CB European Quality Fund Quarterly update 30 September 2015 - PowerPoint PPT Presentation

CB European Quality Fund Quarterly update 30 September 2015 Included in Morningstar Morningstar Sweden and Sweden’s model portfolio Dagens Industri: Best for the Swedish Pension portfolio manager in the European equity category system (PPM) since 2012 January 2015 Fund performance* and AUM NAV, 30 September 2015 (EUR) EUR SEK Q3 2015 -4.2% -2.9% Sicav A 95.59 +8.4% Sicav D 90.53 YTD 2015 +9.5% +7.7% Fund inception 1995 (annualised) +7.6% Sicav I 124.12 563.9. AUM (million) 60.3. *Sicav A

The strategy and the team CB European Quality Fund The team Overview - CB European Quality Fund Carl Bernadotte  A long-only equity fund with a focus on European quality growth Portfolio manager & owner companies >25 years’ experience  The strategy was launched in 1995 Born 1955 Owns shares in CB European Quality Fund  Concentrated portfolio (20-33 holdings) and a long-term perspective  Marcus Grimfors Benchmark: MSCI Europe Net Portfolio manager  Objective: Lower standard deviation than benchmark 7 years’ experience  Objective: Outperform benchmark over 12 months Born 1981 Owns shares in CB European Quality Fund Overview - CB Fonder Alexander Jansson Portfolio manager & CEO  Company founded in 1994 7 years’ experience  Family owned, acting under the supervision of the Swedish Born 1983 Owns shares in CB European Quality Fund Financial Supervisory Authority Erik Allenius Somnell  Guidelines: active, ethical and long-term Business development  An ethical and sustainable framework is applied in the portfolio 3 years’ experience management Born 1984 Owns shares in CB European Quality Fund  The team is based in Stockholm, Sweden; all fund administration is performed in Luxembourg 2

Strategy: Investment criteria CB European Quality Fund Large/mid caps - Min. market cap EUR 1 bn - Mature industries Resilient profit growth Primary - Proven management - - In any econ. environment - Stable dividend yield Conservative valuation Internal recruiting Secondary - Not necessarily high - - History & peers - - Subject to tradition - 3

Strategy: Structural growth is more value CB European Quality Fund creating than cyclical growth - And less dependent of the economic cycle Structural vs. cyclical growth Structural growth is independent of the economic cycle Drivers: Strong multiple Structural growth  Secular trends expansion relative component  Leading business model to the market  Technical leadership Stable profit growth Limited multiple Cyclical growth Purely driven by expansion relative to component macro factors Cyclical model Structural model the market Credit: Allianz GI 4 Design: CB Fonder

Strategy: High barriers to entry CB European Quality Fund protected growth Competetiveness: Porter’s 5 forces -model Negotiating power versus suppliers Barriers to entry • Fragmentation of suppliers Threat of new entrants • Cost, time, knowledge - monopoly to perfect competion • Economies of scale • Degree of specialisation • Technologies, patents etc. Competitive Bargaining power Bargaining power of rivalry among of suppliers incumbents customers (buyers) Customer/client relationship Barriers to substitution • • Degree of customer loyalty Brand recognition Threat of substitute • products or services • Switching costs Product complexity, patents etc. • Pricing power Source: Competitive Strategy: Techniques for Analyzing Industries and Competitors, 5 Michael E. Porter, 1980. Design: CB Fonder

Strategy: Stock selection according to a CB European Quality Fund bottom-up-strategy Fundamental analysis Quantitative analysis Technical analysis • • • Structural growth and barriers to Internally developed models for Momentum factors – is the short-term entry/moat – see p. 4 and 5. screening and ranking based on trend supportive of the sector/style? quantitative variables. • • Business idea – robust enough to deliver No target prices: ” let the trend be your • stable profit growth over an entire Valuation: in comparison to peers and friend ”. economic cycle? the company's own history and growth • rate. Timing for entry and exit levels; • Management – do they deliver as increasing and reducing portfolio • promised? Main multiples: P/E, P/B and PEG. positions. The fundamental and quantitative analysis forms the investment universe. The technical analysis plays a crucial role for the weighting of the portfolio. 6

