High div presentation geneva - long

Dividends in mature markets

ING Dividend Equity funds

Nicolas SimarHead of Value team

ING Investment ManagementGenevaMay 10, 2010

ING Investment Management 2ING Investment Management 2

Why Dividends ?

ING Investment Management 3

Importance of dividends for investorsKey points

• are less volatile – compared to earnings especially during a period of contraction of the economy

• are currently the primary source of total equity return and are suitable for long term investors in all regions

• yield is the only positive source of return as capital gains and dividend growth can show negative figures

• are a stable valuation tool and a reliable signal of the company’s future prospects

Dividends


Dividend yield suitable for long-term investors

Over time, more than 80% of the total shareholder return comes from dividends !


A major contributor to total returns

This is true across the world !

Dividend yield suitable for long-term investorsDividends were the most important part of long-term returns in Europe as well

Source: Morgan Stanley Research, European strategy, 8 March 2010 – page 3

Over time, on European market, 76% of the total real shareholder return came from dividends!


Importance of dividends for investorsDividend suitable for LT investors : an idea also shared by Academics

Some investors don’t like high yielding stocks, because:

“High yielding stocks = Companies that have run out of growth prospects and have nothing better to do with their cash ……”

……but surprise, surprise ! History shows the opposite:

Data quoted from 1946 to 2001, US market

Source: “Surprise! High Dividends= High EarningsGrowth”,Arnott & Asness, Financial Analysts Journal, Vol.59, no.1 January/February 2003.

Starting PayoutQuartile

Average subsequent10yrs earnings growth

Worst subsequent10yrs earnings growth

Best subsequent10yrs earnings growth

1 (Low) -0.4% -3.4% 3.2%

2 1.3% -2.4% 5.7%

3 2.7% -1.1% 6.6%

4 (High) 4.2% 0.6% 11.0%


Our Investment Approach


Outperform the equity market in the long run (through the cycle)

Offer a lower volatility (downside protection, upside participation)

Offer a higher dividend yield (>100bp versus market)

Our Investment ObjectivesIdentifying the best dividend stocks

Aims to achieve attractive risk adjusted returns through the cycle


Investment Process Overview : Europe Dividend

Process combines quantitative screening and fundamental analysis to identify attractively priced stocks with high and sustainable dividend yields

Universe identification8000 – 9000 names

Liquidity screen (Market Cap. & Turnover)400 - 600 names

Dividend screen (Yield & Stability)300 - 350 names

Fundamental analysis & New ideas150 - 200 names

Portfolio construction60 - 90 names


Fundamental Analysis2

Active management

Stock driven

Risk control

3 Portfolio Construction

Quantitative Filter1

Overview Dividend Investment Process

Attractive yields

Identify opportunities Back top picks Build high conviction portfolio

Equally weighting

Quarterly rebalancing

Sell discipline

4 Risk Management

Achieve consistency

Sustainable yields Diversified portfolio Consistency Risk Profile

Quantitative screening

Historical data

Dividend sustainability

Attractive valuation

Creativity within a disciplined framework

As of end February 2009


Quantitative Filter

Objective: Identify attractive dividend yields• Quarterly screening

• Separate experienced Quant team • Proprietary Models• Extensive in-house database

• > 25 years of history• > 15,000 companies• 3 dedicated IT/database-specialists

• Historical data• Dividend yield threshold : min. 2.5% (2.0% for US High Dividend)• Dividend & Earnings stability• Market capitalisation threshold (min. 1bln EUR)• Liquidity analysis

Quantitative Filter1

Attractive yields

Identify opportunities

Quantitative screening

Historical data



Fundamental Analysis

Objective: Identify sustainable dividend yields• Relative Multiples analysis

• Dividend coverage• Dividend policy• Earnings growth• Earnings trend & revision• Quality of balance sheet (leverage, interest coverage)

• Absolute valuation modelling (DCF based)• Research team output (35 sector specialists, 12 years average

experience)• 1, 3 and 5 year price targets • Investment Cases• DCF/ Company Modeling• Sector outlook including theme selection• Company Meeting Notes

• What’s priced in analysis• Sensitivity analysis (Top-line, margins, discount factor)

Fundamental Analysis2

Sustainable yields

Back top picks

Dividend sustainability

Attractive valuation



Portfolio Construction

Active management

Stock driven

Risk controls

Portfolio Construction3

Build high conviction portfolio

Diversified portfolio

Objective: Build a diversified portfolio of high conviction names

• Active management• Own stocks we like, rather than because they are in the

benchmark• Stock driven

• Most of risk budget allocated to stock selection• Select top picks per sector in close consultation with sector

specialists• Overlay controlled sector and regional tilts

• Risk monitoring• Tracking error decomposition• Monitor macro risk (sector, regional deviations)



Risk Management

Objective: Ensure consistency of risk profile• Equally weighting

• Size of company is not investment criteria• Spread risk homogeneously across holdings

• Quarterly rebalancing• Sell winner/buy loser• Contrarian bias• Reduce volatility of portfolio

• Sell discipline based on dividend yield• Exit dividend yield threshold (2%) at any time (1.5% for US High

Dividend) • Ongoing fundamental analysis• Positions monitored continuously : deteriorating fundamentals will

trigger a sell

Equally weighting


Sell discipline

4 Risk Management

Achieve consistency

Consistency Risk Profile


Implementation

Objective: Implement changes to portfolio• Trading desk

• 6 equity persons in European team and 2 persons in US team• Access to all pools of liquidity

• Efficiency• Use of FIX, Algorithms and pre-trade impact analytics

• Compliance• Charles River pre- and post-trade compliance

• Effectiveness• Externally benchmarked by Abel Noser

Efficiency

Compliance

Effectiveness

Implementation

Alpha preservation


Monitoring and Reporting

Objective: Effective risk and client management• Monitoring

• Performance monitoring and risk monitoring by IST• Market and Credit Risk Committee• Investment Case Review Committee• Trade-costs analysed using Abel Noser

• Reporting• Transparency for clients• Marketing & Sales support by Portfolio Specialists

