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Home My WebLink About2011 11 08 Other Handout by JP Farrar, RBC Gobal Asset Management - City of Winter Springs Pension Fund - November 8, 2011 during Regular 602 Board Of Trustees Regular Meeting November 8, 2011 The attached document was provided to the Board Of Trustees by Mr. JP Farrar, Managing Director, Head of Consultant Relations, RBC Global Asset Management, Inc. and was discussed during Regular Agenda Item "602" at the November 8 2011 Regular Meeting. City of Winter Springs Pension Fund November 8, 2011 Presented by: JP Farrar Managing Director, Head of Consultant Relations — U.S. 312.857.9517 jp.farrar @rbc.com MGIAJGAO WJI Juawaseuiew lassd 1ego1J J821 Organizational Overview As of 9.30.11 Royal Bank of Canada (RBC) In its "World's 50 Safest Banks 2011" ratings, Global Finance Magazine named RBC the World's 11 t" Safest Bank and the Safest Bank in North America' 4t" largest bank in North America and 11 t" largest in the world based on market capitalization Credit rating among highest of financial institutions globally - Aal by Moody's - AA- by S &P Diversified mix of businesses and geographies RBC Global go. Asset Management RBC Global Asset Management More than $240 billion (USD) in assets under management and offices located in the United States, Canada, Europe and Asia $38.1 billion in U.S. -based Institutional AUM $68.1 billion in Canadian -based Institutional AUM $97.1 billion in Canadian -based Individual Investors AUM $37.8 billion in London -based Institutional and HNW Investor AUM 'As of 8.78. 77 Source: http. //www.gfmag.com/ tools /best - banks/ 77347 - worlds -50- safest - banks- 2077.html Al!nb3 leuoileuJOlul Juawaseuiew Jassd 1ego1J 3821 RBC GAM (US) International Equity Investment Objective and Philosophy "We seek superior returns while maintaining a focus on absolute risk." Objective: To Identify the Best Values in the World Disciplined, bottom -up value approach Proprietary investment technology In -depth fundamental research Underlying Belief Companies exist to generate cash flow for owners Superior returns can be generated by purchasing the most undervalued streams of "free" cash flow RBC Global go. Asset Management Portfolio Performance Annualized Returns as of 9.30.11 City of Winter Springs (Gross) MSCI EAFE Index -16.99 -21.21 0.65 4.68 -8.83 4.41 -9.11 -14.63 -18.95 1.83 3.44 -8.94 -0.67 -10.10 *Inception Date: 11. 1,2007 Source: RBC GAM (US), MSCI AI/ returns for periods greater than one year are shown on an annualized basis. Past performance is not indicative of future results. RBC Global Asset Management '� o RBC GAM (US) International Equity Composite Performance as of 9.30.11 20% 10% 0% -10% -20% -30% (7.1.98) ■ RBC GAM (US) International Equity (Gross) MSCI EAFE Index Returns are presented gross of management fees and include the reinvestment of all income. All returns for periods greater than one year are shown on an annualized basis. Inception of the International Equity Composite is 7.7.98. The RBC GAM (US) International Equity composite is presented as supplemental to the 'Performance Presentation & Disclosures " appendix to these materials. The appendix contains additional GIPS'- required disclosures and important information regarding calculation of performance data, and includes net of fees performance returns. Past performance is not indicative of future results. RBC Global Asset Management 7 3Q11 YTD 1 Year 3 Years 5 Years 7 Years 10 Years Since Inception RBC GAM (US) International Equity Sector Weightings as of 9.30.11 25 °/a 20 ° /a 15 °/a 10 ° /a 5 ° /a 0 ° /a ■ RBC GAM (US) International Equity MSCI EAFE Index RBC Global Asset Management Source: MSCI Blue Book Sector weightings are based on a representative account. Consumer Consumer Energy Financials Health Care Industrials Information Materials Telecomm. Utilities Discretionary Staples Technology Services RBC GAM (US) International Equity Top Country Allocations as of 9.30.11 (% of Equities) Country RBC GAM (US) MSCI EAFE Index International Japan 20.0% 23.1% Germany 13.8 7.7 United Kingdom 10.8 22.2 Finland 6.6 0.9 Sweden 6.6 2.9 RBC Global Asset Management 9 Source: