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Generating absolute returns withlow volatility using EmergingMarkets’ Bonds and currenciesMarkets’ Bonds and currencies

in a distinguishing way

Presentation prepared for June 20 th 2013

Epsilon Fund Emerging Bond Total Return LU0365358570

A transparent total return strategy with a low expected volatility

• Sharpe Ratio 3Y: 1,18

• Perf. S.I. (27/5/08): 28.59%

• Volatility 3Y: 1.70%

• Yield to maturity*: 3,75%

2Document for Institutional Client’s exclusive use.Disclosure to the public is forbidden. June 2013

*Portfolio data as of May31 st 2013 Company data as of 31/03/13. Source:Epsilon SGR website

It’s an asset manager participated by Banca IMI with a 49% stake; this allows forthe use of risk management skills and investment protection methods that aretypical of investment banking.Assets under management and advisory of Epsilon SGR: 14.132 million eurosEpsilon funds: 517 mln€. Funds with proxy: 10.786 mln€. Institutional mandates:1.648 mln€. Assets under advisory: 1.180 mln€

•

• Duration*: 0,6

Management company :

The distinctive investment process ofEpsilon Fund Emerging Bond Total Return

70%

Performance Performance

Short Term

Emerging Bonds(Carry in €)

Hard currency core portfolio:

• Govies

• Semi-sovereign

• Corporate

Average duration < 1 year

A simple strategy that curbs emerging bonds’ volatility

3 Document for Institutional Client’s exclusive use.Disclosure to the public is forbidden. June 2013

30%Currency exposure via forex

Spread duration

Local debt

Performance drivers

since 2006*

Performance drivers

since 2006*

Active Risk(Tactical)

(Carry in €) Average duration < 1 year

Average rating: Investment Grade

Investment objective: to overperfom the Barclays Capital Euro Treasury Bills® Index+ 1,00% p.a. on a time horizon of 36 months

*Startegy performance from 20/03/06 to 31/05/13. Before 25/05/08 fund returns are based on the clone fund Enis Short Term Emerging Markets Bond

Head of Total Return and Discretional Investments

Luca Sibani, CFA

15 years of experience in emerging markets’ bonds

A structured investment team that integrates highly specialized competences


Corporate AnalystAndrea Mambretti, CFA

Corp & Em. Mkt TraderFrancesco Maiolo

Forex SpecialistGianluca Cagnazzo

• Analysis of currency markets and currency overlay strategies

• 15 years of experience in asset management

• Issuers’ quality analysis and bond picking


• “sentiment” analysis and investor positioning


The track record highlights total return, decorrelation and low volatility

Volatility1,70%3 years

Decorrelation

5 Document for Institutional Client’s exclusive use.Disclosure to the public is forbidden. June 2013Source: internal elaboration on Bloomberg data as of 31/05/2013

Perf. 2010 = + 5,98% Perf. 2011 = + 2,25% Perf. 2012= + 4,76%

Source: Bloomberg on data 31/12/2009 – 31/05/2013

3 years

Since 2006, sharpe ratio and diversification in multimanager portfolios has increased

Excellent risk adjusted return: EF Emerging Bond Total Return

Sharpe Ratio+1,183 years

Epsilon FundEm. Bond TR IEpsilon FundEm. Bond TR I


Em. Bond TR IEm. Bond TR I

*daily data from 20/05/2006 to 31/05/2013. Before 25/05/2008 the performances are based on the clone fund Enis Short Term Emerging Markets Bond

Epsilon Fund Emerging Bond Total Return Essential information

Strengths

• A solid team that has been working together for a long time(average work experience of 12 years)

• A distinctive investment process to achieve a flexiblestrategy

• A constant search for absolute returns through active and

A simple strategy that exploits the opportunities of emerging bondswith low volatility


Investment

objective

Strengths • A constant search for absolute returns through active anddecorrelated strategies

• The investment on short term bonds allows for a completeportfolio turnover 2-3 times per year

• A rigorous risk management and low volatility

• To overperfom the Barclays Capital Euro Treasury Bills®Index + 1,00% p.a. on a time horizon of 36 months

