Your SlideShare is downloading. ×
0
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Pictet
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
2,357
On Slideshare
0
From Embeds
0
Number of Embeds
7
Actions
Shares
0
Downloads
51
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Pictet-Emerging Markets HighDividend fundFOR PROFESSIONAL INVESTORS ONLYPictet Asset ManagementMark Boulton and Stephen BurrowsMay 2012
  • 2. Table of contents 1. Why emerging market high yield equities 2. Pictet-Emerging Markets High Dividend fund 3. Conclusion 4. Portfolio composition, performance and technical details 5. AppendicesPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 2
  • 3. 1Why emerging market highdividend yield equities?
  • 4. High dividend yields are available in emerging equitiesGross dividend yield level of the PGSF Global High Yield Emerging Equity Fund and various asset classes 6% 5.5%* 5% 4% 3.3% 3% 2.7% 2.2% 2% 1.8% 1% German Government Bond US Government Bond MSCI World Equity US "A" Corporate Bond Portfolio*Source: Bloomberg as at 31/03/2012 (German Government Bond: Citigroup German Government Bond Index, US Government Bond: Citigroup US Government Bond Index, MSCI World Index, US ACorporate Bond: Citigroup US A Corporate Bond Index.*Source: Pictet Asset Management. Portfolio is the PGSF Global High Yield Emerging Equity Fund managed for Japanese investors, gross dividend yield as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 4
  • 5. High dividend segment – historical perspectiveEmerging market high Emerging Market, Total Return, Net Dividend Reinvested, 31 Dec 1998 – 31 March 2012dividend yielding stockshave outperformed 1000 90028% of total return 800from MSCI EM Index 700(Dec 1998-March 6002012) has come from 500dividends 400 300 200 100 0 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 MSCI EM High Dividend Yield Index MSCI EM IndexSource: Pictet Asset Management. MSCI EM High Dividend Yield Index and MSCI EM Index, rebased to 100.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 5
  • 6. High yielding stocks offer good risk-adjusted returnsHigher returns of high yielding Risk and return from MSCI EM High Yield Index versus MSCI EM Indexstocks do not imply higher risk 31Dec 1998 - 31 March 2012MSCI EM High Yield Index has:• Lower volatility• Higher sharpe ratio 0.55 0.35 23.89% 24.92% Annualised volatility (% p.a.) Sharpe ratio MSCI EM High Dividend Yield Index MSCI EM Index Source: Pictet Asset Management. MSCI EM High Dividend Yield Index and MSCI EM Index, total return, net dividends reinvested, from 31 Dec 1998 – 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 6
  • 7. Growing dividends from emerging markets companiesDividend growth in MSCI EM & MSCI World equity dividend per share (indexed)emerging markets has 400been greater than indeveloped markets over 350the past ten years 300 250 200 150 100 50 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 MSCI EM MSCI World Source: Morgan Stanley ResearchPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 7
  • 8. Strong balance sheets underpin growing and sustainable dividendsStrong growth in Global emerging markets corporate net debt and shareholders equityshareholders equity hasled to a reduction in $mcorporate gearing (net 1,400,000.00debt/shareholders 1,200,000.00equity ratio) 1,000,000.00 800,000.00 600,000.00 Insert here your graphs 400,000.00 and tables 200,000.00 0.00 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E Net Debt Shareholders Equity Source: GEM Inc, UBSPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 8
  • 9. Dividend payout ratios also have the potential to riseDividend payout ratios Equity dividend payout ratios (% est. 2011)in emerging markets 40%trail the developed 35%world by a wide margin 35% 30% 28%Increasing shareownership will support 25%higher dividend payouts 20% 15% 10% 5% 0% World GEM Source: Thomson Reuters Datastream, UBS Dividend pay-out ratio is % of a company’s earnings paid out as dividend.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 9
  • 10. Wider share ownership supports higher dividend payoutsOngoing IPO’s and Asia ex-Japan average payout ratios and free float decilessecondary offerings arewidening the ownership 45 Avg payout ratio (%)structure of emergingcompanies, particularly 40in Asia 35Higher free floatpercentages: 30• support higher dividend payouts 25• lead to better corporate governance 20 15 Freefloat deciles (%) 10 10 20 30 40 50 60 70 80 90 100 Source: Factset, CLSA Asia-Pacific MarketsPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 10
