R conviction euro citywire - 2012-05-09-vf

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R conviction euro citywire - 2012-05-09-vf

  1. 1. 09 mai 2012 Montreux - May 2012 European equities Crisis, source of opportunities for high-conviction strategy
  2. 2. Montreux - May 2012 Table de matières Sections 1 Rothschild & Cie Gestion 2 2 Investment team 6 3 Investment process 10 4 Performance 15 5 Macro-economic outlook 20 6 Portfolio characteristics 41 7 Main operations since August 2011 44 Annexes A Germany – Divergence of leading indicators 57 B European banking sector 59 C Exports 61 D Contacts details 64 E Funds Characteristics 68 F Disclaimer 71 1
  3. 3. Montreux - May 2012 1. Rothschild & Cie Gestion
  4. 4. Montreux - May 2012 Values persisting from generation to generation Rothschild Values  Tradition & Innovation  Transparency & Efficiency  Integrity James 1792-1868 Paris Amschel 1773-1855 Francfort Carl 1788-1855 Naples Mayer Amschel Rothschild 1743-1812 Salomon 1774-1855 Vienne Nathan 1777-1836 Londres Gustave 1829-1911 Alphonse 1827-1905 Edmond 1845-1934 Robert 1880-1946 Edouard 1868-1949 Maurice 1881-1957 Edmond 1926-1997 Benjamin 1963 Nathaniel 1946 Robert 1947 Eric 1940 Edouard 1957 David 1942 Elie 1917-2007 Alain 1910-1982 Guy 1909-2007 Lionel 1808-1879 Nathaniel 1812-1870 Leopold 1845-1917 Nathaniel 1840-1915 Nathan 1844-1881 Henry 1872-1946 Anthony 1887-1961 Nathaniel 1877-1923 Philippe 1902-1988 Evelyn 1931 Victor 1910-1990 Jacob 1936 Philippine 1935 Extincts armsEnglish arm English arm set up in France French arm 1.1 The Rothschild Heritage 1. Rothschild & Cie Gestion 3
  5. 5. Montreux - May 2012 The asset management branch of Rothschild & Cie Banque A benchmarck in the asset management field €19,5 billion AUM Asset class breakdown A diversified client base A family business with commited managers  Legal structure : limited partership  general partners jointly responsible for the commitments of the Company from their personal assets Financial soundness  A fully-owned subsidiary of Rothschild & Cie Banque (Fitch A rating (long term) /F1 (short term))  SAS 70 Type I certificate Experience  Founded in 1982  200 experienced and qualified employees  An awarded management International  European client base : France, Belgium, Netherlands, Luxemburg, Germany, Austria, Switzerland, Spain, UK, Scandinavia Source Rothschild, as of December 30th, 2011 1.2 Rothschild & Cie Gestion 1. Rothschild & Cie Gestion 4
  6. 6. Montreux - May 2012 To realize the highest possible alpha over the long term, we make bets to seize opportunities offered by short-term inefficiencies of the market, sometimes different from consensus ones. A conviction-based and contrarian management looking for the convexity of investments We focuse on stocks on which the managers have strong convictions : we aim at creating added value by making clear choices allowing them to strongly over-perform portfolio benchmark Portfolio managers favour asymmetric investments, those for which upside potential is higher than downside risk in worst case scenario Contrarian Convexity Conviction Fundamental analysis 1.3 Investment philosophy 1. Rothschild & Cie Gestion 5
  7. 7. Montreux - May 2012 2. Investment team
  8. 8. Montreux - May 2012 2.1 Equity resources The Equity team benefits from the entire resources of Rothschild & Cie Gestion The fundamental analysis made by 9 experts Two senior portfolio managers, highly experienced on the Equity market The 40 investment professional benefit from the macro economic scenario of Rothschild & Cie Gestion defined by the most senior members of the investment team BOTTOM UP Fundamental analysis STOCK SELECTION & PORTFOLIO CONSTUCTION 26 years of experience At Rothschild & Cie Gestion since 2003 General Partner, Philippe Chaumel 26 years of experience At Rothschild & Cie Gestion since 2004 General Partner, Didier Bouvignies Buy side analysts Gabriel Hors Anthony Bailly Natacha Rousset Ludivine de Quincerot Didier Bouvignies Philippe Chaumel Euro/Europe Portfolio managers Loic Tonnelier Daniel Fighiera Thematics 1 3 Thierry Combes (Small cap) (Small cap) (US) TOP DOWN Investment scenario definition General Partner Didier Bouvignies General Partner Philippe Chaumel Equity Fixed Income Alternative Multimanagement Multimanagement Economic & buy side research General Partner Denis Faller 2 2. Investment team 7
  9. 9. Montreux - May 2012  Two senior portfolio managers: ‒ both General Partner of the company, thus ensuring stability of the team ‒ A proven track-record supporting by strong knowledge of the markets ‒ Investment decisions and portfolio construction depend only on the 2 portfolio managers. Portfolios reflect thus the portfolio managers’ strongest convictions, avoiding consensual choices which could be made during big investment committees with too many people  Broad resources to cover the equity market: ‒ 9 people involved in the fundamental analysis: 4 experienced buy side analysts, 2 senior portfolio managers, 1 US portfolio manager, 2 European small/mid cap investment professionals 2.2 Experienced equity portfolio managers 26 years of average experience Our expertise relies on an in-depth fundamental analysis of companies, while integrating a top-down approach in order to control macro-economic bias in the portfolio construction 26 years experience Background  DESS Gestion des Organismes Financiers et Bancaires  SFAF, Société Française des Analystes Financiers Rothschild & Cie Gestion since 2004 General Partner Didier Bouvignies 26 years experience Background  Graduated from Ecole Supérieure de Commerce de Paris  SFAF, Société Française des Analystes Financiers Rothschild & Cie Gestion since 2003 General Partner Philippe Chaumel 2. Investment team 8
