NN Global Sustainable Equity

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1 For professional use only Month ending 31 December 2017 NN Global Sustainable Equity Strategy Brief Portfolio Management Hendrik-Jan Boer Lead Portfolio Manager Experience since: 1990 With firm since: 1998 Alex Zuiderwijk Senior Portfolio Manager Experience since: 1999 With firm since: 2001 Jeroen Brand Senior Portfolio Manager Experience since: 2001 With firm since: 2005 Strategy Description The Global Sustainable Equity strategy invests in a globally diversified portfolio of shares. The strategy combines risks and opportunities linked to Environmental, Social and Governance (ESG) factors with a thorough financial analysis of companies. In this way we take into account factors that are often outside the scope of traditional financial analysis but can have a significant impact on long-term performance. Objective We aim to outperform the mainstream MSCI World (Net) Index by 2% gross on a three year annualised basis. The emphasis of our investment and research process is on identifying attractively valued quality companies that outperform over the long term while offering some downside protection in declining markets. Investment Process The stock selection process relies on the combination of financial and ESG screenings. The latter is composed of both positive (best-in-class screening) and negative screening where companies are excluded based on their activity and level and nature of controversies. The investment team also uses quantitative and fundamental research which it gets from our Global Equity Research team of equity analysts. On the back of this, we determine which stocks to include in the portfolio. Responsible Investing Approach Active ownership Restrictions ESG Integration SRI Solutions For more information about our responsible investing approach within Global Sustainable Equity, please visit the strategy page at ESG Approach The strategy ranks companies on the basis of their socially responsible investment criteria. They are first subjected to a relative screening, i.e. application of best-in-class criteria to the global sectors in the universe under coverage. This is followed by the application of the absolute (exclusionary) criteria where companies are screened based on their activity and level of controversy. This is performed via the automated webbased Sustainalytics tool which applies NN IP s criteria to all the stocks covered by Sustainalytics. Quality Focus We believe that the level of sustainability can be an important indicator for the quality of a company; i.e. by investing primarily in companies with above average potential for cash flows, earnings and a sustainable dividend per share, the strategy is more likely to outperform over the long term. NN Investment Partners at a Glance NN Investment Partners is the asset manager of NN Group N.V., a publicly traded corpora tion. NN IP is head-quartered in The Hague, The Netherlands. NN IP manages in aggregate approximately EUR 244 bln* (USD 288 bln*) in assets for institutions and individual investors worldwide. NN IP employs over 1,200 staff and is active in 15 countries across Europe, U.S., Latin America, Asia and Middle East. * Figures as of 30 September 2017 For more information on NN IP s investment strategies or our mutual funds, please contact your sales representative or relationship manager. Or visit our website Stock Selection We believe that stock selection drives alpha generation. Our strategy is supported by a large proprietary fundamental research team, which is focused on identifying value ahead of consensus. GROWTH VALUE Value/Growth The strategy does not have any pre-determined style. It is a core product which integrates SRI characteristics in its investment process and with the belief that sustainable companies perform better in the long run. Key Elements of the Strategy Proven strategy with successful track record Experienced and stable investment team Distinct sustainable investment process with a tilt toward quality companies