  • 11. Dividend yield and earnings growth – opportunity to benefit from bothThere is no need to Earnings per share (US$, 2000 =100)make a trade offbetween the growth 450potential of emerging 400markets and exposure 350to high dividend paying 300stocks 250 200 150 Insert here your graphs 100 and tables 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 MSCI EM Top 50% Dividend Yield Equity Index MSCI EM Index Source: MSCI, Pictet Asset Management. The MSCI top 50% dividend yield equity index is an index customised for Pictet Asset Management and consists of the top 50% high yielding stocks of the MSCI Emerging Markets Index.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 11
  • 12. High dividend yield emerging companies have superior profitabilityCompanies providing Return on equityhigher dividend yields %in emerging markets 20have generally wellmanaged and 18sustainable businessfranchises 16This is reflected in 14higher levels ofprofitability Insert here your graphs 12 and tables 10 2006 2007 2008 2009 2010 2011 MSCI EM Top 50% Dividend Yield Equity Index MSCI EM Index Source: MSCI, Pictet Asset Management. The MSCI top 50% dividend yield equity index is an index customised for Pictet Asset Management and consists of the top 50% high yielding stocks of the MSCI Emerging Markets Index.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 12
  • 13. High dividend yields in emerging equities – a summary • Dividends have played a key role in emerging market equity returns • Strong balance sheets underpin growing and sustainable dividends • Low dividend pay-out ratios have the potential to rise • Wider share ownership promotes higher dividends • High dividend paying emerging companies have had attractive earnings growth and good profitabilityPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 13
  • 14. 2Pictet-Emerging MarketsHigh Dividend fund
  • 15. Pictet-Emerging Markets High Dividend – at a glanceEmerging market • Focus on emerging market stocks that deliver high anddividend stocks offer sustainable dividendsincome and growthpotential • Aims to provide a return through dividend income and capital appreciation • Distribution of dividend to investors in the fund: – Monthly, annual or reinvested dividend – Payout level annual distribution $4, monthly distribution $0.33 • Experienced investment team: − Pictet has been managing Emerging Market equities with a value bias since 1989 − AUM of $3.1bn** in global emerging market high dividend equity*Dividend policy is reviewed annually.** Source: Pictet Asset Management, as at 31 March 2012 in the PGSF Global High Yield Emerging Equity Fund managed for Japanese investors.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 15
  • 16. Investment beliefs and philosophy • The long-term case for economic, earnings and dividend growth in emerging markets remains intact Klaus Bockstaller • Emerging market companies will continue to increase Head Global Emerging Markets dividends • Active management with a value bias can exploit investment opportunities within this high dividend yield universe Mark Boulton Senior Investment Manager Stephen Burrows Senior Investment Manager& Product SpecialistPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 16
  • 17. Global investment universeUnique Emerging markets Global emerging markets universe covers 69 countriesdatabase:• 6250 companies• 69 countries• 12 sectors• 70 industries• 20 years of historical financial dataLarge emerging marketsteam: 30+ professionalscovering EM equity, debtand economicsPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 17
  • 18. Investment process summary ±6,500 ±1600 ±400 ±100-200 companies companies stocks EMERGING MARKETS INVESTABLE HIGH YIELD RISK DATABASE UNIVERSE UNIVERSE FINAL PORTFOLIO MANAGEMENT LIQUIDITY SCREENING DIVIDEND SCREENING DIVIDEND SUSTAINABILITY HIGHEST CONVICTION INVESTMENT TEAM Market cap >± USD 1billion Targeting the top quartile SCORE STOCK IDEAS Pro-actively Liquidity >± USD 2mln/day dividend yields • Earnings volatility monitoring risk • Financial leverage TOP DOWN RISK exposure at a stock, • Dividend payout ratio ASSESMENT OF COUNTRY, country and sector CURRENCY AND SECTOR level FUNDAMENTAL ANALYSIS WEIGHTS • Industry and Franchise INDEPENDENT RISK • Management TEAM • Financial Analysis Liquidity and full risk analysis VALUATIONPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 18