Risk analysis

Performance analysis

Trade-cost analysis

Marketing & Sales support

Monitoring & Reporting

Oversight and transparency


Portfolio Holdings Examples

A US Tech Company

A Listed Stock Exchange

Expected dividend yield 3.49%Expected dividend cover 1.00Dividend growth last 5 years 36.082

EPS current year 0.55EPS growth next year 56.26%

Gearing (net debt to capital) -25.21%Interest coverage 961.75Credit rating A+Rating outlook STABLE

Liquidity Avg daily value (3 mth) Mln EUR 754.71

Earnings

Capital Structure

Dividend

0

10

20

30

40

50

60

70

80

3/01

/200

0

3/04

/200

0

3/07

/200

0

3/10

/200

0

3/01

/200

1

3/04

/200

1

3/07

/200

1

3/10

/200

1

3/01

/200

2

3/04

/200

2

3/07

/200

2

3/10

/200

2

3/01

/200

3

3/04

/200

3

3/07

/200

3

3/10

/200

3

3/01

/200

4

3/04

/200

4

3/07

/200

4

3/10

/200

4

3/01

/200

5

3/04

/200

5

3/07

/200

5

3/10

/200

5

3/01

/200

6

3/04

/200

6

3/07

/200

6

3/10

/200

6

3/01

/200

7

3/04

/200

7

3/07

/200

7

3/10

/200

7

3/01

/200

8

3/04

/200

8

3/07

/200

8

3/10

/200

8

3/01

/200

9

3/04

/200

9

Expected dividend yield 4.01%Expected dividend cover 1.98Dividend growth last 5 years 50.168

EPS current year 4.18EPS growth next year 12.49%

Gearing (net debt to capital) 49.30%Interest coverage 6.46Credit rating AARating outlook STABLE

Liquidity Avg daily value (3 mth) Mln EUR 94.82

Earnings

Capital Structure

Dividend

0

20

40

60

80

100

120

140

160

5/02

/200

1

5/05

/200

1

5/08

/200

1

5/11

/200

1

5/02

/200

2

5/05

/200

2

5/08

/200

2

5/11

/200

2

5/02

/200

3

5/05

/200

3

5/08

/200

3

5/11

/200

3

5/02

/200

4

5/05

/200

4

5/08

/200

4

5/11

/200

4

5/02

/200

5

5/05

/200

5

5/08

/200

5

5/11

/200

5

5/02

/200

6

5/05

/200

6

5/08

/200

6

5/11

/200

6

5/02

/200

7

5/05

/200

7

5/08

/200

7

5/11

/200

7

5/02

/200

8

5/05

/200

8

5/08

/200

8

5/11

/200

8

5/02

/200

9

5/05

/200

9

Source: Bloomberg, 15/06/09


A Benelux bank

Sell discipline: examples

A UK tech company

A Swedish paper and packaging company


ING IM Equity Value Team

Data as of 30 September 2009

ING Equity Value The Hague, 6 membersAvg. experience 13 yrs.

Nicolas SimarHead of Value, Relevant experience 13 yrs

Euro & Europe strategiesNicolas Simar & Manu Vandenbulck

Global & US strategiesMoudy El Khodr, Kris Hermie

& Adour Sarkissian

Value strategiesPierre Nicolas

Corporate Analytics

Developed (29) & Emerging (6) Markets

Avg. exp. 12 yrs

Portfolio Specialist

Vacancy

4 Equity Boutiques

Core/Value/Specialties/Emerging Markets

Investment Strategy Team

Jan Straatman CIO+

Denholm – van Gelderen – Gupta

Central Trading Team13 members: 6 Equity

Traders + 2 in USAvg. exp. 10 yrs

5 Fixed Income Boutiques

MM/Core/Credits/Loans/EMD/Structured Investments

Quantitative InvestmentsQuant research

11 membersAvg. exp. 11 yrs

Strategy & Tactical AllocationTop-Down Research


Interaction & support

Reporting line

ING Equity Value The Hague, 6 membersAvg. experience 13 yrs.

Nicolas SimarHead of Value, Relevant experience 13 yrs

Euro & Europe strategiesNicolas Simar & Manu Vandenbulck

Global & US strategiesMoudy El Khodr, Kris Hermie

& Adour Sarkissian

Value strategiesPierre Nicolas

Corporate Analytics

Developed (29) & Emerging (6) Markets

Avg. exp. 12 yrs

Portfolio Specialist

Vacancy

4 Equity Boutiques

Core/Value/Specialties/Emerging Markets

Investment Strategy Team

Jan Straatman CIO+

Denholm – van Gelderen – Gupta

Central Trading Team13 members: 6 Equity

Traders + 2 in USAvg. exp. 10 yrs

5 Fixed Income Boutiques

MM/Core/Credits/Loans/EMD/Structured Investments

Quantitative InvestmentsQuant research


Strategy & Tactical AllocationTop-Down Research


Interaction & support

Reporting line


Why us ?

A leader in High Dividend investing.

one of the first in Continental Europe with 10 years of history.

and a proven track record over a full cycle (from TMT bubble to recent commodity/ housing market bubble).

Consistency & transparency of process delivering:

an attractive and predictable risk-adjusted return profile with defensive characteristics: downside protection + upside participation

and a contrarian bias.

Strong team, experienced and stable.

Strong and diverse client base.

2/3 of assets in our Luxembourg based funds are non-affiliated.

dedicated institutional mandates.

Why us?

