Chris St John – Fund Manager

AXA Framlington UK Mid Cap Fund

- The Case for Mid Cap Investing

September 2014

This communication is for professional advisers only and must not be relied

upon by retail clients. Circulation must be restricted accordingly.

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Chris St John

Lead Fund Manager, AXA Framlington

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Chris joined AXA Framlington in 2005 and is the lead fund manager of the AXA Framlington UK Mid

Cap Fund.

15 years investment experience in UK Mid/small cap equities.

Qualified Chartered Accountant.

Top quartile record at ISIS and AXA Framlington in mid and small cap investing.

Mid and small cap institutional funds ahead of the benchmark by >4% pa since inception

UK Mid cap 21.9% ahead of Index* since inception (04/03/2011)

Nigel Thomas – Secondary Fund Manager

Nigel joined AXA Framlington in 2002. He is the lead manager for the AXA Framlington UK Select

Opportunities Fund.

He trained as an accountant with Robson Rhodes, leaving to join Carrington Pembroke (subsequently

ABN AMRO and now Artemis Unit Trust Managers) as a Private Client Portfolio Manager. He

subsequently joined Hill Samuel to run the Hill Samuel Smaller Companies Unit Trust for two years

before rejoining Carrington Pembroke in 1986, launching and managing their UK Growth Fund.

Nigel graduated from University College London with a degree in Economics and Geography in 1976.

In 2013 he was made an Honorary Fellow of Trinity Hall Cambridge for services to investment and

their endowment.

Source: AXA IM as at 31/08/2014. Past performance is not a guide to future performance. *Index – FTSE 250 Mid (ex IT) CR52493/11-14

Case for Mid Cap Investing

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6th largest economy in the world

UK is the low-cost manufacturer of Europe (source: Boston Consulting Group “BCG” Cost Competitive Index)

UK automotive output has increased 50% since 2009 (source: BCG)

>6% of UK GDP spent on the internet - Korea <6%, US circa 4% (source: McKinsey)

2nd largest aerospace industry globally (source: Exane)

UK pharmaceutical industry invests circa £13.3bn annually with £5bn trade surplus (source: Exane)

Why does nobody like the UK?

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CR52493/11-14:

Why invest UK mid cap (structural)?

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Investors under-estimate change and earnings growth

Source: AXA IM as at 31/07/2014. Past performance is not a guide to future performance. CR52493/11-14

Performance 10 year annualised return 13.7%

20 year annualised return 11.2%

Earnings Growth Year end 31/12/2001 net income £5.5bn

Year end 31/08/2014 net income £17.2bn

Dynamic changing index of

companies 22 changes in 2014 so far

Geographic and sector

diversification

c.50% ex UK

Top stock 1.65% of index

Market leaders Best of British, Best in the World

UK Mid Cap – Performance and compounding

Cumulative performance

Source: FactSet from 31/12/1999 to 31/08/2014. Past performance is not a guide to future performance. CR52493/11-14

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0

50

100

150

200

250

300

350

400

450

Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 Dec-09 Dec-11 Dec-13

+406% FTSE 250 Mid TR

+183% FTSE All-Share

+266% FTSE 250 Mid CR

+224% FTSE A Brit Govt

+169% MSCI World

Why invest in Mid Cap (cyclical)?

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Variety, Coveted Assets, Alpha

Past performance is not a guide to future performance. CR52493/11-14

Declining sell side coverage Less analysts, more thinly spread

Beneficiaries of Mergers and

Acquisitions Improving confidence = more activity

Less intense regulatory

spotlight Regulation, price controls, windfall tax

IPO market New businesses, new opportunities

Strong balance sheets Equity the beneficiary

6

8

10

12

14

16

18

20

22

Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14

FTSE 250 12m fwd PE excl Investment trusts Avg - FTSE 250

Source: Citigroup from January 2000 to August 2014. NB: Past performance is not a guide to future performance. CR52493/11-14

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FTSE 250 ex IT UK PE 12M Forward earnings

Historically compounding profit increased capital value

“Short Term voting machine, Long Term weighing machine” Benjamin Graham

Net Income (August 2014)

£ 17.2 bn

Net Income (Dec-2001)

£ 5.5 bn

Realistic earnings expectations

2014 IBES Consensus PAT* growth of 0.8% seems reasonable

IBES Consensus median PAT growth of 5.9% 2013 (actual), 5.0% 2014 (forecast)

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Bottom up earnings forecasts are realistic in many cases

Source: Chart: Citigroup as at 31/08/2014. Past performance is not a guide to future performance. *Profit after Tax. CR52493/11-14

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

-70

-60

-50

-40

-30

-20

-10

0

10

20

30

40

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Net Upgrades/(Downgrades) >5% (LHS) FTSE 250 (RHS)

Companies are in good shape

UK Corporate Cash balances (£bn) at all time highs…

Source: BoAML, May 2014. CR52293/09-14

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M&A targets – FTSE 250 Earnings yield vs UK BBB Corp bond yield

