article quality growth and sustainability

8
1 I nvestors who select asset managers applying a Quality Growth at a Reasonable Price (Quality GARP) strategy generally tend to avoid holding companies that are among the worst ESG offenders. Investors can be confident that the companies in a portfolio following this strategy are, at the aggregate level, less likely to be laggards in their management of material environmental, social and governance matters, and thus demonstrate lower associated risks to the portfolio. Comgest has consistently applied its ‘quality growth’ investment approach for over 25 years and its long-term ‘buy and hold’ investment philosophy naturally favours companies with sound business practices and an ability to deliver strong long-term earnings growth. Our unconstrained investment approach provides us with the freedom to find companies that, in our judgement, have superior earnings potential and visibility. We typically find such businesses in consumer goods and services, informa- tion technology, telecommunications and media, healthcare, business serv- ices, and other less cyclical sectors of the global economy. This means we generally avoid deep cyclicals, companies with poor earnings visibility and those that tend to fluctuate in and out of favour depending on general economic conditions such as commercial banks and commodity- based activities. We believe sustainability concerns are increasingly interwoven into funda- mental business issues and thus it is increasingly natural to look at both financial and non-financial criteria to support the investment thesis in a given company. For example, to help determine how long a company can remain a low cost producer, assessing the quality of relations with employees as well as suppliers can indicate if labour disruptions or raw material price increases are likely or not. Alternatively, questions on the level of independence of the board of directors vis-à-vis management and its track record of minority shareholder-friendly decisions are also material in this company analysis. The difference between a growth and a quality growth company is increasingly defined by how manage- ment addresses both financial and extra-financial matters in their business. Quality growth portfolios often have a structural bias away from resource and pollution intensive industries. In addition to the attractive funda- mental characteristics we can expect from a quality growth portfolio, such as superior returns on assets and equity and high free cash flows, we often observe certain ESG related characteristics on a portfolio level: ‘E’: a structural bias in the port- folio away from capital intensive and often resource and pollution intensive industries, such as car manufacturing, oil and gas explo- ration/production/distribution and chemical and steel production; ‘S’: fewer negative corporate developments related to how the company manages social issues, such as relations with workers, unions, suppliers and local communities, and obligations to defined benefit pensioners and former employees; ‘G’: less negative corporate gover- nance developments related to treatment of minority shareholders, such as dilutive corporate actions, and general governance practices that can affect the stability of senior management and raise the risk of litigation, regulatory failures and other avoidable mistakes that can reduce investor confidence and put significant selling pressure on a stock. Given the low level of reporting and transparency on these issues for companies in emerging markets, it would be hard to support these observations with a conclusive study. However, this environment character- istic can be observed when comparing sector allocations with an overlay of the estimated external environmental costs of a quality growth portfolio compared to a reference index or peer funds. These social and governance characteristics are measured by comparing news flows on these issues for holdings in a quality growth portfolio compared to a reference index or peers, and then estimating the mate- rial impact of those developments on the prospects for a given company. Observing these characteristics, while not easily measured and isolated, does support the case that this investment approach naturally tends to avoid companies that are among the worst ESG offenders. The approach applied in emerging markets The centre of gravity in the investment world has shifted towards emerging markets in recent years, reflecting the strong economic activity throughout Latin America, Africa, Asia and Eastern Europe. Since 1995, an astounding 80% of world market growth has taken place in these economies and half of Why it has a natural tendency to address sustainability considerations… Quality GARP investing PROFILE Public Service Review: Local Government and the Regions: issue 18

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Page 1: Article  quality growth and sustainability

1

Investors who select asset

managers applying a Quality

Growth at a Reasonable Price

(Quality GARP) strategy generally

tend to avoid holding companies that

are among the worst ESG offenders.

Investors can be confident that the

companies in a portfolio following

this strategy are, at the aggregate

level, less likely to be laggards in

their management of material

environmental, social and governance

matters, and thus demonstrate lower

associated risks to the portfolio.

Comgest has consistently applied its

‘quality growth’ investment approach

for over 25 years and its long-term

‘buy and hold’ investment philosophy

naturally favours companies with

sound business practices and an

ability to deliver strong long-term

earnings growth. Our unconstrained

investment approach provides us with

the freedom to find companies that, in

our judgement, have superior earnings

potential and visibility.

