AGF INTERNATIONAL ADVISORS CO. LTD.

Transcription

1 AGF INTERNATIONAL ADVISORS CO. LTD. Eli Nasrallah, CFA Regional Vice-President AGF Funds Inc. October,

2 AGENDA 1. The financial sector what happened and where are we? 2. AGFIA s mandates the health of our portfolios 3. Outlook 4. Areas of opportunity 5. Staying the course 2

3 PEOPLE John Arnold Chief Investment Officer and Managing Director AGF International Advisors Company Ltd. (AGFIA) instrumental in building AGFIA s investment team and research capabilities as Chief Investment Officer, has driven the development of AGFIA s globally recognized equity asset management expertise launched AGF European Equity Class, which is recognized as one of the best performing European equity funds in the world over 14 years joined AGFIA in 1993 as Managing Director has nearly 40 years of industry experience 3

4 QUANTITATIVE SCREENING Weekly screening (on average) to identify companies for further research 4

5 LIFECYCLE OF A PORTFOLIO HOLDING EXECUTION OF VALUE APPROACH ACCUMULATION RECOVERY SELLING Appropriate valuations Strong long-term franchise with shortterm difficulties B Management returns to core business Emphasis on quality Improving financial results Upswing in profile and share price P/E approaches market P/E S 5 8 YEARS 5

6 FINANCIALS ARE VALUE Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 P/E Relative valuations are particularly good Relative P/E of world financials Source: Datastream TMT BOOM

7 WHAT HAPPENED? Global credit crunch: timeline of recent events Feb. 07 HSBC writes down its subprime exposure. June 07 Collapse of 2 Bear Stearns hedge funds that invest in sub-prime securities. Sept. 07 Federal Reserve starts to ease rates to respond to crisis. Other central banks follow. Nov. 07 The Fed injects $41 b into money supply, the largest injection since 9/11. Mar. 08 Bear Stearns is bought by JP Morgan, a deal that is facilitated by the Fed. Apr.07 New Century Financial, the largest U.S. subprime lender, files for bankruptcy. Aug.07 Media frenzy over the subprime crisis begins. Sept. 07 Northern Rock bailed out by Bank of England. Oct.07 Merrill Lynch kicks off the bank writedowns, with $8.4 b. Jan.08 Banks report Q4 earnings. Write-downs continue. 7

8 WHAT HAPPENED? In August 2007, we were excited about valuations We were continuing to find great businesses selling at inexpensive P/E ratios with attractive dividend yields European economy was healthy and our holdings had limited exposure to the sub-prime crisis that was emerging As a result, the portfolios were overweight Europe, and within Europe, overweight Financials 8

9 FINANCIALS: MARKET VALUATION LOSS VS. ASSET WRITE-DOWNS For every $1 of assets written-down in the global financial sector, there was a corresponding loss of $6.5 of market value. (US$ billions) MSCI World Financial Sector Index -$415 billion $2.7 trillion Market Value loss Asset Write-down Sources: Bloomberg and Thompson Datastream, as of June

10 NOT ALL FINANCIALS ARE THE SAME Brokerage houses versus retail banks COMPANY WRITEDOWNS AS A % OF PRE- CRISIS MARKET-CAP* % IN AGF GLOBAL VALUE FUND Investment Banks Merrill Lynch UBS 31% 28% 0% 0% Morgan Stanley 12% 0% Citigroup 8% 1% Bank of America 3% 2% Société Générale 2% 3% BNP Paribas 2% 4% Traditional Retail Banks Unicredito Lloyds TSB Intesa San Paolo 1% 0% 0% 2% 2% 1% BBVA 0% 2% Banco Santander 0% 1% *As at April 30, 2008 Sources: FPK and company data

11 BANK OF AMERICA predominantly retail, and wealth management retail 55% wealth Management 10% (US $600b AUM) best Bank Cash and Working Capital Management in North America* cost-conscious proud of paying dividends *Source: Treasury & Risk Magazine

12 AGF EUROPEAN EQUITY CLASS: NOT ALL FINANCIALS ARE THE SAME Number of holdings Financial Sector Breakdown (61%) Retail Banks Insurance Diversified Financial Services % 18.2% 2.0% Traditional banking: Pay deposits at lower rates Lend at higher rates Make $ on spread Capital Markets 1.0% Thrifts & Mortgage Finance 1.0% Investment Banks 0.0% More leverage used Source: AGF Portfolio Analytics; June 30,

13 HEALTH OF FINANCIAL STOCKS IN OUR MANDATES Over the past 12 months, what happened to the dividends of our global financial stocks? 10 reduced dividends 6 left dividends unchanged 35 increased dividends The ratio of financial stocks increasing dividends vs. reducing? 3:1 As of June 30,

