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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
CONTENTS
– About River Road
– Portfolio Overview
– Investment Strategy
– Aviva Investors US Equity Income Fund
– Summary
– Appendix
2
ABOUT RIVER ROADINTRODUCTION AS OF 30/09/2012
3
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.
IndependentValue
Long-ShortEquity
Cinnamond Moran, Johnson
Alternative Equity
Small Cap Value
SCV | SMID
DividendAll-Cap Value
DAV | DAV II | SEI
Shircliff, Beck, Akin Sanders, Forsha
Traditional Equity
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 Strategy
SCV 14.72% SMID
13.24%
DAV 26.18%
DAV II 20.11%
SEI 13.09%
Ind. Value
12.50%
Other3
0.16%
ABOUT RIVER ROADTEAM AS OF 30/09/2012
4
*Founding associate; 1 Executive Committee member; 2 Management Committee member
41 associates; 15 investment professionalsNo investment professional turnover since team inception
Industry Professional
Investment 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 years
Daniel R. Johnson, CFA, CPA Portfolio Manager 6 years 8 years
J. Alex Brown2 Director of Research 6 years 13 years
Erik M. Keener, CFA Equity Research Analyst 4 years 8 years
Andrew R. McIntosh, CFA Equity Research Analyst 8 years 8 years
Ashley L. Abney, CPA Equity Research Analyst 6 years 7 years
John C. Watkins III Associate Equity Research Analyst 3 years 3 years
Joe Van Cavage Associate Equity Research Analyst 3 years 3 years
Shane P. Connor Associate Equity Research Analyst 2 years 2 years
Risk Management
Greg E. Deuser, CFA2 Chief Risk Officer 28 years 30 years
* Thomas D. Mueller, CFA, CPA1,2 COO & Chief Compliance Officer 14 years 19 years
Christopher K. Fiorito2 Director of Trading 22 years 22 years
Whitney B. Conn, CPA Operations Manager 6 years 16 years
Meagan N. Snyder, JD Compliance Manager 5 years 5 years
L. Michele Robbins2 Vice President of Client & Consultant Relations 28 years 28 years
Katrina Howard O'Leary Vice President of Client & Consultant Relations 13 years 13 years
Shannon M. Burnett2 Director of Client Services 12 years 16 years
Years Experience
Operations
Client Services
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.
5
Deep Value Absolute Value Relative Value
PORTFOLIO OVERVIEWPHILOSOPHY WHY DIVIDENDS?
6
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 favourable
tax 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.
10
100
1,000
10,000
Gro
wth
of $100
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
7
– 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
8
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.
Step 1
Idea generation
UniverseMkt. Cap > $300 M1
Min 2% Yield
Systematic Research:
– Database Reviews
– Value Line
– FactSet
Dynamic Research:
– Multiple Sources
– Dividend Increases
– Insider Transactions
– SEC Filings
– Firm Announcements
Step 3
Portfolio Construction
60 - 80 Holdings2
– Bottom-Up Approach
– Top-Down Risk Management
– Balanced Diversification
Step 4
Sell Discipline
Position & Portfolio Risk Management Approach
– Investment Becomes Overvalued
– Failure to Execute
– Losses Develop
Step 2
Security Analysis
Working Universe
300 - 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 Model
– Shareholder-Oriented Management
– Undiscovered, Underfollowed, Misunderstood
9
INVESTMENT STRATEGY – PROCESS STRUCTURED SELL DISCIPLINE
Investment becomes overvalued
– Stock exceeds price target (100/110/120 rule)
– Holding exceeds 5% of the portfolio
Failure to execute
– Fundamentals turn negative; dividend becomes threatened
– Warning signs emerge within company / industry
– Pay-out ratio begins to climb
Losses develop
– Do not average down; step out of losing positions
– Control total unrealized losses in the portfolio
– Target threshold in total unrealized losses1
1Threshold will vary depending on market conditions and timing of flows.
“A key difference between a losing strategy and a winning strategy is that losers make big mistakes and winners make small mistakes.”
10
AVIVA INVESTORS US EQUITY INCOME FUND
Launched 8 July 2011
11
AVIVA INVESTORS US EQUITY INCOME FUNDKEY FUND FACTS
Aviva Investors US Equity Income Fund
Fund manager Henry W. Sanders III, CFA
Deputy fund manager Thomas S. Forsha, CFA
Launch date 8 July 2011
Yield target1 Russell® 3000 Value +1.5%
Distribution frequency Quarterly
Benchmark Russell® 3000 Value Index
Valuation frequency Daily
Settlement T + 4
IMA sector North America
Currency of fund GBP
Fund structure UCITS compliant ICVC
Ratings2
12
1 The yield target stated in the fund objective is an aspirational yield target and is not guaranteed. It is a 12-month rolling target and is gross of fees and tax. The actual yield will fluctuate from month to month.
