.98 -18.42 18.88

-208 +647 -165

12.12 -1.75 15.67

-222 -1020 +156

rkets discounted assets strategy and offers quarterly liquidity.


gy q y q ye presented on a net of fee basis and for a description of this f future results.

12

L d’ Gl b l E i MLazard’s Global Emerging Ma

Emerging Markets Equity Developing Mg g q y

James Donald Rohit Chopra

Donald Floyd Erik McKee

Monika Shrestha Ben Wulfsohn

p g

Kevin O’Hare

Myla Cruz

Robert Horton

Ardra Belitz Ganesh Ramachandran

Emerging Income Emerging M

Denise S. SimonArdra Belitz Ganesh RamachandranAristotel Kondili Steven NelsonAndrew Raab

Denise S. SimonGeorge Varino

Emerging Markets Small Cap

Alex Ingham

Nicolas Rodriguez

Erik McKee

Rahwa Senay

Global Sector Analysts

Operations Compliance Risk ManComm

As of 10 October 2011

k t St t iarket Strategies

Markets Equity Emerging Markets Discounted Assetsq y

Peter Gillespie

Georg Benes

Mark Lien

g g

Kun Deng Ming Zhong

Lee Ann Alexandrakis David Bliss

Mostafa Hassan Edward Keating

Markets Debt

Arif T. Joshi

Multi Strategy – Emerging Markets

Jai Jacob Steven MarraArif T. Joshi Chris Milonopoulos

Jai Jacob Steven MarraMichael Per Giuseppe Ricotta

Emerging Markets Core Equity

Stephen Russell Thomas C. BoylePaul H. Rogers John MarianoCeline Woo

Emerging Markets Support Analysts

Celine Woo

nagement mittee Settlements Accounting


M All i i F UEmerging Market Multi StrateManages Allocation using Four U

Emerging Markets Equityg g q y

James Donald Rohit Chopra

Donald Floyd Erik McKee

Monika Shrestha Ben Wulfsohn

eam

Developing Markets Equity

Kevin O’Hare Peter Gillespie

Myla Cruz Georg Benes

Ove

rsig

ht T

e Robert Horton Mark Lien

Emerging Markets Debt

Denise S Simon Arif T Joshi

ti-St

rate

gy O Denise S. Simon Arif T. Joshi

George Varino Chris Milonopoulos

Emerging Markets Small Cap

Mul

t Emerging Markets Small Cap

Alex Ingham

Nicolas Rodriguez

Erik McKee

Rahwa Senay

Ardra Belitz Ganesh RamachandranAristotel Kondili Steven Nelson

Emerging Income

Team membership is current as of the date of this document.

Andrew Raab

U d l i A hgy Team

Underlying Approaches

M lti St t E i M k tMulti Strategy – Emerging Markets

JoinedLazard

Years in Industry

Jai JacobJai JacobPortfolio Manager/Analyst 1998 14

Tom McManusPortfolio Manager/Analyst 2010 32

Michael PerQuantitative Research Analyst 1997 15

Stephen Marra, CFA 1999 13Portfolio Manager/Analyst 1999 13

Giuseppe Ricotta, CFAPortfolio Analyst 2007 8


Investment ResourcesM l i S E i M kMulti-Strategy Emerging Markets

The Multi-Strategy team has access to Lazard’s extensive

Years in Industry

Years in Industry

Equity

Industry

Lee Ann Alexandrakis 16Dmitri Batsev 10Georg Benes 11David Bliss 30

Industry

Mark Lien 22Xiaomeng (Michelle) Liu 6

John Mariano 14

Thomas Boyle 13Rhett Brown 16Rohit Chopra 16Elizabeth Chung 18B t d Cli t

Erik McKee 16Andrei Morosanu 13Jonathan Morris 23Kevin O'Hare 21David Pizzimenti 25Bertrand Cliquet 13