We typically find such businesses in

consumer goods and services, informa-

tion technology, telecommunications

and media, healthcare, business serv-

ices, and other less cyclical sectors of

the global economy. This means

we generally avoid deep cyclicals,

companies with poor earnings visibility

and those that tend to fluctuate in and

out of favour depending on general

economic conditions such as

commercial banks and commodity-

based activities.

We believe sustainability concerns are

increasingly interwoven into funda-

mental business issues and thus it is

increasingly natural to look at both

financial and non-financial criteria to

support the investment thesis in a

given company. For example, to help

determine how long a company can

remain a low cost producer, assessing

the quality of relations with employees

as well as suppliers can indicate if

labour disruptions or raw material price

increases are likely or not. Alternatively,

questions on the level of independence

of the board of directors vis-à-vis

management and its track record of

minority shareholder-friendly decisions

are also material in this company

analysis. The difference between a

growth and a quality growth company is

increasingly defined by how manage-

ment addresses both financial and

extra-financial matters in their business.

‘Quality growth

portfolios often have

a structural bias away

from resource and

pollution intensive

industries.’In addition to the attractive funda-

mental characteristics we can expect

from a quality growth portfolio, such

as superior returns on assets and

equity and high free cash flows, we

often observe certain ESG related

characteristics on a portfolio level:

� ‘E’: a structural bias in the port-

folio away from capital intensive

and often resource and pollution

intensive industries, such as car

manufacturing, oil and gas explo-

ration/production/distribution and

chemical and steel production;

� ‘S’: fewer negative corporate

developments related to how the

company manages social issues,

such as relations with workers,

unions, suppliers and local

communities, and obligations to

defined benefit pensioners and

former employees;

� ‘G’: less negative corporate gover-

nance developments related to

treatment of minority shareholders,

such as dilutive corporate actions,

and general governance practices

that can affect the stability of

senior management and raise the

risk of litigation, regulatory failures

and other avoidable mistakes that

can reduce investor confidence

and put significant selling pressure

on a stock.

Given the low level of reporting and

transparency on these issues for

companies in emerging markets, it

would be hard to support these

observations with a conclusive study.

However, this environment character-

istic can be observed when comparing

sector allocations with an overlay of

the estimated external environmental

costs of a quality growth portfolio

compared to a reference index or peer

funds. These social and governance

characteristics are measured by

comparing news flows on these issues

for holdings in a quality growth portfolio

compared to a reference index or

peers, and then estimating the mate-

rial impact of those developments on

the prospects for a given company.

Observing these characteristics, while

not easily measured and isolated,

does support the case that this

investment approach naturally tends

to avoid companies that are among

the worst ESG offenders.

The approach applied inemerging marketsThe centre of gravity in the investment

world has shifted towards emerging

markets in recent years, reflecting the

strong economic activity throughout

Latin America, Africa, Asia and Eastern

Europe. Since 1995, an astounding

80% of world market growth has taken

place in these economies and half of

Why it has a natural

tendency to address

sustainability

considerations…

Quality GARP investing

PROFILE

Public Service Review: Local Government and the Regions: issue 18

Page 2: Article  quality growth and sustainability

that in low income countries.1 As

capital continues to flow from Sidney

and San Francisco into Sao Paulo and

Shanghai, the market capitalisation of

companies in these regions become

increasingly significant; it reflected less

than 5% of the MSCI All Country world

index in 1990 and comprised nearly

13% in 2010 with strong potential to

approach 20% by the end of the next

decade. Among the consequences of

this long-term trend is the increasing

exposure of institutions, such as

pension funds, to emerging markets

equities from a traditionally low direct

exposure (typically less than 5%) to

higher levels more in line with the

weighting in the global equity indices.

‘As allocations by

pension funds

and other large

institutional investors

to emerging markets

increase, so will

their attention to

sustainability issues

that can affect

the prospects of

companies in their

portfolios.’The companies that comprised the

investment universe in the last 10-15

years are remarkably different than

those we see today. The more mature,

established franchises Comgest has

invested in have transformed in many

cases from local entrepreneurial busi-

nesses to regional and, in some cases,

global enterprises with business prac-

tices, strategy, governance structures

and strategies increasingly comparable

to established western businesses.