23

June 2007:US domiciled managed account International Equity Dividend

High Dividend investing since 1999 (€ 6.4 billion in AUM)

ING Equity Value Boutique € Billion

Global High Dividend (includes IGD) 3.2

Euro High Dividend 1.3

Europe High Dividend 0.7

Asia Pacific High Dividend 0.4

U.S. High Dividend 0.4

Belgium High Dividend 0.4

Total for ING IM globally € 6.4 bn

March 1999:ING (L) Invest Euro High Dividend (5 Stars - Superior Rating)

February 2000:Global High DividendDutch domiciled fund (4 Stars)

September 2003:US domiciled Global HiD Equity Mutual Fund

February 2005:ING (L) Invest U.S. High Dividend (4 Stars)

March 2005:US domicield Global Equity Dividend Closed-End Fund (IGD)

November 2005:ING (L) Invest Asia Pacific High Dividend

March 2007:US domiciled Asia Pacific High Dividend Closed-End Fund (IAE)

1999 2007

December 2004:ING (L) Invest Europe High Dividend fund (3 Stars)

June 2007:US domiciled managed account Global Equity Dividend SMA/MF

September 2007:US domiciled International High Dividend Equity Income Closed-End Fund (IID)

Process was not changed

over time

June 2002ING (L) Invest Global High Dividend (3 stars)

2010

ING Equity Value boutique A Leader in Dividend Investing since 1999


Identifying the best high dividend stocksWhat we offer to our shareholders : predictable behaviour

Source: INGIM, ING (L) Invest Euro High Dividend Gross versus MSCI EMU based on end of month returns April 99-March 10

ING Euro High DividendOutperformance ratio basedon holding periods sinceinception.

Out-performance

69,1

7 75,9

3 82,2

9 89,2

9 100,

00

100,

00

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

90,00

100,00

1 2 3 4 5 6

Holding-Periods

in %

0

20

40

60

80

100

120

140

Num

ber o

f Per

iods

% outperformance % underperformance Number of periods

• This analysis of the behaviour of the P EUR share class, aims at showing the manager’s ability to deliver a risk/return profile in absolute terms and relative to the benchmark. As such, the chart has its focus on the probability to outperform over business cycles. As we aim to indentify the quality of the strategy, we choose to compare fund's gross performance with the benchmark in order to avoid distortions due to fees. Base currency of the fund (EUR) has been selected in order to avoid distortions due to currency unintended risks

• The rolling period analysis splits the track record of the investment strategy in different holding periods (1 to 6 years, monthly rolling). Based on the length of the holding period, the analysis measures in how many cases the strategy delivered an outperformance versus its benchmark. As sentiments fluctuate stronger than fundamentals, one must expect that for shorter holding periods, the probability to achieve an outperformance is lower than over entire business cycles.

Outperformance increases with holding periods

Source: INGIM, ING (L) Invest Global High Dividend Grossversus MSCI World

Based on end of month returns till January 2010

No market timing but a strategy for the long-run

Number of periods

% underperformance

% outperformance

Out-performance56

,79

68,1

2

71,9

3 80,0

0

93,9

4

100,

00

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

90,00

100,00

1 2 3 4 5 6

Holding-Periods

in %

0

10

20

30

40

50

60

70

80

90

Num

ber o

f Per

iods

% outperformance % underperformance Number of periods


Downside protection & upside participation

ING Euro Dividend FundRisk profile analysis basedon 5y holding periods

Source: INGIM, ING (L) Invest Euro High Dividend Gross versus MSCI EMU based on end of month returns April 99-March 10

Scatter Plot - 5 years holding periods (ann.)

y = 0,0222x2 + 0,4227x + 4,8995R2 = 0,8611

-10

-5

0

5

10

15

20

25

-10 -5 0 5 10 15 20 25

Index

Fund

BLI036_CAP ING (L) Invest Euro High Dividend CAP 106400_N MSCI (DM) EMU (Net) Polynomial 2nd order (Fund)


Risk Management


Characteristics

Equities only; Long only

Concentrated portfolios

Every holding almost equal weighted


Average dividend yield: Minimum market level +100bp

Sell discipline based on dividend yield

Maximum Stock weight : 5% (3% at rebalancing)

Maximum Sector overweight : 10%

Maximum Region/Country overweight : 10 -15%

Maximum Cash level: 10%

3,75%

(3,67%)

4,08%

(4,80%)

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

5%

Up (73 months) Down (58 months)

Euro High Dividend MSCI EMU Net Return


33 out of 73 outperformance

Monthly return analysis end of March 2010, Gross data versus MSCI EMU net return since inception (April 1999)


ING Euro Dividend : a lower risk profile

3,54%

(3,91%)

3,79%

(4,81%)

(6%)

(5%)

(4%)

(3%)

(2%)

(1%)

0%

1%

2%

3%

4%

5%

Up (77 months) Down (54 months)

Euro High Dividend MSCI EMU High Dividend Net return


39 out of 77

outperformance


Monthly return analysis end of March 2010, Gross data versus MSCI EMU High Dividend net return since inception (April 1999)

…also within the High Dividend space


3 Years Gross Monthly Data

ING (L) Euro High Dividend MSCI EMU Net Return

Annualized Volatility 20.89 % 23.24 %

Annualized Tracking Error 5.03 %

March 31st, 2010

Average Annualized Return -6.81 % -9.64%

Annualized Alpha 1.66%

Beta 0.88

A lower risk profile…



ING (L) Euro High Dividend MSCI EMU High Dividend Net Return



March 31st, 2010

Average Annualized Return -6.81% -12.13 %


Beta 0.80




ING (L) US High Dividend S&P 500 Net Return



Annualized Information Ratio 0.35

March 31st, 2010

Average Annualized Return -3.05 % -4.81%


Beta 0.90

A lower risk profile…



ING (L) US High Dividend MSCI US High Dividend net return



March 31st, 2010

Average Annualized Return -3.05% -6.38 %


Beta 0.85


Risk analysis - End of March 2010

Source: UBS PAS

Lower beta and high active share*

* Active share is a measure of the percentage of stock holdings in portfolio that differ from the benchmark

QPRISM Portfolio Risk ReportModel : UBS Portfolio Analysis System (PAS)Benchmark date : 31-03-2010Portfolio date : 31-03-2010Produced by : Quantitative Investment Strategies

Portfolio Benchmark Targ

et E

x-A

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TE

Ex-A

nte

Trac

king

Err

or

Bet

a

Act

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Shar

e

Act

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chm

ark

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Sect

or R

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ntry

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Ris

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Euro

pe

Japa

n

Latin

Am

eric

a

North

Am

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Asi

a-Pa

cific

(ex

Japa

n)

ING (L) Invest Euro High Dividend MSCI EMU - 3,39 0,93 55,89 1,45 1,63 0,68 0,89 2,34 18,35 23,17 4,00 6,90 47,58 3,47