MSCI Blue Book Top country allocations are based on a representative account. RBC GAM (US) International Equity Portfolio Transactions: Year to Date 2011 Sales First Quarter And ritz AG Autoliv Inc. Prosafe SE Technip SA Second Quarter None Third Quarter Demag Cranes AG TognumAG This should not be construed as a recommendation to buy or sell any financial instruments. Purchases First Quarter Nichirei Corp Second Quarter Deutsche Telecom Guandong Investment LTD Maurel Et Prom Teva Pharmaceutical — SP ADR Third Quarter None RBC Global Asset Management '� o RBC GAM (US) International Equity Portfolio Holdings by Sector as of 9.30.11 Consumer Discretionary Barratt Developments PLC Bellway PLC Christian Dior SA EUR2.00 Duni AB Persimmon PLC Taylor Wimpey PLC Consumer Staples Asahi Breweries, Ltd. Greencore Group PLC Meiji Holdings Co. Ltd. Nichirei Corporation Energy Maurel ET PROM Sasol Ltd. Thai Oil PCL -FRGN Industrials BBA Aviation PLC Camillo Eitzen & Co. ASA lino Kaiun Kaisha, Ltd. Kone OYJ — B Share Konecranes OYJ Nippon Yusen Kabushiki Kaisha Trevi Finanziaria SPA Yit OYJ Telecommunication Deutsche Telekom AG -REG KDDI Corporation SK Telecom Co. Ltd. SK Telecom Co. Ltd. ADR Information Technology Infosys Technologies — SP ADR Samsung Electronics Samsung Electronics Common — GDR Wincor Nixdorf AG Materials BASF SE BHP Billiton PLC ORD USD0.50 BHP Billiton PLC — ADR (UK) CRH PLC Imerys SA Methanex Corporation Metorex Ltd. Showa Denko KK Smurfit Kappa Group PLC Solvay SA Symrise AG Health Care Norvartis AG CHF20(REGD) Teva Pharmaceutical — SP ADR Transgene SA Financials DNB NOR ASA Hannover Ruckversicherung — REF Investor AB -B SHS KBC Groep NV Lloyd's TSB Group PLC Munchener Ruckversicherungs- Gesellschaft State Bank of India — SPON GDR Svenska Handelsbanken — A SHS Utilities Guangdong Investment Ltd. Kansai Electric Power Co. Inc. *Supplemental information on this page complements the International Equity Composite presentation as provided in the Performance Presentation and Disclosure "appendix to these materials. There is no guarantee that the holdings of an actual account will always be identical to the holdings presented here. This presentation should not be construed as a recommendation to buy or sell any financial instruments. The information contained herein should not be relied upon as the sole investment - making decision. RBC Global Asset Management 11 '� o RBC GAM (US) International Equity Portfolio Holdings by Country as of 9.30.11 Australia Hong Kong South Africa BHP Billiton PLC ORD USD0.50 Guangdong Investment Ltd. Metorex Ltd. BHP Billiton PLC —ADR (UK) Sasol Ltd. India Belgium Infosys Technologies — SP ADR South Korea KBC Groep NV State Bank of India — SPON GDR Samsung Electronics Solvay SA Samsung Electronics Common — GDR Ireland SK Telecom Co. Ltd. Canada Anglo Irish Bank Corp. SK Telecom Co. Ltd. ADR Methanex Corp. CRH PLC Greencore Group PLC Sweden Finland Smurfit Kappa Group PLC Duni AB Kone OYJ — B Share Investor AB -B SHS Konecranes OYJ Israel Svenska Handelsbanken — A SHS Yit OYJ Teva Pharmaceutical — SP ADR Switzerland France Italy Norvartis AG CHF20(REGD) Christian Dior SA EUR2.00 Trevi Finanziaria SPA Imerys SA Thailand Maurel ET PROM Japan Thai Oil PCL -FRGN Transgene SA Asahi Breweries, Ltd. lino Kaiun Kaisha, Ltd. United Kingdom Germany Kansai Electric Power Co. Inc. Barratt Developments PLC BASF SE KDDI Corporation BBA Aviation PLC Deutsche Telekom AG -REG Meiji Holdings Co. Ltd. Bellway PLC Hannover Ruckversicherung —REF Nichirei Corporation Lloyd's TSB Group PLC Munchener Ruckversicherungs- Gesellschaft Nippon Yusen Kabushiki Kaisha Persimmon PLC Showa Denko KK Taylor Wimpey PLC Symrise AG Wincor Nixdorf AG Norway Camillo Eitzen & Co. ASA RBC Global DNB NOR ASA go. Asset Management This should not be construed as a recommendation to buy or sell any financial instruments. RBC GAM (US) International Equity Third Quarter 2011 Review Strengths Defensive sectors did best in the market and the portfolio's best performing sector was one of them — Consumer Staples ( +9 bps). The portfolio gained 3.6% versus a market loss for the sector of 9.4 %. Several Japanese companies in this sector led