This has also meant generally lower

business risk exposures as increased

professionalism of management and

the ability to meet the transparency

requirements of sophisticated western

investors, strengthening local

regulations and stiffer local listing

registrations has made information on

both financial and extra-financial

criteria increasing in line with

developed market standards. However,

there is still much progress to make.

How to make progress onsustainability issues inemerging marketsThe progress on sustainability issues by

companies, both headquartered or

active in emerging markets, have been

supported by both bottom-up and

top-down initiatives. The former mainly

involves dialogue between investors

and companies, and the latter primarily

involves the various initiatives that

today enjoy wide support, such as the

Global Reporting Initiative (GRI) and

the United Nations Global Compact

(UNGC). These are two among other

broadly supported initiatives available

to both asset managers and owners

addressing these issues.

As bottom-up investors, Comgest feels

the most effective way in which we can

play a meaningful part in improving

sustainability issues in emerging

markets is to encourage and challenge

company managers and boards of

directors through both passive and

active engagement. Passive engage-

ment is the general dialogue investors

have with companies to gather infor-

mation to support or challenge their

initial investment thesis. In the case of

extra-financial issues, these should be

addressed in parallel with classic

fundamental questions. Active engage-

ment is the specific dialogue often

involving a group of investors that

seeks to gather information and poten-

tially influence the behaviour of the

company. A leading example of active

engagement is supported through the

Emerging Markets Disclosure Project

(EMDP), an international initiative

under the support of the United

National Principals for Responsible

Investment, which seeks to improve

transparency and accountability of

corporate environmental, social and

governance issues.

The asset managers that lead a

specific engagement project in a given

country will have diverse objectives

that they will adjust to the situations

and particularities of each company.

They focus on customising the agenda

to the unique situation and issues

affecting companies, avoiding an

ineffective ‘one size fits all’ approach

to sustainability issues, ensuring

topics relevant for a South African

mining company are not then applied

to a Brazilian clothing retailer. This

active engagement allows for the

relevant issues that are specific to

certain companies are addressed in a

constructive, non-threatening manner,

which tends to make companies more

willing to increasingly take ‘foreign’

business practices, values, rules and

regulations into account. Progress will

be gradual and milestones rather than

clear end goals will be the best

measure of company progress on the

sustainability front.

Quality growth asset managers active

in emerging markets will apply the

approach (top-down, bottom-up, or

both) to advancing the sustainability

agenda that best fits with their convic-

tions, resources and existing investment

approach. Leveraging existing global

initiatives and starting new ones,

however small, will collectively support

gaining more visibility on the ESG char-

acteristics of companies and thus allow

better decision-making when allocating

capital to emerging markets.

1 Financial Times, Jonathan Doh and Guy

Pfeffermann, 6th March 2011

William Holmberg

Investment Specialist

Comgest SA

17 Square Edouard VII

75009 Paris

France

Tel: +33 1 44 94 19 00

[email protected]

www.comgest.com

PROFILE

2Public Service Review: Local Government and the Regions: issue 18

Page 3: Article  quality growth and sustainability

Consistent Comgest in times of turmoil

A strict stock selection process need not be rigid. In today’s difficult markets, the Comgest European equities team seeks extra reassurance that firms can deliver on their above-trend growth promises.

The Comgest approach to stock picking is strictly adhered to by all the firm’s fund managers. Arnaud Cosserat, Franz Weis and Laurent Dobler are lead managers on the Comgest Growth Europe, Comgest Europe and Renaissance Europe funds respectively. As a team they seek out quality growth companies that can provide a solid increase in earnings per share over five years or more. They look for pricing power, recurring sales, strong balance sheets and high barriers to entry.

Visibility is all important, particularly in volatile markets and weak economic conditions. Comgest’s requirement that the firms in which it invests are not heavily indebted has worked in its favour since the liquidity crisis. ‘We have not changed the way we apply the strict list of quality criteria and monitor stocks, before and after they have been selected for inclusion in the portfolio. We always look at the cash generation capabilities and leverage of companies. Half of our European equities portfolio had net cash at the time of the 2008 crisis,’ says Franz Weis.

Not surprisingly, the ongoing sovereign crisis and its potential impact on European banks is a good reason to reassess actual and potential holdings. Weis says the equities team is looking harder at corporate debt repayment schedules.