Performance: The fund and the index CB European Quality Fund  The fund returned -4% in the third quarter; during the last 12 months the fund has returned +14%.  The fund has outperformed MSCI Europe Net in four consecutive quarters. We have seen a trend reversal in the sense that the fund’s quality growth strategy has outperformed in a sharply rising market in Q4 2014 and Q1 2015 (+4.7% and +0.5% outperformance respectively) as well as in a falling market in Q2 and Q3 2015 (+0.8% and +5.1% outperformance respectively). The fund and the benchmark index, 1 year (EUR) The fund and the benchmark index, Q3 2015 (EUR) 110 130 125 105 120 115 +14.4% 100 110 -4.2% 105 95 +2.6% 100 -8.9% 95 CB European Quality Fund Sicav A 90 CB European Quality Fund Sicav A 90 MSCI Europe Net MSCI Europe Net 85 85 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Jun-15 Jul-15 Aug-15 Sep-15 14% 8% CB European Quality Fund Sicav A 12% 7% CB European Quality Fund Sicav A +11.5% vs MSCI Europe Net vs MSCI Europe Net 6% 10% +5.1% 5% 8% 4% 6% 3% 2% 4% 1% 2% 0% 0% -1% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 -2% Jun-15 Jul-15 Aug-15 Sep-15 Source: MSCI, CB Fonder 7

Performance: The fund and the index CB European Quality Fund The fund (EQF) and the benchmark index, 10 years (EUR) 200 175 MSCI Europe Net (EUR) CB European Quality Fund Sicav A (EUR) 150 125 100 75 50 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Key ratios (10 years) EQF Index The fund has – mostly due to +49.6 Performance, % +52.8 the strong risk-on rally in the Standard deviation, % 12.84 15.02 market between the summer of 2012-summer of 2014 – Sharpe (0%) +0.34 +0.27 performed in-line with the -54.10 Max drawdown, % -45.78 benchmark index, but has a Beta against MSCI Europe +0.70 positive alpha due to the low Alpha against MSCI Europe, % p.a. +1.47 beta (0,70). The fund’s risk- adjusted return, Sharpe, is Consistency with MSCI Europe, % 51.67 higher than that of the index. Tracking error, % 8.69 Information ratio +0.02 Source: MSCI, CB Fonder 8

The Portfolio: Contributors and detractors CB European Quality Fund Top three quarterly contributors and detractors, Q3 2015 (EUR) -0,8% -0,6% -0,4% -0,2% 0,0% 0,2% 0,4% 0,6% 0,8% Company Contr./Detr. % Avg. weight*, % Performance, % Orpea +0.54 +14.7 4.1 AAK +0.33 +9.1 4.5 Fresenius +0.22 +4.3 6.4 GEA Group -0.50 2.1 -14.4 Spirax-Sarco -0.56 2.4 -20.7 Shire -0.62 4.1 -15.0 *Average values during Q3 2015. Source: Bloomberg, CB Fonder • The French company Orpea is a European leader in dependency care, a structural growth business due to demography. The company reported strong revenue growth for the second quarter (+26%) and announced that they will acquire the German dependency care operator Residenz Gruppe Bremen, which is fully in-line with Orpea’s objective of consolidating the European dependency care market. The stock gained 15% during Q3, in EUR. • The Swedish based vegetable oils refiner AAK – previously AarhusKarlshamn – once again reported strong quarterly numbers, fully in-line with consensus estimates. Earnings increased by 16% YoY and the company confirmed that the new factories in Brazil and China – which are of great importance to the future growth of the company – are on schedule. The stock gained 9% during Q3, in EUR. • The German group Fresenius – the largest holding in the fund and active in dialysis, clinical nutrition, hospital operation and biotech – is, due to it’s defensive and diversified growth profile, excellently positioned in today’s low growth environment. The company targets organic growth >2x global GDP growth; the average has been 6% since 1999. The stock gained 4% during Q3, in EUR. • . • . • Both German GEA Group and Brittish Spirax-Sarco were negatively affected by the development in China, and the former was also negatively affected by the development in Russia and within the dairy industry. GEA Group was completely sold out of the portfolio while the holding in Spirax-Sarco was reduced. GEA Group lost 14% and Spirax-Sarco 21% during the quarter, respectively. • The UK specialty pharma group Shire – with a strong position within treatment of ADHD, Short Bowel Syndrome and other rare genetic disorders – was negatively affected by a general correction within the biotech sector. The stock looks attractively valued but the general trend within the sector is a bit worrying. We have not made any changes to our position. The stock lost 15% during the quarter, in EUR. 9