AXA Rosenberg European Fund

SHORT REPORT YEAR ENDING 31 JANUARY 2018 ROSENBERG EQUITES AXA Rosenberg European Fund Investment objective and policy AXA Investment The aim of the Fund is to achieve medium to long term capital growth above that of the MSCI Europe ex-UK Index on a rolling three to five year basis. Managers (AXA IM) The MSCI Europe ex-UK Index is designed to measure the performance of the shares of companies is a dedicated listed on stock exchanges in developed European countries (excluding the UK). investment manager The Fund invests in a diversified portfolio of shares of large and medium sized companies in all industry sectors which are listed on European stock exchanges (excluding those in the UK). The Fund within the AXA manager uses a proprietary stock selection model to identify companies that it believes to be attractive, relative to their industry peers, based on the model's analysis of their financial data. In Group, a world constructing the Fund's portfolio, the Fund manager references the index which means that, while the Fund manager has discretion to select the investments for the Fund, the Fund's divergence from the leader in financial index is controlled. protection and The Fund may use derivatives (financial instruments that derive their value from the value of other wealth assets) in an attempt to reduce the overall risk of its investments, reduce the costs of investing or generate additional capital or income known as Efficient Portfolio Management (EPM). management. Rosenberg Equities is AXA IM’s systematic Rosenberg Equities investment process fundamental equity investment specialist, Rosenberg Equities core investment belief has remained unchanged since the formation of the and deploys a pioneering and unique company in 1985. We believe that fundamentals, especially future earnings and the price paid for investment process to deliver a broad those fundamentals, drive equity returns. Therefore by identifying and investing in companies that range of active investment strategies to a display superior fundamentals at an attractive price, it is possible to add value. wide range of investors. Of the £650 billion managed by AXA IM, For this philosophical premise to be valid, markets must be mostly efficient but not perfectly efficient at (Source: AXA IM as at 31 January 2018), pricing stocks. So, while on average the price of a stock will reflect the market’s consensus view of the stocks’ ability to generate future earnings, there will be times when stocks are either under or funds in excess of £16.9 billion is overvalued relative to this implied fair value. It is these mispricings that we seek to identify and exploit. invested by Rosenberg Equities. Furthermore, we believe that it is difficult to time markets or sectors consistently and as a result seek to add value primarily from stock selection rather than asset allocation. Rosenberg Equities core investment process is driven by company-level analysis based on the rigorous fundamental research taking account of company valuations and earnings, combined with an understanding of both the stock specific and environmental risks. Whilst our approach is akin to that of a traditional fundamental investor, our implementation is systematic, harnessing the power of technology to exploit a large number of modest fundamental mispricings across a wide investment universe. Our core investment process seeks to estimate the fair value per share for every company in our investment universe. This is done by estimating the market’s valuation of each component of company value with the aim of identifying companies that are trading at a premium (above) or a discount (below) to the value of the sum of their parts. To increase the accuracy of the valuations and address the limitations of financial accounts, the published accounts are complemented by proprietary Rosenberg forecasts and estimates, for example, estimated up-to-date balance sheets and earnings based on forecast modelling and estimated valuations of off-balance sheet assets such as research and development (R&D) and goodwill. In addition to deriving the fair value for each stock in our investment universe, we also look at each stock’s earnings profile and how it has changed over time. We use historical fundamental data to estimate future earnings growth potential and to measure the reliability of a company’s earnings. We also use sentiment indicators to provide the current market view on a stock’s near-term earnings prospects. The approved company-level views are input to an optimiser that recommends the portfolio with the optimal return for a given level of risk. The objective is to build highly diversified portfolios with superior www.axa-im.co.uk ROSENBERG EQUITES SHORT REPORT YEAR ENDING 31 JANUARY 2018 AXA Rosenberg European Fund fundamentals relative to the Fund's comparative benchmark, with modest active exposures to common factor risk such as size, market and industry. Market review European equity markets delivered