Pricing power is also under review. With raw material prices rising, Weis and his colleagues have probed companies in greater detail about their ability to pass on rising costs to their customers. Weis points to Danone, the dairy product firm, as a good example of a company that can push through price increases when necessary. He says that Danone expects to see input prices rise 8% to 9% in 2011 and is

set to once again increase its operating margin, this time by 20 basis points.

The Comgest team changes focus as volatile markets, trading conditions and political issues dictate. They redeploy resources and stress stock criteria to suit. In 2008, that meant looking deeper into the portfolio, stress testing stocks in the credit crunch and evaluating each for a deeper recession than market watchers expected.

In 2011, the team is again looking at the impact a financial blow-up might have. Arnaud Cosserat says a lot of analysis has gone into assessing how the portfolio might cope with a ‘nightmare scenario’ breakdown of the euro system. ‘It could lead to competitive devaluation. We were relieved to find that Southern Europe only accounts for 9% of the aggregate sales of the 30 or so stocks we hold,’ he says.

Company visits have doubled recently as economic growth has weakened. The Comgest managers want to find out the true impact on their holdings and their end consumers, and to gauge the potential disruption to growth. The economic situation may be deteriorating, yet trading and financial performance of the portfolio is not. Cosserat says companies have learned lessons over the last few years, inventory levels are low and management are now used to a ‘crisis as usual’ situation.

The biggest concern is credit. Cosserat calculates that over 80% of European companies rely on the financial system to

Outperformance of European funds based on selective stock picking

keep their businesses running. Any deterioration or break down in credit could be disastrous. Whilst no final political solution has been agreed, he is encouraged that politicians do not want to repeat the collapse of big banking names as seen in 2008.

The sectors that are more reliant on financing and cyclical factors suffer most in a downturn. Cosserat points to construction and automobiles that tend to be harder hit. The 50 or more companies the Comgest team has seen recently are not ‘hard cyclical’, yet they too have been affected by investor pessimism. ‘Market P/E levels are at 9 times as investors anticipate that earnings will suffer a 20% downgrade. Our companies tell us it is not that bad,’ he says.

Corporate optimism has dimmed but not been wiped out. After a positive year in 2010, markets had hoped for more of the same. When it became clear that growth would not continue as expected, pessimistic analyst

arnaud cOssEratcomgest Growth Europe

‘The current portfolio represents the best of Europe’s dynamic earnings growth’

Page 4: Article  quality growth and sustainability

forecasts and weaker corporate results naturally followed. Franz Weis believes many sectors, including financials and chemicals, have seen earnings per share growth rates halved from 15%. Yet on current price earnings, the market does not believe that corporate Europe will even achieve EPS growth of 7%. ‘The Q2 season delivered more disappointments in terms of expectations. The ratio between positive and negative was the worst it has been for a long time. When companies report next year, they will be even more cautious,’ warns Weis.

There are exceptions to the rule, however. Laurent Dobler is pleased to see Essilor using innovation to stimulate sales growth. It recently launched a new anti-fogging lens for spectacle wearers that should lead to increased sales in 2012.

A number of Comgest’s stocks can generate autonomous growth irrespective of market and economic conditions. Clothing

giants Inditex and H&M are pushing into new global territories to beat slower markets on traditional home territory. Others are picking up on megatrends such as the consumer shift to low-cost products and services and businesses making more use of outsourcing.

Jerónimo Martins, the Portuguese supermarket group, has shifted its business focus to Poland where its hard discount Biedronka stores even manage to undercut Aldi and Lidl. The €8 billion mid-cap stock is generating mid-teens growth in a sector where others struggle to stand still. It is highly cash generative and plans to increase its number of stores from 1,700 to 3,000 by 2015 as it moves into larger cities.

The Comgest European equities team has made a few changes to its portfolio line-up this year. Six stocks have been replaced by newcomers and old favourites. Technology firm Amadeus and fashion group Inditex recently made reappearances. German gas group Linde AG is a new holding. It has a stronger market position than rival Air Liquide

in fast growing markets in Africa, Asia and Eastern Europe. It should benefit from new applications for industrial gases such as demand for hydrogen-powered cars and the race to develop carbon-capture technology.

Portfolio returns were hit by the sharp rotations foisted on the market early this year and by subsequent volatility. Dobler says Comgest’s European portfolios lagged benchmarks by 6% but are now 10%* ahead

year to date. Short-term irrationality does not help, the focus remains on long-term growth. ‘Positive earnings per share are much cheaper to buy now. They should be cheap enough to deliver positive growth. We need to see what happens this quarter to be more confident about visibility,’ he says.

