For professional use only Not for Public distribution For one-on-one use only with eligible investors Available only as Private Placement for eligible taxable and tax-exempt Canadian investors Global Real Estate: Building a Diversified Portfolio from a Broad Opportunity Set Investing in the Age of Macro Finance April 2013 Katherine Giordano, Aberdeen Asset Management Head of Americas, Property Multi-Manager Aberdeen Asset Management ( AAM ) is the marketing name in Canada for Aberdeen Asset Management Inc, Aberdeen Fund Distributors, LLC., and Aberdeen Asset Management Asia Ltd. Aberdeen Asset Management Inc is registered as a Portfolio Manager in the Canadian provinces of Ontario, Nova Scotia and New Brunswick. Aberdeen Asset Management Asia Limited is registered as a Portfolio Manager in Ontario. Aberdeen Fund Distributors, LLC operates as an Exempt Market Dealer in all provinces and territories of Canada. Aberdeen Fund Distributors, LLC is a wholly owned subsidiary of Aberdeen Asset Management Inc. Both Aberdeen Asset Management Inc. and Aberdeen Asset Management Asia Ltd. are wholly owned by Aberdeen Asset Management PLC. Real estate investible universe Source: DTZ Money into Property, Dec 12 Global investible universe Private equity Private debt C$11.2 trillion Public debt Public equity Canadian investible universe Private equity Source: DTZ Money into Property, IPD, EPRA, Dec 12 C$278 billion Private debt Public debt Public equity 1
Real estate allocations rising Average share of real estate across Canada s pension funds % 10 9 8 7 6 5 4 3 2 1 0 2000 2011 Source: Knight Frank Global Capital Markets, 31 Dec 11 2 Why invest globally in real estate? Domestic real estate allocation Non-domestic real estate allocation 1) Potential higher riskadjusted returns OR 2) Potential higher returns Core, low leverage Income-producing Quality assets Real estate approach Value added/ opportunistic Private equity approach Source: Aberdeen Asset Management, Apr 13 3
Case study: global separate account Portfolio construction commenced in 2009 10% allocation to real estate, circa 180 million (C$ 281million) Take over and manage existing UK portfolio 90 million (C$ 140 million): 80 million (C$ 125 million) direct real estate 10 million (C$ 16 million) funds Maintain / re-balance around 50% in the UK; diversify remainder globally Restriction: keep leverage* low at 30% Benchmark linked to local property indexes, target 8-10% return** long term Goals: provide international ti diversification ifi and outperform benchmark Source: Aberdeen Asset Management, Feb13 * The use of leverage may subject investments to additional risk and could magnify losses ** returns are offered as strategy goals and are not referenced to past performance. There can be no guarantee the target returns will be achieved. The Return has been established by Aberdeen Asset Management ( Aberdeen ) based on its assumptions of economic and property fundamentals which will impact real estate Net Operating Income, market interest rates that determine real estate cap rates, investment opportunities and the use of leverage and is subject to the risks set forth more fully in the Investment Memorandum. The target returns are Aberdeen s estimate based on Aberdeen s assumptions, as well as past and current market conditions. The target returns cannot account for the impact that unusual economic and market factors have on the implementation of an actual investment program Your portfolio may not have the same sector or regional allocations. Sector or regional allocations are subject to change Global segregated account is a UK based Property pension fund used for illustrative purposes. Actual market conditions may have a different impact on the portfolio 4 Global neutral property allocation Global neutral allocation by country/region Global neutral allocation by market sector Nordics Australia UK USA Retail Office Japan Residential Eurozone Industrial Source: IPD, Jun 12 5
6 Global separate account: investment schedule Portfolio in GBP 180 Uninvested capital Multi-manager Direct million GBP 160 140 120 100 80 60 40 20 0 2010 2011 2012 2013 Source: Aberdeen Asset Management, Feb 13 Global segregated account is a UK based Property pension fund used for illustrative purposes only. Actual market conditions may have a different impact on the portfolio. 7
Global separate account: result to date Before End 2009 Today Q1 2013 After transition End 2014 0% global 22% global 50% global 1 country 10 countries 10+ countries 41 assets 232 assets 500+ assets 3 funds 11 funds 12-18 funds C$3.2 bn value underlying property C$7.2 bn value underlying property C$10+ bn value underlying property 11.9% total return net, since inception annualized Source: Aberdeen Asset Management, Feb 13. Past performance is not an indication of future results. Your portfolio may not have the same characteristics or performance as the existing separate account. Global segregated account is a UK based Property pension fund used for illustrative purposes only. Actual market conditions may have a different impact on the portfolio. Projections are offered as opinion and are not reflective of potential performance. Projections are not guaranteed and actual events or results may differ materially. For illustrative purposes only. 8 Building a global ex-canada portfolio US UK Eurozone Nordics Japan Australia Define Relative taxation, fees, returns, correlations Strategic tilt portfolio Tactical direction Global ex-canada portfolio Selected portfolio Build Screening Universe 2,200+ funds in Aberdeen database Source: Aberdeen Asset Management, Apr 13 9
