NN European Sustainable Equity

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1 For professional use only Month ending 30 April 2018 NN European 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 European Sustainable Equity strategy was launched in December 2013, leveraging on the success of an institutional mandate with a strong track record that the team has managed since It invests in a diversified portfolio of European stocks. 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 Europe (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 European 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. Under the ESG approach: i.e. application of best-in-class criteria to the 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 web-based 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 246 bln* (USD 296 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 31 December 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 European Sustainable Equity - Strategy Brief Reference performance for this strategy: NN (L) European Sustainable Equity (Z Cap, EUR), gross of fees* As of 30 April Month 3 Months YTD 1 Year 2 Year (Ann.) 3 Year (Ann.) Since Inception (Ann.) Portfolio Return Benchmark Return Relative Return * Source: NN IP Performance Measurement. Benchmark: MSCI Europe (Net). Returns include the reinvestment of income. Fund was launched on 19 December 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 0% per year. Main Points European equities recoup last months losses; MSCI Europe Net Index up 4.6% Company in the spotlight: Bunzl Henkel and Enagas are added to the portfolio 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. Market Review Losses in previous months were recouped in April with MSCI Europe Net Index rising 4.6% (in Euro terms), eking out a small positive return (0.1%) year-to-date. Despite some risks related to trade restrictions, geopolitical noise and expectations of tighter monetary policy, markets rallied thanks to signs that the global economy continues to expand, inflation is only rising gradually and earnings growth is healthy, supported by a strong earnings season so far. The April rally was led by Europe with especially France and Italy outperforming on strong improvements in the labour market supporting consumer confidence. Emerging markets lagged as these were subject to headwinds coming from a stronger USD, increasing Fed fund expectations and a higher oil price. Energy was the best performing sector, underpinned by the higher oil price driven by lower inventories thanks to production cuts put in place by OPEC and the strength of global oil demand. Value stocks outperformed Growth stocks while large caps outperformed the smaller stocks. Investment Performance The fund underperformed the MSCI Europe (Net) in April, impacted by the underweight in the Energy sector. This was partly offset by stock picking in IT and Financials. At a stock level, the German payment processor Wirecard was the best contributor after raising guidance for 2018 and proposing a dividend higher than expected. The Italian IT consultant Reply and Dutch insurer ASR also added to relative performance. On the other hand, Orkla was the main detractor. Portfolio Positioning The fund introduced the German Household Personal Care producer Henkel. The company generates one of the highest return on investment in the sector. As cyclical sectors outperformed defensives over the past year, Consumer Staples stocks such as Henkel became attractively valued. We therefore took the opportunity to start a position in the name. We financed this acquisition by selling the Norwegian producer of branded consumer goods Orkla after it released disappointing margin progression in Q1. Company in the spotlight: Bunzl Bunzl is a UK supplier of disposable products operating worldwide. The company is a clear leader in its industry, where scale is a significant advantage and generates growth by expanding its presence globally through acquisitions. Bunzl has strong policies in how it sources green product by choosing certified products and manufacturers and using sustainable components, such as bamboo fibre paper, reusable bags and biodegradable food containers and boxes. The company also improves its sustainability profile by operating a highly efficient supply chain in strong collaboration with suppliers and clients. Moreover, it reduces its overall carbon footprint by acting as a one-stop shop and thus limiting transportation costs. This will also keep them competitive against online rival businesses. Outlook Our fundamental view on the equity market remains constructive. Looking ahead, our fundamental view on the equity market remains constructive. This is linked to the benign macro-economic environment, which is characterized by robust growth in all regions and supported by all economic actors (consumers, corporates and governments). Linked to this good growth outlook, we believe that global earnings can continue their double-digit growth rate. Margins have room to expand, especially outside the US as the growth in wages remains low and cyclical sector earnings recover. Politics continue to play an important role, but market reactions to issues such as Trump s trade rhetoric have been muted so far and there is no reason to expect this to change dramatically in the short-term. We do expect more volatility in 2018 as market expectations on growth have gone up and global monetary policy will pass the point of maximum ease in the course of this year. Trends in inflation data will need close monitoring as this will determine central bank behaviour. Rising volatility historically favours a quality investment style and in this environment we expect that our focus on attractively valued quality companies with strong ESG credentials is well-positioned to benefit. In the Energy sector, the strategy took profit and sold its holding in the Spanish refiner Repsol. The stock had a strong run, supported by the recent rise in oil price and tax cuts in the US. We reinvested the proceeds in gas transporter Enagas on attractive valuation. 2

