January 2013                         AXA Framlington Europe ex UK Fund                                    g        p      ...
Introduction to AXA Framlington                                   g16332
European – Core Investment Team                    Mark Hargraves                          Continental Europe             ...
AXA Framlington Europe ex UK Fund    Performance – 5 years to 30/11/2012       120                                    AXA ...
AXA Framlington Core European Equity Strategies    Key attributes                                         Consistent prof...
Step 1. Corporate Lifecycle Analysis    Focusing on companies with high ROIC            Future Success                    ...
Europe - Economic and market perspectives            p                        p p16332
Europe – 2008-2012 … not pretty …                Quarterly NNM (€bn) over 5 years ‐ European                 Quarterly NNM...
Europe – Moving from a vicious circle to a virtuous circle?                                     Tail risk                 ...
Europe – What a difference a few months can make                                            FT Person of the Year:        ...
What about fundamentals? Issues being addressed …. slowly …                                                               ...
It has been a painful process …     Italy GDP (1)                                            Spain GDP (2)                ...
Europe – Unable to reform? Not true …     Early                                                  Late                     ...
Upside potential is huge     Impact on GDP per capita of a broad set of reforms in selected countries                     ...
Implications for equity investors     LONGER TERM     Europe is cheap in relative terms and “investible” again     Low g...
Balancing macro vs micro     Spanish retail sales – ouch!     Inditex share price – what crisis?Source: Bloomberg as at 03...
16                                                                          0                                             ...
AXA Framlington European Fund               (Europe ex UK strategy)16332
AXA Framlington European Fund     Strong risk adjusted returns attributes     Risk and return summary*                    ...
AXA Framlington European Fund – Style Overview (1/2)      6                            Value                              ...
AXA Framlington European Fund – Style Overview (2/2)                                                                      ...
Appendix – Portfolio characteristics         pp16332
AXA Framlington European Fund     Geographic and Sector breakdowns     Geographic breakdown (%)                           ...
AXA Framlington European Fund     Top 10 holdings and market cap breakdown                                                ...
AXA Framlington European Fund     Top 10 overweight and underweight                                                     Co...
AXA Framlington European Fund     Sector and stock attributions – 2012 (to end November)     Sector attribution (%)       ...
Important notice     This communication is intended for Investment Professional use only and should not be relied upon by ...
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Axa investment managers

  1. 1. January 2013 AXA Framlington Europe ex UK Fund g p Europe – Moving from a vicious circle to a virtuous circle? Mark Hargraves – Fund Manager This communication is for professional advisers only and must not be relied upon by retail clients. Circulation must be restricted accordingly.16332
  2. 2. Introduction to AXA Framlington g16332