  • 19. Dividend sustainability scoreThree factors are • Earnings volatilitycombined on an equal – Stocks are ranked according to the variability of theirweight basis to historical (five years) earnings per sharedetermine a dividendsustainability score – We prefer lower earnings volatility • Financial leverage – Stocks are ranked according to total debt/shareholders equity (last reported data) – We prefer lower financial leverage • Dividend payout ratio – Stocks are ranked according to the average dividend payout ratio over the last three years – We prefer more conservative dividend payout ratiosPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 19
  • 20. Stock example: Bosideng International HoldingsLeading Chinese clothing manufacturer and Bosideng products in Shanghai department storedistributor – signature product being downjackets (37% market share).Screening for:Market cap: USD 2.3bnLiquidity: USD 4.5mln average daily volumeDividend: 2012 Yield 8.1%DIVIDEND SUSTAINABILITY SCORE FUNDAMENTAL ANALYSIS VALUATION• Score of37% - very high ratings on • Attractive industry growth reflecting • 2012 P/E ratio 10 timesearnings volatility and capital position. increasingly affluent Chinese consumer. • Pictet Value relative to sector median of• Payout ratio maintained at between • Company has a consistent record in 0.46 where a score of 1.0 would put it at the65% and 80% since the IPO in 2007. growing business via building and acquiring median valuation level relative to its sector brands whilst maintaining margins. peers globally. • Conservative balance sheet , 10% of market cap in cash and history of self- financing growth.COUNTRY AND CURRENCY RISK ASSESMENT: China √Source: Pictet Asset Management, Bloomberg. Data as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 20
  • 21. Portfolio constructionStock weights in the portfolio Typical number of positions 100-200reflect:• Level of conviction based on: Maximum position size 5% at cost - Dividend yield Maximum 35% Guideline for country exposure - Dividend sustainability score - Fundamental and valuation Guideline for sector exposure Maximum 40% analysis Currency exposure Emerging market currency exposure is not hedged• Evaluation of country risk and liquidity profilePictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 21
  • 22. 3Conclusion
  • 23. Why invest in the Pictet-Emerging Markets High Dividend fund?Pictet has invested inemerging markets using a – Dividends are increasingly important in emerging marketsvalue based approach since1991 – The fund offers both income and access to long-term growth potential of emerging markets – An active, analytical approach is key to identifying stocks with high and sustainable dividend yields – Experienced fund managers draw on a substantial in-house knowledge base of emerging market and high dividend equities*Source: Pictet Asset Management as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 23
  • 24. 4Portfolio composition,performance and technicaldetails
  • 25. Characteristics of an emerging high dividend yield portfolioSignificant dividend Portfolio Style Skyline of Pictet emerging high dividend yield portfolio* Vs. MSCI EM indexand strong value bias Portfolio Style Skyline™ 14.0Bias towards high 12.0 11.7margin and high quality 10.0(return-on-equity) 8.0 Style Tilt™companies 6.0 3.8 3.6 4.0 3.1 2.3 1.9 2.1 1.5 2.0 0.6 0.4 0.0 0.3 0.0 -2.0 -0.7 -0.8 -0.5 -1.6 -4.0 -2.9 Dividend Yield Foreign Sales CFlow Yield Debt/Equity Income/Sales Sales to Price Earnings Yld Sales Growth Market Cap Rtn on Equity Book to Price Momentum MT Earnings Growth Momentum ST IBES 12Mth Gr EBITDA to Price IBES 1Yr Rev Style Factors Source: Pictet Asset Management, as at 31 March 2012. * PGSF Global High Yield Emerging Equity Fund.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 25
  • 26. Geographical and sector allocation% Country weights relative to MSCI EM Index % Sector weights relative to MSCI EM Index B razil Te le c o ms Taiwan Thailand Russia Financ ials Czech Republic Turkey Ene rgy P eru P o land UA E Utilitie s P hilippines Kazakhstan Mate rials Co lo mbia Hungary Nigeria IT Ho ng Ko ng M o ro cco He althc are Chile Egypt M alaysia Industrials Indo nesia So uth A frica Co ns. Staple s China M exico India Co ns. Disc . Ko rea (Rep.) - 15% - 12% - 9% - 6% - 3% 0% 3% 6% 9% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%Source: Pictet Asset Management as at 31 March 2012 for PGSF Global High Yield Emerging Equity Fund.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 26