2 Source: S&P and OBSR ratings as at 30 September 2012.
AVIVA INVESTORS US EQUITY INCOME FUND THREE DISTINCT PORTFOLIO COMPONENTS AS OF 30/09/2012
1Average discount to Absolute Value as of 30.09.2012. 2 Weighted average yield as of 31.08.2012 shown gross of fees; current portfolio yield does not anticipate special dividends. 3 Data as of 30.09.2012 for the Aviva Investors US Equity Income Fund. Source: River Road Asset Management, LLC and FactSet Research Systems Inc. Past performance is no guarantee of future results.
Current Weighting3
0% 100%25% 50%
60.47%
0% 100%20% 35%
36.15 %
0% 100%25% 40%
3.38%
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
– Highest yield / lower appreciation potential
Core
– 2 - 4% yield
– Larger cap
– Stable growth
– High Liquidity
Core
90.09% wtd. % of AV1
3.37% yield2
High Alpha
85.37% wtd. % of AV1
3.68% yield2
High Yield
88.77% wtd. % of AV1
6.19% yield2
13
AVIVA INVESTORS US EQUITY INCOME FUNDDIVERSIFICATION CHARACTERISTICS AS OF 30/09/2012
Characteristics are as of 30.09.2012 for the Aviva Investors US Equity Income Fund1 Gross of fees; current portfolio yield does not anticipate special dividends; 2 the strategy is permitted to invest in up to 20% in US-listed non-US companies; 3 Excluding Negative Earnings; 4 I/B/E/S MediansSource: Aviva Investors / River Road Asset Management, LLC; The Bank of New York Mellon Corp.; FactSet Research Systems Inc.; and Russell® Investment Group.
14
Economic SectorsUS Equity
Income FundRussell®
3000 Value Under/Over
Consumer Staples 16.30 6.91 9.40
Consumer Discretionary 15.86 8.17 7.69
Industrials 15.10 9.37 5.73
[Cash] 3.82 -- 3.82
Information Technology 9.30 6.79 2.51
Telecommunication Services 5.95 3.54 2.42
Utilities 5.21 6.78 -1.57
Materials 2.41 4.02 -1.62
Health Care 9.05 11.18 -2.13
Energy 3.38 16.08 -12.70
Financials 13.62 27.15 -13.53
Market Cap breakdown1 US Equity Income Fund R3000V
Large Cap > $15.0 B 56.82 67.59
Mid-Cap $2.0-15.0 B 22.62 24.49
Small Cap < $2.0 B 16.74 7.91
Cash 3.82 --
100.0% 100.0%
Characteristics US Equity Income Fund R3000V
Number of holdings 69 2096
US equity 93.2% 100.0%
Non US equity4 6.8% 0.0%
P/E1 14.8 14.9
P/ Cash Flow 8.9 9.1
Price /Book 2.12 1.49
ROE (5y average) 18.6% 12.6%
EPS Growth (5y average) 5.9% 2.4%
LT Growth (5y average)3 7.7% 8.4%
-13.5%
-12.7%
-2.1%
-1.6%
-1.6%
2.4%
2.5%
3.8%
5.7%
7.7%
9.4%
-15% -10% -5% 0% 5% 10% 15%
AVIVA INVESTORS US EQUITY INCOME FUNDPERFORMANCE AS OF 30/09/2012
1 Inception date: 08.07.2011. Past performance is not a guide to the future.Source: Lipper Hindsight. Pricing basis: As at 30/09/12 on a mid to mid, net income re-invested, Sterling basis. Gross of initial charge & net of AMC. 15
1m 3m 6mSince inception1
Aviva Investors US Equity Income Fund Share Class 1 Inc
-0.39 1.77 2.36 5.48
Russell® 3000 Value 1.51 3.39 2.93 7.22
S&P 500 0.90 3.30 2.33 9.49
Out/Underperformance (vs. Russell® 3000 Value)
-1.90 -1.62 -0.57 -1.74
-2
0
2
4
6
8
10
1m 3m 6m Sinceinception
%
Aviva Investors US Equity Income SC1 Inc
Russell 3000 TR
S&P 500 TR
DAV COMPOSITE PERFORMANCE AS OF 30/09/2012
16
The Aviva Investors US Equity Income Fund may differ from US comparable strategy (DAV) due to structure, currency movements and effect of taxation and charges.
The official performance is shown gross of fees for the Dividend All-Cap Value Strategy Composite as of 30/09/2012. 1Inception date: 01/10/2003. 2Gross of fees; current portfolio yield does not anticipate special dividends. Source: River Road Asset Management, LLC; Russell Investment Group; Standard & Poor’s; and
The Bank of New York Mellon Corp. Past performance is no guarantee of future results. Please see appendix for disclosure presentation.
