en thomas palmblad

BANK DEGROOFPresentation for VIVIUM Assurances

Bruxelles Kinepolis 14th October 2010

Mr. Thomas-Karl Palmblad

14th October 2010

2 DEGROOF FUND MANAGEMENT COMPANYBetter Performance Through Active Risk Control

1. Introduction of Bank Degroof

2. Introduction to Degroof’s Global Investment approach for VIVIUM

3. Introduction of Bank Degroof’s Behavioral Value strategy

4. Q & A

Agenda


Independent merchant Bank, founded in 1871, owned by its management

24.1 bn EUR in assets under management

Asset management produces 80% of income

Headcount 1000

Offices in Belgium (HQ), Luxembourg, Switzerland, France, Spain and Bahamas

Bank Degroof


1. Senior management owns a majority stake

in the bank. This gives them, in a long-term

approach, a vital interest in the bank's

performance and reputation

Management & staff include (1)

controlling stake held by Guimard Finance

and the Philippson, Siaens, Schockert,

Haegelsteen and Fontaine families, (2)

active partners and

(3) other members of management and staff

2. Financial partners include Compagnie du

Bois Sauvage, Parmafin (Theo Maes

family), Luc Waucquez family, Levimmo

and others. Own shares represent 1.19 %

ManagementManagement

and staffand staff

63.85%

FinancialFinancial

partners and otherspartners and others

36.15%

MANAGEMENT AND STAFF HAVE A STAKE IN THE GROUP’S SUCCESS


Private clients Institutional clients Public and private companies and their shareholders

BANK DEGROOF’S REPUTATION IS BUILT ON THE EXPERTISE MADE AVAILABLE TO ITS CLIENTS

Corporate Finance• M&A expertise, recognized by various

rankings

• Dominant position in the issue of fairness opinions

• One of the main financial advisers to the Belgian state and regional governments for privatisations and other major financial operations

• Active role in private and public placements for private companies and companies listed on Euronext Brussels

Credits & Structuring

• Structured and tailor-made credits

Private wealth management

• Protect and grow

• Full support at all stages of wealth creation

• EUR 21.0 billion in assets under management

Legal and patrimonial structuring• Specialists in legal, fiscal and inheritance

structuring

Credits & Structuring

• Credit facilities as part of overall asset management relationships

• Bank Degroof Brussel’s Institutional Portfolio Management department, Degroof Fund Managament Company and Degroof Gestion Institutionnelle (DGI) are the Degroof group's competence centres for institutional asset management

• Management of EUR 15.9 billion in UCIs

• Management of EUR 2.9 billion of institutional portfolios

Financial markets• Long-established financial market player• Advice and sales to institutional clients in equities,

bonds, undertakings for collective investment, listed derivatives and treasury management

• A leading liquidity provider on Euronext Brussels

UCI administration


OUR REPUTATION AND PROFESSIONAL APPROACH ENABLE US TO ATTRACT AND RETAIN HIGHLY COMPETENT PROFESSIONALS

• Our culture is that of top grade professionals, working together in a climate of mutual trust and respect to produce optimal, lasting solutions for our clients

• This culture provides a stability stimulating creative innovation

• We favour a long-term approach, with close attention to financial fundamentals

• For example, the average length of service of senior staff is 11.2 years


• a clear and contrarian investment philosophy,

• inspired by academic research and, that is translated

• into disciplined investment processes by Teams

• through a "fundamental-quantitative” approach

• and with tight risk control

Bank Degroof = excellent performance thanks to


VIVIUM, the switch to Degroof Active Management Styles

VIVIUM Managed Funds 4 Compartments

Stability Fund

Balanced Fund

Dynamic Fund

Aggressive Fund

Degroof Active Funds Selection of 4 Management Styles

Global Low

Global Medium

Global High

Equities Europe Behavioral Value

Active Risk Level

Low

High


VIVIUM, the switch to Degroof Active Managed Investment Processes

Equity Level

Low: 20%

High: 100%


Stability Fund

Balanced Fund

Dynamic Fund

Aggressive Fund

12 months return as at 30th September 2010

Return 1 Year : + 6.61%





VIVIUM, the switch to Degroof Active Managed Investment Processes

Equity Level

Low: 20%

High: 100%


Stability Fund

Balanced Fund

Dynamic Fund

Aggressive Fund

Tracking Error 1.92% Vol. 5.29% Tracking Error 2.92% Vol. 9.8%

Tracking Error 6.28% Vol. 15.5%

Tracking Error 5% Vol. 19.7%


• 3 RISK PROFILES

ASSET ALLOCASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION

GLOBAL LOW

GLOBAL MEDIUM

GLOBAL HIGH

EQUITY RATIO

20%

48%

75%

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

DEGROOFGLOBAL ISIS

LOW

DEGROOFGLOBAL ISIS

MEDIUM

DEGROOFGLOBAL ISIS

HIGH

ASSETS UNDER MANAGEMENT (mio €)

