Citywire montreux 2011 keep track on inflation e final

Montreux, 11-13 May 2011

Keep Track of Inflation! Managing Global Inflation Linked Bonds with Behavioral Finance

Dieter Gassner, Head Global Rates & FX LGT Bond Fund Global Inflation Linked (CHF/EUR/USD)

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Inflation linked bonds are relevant to every portfolio

LGT’s strong commitment to this asset class

Analysis combines macroeconomics with behavioral finance

LGT Bond Fund Global Inflation Linked (EUR)

Summary

Legal information

Managing Global Inflation Linked BondsDieter Gassner11-13 May 2011

Table of contents

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Get into the inflation linked bond asset class

“Inflation is when you pay fifteen dollars for the ten dollar haircut you used to get for five dollars when you had hair.”

– Sam Ewing –

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Break-even inflation rate and its implications

Break-even inflation = key parameter for the valuation of inflation linked bondsSource: LGT / Bloomberg

Investments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

Expected inflation > BEI: inflation linked bonds Expected inflation < BEI: nominal bonds

10 year US govt bond yield

Returnnominal bond

Break-eveninflation

Return inflationlinked bond

0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.0

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

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Performance components within inflation linked bonds

Main performance drivers for this asset class are:

Price return: Determined by changes of real yieldsInflation return: Inflation compensation of the underlying inflation index on face valueCoupon return: Fixed interest

Example: Barclays US ILB TR Index

-10

-5

0

5

10

15

20

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Ø

1999-20102010

Source: LGT / Barclays CapitalInvestments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

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Development of global market capitalization –continuity in fund management since 2003

LGT manages more than CHF 1.8 billion in this asset class (March 2011)

USD 1‘723 billion (March 2011)

UK1981

Australia1983

Canada1991

Sweden1994

USA1997

France1998

Italy2003

Japan2004

Germany2006

Greece2003

0

200

400

600

800

1'000

1'200

1'400

1'600

1'800

03/9

7

09/9

7

03/9

8

09/9

8

03/9

9

09/9

9

03/0

0

09/0

0

03/0

1

09/0

1

03/0

2

09/0

2

03/0

3

09/0

3

03/0

4

09/0

4

03/0

5

09/0

5

03/0

6

09/0

6

03/0

7

09/0

7

03/0

8

09/0

8

03/0

9

09/0

9

03/1

0

09/1

0

03/1

1

13.8%

9.0%

2.1%

23.9%

39.5%

3.1%3.7%

0.7%1.1%

3.2%

Market share

Starttrack

record


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Tailor-made portfolio structuring to reduce investment risks for investors

Benchmark GILB Benchmark (LGT) 1-10Y Barclays

CHF/EUR/USD

USA50%

United Kingdom20%

Sweden5%

France25%

Composed of country-specific Barclays Government Inflation Linked Indices 1-10 Years

Defensive focus relative to market and competitors:

Reduced interest rate risk

Lower duration than the market

Lower risk compared to index funds

No currency risk

Reference currency fully hedged

Tactical currency exposure possible <10%

Lowest credit risk available

Government bonds only

Stick to AAA borrowers only


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Our analysis includes all relevant fundamental and behavioral aspects

Compass for holistic analysis

Impact ofinflation

expectation (ie)

Impact ofreal growth (rg)

Funda-mentalMarket condition

Lowergrowth

Higherinflation

-2.0

-1.0

0.0

1.0

2.0 Structural bias (rg)

Cyclical factors (rg)

Trend (rg)

Relative trend (rg)

Trend confirmation/Hurst cycle (rg)

Relative trend confirm./Hurst cycle (rg)

Reversion-to-the-mean (rg)Relative reversion-to-the-mean (rg)

Judgemental overlay (rg)Judgemental overlay (ie)

Relative reversion-to-the-mean (ie)Reversion-to-the-mean factor (ie)

Relative trend confirm./Hurst cycle (ie)

Trend confirmation/Hurst cycle (ie)

Relative trend (ie)

Trend (ie)

Cyclical factors (ie)