DAV Composite Yield 3.74%2
Russell 3000 Value Yield 2.48%
2011 2010 2009 2008 2007 2006 2005 2004
River Road DAV Composite 6.17% 20.20% 22.07% -27.39% 1.92% 27.05% 10.50% 24.71%
Russell 3000 Value -0.10% 16.23% 19.76% -36.25% -1.01% 22.34% 6.85% 16.94%
Out/Underperformance +6.27% +3.97% +2.31% +8.86% +2.93% +4.71% +3.65% +7.77%
Q3 2012 YTD 1 YR 3 YR 5 YR 7 YR Inception1
River Road DAV Composite 4.29% 10.91% 23.89% 15.31% 3.73% 7.46% 10.92%
Russell 3000 Value 6.44% 15.64% 31.05% 11.83% -0.72% 3.32% 6.58%
S&P 500 6.35% 16.44% 30.20% 13.20% 1.05% 4.48% 6.33%
Out/Underperformance -2.15% -4.73% -7.16% +3.48% +4.45% +4.14% +4.34%
-8.00%
0.00%
8.00%
16.00%
24.00%
32.00%
Objectives
– Long-term Total Return > Russell® 3000 Value index plus 200 - 400 bps
– Target Yield > Russell® 3000 Value plus 150 bps
PERFORMANCE DAV VS. RUSSELL® 3000 VALUE AS OF 30/09/2012
17
Attribution calculated from 01/10/2003 through 30/09/2012. Discrepancies between official RRAM reported performance and the performance values found in attribution analysis may occur due to the varied methodologies between RRAM and FactSet Research Systems Inc. Attribution analysis is calculated using cumulative returns which are then annualized for all periods greater than one year. Holdings based attribution analysis is generated for all periods in which the start date is prior to 2007. Holdings based attribution is less precise; performance discrepancies may be greater for these periods. Source: River Road Asset Management, LLC; FactSet Research Systems Inc.; and Russell Investment Group. Past performance is no guarantee of future results. Shown as supplemental information to the DAV Composite. Please see appendix for disclosure presentation.
Avg. Total Contrib. Avg. Total Contrib. Allocat. Select. Interact. Total
GICS Direct Sector Wgt. Return Return Wgt. Return Return Effect Effect Effect Effect
Energy 15.74 20.25 4.56 13.45 15.36 1.85 1.34 1.06 -0.10 2.21
Financials 27.57 3.82 2.99 30.38 -1.78 0.29 0.52 1.60 -0.08 1.99
Consumer Discretionary 10.06 14.46 1.79 9.13 7.19 1.07 0.26 1.26 -0.41 1.13
Materials 4.32 16.09 1.53 3.96 11.26 0.63 0.32 0.75 0.03 1.07
Telecommunication Services 3.71 17.53 0.92 5.18 9.54 0.62 0.14 0.94 -0.36 0.74
Information Technology 3.68 8.17 0.35 5.65 4.51 0.57 0.35 0.37 -0.12 0.60
Consumer Staples 10.72 14.14 1.72 7.34 12.16 0.89 0.07 0.45 0.05 0.56
Industrials 8.21 8.12 1.08 9.61 8.44 0.83 0.14 0.50 -0.30 0.35
Health Care 3.53 9.10 0.54 8.45 7.79 0.70 0.03 0.19 0.00 0.23
Utilities 7.31 8.13 0.76 6.72 10.70 0.79 0.25 -0.26 -0.01 -0.01
Cash 3.69 1.37 0.09 -- -- -- 0.33 -- -- 0.33
Unassigned 1.45 1.49 0.28 0.11 13.55 0.03 0.31 0.11 -0.38 0.05
Total 100.00 11.46 11.46 100.00 6.58 6.58 3.60 5.76 -1.77 7.27
Official Gross Performance 10.92 6.58
DAV Composite Russell 3000 Value Attribution Analysis
Since Inception: 1 October 2003 - 30 September 2012
AVIVA INVESTORS US EQUITY INCOME FUNDTOP 10 HOLDINGS AS OF 30/09/2012
Top 10 Holdings as of 30/09/2012 in the Aviva Investors US Equity Income Fund. Source: River Road Asset Management, LLC. Shown as supplemental information to the US Equity Income Fund. Please see appendix for disclosure presentation. 18
Securities Market Value Pct. (%)
Kimberly-Clark Corporation 7,630,988.80 2.46
Automatic Data Processing, Inc. 7,628,146.40 2.45
General Mills, Inc. 7,564,127.75 2.43
Intel Corporation 7,245,408.82 2.33
Vodafone Group 6,907,545.00 2.22
Chevron Corporation 6,571,652.80 2.11
Sysco Corporation 6,394,402.30 2.06
UNS Energy Corporation 6,228,140.10 2.00
Norfolk Southern Corporation 6,144,112.80 1.98
United Parcel Service, Inc. Class B 6,116,014.35 1.97
Total 68,430,539.12 22.02
19
Automatic Data Processing Inc. is one of the world’s largest providersof business outsourcing solutions primarily focused on HR solutionsand payroll, tax, and benefits processing for small, medium, and largebusinesses. ADP also provides integrated computing solutions forautomotive dealers. Carlos Rodriguez (48) succeeded Gary Butler(65) as CEO in November 2011. ADP is based in Roseland, NJ.
