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16 November 2010

Matthias Born, co-manager of the Allianz RCM European Equity Growth Fund comments: “The impact of emerging markets on Europe has created two key themes for us. Firstly, how can we play on their domestic demand growth story, and secondly, what competition do emerging market companies pose to their European counterparts. “Turning to the domestic demand growth story, it was evident on my recent trip to Asia that Chinese consumers are likely to increase spending in the next couple of years. This is probably also true for other Asian countries, such as India, where the middle class is growing rapidly and with it demand for western products and brands. There major potential for growth in luxury and retail brands in emerging markets and we will continue to look for opportunities to invest in European companies that we expect to benefit from this trend. “Energy efficiency is another theme which plays into this the domestic demand growth story. China’s Five Year Plan for energy efficiency focuses on a shift towards quality products. This means, in my view that high energy consuming areas and industries will be forced to increase their energy efficiency going forward, benefiting European companies such as Siemens and Schneider Electric. “We are closely monitoring the competition between European and Asian companies and the impact this may have on European stocks. Recently, European companies have been losing orders in Asia to Asian companies, for example Alstom, a world leader in transport and energy infrastructure, lost an order in India to a Chinese company, Shanghai Electric. Competition is increasing and in particular in areas that are strategically important to China. European outlook “Europe is being driven by German exports and the improving consumer environment there. Recent gross domestic product figures show that Germany is ahead of the rest of Europe*. Our view on Europe for the next couple of years is that GDP below par, and we will be concentrating on exposure to emerging markets that we believe will continue to grow. The European equity market for 2011 should see some upside as we believe most of these companies’ growth potential is not reflected in the current valuation. “Looking at our performance for third quarter of 2010, the fund posted positive absolute and relative performance numbers. The Allianz RCM Europe Equity Growth fund was 3% ahead of benchmark. The main drivers for the strong performance were the consumer, discretionary and industrial sectors. Also, our exposure to prominent themes such as healthcare, investment cycles in oil and mining and consumer demand in emerging markets contributed to this outperformance.”

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