Structural bias (ie)

Investment model for global inflation linked bonds

Source: LGTInvestments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

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Active tactical positioning following clearsignals

Q2/08: Stagflationary environment (recession fears and strong rising commodity prices)

Q1/09: Crisis mode (deflation fears)

Q2/09: From intensive-care back to action

Q2/11: Unspectacular and solid growth paired with strong rising commodity prices

-2.0

-1.0

0.0

1.0

2.0 Structural bias (rg)

Cyclical factors (rg)

Trend (rg)

Relative trend (rg)

Trend confirmation/Hurst cycle (rg)

Relative trend confirm./Hurst cycle (rg)

Reversion-to-the-mean (rg)

Relative reversion-to-the-mean (rg)Judgemental overlay (rg)

Judgemental overlay (ie)Relative reversion-to-the-mean (ie)

Reversion-to-the-mean factor (ie)

Relative trend confirm./Hurst cycle (ie)

Trend confirmation/Hurst cycle (ie)

Relative trend (ie)

Trend (ie)

Cyclical factors (ie)

Structural bias (ie)

Source: LGTInvestments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

10



Performance vs benchmark and competitors

Source: Micropal. LGT Fund: net of management fees. Universe: German registered funds. Peer group: EUR Inflation-Linked Bond.

Investments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

Performance vs benchmark as of 31 March 2011 (rebased)


GILB Benchmark (LGT) 1-10Y Barclays EUR

Source: LGT / Datastream. LGT Fund: gross of management fees.

96100104108112116120124128132

03/06 09/06 03/07 09/07 03/08 09/08 03/09 09/09 03/10 09/10 03/11

- 1 year

- 3 years

- 5 years 23.12% 15.39% 3 25 ?

10.82% 8.43% 6 32 ?

4.38% -0.11% 6 41 ?

LGT Fund Median Rank Funds 4th quartile 3rd quartile 2nd quartile 1st quartilePeriod

Performance vs competitors as of 31 March 2011

Positive performance in the past is no guarantee of positive performance in the future. The risk of price and foreigncurrency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out.

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Performance development in 2010

LGT Customized Benchmark 1-10Yrs EURFrance Govt Inflation-Linked 1-10YrsSweden Govt Inflation-Linked 1-10YrsUS Govt Inflation-Linked 1-10YrsUK Govt Inflation-Linked 1-10Yrs

Australia Govt Inflation-Linked 1-10Yrs Germany Govt Inflation-Linked 1-10Yrs US Govt Comparator Bond 7-10Yrs US Govt Comparator Bond >10Yrs Germany Govt Comparator Bond 1-10Yrs

(ex benchmark)(ex benchmark)(nominal bond)(nominal bond)(nominal bond)

88

92

96

100

104

108

112

12/2009 03/2010 06/2010 09/2010 12/2010

Q1/2010: 1.69%vs benchmark -0.04%

Overweight US and admixture of ACGB’s did not pay off

Q2/2010: 2.88%vs benchmark +0.97%

All sources contributed posi-tively to the performance

Q3/2010: 1.78%vs benchmark. +0.15%

All sources contributed posi-tively to the performance

Q4/2010: -0.88%vs benchmark -0.79%

Break-even, country, durationdelivered strong negative perf.

Source: LGT / Barclays Capital (index quarterly rebased)Investments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

Positive performance in the past is no guarantee of positive performance in the future. The risk of price and foreigncurrency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out.

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Market outlook –US real yields and inflation expectation

5 year maturity 10 year maturity 30 year maturity

2005-2007 & 2011: Great moderation

2008: Two faces: from inflation to deflation fears

2009: From intensive-care back to action

2010: Consolidation

current: Unspectacular and solid growth paired with strong rising commodity prices

-1.0

0.0

1.0

2.0

3.0

4.0

-1.0 0.0 1.0 2.0 3.0 4.0 5.0

Real Yields

Bre

ak

-ev

en

Ra

tes

-1.0

0.0

1.0

2.0

3.0

4.0

-1.0 0.0 1.0 2.0 3.0 4.0 5.0

Real Yields

Bre

ak

-eve

n R

ate

s

-1.0

0.0

1.0

2.0

3.0

4.0

-1.0 0.0 1.0 2.0 3.0 4.0 5.0

Real Yields

Bre

ak

-ev

en

Ra

tes

Source: LGT / BloombergInvestments open up new opportunities, but they also involve risks.Please consult the legal information at the end of this presentation.