  • 27. Top 10 holdingsCompany Sector Country Portfolio Weight Gross Div FY1 %Taiwan Semiconductor Manufactur. Taiwan IT 3.5% 3.7%Industrial And Comm. Bank China China Financials 3.2% 5.7%Bank of China China Financials 2.8% 6.3%Vale Brazil Materials 2.7% 6.1%Mobile Telesystems Russia Telecoms 2.5% 6.6%Petrochina China Energy 2.4% 4.1%Ambev-Cia Bebidas America Brazil Cons. Staples 2.3% 3.9%Banco Do Brasil Brazil Financials 2.3% 6.6%Kumba Iron Ore South Africa Materials 2.3% 8.8%African Bank Investments South Africa Financials 2.1% 5.0%Source: Pictet Asset Management, Bloomberg. Data as at end of March 2012 for the PGSF Global High Yield Emerging Equity Fund, excludes Cash.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 27
  • 28. Performance PGSF Global High Yield Emerging Equity Fund: Jan 2011–March 2012 (1)Jan 2011: change in investment process - focus on top quartile dividend stocks Monthly Performance % Cumulative Performance % 30 30 20 20 10 10 0.00 0 0.63 0 2.00 -10 -10 -0.83 -20 -2.03 -20 1.63 -30 -30 0.72 Feb 2011 Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 Aug 2011 Sep 2011 Oct 2011 Nov 2011 Dec 2011 Jan 2012 Feb 2012 Mar 2012 -0.50 PGSF Global High Yield Emerging Equity Fund MSCI EMF (Net Return Index) 1.11 -0.17 Performance Portfolio Benchmark Difference (annualised per 31.03.12) Current Quarter 14.55% 14.08% 0.46% YTD 14.55% 14.08% 0.46% 1 Year -4.74% -8.80% 4.06% Since change investment process* -2.09% -3.74% 1.65% *31 January 2011 Net Performance in USDSource: Pictet Asset Management. Performance of the PGSF Global High Yield Emerging Equity Fund managed for Japanese investors. Data as at end of March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 28
  • 29. Performance PGSF Global High Yield Emerging Equity Fund (2) Jan 2011: Change of investment process:Performance in USD, net of fees focus on top quartile dividend stocksAnnual Performance % Cumulative Performance % 200 60 150 40 100 20 50 0.00 0 0.00 0 -50 0.00 -20 -100 0.00 -11.93 -40 -150 4.91 -200 -60 -14.65 2007 (Feb) 2008 2009 2010 2011 2012 (Mar) -2.35 PGSF Global High Yield Emerging Equity Fund MSCI EMF (Net Return Index) 1.55 0.46Performance Portfolio Benchmark Difference Risk Figures Portfolio Benchmark(annualised per 31.03.12) (annualised 5 years per 31.03.12)Current Quarter 14.55% 14.08% 0.46% Standard Deviation 26.62% 30.39%YTD 14.55% 14.08% 0.46% Tracking Error 6.45%Since Inception (31.01.07) 3.75% 5.19% -1.44% Information Ratio -0.201 Year -4.74% -8.80% 4.06%3 Years 22.09% 25.07% -2.98% Net Performance in USD5 Years 3.30% 4.67% -1.37%10 YearsSource: Pictet Asset Management. Performance of the PGSF Global High Yield Emerging Equity Fund managed for Japanese investors. Data as at end of March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 29
  • 30. Pictet-Emerging Markets High Dividend fund• Name: Pictet-Emerging Markets High Dividend• Fund managers: Mark Boulton, Stephen Burrows• Reference index: MSCI Emerging Markets• Legal status: Compartment of the Pictet Luxembourg SICAV, UCITS compliant• EU saving directive: In scope no tax• Reference currency: USD• NAV calculation: Daily, settlement NAV + 4• Subscription period: 21 May to 6 June 2012 until 3.00 pm Luxembourg• Launch date: 7 June 2012• Dividend: Reinvested or distributedSource: Pictet Asset Management as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 30
  • 31. 5Appendix
  • 32. Investment resources Klaus Bockstalller Mark Boulton Emerging Debt Investment Head Global Emerging Markets Senior Investment Manager Team 20 years investment experience Global Emerging Market Equity High Dividend Selection Regional Research Stephen Burrows Investment Team Senior Investment Manager & Product Specialist Global Emerging Sector Pictet Asset Management 21 years investment experience Research Strategy Unit Emerging Economic Analysis Sector and Theme Funds Investment Teams Risk Management Emerging Market Traders (3 dedicated traders) EXCHANGES VIEWS AND PROVIDING SPECIFIC INPUT PORTFOLIO CONSTRUCTION ANALYSISPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 32
