Julian Thompson, Fund Manager of the AXA Framlington Emerging Markets Fund

Opportunities in Emerging Market equities

17627 09/13

This communication is for professional advisers only and must not be relied upon by retail clients. Circulation must be restricted accordingly.

Global Emerging markets – where are we?

Cost of capital now rising globally as US economy recovers

Increased pressure on emerging market central banks to raise rates as capital

flows out

Most emerging economies are in good shape but there may be some

casualties

Cost of credit for emerging economies (bps)

Source: Bloomberg as at 06/09/2013.

0

2

4

6

8

10

12

14

Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13

per

cent

age

po

ints

US 10 YEAR BOND YIELD EMBI SOVEREIGN SPREAD OVERALL SOVEREIGN COST OF CAPITAL

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High yield currencies under pressure

Source: Bloomberg as at 06/09/2013.

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Little visibility on near term growth

Growth has been surprisingly weak; rate

rises do not help

Little room for fiscal stimulus this time

around in larger economies

Varied response from Central Banks on

monetary policy

Markets in very different economic cycles

with their own particular domestic issues

– Banking sector in China

– Policy paralysis in India

– Political intereference in Brazil

Interest rates in major markets (%)

Graph source: Bloomberg as at 05/09/2013.

0

5

10

15

20

25

Apr-09 Apr-10 Apr-11 Apr-12 Apr-13

BRAZIL SELIC rate

India 3 month deposit rate

CHINA Bank ReserveRequirements

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China: Misallocation of Capital

Capital has long been mispriced in China

Leading to overinvestment, especially in

real estate

Government trying to address this issue

with gradual banking sector liberalisation

This probably means lower growth in the

short-term but averts a bigger crisis further

down the line

Consumption has slowed but remains

positive

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Ordos, China: a ghost city example

China banking sector no longer able to support infrastructure

investment

Source: Bloomberg as at 31/07/2013. RMB = Renminbi yuan

0

5

10

15

20

25

30

35

40

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13

Monthly volume of new loans in China (Bn. Yuan, LHS) Growth in existing stock of total bank loans (%, RHS)

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But some signs of life in manufacturing sector

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Source: Bloomberg as at 31/08/2013.

30

35

40

45

50

55

60

65

Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13

HSBC NEW ORDERS PMI CHINA MANUFACTURING PMI

Signs of a pick up in the export sector

Source: Bloomberg as at 31/08/2013. 3mma = 3-month moving average; y-o-y = year-on-year

Export growth (3mma) (% change y-o-y)

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 May-11 May-12 May-13

%

KOREA TAIWAN CHINA BRAZIL MEXICO

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0 5 10 15 20 25

Brazil

Mexico

Other Latin America

China

India

Korea

Indonesia

Malaysia

Taiwan

Thailand

Other Asia/Pacific

Russia

Other Europe

South Africa

Turkey

Other Africa/Middle East

Other EM

Environment calls for increased country differentiation

Strong differentiation between countries

and currencies based on external capital

requirement

Pressure on politicians to introduce

structural reform

Politics handicapping some markets

– Turkey, India

Focus on markets where reform is on the

agenda or likely

– China, Mexico, Thailand

Korea and Taiwan to benefit from a pick up

in manufacturing cycle but corporate

governance remains an issue

Benchmark

Fund

Source: AXA IM as at 31/07/2013.*Refers to AXA Framlington Emerging Markets.

Weight %

Countries we like*

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Mexico is an attractive investment destination

Audi to invest US$1.15bn in new state of

the art plant in Puebla

Will be main production facility globally for

Q5, exporting to US and to Germany

150,000 units annually beginning 2016

Creates 20,000 jobs including indirect

labour

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“More than a dozen locations were looked at….Site conditions, logistics links, infrastructure, well qualified

employees and living quality – these were the decisive criteria for the choice of location”

Audi press release, 5 Sept 5 2012

Not to mention competitive wages….

Mexico: recovery in manufacturing underpinned by economic reform

Enormous change in political environment

One of the few reform stories in Emerging

Markets

Potential GDP growth could hit 5% in

3 years time

Infrastructure, energy, education and

competition are all part of reform

programme

Regained competitiveness vs China

Increasing integration with US economy

Source: Morgan Stanley LatAm Economics – Chart source: as at:31/01/2013 3mma = 3-month moving average ; y-o-y = year-on-year

Mexico’s share of US imports (% of US imports, 3mma seasonally adjusted)

Unit labour costs in manufacturing (3mma, % change y-o-y)

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%

Jul-00 Oct-01 Jan-03 Apr-04 Jul-05 Oct-06 Jan-08 Apr-09 Jul-10 Oct-11 Jan-13

Manufacturing ex-Auto Total Manufacturing

-28%

-24%

-20%

-16%

-12%

-8%

-4%

0%

4%

8%

Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

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-40

-30

-20

-10

0

10

20

30

40

50

60

Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13

Domestic demand (% q/q, saar) GDP (% q/q, saar)

Thailand: sustainable growth in domestic demand

Political environment favours growth in

rural areas

Fiscal policy driving consumption

Strong investment supporting growth

Liquid, well capitalised banking sector with

low credit penetration

Source: National Economic and Social Development Board/Haver Analytics as at 30/06/2013.

Domestic Demand & GDP

Government Contribution

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-30

-20

-10

0

10

20

30

Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13

GDP: Government (% y/y)

Turkey: high external financing requirement

Large current account deficit leaves Turkey

exposed to financing flows

Real interest rates close to zero

Political unrest not helpful given financing

requirement

Banking sector will suffer from higher

interest rates given duration gap

Central Bank reluctant to raise interest

rates for political reasons

Source: Bloomberg as at 31/08/2013.

