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Microsoft PowerPoint - CI061730 - US Equity Income OEIC PPT September 2012 - FINAL AMENDED
AVIVA INVESTORS US EQUITY INCOME FUND
For investment professionals only. It is not to be viewed by or used with retail clients.
30 September 2012
About River Road Portfolio Overview Investment Strategy Aviva Investors US Equity Income Fund Summary Appendix
ABOUT RIVER ROADINTRODUCTION AS OF 30/09/2012
Value-Oriented, Institutional Equity Manager Based in Louisville, KY Founded April 2005 with a 14+ year team history Serves clients on four continents and in 10 countries Affiliate of Aviva Investors, a $400+ billion global asset manager1
$7.05 Billion in Managed Assets2 Small Cap Value Equity $1.04 b Small-Mid Cap Value Equity $933 m Dividend All-Cap Value Equity $4.18 b
Dividend All-Cap Value $1.85 b Dividend All-Cap Value II $1.42 b Select Equity Income $923 m
Independent Value Equity $880 m Long-Short Equity $8 m
1As of 31/12/2011. 2 AUM does not include $62 m and $568 m in preliminary non-advisory assets in DAV and DAV II model portfolios, respectively.3Other includes the Long-Short Equity Strategy and internal account strategies.Source: River Road Asset Management, LLC.
Cinnamond Moran, Johnson
Small Cap Value
SCV | SMIDDividend
All-Cap ValueDAV | DAV II | SEI
Shircliff, Beck, Akin Sanders, Forsha
Corporate Volkswagen of AmericaWellmark, Inc.Nissan North America, Inc.NiSource, Inc.Fiat USA Retirement Board
Sub-AdvisoryAston Asset Management LPBNP ParibasNorthwest & Ethical InvestmentsAviva Investors UK Fund Services Limited
Representative Client List
Taft-HartleyLocal No 8, IBEWCement Masons and Plasterers PensionHawaii Truckers - Teamsters Union Pension
Public FundsKentucky Retirement SystemsRegional Transportation Authority Pension TrustCity of Montgomery, AL ERSCity of Galveston, TX PoliceOklahoma Firefighters Pension & Retirement System
Foundation & EndowmentBattelle Memorial InstituteCornell UniversityGreater Houston Community FoundationGreat Lakes Protection FundSisters of St. Francis of Philadelphia Charitable Trust
RRAM Assets by StrategySCV
14.72% SMID 13.24%
DAV II 20.11%
ABOUT RIVER ROADTEAM AS OF 30/09/2012
*Founding associate; 1 Executive Committee member; 2 Management Committee member
41 associates; 15 investment professionalsNo investment professional turnover since team inception
Industry ProfessionalInvestment Management* Henry W. Sanders III, CFA1,2 EVP & Senior Portfolio Manager 23 years 29 years
Thomas S. Forsha, CFA2 Vice President & Portfolio Manager 14 years 14 years
* James C. Shircliff, CFA1,2 Chief Investment Officer 39 years 39 years* R. Andrew Beck1,2 President & CEO, Senior Portfolio Manager 13 years 21 years* J. Justin Akin Portfolio Manager 9 years 9 years
Eric K. Cinnamond, CFA Vice President & Portfolio Manager 19 years 19 years
Matt W. Moran, CFA Portfolio Manager 12 years 12 yearsDaniel R. Johnson, CFA, CPA Portfolio Manager 6 years 8 years
J. Alex Brown2 Director of Research 6 years 13 yearsErik M. Keener, CFA Equity Research Analyst 4 years 8 years
Andrew R. McIntosh, CFA Equity Research Analyst 8 years 8 yearsAshley L. Abney, CPA Equity Research Analyst 6 years 7 yearsJohn C. Watkins III Associate Equity Research Analyst 3 years 3 yearsJoe Van Cavage Associate Equity Research Analyst 3 years 3 yearsShane P. Connor Associate Equity Research Analyst 2 years 2 years
Risk ManagementGreg E. Deuser, CFA2 Chief Risk Officer 28 years 30 years
* Thomas D. Mueller, CFA, CPA1,2 COO & Chief Compliance Officer 14 years 19 yearsChristopher K. Fiorito2 Director of Trading 22 years 22 yearsWhitney B. Conn, CPA Operations Manager 6 years 16 yearsMeagan N. Snyder, JD Compliance Manager 5 years 5 years
L. Michele Robbins2 Vice President of Client & Consultant Relations 28 years 28 yearsKatrina Howard O'Leary Vice President of Client & Consultant Relations 13 years 13 yearsShannon M. Burnett2 Director of Client Services 12 years 16 years
PORTFOLIO OVERVIEWABSOLUTE VALUE PHILOSOPHY
We seek excellent companies trading at compelling prices Our objective is to invest in well-managed, financially strong companies trading at compelling prices, not
mediocre businesses trading at deep discounts.