  3. 3. European – Core Investment Team Mark Hargraves Continental Europe European sector specialists Fund Manager  17 years’ experience in asset management  Joined AXA Framlington in 2000 as fund manager and became Consumer Energy Materials Head of the Continental European team in 2001  Previously worked for Abbey National, Hambros Fund Management and United Friendly Asset Management Marie Chaperon Olivier Eugène Hervé Mangin 7 yrs’ experience 12 yrs’ experience 13 yrs’ experience  BSc (Hons) Geography Masters in Finance from London Geography. Business School. Associate member of CFA institute of UK Chrysoula Zervoudakis Pan European Fund Manager  25 years’ experience in asset management Tech/Business Services Financials Utilities/Healthcare  Joined AXA Framlington and started managing French and Pan Pan– European funds in 2004 Guillaume Vincent Khiem Lé  Previously Associate Partner in the European equities Robiolle Vinatier 13 yrs’ experience management team at Invesco 15 yrs’ experience 13 yrs’ experience  BSc (Hons) Economics and MBA from Manchester Business School Gilles Guibout Eurozone Telecoms Industrials Fund Manager  16 years’ experience in asset management Chrysoula Bruno Grandsard  Joined AXA IM in 2006, and is responsible for AXA Framlington 11 yrs’ experience Zervoudakis 25 yrs’ experience Eurozone Equity Franchise, Europe Opportunities Franchise  1995-2006 San Paolo Asset Management – Fund Manager European Equities  Institut Supérieur de Gestion (1995) and graduated in Economics and Italian from the University of Paris X-Nanterre.  Member of the Société Française des Analystes FinanciersSource: AXA IM as at 31/10/2012. Years relate to investment experience.2 16332
  4. 4. AXA Framlington Europe ex UK Fund Performance – 5 years to 30/11/2012 120 AXA Framlington European R Inc (MF) FTSE World Europe ex UK TR EUR (IN) 110 100 90 80 70 60 50 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 1 year 3 years 5 years 10 years Quartile ranking 1 1 1 1Source: AXA IM & Lipper, Bid to Bid, Net Income, Net Fees in GBP as at 30/11/2012. Comparative benchmark: FTSE World Europe ex UK. Past performanceis not a guide to future returns.3 16332
  5. 5. AXA Framlington Core European Equity Strategies Key attributes  Consistent profile in alpha delivery in both Bull and Bear phases Core style  Growth oriented philosophy focusing on companies with high ROIC Long term investor  Low turnover - average holding period between 3 and 5 years mindset  In depth knowledge of companies built over a significant p p g p g period  Fundamental stock picking High active share  Conviction based approach not driven by benchmark Core strategies with consistent and regular outperformance through various cycles4 16332
  6. 6. Step 1. Corporate Lifecycle Analysis Focusing on companies with high ROIC Future Success Proven Success Mature Resurgent Success time ROIC ROIC < 0 Sustainable and High ROIC ROIC converging to cost Resurgent growth in ROIC &  Investment Phase  Sales and profits growth of capital Earnings  Building the franchise g  Improving market share through competitive  Competition  business model at  Restructuring Phase: asset sales/new  High EPS growth advantage & innovation risk business mix  Leadership in growing markets  Commoditisation  market share  Management Change  Pricing power losses  Improved perception of company and  Internationalisation  Low revenue and profit growth industry growth trends Investing in the most attractive stages of a company corporate lifecycleSource: AXA IM – For illustration purposes only5 16332
  7. 7. Europe - Economic and market perspectives p p p16332
  8. 8. Europe – 2008-2012 … not pretty … Quarterly NNM (€bn) over 5 years ‐ European  Quarterly NNM (€bn) over 5 years European domiciled actively managed cross‐border funds 4 2 0 ‐2 ‐4 ‐6 Relative Performance of MSCI Europe Ex UK to MSCI World from 31/12/07 to 31/12/12 10 ‐8 ‐10 % 0 ‐12 -10 Equities Euroland Equities Europe ‐14 -20 MSCI Europe ex UK TR Euros -20% MSCI World TR euros ‐16 -30 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12Source: Left-hand chart: AXA IM as at 30/09/2012. Right-hand chart: Lipper as at 31/12/2012.7 16332
  9. 9. Europe – Moving from a vicious circle to a virtuous circle? Tail risk reduction Structural Fund flows F d fl reform Valuation8 16332
  10. 10. Europe – What a difference a few months can make FT Person of the Year: Mario Draghi9 16332
  11. 11. What about fundamentals? Issues being addressed …. slowly … Current account deficits (2) Unit labour costs Fiscal crisis (1) (1) Cumulative Annual Government Deficit as % of GDP (3) (2008-2012) (2008 2012) Banking crisis 2008 2012 %ch (4) Loans €10.8tn €11.4tn +5% Total assets €28.4tn €27.2tn -4% Tangible equity €543bn €968bn +87%Source: (1) Thomson Reuters Datastream as at 04/01/2013. (2) Societe Generale as at 14/11/2012. (3) Deutsche Bank, OECD as at 07/12/2012.(4) KBW, December 2012.10 16332