  10. 10. Montreux - May 2012 2.3 Buy-side analysts A team of four buy-side analysts fully dedicated to European equities 11 years experience Sectors  Automobile  Media  Technology  Telecoms Buy-side analyst Anthony Bailly 14 years experience Sectors  Foods & Beverages  Consumer goods  Oil & Gas  Aerospace, Air transportation / Transport  Retail  Leisure & travels Buy-side analyst Ludivine de Quincerot 19 years experience Sectors  Chemical  Basic ressources  Real Estate  Industrial goods & Services  Construction  Healthcare Buy-side analyst Gabriel Hors 14 years experience Sectors  Banks  Insurance  Utilities Buy-side analyst Natacha Rousset 2. Investment team 9
  11. 11. Montreux - May 2012 3. Investment process
  12. 12. Montreux - May 2012 3.1 Investment philosophy Active, High-conviction based management looking for convexity Investment philosophy Description Conviction Portfolio reflects the strongest convictions of the management team on asset classes, countries, sectors and holdings, instead of investing according to a benchmark. Convexity During high volatility periods, to construct conviction based portfolios can be risked which is why we are paying a strong attention to convexity in our investments. Portfolio managers favour asymmetric investments, those for which upside potential is higher than downside risk in worst case scenario. Contrarian approach To realize the highest possible alpha over the long term, we have to make major bets to seize opportunities offered by short-term inefficiencies of the market, sometimes different from consensus ones. Research driven Companies are at the heart of our process: we invest only in companies on which we have a strong conviction. Our analysis is based on a fundamental approach which objective is to understand the reasons of a company’s valuation and profitability. Style Our investment strategy aims at delivering superior returns whatever the market conditions are. That is why we prefer to avoid permanent bias and to select investment that fit market environment. Thus, our investment style can be considered as “blend” or “opportunistic”. Long-term horizon Our investments are based on fundamental criteria which sometimes need catalysts to unlock value. For that reason, we need a minimum period of time to allow market remove inefficiencies. 3. Investment process 11
  13. 13. Montreux - May 2012 3.2 Investment process Fundamental analysis is the heart of the investment process Earnings potential Competition Valuation Macro-economic cycle positioning Companies margins Valuation Concentrated portfolio Macro-economic analysis Fundamental analysis Comparing portfolio to macro-economic scenario Understanding of company earnings and its evolution forecasted by the market 3. Investment process 12
  14. 14. Montreux - May 2012 3.3 Stock selection In-depth fundamental analysis Stock selection relies on in-depth fundamental analysis aimed to understand the company’s profitability forecasted by the market. It is based on three main steps:  Understanding of market prices and the underlying forecasts;  Challenging the market: evaluation of company’s value-creating factors in conjunction with an assessment of its sustainability of profitability (competitive environment, position in the cycle, restructuring). The analysis aims to answer following questions: is profitability sustainable or threatened? Does the company have competitive advantages to maintain its profitability to a higher level of its competitors?  Upside potential in case of right scenario / downside risk in the worst case scenario (looking for convexity) Understanding of market prices Challenging the market Convexity  Valuation of assets: enterprise value/capital employed, enterprise value/sales  Valuation of earnings power: price to cash flow, price earnings ratio, free cash flow yield  Earnings forecasts: 5-year estimates  Understanding of market outlook of company’s profit (valuation ratios analysis)  Understanding of company (management, strategy, background) and its environment (competition, market shares, barriers to entry, …)  Assessment of profitability estimates and potential impact on valuation  Comparison of our profitability expectations to market ones, integrated in prices  Upside potential  Identify under-valued companies or companies for which earnings growth forecasts are above market expectations  Explain the origin of company’s profit and identify factors that could increase / support growth (competitive advantages, restructuration’s, cycle positioning)  Looking for asymmetric investments, those for which upside potential are higher than downside risk in the worst case scenario Factors of analysis Objective 3. Investment process 13