3 Month ending 30 April 2018 Portfolio Highlights* Portfolio Characteristics Strategy Assets under Management 1,514 mln Ex-Post Tracking Error** 3.02% Beta of the Portfolio** 0.97 Sharpe Ratio** 0.40 Volatility** Portfolio Characteristics Fund Benchmark Dividend Yield FY1 2.5% 3.6% Number holdings Large Caps 50.7% 86.8% Mid Caps 29.2% 12.2% Small Caps 20.1% 1.0% ** 3-years annualised Top and Bottom Monthly Contributors (%) Monthly Performance Attribution Wirecard AG 0.30 Sector Sector Allocation Stock Selection Total Effect ASR Nederland NV 0.23 Energy Materials Reply S.p.A Industrials Bakkafrost P/F 0.13 Consumer Discretionary Consumer Staples i Group plc 0.13 Health Care Zalando SE Financials Information Technology Novozymes A/S Class B Reckitt Benckiser Group plc Telecommunication Services Utilities Real Estate Royal Dutch Shell [Cash] Total Orkla ASA Sector Positioning (%)** Largest Portfolio Positions (%) Financials Health Care Consumer Staples 11.86% 12.53% 13.01% 16.11% 17.35% 20.94% Top 10 Portfolio Benchmark Weight Unilever Prudential plc Reckitt Benckiser Group plc ASR Nederland NV Industrials Materials 8.32% 12.76% 13.07% 11.18% Bunzl plc i Group plc Deutsche Telekom AG Consumer Discretionary Information Technology 5.02% 9.53% 11.00% 8.17% Siemens AG Booking Holdings Inc Wirecard AG Telecommunication Services Energy Utilities Real Estate [Cash] 5.61% 3.69% 3.07% 2.17% 3.69% 0.00% 1.37% 1.52% 0.00% 8.02% 0% 5% 10% 15% 20% 25% Portfolio Weight Benchmark Weight * Source: NN Investment Partners. All data are expressed as of 30 April ** Global Industry Classification Standard (GICS) enriched by NN Investment Partners Classification 3

4 NN European 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 322 mln (includes direct and indirect emissions): 138,504 tonnes CO 2 e or Equivalent to the carbon footprint (direct and indirect) of approximately: 6,156 households Difference portfolio vs benchmark based on financed waste of EUR 322 mln: 105,952 tonnes Carbon Intensity Scope 1+2 & 3 (tco2e/ 1m revenue) or Equivalent to the waste footprint of approximately: 101,389 households Waste Intensity Waste Intensity (Tonnes waste/eur Revenues) Portfolio Portfolio MSCI Europe MSCI Europe Scope 1+2 Scope Sources: NN IP, ISS Ethix Climate Solutions, Milieu Centraal emissions average household and Eurostat All figures as of 30/04/2018 4

5 Month ending 30 April 2018 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 Europe Index (Net) European equities Core Maximum Cash Position 10% Max Management Fee (%) Number of Holdings Typically between Fixed Service Fee (%) Ongoing charges including management fee (%) Minimum Investment I Capitalisation LU EUR ,000 P Capitalisation LU EUR N Capitalisation* LU EUR N Distribution* LU EUR P Distribution LU EUR X Capitalisation LU EUR * 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