  12. 12. It has been a painful process … Italy GDP (1) Spain GDP (2) Unemployment (3)Source: (1) (2) Deutsche Bank, OECD as at 07/12/2012 . (3) Thomson Reuters Datastream as at 04/01/2013. Photos: Reuters, January 2013.11 16332
  13. 13. Europe – Unable to reform? Not true … Early Late 2008 1990 s 1990’s 1990’s 1990 s “Sick man of Europe” “Bad bank” Pension reform Fiscal reforms Hartz reforms Wage cuts Supply side reform Fiscal reform 4000 2000 0 -2000 -4000 -6000 -8000 -10000 -12000 2003 2004 2005 2006 2007 2008 2009 2010 2011Source: Sweden: Societe Generale as at 14/11/2012. Germany: Thomson Reuters Datastream as at 04/01/2013. Ireland: Central Statistics Office as atDecember 2012.12 16332
  14. 14. Upside potential is huge Impact on GDP per capita of a broad set of reforms in selected countries “Never let a good crisis go to waste” % Rahm Emanuel R h E l Chief of Staff to President Obama November 2008Source: Societe Generale as at 14/11/2012.13 16332
  15. 15. Implications for equity investors LONGER TERM Europe is cheap in relative terms and “investible” again Low growth, low interest rates here to stay Supporting long duration quality stocks … a new “Nifty 50”? Reduction in tail risk opens selective value opportunities … eg European financials TACTICAL CONSIDERATIONS Risk on/risk off will remain a feature Risk on growth disappointment remains14 16332
  16. 16. Balancing macro vs micro Spanish retail sales – ouch! Inditex share price – what crisis?Source: Bloomberg as at 03/01/2013.15 16332
  17. 17. 16 0 10 20 30 40 50 60 70 80 -50 -40 -30 -20 -10 0 10 198216332 75 1983 1984 1985 1986 80 1987 1988 1989 1990 85 1991 Net debt to equity % 1992 1993 1994 90 1995 Premium / Discount % 1996 1997 1998 1999 95 2000 Sector Neutral Premium / Discount % 2001 2002 2003 00 Source: MSCI, Morgan Stanley Research as at 28/12/2012. 2004 2005 2006 2007 05 European equities in 4 charts 2008 2009 2010 2011 10 2012e 2013e 2014e European valuation premium/discount relative to USA % -8 -6 -4 -2 2 0 2 4 6 8 0 2 4 6 8 10 10 12 14 16 18 20 1 1982 1982 1 1983 1983 1 1984 1984 1 1985 1985 1 1986 1986 1 1987 1987 1 1988 1988 1989 1 1989 1990 1 1990 1991 1 1991 Return on equity % 1992 1 1992 1993 1 1993 Free cash flow yield % 1994 1 1994 1995 1 1995 1996 1 1996 1997 1 1997 1998 1 1998 1999 1 1999 2000 2 2000 2001 2 2001 2002 2 2002 2003 2 2003 2004 2 2004 2005 2 2005 2006 2 2006 2007 2 2007 2008 2 2008 2009 2 2009 2010 2 2010 2011 2 2011 2012e 20 012e 2013e 20 013e 2014e 20 014e
  18. 18. AXA Framlington European Fund (Europe ex UK strategy)16332
  19. 19. AXA Framlington European Fund Strong risk adjusted returns attributes Risk and return summary* Ex-ante tracking error** 1 year 3 years 5 years 4 Ex ant Beta of Portfolio vs Benchmark (ann) % (ann) % (ann) % 3.5 Performance - net 27.77 7.98 1.81 3 Comparative benchmark 13.80 2.27 -0.62 Excess returns 13.97 5.71 2.42 2.5 Predicted Tracking Error Tracking error - 6.31 6.41 2 te Volatility - 18.18 23.64 1.5 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Benchmark volatility - 18.87 23.85 Time Period Information ratio - 0.90 0.38  Low ex-ante tracking-error ranging 2-5% 2011 2010 2009  Low Turnover reflecting our long term investment philosophy and “investor” mindset Annual returnover (%) 38.74 43.25 56.17*Source AXA IM as at 30/11/2012. Comparative benchmark: FTSE World Europe ex UK. ** Northfield/AXA-IM/FactSet as at 30/11/2012.NB: Past performance is not a guide to future returns.18 16332