  15. 15. Montreux - May 2012 3.4 Portfolio construction Concentrated portfolio on the strongest conviction of portfolio managers The size of a holding can be as large as 10%, although the typical entry weight for a stock in the portfolio is around 2% (minimum 1.5%). The portfolio construction process leads to a concentrated portfolio of around 45-60 stocks. The decision regarding position weight is based on:  The portfolio managers’ conviction level: to generate alpha we need to grab investment opportunities from the market to take clear-cut positions while not following indices.  The stock’s upside potential: the investment team assesses its view on the stock compared to consensus one. Thus, when they have strong conviction on a stock, largely different from the consensus, weighting will be high; if the conviction of the team is closed from the market one (already in market prices) or in case of lower conviction, bet will be less important.  The investment convexity: conviction-based portfolios can be risked with high volatility markets. During the portfolio construction, weightings are determined according to the portfolio managers’ conviction level but also to the level of risk linked to the position. This is why the investment team prefers asymmetric investments, those for which upside potential are higher than downside risk in the worst case scenario. Assets Description Sector  Maximum sector deviation: +/- 1000 bp Holdings  Concentration: 45-60 holdings  Individual holding: weight between 1,5% and 10% Risk  Maximum tracking-error: 8% (internal rule) 3. Investment process 14
  16. 16. Montreux - May 2012 4. Performance
  17. 17. Montreux - May 2012 4.1 Long-term returns Large excess returns over the medium to long-term… R Conviction Euro - 5-year evolution Notes Performance of C-units, net of fees. Past performance is not a guide to future performance and it may fluctuate over time. Benchmark: Eurostoxx ® Over 5 years, R Conviction Euro significantly outperformed its benchmark as well as its peers 4. Performance 16 35 45 55 65 75 85 95 105 30/04/07 29/04/08 29/04/09 30/04/10 30/04/11 30/04/12 Source: Rothschild & Cie Gestion, 30/04/12 R Conviction Euro Benchmark
  18. 18. Montreux - May 2012 60 70 80 90 100 30/06/11 30/08/11 30/10/11 30/12/11 29/02/12 30/04/12 Source: Rothschild & Cie Gestion, 30/04/12 R Conviction Euro Benchmark 70 80 90 100 110 31/12/2008 13/01/2009 26/01/2009 08/02/2009 21/02/2009 06/03/2009 R Conviction Euro Benchmark 40 50 60 70 80 90 100 31/12/07 01/03/08 01/05/08 01/07/08 31/08/08 31/10/08 31/12/08 R Conviction Euro Benchmark 100 120 140 160 180 200 06/03/09 25/07/09 13/12/09 03/05/10 21/09/10 09/02/11 30/06/11 R Conviction Euro Benchmark 4.2 Short-term returns …but short-term under-performance could appear in some market environment R Conviction Euro C - 31-12-2007 / 31-12-2008 R Conviction Euro C - 31-12-2008 / 06-03-2009 R Conviction Euro C - 06-03-2009 / 30-06-2011 R Conviction Euro C - 30-06-2011 / 30-04-2012 Notes Performance of C-units, net of fees. Past performance is not a guide to future performance and it may fluctuate over time. Benchmark: Eurostoxx ® Our fundamental approach, without permanent bias, aims to fit with market environment. It seeks to anticipate reversal of the trends in economic cycle and could sometimes mismatch with markets +16,3% +27% -0,56% Large excess return during the first bear market Over-performance during the bull market Neutral -12% Under-performance 4. Performance 17
  19. 19. Montreux - May 2012 4.3 Risks Risk indicators Notes Performance of C-units, net of fees. Past performance is not a guide to future performance and it may fluctuate over time. Benchmark: Eurostoxx ® R Conviction Euro C 5 years 3 years 2 years 1 year Standard Deviation 28,33% 28,33% 31,67% 38,34% Tracking-error 8,08% 8,48% 9,79% 12,76% Information Ratio 0,56 -0,19 -0,48 -0,82 Sharpe ratio -0,30 0,02 -0,44 -0,78 Alpha 6,09% -1,22% -1,38% -4,32% Beta 1,04 1,22 1,28 1,35 Source: Rothschild & Cie Gestion, 30/04/12 4. Performance 18
  20. 20. Montreux - May 2012 4.4 Recent awards Alpha League Table Grands Prix Eurofond Victoire des Sicav Lipper Fund Awards France Grands Prix de la Gestion d’actifs Pyramides de la gestion Portfolio management many times rewarded Source Lipper Company awards Fund awards Best French Asset Management Company - Equities 2011 and 2010 awards Best French Asset Management Company 2011 and 2010 awards Best Specialist Asset management - Broad range of products 2011 awards Source L’AGEFI Source Investissement Conseil Source Europerformance-EDHEC Risk Source Eurofonds-Le Monde Source La Tribune Lipper Fund Awards 2010 1st over 3 years Category « Eurozone Equity » GPGA 2010 1st over 3 years Category « Eurozone Equity » Pyramides 2010 2nd best fund Category « Large cap Eurozone Equity » 4. Performance 19
  21. 21. Montreux - May 2012 5. Macro-economic outlook
  22. 22. Montreux - May 2012 Growth above expectations, supported by consumption US – ISM surveys and activity US – Retail sales excluding gazoline 5.1 US economic growth 5. Macro-economic outlook 21