Turkey : trade balance

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-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-12

Jan-13

US

$b

n.

Exports Imports Trade Balance

AXA Framlington Emerging Markets – portfolio as at 31/07/2013

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Large Cap => 8bn USD

Medium Cap 1–8bn USD

Small Cap =< 1bn USD

Source: AXA IM as at 31/07/2013. Comparative benchmark: MSCI Emerging Markets. Active share can be defined by the proportion of stock

holdings in the composition of a portfolio which is different from the composition found in its comparative benchmark (MSCI Emerging Markets)

The greater the difference between the asset composition of the fund and its comparative benchmark, the greater the active share.

Market capitalisation breakdown (%)

1.8%

3.1%

28.1%

67.0%

0.0%

0.2%

27.5%

72.3%

0% 20% 40% 60% 80% 100%

Cash

Small Cap

Medium Cap

Large Cap

MSCI Emerging Markets

AXA Framlington Emerging Markets

Top 10 active positionsFund

%

Comparative

benchmark

%

Relative

%

Baidu 3.2 0.0 3.2

Bank of Georgia 3.1 0.0 3.1

Kimberly-Clark de Mexico 3.0 0.1 2.8

Bolsa Mexicana de Valores 2.7 0.0 2.7

Grupo Televisa 2.6 0.4 2.3

TATA Consultancy Services 2.5 0.4 2.1

Arca Continental 2.2 0.1 2.1

Belle International Holdings 2.3 0.2 2.1

Sberbank 3.0 0.9 2.1

CP ALL PCL 2.2 0.1 2.0

TOTAL 26.8 2.3 24.5

% of active share 77%

Number of stocks 66

Sector allocation

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Breakdown by sector (%) Relative exposure by sector (%)

AXA Framlington Emerging Markets MSCI Emerging Markets

Source: Factset using TBR Methodology Data & end of day data as at 31/07/2013. Comparative benchmark: MSCI Emerging Markets.

-9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9

Consumer Discretionary

Consumer Staples

Information Technology

Industrials

Health Care

Telecommunication Services

Financials

Utilities

Energy

Materials0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30

Financials

InformationTechnology

ConsumerDiscretionary

Consumer Staples

Industrials

TelecommunicationServices

Energy

Health Care

Materials

Utilities

Breakdown by country (%)

Country and regional breakdown allocation

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Relative exposure by region & country (%)

MSCI Emerging Markets

Source: AXA IM as at 31/07/2013. Comparative benchmark: MSCI Emerging Markets.

0 5 10 15 20 25

Brazil

Mexico

Other Latin America

China

India

Korea

Indonesia

Malaysia

Taiwan

Thailand

Other Asia/Pacific

Russia

Other Europe

South Africa

Turkey

Other Africa/Middle East

Other EM-8 -6 -4 -2 0 2 4 6 8 10

Mexico

Thailand

Georgia

Peru

China & Hong Kong

Chile

South Africa

Malaysia

Korea

Taiwan

AXA Framlington Emerging Markets

-10 -5 0 5 10 15

Latin America

Europe

Africa/Middle East

Asia Pacific

AXA Framlington Emerging Markets strategy – track record

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Source: AXA IM as at 31/07/2013. Basis: bid to bid, net income, net of fees in GBP. Comparative benchmark : MSCI Emerging

Markets. Dependant on the date this presentation has been prepared, the information presented may be different to the current figures.

NB: Past performance is not a guide to future performance.

10Y Net Performance

50

100

150

200

250

300

350

400

450

500

Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13

AXA Framlington Emerging Markets (net) in GBP MSCI Emerging Markets

Performance (%) net in GBP YTD 1Yr 2Yrs 3Yrs 5Yrs

AXA Framlington Emerging Markets UT Net GBP 0.4 7.0 -4.7 5.8 27.8

MSCI Emerging Markets NR GBP -2.0 5.4 -5.0 6.5 34.3

Excess over comparative benchmark 2.4 1.7 0.3 -0.7 -6.4

Quartile vs IMA Global Emerging Markets 2 2 2 2 3

Disclaimer

This communication is intended for professional advisers’ use only and should not be relied upon by retail clients. Circulation must be restricted

accordingly. Any reproduction of this information, in whole or in part, is prohibited.

This communication does not constitute an offer to sell or buy any units in the Fund. Information relating to investments is based on research and analysis

undertaken or procured by AXA Investment Managers UK Limited for its own purposes and may have been made available to other members of the AXA IM

Group of Companies which, in turn, may have acted on it. Whilst every care is taken over these comments, no responsibility is accepted for errors and

omissions that may be contained therein. It is therefore not to be taken as a recommendation to enter into any investment transactions.

This communication should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA IM investment service or product

and is provided to you for information purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of

any company within the AXA Investment Managers Group and may be subject to change without notice. No representation or warranty (including liability

towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein.

Information relating to investments may have been based on research and analysis undertaken or procured by AXA Framlington for its own purposes and may

have been made available to other expertises within the AXA Investment Managers Group, who in turn may have acted upon it. Information in this document

may be updated from time to time and may vary from previous or future published versions of this document.

Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the

amount originally invested. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets and smaller

companies offer the possibility of higher returns but may also involve a higher degree of risk. An initial charge is usually made when you purchase units. Your

investment should be for the medium to long term i.e. typically 5-10 years.

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17 17627 09/13