  20. 20. AXA Framlington European Fund – Style Overview (1/2) 6 Value Growth Other 4.3 4 2.9 2.7 3.0 2.1 2 1.7 1.5 0.9 09 0.2 0 -0.1 -0.4 -0.4 -0.8 -2 -1.3 -2.2 -2.5 -4 -3.4 -6 -5.3 E ROE y Debt/Equity Sales to o Earnings Book to Foreign 3 Year Sales 12M Sales Market Cap (Forward) Short Term Momentum FY1 Earnings EBITDA A 3 Year EPS Medium Term Dividend Free Cashflow to Sales 12M EPS to Price (Forward) Income Sales Growth Momentum (Historic) Price Price Growth Yield Yield (Historic) Revisions Growth Growth (3m) (12m) Yield The Style Chart shows a series of standardised scores (Weighted Welch’s T-Tests) comparing the fund and comparative benchmark exposures to each of the factors. These are used to highlight areas where the fund and comparative benchmark are statistically significantly different. Generally speaking, a reading of +/- 2 is considered significant and +/- 3 very significant. Higher numbers are expected when the investment universe is small. In the chart, price ratios (e.g. P/E) are inverted into yields for these tilts so that high scores indicate high Value exposure across all Value factors, for consistency of interpretation.Source: Northfield & AXA IM as at 30/11/201219 16332
  21. 21. AXA Framlington European Fund – Style Overview (2/2) Fund Data Bm k Data Fund Bm k Coverage % Coverage % Price to Book 1.5 1.3 86.3 92.6 Dividend Yield % 2.5 3.7 100.0 99.9 Price to Earnings 14.4 13.0 97.6 95.2 Price to Free Cash Flow 8.5 9.1 90.8 88.4 Price to Sales 1.0 10 0.8 08 98.9 98 9 98.5 98 5 Price to EBITDA 7.8 5.2 77.8 79.4 ROE % 18.5 14.4 93.5 95.5 Income to Sales % 11.2 9.5 98.9 97.2 3 Year Sales Grow th % (Historic) 5.2 2.5 98.4 98.3 12M Sales Grow th % (Forw ard) 5.9 4.2 99.0 99.2 3 Year EPS Grow th % (Historic) 14.1 10.3 82.1 84.8 12M EPS Grow th % (Forw ard) 10.1 9.8 99.3 94.1 FY1 Earnings Revision Ratio -2.9 -8.1 100.0 100.0 Market Cap (British Pounds in millions) 34,528 36,490 100.0 100.0 Short Term Momentum (3m) % 6.3 4.3 99.4 100.0 Medium Term Momentum (12m) % 17.3 8.0 98.4 99.8 Debt/Equity % 99.0 106.4 90.8 92.9 Foreign Sales % 69.1 69.5 100.0 99.1 The table above displays the weighted average scores for these factors and weighted harmonic averages for price ratios. In the table, P/Es (not yields) are used for ease of interpretation.Source: Northfield & AXA IM as at 30/11/2012.20 16332
  22. 22. Appendix – Portfolio characteristics pp16332
  23. 23. AXA Framlington European Fund Geographic and Sector breakdowns Geographic breakdown (%) Sector breakdown (%) AUSTRIA Energy BELGIUM CYPRUS Materials DENMARK FINLAND Industrials FRANCE Consumer GERMANY Discretionary GREECE Consumer Staples IRELAND ITALY Healthcare LUXEMBOURG Financials NETHERLANDS NORWAY Information Technology PORTUGAL Telecom SPAIN Services SWEDEN Utilities SWITZERLAND 0 5 10 15 20 25 30 0 5 10 15 20 25 Strategy gy Comparative benchmark pSource AXA IM as at 30/11/2012. Comparative benchmark: MSCI Europe ex UK..22 16332
  24. 24. AXA Framlington European Fund Top 10 holdings and market cap breakdown Market cap breakdown (%)* Comparative Difference Top 10 Holdings Fund % benchmark % % Nestle S.A. 4.2 4.8 -0.6 93.1 Novo Nordisk A/S 3.5 1.4 2.1 Large Cap 94.3 94 3 Roche Holding AG 3.5 3.1 0.4 BNP Paribas S.A. 3.3 1.2 2.1 Medium 4.8 Cap 5.7 Societe Generale 2.7 27 0.6 06 2.2 22 Fund Allianz SE 2.6 1.3 1.3 0.0 Comparative benchmark Small Cap Anheuser-Busch InBev 2.4 1.6 0.8 0.0 Total S.A. 2.2 2.4 -0.1 0 20 40 60 80 100 ING Groep N.V. 2.2 0.8 1.4 Industria de Diseno Textil S A S.A. 2.1 21 0.7 07 1.4 14 Large Cap => 3bn EUR TOTAL 28.7 17.6 11.1 Mid Cap 0.5bn EUR – 3bn EUR Small Cap < 0.5bn EURSource AXA IM as at 30/11/2012. Comparative benchmark: MSCI Europe ex UK. Past performance is not a guide to future returns.*Remaining assets held in cash.23 16332
  25. 25. AXA Framlington European Fund Top 10 overweight and underweight Comparative Comparative Fund benchmark Difference Fund benchmark Difference Top 10 overweight positions weight % weight % % Top 10 underweight positions weight % weight % % Societe Generale 2.7 0.6 2.2 Sanofi S.A. -- 2.3 -2.3 Novo Nordisk A/S 3.5 1.4 2.1 Siemens AG -- 1.9 -1.9 BNP Paribas S.A. 3.3 1.2 2.1 Novartis AG 1.4 3.1 -1.7 Bureau Veritas S.A. 1.7 0.1 1.6 Banco Santander S.A. -- 1.7 -1.7 Fresenius Medical Care AG & Co. KG 1.8 0.3 1.5 ENI S.p.A. -- 1.3 -1.3 Royal Dutch Shell PLC 1.5 -- 1.5 UBS AG -- 1.3 -1.3 Industria de Diseno Textil S.A. 2.1 0.7 1.4 Telefonica S.A. -- 1.2 -1.2 ING Groep N.V. 2.2 0.8 1.4 Banco Bilbao Vizcaya Argentaria -- 1.0 -1.0 Chr. Hansen Holding A/S 1.4 -- 1.4 Daimler AG -- 1.0 -1.0 Allianz SE 2.6 1.3 1.3 ABB Ltd. -- 0.9 -0.9 TOTAL 22.8 6.4 16.5 TOTAL 1.4 15.7 -14.3 14.3Source AXA IM as at 30/11/2012. Comparative benchmark: MSCI Europe ex UK.24 16332