  23. 23. Montreux - May 2012 Growth supported by improvement in employment and decrease in household saving rates US – Quarterly job creations US – Personal saving rates 5.2 US economic growth 5. Macro-economic outlook 22
  24. 24. Montreux - May 2012 Real Estate recovering thanks to solvency improvement of households US – Housing US – Housing affordability 5.3 US economic growth 5. Macro-economic outlook 23
  25. 25. Montreux - May 2012 Recent improvement of leading indicators with strengthening on domestic demand in China United-States and Emerging markets limit the slowdown in Eurozone growth Business surveys – ISM non-manufacturing China 5.4 Global growth 5. Macro-economic outlook 24
  26. 26. Montreux - May 2012 Cut in interest rates benefiting from declining inflationary pressures Central banks – Policy rates China – Consumer prices 5.5 Emerging markets growth 5. Macro-economic outlook 25
  27. 27. Montreux - May 2012 -2,0 -1,0 0,0 1,0 2,0 3,0 4,0 Mar'10 Avr'10 Mai'10 Juin"10 Juillet'10 Août'10 Sep'10 Oct'10 Nov'10 Dec'10 Jan'11 Fév'11 Mar'11 Avr'11 Mai'11 Juin'11 Juillet'11 Août'11 Sep'11 oct'11 nov'11 dec'11 Janv'12 Fév'12 Mars'12 avr-12 Eurozone - 2011 United States - 2011 Source : Consensus Forecasts, Rothschild Growth estimates - 2011 Japan - 2011 Germany - 2011 -1,0 0,0 1,0 2,0 3,0 4,0 Jan'11 Fév'11 Mar'11 Avr'11 Mai'11 Juin'11 Juillet'11 Août'11 Sep'11 oct'11 nov'11 dec'11 Janv'12 Fév'12 Mars'12 avr-12 Eurozone - 2012 United States - 2012 Source : Consensus Forecasts, Rothschild Growth estimates - 2012 Japan - 2012 Germany - 2012 A potential improvement of estimates Growth estimates 2012 Growth estimates 2011 5.6 Eurozone growth 5. Macro-economic outlook 26
  28. 28. Montreux - May 2012 Growth in Eurozone is led by Germany benefiting from wages growth Business surveys – PMI Non-manufacturing Germany - Wages 5.7 Eurozone growth 5. Macro-economic outlook 27
  29. 29. Montreux - May 2012 Positive effect of decrease in commodities prices Eurozone – Consumer prices Raw materials in $ 5.8 Eurozone growth 5. Macro-economic outlook 28
  30. 30. Montreux - May 2012 -1 -0.5 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 Portugal Spain Germany Italy France Source OECD Trade balance contribution Eurozone – Trade balance Trade balances 2011 – Contribution to GDP (%) 5.9 Eurozone growth 5. Macro-economic outlook 29
  31. 31. Montreux - May 2012 Trade balance contribution Eurozone – Current account (% of GDP) Germany – Trade balance 5.10 Eurozone growth 5. Macro-economic outlook 30
  32. 32. Montreux - May 2012 Positive impact of the european quantitative easing for the Banks and States refinancing Central bank’s balance sheet 5.11 European issues 5. Macro-economic outlook 31
  33. 33. Montreux - May 2012 LTRO effect : improvement of the sovereign debt market Eurozone – Government benchmark 10 years Italy – Government benchmark 5.12 Interest rates 5. Macro-economic outlook 32
  34. 34. Montreux - May 2012 Historical attractive valuation Eurozone France 5.13 Equity 5. Macro-economic outlook 33
  35. 35. Montreux - May 2012 Historical undervaluation of European equities vs US equities Comparative returns 5.14 Equity 0,6 0,6 0,7 0,7 0,8 0,8 0,9 0,9 1,0 mai-98 mai-00 mai-02 mai-04 mai-06 mai-08 mai-10 Actions zone Eurochères / actions américaines Actions zone Europas chères / actionsaméricaines Moyenne Source : SG, Rothschild Eurozone stocks expansive vs US stocks Eurozone stocks cheap vs US stocks Average Evolution relative du ratio Cours / Actif net 5. Macro-economic outlook 34
  36. 36. Montreux - May 2012 5.15 Equity A momentum market? SXXE (total return) World - Relative performances Eurozone – Relative performances 5. Macro-economic outlook 35
  37. 37. Montreux - May 2012 5.16 Equity ‘Growth’ vs. ‘value’ : historical decorrelation  Composite of 10 « growth » stocks : LVMH, Essilor, Publicis, Dassault Systèmes, Air Liquide, Sodexo, PPR, Sanofi, L’Oréal, Danone  Composite of 10 « value » stocks : STMicroelectronics, TF1, Arcelor Mittal, Lafarge, EDF, Peugeot, Société Générale, Veolia, Alcatel Lucent, Air France Source : Bloomberg Performances based on the level of the CAC 40 on the 30/06/2007, ie 6054,93 pts Source : Bloomberg Performances based on the level of the CAC 40 on the 31-12-2008, ie 3217,97 pts Evolution since June 30, 2007 (pic of the market) Evolution since December 31,2008 (bottom of the market) 5. Macro-economic outlook 36
  38. 38. Montreux - May 2012 0 50 100 150 200 250 300 350 4000 0,2 0,4 0,6 0,8 1 1,2 1,4 Price-to-Book ratio Europe CDS Financials Banks – high correlation with CDS Price-to-Book ratio and CDS evolution (reversed scale) European Banking sector France 5.17 Equity 5. Macro-economic outlook 37
  39. 39. Montreux - May 2012 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 0 2 4 6 8 10 12 nov.-06 mars-07 juil.-07 nov.-07 mars-08 juil.-08 nov.-08 mars-09 juil.-09 nov.-09 mars-10 juil.-10 nov.-10 mars-11 juil.-11 nov.-11 mars-12 Natural gaz $/mBTU Gallon $ Source : Bloomberg,  Rothschild Oil increase links to geopolitical issues US – Energy prices US – Oil imports 5.18 Main risks : energy prices 5. Macro-economic outlook 38