Franz Weis also points out that the current portfolio represents the best of Europe’s dynamic earnings growth. Markets may not be in a positive mood right now, but he believes that the current line-up has the greatest potential for upward re-ratings. In the meantime, investors can count on exceptional dividend yields. At close to 3% for 2012, the Comgest portfolio is delivering far more than German bunds. Investors will have to look beyond quality sovereigns and gold if they want to boost their returns. When they do, the Comgest portfolios should experience healthy returns.

*Figures expressed in euros as at 30/09/2011

‘The economic situation may be deteriorating, yet the performance of the portfolio is not’

franz wEiscomgest Europe

laurEnt dOblErrenaissance Europe

Page 5: Article  quality growth and sustainability

Source: Comgest/FactSet, unless otherwise stated COMGEST GROWTH EUROPE | 29.02.2012 | page 1 of 2

COMGEST GROWTH EUROPE29 February 2012

ISIN IE0004766675Domicile IrelandFund Currency EURTotal Net Asset Value (m) 434.79Net Asset Value per Share 12.15

Portfolio Managers Arnaud CosseratLaurent DoblerFranz Weis

Contact [email protected]

Portfolio profileAsset Class European equityNumber of holdings 32Average weighted market cap (m) €28,946Weight of top 10 stocks 49.53%

Index* MSCI Europe - Net Return*used for comparative purposes only

Standard and Poor’s AA rating (as at April 2011). Morningstar Gold rating (as at Nov 2011). Ratings and awardsmentioned in this document can change at any time and do not constitute a buy recommendation.

CommentaryIn February, Greece made considerable progress in addressing itssovereign debt problem: it approved a new austerity budget, wonEuropean Community approval for a second rescue loan packageand initiated a major debt restructuring plan. At the same time, theEuropean Central Bank and the Bank of England continued tosupport the European banking systems with large amounts ofliquidity. The European economy seems to be stabilizing: whilstItaly's economy shrank more than expected in the last quarter of2011, the French and German economies proved more solid thanexpected. French consumer and business confidence were stable inFebruary, albeit still at a low level, while the German IFO survey ofbusiness confidence slightly improved. Against a background ofdiminishing risks with regard to the stability of the euro and theeconomy, the European stock market rallied in February, up 4.1%,with investors showing a preference for cyclical industries andfinancial stocks. The corporate results season continued with morenegative than positive surprises, leading to further downwardsrevisions of earnings forecasts. However, among the portfoliocompanies, Dassault Systèmes exceeded expectations, increasingsales by 14% in constant currencies, driven by 20% licence growthas the company starts addressing new industries and benefitingfrom an upgrade cycle; the operating margin improved by 1.8% androse above 30% for the first time. Despite uncertain demand,management committed itself to 5-7% sales growth in 2012. L'Oréalalso reported good results, with 5.1% organic sales growth and a0.5% improvement in operating margin to 16.2%. The key growthdrivers were its luxury division and the emerging markets, morethan offsetting weaker trends in Eastern and Southern Europe. Forthe current year, management aims for unchanged growth at 5%,again outperforming the cosmetics market. Danone also managedto surprise positively with 7.8% organic sales growth, helped byvolume growth as well as price and mix improvements. Thecompany's profit margin expanded on a comparable basis.

The views expressed in this fact sheet are those of the portfolio manager at the time of preparation. Theymay be subject to change and should not be interpreted as investment advice.

Portfolio Data Top 5 Holdings

% weight Essilor International S.A. 6.2 France Health CareSAP AG 5.8 Germany Information TechnologyIndustria de Diseno Textil S.A. 5.3 Spain Consumer DiscretionaryColoplast A/S 5.0 Denmark Health CareLinde AG 5.0 Germany Materials

Holdings are provided for information purposes only, are subject to change and should not be deemed as a recommendation tobuy or sell the securities shown. Holdings exclude cash and cash equivalents.

Sector breakdown% weight relative to index

Health Care-- +9.5

Consumer Discretionary-- +10.4

Consumer Staples-- +3.1

Industrials-- +5.5

Information Technology-- +9.0

Materials-- -4.1

[Cash]-- +4.8

Telecommunication Services-- -3.8

Others-- +1.6

20.719

16.716.4

126.1

4.82.6

1.6

Breakdown based on MSCI sector classification.