ING (L) Invest Europe High Dividend MSCI Europe - 3,46 0,90 60,10 1,76 2,06 0,79 0,82 1,83 25,75 35,50 5,17 5,62 27,96 3,46

ING (L) Invest Global High Dividend MSCI World - 4,31 0,85 79,32 2,27 2,83 1,22 1,02 1,68 27,87 43,22 8,00 5,62 15,29 0,64 0,42 -0,02 3,24 0,02

ING (L) Invest US High Dividend US S&P 500 - 5,43 0,79 77,25 3,55 3,04 0,70 1,22 2,39 42,64 31,31 1,64 5,04 19,37 5,74

Absolute % of Total RegionRisk Factor Breakdown

Source: UBS PAS

• Attractive dividend yield, bias to value and quality (ROE)

• Solid historic growth while not overpaying for future growth

Style analysis - End of March 2010

Portfolio/Index Style Analysis Value SizeDate: 03/31/10

ING Portfolio PE

FY

0

PE F

Y1

(1)

PE

FY

2 (1

)

Pric

e to

Boo

k

Div

iden

d Y

ield

Div

iden

d Y

ield

FY

1 (1

)

% M

SCI V

alue

(7)

1 ye

ar E

PS G

row

th (2

)

2 ye

ars

EPS

Gro

wth

(3)

5 Y

ears

His

t. G

row

th (4

)

% M

SCI G

row

th (7

)

RO

E (5

)

% L

arge

Cap

(6)

% M

id C

ap (6

)

% S

mal

l Cap

(6)

ING (L) INVEST Euro High Dividend 12,5 11,8 10,3 1,5 5,1% 4,6% 0,63 6,5% 10,3% 0,1% 0,24 10,8% 0,80 0,15 0,06MSCI EMU 13,0 11,4 9,8 1,5 4,1% 4,4% 0,57 14,3% 15,4% 0,0% 0,33 9,5% 0,82 0,15 0,03MSCI EMU High Dividend Yield 10,8 9,9 8,9 1,7 5,5% 6,1% 0,80 9,1% 9,9% 3,3% 0,15 15,7% 0,91 0,08 0,02

ING (L) INVEST Europe High Dividend 12,1 10,9 9,8 1,7 4,5% 4,7% 0,54 11,0% 11,1% 3,5% 0,29 12,2% 0,74 0,14 0,12MSCI Europe 14,9 11,8 10,1 1,7 3,9% 4,1% 0,44 27,0% 21,9% 1,9% 0,46 10,1% 0,83 0,14 0,03MSCI Europe High Dividend Yield 12,6 10,5 9,1 1,6 5,0% 5,4% 0,77 20,1% 17,5% 0,3% 0,16 9,8% 0,92 0,06 0,02ING (L) INVEST Global High Dividend 15,8 12,6 11,1 1,8 4,3% 4,3% 0,66 25,9% 19,2% 1,1% 0,17 10,0% 0,80 0,14 0,06MSCI World 18,2 13,5 11,3 2,1 2,9% 3,0% 0,44 34,5% 26,8% 2,8% 0,44 10,4% 0,79 0,17 0,04

MSCI World High Dividend Yield 13,3 11,4 10,1 1,8 4,3% 4,5% 0,72 16,0% 14,6% 2,9% 0,20 12,1% 0,89 0,09 0,02

ING (L) INVEST US High Dividend 14,0 13,2 11,3 2,3 3,4% 3,5% 0,42 6,0% 11,1% 4,1% 0,23 14,2% 0,56 0,23 0,20S&P 500 18,7 14,9 12,4 2,2 2,3% 2,4% 0,00 25,7% 22,7% 3,9% 0,00 10,6% 0,00 0,00 0,00

Growth & Profitability


Portfolio overview


ING (L) Invest Euro High Dividend (in %)

Strategy did participate to recovery trade and performed in line over 1Y despite lower betaValue creation happened in Q4 2009 & Q1 2010 (end of low quality outperformance)Multiple expansion was the name of the game in 2009Earnings growth will have to take the lead from now onA return of fundamentals in a more mature market in 2010

Gross performance ING (L) Invest Euro High Dividend in EUR, Benchmark: MSCI EMU Net return Index, as at 31 March 2010.

Q12010

YTD2010 1 year 3 years

(ann.)5 years(ann.)

Sinceinception

(Apr99) (ann.)

ING (L) Invest Euro High Dividend 1.23 1.23 48.66 -6.81 3.39 4.81

MSCI EMU (net return) 0.92 0.92 48.78 -9.64 2.24 0.56

Relative performance 0.31 0.31 -0.13 2.83 1.15 4.24


Performance attribution ING (L) Euro High DividendQ1 2010

• Positive stock selection in Telecommunications (Telecom Italia )& Industrials (Prysmian)

• Negative contribution from Health Care (Bayer) & Energy (Saras & Repsol)

ING (L) Invest Euro High Dividend MSCI EMU Attribution Analysis

Port. Bench.Ending Total Contribution Ending Total Contribution Allocation Selection + Total

High Div Custom Sectors Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 7,64 5,59 0,44 9,41 3,68 0,32 -0,04 0,17 0,13Consumer Staples 8,14 3,20 0,30 8,90 4,51 0,43 -0,00 -0,16 -0,16Energy 10,44 -2,81 -0,22 7,80 -1,11 -0,11 -0,06 -0,19 -0,25Financials 21,15 -2,94 -0,74 24,37 -2,74 -0,75 0,14 -0,05 0,10Health Care 6,01 -5,24 -0,28 5,99 -0,30 -0,00 -0,00 -0,28 -0,28Industrials 10,02 7,65 0,98 11,51 6,80 0,75 0,07 0,14 0,20Information Technology 4,44 20,77 0,71 4,83 16,71 0,71 -0,10 0,12 0,01Materials 6,52 2,95 0,40 8,36 2,24 0,20 -0,00 -0,00 -0,00Real Estate 4,17 1,63 0,08 1,08 2,33 0,02 0,02 -0,02 0,00Telecommunication Service 6,86 -0,98 -0,08 7,92 -4,28 -0,34 0,20 0,24 0,43Utilities 11,89 -2,36 -0,40 9,83 -2,87 -0,33 -0,07 0,05 -0,02[Cash] 2,72 0,17 0,01 -- -- -- 0,10 -- 0,10

Total 100,00 1,20 1,20 100,00 0,92 0,92 0,25 0,02 0,28

Holdings Data As Of ING (L) Invest Euro High Dividend 12/31/2009 through 3/30/2010 MSCI EMU 1/01/2010 through 3/31/2010

ING (L) Invest Europe High DividendPerformance at the end of Q1 2010

Strong absolute performance and reasonable relative over the last 12 months

With limited underperformance thanks to cyclical exposure (dividend style did not work)

Q1 2010 : strong relative performance in January gradually evaporated in the strong equity market rise in February and March driven by high risk outperformance.