Strategic factors resulting in long term portfolio tilt Neutral market weight Leakage (tax and fees) relative Correlation relative Long-term return relative Strategic tilt portfolio US 38% Negative Negative Negative 20% Europe 34% Positive Neutral Neutral 45% Asia Pacific 28% Negative Positive Positive 35% Creating a non-market weight portfolio from the specific viewpoint of the Canadian investor can potentially provide better long-term returns. Source: Aberdeen Asset Management, Feb 13 10 Portfolio construction model portfolio Model portfolio (based on C$100m invested equity) Number of funds 13 Number of countries 20 Number of properties 540+ Portfolio leverage* (%) 32.9 GAV total portfolio in C$ bn 27.3 Portfolio target return** net at fund of fund level (%) 8.8 Average weighted cash yield 6.1 Open-ended (% of portfolio) 71.0 Largest country weight (%) 21 in the US Invested in debt strategy (%) <7.0 Regional allocation US 20% UK 15% Sector allocation Residential 3% Industrial 29% Office 37% APAC 37% Continental Europe 27% Other*** 2% Retail 28% Source: Aberdeen Asset Management, Jan 13 * The use of leverage may subject investments to additional risk and could magnify losses ** returns are offered as strategy goals and are not referenced to past performance. There can be no guarantee the target returns will be achieved. The Return has been established by Aberdeen Asset Management ( Aberdeen ) based on its assumptions of economic and property fundamentals which will impact real estate Net Operating Income, market interest rates that determine real estate cap rates, investment opportunities and the use of leverage and is subject to the risks set forth more fully in the Investment Memorandum. The target returns are Aberdeen s estimate based on Aberdeen s assumptions, as well as past and current market conditions. The target returns cannot account for the impact that unusual economic and market factors have on the implementation of an actual investment program *** Other includes hospitality, healthcare, student housing, hotel, etc Your portfolio may not have the same sector or regional allocations. Sector or regional allocations are subject to change Model portfolio used for illustrative purposes only and actual market conditions may have a different impact on the portfolio 11
Trends driving real estate returns Market displacement Core Markets Megatrends Emerging Markets Demand & Supply US single-family housing Ireland, Spain Economic growth Urbanisation Fashion Fear China India Latin America Changing demographics Wealth Source: Aberdeen Asset Management 12 Rents still recovering across most of North America Rents still below 2007/2008 peak on inflation adjusted basis 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% US mall US power center US warehouse US neigh/comm retail US downtown office US suburban office Canada industrial US garden apartments US high rise apartments Canada office Source: CBRE-EA, Aberdeen Asset Management, Dec 12 13
Private equity real estate in emerging markets Source: Aberdeen Asset Management, Dec 12 Strategic markets are Clear s and Tactical markets are Potential. returns are offered as strategic goals and are not referenced to past performance. There can be no guarantee targets will be achieved. The Return has been established by Aberdeen Asset Management based on its assumptions of economic and property fundamentals which will impact real estate Net Operating Income, market interest rates that determine real estate cap rates, investment opportunities and the use of leverage and it subject to the risks set forth more fully in the Investment Memorandum. The Returns cannot account for the impact that unusual economic and market factors have on the implementation of an actual investment programs No. of funds/ currently open Latin America gross return Europe, Middle-East, Africa No. of funds/ currently open gross return LTV 70/10 20% 60% LTV 72/26 20% 50% Strategic target markets Tactical target markets Asia Pacific No. of funds/ currently gross open return LTV 104/26 20% 60% Approximately 62 funds currently open for investment 14 Important information This document does not constitute or form part of any offer for sale or solicitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. This document does not constitute investment advice and Aberdeen Fund Distributors, LLC ( AFD ),is not holding itself out as engaging in the business of advising others as to the investing in or the buying or selling of securities. AFD is registered as an Exempt Market Dealer in all provinces and territories in Canada and also operates pursuant to the International Dealers Exemption in several provinces in Canada. AFD is not in the business of advising others as to the investing in or the buying or selling of securities except in those provinces and territories in Canada in which it is duly registered as an dealer or in which it is entitled to rely on an exemption. Neither AFD nor any of its agents have given any consideration to nor have they made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any lossarising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. Investments in property segregated mandates and property pooled funds may carry additional risk of loss due to the nature and volatility of the underlying investments. Property segregated mandates and property pooled funds may not be available for investment by Canadian investors unless the investor meets certain regulatory requirements. In considering the prior performance information contained herein, potential investors should bear in mind that past performanceis not necessarily indicative of future results, and there can be no assurance that such investments will achieve comparable results Prior to making an investment in the Fund, prospective investors should carefully consider all the information in the fund documents. The investments to be made by the Fund are speculative by nature and there is a possibility of partial or total loss of invested capital. Investors should not subscribe to or invest in the fund unless they can readily bear the consequences of such loss. The value of an investment in the fund may go down and involves various risks and investment considerations, some of which are highlighted below. The risk factors described herein are not intended to be exhaustive. Certain funds may have limited it or no operating history. The past experience of the persons behind the fund and the Fund and Investment t Manager in owning, managing and selling properties is not necessarily indicative of the prospects of the fund and no assurances can be given that the investments of the fund will provide acceptable returns. Real estate investments are relatively illiquid and the ability of the fund to vary its investments in response to changes in economic and other conditions is limited. Property values can be affected by a number of factors, including, inter alia, economic climate, property market conditions, interest rates, and regulation. An investment in the Fund may involve complex tax structures. Potential investors should contact their tax advisor to determine if property investments are appropriate for their tax situation. Participation in the Fund will generally be a relatively illiquid investment 2013, Aberdeen Asset Management Inc. www.aberdeen-asset.ca 15