• VAR max 3% monthly with 99% confidence (max TEV 4,5%)

The investible universe ofemerging markets’ bonds

� 4 indices: EMBIG, CEMBI, GBI-EM, ELMI+

Asset Class Currency Index Market Cap Rating

Hard Currency DebtUSD EMBI <600 billion USD BBB-

Corporate Hard CurrencyUSD Cembi >600 billion USD BBB

Local Currency DebtLocal Currency GBI-EM 1500 billion USD BBB-

Currencies Elmi+


� And possibility of global macroeconomic diversification

Fonte: JPMorgan

Currencies Elmi+

The market keeps gorwing

� Market cap development of “emerging” bonds

� EM Bonds and Equity funds are the largest beneficiaries of QE 3

Market cap. in USD of emerging market bond indices


Source: JPMorgan as of May 2013

What is happening to emerging bonds?

…. after having benefitted from spread compressionin the last years

Annualized Total Return last 1, 3 and 5 years

Emerging bonds have becomevery sensitive to“core” rates…

Total Return YTD*


Source: DataQuery* As of June 13 th 2013

In 2013 the correlation of emerging bonds withcore rates has increased a lot

� Strong correlation increase of all emerging indices with core rates in the second quarter of 2013

� From negative («carry trade») to positive (risk hedging) correlation

Flight from risk

Yield search

Correlation with US Treasuries


Flight from risk

Source: internal elaborations on Bloomberg data as of 31/5/2013

Is it a short term movement or a ten-year trend reverse?

• Soundness of macro fundamentals:

� growth rates

� public finance indicators

� trade balance

� Check up or risks and opportunities present in the asset classes that make up emerging bonds


� trade balance

• Contribution to portfolio diversification

• Relative returns:

� Hard currency sovereign debt

�Corporate bonds

�Local currency debt

�Currencies

• Technical factos

More positive than negative aspectsin growth levels

� Economic activity: emergingcountries have increased theircontribution to world GDP

� 2013 Contribution: also in 2013 the contribution is above 70%.

Punti di forzaContribution toworld GDP growth

Strengths


� GDP growth: below expectationsin 2012

� 1st quarter 2013: disappointinggrowth data in China (7%), Braziland South Africa

Source world gdp: IMF, data as of April 30 th 2013Source picture on the right: datastream – Thomson Reuters as of May 13

Weaknesses

Public finance balances: debt loadsremain under control

� Fiscal balance: thanks to high growth rates, richness of commodities but most of all toimprovement in tax collection, fiscal balances are near break even

� Debt/GDP Ratio: debt stock has been considerably reduced

Fiscal balanceDebt/GDP Ratio


Source IMF, data as of April 30 2013

Current account balance is still positivebut decreasing, in particular in Asia

� Reserves’ accumulation that hasinvolved almost all emergingcountries

� Total value is higher than $8000bln (of which $3500bln in China)

Punti di forzaForeign reserves in

billion USD Strengths


� With respect to the past the currentaccount balance of emerging countries isdeteriorating

� Trend is worsening in India, Indonesia and South- East Asia in general

Current account/GDP balance

Source Thomson reuters as of April 2013

Weaknesses

Investing in emerging bonds contributes toportfolio diversification

� Risk/return analysis supports the investment in emerging bonds

� Sovereign bonds, corporate bonds and currency exposure contribute to improve the construction of a bond portfolio

Sharpe Ratio at 10 YrsEMBIG


Source: our elaborations on data DataQuery –JP Morgan and BofA as of 31/05/2013

CEMBI

GBI-EM

� The comparison with BBB US corporates still appears favorable for the emergingmarkets’ bond index

� During 2013 the differential increased for about 40 bps

Yield: is there still value in sovereign bonds?

