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

09 mai 2012

Montreux - May 2012

European equitiesCrisis, source of opportunities for high-conviction strategy

Montreux - May 2012

Table de matières

Sections1 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

AnnexesA 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

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1. Rothschild & Cie Gestion

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Values persisting from generation to generation

Rothschild Values Tradition & Innovation Transparency & Efficiency Integrity

James1792-1868

Paris

Amschel1773-1855Francfort

Carl1788-1855

Naples

Mayer Amschel Rothschild1743-1812

Salomon1774-1855

Vienne

Nathan1777-1836

Londres

Gustave1829-1911

Alphonse1827-1905

Edmond1845-1934

Robert1880-1946

Edouard1868-1949

Maurice1881-1957

Edmond1926-1997

Benjamin1963

Nathaniel1946

Robert1947

Eric1940

Edouard1957

David1942

Elie1917-2007

Alain1910-1982

Guy1909-2007

Lionel1808-1879

Nathaniel1812-1870

Leopold1845-1917

Nathaniel1840-1915

Nathan1844-1881

Henry1872-1946

Anthony1887-1961

Nathaniel1877-1923

Philippe1902-1988

Evelyn1931

Victor1910-1990

Jacob1936

Philippine1935

Extincts armsEnglish arm English arm set up in France French arm

1.1 The Rothschild Heritage1. Rothschild & Cie Gestion

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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 commitedmanagers

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 Gestion1. Rothschild & Cie Gestion

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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 philosophy1. Rothschild & Cie Gestion

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2. Investment team

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2.1 Equity resourcesThe 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


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

LoicTonnelier

DanielFighiera

Thematics

1

3

ThierryCombes

(Small cap) (Small cap)

(US)

TOP DOWN

Investment scenario definition

General Partner

Didier Bouvignies

General Partner

Philippe Chaumel

Equity Fixed Income Alternative MultimanagementMultimanagementEconomic & buy

side research

General Partner

Denis Faller2

2. Investment team

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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 theportfolio managers’ strongest convictions, avoiding consensual choices which could be made during biginvestment 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 managers26 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 experienceBackground DESS Gestion des Organismes Financiers et Bancaires SFAF, Société Française des Analystes FinanciersRothschild & Cie Gestion since 2004

General Partner

Didier Bouvignies

26 years experienceBackground Graduated from Ecole Supérieure de Commerce de Paris SFAF, Société Française des Analystes FinanciersRothschild & Cie Gestion since 2003

General Partner

Philippe Chaumel

2. Investment team

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2.3 Buy-side analystsA team of four buy-side analysts fully dedicated to European equities

11 years experienceSectors Automobile Media Technology Telecoms

Buy-side analyst

Anthony Bailly

14 years experienceSectors Foods & Beverages Consumer goods Oil & Gas Aerospace, Air transportation / Transport Retail Leisure & travels

Buy-side analyst

Ludivine de Quincerot

19 years experienceSectors Chemical Basic ressources Real Estate Industrial goods & Services Construction Healthcare

Buy-side analyst

Gabriel Hors

14 years experienceSectors Banks Insurance Utilities

Buy-side analyst

Natacha Rousset

2. Investment team

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3. Investment process

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3.1 Investment philosophyActive, 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.


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3.2 Investment processFundamental analysis is the heart of the investment process

Earnings potential Competition Valuation

Macro-economic cycle positioning

Companies margins Valuation

Concentrated portfolio

Macro-economic analysis


Comparing portfolio to macro-economic scenario

Understanding of company earnings and its evolution forecasted by the market


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3.3 Stock selectionIn-depth fundamental analysis

Stock selection relies on in-depth fundamental analysis aimed to understand the company’s profitability forecasted bythe 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 toanswer following questions: is profitability sustainable or threatened? Does the company have competitiveadvantages 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


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3.4 Portfolio constructionConcentrated 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 themarket 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 theconviction of the team is closed from the market one (already in market prices) or in case of lower conviction, bet willbe less important.

