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

    • Montreux - May 2012European equitiesCrisis, source of opportunities for high-conviction strategy09 mai 2012
    • 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 711
    • Montreux - May 20121. Rothschild & Cie Gestion
    • Montreux - May 2012 1. Rothschild & Cie Gestion 1.1 The Rothschild Heritage Values persisting from generation to generationRothschild Values Mayer Amschel Rothschild Tradition & Innovation 1743-1812 Transparency & Efficiency Integrity Nathan Amschel Salomon Carl James 1777-1836 1773-1855 1774-1855 1788-1855 1792-1868 Londres Francfort Vienne Naples Paris Lionel Nathaniel Alphonse Gustave Edmond 1808-1879 1812-1870 1827-1905 1829-1911 1845-1934 Nathaniel Leopold Nathan Edouard Robert Maurice 1840-1915 1845-1917 1844-1881 1868-1949 1880-1946 1881-1957 Nathaniel Anthony Henry Guy Alain Elie Edmond 1877-1923 1887-1961 1872-1946 1909-2007 1910-1982 1917-2007 1926-1997 Victor Evelyn Philippe David Edouard Eric Robert Nathaniel Benjamin 1910-1990 1931 1902-1988 1942 1957 1940 1947 1946 1963 Jacob Philippine 1936 1935 English arm English arm set up in France French arm Extincts arms 3
    • Montreux - May 2012 1. Rothschild & Cie Gestion 1.2 Rothschild & Cie Gestion The asset management branch of Rothschild & Cie Banque A benchmarck in the asset management field €19,5 billion AUM Asset class breakdown A family  Legal structure : limited partership business with  general partners jointly responsible for commited the commitments of the Company from managers their personal assets  A fully-owned subsidiary of Rothschild Financial & Cie Banque (Fitch A rating (long soundness term) /F1 (short term))  SAS 70 Type I certificate A diversified client base  Founded in 1982  200 experienced and qualified Experience employees  An awarded management  European client base : France, Belgium, Netherlands, Luxemburg, International Germany, Austria, Switzerland, Spain, UK, Scandinavia Source Rothschild, as of December 30th, 20114
    • Montreux - May 2012 1. Rothschild & Cie Gestion 1.3 Investment philosophy A conviction-based and contrarian management looking for the convexity of investments We focuse on stocks on which the Portfolio managers favour managers have strong convictions : asymmetric investments, those for we aim at creating added value by which upside potential is higher than Convexity Conviction making clear choices allowing them downside risk in worst case to strongly over-perform portfolio scenario benchmark Fundamental analysis Contrarian 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.5
    • Montreux - May 20122. Investment team
    • Montreux - May 2012 2. Investment team 2.1 Equity resources The Equity team benefits from the entire resources of Rothschild & Cie Gestion 1 Buy side analysts Euro/Europe Portfolio managers ThematicsThe fundamental analysis made BOTTOM UP (Small cap) Ludivine de Anthony Philippe Didier Daniel (Small cap) Loicby 9 experts Quincerot Bailly Chaumel Bouvignies Fighiera Tonnelier Fundamental analysis Natacha Gabriel Thierry (US) Rousset Hors Combes 3 Philippe Chaumel Didier Bouvignies STOCK SELECTIONTwo senior portfolio managers, General Partner, General Partner, &highly experienced on the Equitymarket 26 years of experience 26 years of experience PORTFOLIO CONSTUCTION At Rothschild & Cie Gestion since 2003 At Rothschild & Cie Gestion since 2004 2 Didier Bouvignies Philippe Chaumel Denis FallerThe 40 investment professional TOP DOWN General Partner General Partner General Partnerbenefit from the macro economicscenario of Rothschild & CieGestion defined by the most Investment scenario definition Economic & buy Alternativesenior members of the investment Equity Fixed Income Multimanagement side research Multimanagementteam 7
    • Montreux - May 2012 2. Investment team 2.2 Experienced equity portfolio managers 26 years of average experience  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 Didier Bouvignies Philippe Chaumel General Partner General Partner 26 years experience 26 years experience Background Background  DESS Gestion des Organismes Financiers et Bancaires  Graduated from Ecole Supérieure de Commerce de Paris  SFAF, Société Française des Analystes Financiers  SFAF, Société Française des Analystes Financiers Rothschild & Cie Gestion since 2004 Rothschild & Cie Gestion since 2003  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 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 construction8