Emerging vs Us Corporate BBB


Note: indices are EmbiGlobal and Juli All ex EM

Source: DataQuery

40 bps

Great selectivity is necessary to seize valueon single sovereign issuers

3500CDS Spread

(on 5 year maturities)

� The comparison with developed countries shows the need of a high selectivity amongemerging countries to seize the opportunities on “outlier” countries


Source: Bloomberg, data as of May 31 st 2013

� Corporate emerging global bonds have significantly grown in the last years and kept a high credit standing(BBB): over 75% of issues is IG

� The spread with corporate US BBB is stable for corporate emerging bonds IG and it’s between 50 and 75bps

� The spread of corporate HY is stable since the beginning of the year

Corporate emerging bonds keep a yield pickup, but…

Spread Corporate Emerging


Source: DataQuery, data as of May 31 st 2013

� Net emerging corporate issues are increasing up to over $300 bln expected in 2013

� Only partly absorbed by the launch of dedicated funds (moreover exposed to possibleredemptions)

…technical factors are not very favorable

Corporate issuesConcentration of inflows on corporate

emerging bond funds


Source: JP Morgan, data as of May 2013

Emerging bonds in local currencyare interesting only on a nominal level

� Asset growth also thanks to local investors

� Volatility of local currency bonds is almost twice as high as that of hard currencybonds

� Nominal yield of local currency issues appears to be higher than the global one in hard currency, but that difference is due to inflation

Higher Yield only on a nominal level


Source: DataQuery and IMF

3,5%

Inflation

3,5%

Nominal yields

Bonds in local currency are vulnerable whenthe main driver is carry

� Double risk factor: interest rate and exchange rate

� Central banks’ behaviour constrained by current instability

Turkey

2013

2012

South Africa

2013


Source: our elaboration on Bloomberg data as of May 31 st 2013

2012

Poland

2013

2012

2012

Brazil2013

2012

The dependence on foreign investors makessome countries more vulnerable

� The weight of foreign investors has grown in particular in the past 4 years

� The securities more subject to volatility/ sell off risks are those of emerging countries more exposed toforeign investors

Attention level

Percentage held by foreign investors


Source: CityBank as of April 30 th 2013

Emerging currencies allow to create valueand diversify asset allocation

� The emerging forex market is sufficiently liquid to manage volatility and carry of the asset class

� Potential increase in value with respect to hard currencies thanks to the seculartrend of higher growth and investments in emerging economies

� Currency investment requires a selective and tactical approach

� We create value by combining fundamental aspects, «carry» and investors’ positioning

Gap from equilibrium price of cross exchange rates


Source: our elaborations on Bloomberg and Jp Morgan data as of31/5/2013

� 2012 registered a new record of incoming flows (97 billions)

� In 2013 flows are more concentrated on local debt

� In June 2013 first significant outflow

There are outlier opportunities on emergingbonds, but attention on potential sell offs

Hard currency Local currency

Inflows on funds and ETFs dedicated to emerging bonds


Source: EPFR and JPMorgan

The second semester 2013 strategy of Epsilon Fund Emerging Bond Total Return

� We expect more volatility and a less search for yield approach from now on

� We will keep finding value mainly from carry of short term bonds

� The liquidity of instruments and of the fund represent a reference point in

portfolio management

� A lot of outlier opportunities : the flexible total return strategy exploits all the

emerging markets’ asset classes (government, corporate, forex, local currency


emerging markets’ asset classes (government, corporate, forex, local currency

and hard currency):

� The sovereign component in hard currency will retain a relevant role

� We will invest on semi-sovereigns and corporates, in particular

“national champions”

� Selective investment in emerging countries’ currencies based more

on tactical views rather than long term views

CCY EXPOSURE

EMERGING MARKET EXPOSURE

Epsilon Fund Emerging Bond Total ReturnPortfolio Allocation

YtM 3.75%

Duration 0. 60

Volatility 1Y = 1.13%

YtM 3.75%

Duration 0. 60

Volatility 1Y = 1.13%

RATING WEIGHT

AAA 1.50%

AA 0.82%

A 6.39%

BBB 44.09%

BB 33.17%

B 4.65%

27

CCY EXPOSURE

Source: internal elaboration on data as of May 31 st 2013

ISSUERS

Sovereign 41.04%

Semi- Sovereign 9.02%

Finance 14.07%

Corporate 26.49%

Cash 9.38%

GENERAL CHARACT.