2 NN Global Sustainable Equity - Strategy Brief Reference performance for this strategy: NN (L) Global Sustainable Equity (P Cap, EUR), gross of fees* As of 31 December Month 3 Months YTD 1 Year 3 Years (Ann.) 5 Years (Ann.) Since Inception (Ann.) Portfolio Return Benchmark Return Relative Return * Source: NN IP Performance Measurement. Benchmark: MSCI World (Net). Returns are presented after all transaction costs, but before management fees. Returns include the reinvestment of income. Fund was launched on 9 July Past performance is no guarantee of future results and the possibility of loss does exist. The management fees vary per share class. The management fee of this share class is 1.50% per year. Main Points Global equities climbed further; MSCI World index finished 0.6% higher in euro The strategy outperforms the market Company in the spotlight: Clinigen Siemens Gamesa and Cigna are added to the portfolio Market Review Global equities climbed again in December, finishing off another positive year for the asset class. The MSCI World Net Index finished the month 0.6% higher in euro terms, resulting in a 7.5% performance for the year. The fundamental backdrop for equity markets remained positive as macro-economic data continued to point to strong economic growth. The EU and the UK reached an agreement on the first phase of the Brexit negotiations which reduced the risk of a hard Brexit. In the week before Christmas US congress passed the long awaited tax reform plan which will lower the corporate tax rate from 35% to 21%. This will have a positive effect on corporate earnings. From a regional perspective Emerging Markets were the best performers, both in December as well as the full year. The Eurozone declined somewhat, but still ended the year as the best performing developed region in Euro terms. The commodity related Energy and Materials sectors outperformed in December, as prices for oil and industrial metals ticked up. Despite this the Energy sector still ended the year as the worst performing sector. The IT sector lost some ground in December, but was still the strongest performer by some distance in Investment Performance The strategy outperformed the MSCI World (Net) benefitting from a positive contribution from stock selection, especially in the Health Care and Consumer Staples sectors. This was partly offset by stock picking in Telecom and the underweight in Energy. At a stock level, the US Health Care Services company Surgery Partners was the best contributor after announcing a $50mln share buy-back program. German Fresenius also added to relative performance as well as the UK household product manufacturer Reckitt Benckiser. The latter rebounded following recent declines after the quarterly results over the summer were impacted by a cyber attack. On the negative side, Japanese Telecom company KDDI detracted following the announcement of a new entrant in the Japanese mobile market. Portfolio Positioning The strategy introduced the German wind turbine manufacturer Siemens Gamesa to the portfolio. The Spanish firm Gamesa was recently acquired by Siemens and is exposed to a growing market in Europe thanks to falling costs and an increase in renewable energy. We also added the Swedish credit management services company Intrum Justitia which offers a whole range of credit services to businesses. The stock is trading at an attrative discount following the recent acquisition of competitor Lindorff. The US managed health care company Cigna was another purchase in the portfolio. This acquisition followed the takeover bid by CVS for health care insurer Aetna. The strategy took profit and sold the latter name benefitting from a strong uplift in the stock s valuation. Finally, we sold our holding in Energy company Helmerich & Payne. The stock strongly outperformed during the recent rally of in the oil price and subsequently of the sector which triggered the opportunity sell our positions on high valuations. We continue to apply a long term horizon and are invested in sustainable high quality stocks, where we pay special attention to a company s intangibles. The strategy is overweight the Materials, Health Care and IT sectors and underweight the Financials and Energy sectors. Company in the spotlight: Clinigen Clinigen is the leader in the ethical supply of medications and, alongside existing products, this should lead to strong cash flow generation over the coming 5 years. We see further product acquisitions enhancing margins and promoting even faster earnings growth. There are only three ways for a patient to ethically access a medicine: through clinical trials, unlicensed or licensed supply. Clinigen's unique business model allows them to manage access to all three routes worldwide. It offers innovative products in more than 130 countries, ensuring that an estimated 5.5bn people around the world have access to the treatments they need, which is ahead of what any other competitor provides. Their target going forward is to be the recognised and trusted go to solution for hospital pharmacists and health care professionals for the supply of medicines not available at the patient s 'point of care'. Outlook We continue to live in an equity-friendly environment. The year is faring well thanks to the clear improvement in the global economy, although the strengthening euro has limited returns for euro investors somewhat. Global growth is stronger and more synchronized than seen in at least 5 years. Moreover, labour markets and household and business sentiment are at their best levels in more than a decade. Meanwhile corporate earnings have risen at the fastest pace since could be a year of continued strong developed markets performance with some upside risks and a moderate improvement in emerging markets performance. As long as central banks remain on a gradual course this should make for a good environment for risky assets. Clearly the inflation outlook is the key variable. We stick to our assumption that inflation pressures will remain benign. Plain sailing for the growth outlook becomes somewhat less certain as we approach the end of 2018 and go into A key driver here is the state of the US economy. EMU growth is better supported, partly thanks to the release of pent-up demand. From a valuation perspective there is not much support in an absolute sense. However compared to many other asset classes, equities continue to screen relatively attractive. Finally, while politics continue to play an important role, market reactions have been muted so far and there is no reason to expect this to change in the short-term. In this environment we expect that our focus on attractively valued quality companies with strong ESG credentials is well-positioned to benefit. 2

3 Month ending 31 December 2017 Portfolio Highlights* Portfolio Characteristics Strategy Assets under Management 3,903 mln Ex-Post Tracking Error** 2.34% Beta of the Portfolio** 0.96 Sharpe Ratio** 0.85 Volatility** Portfolio Characteristics Fund Benchmark Dividend Yield FY1 1.6% 2.4% Number holdings 55 1,653 Large Caps 74.1% 89.6% Mid Caps 15.5% 9.3% Small Caps 10.4% 1.1% **3-years annualised Top and Bottom Monthly Contributors (%) Surgery Partners, Inc. Reckitt Benckiser Group plc Fresenius SE & Co. KGaA Mineral Resources Limited Bakkafrost P/F Thermo Fisher Scientific Inc Nasdaq, Inc Cigna Corporation Largest Portfolio Positions (%) Top 10 Portfolio Benchmark Weight Microsoft Corporation Alphabet Visa Inc. Class A UnitedHealth Group Incorporated Facebook, Inc. Class A Reckitt Benckiser Group plc Siemens AG T-Mobile US, Inc Thermo Fisher Scientific Inc Cigna Corporation 2.56 UnitedHealth Group Incorporated - KDDI Corporation Sector Positioning (%)** Information Technology Health Care 18.73% 16.80% 15.79% 11.76% Financials 13.94% 18.10% Industrials 12.25% 11.62% Consumer Discretionary 10.57% 12.26% Consumer Staples 8.76% 9.04% Materials 8.36% 5.25% Telecommunication Services 4.86% 2.77% Utilities 2.58% 2.97% Energy 1.38% 6.32% Real Estate 0.77% 3.11% [Cash] 2.01% 0.00% Monthly Performance Attribution Sector Sector Allocation Stock Selection Total Effect Energy Materials Industrials Consumer Discretionary Consumer Staples Health Care Financials Information Technology Telecommunication Services Utilities Real Estate [Cash] Total % 5% 10% 15% 20% Portfolio Weight Benchmark Weight * Source: NN Investment Partners. All data are expressed as of 31 December ** Global Industry Classification Standard (GICS) enriched by NN Investment Partners Classification 3