Country breakdown% weight relative to index

France-- +15.6

Germany-- +0.4

Switzerland-- -1.4

Denmark-- +8.5

United Kingdom-- -24.4

Spain-- +2.0

[Cash]-- +4.8

Sweden-- -0.5

Netherlands-- -0.2

Portugal-- +1.5

Others-- +1.6

Ireland-- +0.6

Italy-- -2.8

29.913.4

11.610.39.9

6.74.84.5

3.51.81.6

10.8

Performance Data* Cumulative performance since inception

Dec2004

Dec2009

50

60

70

80

90

100

110

120

Inde

xed

Per

form

ance

% change

Fund Index

Rolling performance (%)Description 1 Month 1 Year

annualised3 Years

annualised5 Years

annualised10 Years

annualisedInception

annualised

Fund Performance 5.93 11.74 17.69 2.12 2.27 1.66Index Performance 4.06 -4.76 18.38 -3.43 1.52 -0.93Fund Volatility 15.62 13.65 17.08 15.19 15.20

Index Volatility 22.43 20.17 24.74 20.52 20.76

Calendar performance (%)

Description 2007 2008 2009 2010 2011 YTD

Fund 2.79 -29.27 21.07 15.40 2.19 8.68Index 2.69 -43.65 31.60 11.10 -8.08 8.03+/- Index 0.09 14.38 -10.52 4.31 10.28 0.65

*Past performance is no guarantee of future results. Indices are used for comparison of past performance only.Performance calculation based on NAV to NAV variation expressed in euros. Fund volatility is calculated using weeklyperformance data.

Please see important information on final page All information and performance data is as of 29 February 2012 and is unaudited (unless otherwise stated)

Page 6: Article  quality growth and sustainability

Source: Comgest/FactSet, unless otherwise stated COMGEST GROWTH EUROPE | 29.02.2012 | page 2 of 2

COMGEST GROWTH EUROPE29 February 2012

InformationLegal StructureA sub-fund of Comgest Growth plc, an open-endedumbrella-type investment company with variablecapital and segregated liability between sub-fundsincorporated in IrelandUCITS IV compliant

Asset ClassEuropean equity

Investment ManagerComgest Asset Management International Ltd(Regulated by the Central Bank of Ireland)46 St. Stephen's GreenDublin 2, IrelandTel: +353 (0)76 688 [email protected]

Investment AdvisorComgest SA (Arnaud Cosserat, Laurent Dobler, FranzWeis)

Countries registered for saleListed on the Irish Stock ExchangeRecognised in Bahrain (expert investors only),Belgium, France, Germany, Italy (institutionalinvestors only), Luxembourg, Netherlands, Singapore(accredited investors only), Sweden, Switzerland,United Kingdom.

Fund CodesISIN: IE0004766675SEDOL: 0476667BLOOMBERG: COMGREA ID

Initial NAVEUR 10 per share on 15th May 2000Minimum initial investment: EUR 10,000Maximum sales commission: 4%Redemption fee: NoneManagement Fee1.5% per annum of the net asset valueDividend Policy: Capitalisation

Contact for subscriptions and redemptionsRBC Dexia Investor Services [email protected].: +353 1 440 6555Fax: +353 1 613 0401

Trading frequencyDaily, when the banks in Dublin and Luxembourg areopen for business

Cut-off12 noon Irish time on day D

An earlier deadline for receipt of application orredemption requests may apply if your request issent through a third party. Please enquire with yourlocal representative, distributor or other third party.

NAVcalculated using closing prices of DNAV knownD+1SettlementD+3

RiskThe value of shares and the income from them can go down as well as up and you may get back less than the initial amount invested.Movements in exchange rates can negatively impact both the value of your investment and the level of income received.A more detailed description of the risk factors that apply to the fund is set out in the full Prospectus.

IMPORTANT INFORMATION

Investment involves risk. Past performance is no guarantee of future results. Indices are used for comparison of past performance only. Figures used in this factsheet arefor illustrative purposes only and are not indicative of the actual return likely to be achieved.