The investment convexity: conviction-based portfolios can be risked with high volatility markets. During the portfolioconstruction, weightings are determined according to the portfolio managers’ conviction level but also to the level ofrisk linked to the position. This is why the investment team prefers asymmetric investments, those for which upsidepotential 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)


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4. Performance

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4.1 Long-term returnsLarge excess returns over the medium to long-term…

R Conviction Euro - 5-year evolution

NotesPerformance 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

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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


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


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


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

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4.3 RisksRisk 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

4. Performance

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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 -Equities2011 and 2010 awards

Best French Asset Management Company2011 and 2010 awards

Best Specialist Asset management - Broad range of products2011 awards

Source L’AGEFI Source Investissement Conseil

Source Europerformance-EDHEC Risk Source Eurofonds-Le Monde Source La Tribune

Lipper Fund Awards 20101st over 3 yearsCategory « Eurozone Equity »

GPGA 20101st over 3 years Category « Eurozone Equity »

Pyramides 20102nd best fundCategory « Large cap Eurozone Equity »

4. Performance

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5. Macro-economic outlook

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Growth above expectations, supported by consumption

US – ISM surveys and activity US – Retail sales excluding gazoline

5.1 US economic growth5. Macro-economic outlook

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Growth supported by improvement in employment and decrease in household saving rates

US – Quarterly job creations US – Personal saving rates


22

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Real Estate recovering thanks to solvency improvement of households

US – Housing US – Housing affordability


23

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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 growth5. Macro-economic outlook

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Cut in interest rates benefiting from declining inflationary pressures

Central banks – Policy rates China – Consumer prices

5.5 Emerging markets growth5. Macro-economic outlook

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-2,0

-1,0

0,0

1,0

2,0

3,0

4,0

Mar

' 10

Avr'1

0M

ai'10

Juin

"10

Juille

t'10

Août

'10Se

p' 10

Oct'1

0No

v'10

Dec'1

0Ja

n'11

Fév'

11M

ar' 1

1Av

r' 11

Mai'

11

Juin

'11Ju

illet'1

1Ao

ût'11

Sep'

11oc

t'11

nov'1

1de

c'11

Janv

'12Fé

v'12

Mar

s'12

avr-1

2

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'1

1

Fév'

11

Mar

' 11

Avr'

11

Mai'

11

Juin

'11

Juille

t'11

Août

'11

Sep'

11

oct'1

1

nov'1

1

dec'1

1

Janv

'12

Fév'1

2

Mar

s'12

avr-1

2Eurozone - 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 growth5. Macro-economic outlook

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Growth in Eurozone is led by Germany benefiting from wages growth

Business surveys – PMI Non-manufacturing Germany - Wages


27

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Positive effect of decrease in commodities prices

Eurozone – Consumer prices Raw materials in $


28

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-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 (%)


29

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Trade balance contribution

Eurozone – Current account (% of GDP) Germany – Trade balance


30

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Positive impact of the european quantitative easing for the Banks and States refinancing

Central bank’s balance sheet

5.11 European issues5. Macro-economic outlook

31

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LTRO effect : improvement of the sovereign debt market

Eurozone – Government benchmark 10 years Italy – Government benchmark

5.12 Interest rates5. Macro-economic outlook

32

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Historical attractive valuation

Eurozone France

5.13 Equity5. Macro-economic outlook

33

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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 Euro chères / actions américaines

Actions zone Euro pas chères / actions américaines

Moyenne

Source : SG, Rothschild

Eurozone stocks expansive vs US stocks

Eurozone stocks cheap vs US stocks

Average

Evolution relative du ratio Cours / Actif net


34

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5.15 EquityA momentum market?

SXXE (total return)

World - Relative performances Eurozone – Relative performances


35

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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 : BloombergPerformances based on the level of the CAC 40 on the 30/06/2007, ie 6054,93 pts

Source : BloombergPerformances 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)


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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 Equity5. Macro-economic outlook

37

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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

mar

s-07

juil.

-07

nov.

-07

mar

s-08

juil.

-08

nov.

-08

mar

s-09

juil.

-09

nov.

-09

mar

s-10

juil.

-10

nov.

-10

mar

s-11

juil.

-11

nov.