Myla Cruz 4Kun Deng 18James Donald 27Lada Emelianova 14

David Pizzimenti 25Nicolas Rodriguez-Brizuela 12

Paul Rogers 27Stephen Russell 14Lada Emelianova 14

Donald Floyd 17Peter Gillespie 20Mostafa Hassan 17Robert Horton 17P t H b 23

Rahwa Senay 14Monika Shrestha 15Jeremy Taylor 16Christopher Whitney 14Sookyum Woo 8Peter Hunsberger 23

Alex Ingham 16Edward Keating 11

Sookyum Woo 8Ben Wulfsohn 21Ming Zhong 8

“Years” are calculated as of year-end 2011; YTD 2012 experience/tenure is not reflected

s

e resources which includes 56 Investment Professionals

Years in Industry

Fixed Income

Years in Industry

Multi Strategy

Industry

Alessandra Alecci 14Katerina Alexandraki 17Ardra Belitz 18Arif Joshi 14

Industry

Jai Jacob 14Tom McManus 32Michael Per 15Stephen Marra 13

Aristotel Kondili 11Christian Milonopolous 12Steven Nelson 13Andrew Raab 8G h R h d

Stephen Marra 13Giuseppe Ricotta 8

Ganesh Ramachandran 15Denise Simon 26Sergio ValderramaRamirez 13

George Varino 16gYuiGai Zu 1


L d M lti St t SLazard Multi-Strategy Summa

Leverages strength of Lazard’s Emerging MLeverages strength of Lazard s Emerging MMarkets investing, 8 dedicated teams, 40+ i

P id h i E i M k Provides a comprehensive Emerging Marke

Sources alpha from both fundamental secup

Uses proprietary macroeconomic framewor

Targets Emerging Markets Equity returns a

ary

Markets Platform - 20+ years of EmergingMarkets Platform 20+ years of Emerging investment professionals

ll i l iets asset allocation solution

rity selection and top-down asset allocationy p

rk to drive dynamic allocation process

at 25% lower volatility


L d M l i S E iGIPS Composite InformationLazard Multi-Strategy – Emerging

Benchmark: MSCI Emerging Markets IndexR ti D t 30 J 2012Reporting Date: 30 June 2012Composite Inception Date: 01 July 2009Reporting Currency: U.S. Dollar

Composite DescriptionThe composite returns represent the total returns of all fully discretionary, fee-paying portfolios with a Lazard Multi Strategequity and debt strategies, the strategy seeks to overweight allocations that it feels are best positioned for the prevailing marwill consistently outperform the MSCI Emerging Markets Index while providing lower volatility This strategy continuallywill consistently outperform the MSCI Emerging Markets Index while providing lower volatility. This strategy continually exposure to local money market performance. Additionally, this strategy makes use of leverage for Emerging Markets currelocal currencies and of swaps, forwards, structured notes and loans of portfolio securities.

Calculation of Performance ReturnsLazard's account inclusion policy is the first full month or the end of the month in which the account is fully invested. The rmonthly portfolio valuations, and include the reinvestment of all earnings as of the payment date. The composite returns areportfolios, calculating performance, and preparing compliant presentations are available upon request. The percentage of co100% of this composite comprises non fee paying accounts. For these accounts, net of fee performance has been calculated shown before taxes and the deduction of custody fees (except for mutual funds which includes all fees) The composite andshown before taxes and the deduction of custody fees (except for mutual funds which includes all fees). The composite andreturns presented represent past performance and is not a reliable indicator of future results, which may vary.

Fee ScheduleLazard's standard fee schedule for Multi-Strategy - Emerging Markets (Equity + Debt) accounts is 125bps on the first $100equivalents based on prevailing exchange rates.) Actual account fees, inclusive of performance-based fees (if applicable) arall Lazard composites is available upon request.

Benchmark InformationThe MSCI Emerging Markets Index is a free float adjusted market capitalization index calculated total return and net of forThe MSCI Emerging Markets Index is a free float-adjusted market capitalization index calculated total return and net of for

GIPS Compliance and Verification StatusLazard Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepareverified for the period of January 1, 1993 through December 31, 2011. The verification reports are available upon request. Vstandards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance Lazard Asset Management is the "Firm" to which the GIPS Standards apply (Frankfurt office included in Firm definition aspreparation or review of this presentation. The composite creation date is January 2010.