    • Montreux - May 2012 2. Investment team 2.3 Buy-side analysts A team of four buy-side analysts fully dedicated to European equities Gabriel Hors Ludivine de Quincerot Buy-side analyst Buy-side analyst 19 years experience 14 years experience Sectors Sectors  Chemical  Foods & Beverages  Basic ressources  Consumer goods  Real Estate  Oil & Gas  Industrial goods & Services  Aerospace, Air transportation / Transport  Construction  Retail  Healthcare  Leisure & travels Anthony Bailly Natacha Rousset Buy-side analyst Buy-side analyst 11 years experience 14 years experience Sectors Sectors  Automobile  Banks  Media  Insurance  Technology  Utilities  Telecoms9
    • Montreux - May 20123. Investment process
    • Montreux - May 2012 3. Investment process 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.11
    • Montreux - May 2012 3. Investment process 3.2 Investment process Fundamental analysis is the heart of the investment process Fundamental analysis Earnings potential Competition Valuation Understanding of company earnings and its evolution forecasted by the market Concentrated portfolio Comparing portfolio to macro-economic scenario Macro-economic Companies Valuation cycle positioning margins Macro-economic analysis12
    • Montreux - May 2012 3. Investment process 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 ConvexityFactors of analysis  Valuation of assets: enterprise  Understanding of market outlook of  Assessment of profitability estimates value/capital employed, enterprise company’s profit (valuation ratios and potential impact on valuation value/sales analysis)  Comparison of our profitability  Valuation of earnings power: price to  Understanding of company expectations to market ones, cash flow, price earnings ratio, free (management, strategy, background) integrated in prices cash flow yield and its environment (competition,  Upside potential  Earnings forecasts: 5-year estimates market shares, barriers to entry, …)  Identify under-valued companies or  Explain the origin of company’s profit  Looking for asymmetric investments,Objective companies for which earnings growth and identify factors that could increase those for which upside potential are forecasts are above market / support growth (competitive higher than downside risk in the worst expectations advantages, restructuration’s, cycle case scenario positioning)13
    • Montreux - May 2012 3. Investment process 3.4 Portfolio construction Concentrated portfolio on the strongest conviction of portfolio managers 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) 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.14
    • Montreux - May 20124. Performance
    • Montreux - May 2012 4. Performance 4.1 Long-term returns Large excess returns over the medium to long-term… R Conviction Euro - 5-year evolutionOver 5 years, RConviction Euro 105significantlyoutperformed itsbenchmark as well as 95its peers 85 75 65 55 45 35 30/04/07 29/04/08 29/04/09 30/04/10 30/04/11 30/04/12 R Conviction Euro Benchmark Source: Rothschild & Cie Gestion, 30/04/12 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 ®16
    • Montreux - May 2012 4. Performance 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 / 06-03-2009Our fundamental Large excess return during the first bear market Neutralapproach, without 100 110permanent bias, aims 90to fit with market 100 80environment. 70 90It seeks to anticipate 60 +16,3% 80reversal of the trends 50 -0,56%in economic cycle 40 70and could sometimes 31/12/07 01/03/08 01/05/08 01/07/08 31/08/08 31/10/08 31/12/08 31/12/2008 13/01/2009 26/01/2009 08/02/2009 21/02/2009 06/03/2009mismatch withmarkets R Conviction Euro Benchmark R Conviction Euro Benchmark R Conviction Euro C - 06-03-2009 / 30-06-2011 R Conviction Euro C - 30-06-2011 / 30-04-2012 200 Over-performance Under-performance 100 during the bull 180 market +27% 90 160 80 140 -12% 70 120 100 60 06/03/09 25/07/09 13/12/09 03/05/10 21/09/10 09/02/11 30/06/11 30/06/11 30/08/11 30/10/11 30/12/11 29/02/12 30/04/12 R Conviction Euro Benchmark Source: Rothschild & Cie Gestion, 30/04/12 R Conviction Euro Benchmark 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 ®17