  40. 40. Montreux - May 2012 -6 -4 -2 0 2 4 6 8 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Germany Nominal GDP Government benchmark 10 years Unusually low level of the German interest rates Germany 5.19 Main risks : bond market shock 5. Macro-economic outlook 39
  41. 41. Montreux - May 2012 Economic environment, characterised by:  Global growth around 3%, led by Emerging countries and by the recovery in the United-States  Eurozone growth, less negative than anticipated because of: • Growth potential in Germany • Decrease in inflation  Refinancing program of ECB Should lead markets at the opposite of 2011, with a decrease in risk premium on:  Italian bonds  Corporate bonds  Eurozone equities  Financial and cyclical stocks 5.20 Conclusion 5. Macro-economic outlook 40
  42. 42. Montreux - May 2012 6. Portfolio characteristics
  43. 43. Montreux - May 2012 6.1 Sector breakdown April 2011 vs. April 2012 Sector positionning Relative positionning 6. Portfolio characteristics 42 30,5% 16,8% 13,8% 11,7% 8,5% 8,4% 5,7% 4,6% 31,7% 11,9% 15,7% 8,8% 12,0% 8,2% 6,0% 5,7% Finance Industry Télécoms - Utilities Consumer goods Services Technology Oil & Gas - Basic resources Santé Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 30/04/2012 30/04/2011 11,7% 2,1% 1,9% -7,0% 1,9% 3,6% -13,0% -1,3% 8,7% -2,8% 0,6% -5,6% 5,5% 3,4% -11,6% 1,8% Finance Industry Télécoms - Utilities Consumer goods Services Technology Oil & Gas - Basic resources Santé Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 30/04/2012 30/04/2011
  44. 44. Montreux - May 2012 6.2 Country breakdown April 2011 vs. April 2012 Country positionning Relative positionning 6. Portfolio characteristics 43 50,2% 21,4% 16,4% 5,6% 4,4% 2,1% 57,4% 15,8% 17,0% 3,8% 3,3% 2,7% France Germany Italy Netherlands Spain Other eurozone Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 30/04/2012 30/04/2011 17,2% -8,8% 8,5% -3,1% -4,8% -9,0% 24,2% -10,9% 7,8% -4,8% -7,8% -8,3% France Germany Italy Netherlands Spain Other eurozone Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 30/04/2012 30/04/2011
  45. 45. Montreux - May 2012 7. Main operations since August 2011
  46. 46. Montreux - May 2012 Index Purchases and strengthening, mostly on cyclical stocks 5.1 Main operations since August 2011 Cyclical vs defensives stocks (Eurozone) Cyclicals: Basic Materials, Chemicals, Construction, Industrial goods, Auto, Leisure & Travel, Technology Defensive: Retail, Consumer goods, Foods & Beverages, Healthcare, Telecoms, Utilities 7. Main operations since August 2011 45
  47. 47. Montreux - May 2012 Purchases and strengthening 5.1 Main operations since August 2011 Stock Daimler Peugeot Air France ST Microelectronics HeidelbergCement Stock Veolia Environnement RWE Mostly on cyclical stocks Reduce underweight on utilities 7. Main operations since August 2011 46
  48. 48. Montreux - May 2012 Valuation 2011 2012e EV / Sales 0,34 x 0,35 x EV / EBITDA 3,0 x 3,1 x Source Exane / Bloomberg 1 2 3 4 5 Introduction of new platforms to seek costs synergies between the different lines of products. Daimler starts to take advantage of economies of scale.  New platforms should allow to reduce costs by 8% to 10% compared to vertical existing platforms, according to the management  Positive impact as early as 2014. In 2016, impact of those costs synergies are evaluated as more than €1bn. Important potential of restructuration, that should improve significantly margins. Daimler should reduce number of employees by 10% as BMW has done between 2007 and 2011. Repositioning on the lower-end of the market: evolution of existing models (A and B-Class) and launch of new ones (competition with X1 and 1-Serie of BMW) in line with C and E-Class design Strong and increasing exposure to China, allowing the Group to benefit from economic growth in this area. From 2010 to 2011, the weight of China in the Group sales turnover has doubled (9% in 2010 to 18% in 2011 Q3) Growth potential in trucks:  US sales should be sustained by the average age of the fleet (7 years) at a historical peak since 1979  New regulations in western Europe (Euro III to Euro V standards) for more than 200.000 trucks Daimler : should benefit from a new strategy and a more favourable economic environment 5.1 Main operations since August 2011 7. Main operations since August 2011 47
  49. 49. Montreux - May 2012 HeidelbergCement: discount with an attractive mix 1/3/2012 P/E 2011 P/E 2012 P/E 2013 Ev/EBIT 2011 Ev/EBIT 2012 Ev/EBIT 2013 Lafarge S.A. 16,5 x 13,1 x 10,3 x 11,8 10,5 9,2 Holcim Ltd. 24,1 x 17,8 x 14,3 x 15,7 13,4 11,4 Italcementi S.p.A. 61,1 x 27,0 x 14,3 x 17,6 16,2 11,6 Heidelberg Cement AG 16,3 x 13,0 x 10,2 x 11,3 10,3 8,8 CRH PLC 21,0 x 18,1 x 14,6 x 17,6 15,3 12,7 Average 27,8 x 17,8 x 12,7 x 14,8 x 13,1 x 10,7 x Premium/ (discount) Heidelberg Cement -41% -27% -20% -24% -22% -18% Source Bloomberg 15% under-performance relative to sector with was not justified given the Group strengths. One of the best geographic mix within sector.  No exposure to peripheral countries and a strong presence in Northern and Eastern Europe  Main beneficiary of recovery in US and UK growth (40% of profits in the middle of cycle) Margins should improve  Market low of 10% in 2010, previous pick at 16.6% in 2007  Operating leverage, costs reduction, spread between prices increase and the cost of energy will be much less penalised than in 2011 Balance sheet under control  Credit line of €2.4bn, that has not been used, no risk of Group downgrade Average discount of around 10%-15% compared to its peers, that appears without justification 1 2 3 4 5.1 Main operations since August 2011 7. Main operations since August 2011 48