double-digit gains to investors over the year to 31 January 2018. From a style and market risk perspective, our preference for attractively valued companies added to relative returns. In addition, favouring stocks with above-average price momentum was helpful as recent winners extended their gains in what was a generally positively-trending market. The Fund’s bias towards companies with smaller market capitalisations also proved beneficial. Relative industry positions weighed on returns over the year. The Fund had an above- benchmark exposure to telecoms, which was unhelpful given the EU’s proposal to cut roaming charges, and the position in Spain’s Telefonica weighed on relative returns. The below-benchmark exposure to the banking industry also detracted from performance. Stock selection was well rewarded within the consumer discretionary and materials sectors over the period. Within the consumer discretionary sector, the overweight position in vehicle manufacturer Volvo benefited the Fund as shares hit a record high following strong demand for its trucks business. The top contributor at stock level came from the above- benchmark exposure to German airline Lufthansa, whose shares soared after the EU competition commissioner approved its plans to takeover low-cost rival Air Berlin. Rosenberg Equities 31 January 2018 Source: Bloomberg, period ending 31 January 2018 Past performance is not a guide to future performance. www.axa-im.co.uk ROSENBERG EQUITES SHORT REPORT YEAR ENDING 31 JANUARY 2018 AXA Rosenberg European Fund Risk and reward profile FUND FACTS The Fund invests primarily in the shares of quoted European companies drawn from all economic Lead Fund manager Rosenberg Equities sectors. As the Fund invests in overseas securities it may hold currencies other than sterling. As a result, exchange rate movements may cause the value of investments to fall or rise. The value of Sector (IA) Europe investments and the income from them is not guaranteed and can go down as well as up. Excluding UK Lower risk Higher risk Comparative benchmark MSCI Europe Ex UK Total Return Potentially lower reward Potentially higher reward Date of establishment 5 Jul 1999 1 2 3 4 5 6 7 Fund size at 31 Jan 2018 £21m Fund size at 31 Jan 2017 £19m The risk category is calculated using historical performance data and may not be a reliable indicator of Minimum initial R: £1,000 the Fund’s future risk profile. The risk category shown is not guaranteed and may shift over time. The investment Z: £100,000 lowest category does not mean risk free. Minimum subsequent R: £500 Why is this Fund in this category? purchase/redemption Z: £5,000 The capital of the Fund is not guaranteed. The Fund is invested in financial markets and uses Yield R Acc (Gross & Net) 2.07% techniques and instruments which are subject to some level of variation which may result in gains or losses. Yield Z Acc (Gross & Net) 2.41% Share types Accumulation Additional risks Counterparty Risk: failure by any counterparty to a transaction (e.g. derivatives) with the Fund to meet Number of stocks 99 its obligations may adversely affect the value of the Fund. The Fund may receive assets from the Initial charge R: Nil counterparty to protect against any such adverse effect but there is a risk that the value of such assets *Z: Nil at the time of the failure would be insufficient to cover the loss to the Fund. Annual charge R: 1.50% Z: 0.75% Currency Risk: the Fund holds investments denominated in currencies other than the base currency of the Fund. As a result, exchange rate movements may cause the value of investments (and any income Ongoing charges** received from them) to fall or rise effecting the Fund's value. R Acc 1.71% Derivatives: derivatives can be more volatile than the underlying asset and may result in greater Z Acc 0.96% fluctuations to the Fund's value. In the case of derivatives not traded on an exchange they may be Accounting dates (interim) 31 Jul subject to additional counterparty and liquidity risk. Accounting dates (annual) 31 Jan Geopolitical Risk: investments issued or traded on markets in different countries may involve the Distribution dates 31 Mar, 30 Sep application of different standards and rules (including local tax policies and restrictions on investments (income) and movement of currency), which may be subject to change. The Fund's value may therefore be All data, source: AXA IM as at 31 January 2018. *For historical and contractual reasons existing regular savers impacted by those standards/rules (and any changes to them) as well as the political and economic who hold Class Z shares will continue to pay an initial charge of circumstances of the country/region in which the Fund is invested. 3.5%. **For more information on AXA’s fund charges and costs please use the following link https://retail.axa-im.co.uk/fund-charges- Operational Risk: the Fund is subject to the risk of loss resulting from inadequate or failed internal and-costs.

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