Calendar A

QTD YTD 2011 2010 Jul 09 -Dec 09 1 YR

Lazard Rate of Return (%; Gross of Fees) -6.27 4.56 -11.95 17.23 25.59 -9.25

Lazard Rate of Return (%; Net of Fees) -6.56 3.90 -13.05 15.76 24.80 -10.39

Benchmark (%; Rate of Return) -8.89 3.93 -18.42 18.88 31.24 -15.95( ; )Composite Standard Deviation (3-yr. Ann.) 16.95 16.95 N/A N/A N/A

Benchmark Standard Deviation (3-yr. Ann.)22.65 22.65 N/A N/A N/A

# of Portfolios 1 1 1 1 1

Composite Dispersion (Asset Wtd. Std. Dev.)N/A N/A N/A N/A N/A

C i A (USD Milli ) 9 9 9 9 9 4 9 1 8 2Composite Assets (USD Millions) 9.9 9.9 9.4 9.1 8.2

Total Firm Assets (USD Billions) 132.2 132.2 124.4 140.6 116.5

M k (E i D b )g Markets (Equity+Debt)

gy - Emerging Markets (Equity + Debt) investment mandate. Through dynamic allocations to Lazard's Emerging Markets rket conditions. Lazard's Emerging Markets Multi Strategy (Equity + Debt) blend seeks to generate annualized returns that makes use of short duration Emerging Markets derivative instruments by material use of currency forwards to gainmakes use of short duration Emerging Markets derivative instruments by material use of currency forwards to gain

ency long and short positions. Also, this strategy makes use of emerging markets debt investments denominated in hard and

returns of the individual portfolios within the composite are time-weighted, use trade date accounting, are based upon e asset-weighted based upon beginning period market values. Additional information regarding policies for valuing omposite non fee paying accounts for each annual period end are as follows: 2011 - 2009, 100%. In the current period, using the standard fee schedule for the Multi Strategy Emerging Markets - Equity + Debt strategy. Composite returns are benchmark returns are reported net of foreign withholding taxes on dividends interest and capital gains The composite benchmark returns are reported net of foreign withholding taxes on dividends, interest and capital gains. The composite

million and 100 bps on the balance of the account. (This fee schedule may be presented in non-U.S. local currency re used in the construction of composite net of fee performance unless otherwise noted. A complete list and description of

reign withholding taxes that is designed to measure equity market performance in the global emerging marketsreign withholding taxes that is designed to measure equity market performance in the global emerging markets.

ed and presented this report in compliance with the GIPS standards. Lazard Asset Management has been independently Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

s of January 1, 2003). GIPS is a registered trademark of CFA Institute. CFA Institute has not been involved in the

Annualised

3 YR Since Inception

10.67 10.679.28 9.289.77 9.77


R l t Di lRegulatory Disclosures

All data contained herein is sourced by Lazard Asset Management as at 30 September 2012 unless otThis is a financial promotion and is not intended to be investment advice. In the UK this document,advisers authorised to carry out business under the Financial Services and Markets Act 2000.References to Director and other titles of employees of Lazard Asset Management are internal titles The Lazard Emerging Markets Allocation Fund is a sub-fund of Lazard Global Investment Funds plInvestment Funds PLC is authorised by the Financial Services Authority under section 264 of the Fiwithin the UK. The Central Bank of Ireland regulates all other aspects of the Company's operations.