High and Growing Dividend Yield:– In December 2011, ADP increased its dividend 9.7% to $1.58/share per year. ADP
has increased its dividend every year since 1975 at an annualized rate of 16.1%.Over the last five years, the dividend has increased at an 11.4% annualized rate.
Financial Strength:– ADP is one of only four companies with AAA credit ratings from both Moody’s and
S&P. ADP has a net cash position of $3.36/share.
Valuation:– ADP is trading at a 5% premium to our assessed Absolute Value of $56.
Attractive Business Model:– ADP benefits from a stable and diverse client base with customer retention rates
above 90% and no single customer accounting for more than 2% of revenues.ADP can invest its clients’ funds before remitting them to the appropriate taxingauthority to earn interest that is essentially all profit to ADP.
Shareholder Orientation:– ADP accelerated the company’s dividend growth and share buybacks in 2006.
Since fiscal year end 2006, the dividend per share has increased by 114% andshares outstanding have been reduced by 13%.
Undiscovered, Underfollowed, Misunderstood:– The market is concerned about unemployment and low interest rates, but ADP
grew revenues throughout the recession and is positioned to benefit from risinginterest rates.
INVESTMENT STRATEGYDAV II LARGEST HOLDING – AUTOMATIC DATA PROCESSING (ADP)
As of 30/09/2012, Automatic Data Processing is the largest holding in the Dividend All-Cap Value II Strategy Composite. Source: River Road Asset Management, LLC and FactSet Research Systems Inc. Past performance is no guarantee of future results. Shown as supplemental information to the DAV II Composite. Please see appendix for disclosure presentation.
$30
$35
$40
$45
$50
$55
$60
2008 2009 2010 2011 2012
ADP Share Price Absolute Value
Paychex (PAYX) 12.2x
Intuit (INTU) 11.5x
Revenues/Share $21.95 $10.8 b in 2013 Rev.
EBITDA Margin 17.52%
CF/Share $3.84
CF Multiple 12.0x
Business Value $46.14
Float Income/Share $0.84 $412 m in 2013 Inc.
Multiple 8.0x
Float Value $6.71
Business Value $46.14
Float Value $6.71 $1.7 b in cash
Net Cash/Share $3.36 $17 m in debt
Absolute Value $56 / Share
Public Market Comps (trailing EV/EBITDA)
Private Market Comps
Ceridian was taken private in November 2007 at 13.7x
Valuation
SUMMARYCOMPETITIVE ADVANTAGE
Team + Process = Results
Unique philosophy/proven process
– Emphasise consistent, low volatility, high alpha returns
– No black box; combination of proven fundamentals & hard work
– Structured sell discipline
Experience/outstanding culture
– Experienced portfolio management team dedicated to value discipline
– Portfolio managers average over 19 years experience
– No investment professional turnover since team inception
20
APPENDIX
21
APPENDIXPROCESS INTERNAL RISK MANAGEMENT
Working Policy Guidelines1:
– 60 - 80 holdings
– No companies with an average trading volume, at time of initial purchase, of less than $500,000 per day
– No more than 5% in any one security
– Maximum of 30% in any one sector2
– Only securities traded on a North American exchange, including ADR’s, for new purchases
– Limit of 20% in foreign companies3
– No more than 5% in cash
1 Internal Risk Management Guidelines are working policies and, as such, subject to change without notification. 2 As defined by GICS; Financials sector excludes REITs. 3 As defined by River Road Asset Management, LLC.
Daily Team
Interaction
Weekly Team
Risk Meeting
Weekly Firm-Wide
Research Meeting
Monthly Firm-Wide
Risk Meeting
22
Anlzd. 5 Yr.
Return
Anlzd.
Std. Dev. Beta
Sharpe
Ratio R-Squared
Anlzd.
Alpha
Tracking
Error
Worst
Return
Best
Return
DAV II Equity Only Simulated 6.47 14.67 0.75 0.28 94.41 5.02 5.94 -13.34 6.96
DAV Equity Only Simulated 6.71 14.86 0.76 0.30 94.74 5.25 5.73 -14.18 7.53
Russell 3000 Value 1.45 19.07 1.00 -0.04 100.00 -- -- -17.54 11.13
Max
Drawdown
Max
Gain
Treynor
Ratio Info. Ratio Cons. Pos. Cons. Neg.