  26. 26. AXA Framlington European Fund Sector and stock attributions – 2012 (to end November) Sector attribution (%) Stock attribution (%) Portfolio Total Consumer stock effect Discretionary 0.0 Top 10 attributors return % % Consumer Societe Generale 29.56 0.65 Staples 0.0 Industria de Diseno Textil S.A. 65.53 0.64 T l f i SA Telefonica S.A. 0 64 -0.64 0 57 0.57 Energy 0.0 Novo Nordisk A/S 36.07 0.54 Financials Bureau Veritas S.A. 50.45 0.52 0.0 Continental AG 74.79 0.47 Healthcare -0.1 Gemalto N.V. 84.01 0.46 BNP Paribas S A S.A. 13.65 13 65 0.40 0 40 Industrials 0.0 Essilor International S.A. 33.86 0.39 Anheuser-Busch InBev 41.61 0.35 Information Technology 0.0 Sector allocation Portfolio Total Stock selection Materials 0.0 stock effect Bottom 10 attributors return % % Telecom Services -0.1 Royal Dutch Shell PLC (CL A) -6.67 -0.48 Fresenius Medical Care AG & Co. KGaA -1.17 -0.30 Utilities 0.0 Deutsche Bank AG -11.29 -0.19 Sanofi S.A. 0.00 -0.18 Cash 0.0 00 UBS AG -4.81 4 81 -0.16 0 16 Munich Reinsurance Company 0.00 -0.15 Total -0.2 Banco Bilbao Vizcaya Argentaria S.A. -15.45 -0.13 Swiss Re AG 0.00 -0.12 -4 1 6 11 ASML Holding N.V. 0.00 -0.12 Michelin 0.00 -0.11 0.11Source AXA IM and FactSet as at 30/11/2012. Comparative benchmark: MSCI Europe ex UK. NB: Past performance is not a guide to future returns.25 16332
  27. 27. Important notice This communication is intended for Investment Professional use only and should not be relied upon by retail clients. Circulation must be restricted accordingly. Any reproduction of this information, in whole or in part, is prohibited. This communication does not constitute an offer to sell or buy any units in the Fund. Information relating to investments is based on research and analysis undertaken or procured by AXA Investment Managers UK Limited for its own purposes and may have been made available to other members of the AXA Group of Companies which, in turn, may have acted on it. Whilst every care is taken over these comments, no responsibility is accepted for errors and omissions that may be contained therein. It is therefore not to be taken as a recommendation to enter into any investment transactions. This communication should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA investment service or product and is provided to you for information purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of any company within the AXA Investment Managers Group and may be subject to change without notice. No representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Information relating to investments may have been based on research and analysis undertaken or procured by AXA Framlington for its own purposes and may have been made available to other expertises within the AXA Investment Managers Group, who in turn may have acted upon it. Information in this document may be updated from time to time and may vary from previous or future published versions of this document. Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets and smaller companies offer the possibility of higher returns but may also involve a higher degree of risk. The price of units and the income from them can go down as well as up and investors may not get back the amount originally invested. An initial charge is usually made when you purchase units. Your investment should be for the medium t l di to long t term i t i ll 5 10 years. Ch i.e. typically 5-10 Changes i exchange rates will affect th value of t t i in h t ill ff t the l f trust investments overseas. t t AXA Framlington is an expertise of AXA Investment Managers UK Limited. Issued by AXA Investment Managers UK Limited which is authorised and regulated by the Financial Services Authority. Registered in England and Wales No: 01431068 Registered Office: 7 Newgate Street, London EC1A 7NX. Telephone calls may be recorded for quality assurance purposes.26 16332
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