Interview Series

WIOF Latin American Performance Fund

Investment Advisor: INCA Investments, LLC

(June 2012)

So far this year, Latin America has been one of the best performing regions for equities in the world. Do you expect this to continue for the rest of the year and if so, why?

Latin American markets have performed well this year as global investors realize that Latin American economies are not closely associated with current global economic concerns, especially those created by highly indebted European economies. However, if global risk aversion returns, we expect Latin American markets to be negatively affected in the short term. In the longer term, we expect them to perform well based on their relatively strong economic fundamentals.

Latin American equities did not have a good year in 2011. Was this simply because all stocks struggled last year, especially those in emerging market regions, or was there anything specific to Latin America which contributed to the poor performance?

We believe the poor performance of Latin American stocks in 2011 was driven by global risk aversion.  Although we would argue that the strength of Latin American economies and their relatively low government and private debt levels make them a global safe haven, investors continue to treat Latin American markets as a risky asset class and sell their stocks when global risk aversion sets in.

To what extent are stock markets in the region affected by events in other parts of the world e.g. the Eurozone crisis, China’s economic slowdown?

Although Latin America is part of the global economy, the region’s economies are not export oriented and are focused on domestic consumption drivers, which shields them from much of the economic fallout outside of the region. However, if China experiences a more severe contraction than expected, it is difficult to believe that any region of the world would be immune, including the major economies of Latin America.

Local stock indexes are heavily driven by commodity stocks which can be very sensitive to external shocks e.g. the slowdown in the Chinese economy. Does this make them a poor guide to the health of companies in all sectors of individual countries’ economic sectors and how should investors therefore approach the performances of various country stock indexes?

Commodity stocks are more important to the Latin American market indices than the Latin American markets and economies.  In an environment of falling commodity prices, Latin American indices will perform worse than their markets and their underlying economies.  In addition, we generally believe that the better long term investment opportunities are in domestic-consumption oriented companies, which should weather commodity price declines more defensively.

As the largest market in the region and with its status as a BRIC nation, does Brazil present the best investment opportunities in Latin America?

We remain very optimistic about the long term potential of the Brazilian economy and its market. However, we expect the economies and markets of the smaller Latin American countries such as Chile, Peru and Colombia to perform better than those of Brazil in the next few years.

What is your investment strategy regarding the geographical allocation of the Fund portfolio?

Our strategy is, and will remain, to focus the portfolio on those companies which we believe represent the best investment value in the region. Our bottom up investment style has resulted in an underweight position in the Brazilian market which has been invested across other Latin American markets.

Do you plan to expand the Fund’s portfolio to include investments in more countries in the future?

For the near future, we expect the portfolio to remain invested in the five major countries of the region: Brazil, Mexico, Chile, Peru and Colombia.

Many investors associate political risk with investing in Latin America because of unstable political regimes. Has the situation improved with regard to this in recent years and are there any countries in the region which you would not invest in because of political risk?

Political risk has been greatly reduced in Latin American countries as their democratic institutions have held political leaders accountable for the management of their economies.  We are not invested in Latin American countries such as Venezuela and Argentina due to our negative view on the growing state intervention and manipulation of their economies by government forces.

Mexico is seeing multinationals return operations to the country from places which were previously considered to be more cost-effective in terms of cheap labour etc. Do you think this trend is a longer-term one and what investment opportunities does it present?

We are highly encouraged by the increase in Mexico’s manufactured exports.  We expect this trend to continue as Mexico’s cost of manufacturing continues to approach that of China.  We believe this export trend will increase the purchasing power of Mexican consumers and result in very good investment opportunities in the consumption-oriented companies of Mexico, which we favour.

What sectors in the region present, in your opinion, standout investment opportunities?

We believe that the domestic consumption companies of Latin America present the most attractive secular, long term investment opportunity.

In Latin America public information is not as readily available as in some other parts of the world. How does this affect your investment and stock picking strategies e.g. do you have an extensive local network of partners providing you with information on companies etc?

Our investment team relies on our local information network, as well as travelling to the region often to obtain first-hand information on the business environment and company prospects.

How do you see the prospects for Latin American markets and economies in the next six months?

We believe that Latin American markets will be driven by global risk perceptions in the short term.  Over longer term periods we believe the favourable economic environment of the region will provide a solid platform to allow the companies in the portfolio to perform well.

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.