Q1 2010 : Outperformance year to date versus dividend style indices

The outperformance of low quality stocks is most probably over => positive outlook for quality stocks

+0.2%

+2.6%

+2.8%

5 Years(ann.)

-0.1%

-8.3%

-8.4%

3 Years(ann.)

+0%-3.5%-0.1%Relative performance

+3.5%+53.2%+4.1%MSCI Europe (net return)

+3.5%+49.7%+4.0%ING (L) Invest Europe High Dividend

Since Incep.(Dec. 04)

(ann.)1 YearQ1

2010

Gross performance ING (L) Invest Europe High Dividend in EUR, Benchmark: MSCI Europe Net Return Index, 31 Mar. 2010.


Performance attribution ING (L) Europe High DividendQ1 2010

• Cyclicals sectors and high risk stocks outperformed

•Positive stock selection in Industrials (ABB, Prysmian, Bouygues) and IT (Cap Gemini)

• Negative contribution from Health Care (GSK, Bayer) & Energy (Saras)

ING (L) Invest Europe High Dividend MSCI Europe Attribution Analysis


Sectors Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 6,29 9,43 0,64 7,39 7,41 0,53 0,01 0,11 0,12Consumer Staples 9,14 6,79 0,67 12,06 7,21 0,89 -0,04 -0,04 -0,08Energy 12,72 0,82 0,19 11,00 1,53 0,15 -0,02 -0,08 -0,10Financials 18,21 1,66 0,38 22,85 1,85 0,41 0,14 -0,07 0,08Health Care 13,22 1,41 0,25 10,18 3,52 0,38 -0,03 -0,26 -0,29Industrials 10,86 10,46 1,04 10,05 8,85 0,86 -0,01 0,13 0,12Information Technology 4,08 22,28 0,71 3,03 17,09 0,47 0,09 0,13 0,23Materials 3,09 9,27 0,38 9,76 6,72 0,65 -0,17 0,14 -0,03Real Estate 4,25 1,68 0,08 0,91 0,48 0,00 -0,12 0,05 -0,07Telecommunication Services 7,02 -0,39 -0,09 6,74 -0,62 -0,04 0,00 0,01 0,01Utilities 7,99 -2,01 -0,17 6,03 -2,34 -0,17 -0,09 0,03 -0,06[Cash] 3,12 0,05 0,03 -- -- -- 0,04 -- 0,04

Total 100,00 4,10 4,10 100,00 4,12 4,12 -0,18 0,16 -0,02


We reduced (moved underweight) our exposure on Industrials:

Sold Saint-Gobain, Tognum & GEA Group; Reduced exposure on Prysmian, Siemens

ING Euro Dividend : Portfolio Actions Q1 2010

Within Materials sector we increased the dividend yield:

Sold Umicore and reduced Symrise

Added BASF

Within Financials (back to neutral from underweight) we favour Insurance vs Banks:

Added to Munich Re, Fortis, Intesa SanPaolo

Reduced Santander, BBVA

Within Energy & Utilities

Sold Saras (dividend cut), sold Red Electrica (profit taking)

Introduced SBM Offshore, added to Total and Veolia Environnement

We reduced underweight on Telecommunication sector & added to IT

Telecom Italia Rsp sold on potential Telefonica bid

Telekom Austria was added

Neopost added to portfolio

We moved underweight on Consumer Staples

Pernod-Ricard sold on valuation and dividend yield threshold

ING Europe Dividend : Portfolio Actions Q1 2010

• Reduced exposure on Materials in favour some lagging Industrials:

• Profit taking on BHP Billiton and Johnson Matthey

• Buying Orkla and Balfour Beatty.

• Within Financials:

• We reduced exposure to Zurich Financial after strong performance

• We bought Intesa SanPaolo: attractive valuation and capital reserves above sector average.

• Within defensive sectors:

• We sold Telecom Italia Rsp on bid rumors

• Introducing Telekom Austria after its strong underperformance vs the telecom sector.

• And we took profit on catering group Compass Plc.

• We also increased our exposure to the IT sector:

• Buying Ericsson and Neopost.

In the 1st quarter of 2010 we continued to take profit on high performing stocks and

reinvested the proceeds in attractively valued stocks both in cyclical and defensive sectors


Current positions Euro High Dividendend of March 2010

Relative Positioning(in %)

Cash 1.7

Consumer Discretionary -1.9

Consumer Staples -0.7

Energy 2.9

Financials 0.0

Health Care 0.0

Industrials -1.4

IT -0.3

Materials -1.7

Telecommunication -0.8

Utilities 2.1

Portfolio’s average yield 5.1%

Dividend yield FY01 (in %)

Telefonica 8.1

Vivendi 7.2

Telekom Austria 7.1

KPN 6.8

Wereldhave 6.5

Neopost 6.2

Terna 6.0

ENI 6.0

Santander 5.7

Royal Dutch 5.6

GDF Suez 5.5

2,5Cash

-1,0Financials

-2,5Consumer Staples

-1,0Consumer Discretionary

2,0Energy

2,0Utilities

3.0Pharma

Materials

Telecom

IT

Industrials 1,0

1,0

0,5

-6,0


-0,5DKK

-1,0GBP

-1,5SEK

0,0CHF

1,0EUR

2,0NOK


• Sector and currency deviations limitted

•Reduced Consumer Staples in favour of Pharma (valuation)

• Reduced Materials in favour of (lagging) Industrials

1,5GlaxoSmithKline

1,5Eni

1,5Scottish & Southern

1,5Credit Suisse

1,5Sanofi-Aventis

Biggest bets(in %)

Current positions Europe High Dividendend of March 2010


Attractive portfolio’s dividend yield (4.6%)

More focus on stable, sustainable and well covered dividend yields

Good balance between Value (60%) and Growth (30%)

Lower beta (0.92)

Ex-ante tracking error (3.30%)

High active share (around 60%)

Data as end of March 2010

ING Euro/Europe Dividend Risk Metrics

-0.32%

+2.06%

+1.74%

5Y(ann.)

