January 2012 Pictet-High Dividend Selection Emma Stenzel Fund Distribution and Marketing For Professional Investors only
January 2012
Pictet-High Dividend Selection
Emma Stenzel Fund Distribution and Marketing
For Professional Investors only
2Product Presentation Pictet-High Dividend Selection
Agenda1. Investment case2. Investment team and process3. Portfolio review4. Conclusions5. Technicals6. Appendices
3Product Presentation Pictet-High Dividend Selection
Investment case1
4Product Presentation Pictet-High Dividend Selection
Low yield environment
Europe and the UK are sliding towards recession
• Eurozone woes will weigh heavy on the UK
• Political unity in Europe is unlikely in the short term
• Policy response is weak so far• Significant stress in the European
banking system• Cash injections from Central banks will
help
Traditional sources of income are diminished• Bond yields at all time lows• Government policy will favour lower
yields• Higher yields will carry higher risks –
Greece ??
Equity dividends can be an alternative source of income
-0.80-0.60-0.40-0.20
0.000.200.400.600.801.001.20
Nov-
09
Feb-
10
May
-10
Aug-
10
Nov-
10
Feb-
11
May
-11
Aug-
11
Nov-
11
Leading index growth
%m/m
-2.00-1.50-1.00-0.50
0.000.501.001.502.00
Nov-
09
Jan-
10
Mar
-10
May
-10
Jul-1
0
Sep-
10
Nov-
10
Jan-
11
Mar
-11
May
-11
Jul-1
1
Sep-
11
Nov-
11
Leading index growth
%m/m
Eurozone sequential leading (Pictet) growth M/M
The UK is not insulated from the Eurozone
Source: Pictet,
5Product Presentation Pictet-High Dividend Selection
Key characteristics• Focus on lower volatility stocks with:
− Predictable and stable cash flows − An above average yield
• Wide investment universe:−All sectors of the MSCI World −Developed and emerging markets
• Experienced investment team:−Proven track record in high yield equity investing−Unique and disciplined benchmark unaware investment
process
• Monthly Distribution of dividend*:– Dividend policy reviewed annually (September)**
Aim is to deliver equity returnswith lower volatility and higher dividend yields
*For monthly distributing share classes (P dm USD, R dm EUR, R dm USD, I dm GBP, P dm GBP,I dm, GBP).**Current payout level for annual dividend distribution is €4.00 and €0.33 for monthly distribution.
6Product Presentation Pictet-High Dividend Selection
Higher yielding stocks outperform over the long term
Returns on US stocks by yield, 1927-2010
Insert here your graphs and tables
Source: Professor Kenneth French, Tuck School of Business, Dartmouth (website). Logarithmic scale.Stocks were divided in quartiles. The High yield had an annualised total return of 11.2%, the Medium yield had an annualised total return of 10.3%, the Low yield had an annualised total return of 9.1% and the Zero yield had an annualised total return of 8.4%.
7Product Presentation Pictet-High Dividend Selection
…and enhance risk-return
Source: Elroy Dimson, Paul Marsh and Mike Staunton analysis using style data from Professor Ken French, Tuck School of Business,Dartmouth, Dimensional Fund Advisors, MSCI, Thomson Reuters, Credit Suisse Research and London Business School
Risk and return from alternative yield strategies, 1900–2010
Higher yield: top 50% yielding companiesLower yield: bottom 50% yielding companies
8Product Presentation Pictet-High Dividend Selection
Attractive dividend yield makes for a timely investment
World Government Bond: Citigroup World Government Bond Index, World Equities: MSCI World Index, US Government Bond: Citigroup US Government Bond Index, US A Corporate Bond: Citigroup US A Corporate Bond Index, German Government Bond: Citigroup German Government Bond Index
Source: Factset, as of 30/12/2011
Yield level of the Pictet-High Dividend Selection Portfolio and various asset classes
1.1%
1.4%
1.9%
2.9%
3.8%
4.8%
5.3%
0%
1%
2%
3%
4%
5%
6%
US GovernmentBond
GermanGovernment Bond
World GovernmentBond
World Equities US "A" CorporateBond
MSCI World HighDividend Yield
Portfolio
9Product Presentation Pictet-High Dividend Selection
Enhancing the cash flow (CF) volatility and dividend yieldSector level:• We look at all sectors
Company level:• We select companies