    • Montreux - May 2012 4. Performance 4.3 Risks Risk indicators 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 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 ®18
    • Montreux - May 2012 4. Performance 4.4 Recent awards Portfolio management many times rewardedCompany awards Alpha League Table Grands Prix Eurofond Victoire des Sicav Best French Asset Best French Asset Best Specialist Asset Management Company - Management Company management - Broad Equities range of products 2011 and 2010 awards 2011 and 2010 awards 2011 awards Source Europerformance-EDHEC Risk Source Eurofonds-Le Monde Source La TribuneFund awards Lipper Fund Awards France Grands Prix de la Gestion d’actifs Pyramides de la gestion Lipper Fund Awards GPGA 2010 Pyramides 2010 2010 1st over 3 years 2nd best fund 1st over 3 years Category « Eurozone Category « Large cap Category « Eurozone Equity » Eurozone Equity » Equity » Source Lipper Source L’AGEFI Source Investissement Conseil19
    • Montreux - May 20125. Macro-economic outlook
    • Montreux - May 2012 5. Macro-economic outlook 5.1 US economic growth Growth above expectations, supported by consumptionUS – ISM surveys and activity US – Retail sales excluding gazoline21
    • Montreux - May 2012 5. Macro-economic outlook 5.2 US economic growth Growth supported by improvement in employment and decrease in household saving ratesUS – Quarterly job creations US – Personal saving rates22
    • Montreux - May 2012 5. Macro-economic outlook 5.3 US economic growth Real Estate recovering thanks to solvency improvement of householdsUS – Housing US – Housing affordability23
    • Montreux - May 2012 5. Macro-economic outlook 5.4 Global growthUnited-States and Emerging markets limit the Recent improvement of leading indicators withslowdown in Eurozone growth strengthening on domestic demand in ChinaBusiness surveys – ISM non-manufacturing China24
    • Montreux - May 2012 5. Macro-economic outlook 5.5 Emerging markets growth Cut in interest rates benefiting from declining inflationary pressuresCentral banks – Policy rates China – Consumer prices25
    • Montreux - May 2012 5. Macro-economic outlook 5.6 Eurozone growth A potential improvement of estimatesGrowth estimates 2012 Growth estimates - 2012 Growth estimates 2011 Growth estimates - 20114,0 4,0 Germany - 2011 3,03,0 United States - 2012 United States - 2011 2,02,0 Japan - 2012 Eurozone - 2011 1,01,0 Germany - 2012 0,0 Japan - 20110,0 Eurozone - 2012 -1,0 Source : Consensus Forecasts, Rothschild Source : Consensus Forecasts, Rothschild-1,0 -2,0 Juin11 Janv12 Oct10 Fév 11 Mars12 Fév12 Avr10 Août10 Nov10 Dec10 Avr 11 Août11 Sep 10 Sep 11 Mai10 Jan11 Mai 11 nov11 dec11 oct11 Juillet10 Juillet11 Mar 10 Mar 11 Juin"10 avr-12 Juin11 Janv12 Fév 11 Fév12 Mars12 Sep 11 Avr 11 Août11 Mai 11 Jan11 oct11 nov11 dec11 Mar 11 Juillet11 avr-1226
    • Montreux - May 2012 5. Macro-economic outlook 5.7 Eurozone growth Growth in Eurozone is led by Germany benefiting from wages growthBusiness surveys – PMI Non-manufacturing Germany - Wages27
    • Montreux - May 2012 5. Macro-economic outlook 5.8 Eurozone growth Positive effect of decrease in commodities pricesEurozone – Consumer prices Raw materials in $28
    • Montreux - May 2012 5. Macro-economic outlook 5.9 Eurozone growth Trade balance contributionEurozone – Trade balance Trade balances 2011 – Contribution to GDP (%) 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Source OECD -0.5 -1 Portugal Spain Germany Italy France29
    • Montreux - May 2012 5. Macro-economic outlook 5.10 Eurozone growth Trade balance contributionEurozone – Current account (% of GDP) Germany – Trade balance30
    • Montreux - May 2012 5. Macro-economic outlook 5.11 European issues Positive impact of the european quantitative easing for the Banks and States refinancing Central bank’s balance sheet31
    • Montreux - May 2012 5. Macro-economic outlook 5.12 Interest rates LTRO effect : improvement of the sovereign debt marketEurozone – Government benchmark 10 years Italy – Government benchmark32
    • Montreux - May 2012 5. Macro-economic outlook 5.13 Equity Historical attractive valuationEurozone France33
    • Montreux - May 2012 5. Macro-economic outlook 5.14 Equity Historical undervaluation of European equities vs US equities Evolution relative du ratio Cours / Actif net Comparative returns1,00,9 Eurozone stocks expansiveactions américaines Actions zone Euro chères / vs US stocks0,90,80,8 Average Moyenne0,70,70,6 Eurozone stocks chères / actions américaines Actions zone Euro pas cheap vs US stocks0,6 mai-98 mai-00 mai-02 mai-04 mai-06 mai-08 mai-10 Source : SG, Rothschild 34