-2.19%

-5.92%

-8.11%

3Y(ann.)

+1.26%-0.25%-0.22%Relative performance

+2.41%+49.50%+9.47%MSCI World (net return)

+1.15%+49.25%+9.25%ING (L) Invest GlobalHigh Dividend

Incept(Oct 00) (ann.)1YQ1

2010

• Strong absolute and reasonable relative performance over the last 12 months• A strong equity with limited underperformance in year thanks to cyclical and IT exposure• Q1 2010 : strong relative performance in January gradually evaporated in the strong equity market rise

in February and March driven by “high risk” outperformance. • Q1 2010 : Outperformance year to date versus dividend style indices• The outperformance of low quality stocks is most probably over => positive outlook for quality stocks

ING (L) Invest Global High DividendPerformance at the end of Q1 2010

• Positive stock selection in Staples (Hershey, Sara Lee, etc) & Industrials (Emerson, Honeywell)

• Negative contribution from Discretionary (H&R Block & Vivendi)

Performance attribution ING (L) Global High DividendQ1 2010


Current positions Global High Dividendend of March 2010

Relative Positioning (in %)

Relative Positioning (in %)

Cash 3,5 Cash 3,0Utilities 5 Australia 2,0Consumer Staples 4,5 Europe 1,8Telecom 2,5 UK 1,7Health Care 0,5 Emergin Markets 1,5Energy 0,5 Japan -0,7Financials -3 Canada -3,2Consumer Discretionary -3 United States -6,0Industrials -3Materials -3IT -4,5 Biggest bets (in %)

Pitney Bowes 1,4Vivendi 1,4Sumitomo Mitsui 1,3Nintendo 1,3Eni 1,2

• Underweight Materials reduced buying Nucor, Lafarge and CRH out of cash

+2.16%

+1.28%

+3.44%

5Y(ann.)

+1.75%

-4.80%

-3.05%

3Y(ann.)

+2.16%-1.66%-0.42%Relative performance

+1.28%+48.80%+5.23%S&P 500 (net return)

+3.44%+47.14%+4.81%ING (L) Invest US High Dividend

Incept(Oct 00) (ann.)1YQ1

2010

• Strong absolute and reasonable relative performance over the last 12 months• A strong equity with limited underperformance in year thanks to positive stockpicking• Q1 2010 : strong relative performance in January gradually evaporated in the strong equity market rise

in February and March driven by “high risk” outperformance. • Q1 2010 : Outperformance year to date versus dividend style indices• The outperformance of low quality stocks is most probably over => positive outlook for quality stocks

ING (L) Invest US High DividendPerformance at the end of Q1 2010

ING (L) Invest US High Dividend SP500 Attribution Analysis


Sectors Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 5,79 17,42 1,05 10,00 10,32 1,02 -0,17 0,43 0,26Consumer Staples 20,65 7,39 1,56 11,33 5,58 0,66 0,07 0,38 0,45Energy 7,30 2,08 0,17 10,84 0,48 0,06 0,18 0,09 0,27Financials 14,27 9,83 1,05 15,17 11,35 1,61 -0,18 -0,26 -0,44Health Care 15,85 1,98 0,33 12,20 3,25 0,38 -0,11 -0,18 -0,29Industrials 5,02 11,26 0,48 10,58 12,88 1,28 -0,39 -0,07 -0,47Information Technology 6,91 1,80 0,07 18,93 1,82 0,31 0,43 0,03 0,45Materials 6,56 8,21 0,52 3,47 2,73 0,10 -0,02 0,28 0,27Real Estate 0,69 1,93 0,02 1,27 10,11 0,12 -0,01 -0,06 -0,07Telecommunication Services 3,53 0,29 0,03 2,81 -4,72 -0,16 -0,05 0,18 0,13Utilities 7,12 -3,09 -0,24 3,39 -3,79 -0,15 -0,30 0,05 -0,25[Cash] 6,31 0,38 0,04 -- -- -- -0,47 -- -0,47

Total 100,00 5,08 5,08 100,00 5,23 5,23 -1,02 0,87 -0,15

Holdings Data As Of ING (L) Invest US High Dividend 12/31/2009 through 3/30/2010 SP500 12/31/2009 through 2/26/2010

• Positive contribution from underweight IT and stock selection in Consumer (i.e. Hershey, Kraft)

•Negative contribution from underweight Banks and Industrials and cash position

Performance attribution ING (L) US High DividendQ1 2010


Current positions US High Dividendend of March 2010

• Profit taking in Energy (Murray Oil), Materials (Dupont) and Consumer sectors (Hershey’s, Hasbro)

• Increased Financials (laggards Hudson City bank, Everest Reins.) and IT (Applied Materials)

•Cyclical sectors remain underweight

Relative Positioning (in %) Biggest bets (in %)

Cash 10 Alcon 3,0Consumer Staples 9 Everest Reins. 2,7Utilities 3 Southern Co 2,6Materials 3 Kimberly Clark 2,2Health Care 2 Arthur Gallagher Ins. Brokers 2,0Telecom 1Financials -1Industrials -4Energy -5Consumer Discretionary -5IT -13


Outlook


The Style cycle


Where are we now ?