that enhance the portfolio’s cash flow volatility and dividend yield characteristics
• We create a non cyclical growth portfolio with an attractive dividend yield profileCash flow (CF) volatility: standard deviation of
annual operating CF growth rateSource: Credit Suisse Holt database FY2006~ FY2010
1%
3%
5%
7%
9%
11%
13%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Cash Flow Volatility
Avera
ge Di
viden
d Yiel
d
Portfolio
Average
MSCI World High Dividend Yield Sectors: Risk / Return - Past 5 Year Average
ConsumerDiscretionaryConsumer
Staples
Energy
Financials
Health Care Industrials
InformationTechnology
Materials
TelecommunicationServices
Utilities
Portfolio
Average
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
15% 20% 25% 30% 35% 40%Cash Flow Volatility
Avera
ge Di
viden
d Yiel
d
MSCI World High Dividend Yield Companies: CF Volatility and Dividend Yield (5 year average)
MSCI World High Dividend Yield Sectors: CF Volatility and Dividend Yield - 5 yr average
10Product Presentation Pictet-High Dividend Selection
Investment team & process
2
11Product Presentation Pictet-High Dividend Selection
Experienced investment team
Manager
Hans-Peter Portner, CFA Bruno Lippens
Louis Veilleux, MBA, CFA Karen Kharmandarian Piotr Stopinski
Senior Investment Manager
Senior Investment Manager
Senior Investment Manager
Senior Investment Manager
Junior Investment Manager
20 years experience 15 years experience 14 years experience 18 years experience 3.3 years experienceHistory PAM - 1997 to date PAM - 2007 to date PAM - 2005 to date PAM - 2004 to date PAM - 2008 to date
UBS Brinson - 1992-1997 Robeco - 2002-2007 Pictet & Cie - 1998-2005 Ixis AM - 1999-2004
Puilaetco Dewaay Aurel-Leven - 1996-1999
ING SG - 1994-1996Education
Master’s degree in Economics from the University of Bern
Master's degree in Financial Policies and Investment Sciences from EHSAL (Brussels)
Master's degree in Business Administration from Laval University (Quebec city, Canada)
Economics degree & postgraduate Sorbonne & business degree from Institut d'Etudes Politiques (Paris)
Bachelor's degree in International Business from University of Warwick (UK). Passed all three levels of CFA examinations.
12Product Presentation Pictet-High Dividend Selection
Investment team & resources
Karen KharmandarianSenior Investment Manager
FinancialsEuropean & Emerging Markets
Utilities
INVESTMENT MANAGERS
Hans-Peter Portner, CFASenior Investment Manager
Head of Sector Theme & Funds
Louis Veilleux, MBA, CFASenior Investment Manager
Energy, Industrials & MaterialsNorth American Utilities
Bruno LippensSenior Investment Manager
Telecom Services, IT & Healthcare
Piotr StopinskiJunior Investment Manager
Consumer Goods
PAM EQUITY RESEARCHCREDIT RESEARCHEMERGING MARKETSDEVELOPED MARKETSSMALL CAP TEAM
PAM STRATEGY UNITRISK MANAGEMENT
13Product Presentation Pictet-High Dividend Selection
INVESTABLE UNIVERSE:HIGH DIVIDEND DEFENSIVE EQUITIES
GLOBAL EQUITIES DATABASE
HIGH DIVIDEND EQUITIES
Cash flow volatility: Selecting stocks with below High Dividend Equities median cash flow volatility
Proprietary quantitative screening:Level of dividend yieldLiquidityStock volatilityCash flow volatilityIn-depth qualitative analyses of potential of dividend (scoring): Business franchise Management Valuation
Industry dynamicsRisk control:Currency and sector allocation
c.700 companies USD 10tn market cap
c.340companiesUSD 5.7tn market cap
c.60-100 companies
PICTET-HIGH DIVIDEND SELECTION
Higher than average dividend yield relative to global equities database
Market cap >$ 500m
Summary of investment process
Quantitative:Price momentum toolHolt screeningEarnings revision monitoring
Qualitative: Management meetingsPictet research Input other investment teams Sell side research Industry contacts
Idea Generation Portfolio weight
14Product Presentation Pictet-High Dividend Selection
Investment process example: AltriaPortfolio construction (Screening)No adjustment for dividend yield and liquidity.Slight adjustment for stock volatility while 1.2% adjustment for CF volatility (~ 22% above investable universe median of 18%).