347

580

1,918

-

500

1,000

1,500

2,000

2,500

ISIS LOW ISIS MEDIUM ISIS HIGH


• MEDIUM = Flagship Management of Banque Degroof, 1.92 billion euros

reflects the allocation strategy of medium risk

ASSET ALLOCATION DIVERSIFICATION PERFORMANCE CONCLUSIONINTRODUCTION

OPTIMIZE THE RETURN

1. Allocation between

assets classes

2. Diversification within every asset class

• OBJECTIVE

80% OF THE RETURN

20% OF THE RETURN


BONDS

EQUITIES

SHORT TERMALTERNATIVE

CONVERTIBLE BONDS

REAL ESTATE


Govies / AgenciesSecuritizedCorporatesInflation linked

Large capsSmall capsPrivate Equity

CurrenciesDeposits

Commercial papers

OfficesCommercialResidential

Flex CollarHedge Funds

Timber


1. ALLOCATION : MEDIUM (July 2010)


LowLow

HighHigh

EQUITIES BONDS CONV BDS ALTERN. CASH REAL PROP. TOTAL

EURO 14.8 24.8 0.3 11.0 0.0 2.9 53.9Belgium 0.7 0.9 0.3 0.9 2.8Germany & Austria 4.1 5.5 0.0 0.2 9.8France 4.4 11.3 1.1 16.9Netherlands 1.5 0.5 0.5 2.5Italy 1.5 0.5 0.0 2.1Spain 1.7 1.0 2.7Others (Port,Irel,Finl,Gr) 0.9 5.0 0.1 6.1

EMEA ex-Euro 5.4 0.9 0.3 0.0 0.1 6.6Great Britain 3.1 0.3 0.0 0.1 3.5Switzerland 1.0 0.0 1.0Others (Swed, Norw, Denm, Isr) 1.2 0.9 0.0 2.1

NORTH AMERICA 14.5 0.0 0.3 4.4 0.3 0.5 20.0

United States 13.0 0.0 0.3 4.4 0.2 0.5 18.4Canada 1.6 0.0 1.6

JAPAN 2.2 0.1 2.3

ASIA ex-Japan 2.0 0.3 2.3 0.1 4.6Australia & NZ 1.3 0.1 0.0 0.0 1.4Hong Kong 0.5 0.1 1.2 0.1 1.8Singapore 0.2 0.1 1.1 0.0 1.4

EMERGING MARKETS 10.7 1.9 12.6

TOTAL 49.5 25.7 3.2 15.4 2.6 3.6 100.0


2. BENCHMARK

LowLow

HighHigh


ISIS MEDIUM

58%

21%

8%

38%

10%

48%

16%

4%

28%

2%

38%

11%

0%

18%

0%6%3%0%0%

10%

20%

30%

40%

50%

60%

Equitie

s

Conv B

onds

Altern

ative

Real e

state

Bonds

Cash

Max

Bench

Min


3. ALLOCATION TOOLS (ASSETS CLASSES)


INVESTMENT COMMITTEE

MACRO-ECONOMY

-Growth: Europe, USA, Japan, Emerging countries

-Inflation :

-Short term interest-Long term interest-Exchange rates-Equity markets valorisations

Leading indicatorsConsummer confidenceLabour marketNew ordersInventoriesProfitabilityReal estate activityCreditsCPI, PPI

Monetary aggegatesCommodities pricesWorld trade volumeLabor cost


BONDS ALLOCATION

- Duration/Positioning Real interest rate Yield curve

- Govies-Inflation linked: Expected inflation

- Credit: Corporate - govies: Rating/risk

- Sectors

- Countries

3. ALLOCATION TOOLS (ASSETS CLASSES)


INVESTMENT COMMITTEE FIXED INCOME COMMITTEE

QUANTITATIVE TOOLS

- Allocation Equity-Bonds: Risk premium

- Allocation Blue-Small: Relative P/E

FINANCIAL RATIOS

- Price/Earnings

- Earnings revision


4. STRATEGY

A. GLOBAL ALLOCATION

Slightly overweighted in equity

Underweighted in real estate

Lower bonds duration


0

10

20

30

40

50

Equity

Conv Bonds

Alternative

Real estateBonds

Cash

(%)

Isis Medium Benchmark


Underweighted in Japan


4. STRATEGY

B. EQUITY ALLOCATION

0

5

10

15

20

25

Euro

Europe ex-euro

North America

Asia & Emg mktsJapan

(%)

Isis Medium Benchmark



4. STRATEGY

C. BOND ALLOCATION

Overweighted in corporate & securitized bonds

01020304050607080

AAA AA A BBB NR

(%)