-11

mar

s-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 prices5. Macro-economic outlook

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-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 benchmark10 years

Unusually low level of the German interest rates

Germany

5.19 Main risks : bond market shock5. Macro-economic outlook

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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 Conclusion5. Macro-economic outlook

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6. Portfolio characteristics

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6.1 Sector breakdownApril 2011 vs. April 2012

Sector positionning Relative positionning


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


30/04/2012 30/04/2011

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6.2 Country breakdownApril 2011 vs. April 2012

Country positionning Relative positionning


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


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


30/04/2012 30/04/2011

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7. Main operations since August 2011

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Inde

x

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


45

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Purchases and strengthening


Stock

Daimler

Peugeot

Air France

ST Microelectronics

HeidelbergCement

Stock

Veolia Environnement

RWE

Mostly on cyclical stocks Reduce underweight on utilities


46

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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 startsto 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 reducenumber 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 ofnew 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 2011Q3)

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 20117. Main operations since August 2011

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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


48

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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


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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 inGermany

Losses decrease on gas long-term contracts thanksto the likely increase in gas spot prices

The abandonment of nuclear power in Germanyshould allows electricity prices to increase and thusmargins for suppliers.

Positive exposure to CO² low prices compared toE.On and to less polluting utilities

Positive exposure to UK, first market in Europe toexperienced supply-demand balance narrowing andimprovement in 2011 margins

Greater visibility to the stock with an attractivevaluation (6.6x EV/EBITDA 12e)

Capital increase


Utilities sector


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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


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5.1 Main operations since August 2011Shifts 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


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Banking sector contribution - R Conviction Euro fund


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

10,511,6

-15

-10

-5

0

5

10

15

2006 2007 2008 2009 2010 2011 2012


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Exposure reduced on defensives stocks, in particular within Telecoms

Sales in defensive stocks


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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 5,6Bayer 11,1x 9,9x 9,1x 6,6 5,8 5,2 9,5 8,1Glaxo SmithKline 11,2x 10,2x 9,3x 7,5 7,0 6,5 8,8 8,2Novartis 9,8x 9,5x 8,7x 9,5 9,0 7,8 12,0 11,3Roche 11,5x 10,5x 10,0x 8,2 7,4 7,0 9,7 8,7Sanofi 9,5x 9,0x 8,4x 6,9 6,2 5,6 7,7 6,9Novo Nordisk 22,3x 19,1x 16,2x 15,2 13,7 12,2 17,1 15,3Teva Pharma 8,0x 7,4x 6,9x 7,0 6,3 5,9 8,1 7,2Average (Europe) Pharma 11,3x 10,3x 9,5x 8,2x 7,5x 6,9x 9,8x 8,9xAverage (US) Pharma 11,9x 11,3x 11,0x 7,6x 7,2x 6,8x 9,2x 8,5xAverage (Global) Pharma 11,6x 10,8x 10,2x 7,9x 7,4x 6,9x 9,5x 8,7xPremium (discount) Sanofi vs Pharma Europe -16% -13% -11% -16% -17% -19% -22% -23%

Sanofi: still in the portfolio but exposure has been reduced


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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 historicalpick at 11.5 (above long-term average)

New production capacities in the upcoming 24months, lead to an important gap between productionand volume sales growth

Lower demand in some key sectors/clients:automobile and construction (30% of outlets)

Seasonality re-emerging in H2 2011, the first timesince two years

Pricing power lower than in the past

Margins decrease have appeared, several profitwarnings in H2 (Akzo, DuPont), disappointed resultsin Q4 (BASF, Bayer)

Consensus forecasts a decrease in EPS 2012 by only3%, maybe too optimistic regarding Q4 earningswithin 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

9095

100105110115120125

2009 2010 2011 2012 2013 2014 2015

Production Capacity growth Volume growth


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Annexe A. Germany – Divergence of leading indicators

Montreux - May 2012

A.1 Germany – Divergence of leading indicatorsAnnexe A. Germany – Divergence of leading indicators

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Annexe B. European banking sector

Montreux - May 2012

B.1 European banking sector

Divergence of performances between Europe and the United States

Annexe B. European banking sector

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Annexe C. Exports

Montreux - May 2012

EU

R (b

illio

ns)

EU

R (b

illio

ns)

EU

R (b

illio

ns)

EU

R (b

illio

ns)

C.1 ExportsAnnexe C. Exports

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C.2 ExportsAnnexe C. Exports

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Annexe D. Contacts details

Montreux - May 2012

D.1 Contacts detailsA client closely relationship

Institutional investors

Lionel [email protected] : +33 1 40 74 40 73

Arnaud PerrierManaging Director – Head of business development and [email protected] : +33 1 40 74 42 82