Company (Scoring)1% due to positive business franchise (score +0.6), strong management score (score +1.6) and positive valuation score (+1.0).Company score = +0.6*40% +1.6*20% + 1.0*40% = +1.0% Industry factorNo particular discount on FX, margin and financial leverage
Investment process example
Source: Pictet Asset Management, as of 30/12/2011
Quan
titat
ive
Scre
enin
g
2.5%0%1.0%
1.5%
-1.5%3.0%
0
1
2
3
4
5%
Star
ting
weig
ht
Initi
al w
eigh
t*
Qual
itativ
e an
alys
is(S
corin
g)
Indu
stry
fact
or
Portf
olio
wei
ght
* Liquidity, volatility, yield and CF volatility are calibrated. The sum of initial weights is calibrated to 50% on a pro rata basis and is a function of the sustainable fund size and the structure of the investable universe.
15Product Presentation Pictet-High Dividend Selection
Portfolio review3
16Product Presentation Pictet-High Dividend Selection
60
80
100
120
140
160
180
Mar-05
Jun-05
Sep-0
5De
c-05
Mar-0
6Ju
n-06
Sep-06
Dec-06
Mar-0
7Ju
n-07
Sep-0
7De
c-07
Mar-0
8Ju
n-08
Sep-08
Dec-0
8Mar-
09Ju
n-09
Sep-09
Dec-0
9Mar-
10
Actual Model Portfolio MSCI World Utilities MSCI WorldPortfolio
Successful high yield investor since 2005Established track record in a high yield equities fund developed for Japanese marketNet performance (March 2005 - May 2010) in EUR
Portfolio
MSCI World
Utilities
MSCI World
2005* 21.5% 23.2% 21.0%2006 23.6% 21.5% 7.4%2007 10.1% 9.6% -1.9%2008 -30.1% -27.1% -38.9%2009 13.4% 5.6% 28.8%2010 3.3% 1.4% 8.7%*Inception March 2005
Annualized return
5.9% 4.7% 1.7%
Risk 13.8% 13.1% 15.3%
Source: Pictet, Net of fees performance, as at 31/05/2010. Rebased to 100. Source: Pictet, Net of fees performance, as of 31/12/2010
17Product Presentation Pictet-High Dividend Selection
*MSCI World since 01/01/11, before MSCI World Utilities
Review of performance as of December 30, 2011
YTD
1 month
3 months
6 months
1 year
Since inceptio
nPictet-High Dividend Selection-P EUR
-0.1% 1.7% 4.5% 1.5%
-0.1% 3.3%
MSCI World Composite*-
3.1% 3.6%11.2
% 0.2%-
3.1% -1.4%
Performance of Pictet-High Dividend Selection in EUR since inception (May 2010)
Source: Pictet, data as at 30/12/2011 in EUR, net of fees
18Product Presentation Pictet-High Dividend Selection
Sector and market cap breakdown
Source: MSCI, Pictet Asset Management, as of 30/12/2011
Sector breakdown Market cap breakdown
19Product Presentation Pictet-High Dividend Selection
Region and currency breakdown
Source: MSCI, Pictet Asset Management, as of 30/12/2011Rest of the World: SEK, CAD, BRL, HKD, JPY, AUD, CKZ, ZAR, IDR & SGD. Emerging markets amount to 8.3% of total.
Region breakdown Currency breakdown
20Product Presentation Pictet-High Dividend Selection
Credit quality
Source: MSCI, Pictet Asset Management, as of 30/12/2011
Credit rating
83% INVESTMENT GRADE
NR10.5%
A32.6%
BBB32.0%
BB6.5%
AAA2.2% AA
16.2%
Outstanding credit quality
21Product Presentation Pictet-High Dividend Selection
Conclusions4
22Product Presentation Pictet-High Dividend Selection
Conclusions• Aims to provide equity returns with lower volatility and
higher dividend yields: – Strong and predictable cash flows lead to more
attractive dividend income– High and growing dividend is a source of stable
investment returns• Global investment universe• Benchmark unaware
• Market and economic uncertainties require a defensive investment approach and a focus on recurring income
• Substantially higher dividend yield versus other traditional yielding asset classes
• Experienced management team with a proven track record in High Dividend Yield equities
• Unique investment process developed over many years
Why invest in Global High Dividend Yield equities?