  50. 50. Montreux - May 2012 Shifts within IT services Relative performance Atos vs Cap Gemini Purchases Sales Stock Cap Gemini Stock Atos Source Bloomberg, Rothschild 80,00 90,00 100,00 110,00 120,00 130,00 140,00 150,00 25/02/10 25/05/10 25/08/10 25/11/10 25/02/11 25/05/11 25/08/11 25/11/11 25/02/1 Atos Cap Gemini 5.1 Main operations since August 2011 7. Main operations since August 2011 49
  51. 51. Montreux - May 2012 Company profile Premium LT gas contracts vs gas spot prices (€/MWh) Relative performance RWE / Utilities RWE: turnaround’s potential within utilities sector 70 80 90 100 110 120 30/6/11 31/8/11 31/10/11 31/12/11 29/2/12 RWE Secteur Utilities  Strengthen financial soundness: – Divestments: €11bn by 2013 – Additional costs cutting: €1bn – Capital increase: €2.1bn in December 2011  Positive exposure to gas price increase in Germany  Losses decrease on gas long-term contracts thanks to the likely increase in gas spot prices  The abandonment of nuclear power in Germany should allows electricity prices to increase and thus margins for suppliers.  Positive exposure to CO² low prices compared to E.On and to less polluting utilities  Positive exposure to UK, first market in Europe to experienced supply-demand balance narrowing and improvement in 2011 margins  Greater visibility to the stock with an attractive valuation (6.6x EV/EBITDA 12e) Capital increase 5.1 Main operations since August 2011 Utilities sector 7. Main operations since August 2011 50
  52. 52. Montreux - May 2012 Shifts between financials Comparative performances between Intesa and Unicredit 30 40 50 60 70 80 90 100 110 120 25/2/11 25/3/11 25/4/11 25/5/11 25/6/11 25/7/11 25/8/11 25/9/11 25/10/11 25/11/11 25/12/11 25/1/12 25/2/12 Intesa Unicredit Purchases Sales Stock Price BNP Paribas 30,50 Unicrédit 2,90 Société Générale 17,50 Stock Price BNP Paribas 33,70 Intesa +30% (since end of August) / +70% (since low of September) Generali Source Bloomberg, Rothschild 5.1 Main operations since August 2011 7. Main operations since August 2011 51
  53. 53. Montreux - May 2012 5.1 Main operations since August 2011 Shifts between financials Attractive valuation even with taking into consideration non-recurring items Profits and valuation adjusted by non-recurring items Compliance with solvency requirement without capital increase 9% 10,70% 9,60% 11,60% Core Tier 1 Bâle 2,5 Tier 1 Bâle 2,5 ratios de solvabilité au 31.12.11 SG BNP 2011 SG BNP Earnings (€M) 2 385 6 050 RoE released 6% 8,8% Earnings excluding sovereign debt depreciation (€M) 3 007 8 367 Recurring earnings (€M) 3 114 8 485 Recurring RoTE 9,5% 15,3% P/TBV 0,57 0,80 Recurring P/E 6,2 5,3 7. Main operations since August 2011 52
  54. 54. Montreux - May 2012 Banking sector contribution - R Conviction Euro fund 5.1 Main operations since August 2011 Banks – Performance attribution Banks – Relative weights vs benchmark -0,01 2,07 1,81 2,33 0,42 -3,9 3,93 6,65 -6 -4 -2 0 2 4 6 8 2006 2007 2008 2009 2010 2011 2012 Total -9,5 -10,5 -6 0 3,9 10,5 11,6 -15 -10 -5 0 5 10 15 2006 2007 2008 2009 2010 2011 2012 7. Main operations since August 2011 53
  55. 55. Montreux - May 2012 Exposure reduced on defensives stocks, in particular within Telecoms Sales in defensive stocks 5.1 Main operations since August 2011 7. Main operations since August 2011 54
  56. 56. Montreux - May 2012  Significant over-performance compare to sector and market, going faster in Q2 2011 – Investors consider again the stock as defensive – Good resilience of results in a difficult economic environment – New strategy of M. Viesbacher since 2008 starts to be successful  Stock still has upside potential, even if discount has been reduced (but remains around 15%)  Support factors to maintain over-performance – Good news flow on Genzyme, with a production in process of standardization – Bottom for profits will be reached at Q1 2012, with the loss of Plavix patent  Emerging of the “new” Sanofi – Top-line growth potential of 4-6% (thanks to emerging markets, vaccines, Genzyme, …) – Operational margins sustained around 30-35% Source Bloomberg 01/03/2012 P/E 2012 P/E 2013 P/E 2014 EV/EBITDA 2012 EV/EBITDA 2013 EV/EBITDA 2014 EV/EBIT 2012 EV/EBIT 2013 Astra Zeneca 7,2x 7,1x 7,2x 4,7 4,7 4,8 5,6 5,6 Bayer 11,1x 9,9x 9,1x 6,6 5,8 5,2 9,5 8,1 Glaxo SmithKline 11,2x 10,2x 9,3x 7,5 7,0 6,5 8,8 8,2 Novartis 9,8x 9,5x 8,7x 9,5 9,0 7,8 12,0 11,3 Roche 11,5x 10,5x 10,0x 8,2 7,4 7,0 9,7 8,7 Sanofi 9,5x 9,0x 8,4x 6,9 6,2 5,6 7,7 6,9 Novo Nordisk 22,3x 19,1x 16,2x 15,2 13,7 12,2 17,1 15,3 Teva Pharma 8,0x 7,4x 6,9x 7,0 6,3 5,9 8,1 7,2 Average (Europe) Pharma 11,3x 10,3x 9,5x 8,2x 7,5x 6,9x 9,8x 8,9x Average (US) Pharma 11,9x 11,3x 11,0x 7,6x 7,2x 6,8x 9,2x 8,5x Average (Global) Pharma 11,6x 10,8x 10,2x 7,9x 7,4x 6,9x 9,5x 8,7x Premium (discount) Sanofi vs Pharma Europe -16% -13% -11% -16% -17% -19% -22% -23% Sanofi: still in the portfolio but exposure has been reduced 5.1 Main operations since August 2011 7. Main operations since August 2011 55