AUM (mln €) 511.87

Duration 0.60

YTM (carry portfolio) 1.78%

YTM 3,75%

Average rating BBB-

MATURITIES

Cash 9.38%

2013 42.06%

2014 27.38%

2015 and over 21.18%

JPY -4.50%

Other -1.93%

HUF -1.96%

EUR -0.43%

SGD -2.00%

USD 1.87%

TRY 1.89%

KRW 1.92%

RUB 2.34%

BRL 2.44%

2013 scenario highlights the differential value of our total return strategy

� In this market reflexive phase the flexibility and the focus on total return with low volatility allow for an exposure to the opportunities that remain on the emerging marketsasset class as well as capital protection

Trend of Emerging Bond Eur Hdg funds

28 Document for Institutional Client’s exclusive use.Disclosure to the public is forbidden. June 2013Source: Morningstar from 02/01/2013 to 13/06/2013

Eurizon Capital s.a. Documento ad uso esclusivo dei clienti Professionali. Vietata la diffusione al pubblico. Giugno 2013

Eurizon Capital s.a. Documento ad uso esclusivo dei clienti Professionali. Vietata la diffusione al pubblico. Giugno 2013

Total return, decorrelationand low volatility

EF Emerging Bond Total Return I LU0365358570

3Y

• Total Return +10.27%

• Volatility 1,70%

• Sharpe Ratio 1,18

• Jensen’s Alpha +0,53%

Decorrelation


• Jensen’s Alpha +0,53%

• YTM 3.75%

• Duration 0.60

• A.U.M. 512 mln

Perf. 2010 = + 5,98%Perf. 2010 = + 5,98% Perf. 2011 = + 2,25%Perf. 2011 = + 2,25% Perf. 2012= + 4,76%Perf. 2012= + 4,76%

Source: internal elaboration on Bloomberg data as of 31/05/2013 * See disclaimer in the end notes

AttachmentGeneral fund information

Fund name Epsilon Fund Emerging Bond Total Return I

Benchmark Barclays Capital Euro Treasury Bills Index in € +1.00% (gross of fees)

Domicile Luxembourg UCITS III, FCP

Launch date 27/5/2008

Dealing & Valuation daily


Fees (%) •Fees: 25 Bps

• Perf. fee: 20% of extra performance (max 50 bps)

Codes •Isin: LU0365358570•Bloomberg: EURBDTR LX

Risk constraints •Max TEV : 4.5%•99%VaR: 3% monthly

Epsilon Fund Emerging Bond Total Return is a subfund that aims to achieve a performance at least equal to the Barclays Capital Euro TreasuryBills® Index expressed in Euro + 100 basis points, over a time horizon of 36 months.The performance of the subfund is generated by a combination of investments in short-term government and corporate bonds, issued in EmergingCountries. The subfund can take positions in the currencies of these countries and implement spreading strategies among their interest rates. Theportfolio duration is limited and does not represent a source of value.

Attachment - Performance: distribution of monthly returns since inception consistently total return


Monthly data from 31s Dec 2009 to 31st May 2013, before 25 May 2008 fund returns based on the previous fund

Attachment – Investment process:active risk pyramid

TRADING

20% - 30%

Quantitative indicators

TACTICAL VIEWS

RELATIVEVALUE

MEDIUM TERM

Weekly / daily

Max 3 months

TIME HORIZON INVESTMENT VIEWS


30% - 40%

SENTIMENT & POSITIONING

TECHNICAL ANALYSIS

STRATEGIC VIEWS

40% - 50%

MEDIUM TERM TREND

LONG TERM TREND

Max 3 months

6 – 12 months

Attachment – Investment process

TOP DOWN

Portfolio Construction

4 sources of total return


BOTTOM UP

Security

SelectionExposure

CountryCountrySelectionSelection

IssuerSelection

Attachment – Investment processExposure

Exposure

Spread

Macroeconomic

• Macro trends

• Correlation and relative value analyses

Security

SelectionExposure

CountrySelection

IssuerSelection


Macroeconomicscenario

Valuations

Technical aspects

• Correlation and relative value analysesbetween EM Bond and other assetclasses

• Net Issuance and positioning

Widening

Tightening

Attachment – Investment processCountry Selection

Country Selection

• Focus on 20-25 most relevant issuers representing over 70% of the sovereign

risk in the emerging markets arena

Security

SelectionExposure

CountrySelection

IssuerSelection


+ Overweight vs bmk

- Underweight vs bmk

risk in the emerging markets arena

• Ranking/scoring based on fundamentals (Ability to pay)