d h FSA ll i l C i d h Fi i l S i Cagreement under the FSA cancellation rules. Compensation under the Financial Services CompensatAccounts in English and German are available on request from the address below or www.uk.lazardrelevant for UK tax payers.Past performance is not a reliable indicator of future results. Fluctuations in the rate of exchange beteffect of causing the value of your investment to diminish or increase. Securities identified in this dothese securities. It should also not be assumed that any investment in these securities were, or will beundeveloped nature of the securities markets in those countries Investors should consider carefully wundeveloped nature of the securities markets in those countries. Investors should consider carefully wsubstantial a part of their portfolio such investments should be.Yields from bonds reflect in part the risk rating of the bond issuer. Investment in lower rated bonds may carry a greater risk of capital values falling or have limited prospects of capital growth or recovedegree of risk to both income and capital.The Fund may invest in financial derivative instruments (“FDI’s”). While the use of FDI’s can be beby more traditional investments FDI’s may be subject to sudden unexpected and substantial price mby more traditional investments. FDI s may be subject to sudden, unexpected and substantial price mValue. FDI’s do not always perfectly or even highly track the value of the securities, rates or other inor other investments than by a direct investment, increases the possibility for profit but also increaseInvesting in equities may lead towards higher returns in the long term. However considerable fluctuaThe Fund is able to gain market exposure in excess of its net asset value through utilizing FDI’s. SucThe Fund is also subject to the risk of the insolvency or default of its counterparties to FDI investmexperiences lossesexperiences losses.More than 35% of the fund may be invested in fixed interest securities issued by a single governmenThe Fund may invest a significant amount of NAV in units or shares of other collective investment and expenses.Potential investors should pay particular attention to the risk disclosures in the Prospectus.Investors are reminded that the value of investments and the income from them is not guaranteed anyou may get back less than you originally invested. Issued and approved by Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LL La525667. It is authorised and regulated by the Financial Services Authority.The contents of this document are confidential and should not be disclosed other than to the person

therwise noted., which is supplied for information only, is for distribution only to professional investors and

and do not necessarily imply any legal status or responsibility.lc, an Irish-registered Open Ended Investment Company and recognised UCITS. Lazard Global inancial Services & Markets Act 2000 (“FSMA”) for the purposes of the marketing of the Company . Subscriptions may only be based on the current prospectus. There will be no right to cancel any i S h ill b il bl C i f h Si lifi d P P d Rtion Scheme will not be available. Copies of the Simplified Prospectus, Prospectus and Report &

dnet.com. The subfund has obtained reporting status from HMRC from 1 April 2011. This is

tween the currency in which shares are denominated and the currency of investment may have the cument should not be considered as a recommendation or solicitation to purchase, sell or hold e, profitable. Investments in emerging markets carry an above-average degree of risk due to the whether or not investment in emerging markets investments is suitable for them and if so howwhether or not investment in emerging markets investments is suitable for them and, if so, how

increases the risk of default on repayment and the risk to capital of the fund. High yielding assets ery. No investor should invest in high yield securities unless they are prepared to accept a high

eneficial, they also involve risks different from, and in certain cases, greater than, the risks presented movements that are not always predictable This can increase the volatility of the Fund’s Net Assetmovements that are not always predictable. This can increase the volatility of the Fund s Net Asset nvestments they are designed to track. The use of FDI’s to gain greater exposure to securities, rates es the risk of loss. ations can apply to equity prices resulting in a greater risk that you may not get your money back.ch leverage increases the possibility for profit but also increases the risk of loss.

ments. In such events the funds may have limited recourse against the counterparty and may

nt. If they can’t repay the amount borrowed the value of your investment will fall. schemes. Such other schemes may themselves be subject to investment management and other fees

nd can fall as well as rise due to market and currency movements. When you sell your investment

azard Asset Management Limited is incorporated in England and Wales with registered number

n or persons for whom it is intended


C t t D t ilContact Details

Company: Lazard Asset ManagemCompany: Lazard Asset Managem

Address: 50 Stratton StreetLondon W1J 8LLLondon W1J 8LL

Broker Support D k T l h 0800 374810Desk Telephone: 0800 374810

Fax: (020) 7659 5794

E-Mail: [email protected]

Website: lazardassetmanagemen

ment Limitedment Limited

m

nt.co.uk


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