results, as noted below. Utilities ( +3 bps) also aided performance in the quarter. The five best contributing stocks to the strategy's quarterly performance included: Meiji Holdings (Japanese dairy company), +29 bps; Nicherei Corporation (Japanese cold storage warehouse company), +19 bps; Asahi Breweries, Ltd. (Japanese beer maker), +16 bps; Guangdong Investment Ltd. (Hong Kong -based water supply & real estate company), +12 bps; and lino Kaiun Kaisha, Ltd. (Japanese shipping company), +12 bps. Weaknesses The Materials sector was the worst sector in the market, losing 27.9 %. The portfolio's returns in the sector were slightly worse than the market's returns at - 31.4 %. We reduced our Industrials exposure to a near market weighting by the end of the quarter, but the sector also performed poorly, down 22.1 %. Our returns were somewhat worse than the market, at -26 %. Security selection in Materials ( -8 bps) and Industrials ( -6 bps) detracted from quarterly performance. The five worst contributing stocks to the strategy's quarterly performance were: Smurfit Kappa Group (Irish packaging company; higher than expected corrugated container costs), -160 bps; Konecranes (Finnish crane manufacturer), -118 bps; BASF SE (German chemical company; caution about second half growth), -108 bps; Solvay S.A. (South African Chemical Company; caution about second half growth), -102 bps; and Methanex Corporation (global methanol supplier), -92 bps. RBC Global go. Asset Management RBC GAM (US) International Equity Third Quarter 2011 Review Outlook Going forward, rather than predicting volatile macro - economic conditions, we continue to seek out companies we believe are able to weather economic downturns. We carefully assess the fundamental strengths of individual holdings, noting that the outlook for many of the portfolio companies' cash flows is promising. Consider the recent purchase of Deutsche Telekom. The U.S. Department of Justice is now suing to block AT &T's proposed takeover of Deutsche Telekom's cellular unit, T- Mobile USA, on antitrust concerns — which caused the stock to drop. However, Deutsche Telekom stands to earn a termination fee of at least $3 billion from AT &T, equivalent to 5.5% of its market value, if the $39 billion sale of T- Mobile USA falls through. The firm has stated its commitment to returning substantial cash to shareholders over the next several years. Japanese companies continue to show up in our work as undervalued, even though Japan was one of the best performing countries last quarter, with a loss of 6.4 %. We continue to work through the fundamentals of these companies and our management team just completed a visit to many of them. We expect to make purchases there in the coming quarter. RBC Global go. Asset Management xipueddb Juawaseuiew Jassd 1ego1J 3821 Performance Presentation and Disclosures Appendix RBC GAM (US) International Equity as of September 30, 2011 ANNUALIZED RETURNS YTD YTD One Three Fire Ten Percent of QTD YTD Year Years Years Years RBC GAM (US) International Equity (Gross) - 21.22% . 16.99 % -8.84% 4.35% - 2.32% 12.19% RBC GAM (US) International Equity (Net) - 21.42 % - 17.59% - 9.71% 3.37% - 3.25% 11.14% MSCI EAFE Index - 18.95% . 14.62% - 8.94% - 0.66% - 3.00% 5.48% ANNUAL RETURNS "NIA - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Performance for the period March 2009 through March 2010 occurred during a period where the equity and fixed income markets rebounded from a significant market downturn, It should not be assumed that clients will experience future returns comparable to those short -term returns for that period. (Performance Presentation and Disclosures continued on next page} NO. RBC Global Asset Management 16 YTD YTD MSCI EAFE Composite Numberof Market Percent of Total Period Gross Net Index Dispersion Accounts Value ($MM) Firm Assets Firm Assets 2001 0.75% - 0.20% - 21.21% N/K 1 $19.5 $15,0613 2002 5.91% 4.91`3' - 15.66% NIX 1 $20.6 $20,245.8 2003 54.89% 53.48% 39.17% N /A' 1 $33.6 $22,518.8 2004 29.82% 28.62`3'0 20.70% N/A 1 $89.9 $26,858.3 2005 16.69% 15.60% 14.02% N/K 2 $153.4 $27,018.8 2006 34.58% 33.34% 26.86% NIA 3 $282.6 - $28,358.1 2007 1.74% 0.78% 11.63% 0.20`36 3 $377.6 1.2`36 $32,045.1 2008 - 50.14% - 50.65% - 43.06% 0.24% 2 $217.4 <1% $32,140.1 2009 53.35% 51.95% 32.46% 0.40% 2 $3255 Q% $44,674.0 2010 20.27% 19.16% 8.21% N/K 1 $272.5 c1% $43,779.5 2011 YTD . 