  • 33. BiographiesKlaus Bockstaller Mark Boulton Stephen BurrowsHead Global Emerging Markets Senior Investment Manager Senior Investment Manager & Product SpecialistKlaus Bockstaller joined Pictet Asset Mark Boulton joined Pictet Asset Management in Stephen Burrows joined Pictet AssetManagement in 2009 as Head of EMEA and 1998. He is a Senior Investment Manager of the Management in 1997. He is a Senior InvestmentLatAm. In 2011 he assumed responsibility for Emerging Markets High Dividend fund. He was Manager of the Emerging Markets High Dividendall EMEA and Global mandates. Head of the Global Equities team for eight years Fund and Product Specialist for the EmergingBefore joining Pictet, Klaus was a founding before taking on responsibility for Equities Markets Equities team.partner of Fleming Family & Partners Capital Advisory in 2009. Previously he was a Senior Investment ManagerManagement LLP (FCM). He spent five years at After qualifying as a chartered accountant with for the European Equities team at Pictet. HeFleming managing the FCM European Frontier Arthur Andersen & Co., he joined the European began his investment career in 1987 with aand the FCM Global Opportunities long / short equity team at Rothschild Asset Management as three year training program at Rothschild Assetequity funds. Previously, Klaus spent seven an investment manager in 1991. In 1995, he Management before moving on to become anyears at UBS Brinson as Portfolio Manager – spent 18 months at Rothschild & Compagnie Investment Manager for European Equities and aEastern Europe (1994 – 2000) and in 2000 he Banque in Paris as Head of the European Team. member of the Global Asset Allocationmoved to Baring Asset Management as Head of On his return to London in 1997 he became Committee. In 1995 he moved to Norwich UnionEMEA. Head of the International Equities Department, Investment Management as an InvestmentKlaus holds a Masters degree (Diplom Volkswirt) where his responsibilities also included global Manager in the European Equity team.in Economics from the University of Freiburg. emerging markets. At the end of 1997 he was Stephen is an Associate Member of the Society appointed Director of Rothschild Asset of Investment Professionals. Management. Mark graduated from Brasenose College, Oxford in 1988 with an MA (Hons) in Chemistry. He has a diploma in Investment Management from the London Business School and is an associate member of the Securities Institute.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 33
  • 34. Investment process – Fundamental analysis and valuationWe validate our analysis through company meetings.The Global Emerging Markets team has approximately 1400 meetings per year. INDUSTRY DYNAMICS & BUSINESS FRANCHISE MANAGEMENT FINANCIAL ANALYSIS VALUATION • Growth drivers • Credibility • Improving ROE, ROIC •Dividend yield • Competition and product • Proven track record • Sustainability of margins •Undervalued capacity differentiation • Coherent strategy • Capital management (proprietary database) • Barriers to entry and • Reporting transparency • Balance sheet structure •Traditional metrics pricing power • Cash flow generation • Corporate Governance • Quality and utilisation of • Dividend history & outlook productive assets. • New market opportunitiesPictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 34
  • 35. Top down risk assessmentDoes the macro and COUNTRY RISK INDICATOR SECTOR RISK ANALYSISsector analysis alter ourbottom up views? Economic environment: Sector valuation relative to •Leading activity index / CPI inflation rate replacement cost Public finance: Pricing power, inventory levels • Debt and fiscal balance to GDP ratio Capacity trends, over/under Financial domestic strength: investment • Loans to GDP ratio and deposits ratio Demand cycle External financing needs: • Net foreign assets Margin pressures • Total and short-term external debt • Current account External strength: • FX reserves / FX reserves to imports ratio • Openness to GDP ratio • Real trade-weighted exchange ratePictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 35