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Current portfolio positioning

Exploitation of roll-down effect of yield curveUS nominal yield curve flattenerBreak-even trade in Euroland and SwedenStick to AAA government bonds only

Maturity structure Country allocation

Key figures Portfolio outlook

Duration: 6.07 +1.05 yrsRating: AAA 100%Nominal exposure: 9.62%Currency: 100% hedged

52%

18%

11%

9%

6%2%3%

USA

Great Britain

France

Australia

Sweden

Canada

Germany0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

1 yr

2 yr

s

3 yr

s

4 yr

s

5 yr

s

6 yr

s

7 yr

s

8 yr

s

9 yr

s

10 y

rs

12 y

rs

14 y

rs

16 y

rs

18 y

rs

Portfolio Benchmark


14Dieter GassnerManaging Global Inflation Linked Bonds

11-13 May 2011

Summary

Why invest in Global Inflation Linked Bond Funds with LGT?

Source: LGT

We believe that global inflation linked bonds are relevant to every portfolio as a strategic investment – LGT holds up to 20% in every fixed income portfolio

As global monetary and fiscal policy has beenaggressively positioned, there are clear risks that inflation will be higher than expected

Global investment universe with reduced interest rate and credit risk – correlation between different regions offers a diversification benefit

Long-standing experience in this asset class and continuity with identical fund management team since 2003 – LGT currently manages CHF 1.8 billion

Respond to increasedinflation risks

Global approach andreduced risk profile

LGT’s strong commit-ment to this asset class

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Source: TELOS GmbH / Standard & Poor‘s / Axel Springer Verlag

Dieter Gassner11-13 May 2011

Managing Global Inflation Linked Bonds

Summary

Fund ratings and awards of LGT Bond Fund Global Inflation Linked (EUR)

TELOS Fund Rating “AA-”LGT Bond Fund Global Inflation Linked (EUR) since January 2011

Standard & Poor‘s Fund Management Rating “A“LGT Bond Fund Global Inflation Linked (EUR) since May 2009

€uro-Fund Award 2011LGT Bond Fund Global Inflation Linked (EUR) Best Fund over 5 Years

”Bond Fund (Inflation Protected)” category

LGT Bond Fund Global Inflation Linked (EUR) was named the “Fund Award 2011“ by the editors of €uro, €uro am Sonntag and €uro-fondsxpress (Axel Springer Verlag) for its outstanding performance.

Following the Fund Award 2008 and 1010, this is the third time that the fund won first place in this category.

16Dieter GassnerManaging Global Inflation Linked Bonds

11-13 May 2011

Summary

LGT Bond Fund Global Inflation Linked (CHF/EUR/USD)* – terms & conditions

* The detailed and binding terms and conditions can be found in the full or the simplified prospectus issued by LGT Funds AGmvK with information to the LGT Bond Fund Global Inflation Linked (CHF), LGT Bond Fund Global Inflation Linked (EUR) and LGT Bond Fund Global Inflation Linked (USD).

Fund description LGT Bond Fund Global Inflation Linked (CHF/EUR/USD) is an actively managed portfolio, which invests intraditional and synthetic inflation linked, investment grade bonds issued by issuers in the private and public sectors worldwide. It aims to generate attractive, inflation protected returns over the long term.

Inception A: CHF: 31.08.2010 • EUR: 31.08.2010 • USD: 30.09.2010 B: CHF: 31.03.2009 • EUR: 10.05.2004 • USD: 30.09.2010

Fund domicile Principality of Liechtenstein

Investment manager LGT Capital Management Ltd.

