Income Plus Portfolio - 2012 08 01 - Copy · 9/1/2012 · 3 Investment Process Investment Universe: Our primary market is the European market.The vast majority of issuers have bonds

PRIVATE & CONFIDENTIAL September 2012

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Introduction The Credo Income Plus Portfolios (CIPs) are three high conviction bond portfolios across 2 currencies,

each with a minimum targeted annual return that we would expect to achieve over the life of the portfolios,

whatever the economic backdrop, but assuming bonds are held to maturity.

The portfolios will be actively managed by our Fixed Income Team, which has consistently delivered

strong results. Clients will have daily access to their portfolios via MyCredo, which provides transparent

secure online reporting.

Portfolios

The Credo Income Plus Portfolios can be invested in as standalone portfolios or as part of a wider asset

allocation strategy.

Investment Strategy We look for corporate bonds that offer sufficient compensation for the risks of owning them. Whilst the

CIPs’ primary objective is to create income for our investors we are aware that excess returns can be

derived through capital appreciation.

Because the CIPs are actively managed portfolios, when the economic backdrop strengthens and rewards

increase, we would envisage increasing the risk in the CIPs to increase the targeted yields.

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Investment Process

Investment Universe: Our primary market is the European market. The vast majority of issuers have

bonds listed in Europe in a variety of currencies. Eurobonds tend to be liquid, well researched and our

dealing expertise tends to be focussed in this area.

Screening and Elimination: The screening process contains both quantitative and qualitative aspects.

We reduce our universe by filtering out bonds that are not rated highly enough by the various rating

agencies for inclusion in the CIPs, or that are below our minimum issue size ($150m and £100m) and

bonds that do not have the necessary liquidity. We also eliminate bonds we feel offer inadequate

compensation or have significant risks.

Analysis: Although rating agencies are a useful starting point, in our view they are slow to adapt to changes

in the markets. It is therefore important to conduct one’s own analysis and this is a vital part of the CIPs

investment process. Using both internal and external sources we conduct a detailed analysis of each bond

whilst incorporating our macro-economic view and taking a strategic outlook on the investment. Our

universe will be filtered substantially at this point. The main focus of our analysis will be based upon the

following key attributes:

Total outstanding debt Access to capital markets Terms of debt

Balance sheet strength Character/reputation of issuer Interest rate sensitivity

Cash flow and Profitability Political sensitivity Debt maturity

Seniority of debt Geographical sensitivity

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Construction: By this stage our universe has been substantially narrowed. The final portfolio is

constructed from the highest yielding bonds we can get for the risk that we are prepared to take. Great

care is taken to achieve diversity across both industry and maturity of the bonds. The end result is a

diversified portfolio of 7-12 high conviction holdings.

Execution: Unlike the equity world, bonds are typically traded telephonically and ‘best price’ is not always

shown on data sources such as Bloomberg. It is important, therefore, to have a large network of trusted

broker-dealers and intermediaries to ensure that bonds are traded at the best possible levels. We have a

wide network of market participants and counterparties making Credo a very attractive house through

which to purchase these instruments.

Monitoring: We review our portfolios on an on-going basis and monitor the constituents regularly. This

includes receiving company news and analyst alerts, reviewing analyst reports and attending company

events and conference calls. We are in regular contact with a variety of bond market participants whose

input complements our own research.

Liquidity The corporate bond market can become illiquid especially during times of financial stress. In addition certain

bonds have large minimum dealing sizes that may be in excess of an individual client’s position. It is highly

plausible that an investor who wishes to redeem bonds before the stipulated redemption date may not be able

to sell as and when required at the reported price if indeed at all. We will endeavour to aid liquidity for sellers.

Fixed Income Team The Credo Fixed Income team has been managing fixed income portfolios as a tight knit unit for the past

12 years. The team takes an entrepreneurial yet measured approach in managing these portfolios. With

an experienced Investment Committee at the helm we are confident that the Fixed Income team will

continue to deliver superior returns to its clients.

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The Current CIPs

Low Volatility – Target: 3% Plus (Sterling)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

A- N/A BAA FUNDING LTD 3.000 08/06/2015 103.50 1.70

A- Baa1 MORGAN STANLEY 5.125 30/11/2015 104.30 3.70

BBB Baa2 NEXT PLC 5.875 12/10/2016 113.75 2.31

BBB Baa2 BRITISH TELECOM PLC 7.500 07/12/2016 126.00 2.07

BBB Baa2 GLENCORE FINANCE EUROPE 6.500 27/02/2019 113.25 4.13

A- Baa1 TESCO PLC 5.500 13/12/2019 117.75 2.75

BBB- Baa3 OLD MUTUAL PLC 8.000 03/06/2021 108.25 6.74

BBB- Baa3 MARKS & SPENCER PLC 6.125 06/12/2021 113.00 4.34

Average Yield 3.47

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Medium Volatility – Target: 5% Plus (Sterling)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

BB+ Ba1 WILLIAM HILL PLC 7.125 11/11/2016 111.50 4.11

N/A N/A PROVIDENT FINANCIAL PLC 7.000 10/04/2017 106.40 5.54

N/A N/A TESCO PERSONAL FINANCE 5.200 24/08/2018 106.80 3.91

BBB+ A3 AXA SA 7.125 15/12/2020 111.50 5.36

A Baa1 BARCLAYS BANK PLC 10.000 21/05/2021 117.00 7.29



N/A Ba1 INVESTEC BANK PLC 9.625 17/02/2022 101.25 9.40

Average Yield 5.82

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Medium / High Volatility – Target: 7% Plus (Sterling)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