16.99% - 17.59% - 14.62% N/K 1 $212.2 (1% $38,086.3 "NIA - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Performance for the period March 2009 through March 2010 occurred during a period where the equity and fixed income markets rebounded from a significant market downturn, It should not be assumed that clients will experience future returns comparable to those short -term returns for that period. (Performance Presentation and Disclosures continued on next page} NO. RBC Global Asset Management 16 Performance Presentation and Disclosures Appendix RBC GAM (US) International Equity as of September 30, 2011 Complance5""' ea RBC GlobalAsset Management (U.S.) Inc. rah claims compliance with the Global Investment Performance Standards (GIPSO) andhas prepared acrd presented this report in compliance with the GIPS standards. RRC GAM (US) has been independently verified for the periods January 1993 through December 2010. Ueri frcation assesses whether (1) the firm has com plied with all the composite construction requirements of the GIPS standards on a firm -wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Intemational Equity Composite has been examined for the periods July 1998 through December2olo. The verification and performance examination reports are available upon request. Descripffon of tie Firm; RBC GAM (US) is a registered investment adviser headquartered in Minneapolis, Minnesota. RBC GAM (US) was founded in 1983 as VoyageurAsset Mona em ent Inc. (WAM). RBC GAM (US) was purchased in December 2000 by RBC Capital Markets Holdings (VSA)Inc., form erly known as RBC Drain Rauscher Corp. RBC GAM (US) purchased substantially all of the assets of Freedom Capital Management, LLC (Freedom) on 1.5.017. Freedom's investment professionals became RBC GAM (115) employees, and the equity management team remained substantially the some after the transition. Forthe purpose of complying with GIPS, effective 12.31.09 total farm assets include all discretionary and non - discretionary assets managed by RBC GAM (US). From 1. 1.06 to 12.31.O9the wrap fee/SMA business of RBC GAM (US) was de fined as a separate division under the name VoyageurAdvisory Services and was excluded from the GIPS - defined firm. Priorto 1.1.06, the GIPS- defined firm included all discretionaryand non - discretionary assets managed by RBC GAM (US). The firm maintains a com plete list and description of all composites, which is available upon request. Composite Descrlptknr The International Equity Composite consists of accounts invested i7 a diversified portfolio of foreign equity securities deemed to be undervalued by the strategy's investment team. Accounts in the composte may have allocations to countries not included in the Index, including investments in emerging economies. Additional hformation regarding the percentage of the composite which maybe invested air countries or regions not included in the Index is avar?able upon request. Benchmork. The benchmark for this composite is the MSG WE (Gross) Index. Thelndex is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Effective 1.31.06, the firm changed the benchmark for comparison purposes from the MSG EVE (Net) Index to the MSCI EAFE (Gross) Indexin order to align the comparison against the industries m ore widely reported by the Gross Index. The MSG SAFE (Gross) Index is shown gross of foreign withholding tax and approxim mates the maximum possible dividend reinvestment. The amountreinvestedis the entire dividend distributed to individuals resident in the country of the company, but does not include tax Index returns are provided for comparison purposes to represent the investment environm ent existing during the time periods shown. An index is fully invested, includes the reinvestment of dividends and capital gains, but does not include anytransoction casts, management fees, or other costs. Holdings of each separately managed account in a com posite will differ from the index. An investor maynot invest