1. Delivering absolute returns from global bond markets
April 2016
Nicholas Chatters – Investment Manager, Fixed Income

2. Nicholas Chatters, Investment manager
Nicholas Chatters is an investment manager in the fixed income team and specialises in interest rate derivatives and relative value investment. He is co-manager of the Kames Absolute Return Global Bond Fund and supports the management of the Kames Absolute Return Bond Fund. Nicholas joined us in 2013 from Citi and has a background as an interest rate derivatives trader. He studied for an undergraduate degree in Economics and postgraduate degree in Finance at the University of St Andrews. He has 9 years’ industry experience.

3. Introducing Kames Capital absolute return
Assets under management in absolute return funds (€m)
Investment capabilities
Fixed income
Equities
Property
Multi-asset
Absolute return
Ethical
Launched first absolute return fund in
We manage six funds:
Three equity market neutral funds
Three absolute return bond funds
Kames Absolute Return Bond Fund
Kames Absolute Return Bond Global Fund launched 29 April 2015, designed to replicate KARB
As at 31 December 2015

4. Kames Absolute Return Bond Fund Performance
Net performance total return since launch
Total since launch
Total return (net)
7.64%
Benchmark total return
2.86%
Difference (net)
4.78%
Total return (gross)
10.78%
Best month (Oct 2011)
0.60%
Worst month (Jan 2016)
-0.31%
Up months
36/53
Down months
17/53
Maximum Drawdown
-1.00%
Volatility
0.69
Sharpe Ratio
1.53
Source: Lipper, NAV to NAV, noon prices, local currency, as at 29 February Kames Absolute Return Bond Fund B (Acc) GBP shares. Total return excluding initial charges, net of annual management charge, income re-invested. Table – all Fund returns based on cumulative noon Lipper data. Gross returns based on Lipper data grossed up for AMC. Benchmark is at close. Risk statistics based on annualised monthly returns. Maximum Drawdown period based on daily returns. Past performance is not a guide to future returns. Note: the Fund launched on 30 September 2011 and within the last 5 years. .

5. Lower volatility opportunity Focus on alpha over beta
Source: Kames Capital, Bloomberg, BofA Merril Lynch, as at 29 February * Annualised volatility since inception for Kames Absolute Return Bond Global Fund

6. Delivering returns uncorrelated to the underlying market
Correlation = 0.07
Correlation = -0.16
Source: Bloomberg and BoA Merrill Lynch as at 29 February Kames Absolute Return Bond Fund B (Acc) GBP shares. Past performance is not a guide to future returns.

7. Our Absolute Return Bond Funds structure
Kames Absolute Return Bond Funds
Carry
Rates
Credit & Asset Allocation
Targeting absolute return, low volatility, low correlation

8. Trade examples

9. Rates module Long UK/short US
Rationale
Diverging expectations of monetary policy
Action in May 2015
Long UK 5-year government risk
Short US 5-year government risk
Result
Fundamental trade rationale remains intact
Short-term technical argued for taking profit
We closed the trade at a small profit
Trade closed
Trade entered
Source: Bloomberg and Kames Capital as at 16 June For illustrative purposes only.

10. Rates UK 10s30s flattener Rationale Action in October 2015 Result
Long end underperformed ahead of supply event
Action in October 2015
Long 30y UK Government risk
Short 10y UK Government risk
Result
Trade closed at profit after continues flattening
Re-entered position at better entry levels
Trade entered
Trade closed
Source: Kames and Bloomberg as at 13 November For illustrative purposes only.

11. Rates module 2v5v10y GBP Fly
Rationale
UK interest rate pricing looks extremely low in short dated swaps, looking for relative value in the shape of the curve
Action in May 2015
Long 1 unit of 2y swap
Short 2 units of 5y swap
Long 1 unit of 10y swap
Result
As market expectations of interest rate moves are priced in, the fly moves higher to generate a profit, without taking outright duration risk
Closed trade
18 Nov 7.9bps
Entered trade
23 Oct 4.4bps
Source: Bloomberg and Kames Capital as at 31 December For illustrative purposes only.