Why now?
Why Pictet?
23Product Presentation Pictet-High Dividend Selection
Technicals5
24Product Presentation Pictet-High Dividend Selection
TechnicalsName: Pictet-High Dividend SelectionLaw: Sicav part I of Luxembourg LawConsolidation currency: EURCalculation: daily; settlement NAV + 3Inception:14 May 2010Fund size:EUR 440mn, as per 31 December 2011Dividend: Reinvested (I, P, R) or distributed (P dy, P dm)Benchmark: MSCI World (net div reinvest)Share classes:
* I-Share: min investment EUR 1'000'000, or equivalent for USD, GBP and CHF share classesSource: Pictet, as at 30/09/2011
Class ISINDividend
distribution MF(%)Admin/
Custody TER(%)**I dm GBP * LU0503635897 Y 0.60% 0.30% 0.63%I EUR * LU0503633769 0.80% 0.30% 0.93%I USD * LU0503635111 0.80% 0.30% 0.86%P CHF LU0503636358 1.60% 0.30% 1.79%P dm GBP LU0503635970 Y 1.20% 0.30% 1.34%P dm USD LU0503635467 Y 1.60% 0.30% 1.72%P dy CHF LU0503636275 Y 1.60% 0.30% 1.78%P USD LU0503635202 1.60% 0.30% 1.75%P EUR LU0503634221 1.60% 0.30% 1.71%P dy EUR LU0503634577 Y 1.60% 0.30% 1.76%R dm EUR LU0503635038 Y 2.30% 0.30% 2.43%R dm USD LU0503635624 Y 2.30% 0.30% 2.44%R EUR LU0503634734 2.30% 0.30% 2.44%R USD LU0503635541 2.30% 0.30% 2.42%I dm GBP * LU0503635897 Y 0.60% 0.30% 0.63%
25Product Presentation Pictet-High Dividend Selection
Pictet Asset Management SARoute des Acacias 60, 1211 Geneva 73
Tel: +41 58 323 3333 Fax: +41 58 323 2040
Pictet Asset Management LimitedAuthorised and regulated by the Financial Services Authority
Moor House, Level 11120 London Wall London EC2Y 5ET
Tel: +44 20 7847 5000 Fax: +44 20 7847 5300
Pictet Asset Management (“PAM”) definition: In this document, Pictet Asset Management includes all the operating subsidiaries and divisions of the Pictet group that carry out institutional asset management: Pictet Asset Management SA, a Swiss corporation registered with the Swiss Financial Market Supervisory Authority FINMA, Pictet Asset Management Limited, a UK company authorised and regulated by the Financial Services Authority, and Pictet Asset Management (Japan) Limited, a Japanese company regulated by the Financial Services Agency of Japan.This document is for distribution to professional investors only. However it is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation. Information used in the preparation of this document is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. This document has been issued in Switzerland by Pictet Asset Management SA and/or Pictet & Cie and in the rest of the world by Pictet Asset Management Limited and may not be reproduced or distributed, either in part or in full, without their prior authorisation. For UK investors, the Pictet and Pictet Total Return umbrellas are domiciled in Luxembourg and are recognised collective investment schemes under section 264 of the Financial Services and Markets Act 2000. Swiss Pictet funds are only registered for distribution in Switzerland under the Swiss Fund Act, they are categorised in the United Kingdom as unregulated collective investment schemes. The Pictet group manages hedge funds, funds of hedge funds and funds of private equity funds which are not registered for public distribution within the European Union and are categorised in the United Kingdom as unregulated collective investment schemes.For US investors, the Shares of the funds managed by the Pictet Group are being offered to United States tax-exempt investors Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
For more information, please contact your Pictet client relationship manager
www.pictet.com