• Entering the slow down phase of the cycle

Entering the maturing phase

Panic2008/2009Earnings declinePE ContractionDefensivesGrowth

Recovery2009/2010Earnings troughPE ExpansionCyclicalsValueSmall Cap

Maturing2010/2011Earnings growthPE ContractionQuality growthLarge Cap

(over)-optimism2011/2012Earnings peakPE Expansion

Large cap

2010

The importance of dividends

Investors are looking for yield enhancementEuropean dividend yields (3.4%) are attractive compared to (corporate) bond yields (4.2%)Dividends will represent a bigger part of the total equity returnExpect double digit dividend growth following the earnings rebound, strongbalance sheets and reasonable pay out ratio’s

Source: Datastream, INGIM

Dividend pay out (Europe)

30%

35%

40%

45%

50%

55%

60%

jan/

73

jan/

75

jan/

77

jan/

79

jan/

81

jan/

83

jan/

85

jan/

87

jan/

89

jan/

91

jan/

93

jan/

95

jan/

97

jan/

99

jan/

01

jan/

03

jan/

05

jan/

07

jan/

09

EUROPEAN DIIVDEND YIELD

0

1

2

3

4

5

6

7

8

jan/

73

jan/

75

jan/

77

jan/

79

jan/

81

jan/

83

jan/

85

jan/

87

jan/

89

jan/

91

jan/

93

jan/

95

jan/

97

jan/

99

jan/

01

jan/

03

jan/

05

jan/

07

jan/

09

Dividend yield approaches corporate bond yield

Prefer high-yielding equity investments, offering a “free option” on growth

Source: Datastream, INGIM

Corporate bond yield less dividend yield

0.00

0.50

1.00

1.50

2.00

2.50

3.00

jan/03

mei/03

sep/03

jan/04

mei/04

sep/04

jan/05

mei/05

sep/05

jan/06

mei/06

sep/06

jan/07

mei/07

sep/07

jan/08

mei/08

sep/08

jan/09

mei/09

sep/09

jan/10

AVERAGE

Corporate bonds attractive

Equities attractive

Analysts expect V-shape earnings recovery

Peak earnings are expected to return by 2011

Earnings growth expectations

Market is already pricing in peak earnings level

Market valuation

US equities not cheap relative to long term GD PE average


Limited price upside from current levels

Market valuation

Source: SocGen Quant Strategy, 1 April 2010, pg 6


Proxi of real business

Commodities: Mind the gap

Commodities = NO diversification today

Proxi of market sentiment

Recently de-correlated!

Source: Chevreux E-Quant, 8 April 2010 – page 4

Source: T. Abet, Chevreux E-Quant, 12 April 2010


High Quality equities are oversold !

• Strong and fast rerating of low quality stocks in 2009 compared to 2003

• Outlook for quality stocks now positive (ING Euro High Dividend strategy outperformed in 2004 in a rising market (+14%)


What if rates rise?

BY Trough BY Peak Duration Cumulative chg in BY (bps) Ann'd chg in BY (bps) Cumulative return Ann'd return

Dec-72 Sep-75 33 206 74 43% 14%

Dec-76 Sep-81 58 846 176 6% 1%

May-83 Jun-84 13 317 287 17% 15%

Jan-87 Oct-87 9 245 323 4% 5%

Feb-88 Mar-89 13 114 104 11% 10%

Dec-89 Sep-90 9 105 138 -6% -7%

Oct-93 Nov-94 13 262 238 9% 8%

Oct-98 Jan-00 15 212 167 -16% -13%

Jun-03 Jun-07 49 177 44 -6% -1%

Average 24 276 172 7% 4%

Median 13 212 167 6% 5%

Hit Ratio 6 / 9 6 / 9

Hit Ratio 67% 67%

Major periods of rising US 10yr bond yield Stock picking strategy based on high dividend yield in US*

Very strong equity markets

Tech bubble

High dividend strategies outperformed low dividend strategies by an average of 7% in 8 out of 9 periods when long bonds rose, excluding the tech bubble and the bull market 03/07 (since 1972).

Source: Morgan Stanley March 2010

High inflation


Sub-par equity markets, implicitly lower returns

• Sustainability of earnings a driving theme for forward returns• sub-par economic & corporate earnings growth = lower return profile

• added likelihood of market regulation = lower return profile

Two investment implications:

1. invest where growth prevails and where it is sustainable

2. recognise the importance of yield in the total return equation

Positive outlook for the contribution from dividends

to total shareholder return


1. We will face sub-par equity markets, recognise the importance of yields

2. Markets have been driven by PE expansion

3. Earnings growth will take the lead from now on

4. The return of fundamentals in a low-return world (sideways market)

Conclusion

Appendices:

• Buy side research output• FY 2009 performance attribution• Biographies• Share classes

Fundamental Research ProcessProprietary Analyst Screens (sector specific)