ISIS Medium Benchmark


Based on long term views

5. ASSET ALLOCATION: CONCLUSIONS




1. NON EQUITY CLASSES 2. EQUITY CLASSES

- BONDS- FLEXIBLE COLLAR- CONVERTIBLE BONDS- HEDGE FUNDS- REAL ESTATE- COMMODITIES- OTHERS: TIMBER

- STYLES:INDEXEDVALUEGROWTH…

- PRIVATE EQUITY


MEDIUM


1. NON EQUITY CLASSES

Cash

2%

Flex collar14%

Timber1%Cash

2%

Real properties4%

Bonds25%

Conv bonds3%

Equity51%

Hedge funds1%

Non equity49%

Bonds 16.5% Govies,

3.1% Inflation linked

2.4% Corporates

3.7% Securitized



2. EQUITY CLASSES

MEDIUM

third party12%

value6%

Non equity49%

Index31%

Equity51%

private equity1%



Based on convictions, on medium term views

DIVERSIFICATION: CONCLUSIONS


RISK CONTROL


MEDIUM

RiskControl

1


Positive years: 2003 - 2007

80

90

100

110

120

130

140

150

2003 2004 2005 2006 2007

Global bonds Isis Medium


PESSIMISTIC SCENARIOOPTIMISTIC SCENARIOPositive years: 1993 - 2000

70

90

110

130

150

170

190

210

230

250

1993 1994 1995 1996 1997 1998 1999 2000


Negative years: 2000 - 2003

40

50

60

70

80

90

100

110

2000 2001 2002 2003


+25.5%

+36.5%

-10.1%

UPSIDE HIGHER THAN DOWNSIDE

Bank Degroof’s

Behavioral Value strategy


Introduction to Bank Degroof’s Behavioral Value strategy

Source: “Capturing the Value Premium in the UK; 1955-2001” Dimson, Nagel & Quigley, LSE, January 2003

Cumulative value of British shares between 1955 and 2001

Unfortunately …

You are here


Introduction to Bank Degroof’s Behavioral Value strategy2. Quality of forecasting is a disaster

Behavioral Value deals with these flaws through

A. Strong buying and selling discipline

Obtained through a quantitative approach and improved bybehavioral criteria such as earnings revision momentum

B. Behavioral Value eliminates the analysts’ bias oflong term optimism

By introducing mean reverting in the valuation model/business plan


The Wheel of Fortune – where Degroof is

Behavioral Value


Risk PremiumDJ Stoxx 50 Earnings Yield Gap - Growth sensitivity

-0.25%

0.75%

1.75%

2.75%

3.75%

4.75%

5.75%

6.75%

7.75%

8.75%

9.75%

10.75%

11.75%

12.75%

13.75%

14.75%

J an-99 J an-00 J an-01 J an-02 J an-03 J an-04 J an-05 J an-06 J an-07 J an-08 J an-09 J an-10-0.25%

0.75%

1.75%

2.75%

3.75%

4.75%

5.75%

6.75%

7.75%

8.75%

9.75%

10.75%

11.75%

12.75%

13.75%

14.75%

Risk P remium Normative RP -25% -15% -5%

5% 15% Stdev Stdev -35%

Normative RP = 2.90% ; Last = 10.14% ; 30/08/2010 = 10.60%

Last update : 02/09/2010


Degroof Equities Europe Behavioral Value Gips


Market snapshot

Source: Bloomberg 8th October 2010


Start End Return US Equity Market

Q4 1948 Q4 1949 -15%

Q2 1953 Q2 1954 -12%

Q3 1957 Q2 1958 -19%

Q2 1960 Q1 1961 -11%

Q4 1969 Q4 1970 -30%

Q4 1973 Q1 1975 -46%

Q1 1980 Q3 1980 -7%

Q3 1981 Q4 1982 -24%

Q3 1990 Q1 1991 -16%

Q1 2001 Q4 2001 -46%

Q1 2008 (?) Q1 2009 (?) -43%

Mean -23%

Median -17%

Source: Lehman Brothers, Global Strategy Outlook, 7 December 2007

OutlookComparison to previous crises


Source: Global Financial Data

Bottom reached at

8 July 1932 171%

31 March 1938 29%

28 April 1942 54%

19 May 1947 19%

13 June 1949 42%

22 October 1957 31%

26 June 1962 33%

7 October 1966 33%

26 May 1970 44%

3 October 1974 38%

12 August 1982 58%

4 December 1987 21%

11 October 1990 29%

9 October 2002

9 March 2009

34%

Oct 8, 2010 +68%

Average 45%

Median 33%

Performance US equities 12 months after bear market bottom

OutlookEquities


Contact details

Thomas Palmblad,

Institutional & Corporate Desk

Rue de l’Industrie 44

1040 Bruxelles

E-mail: [email protected]

Phone: +32 2 287 93 27

www.degroof.be

en thomas palmblad

Economy & Finance

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