Avg.
Downmarket
Return
Avg.
Upmarket
Return
Anlzd.
Excess
Return
DAV II Equity Only Simulated -41.46 69.69 5.59 0.85 8.00 4.00 -3.65 3.09 5.02
DAV Equity Only Simulated -44.09 75.51 5.82 0.92 10.00 6.00 -3.66 3.12 5.26
Russell 3000 Value -55.56 82.09 -0.85 -- 8.00 5.00 -5.41 3.57 --
PERFORMANCE DAV RISK SUMMARY- TRAILING 60 MONTHS AS OF 31/12/2010
23
0 5 10 15 20 25 30 35
Annualized Standard Deviation
-5
0
5
10
15
An
nua
lize
d R
etu
rn
Annualized Standard Deviation vs. Annualized Return
01/2006 to 12/2010 Universe: eVestment (eA Universes):eA US All Cap Value Equity
UniverseDAVII EQUITY ONLY SIMULATEDDAV EQUITY ONLY SIMULA TED (03-06 Holdings based; 06- Transaction based)Russell 3000 Value - Total Return
Simulated performance is shown gross of fees for the equity only Dividend All-Cap Value II Strategy Composite and the equity only Dividend All-Cap Value Strategy Composite from 01/01/2006 through 31/12/2010. Source: River Road Asset Management, LLC; eVestment Alliance; FactSet Research Systems Inc.; and Russell Investment Group. Past performance is no guarantee of future results. Equity only simulated performance shown as supplemental information to the DAV II and DAV Composites. Please see appendix for disclosure presentation and important information regarding the simulated performance presented.
0.00
5.00
10.00
15.00
20.00
Anlzd. 5 Yr.Return
Anlzd.Std. Dev.
TrackingError
DAV II / DAV SIMULATED VS. R3000V1 January 2006 - 31 December 2010
DAV II Equity Only Simulated DAV Equity Only Simulated Russell 3000 Value
PERFORMANCE DAV MARKET CAP ANALYSIS AS OF 31/09/2012
24
Historically, we have successfully added value across the capitalization spectrum
Avg. Total Contrib. Avg. Total Contrib. Allocat. Select. Interact. Total
Wgt. Return Return Wgt. Return Return Effect Effect Effect Effect
Mkt Cap: > $15.0 billion 36.54 9.51 3.63 63.91 5.14 3.09 0.99 3.29 -1.68 2.86
Mkt Cap: $2.0 billion - $15.0 billion 31.07 12.02 5.45 26.79 8.49 3.25 0.39 1.32 0.38 1.99
Mkt Cap: $1.0 billion - $2.0 billion 13.13 12.00 2.70 4.65 7.93 0.65 0.47 0.43 0.61 1.45
Mkt Cap: < $1.0 billion 15.29 13.14 3.66 4.51 7.40 0.73 0.70 0.34 0.47 1.46
Cash 3.69 1.37 0.09 -- -- -- 0.43 -- -- 0.43
Merged / Acquired / Dissolved 0.28 -2.75 0.05 0.13 -10.49 -0.02 0.22 0.22 0.24 0.66
Total 100.00 11.46 11.46 100.00 6.58 6.58 3.08 5.01 0.15 7.27
Official Gross Performance 10.92 6.58
Attribution AnalysisDAV Composite Russell 3000 Value
Since Inception: 1 October 2003 - 30 September 2012
$0.0
$6.0
$12.0
$18.0
$24.0
0%
20%
40%
60%
80%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Wtd
. M
ed
ian M
ark
et
Cap
(b
illio
ns)
% o
f D
AV
Co
mp
osite
> $15.0 billion
$2.0 - $15.0 billion
$1.0 - $2.0 billion
< $1.0 billion
Wtd. Median Mkt. Cap
Chart shows quarterly market cap data for the Dividend All-Cap Value Strategy Composite from 31/12/2003 through 30/09/2012. Attribution calculated from 01/10/2003 through 30/09/2012. Discrepancies between official RRAM reported performance and the performance values found in attribution analysis may occur due to the varied methodologies between RRAM and FactSet Research Systems Inc. Attribution analysis is calculated using cumulative returns which are then annualized for all periods greater than one year. Holdings based attribution analysis is generated for all periods in which the start date is prior to 2007. Holdings based attribution is less precise; performance discrepancies may be greater for these periods. Source: River Road Asset Management, LLC; FactSet Research Systems Inc.; Russell Investment Group; and The Bank of New York Mellon Corp. Past performance is no guarantee of future results. Shown as supplemental information to the DAV Composite. Please see appendix for disclosure presentation.