14 DIVIDENDS ARE SUSTAINABLE Allianz dividend increased 45% Banco Santander dividend increased 25% Munich Re dividend increased 22% Royal & SunAlliance dividend increased 19% BBVA dividend increased 15% Aegon dividend increased 13% Aviva dividend increased 10% BNP Paribas dividend increased 8% Unicredito dividend increased 8% Lloyds TSB dividend increased 5% Source: 2007 year end company data 14

15 EUROPEAN INSURANCE TOTAL RETURN INDEX 8000 Cash Raisings Swiss Re Brittanic Hanover Re Legal & General AXA 5000 RSA Munich Re Zurich Sept'11 Generali Allianz Aegon Swiss Life Source: Thomson Datastream 15

16 30/30/30 SCREEN: WHERE ARE WE FINDING VALUE RIGHT NOW? Region % Europe 63 Asia ex Japan 29 North America 5 Japan 1 Latin America 1 Rest of the world Sector % Financials 41 Industrials 21 Consumer services 16 Consumer goods 9 Basic materials 4 Oil and gas 3 Telecoms 2 Technology 2 Utilities 2 Health care Source: AGFIA, as of July 4,

17 THE ENTIRE WORLD: BY MARKET CAP, EARNINGS & DIVIDENDS REGION MARKET CAP EARNINGS DIVIDENDS Europe 35% 43% 45% U.S. 32% 27% 25% Canada 4% 3% 4% Latin America 4% 4% 4% Asia (ex. Japan) 12% 12% 11% Japan 9% 6% 6% Rest of the world 4% 5% 5% 100% 100% 100% Source: Datastream; March 31, 2008

18 EMERGING THEMES HEALTHCARE Stock Price 85 SANOFI-AVENTIS 5.00 SANOFI-AVENTIS - DIVIDEND YIELD Source: Thomson Datastream, January 1, 2001 to June 30,

19 INFLATION % 5 Consumer Price Index 4 US Europe Japan Source: Thomson Datastream, as of July 9,

20 U.S. AND EUROPE: OIL CONSUMPTION Oil Consumption Tonnes/GDP$ (m) U.S. EU Source: NCB, as of June

21 GLOBAL INTEREST RATES % Central Bank: Interest Rates Europe US Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Source: Thomson Datastream, as of June 30,

22 OIL & FINANCIALS Brent Crude Inverted $ 50 Financials relative to the market Brent Crude price - Inverted Financials relative to the Globe Source: Thomson Datastream, as of July 11,

23 RECENT VOLATILITY IN EUROPEAN MARKETS EUROPE-DS Market - PRICE INDEX Oct. 31, 2007 to July 10, % % % OCT NOV DEC JAN FEB MAR APR MAY JUN JUL Source: Thomson Datastream, as of July 10,

24 TIME TO SWITCH TO VALUE Value dividend yield premium: a 15-year high Source: SG European Equity and Cross Asset Strategy, MSCI 24

25 TIME TO SWITCH TO VALUE Value is now pricing: a 50% discount (price-to-book) Source: Société Générale. Data rebased to take into account change of methodology by MSCI in June

26 AGF EUROPEAN EQUITY CLASS Analysis of top 10 worst 12 month returns (pre-subprime) 12-month Return Post 1-year Return Post 3-year Return (Cumulative) Average -14.0% 27.6% 61.3% Source: PALTrak, as of June 30,

27 HISTORICAL RETURNS Fund name 1-year return 2-year return 3-year return 4-year return 5-year return 10-year return Since inception AGF European Equity Class Quartile AGF U.S. Value Class Quartile AGF International Stock Class Quartile AGF Global Financial Services Class Quartile AGF Global Perspective Class* Quartile AGF Global Value Fund** Quartile AGF World Balanced Fund Quartile * Note: AGF Global Perspective Class was taken over by AGFIA in April 2005 **Note: AGF International Value Fund was taken over by AGFIA in September 2006 and subsequently renamed AGF Global Value Fund in April Source: PALTrak; as of May 30,

28 THANK YOU 28

29 DISCLAIMER Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated. The rate of return is used only to illustrate the effects of compound growth rate and is not intended to reflect future values or returns on investments. The information contained in this presentation is designed to provide you with general information related to investment alternatives and strategies and is not intended to be comprehensive investment, tax or legal advice applicable to the circumstances of the individual. We strongly urge you to consult with a financial advisor, or seek professional advice prior to making any investment decisions. 29