directly in an index. MlnanumAccouatSire. There is currently no minimum account see. Prior to 1.1.11 the minimum was $1,000,000. Der,VatrVes, Leverage, amd Short PaslGons. None of these strategies is employed by anyaccounts in this composite. Composite flis %r The composite was created on 1.5.07 acrd has on inception date o[7.1.98. Performance presented prior to 1.5.07 is that ore composite from Freedom. Polaris Capital Management, LLC has been the sub- advisorfor this strategy since 7.1.98. Cash Flow Polky: Composite policy for composites with more than three accounts requires the temporary removal of any port folio incurring a client- WdDtedsig.nificant cash inflow oroutf7owof at least 10% of portfolio assets. The temporaryremoval of such an account occurs at the begkning of the month in which the significant cash flowoccurs and the accountre- enters the composite the first full month of being fully invested. Prior to 1.1.07occounts Ma t experienced a signiicantrosh flow werenot excluded from the composite. Additional information regarding the treatment of significant cash flows is available upon request. Composite Disperslan; The annual composite dispersion presented is an asset - weighted standard deviation, and represents the dispersion of annual results forthe accounts in the composite fora full year. YTD dispersion represents the dispersion of the year -to - date returns of all accounts in the composite since the beginning of the year. Equol- weighted standard deviation was used from 2007 through 2010. Priorto 1.1.017 asset weighted standard deviation was calculated if 6 or more accounts were in the composite for a full year. Partial periods and /or periods with less than two accounts (sixoccounts prior to 2007) in the composite for an entire year are marked "N /A" because they are not statisticallym eaningful. Three Yearfu- PbstStandard Deviation: The 2011 YTD ThreeYearAnnualized Standard Deviation for the composite is 29. 03, and forthe Index it is 25.12. This statistic measures the volatility o forthe composite and benchmark over the preceding 36 -month period. It is notpresented for the periods 2000 through 2010 because 36 monthly returns are not available for all periods and because it is notrequired for periods prior to 2011. Performance Colculatlon: Results are based on all fully discretionary accounts meeting the com poshte definition, including those accounts no longer with the firm. Performance is presented net of foreign withholding taxes, and composite returns represent investors domiciled in the United States. Wkhholding taxes moy vary a ccording to the investor's domicile. The Index gross es -up dividends, where this is appropriate, to reflect the position of an international investor with the benefit cf double taxation agreements, if any. Returns are shown in U.S. Dollars and include the effect of foreign currency exchange rates. Retums are presented gross and net of management fees and include the reinvestm ent of all income. Beginning 6.1.07, gross and net o f fee performance far the Fund in the composite has been reduced by all fund expenses, including custody, administration, and other fund related costs. Net of fee performance is calculated using the maxim Lin stated annual fee of 0.95% calculated and applied monthly.Advisory fees are described on this page and on form ADV Port11. Additional inform ation regarding policies for valuing portfolios, calculating performance, and preparing presentations is available upon request. Post performance is not indicative of future results. lnsbtutknal Fee Schedule: 0.95% on all assets. RBC GAM (US) reserves theright to negotiate all advisory fees. ROC GlobalAsset Management (RBC GAM) is the asset management division of Royal Bank of Canada (RBC) which includes ROC GlobalAsset Management (U.S) Inc., RRC GlobalAsset Managementlnc., ROCAlternative Asset Management Inc., and BlueBayAsset Management Ltd., which are separate, but affiliated corporate entities. 0 Registered trademark of Royal Bank of Canada. RRC GlobolAsset Management is a trademark of Royal Bank of Canada. Used under license. 0 2011 RRC Global Management (U.S.) Inc. NO. RBC Global Asset Management 17