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Source: Citigroup as at 31/08/2014. Past performance is not a guide to future performance. CR52493/11-14

M&A, CapEx, buy backs, dividends supported

2

4

6

8

10

12

14

16

Aug 00 Aug 02 Aug 04 Aug 06 Aug 08 Aug 10 Aug 12 Aug 14

FTSE 250 Earnings Yield UK BBB Corp Bond Yield

M&A deals boost UK Equity market

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Source: Citigroup Corp. & Investment Bank – MertGenc as at 31/08/2014. CR52493/11-14

M&A Deals since 2001

Increasing M&A bodes well

0

50

100

150

200

250

300

350

400

£0

£10

£20

£30

£40

£50

£60

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD

Value (£bn) (LHS) No. of deals (RHS)

There is always opportunity

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Number of stocks in the FTSE 250 with total shareholder return in excess of 20% between

2000 and 2014 YTD

Source: AXA IM as at 04/09/2014. * Capital Return. Past performance is not a guide to future performance. CR52493/11-14

Stockpicking paradise

73

30

17

147

102

119

131

40

10

153

124

25

129

143

17

0

20

40

60

80

100

120

140

160

180

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD04/09/2014*

No

. o

f co

mp

an

ies

Idea Generation

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Strategy / thematic views – economic tailwind rather than headwind

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CR52493/11-14

UK Survivorship

Beneficiaries of the

Credit Crunch

Disruptive

Innovation

Increasing capital

efficiency Technological

Disruption

Self Help/

Management

Change

Pricing Power

Reindustrialisation

of US

Total Shareholder

Returns

Can’t Change,

won’t change

Service, Service,

Service.

Digital Connected

Economy

Innovations, Behavioural and Global Secular Trends

Drivers for a Quality Portfolio

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Organic

Pricing Power

Equity Incentivised

High Service Levels

Intellectual Property

EconomicTailwind

Strong Balance Sheet

Clear Accounting

Acquisition Growth

Price Taker

Salary Incentivised

Product Only

Generalised Product

Economic Headwind

Inappropriate Leverage

Opaque Accounting

Likes Dislikes

Assessment of management’s ability to guard capital whilst capitalising on opportunities

CR52493/11-14

Market Focus 2014 and Investment Outlook

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Market Focus 2014

Market concerns

– QE tapering

– Policy inflection

– EU deflation

– Geopolitics

– Complacency

Equity supply (IPO) vs demand (M&A, fund flows)

Brutal style rotation in Q2 2014

Source: AXA IM as at 31/08/2014. CR52493/11-14

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Investment Outlook

We believe earnings look set to recover – operational gearing to economic recovery and

business investment

Total Shareholder Return focus rewarded

Earnings growth will be highly prized commodity

Geopolitical/macro economic uncertainty likely to create short term stock market volatility

We continue to remain wary of leverage

Corporates currently exhibit strong balance sheets and accelerating investment, cash returns

and M&A

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Market continues to favour stock picking which suits our style

CR52493/11-14

AXA Framlington UK Mid Cap Fund

– Performance & Structure

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AXA Framlington UK Mid Cap Fund

Performance

Source: Graph: Lipper as at 31/08/2014, Basis: Z share class, net income reinvested, Bid to Bid, net fees in GBP. Table: Fund, IMA & Quartile: Lipper, Net

Income, Bid to Bid. Net Fees as at 31/08/2014. *AXA Framlington UK Mid Cap Fund Institutional Share Class. **Rank vs IMA UK All Companies. Z institutional

share class used in the IMA peer group.*** from 04/03/2011 to 31/12/2011. Inception date 04/03/2011. Past performance is not a guide to future performance. CR52493/11-14

Net Cumulative Performance since Chris St John took over the Fund’s management (04/03/2011)

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0

20

40

60

80

100

120

140

160

180

200

Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

AXA Framlington UK Mid Cap - Net, Z IMA UK All Companies

34.2%

2014 YTD 2013 2012 2011*** 1Y 3Y Since inception**

AXA Framlington UK Mid cap Net* 2.2 42.0 29.1 6.2- 13.3 91.9 75.9

FTSE 250 Mid (ex IT) TR 0.9 34.9 28.7 12.2- 11.5 70.2 54.0

Net performance relative to comparative benchmark 1.3 7.1 0.4 6.0 1.8 21.7 21.9

Rank*** 116/261 12/262 17/278 83/293 49/261 8/251 5/244

Quartile 2 1 1 2 1 1 1

75.9%

AXA Framlington UK Mid Cap Unit Trust

Name : AXA Framlington UK Mid Cap Fund

Fund manager : Chris St John

Launch date : 4 March 2011

Fund size : £77.1m

Fund beta : 1.00

Number of holdings : 69

Fund structure : Unit Trust

Management fee : 0.75% per annum with £100k minimum investment (Institutional Class)

Comparative benchmark : FTSE 250 ex IT (used as a point of reference)