  57. 57. Montreux - May 2012 Sector profile Chemical sector EBIT margins (LT average : 10,7%) Chemical - Production capacity growth and demand Chemical: still cautious on sector  Sector margins at their historical pick – 2011 EBIT margins: 14% vs previous historical pick at 11.5 (above long-term average)  New production capacities in the upcoming 24 months, lead to an important gap between production and volume sales growth  Lower demand in some key sectors/clients: automobile and construction (30% of outlets)  Seasonality re-emerging in H2 2011, the first time since two years  Pricing power lower than in the past  Margins decrease have appeared, several profit warnings in H2 (Akzo, DuPont), disappointed results in Q4 (BASF, Bayer)  Consensus forecasts a decrease in EPS 2012 by only 3%, maybe too optimistic regarding Q4 earnings within the sector: BASF, EBIT 2011 Q4 -14%) 8,3% 6,2% 9,7% 11,4% 11,4% 11,5% 11,3% 10,0% 13,3% 14,0% 0,0% 2,0% 4,0% 6,0% 8,0% 10,0% 12,0% 14,0% 16,0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source Nomura estimates 90 95 100 105 110 115 120 125 2009 2010 2011 2012 2013 2014 2015 Production Capacity growth Volume growth 5.1 Main operations since August 2011 7. Main operations since August 2011 56
  58. 58. Montreux - May 2012 Annexe A. Germany – Divergence of leading indicators
  59. 59. Montreux - May 2012 A.1 Germany – Divergence of leading indicators Annexe A. Germany – Divergence of leading indicators 58
  60. 60. Montreux - May 2012 Annexe B. European banking sector
  61. 61. Montreux - May 2012 B.1 European banking sector Divergence of performances between Europe and the United States Annexe B. European banking sector 60
  62. 62. Montreux - May 2012 Annexe C. Exports
  63. 63. Montreux - May 2012 EUR(billions) EUR(billions) EUR(billions) EUR(billions) C.1 Exports Annexe C. Exports 62
  64. 64. Montreux - May 2012 C.2 Exports Annexe C. Exports 63
  65. 65. Montreux - May 2012 Annexe D. Contacts details
  66. 66. Montreux - May 2012 D.1 Contacts details A client closely relationship Institutional investors Lionel Deny Sales lionel.deny@rothschild.com Tel : +33 1 40 74 40 73 Arnaud Perrier Managing Director – Head of business development and marketing arnaud.perrier@rothschild.com Tel : +33 1 40 74 42 82 Aurélie Ferrer Sales aurelie.ferrer@rothschild.com Tel : +33 1 40 74 42 51 Marie-Line Hashatel Client Relationship management marie-line.hashatel@rothschild.com Tel : +33 1 40 74 41 67 Adrien Rollando Client Relationship management adrien.rollando@rothschild.com Tel : +33 1 40 74 71 24 Philippe Louisadat Head of Third-Party Distribution – France and Spain philippe.louisadat@rothschild.com Tel : +33 1 40 74 72 06 Olivier Guichard Sales olivier.guichard@rothschild.com Tel : +33 1 40 74 72 78 Johanna Meimoun Sales johanna.meimoun@rothschild.com Tel : +33 1 40 74 49 25 Marion Semblat Sales marion.semblat@rothschild.com Tel : +33 1 40 74 88 77 Third-Party Distribution Annexe D. Contacts details 65
  67. 67. Montreux - May 2012 D.2 Contacts details Business development teams dedicated to our European clients Valérie Kaliski Head of Benelux, Scandinavia & UK valerie.kaliski@rothschild.com Tel : +33 1 40 74 42 68 Brandon H. Le Tran Institutional Sales Benelux & Scandinavia brandon.letran@rothschild.com Tel : +33 1 40 74 42 19 Marie-Line Hashatel Client Relationship management marie-line.hashatel@rothschild.com Tel : +33 1 40 74 41 67 Rothschild & Cie Gestion has dedicated teams and develops active partnerships for its business in Europe Philippe Louisadat Head of Third-Party Distribution – France and Spain philippe.louisadat@rothschild.com Tel : +33 1 40 74 72 06 Konstantin Nikiteas Managing Director Northern Europe konstantin.nikiteas@rothschild.com Tel : +41 4 43 84 78 45 Özlem Reinhard Client Relationship Management oezlem.reinhard@rothschild.com Tel : +41 4 43 84 78 46 Business development partnership in Germany Annexe D. Contacts details 66
  68. 68. Montreux - May 2012 D.3 Our partnership in Germany : Tel.: 069/7191897-18 @ i.wachter@max-xs.de Director Institutional Sales Ilona Wachter Tel.: 069/7191897-22 @ t.dinges@max-xs.de Senior Sales Manager Thomas M. Dinges Tel.: 069/7191897-11 @ s.schrempp@max-xs.de Client Service Manager Sibylle Schrempp Tel.: 069/7191897-23 @ a.flechsig@max-xs.de Client Service Manager Alexandra Flechsig Tel.: 069/7191897-12 @ t.dierich@max-xs.de Sales Manager Thorsten W.Dierich Tel.: 069/7191897-16 @ i.mlinaric@max-xs.de Ivan Mlinaric Tel.: 069/7191897-17 @ t.gils@max-xs.de Thomas Gils Senior Sales Manager Senior Product Specialist Institutional Business Tel.: 069/7191897-15 @ r.otteman@max-xs.de Managing Director – Head of Distribution Rainer Otteman Tel.: 069/7191897-14 @ m.richlick@max-xs.de Client Service Manager Michèle Richlick Tel.: 069/7191897-19 @ o.roll@max-xs.de Managing Director – Head of Fund Selction & Institutional Business Dr. Oliver Roll Tel.: 069/7191897-0 @ n.n@max-xs.de Director Institutional Sales N.N. (bald für Sie da) Annexe D. Contacts details 67