We build portfolios one company at a time We believe alpha is optimized by identifying superior fundamental business characteristics, rather than
chasing market and index trends.
We seek market inefficiencies We believe inefficiencies can be found and captured in smaller capitalization and out-of-favor securities,
and in securities with little or no formal Wall Street analyst coverage.
We are risk averse We employ a strategy of balanced diversification and a structured sell discipline that minimizes both
portfolio volatility and the potential loss of capital.
The objective of Absolute Value investing is to provide attractive, sustainable, low volatility returns over the long term.
Deep Value Absolute Value Relative Value
PORTFOLIO OVERVIEWPHILOSOPHY WHY DIVIDENDS?
Performance: Dividend-paying stocks outperform non-dividend payers
Numerous studies have demonstrated that dividend-paying stocks deliver higher returns (over the long-term) with lower risk than non-dividend payers.1
Conviction: Paying dividends requires real earnings
Companies that pay consistent dividends are typically financially sound and seek to maximise proper utilisation of free cash flow.
Sentiment: Dividends currently receive favourabletax treatment
The Jobs and Growth Tax Relief Reconciliation Act of 2003 lowered the top rate on qualified dividend income to 15%.
Demand: Demographic trends favour income-orientated investments
Retiring baby boomers will increasingly demand investments that offer current income and growth to keep up with inflation.
Chart shown from 31/01/1972 through 30/09/2012. 1Source: Ned Davis Research, Inc. Past performance is no guarantee of future results.
Dividend-Paying S&P 500 StocksGain/Annum: 8.75%
Non-Dividend-Paying S&P 500 StocksGain/Annum: 1.59%
PORTFOLIO OVERVIEWTHE DIVIDEND ALL-CAP ADVANTAGE
The small cap asset class offers a broader universe of high income stocks and features a higher weighted average yield.
Sufficient universe remains following period of substantial dividend cuts.
1Universe: U.S. listed equity; 40% > yield > 2%; mkt. cap > $1 million; data as of 09/10/2012. Source: River Road Asset Management, LLC and FactSet Research Systems Inc. Shown as supplemental information to the DAV and DAV II Composites.
# of Firms Wtd. Avg. Yield1
Mkt. Cap < $300 m 306 5.41%$300 m < Mkt. Cap < $1 b 264 5.50%$1 b < Mkt. Cap < $2 b 164 4.72%$2 b < Mkt. Cap < $15 b 354 4.01%Mkt. Cap > $15 b 206 3.57%
PORTFOLIO OVERVIEW PHILOSOPHY PORTFOLIO OVERVIEW
Dividend All-Cap Value Launched October 1, 2003 Dual objective: capital appreciation
plus current income Benchmark: Russell 3000 Value Target yield of Russell 3000 Value
plus 150 bps Emphasis on diversification
Source: River Road Asset Management, LLC and FactSet Research Systems Inc. Past performance is no guarantee of future results.
Core 2 - 4% Yield Larger Cap Stable Growth High Liquidity
High Alpha 3 - 6% Yield Smaller to Mid Cap More Inefficient Key Source of Alpha
High Yield 5%+ Yield Smaller to Mid Cap Includes Non-Traditional Equities
(i.e. REITs and MLPs) Highest Yield / Lower Appreciation Potential
INVESTMENT STRATEGY PROCESS DIVIDEND ALL-CAP VALUE
1Historically, the market cap limit reflects minimum liquidity constraint used in portfolio construction. 2The target number of portfolio holdings is a working guideline. The actual number may vary depending on market conditions and other factors.
Idea generationUniverseMkt. Cap > $300 M1Min 2% Yield
Systematic Research: Database Reviews
Value Line FactSet
Dynamic Research: Multiple Sources
SEC Filings Firm
60 - 80 Holdings2
Top-Down Risk Management
Position & Portfolio Risk Management Approach
Investment Becomes Overvalued
Failure to Execute Losses Develop
Working Universe300 - 400 stocks
High & Growing Dividend
Target 3% Yield Positive Growth
Rate Stable Pay-out
Ratio Financial Strength Priced at a Discount
to AV Attractive Business
Undiscovered, Underfollowed, Misunderstood
INVESTMENT STRATEGY PROCESS STRUCTURED SELL DISCIPLINE
Investment becomes overvalued S