12. Credit module Long MGM/short Ladbrokes
Rationale
Labour party plan for crackdown on UK high street betting
MGM underperformance due to headline risk of Macau business
Bulk of MGM business US-based and supported by lower oil prices
Action
Buy: MGM risk (5yr CDS)
Sell: Ladbrokes risk (5yr CDS)
Result
Election uncertainty fears weigh on Ladbrokes
MGM outperforms; target reached
Trade closed at a profit
Trade entered
Trade closed
Source: Kames Capital and Bloomberg as at 31 July For illustrative purposes only.

13. Credit module Long 10yr iTraxx/short 5yr iTraxx
CDS curve flattener trade
The difference between 10yr and 5yr credit spreads widened materially over
10yr spreads looked cheap relative to 5yr spreads - curve expected to flatten
Action:
Long risk 10yr iTraxx Main
Short risk 5yr iTraxx Main
Result
Spread between the two assets narrowed
Closed the trade profitably in August 2014
Closed trade
@ 41bps
Entered trade
@ 47bps
Source: Kames Capital and Bloomberg as at 25 February For illustrative purposes only.

14. Credit & Asset Allocation module Long investment grade/short high yield
Rationale
Euro IG underperformed HY after the ECB QE announcement
Any addition of IG bonds into QE basket would be supportive
Action
Trade entry attractive on 6 July
Long IG risk (sell iTraxx Main protection)
Short HY risk (buy iTraxx Xover protection)
Trade implemented on beta-weighted basis
Result
Post-Greek election IG recovered relative to HY
Spread compression added value to fund – trade closed at a profit
Source: Bloomberg and Kames Capital as at 14 October Xover spread beta-weight x 0.2.

15. Kames Absolute Return Bond Global Fund Summary
Proven fixed income investment process and absolute return capability
Low-risk investment solutions designed to deliver stable profiles of returns
Low correlation to underlying bond markets
Managed by experienced and award-winning fixed income team
Sauren fondsmanager-rating has been awarded to David Roberts, Head of Fixed Income. Past performance is no guarantee of future results.

16. Important information
This document is not intended for retail distribution and is directed only at investment professionals. It should not be distributed to, or relied upon by, private investors. All data in this presentation is sourced to Kames Capital unless otherwise stated. The views expressed in this document represent our understanding of the current and historical positions of the market. They should not be interpreted as a recommendation or advice. Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and is not guaranteed. The Kames Absolute Return Bond Fund and The Kames Absolute Return Bond Global Fund are registered in the United Kingdom, Ireland, Austria, Germany, Jersey, Guernsey, Luxembourg, Malta, the Netherlands, Switzerland, Spain, Italy, Sweden and Belgium. Not all available shareclasses are registered in every country. Please for the list of shareclasses registered in your jurisdiction. While the investment objective of absolute return funds is to achieve a positive return in all market conditions, this is not guaranteed in any way. Investment professionals must ensure that they meet their obligations in relation to their understanding of this product and the risks involved, and the extent to which this product meets the needs of their clients. Please refer to the Full Prospectus. This document is accurate at the time of writing but can be subject to change without notification. Kames Capital Investment Company (Ireland) plc, is an umbrella type open-ended investment company with variable capital registered in the Republic of Ireland (Company Number ), registered office at North Wall Quay, International Financial Services Centre, Dublin 1. Board of Directors: Andrew Bell (UK), Mike Kirby (Ireland) and Bronwyn Wright (Ireland). Kames Capital Investment Company (Ireland) plc is regulated by the Central Bank of Ireland. Kames Capital is an Aegon Asset Management company and includes Kames Capital plc (Company Number SC113505) and Kames Capital Management Limited (Company Number SC212159). Both are registered in Scotland and have their registered office at Kames House, 3 Lochside Crescent, Edinburgh, EH12 9SA. Kames Capital plc is authorised and regulated by the Financial Conduct Authority, (FCA reference no: ). Kames Capital plc is the Investment Manager and Marketing Agent for Kames Capital Investment Company (Ireland) plc. Kames Capital Management Limited is an appointed representative of Scottish Equitable plc (Company Number SC144517), an Aegon company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (PRA/FCA reference no: ). For Investors in Sweden - Kames Capital Investment Company (Ireland) plc is a UCITS collective investment scheme notified for sale in Sweden. The Prospectus, Supplement and Key Investor Information for Kames Capital Investment Company (Ireland) plc are available free of charge from MFEX Mutual Funds Exchange AB, Grev Turegatan 19, Box 5378, SE Stockholm, Sweden, Tel : +46 (0)
FPID: 2016/22819