This document is under no circumstances to be used or considered as an offer to buy any security. Under no circumstances shall it be considered as having any contractualvalue. Nothing herein constitutes investment, legal or other advice and is not to be relied upon in making an investment decision. You should obtain specific professionaladvice before making any investment decision.

The fund is aimed at investors with a long-term investment horizon. Calculation of performance data is based on the net asset value which does not include any salescommission or redemption fees. If taken into account, sales commission and redemption fees would have a negative impact on performance.

You should not subscribe into this fund without having first read the full and simplified prospectus of the fund and associated documentation. The full and simplifiedprospectus as well as the latest annual and interim reports and any country specific addendums can be obtained free of charge from the Investment Manager orAdministrator.

Contact details for local representatives/paying agents in countries where the fund is registered for distribution are available from the Investment Manager orAdministrator and can be found in the fund documentation.

The full and simplified prospectus as well as the latest annual and interim reports and any country specific addendums are also available from the local representatives,including -

For Belgium: Fastnet Belgium, SA, avenue Port, 86C Bte 320, B-1000 Brussels. Tel: +32 2 209 26 40. The fund may invest in other France, Luxembourg or Ireland-domiciledfunds within the Comgest range.

For Germany: Marcard, Stein & Co AG, Ballindamm 36, 20095 Hamburg.

For Switzerland: BNP Paribas Securities Services, Paris, Succursale de Zurich, Selnaustrasse 16, CH-8002 Zurich.

Please see important information on final page All information and performance data is as of 29 February 2012 and is unaudited (unless otherwise stated)

Page 7: Article  quality growth and sustainability

                      PRESS RELEASE                                

Comgest named 2012 European Equity Fund Manager of the Year At an award ceremony in Vienna, Morningstar recognises Comgest fund managers Arnaud

Cosserat and Laurent Dobler for their long-standing track record and superb management of

Renaissance Europe

Paris, 16 March 2012 – Comgest fund managers Arnaud Cosserat and Laurent Dobler have been presented with

Morningstar’s European Fund Manager of the Year Award 2012. The two lead managers, who came out on top in

the category of European Equity Manager of the Year, received the coveted award at a ceremony in Vienna on

15 March for their success in managing Renaissance Europe. This French domiciled fund, available to

institutional and retail investors, has demonstrated strong risk-adjusted returns for more than 20 years.

In making its selection, the fund research team at Morningstar combed through more than 1,400 funds, assessing

them on the basis of qualitative analysis. Laurent Dobler and Arnaud Cosserat were selected as this year’s

winners not only for their strong performance over the past calendar year but also on the grounds of their superb

long-term performance. The award selection committee placed particular emphasis on the quality of fund

management, on the investment process and on Comgest’s organisation. The fee structure was among other

secondary criteria that led Morningstar to choose this Comgest fund.

“As a general rule, our funds do not invest in cyclical stocks,” explained Dobler. “We select only those companies

which we believe can demonstrate superior, predictable long-term earnings growth. With our Quality Growth

approach, we have been able to achieve steady, above-average growth for our investors even through the

turbulence of recent years.”

Alongside the French-registered Renaissance Europe fund, Comgest – an independent international fund

boutique – also offers a sister fund, Comgest Growth Europe, with the same investment strategy and a nearly

identical portfolio. Units in this fund are available for sale in Germany, Switzerland and other countries. The

company expects to receive further approval for sale in Austria within the current month of March. The team at

Comgest, which manages the Growth Europe fund, includes not only Dobler and Cosserat but also Franz Weis, a

German member of the team with more than 20 years’ experience in European investing.

The ceremony at which Dobler accepted the award was held in Vienna as part of a pan-European investment

conference organised by Morningstar.

Press contact:

Anne Sommerlatt Stockheim Media phone: +49 69 13 38 96-14 e-mail: [email protected] Jorge Person Stockheim Media phone: +49 69 13 38 96-20 e-mail: [email protected]

Page 8: Article  quality growth and sustainability

Quality growth in the long term

w w w. c o m g e s t . c o m

IndependenceCapital held by company founders and employees

Culture based on transparency, interaction and conviction

Disciplined investment approachQuality GARP consistently applied for over 25 years

Research-intensive, bottom-up stock selection

Long-term investment horizonTypical holding period of 3-5 years

Below-average volatility relative to a given index

P A R I S - h O N G k O N G - d u b l I N - t O k Y O - S I N G A P O R e