Historically, we have successfully added value across the capitalization spectrum
– Russell® 3000 Value represents the best overall fit
– Low volatility and low beta
PERFORMANCE DAV CORRELATION ANALYSIS AS OF 30/09/2012
251 Trailing five year performance is shown gross of fees as of 30/09/2012.Source: River Road Asset Management, LLC; FactSet Research Systems Inc.; MSCI Inc.; Russell Investment Group; and Standard & Poor’s. Past performance is no guarantee of future results. Shown as supplemental information to the DAV Composite. Please see appendix for disclosure presentation.
Trailing 5 Yr
Anlzd. Ret. (%)1Anlzd.
Std. Dev. (%)
Dividend All-Cap Value 3.73 14.69 R-Squared Beta
Russell 3000 Value -0.72 20.41 94.90 0.70
Russell Midcap 2.24 22.83 89.42 0.61
Russell 2000 2.21 24.54 86.56 0.56
Russell Midcap Value 1.73 23.14 92.38 0.61
Russell 2000 Value 1.35 24.80 87.18 0.55
Russell 3000 1.30 19.71 93.85 0.72
Russell 1000 1.22 19.38 93.83 0.73
MSCI NA 1.06 19.41 92.83 0.73
S&P 500 1.05 18.97 94.30 0.75
MSCI NAV -0.83 19.63 93.35 0.72
Russell 1000 Value -0.90 20.13 94.82 0.71
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-8.86%
-4.06%
-1.51%
1.62%
3.65%
7.38%
-6.07%
-2.30%
-0.77%
1.87%
3.00%
5.57%
-10%
-5%
0%
5%
10%
R3V < -5%12 Months
R3V ≤ -5% to -3%6 Months
R3V < -3% to 0%20 Months
R3V ≥ 0% to 3%38 Months
R3V > 3% to 5%18 Months
R3V ≥ 5%14 Months
Performance is shown gross of fees for the Dividend All-Cap Value Strategy Composite as of 30/09/2012. Monthly performance is shown gross of fees for the Dividend All-Cap Value Strategy Composite and the Dividend All-Cap Value II Strategy Composite. Source: River Road Asset Management, LLC and Russell Investment Group. Past performance is no guarantee of future results. Shown as supplemental information to the DAV and DAV II Composites. Please see appendix for disclosure presentation.
PERFORMANCE R3000V VS. DAV COMPOSITE FROM 01/10/2003 TO 30/09/2012
Russell® 3000 ValueDAV Composite
Monthly Performance
DAV II DAV R3000V
October 7.99% 8.15% 11.68%
November 1.54% 1.46% -0.49%
December 2.00% 1.81% 1.98%
January 1.92% 2.28% 4.01%
February 1.56% 1.80% 3.79%
March 2.07% 2.08% 2.98%
April -0.21% -0.34% -1.05%
May -3.56% -3.80% -5.88%
June 4.24% 4.37% 4.95%
July 1.54% 1.38% 0.88%
August 1.16% 1.47% 2.24%
September 0.95% 1.38% 3.20%
70% of Sample 30% of Sample
APPENDIXDAV COMPOSITE RETURNS AS OF 31/09/2012
27Performance is shown gross of fees for the Dividend All-Cap Value Strategy Composite as of 30/09/2012.Inception date: 01/10/2003. Source: River Road Asset Management, LLC; Russell Investment Group; and Standard & Poor’s.Past performance is no guarantee of future results. Please see appendix for disclosure presentation.
MONTHLY RETURNS 2012 2011 2010 2009 2008 2007 2006 2005 2004 Q4 2003
January 2.28% 0.56% -1.94% -6.42% -0.90% 1.22% 4.09% -1.18% 0.84%
February 1.80% 2.91% 2.89% -8.91% -2.95% -1.02% 0.91% 3.07% 2.92%
March 2.08% 0.56% 4.98% 5.91% 0.84% 1.60% 3.33% -2.13% 1.14%
April -0.34% 2.90% 3.11% 7.29% 3.62% 3.00% 2.04% 0.17% -7.19%
May -3.80% 0.25% -6.07% 2.32% 1.17% 3.95% -0.49% 1.78% 3.59%
June 4.37% -1.43% -3.13% 0.58% -8.07% -1.20% 0.27% 3.64% 3.25%
July 1.38% -2.79% 6.65% 6.90% -0.91% -4.79% 1.26% 3.69% 1.25%
August 1.47% -2.65% -2.46% 2.26% 2.65% 1.24% 2.86% -1.25% 3.32%
September 1.38% -5.09% 6.74% 3.43% -5.34% 2.57% 1.54% 0.58% 3.98%
October 8.15% 3.47% 0.07% -13.30% 0.07% 3.12% -2.00% 2.30% 3.99%