• Qualitative and Political Analysis (Willingness to pay)

• Meeting/research, sell-side analysis

Attachment – Investment processIssuer Selection

Issuer Selection

Sovrani +

Latam -

Asia +

CEEMEA -/2

Semi-Sovereign -� Three different categories:

Security

SelectionExposure

CountrySelection

IssuerSelection

Relative value analysis amongissuers - example


Semi-Sovereign -

Latam -

Asia =

CEEMEA =

Corporate -

Latam -

Asia =

CEEMEA =

� Three different categories:

Sovereign, Semi-Sovereign, Corporate

� Internal Rule: Sovereign & Semi-Sovereign >67% portfolio allocation

� Relative value analysis among country issuers.

Attachment – Investment processSecurity Selection

Security Selection

� Single issuer curve analysis: stand alone and compared to sector/rating:

Security

SelectionExposure

CountrySelection

IssuerSelection


� Single issuer curve analysis: stand alone and compared to sector/rating:

� Currency of issuance (€, USD GBP,....)

� Liquidity analysis

This task is jointly performed with the execution desk that does the price discovery and the market positioning analysis

Attachment- Portfolio construction: a summary onEF Emerging Bond Total Return

Performance targets

Style bias

To overperform the Barclays Capital Euro Treasury Bills Index +100 basis points p.a.

Active, pursued through the overlay of tactical uncorrelated strategies on a short term emerging

market bonds portfolio


Tracking error range

Constraints

4,5% TEV Max 3% monthly VAR (99%)

Average rating above Investment GradeAverage maturity below 18 months

market bonds portfolio

The content of this document is for information purposes only and is targeted solely to institutional investors.

To the best of the knowledge, information and belief of Eurizon Capital S.A., all information contained herein is accurate as at thedate of publication and is provided on an "AS IS" basis and without any warranties of any kind, either expressed or implied.However, neither Eurizon Capital S.A. nor its affiliates nor any directors or employees can or does warrant, guarantee or represent,either expressly or by implication, the accuracy, validity or completeness of such information.

This document contains information covering different Luxembourg-domiciled UCITS III umbrella funds, managed and registered inmany locations worldwide. In particular the Funds are registered for marketing in some, but not all EU countries. As such, access tothe information contained herein may be restricted by laws and regulations applicable to the user. This information is not intended tobe published or made available to any person in any jurisdiction where doing so would result in breach of any applicable laws orregulations. In particular, marketing of certain Funds is restricted to certain jurisdictions only.

The user should ensure that the use of this information and any investment made as a result does not breach any such restrictions.

Disclaimer


The user should ensure that the use of this information and any investment made as a result does not breach any such restrictions.It is the user's responsibility to be informed and to observe all applicable laws and regulations of any relevant jurisdiction.

In particular, the information contained in this document does not constitute investment advice or an offer to sell or the solicitationof any offer to buy any securities or services in the United States to or for the benefit of any United States persons (being residentsof the United States or partnerships or corporations organised under the laws of the United States). The Funds have not beenregistered in the United States under the Investment Company Act of 1940 and units or shares of the Funds are not registered in theUnited States under the Securities Act of 1933.

The document is not directed at investors in Hong Kong and its content has not been approved by the Hong Kong Securities andFutures Commission.

Under no circumstances may the information contained herein, or any part thereof, be copied, reproduced or redistributed withoutthe express permission of Eurizon Capital S.A.. Neither Eurizon Capital S.A. nor its affiliates, or any directors or employees shall beliable for any damage arising from any person's reliance on such information and shall not be liable for any errors or omissions(including but not limited to errors or omissions made by third parties) in such information.

The information provided herein is subject to change without further notice.

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