Aurélie [email protected] : +33 1 40 74 42 51

Marie-Line HashatelClient Relationship [email protected] : +33 1 40 74 41 67

Adrien RollandoClient Relationship [email protected] : +33 1 40 74 71 24

Philippe LouisadatHead of Third-Party Distribution –France and [email protected] : +33 1 40 74 72 06

Olivier [email protected] : +33 1 40 74 72 78

Johanna [email protected] : +33 1 40 74 49 25

Marion [email protected] : +33 1 40 74 88 77

Third-Party Distribution


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D.2 Contacts detailsBusiness development teams dedicated to our European clients

Valérie KaliskiHead of Benelux, Scandinavia & [email protected] : +33 1 40 74 42 68

Brandon H. Le TranInstitutional Sales Benelux & Scandinavia [email protected] : +33 1 40 74 42 19

Marie-Line HashatelClient Relationship [email protected] : +33 1 40 74 41 67

Rothschild & Cie Gestion has dedicated teams and develops active partnerships for its business in Europe

Philippe LouisadatHead of Third-Party Distribution –France and [email protected] : +33 1 40 74 72 06

Konstantin NikiteasManaging Director Northern [email protected] : +41 4 43 84 78 45

Özlem ReinhardClient Relationship [email protected] : +41 4 43 84 78 46

Business development partnership in Germany


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D.3 Our partnership in Germany :

Tel.: 069/7191897-18@ [email protected]

Director Institutional Sales

Ilona Wachter


Senior Sales Manager

Thomas M. Dinges


Client Service Manager

Sibylle Schrempp



Alexandra Flechsig


Sales Manager

Thorsten W.Dierich


Ivan Mlinaric


Thomas Gils

Senior Sales Manager

Senior Product SpecialistInstitutional Business


Managing Director – Head of Distribution

Rainer Otteman



Michèle Richlick


Managing Director – Head of Fund Selction & Institutional Business

Dr. Oliver Roll


Director Institutional Sales

N.N. (bald für Sie da)


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Annexe E. Funds Characteristics

Montreux - May 2012

E.1 Administrative characteristicsR 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)


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E.2 Administrative characteristicsR 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)


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Annexe F. Disclaimer

Montreux - May 2012

F.1 DisclaimerThe Rothschild & Cie Gestion’s funds (hereinafter, the “Fund(s)”) presented in this document, are incorporated under the laws ofFrance and agreed by the FINMA to be actively distributed in Switzerland. This information is not an invitation to subscribe in any of theFunds described herein, nor is it a substitute for the Fund’s prospectus and is provided for information only. The presentation is neitheran 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 theFINMA. Any information communicated through this document is given for information only and does not contain any contractualmatter. Past performance is not a guide to the future. Moreover, it does not include fees and commissions charged for the issue andredemption of units of the relevant Fund. Rothschild & Cie Gestion does not guarantee in any way the evolution of the performance andcannot 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 takemore information by contacting the Representative of the Funds in Switzerland, as indicated below, its usual financial adviser orRothschild & Cie Gestion before any decision of investment, in particular towards the suitability between the Funds’ characteristics andtheir needs.

Information for shareholders living in SwitzerlandRothschild & Cie Gestion, Paris, Zurich-Branch (Zollikerstrasse 181- CH-8034 Zurich - Switzerland) obtained an authorisation by theFINMA to actively commercialize the Funds in Switzerland and has appointed BNP Paribas Securities Services, Paris, succursale deZurich - Selnaustrasse 16 - CH-8002 Zurich - Switzerland, as representative in Switzerland and this latter also acts as paying agent inSwitzerland (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 onwww.rothschildgestion.frAnnouncements to investors in Switzerland which concern Rothschild & Cie Gestion or the Funds will be published in the “FeuilleOfficielle Suisse du Commerce” (FOSC) and on the recognised electronic platform www.fundinfo.comThe issue and redemption prices or the net asset values with the indication “commissions excluded” will be published daily on therecognised electronic platform www.fundinfo.com.

Registering of the FundsNone of the Funds are or will be registered according to the United States Securities Act 1933 or according to the United StateCompany Act 1940. As a consequence, the Funds must not in any circumstances be offered or distributed: (i) in the United States ofAmerica, 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 thebenefit of any United States Person (as defined in Regulation S of the "United States Securities Act" of 1933).

Annexe F. Disclaimer

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

Economy & Finance

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