  • 36. Stock example: PZU Life insurance premiums as a percentage of GDP*Polish Insurance company with leading 12market shares in life (33%) and non-life(37%). 10 8Screening for: 6Market cap: USD 8.7bn 4Liquidity: USD 23mln average daily volume 2Dividend: 2012 Yield 8.4% 0 B ium olla d Italy K S itzerla d S P nd w en ce G ay H n U U n erm n Fran S ed ola elg wDIVIDEND SUSTAINABILITY SCORE FUNDAMENTAL ANALYSIS VALUATION• Score of 59% - high rating on earnings • Company offers superior profitability. • Price to Book 2.1 timesvariability and capital position. ROE 19% vs European average of 12%. • Price to Embedded Value 1.1 times• Regulator recommended 75% payout ratio • Management following through on IPO • 2012 P/E ratio 10 timeswhich is low in the sector given the level of promises – cost reduction programme one yearexcess capital. ahead of target. • Very conservative capital position - estimated to have excess capital of PLN5.6bn on total capital of PLN12.9bn.COUNTRY AND CURRENCY RISK ASSESSMENT: Poland √Source: Pictet Asset Management, PZU (* 2010 data), Morgan Stanley, Deutsche Bank, Citi. Data as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 36
  • 37. Stock example: HTC Corporation HTC makes a wide range of phones to meet different needsDescription: Taiwanese technology companythat manufactures own and 3rd partybranded smart and feature phones.Screening for:Market Cap: USD 13.9bnLiquidity: USD 95mln average daily volumeDividend: 2012 Yield 8.5%DIVIDEND SUSTAINABILITY SCORE FUNDAMENTAL ANALYSIS VALUATION• Score of 28% • 10% share of global smart phone market. • 2012 P/E ratio 9.5 times• Average payout ratio of 70% over last five The smart phone percentage of total handset • High ROE maintained to date, justifies theyears. shipments is set to grow from 27% in 2011 to 3.8 times book value – but ROE levels need to 49% in 2015* be maintained.•Management willing to use balance sheet tosupport dividends in an industry which by its •Management quality & close relationship withnature has more volatile earnings. Qualcomm (chip-set architect) should ensure HTC benefits from this growth as 4G rolls out. •Conservative balance sheet - USD2.6bn net cashCOUNTRY AND CURRENCY RISK ASSESSMENT: Taiwan √Source: Pictet Asset Management, Gartner*. Data as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 37
  • 38. Stock example - Telefonica Brasil Brazil’s middle class is growingCreated from merger of fixed line operatorTelesp and mobile operator VIVO in 2011.Screening for:Market cap: USD 31bnLiquidity: USD 22mln average daily volumeDividend: 2012 Yield 7.8%DIVIDEND SUSTAINABILITY SCORE FUNDAMENTAL ANALYSIS VALUATION• Score of 81% - but excellent balance • Structural TMT growth aided by 5mn people • 2012 P/E ratio 11 timessheet. Mid-range earnings volatility and a per annum entering “middle class” in Brazil. • EV/Ebitda of 4.7 timeshigh payout ratio should be sustainable. • Company well positioned with dominant fixed • Pictet Value relative to sector median of 1.17,• Slightly different situation – 51% owned line position in wealthiest Sao Paulo region and where a score of 1.0 would put it at the medianby Telefonica of Spain, who ensure strong the largest national mobile network. valuation level relative to sector peers. Growthdividend stream from Telefonica Brasil to • High quality management and network – e.g. prospects should be above the peer group.cover their own dividend commitments. fibre to the home investment should enable them to continue to dominate broadband services in Sao Paolo.COUNTRY AND CURRENCY RISK ASSESSMENT: Brasil√Source: Pictet Asset Management, Bradesco. Data as at 31 March 2012.Pictet Asset Management Pictet-Emerging Markets High Dividend fund FOR PROFESSIONAL INVESTORS ONLY 38
  • 39. Pictet Asset Management For more information, please visit our websites www.pictet.com www.pictetfunds.comFor professional investors only.This marketing document is issued by Pictet Funds (Europe) S.A. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of or located in any locality, state, country orjurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, regulations, annual and semi-annual reports may be relied upon asfund the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Funds (Europe) S.A., 3 Boulevard Royal, L-2449 Luxembourg.The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments.Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Funds (Europe) S.A. has not taken any steps to ensure thatthe securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individualcircumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financialknowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors arelisted in the fund’s prospectus and are not intended to be reproduced in full in this document.Past performance is neither guarantee nor a reliable indicator of future results. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketingmaterial is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or fundsmentioned in this document.

×