4 NN Global Sustainable Equity - Strategy Brief What is a carbon footprint? A corporate carbon footprint is the amount of carbon dioxide that an organization releases directly or indirectly into the atmosphere, measured in tonnes. This can then be translated into an intensity figure by dividing it by the company s revenue, typically expressed as tonnes per EUR 1 million. Three types of emission source can be used in the calculation: Scope 1 emissions also referred to as Direct greenhouse gas (GHG) are defined as emissions from sources that are owned or controlled by the organization; Scope 2 emissions, or Energy GHG, are emissions from the consumption of purchased electricity, steam, or other sources of energy generated upstream from the organization; Scope 3 emissions, also known as Other GHG, are emissions that are a consequence of the operations of an organization, but are not directly owned or controlled by the organization. Scope 3 emissions are by far the largest component of most corporate carbon footprints. CO2 Purchased ellectricity, steam, heating & cooling for own use SCOPE 2 SCOPE 1 Direct Purchased goods & services SCOPE 3 Company facilities SCOPE 3 Capital goods Leased assets Transportation & distribution Investments Fuel & energy related activities Transportation & distribution Waste generated in operations Employee commuting Business travel Company vehicles Processing of sold products Use of sold products Franchises Leased assets End-of-life Treatment of sold products source: GHG Protocol Upstreamactivities Reporting company Downstreamactivities Difference portfolio vs benchmark based on financed emissions of EUR 1,680 mln (includes direct and indirect emissions): 684,620 tonnes CO 2 e or Equivalent to the carbon footprint (direct and indirect) of approximately: 30,428 households Difference portfolio vs benchmark based on financed waste of EUR 1,680 mln: 153,207 tonnes or Equivalent to the waste footprint of approximately: 146,609 households Carbon Intensity Scope 1+2 & 3 (tco2e/ 1m revenue) Waste Intensity Waste Intensity (Tonnes waste/eur Revenues) Portfolio Portfolio MSCI World MSCI World Scope 1+2 Scope Sources: NN IP, South Pole Group, Milieu Centraal emissions average household and Eurostat All figures as of 31/12/2017 4

5 Month ending 31 December 2017 Share Classes ISIN Currency Objectives Investment objective Benchmark Other Characteristics Investment universe Target Ex AnteTracking Error 2 6% Investment style Benchmark +2% gross on a 3 year annualised basis MSCI DM World Index (Net) Worldwide equities Core Maximum Cash Position 10% Max Management Fee (%) Number of Holdings Typically between Fixed Service Fee (%) Ongoing charges including management fee (%) Minimum Investment P Capitalisation LU EUR P Distribution LU EUR X Capitalisation LU EUR I Capitalisation LU EUR ,000 N Capitalisation* LU EUR V Capitalisation LU EUR X Capitalisation (hedged i) LU CZK * only available for the Dutch market Key Characteristics of the Strategy Disclaimer This communication is intended for MiFID professional investors only. This communication has been prepared solely for the purpose of information and does not constitute an offer, in particular a prospectus or any invitation to treat, buy or sell any security or to participate in any trading strategy or the provision of investment services. While particular attention has been paid to the contents of this communication, no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or completeness thereof. Any information given in this communication may be subject to change or update without notice. Neither NN Investment Partners B.V., NN Investment Partners Holdings N.V. nor any other company or unit belonging to the NN Group, nor any of its directors or employees can be held directly or indirectly liable or responsible with respect to this communication. Use of the information contained in this communication is at your own risk. This communication and information contained herein must not be copied, reproduced, distributed or passed to any person other than the recipient without NN Investment Partners B.V. s prior written consent. The fund is a sub-fund of NN (L) (SICAV), established in Luxembourg. NN (L) (SICAV) is duly authorised by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg. Both the fund and sub-fund are registered with the CSSF. The prospectus and the Key Investor Information Document (KIID) (if applicable) and other legally required documents relating to the fund are available on www. nnip.com. Investment sustains risk. Please note that the value of any investment may rise or fall and that past performance is not indicative of future results and should in no event be deemed as such. This communication is not directed at and must not be acted upon by US Persons as defined in Rule 902 of Regulation S of the United States Securities Act of 1933, and is not intended and may not be used to solicit sales of investments or subscription of securities in countries where this is prohibited by the relevant authorities or legislation. Any claims arising out of or in connection with the terms and conditions of this disclaimer are governed by Dutch law. 5