N/A N/A PROVIDENT FINANCIAL PLC 7.000 10/04/2017 106.40 5.54

BB- B1 JAGUAR LAND ROVER PLC 8.125 15/05/2018 106.75 6.68

BB Ba3 LBG CAPITAL NO.1 PLC 11.040 19/03/2020 103.00 10.45

BBB+ A3 AXA SA 7.125 15/12/2020 111.50 5.36

BBB+ Baa2 CO-OPERATIVE BANK PLC 9.250 28/04/2021 107.50 8.00



N/A Ba1 INVESTEC BANK PLC 9.625 17/02/2022 101.25 9.40

BBB Baa2 RWE AG 7.000 Perpetual* 105.50 6.09

Average Yield 7.28

(*) Perpetual bonds can sometimes be redeemed by the issuer at specific dates. For the annual yield we have estimated the most

conservative likely outcome for investors.

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Low Volatility – Target: 3% Plus (US Dollar)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

BBB Baa2 GLENCORE FUNDING 6.000 15/04/2014 106.50 1.92

A- A2 MORGAN STANLEY 5.375 15/10/2015 105.50 3.50

BBB+ Baa1 DEUTSCHE TELEKOM INT FIN 5.750 23/03/2016 113.25 1.87

A- A3 HUTCHINSON WHAMPOA 3.500 13/01/2017 106.10 2.03

BBB- Baa3 ARCELORMITAL 4.500 25/02/2017 98.75 5.06

BBB A3 INVESTEC BANK PLC 3.875 24/07/2017 98.50 4.22


BBB Baa3 STANDARD BANK PLC 8.125 02/12/2019 114.00 5.74

Average Yield 3.54

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Medium Volatility – Target: 5% Plus (US Dollar)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

BBB- Baa3 ARCELORMITTAL 4.500 25/02/2017 98.75 5.06


BBB Baa3 STANDARD BANK PLC 8.125 02/12/2019 114.00 5.74

A- A1 GOLDMAN SACHS GROUP INC 5.375 15/03/2020 107.75 4.17

BBB- Baa3 ANGLOGOLD ASHANTI 5.375 15/04/2020 106.00 4.44


DBRS: BBBL

N/A ABERDEEN ASSET MANAGEMENT PLC

7.900 Perpetual* 100.40 7.87

BBB+ Baa1 PRUDENTIAL PLC 11.750 Perpetual* 116.00 4.65

Average Yield 5.27



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Medium / High Volatility – Target: 7% Plus (US Dollar)

S&P

Moodys

Issuer

Coupon Maturity

Price AnnualYield

N/A Baa2 AFRICAN BANK LIMITED 8.125 24/02/2017 107.50 6.18

BB- B1 JAGUAR LAND ROVER PLC 7.750 15/05/2018 107.00 6.01


DBRS: BBBL

N/A ABERDEEN ASSET MANAGEMENT PLC

7.900 Perpetual* 100.40 7.87

BBB Baa2 RWE AG 7.000 Perpetual* 105.00 6.41

N/A N/A SWISS RE 8.250 Perpetual* 103.75 7.45

BB Ba2 LLOYDS BANK PLC 6.850 Perpetual* 73.50 9.44

Average Yield 7.09



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Investment Terms Minimum Investment: £100,000 or $150,000

Implementation Due to the fact that most bonds trade in minimum lot sizes of 100,000 there may be some delay in

aggregating orders. In some cases where we do not reach the minimum lot size within a suitable time

frame, we may select alternative bonds.

Reporting As a client you will have full transparent access to the live portfolio via MyCredo, our state of the art online

secure reporting system.

About Credo Credo is an independently owned wealth management group established in 1998 which provides financial

services to private and institutional clients. It is a multi-national business with offices in London, Geneva,

Bermuda, BVI and South Africa and associations in Australia, New Zealand and Luxembourg. The group

has assets under administration in excess of £1.2bn and employs over 65 employees. Credo’s primary aim

is to protect and enhance our clients' wealth.

Important Notice The Credo Income Plus Portfolios (“CIPs”) document has been issued by Credo Capital Plc (the “Company”)

for information purposes only. This document does not constitute an offer or solicitation to invest. Its sole

purpose is to advise investors of this new offering and to assist the recipient in deciding whether they wish to

receive further information about this opportunity. It does not constitute advice or a personal recommendation

and if you wish to invest in a CIP you should consult with your investment advisor to ensure that the CIP you

want to invest in is suitable for you given your investment objectives, attitude to risk and financial circumstances.

This document contains forward looking information that is based on current opinions and expectations.

Actual results could differ materially from those anticipated in the forward looking information.

Investors are warned that past performance is not necessarily a guide to future performance, income is

not guaranteed and security prices may go up or down and if you invest in CIPs you may not get back

your original capital invested. The value of your investments may also rise or fall due to changes in tax

rates and rates of exchange if different to the currency in which you measure your wealth. Companies in

the Credo Group and their respective directors, members and employees may have positions in the

companies and may have given advice in relation to the companies in the last twelve months.

Investors should note that annual yields shown are before any charges or fees are levied and that pricing

is indicative as at 29th August 2012.

The information contained in this document has been obtained from sources considered reliable and is

private and confidential and no part of this document may be reproduced or distributed in any manner

without the written permission of the Company.

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Income Plus Portfolio - 2012 08 01 - Copy · 9/1/2012 · 3 Investment Process Investment Universe: Our primary market is the European market.The vast majority of issuers have bonds