    • Montreux - May 2012 5. Macro-economic outlook 5.15 Equity A momentum market?World - Relative performances Eurozone – Relative performances SXXE (total return)35
    • Montreux - May 2012 5. Macro-economic outlook 5.16 Equity ‘Growth’ vs. ‘value’ : historical decorrelation Evolution since June 30, 2007 (pic of the market) Evolution since December 31,2008 (bottom of the market) Source : BloombergSource : Bloomberg Performances based on the level of the CAC 40 on the 31-12-2008, ie 3217,97 ptsPerformances based on the level of the CAC 40 on the 30/06/2007, ie 6054,93 pts 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 36
    • Montreux - May 2012 5. Macro-economic outlook 5.17 Equity Banks – high correlation with CDSEuropean Banking sector France1,4 0 Price-to-Book ratio and CDS evolution (reversed scale) 501,2 100 1 1500,8 2000,6 2500,4 3000,2 350 0 400 Price-to-Book ratio Europe CDS Financials37
    • Montreux - May 2012 5. Macro-economic outlook 5.18 Main risks : energy prices Oil increase links to geopolitical issuesUS – Energy prices US – Oil imports12 5 Gallon $ 4.510 4 3.5 8 3 6 2.5 2 4 1.5 Natural gaz 1 2 $/mBTU 0.5 Source : Bloomberg,  Rothschild 0 0 juil.-07 juil.-08 juil.-09 juil.-10 juil.-11 mars-07 mars-08 mars-09 mars-10 mars-11 mars-12 nov.-06 nov.-07 nov.-08 nov.-09 nov.-10 nov.-11 38
    • Montreux - May 2012 5. Macro-economic outlook 5.19 Main risks : bond market shock Unusually low level of the German interest rates Germany Germany 8 Government benchmark 6 10 years 4 2 0 Nominal GDP -2 -4 -6 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201139
    • Montreux - May 2012 5. Macro-economic outlook 5.20 Conclusion 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 stocks40
    • Montreux - May 20126. Portfolio characteristics
    • Montreux - May 2012 6. Portfolio characteristics 6.1 Sector breakdown April 2011 vs. April 2012 Sector positionning Relative positionning 30,5% 11,7% Finance Finance 31,7% 8,7% 16,8% 2,1% Industry Industry 11,9% -2,8% 13,8% 1,9% Télécoms - Utilities Télécoms - Utilities 15,7% 0,6% 11,7% -7,0% Consumer goods Consumer goods 8,8% -5,6% 8,5% 1,9% Services Services 12,0% 5,5% 8,4% 3,6% Technology Technology 8,2% 3,4% Oil & Gas - 5,7% Oil & Gas - -13,0% Basic resources 6,0% Basic resources -11,6% 4,6% -1,3% Santé Santé 5,7% 1,8% 30/04/2012 30/04/2011 30/04/2012 30/04/2011 Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 Source : Bloomberg - Rothschild & Cie Gestion, 30/04/1142
    • Montreux - May 2012 6. Portfolio characteristics 6.2 Country breakdown April 2011 vs. April 2012 Country positionning Relative positionning 50,2% 17,2% France France 57,4% 24,2% 21,4% -8,8% Germany Germany 15,8% -10,9% 16,4% 8,5% Italy Italy 17,0% 7,8% 5,6% -3,1% Netherlands Netherlands 3,8% -4,8% 4,4% -4,8% Spain Spain 3,3% -7,8% 2,1% -9,0% Other eurozone Other eurozone 2,7% -8,3% 30/04/2012 30/04/2011 30/04/2012 30/04/2011 Source : Bloomberg - Rothschild & Cie Gestion, 30/04/11 Source : Bloomberg - Rothschild & Cie Gestion, 30/04/1143
    • Montreux - May 20127. Main operations since August 2011
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Purchases and strengthening, mostly on cyclical stocks Cyclical vs defensives stocks (Eurozone) Cyclicals: Defensive: Basic Materials, Chemicals, Retail, Consumer goods, Foods & Construction, Industrial goods, Auto, Beverages, Healthcare, Telecoms, Utilities Leisure & Travel, Technology Index45
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Purchases and strengthening Mostly on cyclical stocks Reduce underweight on utilities Stock Stock Daimler Veolia Environnement Peugeot RWE Air France ST Microelectronics HeidelbergCement46
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Daimler : should benefit from a new strategy and a more favourable economic environment 1 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. 2 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. 3 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 4 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) 5 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 Valuation 2011 2012e EV / Sales 0,34 x 0,35 x EV / EBITDA 3,0 x 3,1 x Source Exane / Bloomberg47