November 1.46% -0.02% 5.24% -6.63% -3.47% 2.39% 2.80% 6.00% 2.77%
December 1.81% 5.30% 2.86% -0.31% -0.89% 2.97% 1.11% 1.47% 6.23%
QUARTERLY RETURNS 2012 2011 2010 2009 2008 2007 2006 2005 2004 Q4 2003
First quarter 6.28% 4.06% 5.92% -9.72% -3.02% 1.79% 8.53% -0.32% 4.97%
Second quarter 0.06% 1.68% -6.18% 10.40% -3.64% 5.78% 1.81% 5.66% -0.73%
Third quarter 4.29% -10.18% 11.04% 13.07% -3.72% -1.13% 5.76% 2.99% 8.78%
Fourth quarter 11.71% 8.94% 8.32% -19.30% -4.26% 8.72% 1.87% 10.03% 13.53%
YTD / ANNUAL 2012 2011 2010 2009 2008 2007 2006 2005 2004 Q4 2003
River Road DAV Composite 10.91% 6.17% 20.20% 22.07% -27.39% 1.92% 27.05% 10.50% 24.71% 13.53%
Russell 3000 Value 15.64% -0.10% 16.23% 19.76% -36.25% -1.01% 22.34% 6.85% 16.94% 14.35%
Russell 3000 16.13% 1.03% 16.93% 28.34% -37.31% 5.14% 15.72% 6.12% 11.95% 12.43%
S&P 500 16.44% 2.11% 15.06% 26.46% -37.00% 5.49% 15.79% 4.91% 10.88% 12.18%
APPENDIXHISTORICAL INDICATED YIELDS AS OF 30/09/2012
28
Dividend yields shown gross of fees from 31/12/2003 through 30/09/2012. Indicated yields do not include special dividends. Dividend All-Cap Value Strategy Composite inception date: 01/10/2003. Source: Bloomberg, FactSet Research Systems Inc., Russell Investment Group, and The Bank of New York Mellon Corp. Past performance is no guarantee of future results. Shown as supplemental information to the DAV and DAV II Composites. Please see appendix for disclosure presentation.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Ind
icate
d A
nn
ual Y
ield
%
Q403 Q104 Q204 Q304 Q404 Q105 Q205 Q305 Q405 Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111 Q211 Q311 Q411 Q112 Q212 Q312
DAV Composite 5.11 4.76 5.48 5.70 5.34 6.08 5.51 5.56 5.35 4.68 5.03 4.79 4.54 4.45 4.36 4.44 4.88 5.01 5.03 5.04 5.76 5.60 4.87 4.09 3.99 3.85 4.10 3.79 3.44 3.64 3.84 4.32 3.87 3.63 3.74 3.74
DAV II Simulated 4.14 4.19 4.33 4.06 4.32 4.92 5.46 4.34 3.83 3.76 3.44 3.69 3.49 3.49 3.29 3.47 3.81 3.98 4.19 4.27 4.85 5.26 4.52 3.76 3.54 3.35 3.58 3.38 3.29 - - - - - - -
DAV II Composite - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3.66 3.81 4.05 3.81 3.53 3.58 3.60
Russell 3000 Value 2.24 2.27 2.38 2.41 2.27 2.35 2.41 2.38 2.43 2.36 2.49 2.41 2.31 2.38 2.32 2.42 2.67 2.88 3.01 3.10 3.72 3.44 2.67 2.25 2.21 2.10 2.48 2.31 2.15 2.17 2.28 2.82 2.61 2.44 2.56 2.48
DAV Spread +2.87 +2.49 +3.10 +3.29 +3.07 +3.73 +3.10 +3.18 +2.92 +2.32 +2.54 +2.38 +2.23 +2.07 +2.04 +2.02 +2.21 +2.13 +2.02 +1.94 +2.04 +2.16 +2.20 +1.84 +1.78 +1.75 +1.62 +1.48 +1.29 +1.47 +1.56 +1.50 +1.26 +1.19 +1.18 +1.26
10 YR U.S. Treasury 4.25 3.83 4.58 4.12 4.22 4.48 3.91 4.32 4.39 4.85 5.14 4.63 4.70 4.64 5.02 4.59 4.02 3.41 3.97 3.82 2.21 2.66 3.53 3.31 3.84 3.83 2.93 2.51 3.29 3.47 3.16 1.92 1.88 2.21 1.64 1.63
APPENDIX – BIOGRAPHICAL DATAINVESTMENT MANAGEMENT AND RESEARCH
Henry W. Sanders, III, CFAExecutive Vice President & Senior Portfolio Manager
Main ResponsibilitiesMr. Sanders serves as Lead Portfolio Manager for River Road’s Dividend All-Cap Value Portfolios and as Portfolio Co-Manager for River Road’s Small Cap Value and Small-Mid Cap Value Portfolios. Additionally, Mr. Sanders serves as Executive Vice President of the firm. Prior to co-founding River Road, Mr. Sanders served as Senior Vice President and Portfolio Manager for Commonwealth Trust Company (Commonwealth SMC). Additionally, Mr. Sanders served as President of Bridges Capital Management and Vice President of PRIMCO Capital Management.