Share classes A: Distributing share classB: Reinvesting share classI1: Institutional share class (minimum investment: CHF 1 million or countervalue)

ISIN/Valor A: CHF: LI0114576437/11457643 • EUR: LI0114576429/11457642 • USD: LI0114576387/11457638B: CHF: LI0100058481/10005848 • EUR: LI0017755534/1775553 • USD: LI0114576395/11457639I1: CHF: LI0100058499/10005849 • EUR: LI0021090100/2109010 • USD: LI0114576403/11457640

Issue/redemption Daily (business days), cut-off time 2.00 p.m. CET

Reference currency CHF • EUR • USD

Benchmark GILB Benchmark (LGT) 1-10Y Barclays CHF/EUR/USD

Registration CHF: FL, CH, AT, DE • EUR: FL, CH, AT, DE • USD: FL, AT, DE, CH

Fees and commissions A: Management fee p.a. 0.90%Operations fee p.a. 0.25%

B: Management fee p.a. 0.90%Operations fee p.a. 0.25%

I1: Management fee p.a. 0.45%Operations fee p.a. 0.15%

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This document is intended solely for the recipient and may not be duplicated, distributed or published either in electronic or any other form without the prior written consent of LGT Group Foundation. This publication is for your information only and is not intended as an offer, solicitation of an offer, public advertisement or recommendation to buy or sell any investment or other specific product. Its content has been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any undertaking or guarantee as to it being correct, complete and up to date. The circumstances and principles to which the information contained in this publication relates may change at any time. Once published, therefore, information shall not be understood as implying that no change has taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-making in relation to financial, legal, tax or other consulting matters, nor should any investment or other decisions be made on the basis of this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future. Forecasts are not a reliable indicator of future value developments. The risk of price and foreign currency losses and of fluctuations in return as a result of unfavorable exchange rate movements cannot be ruled out. There is a possibility that investors will not recover the full amount they initially invested. We disclaim without qualification all liability for any loss or damage of any kind, whether direct, indirect or consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication shall therefore be obliged to find out about any restrictions that may apply and to comply with them.

It is up to potential investors to obtain comprehensive information and appropriate advice in their home country, country of residence or country of domicile about the applicable legal requirements and any tax consequences, foreign currency restrictions or foreign exchange controls and any other aspects that are of relevance prior to any decision to subscribe to, purchase, own, exchange or redeem such investments, or enter into any other transaction in relation to same.

The securities and rights mentioned in this document may not be purchased or held by investors or for investors domiciled in the USA and/or with US citizenship, nor may such securities and rights be transferred to them.


Legal information

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LGT Capital Management

Contact

Phone +41 55 415 9292 Fax +41 55 415 9230 E-Mail [email protected] www.lgt.com

LGT Capital Management Ltd. Herrengasse 12FL-9490 VaduzPrincipality of Liechtenstein

LGT Capital Management Ltd.Schützenstrasse 6CH-8808 Pfäffikon (SZ)Switzerland

Further locations with investment specialists: Geneva, Hong Kong, Singapore

LGT Capital Management Ltd.(Niederlassung Deutschland)Schaumainkai 85D-60596 Frankfurt am MainGermany

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Picture description

"Ships Off the Coast", 1672

WILLEM VAN DE VELDE THE YOUNGER 1633–1707

New and popular subjects amongst Dutch painters were the marine, the so-called seascape or ship picture. These genres were particularly well-suited to depicting the rich trading and nautical power of the still-young nation of the States-General of the Netherlands. Willem van de Velde the Younger specialised in this genre. He often borrowed detailed motifs from his father, a marine draftsman who recorded the activities of the Dutch fleet, and combined these to create imaginary compositions. His painting "Ships Off the Coast" depicts ships with their particular features, accurately proportioned and skilfully executed.The painting, dated 1672, was created in the year in which van de Velde went to England.

© Collections of the Prince of Liechtenstein, Vaduz – ViennaLIECHTENSTEIN MUSEUM, Vienna. www.liechtensteinmuseum.at

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Citywire montreux 2011 keep track on inflation e final