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 HeidelbergCement: discount with an attractive mix 1 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) 2 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 3 Balance sheet under control  Credit line of €2.4bn, that has not been used, no risk of Group downgrade 4 Average discount of around 10%-15% compared to its peers, that appears without justification 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 Bloomberg48
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Shifts within IT services Purchases Sales Stock Stock Cap Gemini Atos Relative performance Atos vs Cap Gemini 150,00 140,00 Atos 130,00 120,00 110,00 Cap Gemini 100,00 90,00 80,00 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 Source Bloomberg, Rothschild49
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 RWE: turnaround’s potential within utilities sector Company profile Premium LT gas contracts vs gas spot prices (€/MWh)  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 Relative performance RWE / Utilities  The abandonment of nuclear power in Germany 120 should allows electricity prices to increase and thus margins for suppliers. 110  Positive exposure to CO² low prices compared to Utilities sector Secteur Utilities 100 E.On and to less polluting utilities 90  Positive exposure to UK, first market in Europe to RWE experienced supply-demand balance narrowing and 80 Capital increase improvement in 2011 margins 70 30/6/11 31/8/11 31/10/11 31/12/11 29/2/12  Greater visibility to the stock with an attractive valuation (6.6x EV/EBITDA 12e)50
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Shifts between financials Purchases Sales Stock Price Stock Price BNP Paribas 30,50 BNP Paribas 33,70 Unicrédit 2,90 +30% (since end of August) / +70% (since Intesa low of September) Société Générale 17,50 Generali Comparative performances between Intesa and Unicredit 120 110 Intesa 100 90 80 70 Unicredit 60 50 40 30 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 Source Bloomberg, Rothschild51
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Shifts between financialsAttractive valuation Compliance with solvency requirement without capital Profits and valuation adjusted by non-recurring itemseven with taking increaseinto consideration ratios de solvabilité au 31.12.11non-recurring items 2011 SG BNP Earnings (€M) 2 385 6 050 RoE released 6% 8,8% Earnings excluding sovereign 3 007 8 367 debt depreciation (€M) 11,60% 10,70% 9% 9,60% Recurring earnings (€M) 3 114 8 485 Recurring RoTE 9,5% 15,3% Core Tier 1 Bâle 2,5 Tier 1 Bâle 2,5 P/TBV 0,57 0,80 SG BNP Recurring P/E 6,2 5,352
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Banking sector contribution - R Conviction Euro fund Banks – Performance attribution 8 6,65 6 3,93 4 2,07 2,33 1,81 2 0,42 0 -0,01 -2 -4 -3,9 -6 2006 2007 2008 2009 2010 2011 2012 Total Banks – Relative weights vs benchmark 15 11,6 10,5 10 5 3,9 0 0 -5 -6 -10 -9,5 -10,5 -15 2006 2007 2008 2009 2010 2011 201253
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Exposure reduced on defensives stocks, in particular within Telecoms Sales in defensive stocks54
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Sanofi: still in the portfolio but exposure has been reduced  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% EV/EBITDA EV/EBITDA EV/EBITDA 01/03/2012 P/E 2012 P/E 2013 P/E 2014 EV/EBIT 2012 EV/EBIT 2013 2012 2013 2014 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% Source Bloomberg55
    • Montreux - May 2012 7. Main operations since August 2011 5.1 Main operations since August 2011 Chemical: still cautious on sector Sector profile Chemical sector EBIT margins (LT average : 10,7%) 16,0%  Sector margins at their historical pick 14,0% 14,0% 13,3% – 2011 EBIT margins: 14% vs previous historical 12,0% 11,4% 11,4% 11,5% 11,3% pick at 11.5 (above long-term average) 10,0% 9,7% 10,0% 8,0% 8,3%  New production capacities in the upcoming 24 6,0% 6,2% months, lead to an important gap between production 4,0% and volume sales growth 2,0%  Lower demand in some key sectors/clients: 0,0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 automobile and construction (30% of outlets)  Seasonality re-emerging in H2 2011, the first time Chemical - Production capacity growth and demand since two years 125 120  Pricing power lower than in the past 115  Margins decrease have appeared, several profit 110 105 warnings in H2 (Akzo, DuPont), disappointed results 100 in Q4 (BASF, Bayer) 95 90  Consensus forecasts a decrease in EPS 2012 by only 2009 2010 2011 2012 2013 2014 2015 3%, maybe too optimistic regarding Q4 earnings Production Capacity growth Volume growth within the sector: BASF, EBIT 2011 Q4 -14%) Source Nomura estimates56