30 APPENDIX 30

31 AGF EUROPEAN EQUITY CLASS Number of holdings 68 Cash level 0.3% Top 10 companies BNP Paribas SA SGF-SOC Générale de France SA Royal & SunAlliance Ins. Grp. PLC GlaxoSmithKline PLC Sanofi-Aventis Royal Dutch Shell PLC B Unicredito SpA France Telecom SA Kingfisher PLC AXA SA 10.7% 9.0% 8.2% 7.4% 6.2% 6.0% 5.4% 4.5% 3.6% 3.2% Sector allocation Financials 60.7% Health care 13.7% Consumer discretionary 7.3% Telecommunication services 6.3% Energy 6.0% Materials 3.1% Industrials 2.4% Utilities 0.2% Information technology 0.1% Source: AGF Portfolio Analytics; June 30,

32 AGF GLOBAL PERSPECTIVE CLASS Number of holdings 55 Cash level 0.0% Top 10 companies BNP Paribas SA 8.2% SGF-SOC Générale de France SA 5.9% Sanofi-Aventis 5.8% GlaxoSmithKline PLC 5.6% Royal Dutch Shell PLC 4.3% Royal & SunAlliance Insurance 3.3% AXA SA 3.1% Kingfisher PLC 2.9% France Telecom SA 2.6% Aviva PLC 2.5% Sector allocation Financials 47.9% Health care 12.9% Telecommunications services 10.4% Consumer discretionary 10.0% Energy 7.5% Materials 4.5% Industrials 4.2% Information technology 2.1% Utilities 0.8% Source: AGF Portfolio Analytics; June 30,

33 AGF GLOBAL VALUE FUND Number of holdings 72 Cash level 0.3% Top 10 companies GlaxoSmithKline PLC 5.3% BNP Paribas SA 4.5% Royal Dutch Shell PLC B 4.1% Royal & SunAlliance Insurance 3.5% SGF-SOC Générale de France SA 3.0% AXA SA 2.6% CoNoCoPhilips 2.5% Sanofi-Aventis 2.4% Itochu Corporation 2.4% Banco Bilbao Vizcaya Argentaria SA 2.3% Sector allocation Financials 50.7% Health care 11.6% Telecommunications services 9.8% Energy 9.1% Consumer discretionary 8.2% Materials 4.4% Industrials 2.8% Consumer staples 2.0% Utilities 1.1% Source: AGF Portfolio Analytics; June 30, Note: AGF International Value Fund was renamed AGF Global Value Fund in April

34 AGF INTERNATIONAL STOCK CLASS Number of holdings 47 Cash level 0.2% Top 10 companies BNP Paribas SA 7.7% GlaxoSmithKline PLC 6.3% Royal & SunAlliance Ins. Grp. PLC 6.2% UniCredito SpA 6.1% Sanofi-Aventis 5.7% AXA SA 5.0% SGF-SOC Générale de France SA 4.7% Repsol YPF SA 3.7% Intesa Sanpaolo SpA 3.6% France Telecom SA 3.6% Sector allocation Financials 52.2% Health care 12.0% Energy 10.0% Telecommunication services 8.2% Materials 5.6% Consumer discretionary 5.1% Industrials 1.9% Utilities 1.8% Consumer staples 1.7% Information technology 1.4% Source: AGF Portfolio Analytics; June 30,

35 AGF U.S. VALUE CLASS Number of holdings 36 Cash level 8.1% Top 10 companies ConocoPhillips 6.1% U.S. Bancorp 5.9% The Allstate Corporation 5.4% Bank of America Corporation 4.9% Citigroup Inc. 4.6% Eastman Kodak Company 4.5% Wachovia Corporation 4.2% Hartford Financial Services 3.5% IPC Holdings Ltd. 3.4% Sector allocation Financials 52.0% Consumer discretionary 16.4% Energy 6.1% Telecommunication services 5.0% Consumer staples 4.3% Health care 3.8% Materials 1.8% Utilities 1.6% Industrials 0.9% Verizon Communications Inc. 3.3% Source: AGF Portfolio Analytics; June 30,

36 AGF WORLD BALANCED FUND Number of holdings 58 Cash level 0.0% Top 10 companies Royal & SunAlliance Insurance Group PLC 7.8% BNP Paribas SA 7.5% SGF-SOC Générale de France SA 6.6% GlaxoSmithKline PLC 6.0% Sanofi-Aventis 4.5% U.S. Treasury Notes 4.875% April 30, 2011 United Kingdom Treasury 4.25% March 7, % 4.3% UniCredito SpA 3.9% Aviva PLC 3.8% Sector allocation Financials 49.7% Energy 13.1% Health care 11.0% Governments 10.9% Consumer discretionary 5.6% Telecommunication services 3.6% Materials 3.1% Industrials 2.3% Utilities 0.4% Consumer staples 0.4% AXA SA 3.1% Source: AGF Portfolio Analytics; June 30,