  69. 69. Montreux - May 2012 Annexe E. Funds Characteristics
  70. 70. Montreux - May 2012 E.1 Administrative characteristics R Conviction Euro Administrative characteristics ISIN code FR0010187898 (C-share) / FR0010807099 (F-share) / FR0010839555 (I-share) Inception date 9 May 2005 (C-share) / 28 September 2009 (F-share) / 30 December2009 (I-share) AMF classification Eurozone Equity Benchmark Eurostoxx ® Frequency of valuation Daily Management fees 1,50% max VAT included (C-share) / 1,90% (F-share) / 0,75% (I-share) Performance fees 15% of over-performance (Eurostoxx ® total return) Subscription/redemption fees 4,50% / None Countries of registration France, Switzerland, Belgium, Luxembourg (C-share), Spain, Germany, Netherlands (C-share), Austria (C & F-share) Annexe E. Funds Characteristics 69
  71. 71. Montreux - May 2012 E.2 Administrative characteristics R Conviction Europe Administrative characteristics ISIN code FR0010784835 (C-share) / FR0010961698 (F-share) Inception date 3 juin 1996 (C(-share) / 10 novembre 2010 (F-share) AMF classification European equities Benchmark Stoxx 600 ® Frequency of valuation Daily Management fees 1.495% TTC maximum (C-share) / 1.90%TTC maximum (F-share) Subscription/redemption fees 4.5% TTC maximum / 3% TTC maximum Countries of registration France, Belgium, Switzerland, Germany and Austria (C-share & F-share) Annexe E. Funds Characteristics 70
  72. 72. Montreux - May 2012 Annexe F. Disclaimer
  73. 73. Montreux - May 2012 F.1 Disclaimer The Rothschild & Cie Gestion’s funds (hereinafter, the “Fund(s)”) presented in this document, are incorporated under the laws of France and agreed by the FINMA to be actively distributed in Switzerland. This information is not an invitation to subscribe in any of the Funds described herein, nor is it a substitute for the Fund’s prospectus and is provided for information only. The presentation is neither an advice nor a recommendation to subscribe any Fund. Subscriptions will only be received and shares issued on the basis of the current prospectus for the relevant Fund, as agreed by the FINMA. Any information communicated through this document is given for information only and does not contain any contractual matter. Past performance is not a guide to the future. Moreover, it does not include fees and commissions charged for the issue and redemption of units of the relevant Fund. Rothschild & Cie Gestion does not guarantee in any way the evolution of the performance and cannot be held responsible for any decision taken on the basis of information contained in this document. The investment in one or several units of shares of any Fund is not riskless. Rothschild & Cie Gestion recommend investors to take more information by contacting the Representative of the Funds in Switzerland, as indicated below, its usual financial adviser or Rothschild & Cie Gestion before any decision of investment, in particular towards the suitability between the Funds’ characteristics and their needs. Information for shareholders living in Switzerland Rothschild & Cie Gestion, Paris, Zurich-Branch (Zollikerstrasse 181- CH-8034 Zurich - Switzerland) obtained an authorisation by the FINMA to actively commercialize the Funds in Switzerland and has appointed BNP Paribas Securities Services, Paris, succursale de Zurich - Selnaustrasse 16 - CH-8002 Zurich - Switzerland, as representative in Switzerland and this latter also acts as paying agent in Switzerland (the “Representative”). Before any subscription in one or several units of shares of any Funds, the investor must take cognizance of the prospectuses. The Fund’s articles of incorporation, the full prospectus, the simplified prospectus, the annual and semi-annual reports of each Fund, may be obtained, on simple request and free of charge, at the head office of the Representative, and/or at Rothschild & Cie Gestion – Service Commercial – 29, avenue de Messine – 75008 Paris – France . These Documents are also available on www.rothschildgestion.fr Announcements to investors in Switzerland which concern Rothschild & Cie Gestion or the Funds will be published in the “Feuille Officielle Suisse du Commerce” (FOSC) and on the recognised electronic platform www.fundinfo.com The issue and redemption prices or the net asset values with the indication “commissions excluded” will be published daily on the recognised electronic platform www.fundinfo.com. Registering of the Funds None of the Funds are or will be registered according to the United States Securities Act 1933 or according to the United State Company Act 1940. As a consequence, the Funds must not in any circumstances be offered or distributed: (i) in the United States of America, in any of its States or in any other political subdivision of the United States of America, or (ii) to or on behalf of or for the benefit of any United States Person (as defined in Regulation S of the "United States Securities Act" of 1933). Annexe F. Disclaimer 72

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