    • Montreux - May 2012Annexe A. Germany – Divergence of leading indicators
    • Montreux - May 2012 Annexe A. Germany – Divergence of leading indicators A.1 Germany – Divergence of leading indicators58
    • Montreux - May 2012Annexe B. European banking sector
    • Montreux - May 2012 Annexe B. European banking sector B.1 European banking sector Divergence of performances between Europe and the United States60
    • Montreux - May 2012Annexe C. Exports
    • 62 Montreux - May 2012 EUR (billions) EUR (billions) C.1 Exports EUR (billions) EUR (billions) Annexe C. Exports
    • Montreux - May 2012 Annexe C. Exports C.2 Exports63
    • Montreux - May 2012Annexe D. Contacts details
    • Montreux - May 2012 Annexe D. Contacts details D.1 Contacts details A client closely relationship Arnaud Perrier Managing Director – Head of business development and marketing arnaud.perrier@rothschild.com Tel : +33 1 40 74 42 82 Institutional investors Third-Party Distribution Lionel Deny Aurélie Ferrer Philippe Louisadat Olivier Guichard Sales Sales Head of Third-Party Distribution – Sales lionel.deny@rothschild.com aurelie.ferrer@rothschild.com France and Spain olivier.guichard@rothschild.com Tel : +33 1 40 74 40 73 Tel : +33 1 40 74 42 51 philippe.louisadat@rothschild.com Tel : +33 1 40 74 72 78 Tel : +33 1 40 74 72 06 Marie-Line Hashatel Johanna Meimoun Marion Semblat Client Relationship management Sales Sales marie-line.hashatel@rothschild.com johanna.meimoun@rothschild.com marion.semblat@rothschild.com Tel : +33 1 40 74 41 67 Tel : +33 1 40 74 49 25 Tel : +33 1 40 74 88 77 Adrien Rollando Client Relationship management adrien.rollando@rothschild.com Tel : +33 1 40 74 71 2465
    • Montreux - May 2012 Annexe D. Contacts details 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 Business development partnership in Germany Konstantin Nikiteas Managing Director Northern Europe konstantin.nikiteas@rothschild.com Philippe Louisadat Tel : +41 4 43 84 78 45 Head of Third-Party Distribution – France and Spain Özlem Reinhard philippe.louisadat@rothschild.com Client Relationship Management Tel : +33 1 40 74 72 06 oezlem.reinhard@rothschild.com Tel : +41 4 43 84 78 46 Rothschild & Cie Gestion has dedicated teams and develops active partnerships for its business in Europe66
    • Montreux - May 2012 Annexe D. Contacts details D.3 Our partnership in Germany : Dr. Oliver Roll Rainer Otteman Managing Director – Head of Fund Managing Director – Head of Selction & Institutional Business Distribution Tel.: 069/7191897-19 Tel.: 069/7191897-15 @ o.roll@max-xs.de @ r.otteman@max-xs.de Ivan Mlinaric Thorsten W.Dierich Thomas M. Dinges Senior Product Specialist Institutional Business Sales Manager Senior Sales Manager Tel.: 069/7191897-16 Tel.: 069/7191897-12 Tel.: 069/7191897-22 @ i.mlinaric@max-xs.de @ t.dierich@max-xs.de @ t.dinges@max-xs.de Thomas Gils N.N. (bald für Sie da) Ilona Wachter Senior Sales Manager Director Institutional Sales Director Institutional Sales Tel.: 069/7191897-17 Tel.: 069/7191897-0 Tel.: 069/7191897-18 @ t.gils@max-xs.de @ n.n@max-xs.de @ i.wachter@max-xs.de Michèle Richlick Alexandra Flechsig Sibylle Schrempp Client Service Manager Client Service Manager Client Service Manager Tel.: 069/7191897-14 Tel.: 069/7191897-23 Tel.: 069/7191897-11 @ m.richlick@max-xs.de @ a.flechsig@max-xs.de @ s.schrempp@max-xs.de67
    • Montreux - May 2012Annexe E. Funds Characteristics
    • Montreux - May 2012 Annexe E. Funds Characteristics 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 France, Switzerland, Belgium, Luxembourg (C-share), Spain, Germany, Netherlands (C-share), Countries of registration Austria (C & F-share)69
    • Montreux - May 2012 Annexe E. Funds Characteristics 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)70
    • Montreux - May 2012Annexe F. Disclaimer
    • Montreux - May 2012 Annexe F. Disclaimer 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).72