Experience and QualificationsMr. Sanders earned the Chartered Financial Analyst designation (CFA) in 1992 (CFA Institute). He received his B.A. in Business Administration from Bellarmine University and his M.B.A. from Boston College. Mr. Sanders is a member of the CFA Institute. He is an active member and past President of the CFA Society of Louisville and served as adjunct professor of Finance and Economics at Bellarmine University.
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APPENDIX – BIOGRAPHICAL DATAINVESTMENT MANAGEMENT AND RESEARCH
Thomas S. Forsha, CFAVice President & Portfolio Manager
Main ResponsibilitiesMr. Forsha serves as Vice President and Portfolio Co-Manager for River Road’s Dividend All-Cap Value Portfolios. Prior to joining River Road, Mr. Forsha served as Equity Analyst and Portfolio Manager for ABN AMRO Asset Management, USA, where he was responsible for management of the North American equity allocation of the firm’s Global High Income Equity Fund.
Experience and QualificationsMr. Forsha earned the Chartered Financial Analyst designation (CFA) in 2002 (CFA Institute). He received his B.S. in Finance from The Ohio State University’s Fisher College of Business and his M.B.A. from The University of Chicago Booth School of Business. Mr. Forsha is a member of the CFA Institute and the CFA Society of Louisville.
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APPENDIX – BIOGRAPHICAL DATAINVESTMENT MANAGEMENT AND RESEARCH
James C. Shircliff, CFAChief Investment Officer
Main ResponsibilitiesMr. Shircliff serves in the role of Chief Investment Officer for River Road Asset Management. Additionally, Mr. Shircliff serves as Lead Portfolio Manager for River Road’s Small Cap Value and Small-Mid Cap Value Portfolios and Portfolio Co-Manager for River Road’s Dividend All-Cap Value Portfolio. Prior to co-founding River Road, Mr. Shircliff served as EVP, Portfolio Manager and Director of Research for SMC Capital, Inc., a Registered Investment Advisor and affiliate of Commonwealth Trust Company (Commonwealth SMC).
Experience and QualificationsMr. Shircliff has 37 years of investment management experience. He started his career in 1973 as Research Analyst for First Kentucky Trust, where he later served as Director of Research. In 1983, he joined Oppenheimer Management Company as Special Situations Analyst and, later, Portfolio Manager for Oppenheimer’s Target Fund. In 1986, Mr. Shircliff joined Southeastern Asset Management (Longleaf Funds) as Partner, Portfolio Manager, and Director of Research. In 1997, he joined SMC Capital, Inc., where he launched River Road's Small Cap Value and Dividend All-Cap Value Portfolios.
Mr. Shircliff earned the Chartered Financial Analyst (CFA) designation in 1978 (CFA Institute). He received his B.S. in Finance from the University of Louisville and is a member of the CFA Institute and the CFA Society of Louisville.
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IMPORTANT NOTES
This document is intended for institutional or professional investors and experienced advisors only. It is not to be view by or used with private investors. Past performance is not a guide to the future.
Except where stated as otherwise, the source of all information is Aviva Investors as at 30 September 2012.
Note that performance shown of the DAV strategy is not necessarily an accurate representation of how the UK Fund structure wouldhave performed and that returns to UK investor will differ because of the UK Fund structure, currency movements and the effect of taxation and charges. When funds invest in overseas assets, the value will go up and down in line with movements in exchange rates.
On 1 July 2007 the benchmark was officially changed from Russell® 3000 Index to Russell® 3000 Value Index. Russell Investment Group is the source and owner of trademarks, service marks and copyrights related to the Russell indices. Russell® is a trademark of Russell Investment Group.
Investments in smaller companies may be less liquid than in larger companies and price swings may be greater than in larger companies. Therefore, they are generally a higher risk investment than larger companies.
Any future returns and opinions expressed are based on the internal forecasts of Aviva Investors and should not be relied upon as indicating any guarantee of return from an investment managed by Aviva Investors. No part of this document is intended to constitute advice or recommendations of any nature.
The value of an investment in the Fund can go down as well as up and can fluctuate in response to changes in exchange rates. Where performance has been illustrated it is not intended to be a guide to the future. The value of an investment in a fund and the income from it can go down as well as up.
Full details of the Aviva Investors products and services are available on request.
Aviva Investors is a business name of Aviva Investors UK Fund Services Limited, the Authorised Fund Manager. Registered in England No. 1973412. Authorised and regulated by the Financial Services Authority. FSA Registered No. 119310. Registered address: No 1. Poultry, London EC2R 8EJ. An Aviva company. www.avivainvestors.co.uk
CI061730 10/2012
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