Fund manager’s self : Unconstrained UK Medium Capitalisation Portfolio

Imposed parameters Exposure to FTSE 250 ex IT of not less than 70%

Exposure no greater than 15% held in FTSE 100

Target typically 60-80 holdings

No greater than 4% stock holding size

Source: AXA IM as at 31/08/2014. CR52493/11-14

Actively managed UK Mid Cap fund

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By Market Cap (%)

By Industry (%)

Source: FactSet as at 31/08/2014. Comparative benchmark: FTSE 250 ex IT. CR52493/11-14

AXA Framlington UK Mid Cap Fund

Portfolio as at 31/08/2014

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Fund

%

Fund

%

FTSE 100 4.7 FTSE AIM 3.6

FTSE 250 81.4 Other 0.0

FTSE Small Cap 2.3 Cash 5.9

Fund

%

Relative

%

Fund

%

Relative

%

Oil & Gas 3.7 -1.6 Consumer Services 16.9 -2.8

Basic Materials 3.1 -2.1 Telecom Services 4.3 1.6

Industrials 37.1 11.9 Financials 18.0 -7.0

Consumer Goods 1.7 -6.3 Information Technology 6.3 2.7

Health Care 3.0 -0.2 Cash 5.9 5.9

AXA Framlington UK Mid Cap Fund

Top 20 holdings as at 31/07/2014

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Source: FactSet as at 31/07/2014. CR52493/11-14

% of

portfolio

% of

portfolio

Essentra plc 2.2 Kentz Corporation Limited 1.8

Howden Joinery Group PLC 2.0 ITV plc 1.7

Senior plc 2.0 Telecom Plus PLC 1.7

Ultra Electronics Holdings plc 1.9 Dixons Retail plc 1.7

RPC Group Plc 1.9 QinetiQ Group plc 1.7

Paragon Group of Companies PLC 1.9 Rightmove plc 1.7

Elementis plc 1.9 Grainger plc 1.7

Hunting PLC 1.9 BBA Aviation Plc 1.6

HellermannTyton Group Plc 1.8 Betfair Group plc 1.6

Premier Oil plc 1.8 Greene King plc 1.6

36.1

Appendix

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Investment process

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4. Continuous

risk management Continuous fund review

Combination of sector thematics and bottom-up stock picking

4. Continuous risk management

3. Portfolio construction

Circa 60-80 holdings

2. Bottom-up analysis

Fundamental analysis Company meetings

Valuation assessment

1. Top-down sector/theme analysis

CR52493/11-14

Fund Managers’ Investment process*

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These limits do not refer to restrictions on the fund. CR52493/11-14

Bottom-up analysis Top-down sector/theme Portfolio Construction 1 2 3 4 Continuous risk

management

Micro/macro economic drivers

Constantly reviewed

Management and industry feedback

Management track record

Organic growth

Pricing power

High barriers to entry

Customer diversification

Appropriate funding structure

Valuation

Target 60-80 holdings

Holding size correlates to risk /

reward

Maximum 4% size

Market capitalisation spread

Sector diversification

Benchmark aware

not benchmark driven

Ongoing company meetings /

assessment

Sell discipline

Important notice

This communication is intended for Investment Professional use only and should not be relied upon by retail clients. Circulation must be restricted

accordingly. Any reproduction of this information, in whole or in part, is prohibited.

This communication does not constitute an offer to sell or buy any units in the Fund. Information relating to investments is based on research and analysis

undertaken or procured by AXA Investment Managers UK Limited for its own purposes and may have been made available to other members of the AXA

Investment Managers group of companies which, in turn, may have acted on it. Whilst every care is taken over these comments, no responsibility is accepted

for errors and omissions that may be contained therein. It is therefore not to be taken as a recommendation to enter into any investment transactions.

This communication should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any AXA IM investment service or product

and is provided to you for information purposes only. The views expressed do not constitute investment advice and do not necessarily represent the views of

any company within the AXA Investment Managers Group and may be subject to change without notice. No representation or warranty (including liability

towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein.

Information relating to investments may have been based on research and analysis undertaken or procured by AXA Framlington for its own purposes and may

have been made available to other expertises within the AXA Investment Managers Group, who in turn may have acted upon it. Information in this document

may be updated from time to time and may vary from previous or future published versions of this document.

Past performance is not a guide to future performance. The value of investments and the income from them can fluctuate and investors may not get back the

amount originally invested. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets and smaller

companies offer the possibility of higher returns but may also involve a higher degree of risk. An initial charge is usually made when you purchase units. Your

investment should be for the medium to long term i.e. typically 5-10 years.

AXA Framlington is an expertise of AXA Investment Managers UK Limited. Issued by AXA Investment Managers UK Limited which is authorised and regulated

by the Financial Conduct Authority. Registered in England and Wales No: 01431068 Registered Office: 7 Newgate Street, London

EC1A 7NX. Telephone calls may be recorded for quality assurance purposes.

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