Europe P/E '09 P/E '10 P/E '11 P/E '12 P/E '13 EPS % Peak P/E Peak EV/Sales '10 EBIT % '10 EBIT % '13 EBIT % Peak EBIT DCF DCF Mid‐Cycle % to Peak EV DCF/Mid YTD 1M 3M 12MSandvik 124,9 37,0 26,2 23,2 20,0 ‐41% 11,9 1,8 9% 13% 17% 14% ‐23% 7% 64% 6% 19% 4% 85% Vallourec 17,8 23,5 12,3 10,5 9,9 ‐18% 8,1 1,6 14% 22% 28% 17% ‐1% ‐22% 57% X 20% 11% 19% 124% Volvo 59,1 16,6 11,6 12,1 11,6 ‐19% 9,3 0,9 6% 6% 9% 7% ‐8% 29% 103% 22% 25% 19% 71% MAN 23,1 17,1 12,1 13,2 12,6 ‐42% 7,3 0,8 7% 8% 11% 7% 4% ‐7% 101% 13% 18% 13% 86% Atlas Copco 21,6 25,4 21,1 18,8 18,1 ‐49% 9,3 2,3 14% 17% 19% 17% ‐23% ‐1% 6% 8% 15% 8% 77% SKF 25,9 16,8 14,9 14,0 13,6 ‐6% 12,7 1,2 11% 12% 13% 11% ‐5% ‐11% 12% X 4% 15% 4% 77% Alfa Laval 16,7 19,7 18,4 16,8 15,2 ‐18% 12,5 1,7 15% 16% 21% 15% ‐6% ‐12% 19% 11% 10% 13% 74% Kone 17,9 18,4 18,9 18,5 18,6 ‐4% 17,9 1,7 13% 12% 12% 14% ‐5% ‐11% ‐6% 5% 2% 7% 104% Metso 19,0 20,6 15,8 12,3 11,2 ‐24% 8,5 0,9 6% 8% 10% 7% ‐2% ‐12% 95% 0% 10% 2% 163% GEA 15,3 18,4 14,6 9,7 9,3 25% 11,6 0,6 8% 9% 9% 9% 15% 10% 61% X X 12% 28% 13% 119% Wartsila 9,4 15,9 25,0 19,4 15,5 ‐40% 9,4 0,7 8% 8% 11% 8% ‐12% ‐9% 47% X 33% 9% 36% 116% XInvensys 16,3 14,7 13,9 13,6 13,3 ‐37% 8,4 0,9 11% 10% 12% 11% 10% ‐16% 23% X 16% 12% 18% 110% Schindler 16,6 20,4 17,9 16,7 15,7 5% 16,6 0,6 7% 8% 8% 9% 7% ‐5% X X 15% 9% 15% 77% Cargotec ‐108,0 21,8 17,4 12,2 10,6 ‐20% 8,4 0,6 5% 7% 9% 7% 17% 1% 129% X X 12% 9% 15% 208% Sulzer 14,9 19,0 20,8 17,3 14,5 ‐27% 10,7 0,8 10% 11% 13% 11% 8% 13% 88% X X 25% 7% 29% 74% Andritz 23,0 20,4 18,4 17,1 16,4 2% 16,6 0,5 6% 6% 7% 6% 6% ‐7% 19% X 12% 10% 13% 122% Vossloh 13,7 13,8 13,2 12,9 12,6 ‐34% 8,3 0,9 11% 10% 12% 9% 3% ‐7% 22% X 13% 11% 12% 1% Demag Cranes 17,9 25,0 14,9 10,2 9,2 ‐25% 6,9 0,6 6% 9% 11% 8% 16% 16% 99% X X 12% 8% 11% 95% Charter 12,7 10,3 9,4 9,1 8,9 ‐6% 8,3 0,7 9% 10% 12% 9% 19% 11% 66% X X 4% 14% 6% 71% Konecranes 16,8 17,9 16,1 13,7 12,8 ‐36% 8,2 0,7 7% 8% 12% 7% 0% 1% 48% X 22% 16% 25% 84% Tognum 24,6 24,7 16,6 12,1 10,7 ‐25% 8,0 0,7 6% 9% 12% 8% ‐8% 8% 94% X 17% 10% 19% 79% FLSmidth 13,2 15,9 16,1 13,9 12,1 9% 13,2 0,9 9% 9% 10% 9% ‐6% ‐3% 51% X 6% 13% 5% 183% Outotec 25,8 26,4 20,1 18,6 17,4 ‐31% 11,9 1,1 7% 9% 11% 8% 1% ‐12% 102% 8% 27% 12% 103% Krones ‐46,1 29,8 21,2 14,5 13,9 ‐19% 11,4 0,6 3% 6% 8% 6% 2% 9% 67% X X 8% 1% 10% 69%

Re-rating potential Recovery potential Re-rating potential Recovery potential Re-rating potential Recovery potentialZardoya Otis 55% Vallourec 13% Navistar Intl 37% Terex Corp 21% Modec Inc 126% Okuma Corp 28%Sulzer Ag-Reg 16% Scania Ab-B 13% Oshkosh Corp 31% Paccar Inc 19% Sany Heavy Indus 108% Fanuc Ltd 22%Krones Ag 13% Volvo Ab-B 11% Agco Corp 26% Timken Co 18% Mitsui Eng&Shipb 78% Amada Co Ltd 22%Charter Internat 13% Cargotec Oyj-B 11% Spx Corp 26% Wabco Holdings 18% Ihi Corp 45% Thk Co Ltd 18%Tognum Ag 11% Konecranes Oyj 10% Itt Corp 26% United Rentals 17% Changsha Zooml-A 32% Smc Corp 16%Volvo Ab-B 11% Outotec Oyj 10% Ingersoll-Rand 18% Rush Enter-Cl A 16% Jtekt Corp 27% Ngk Insulators 15%Demag Cranes Ag 9% Tognum Ag 9% Harsco Corp 11% Caterpillar Inc 14% Tadano 24% Komatsu Ltd 14%Gea Group Ag 2% Demag Cranes Ag 9% Columbus Mcki/Ny 11% Kennametal Inc 13% Ntn Corp 20% Keyence Corp 14%Danieli & Co 1% Metso Oyj 9% Cnh Global Nv 10% Cnh Global Nv 12% Sumitomo Heavy 16% Hitachi Const Ma 14%Cargotec Oyj-B -4% Krones Ag 9% Illinois Tool Wo 5% Columbus Mcki/Ny 11% Lonking Holdings 11% Jtekt Corp 13%Group Average -7% Group Average 6% Group Average -7% Group Average 10% Group Average 0% Group Average 7%

Europe United States Japan/RoW

Fundamental Research ProcessIn-House Company Modeling: Standard ING IM Template

Key Characteristics• Easy-to-use: Automatic data feed• Holistic: Incorporating Fixed Income and Equity functionality• Flexible: Flexibility to adjust or improve standardised model• In house assumptions on all key valuation drivers• In-House Cost of Equity process

Output• Company model, including ratio analysis• DCF, including sensitivity analysis• Fixed Income scorecard• ING versus Consensus analysis

2006 2007 2008 2009 2010 2011 2012 2013

PROFIT & LOSS

Sales 39.642 40.187 40.523 40.523 41.333 42.160 43.003 43.863 Growth (yoy) -0,1% 1,4% 0,8% 0,0% 2,0% 2,0% 2,0% 2,0%

- COGS 20.093 20.558 21.342 21.275 21.700 22.134 22.577 23.028 % of Sales 50,7% 51,2% 52,7% 52,5% 52,5% 52,5% 52,5% 52,5%

Gross Profit 19.549 19.629 19.181 19.248 19.633 20.026 20.427 20.835 % of Sales 49,3% 48,8% 47,3% 47,5% 47,5% 47,5% 47,5% 47,5%

Labour Costs NA NA NA 0 0 0 0 0 % of Sales NA NA NA

SG&A NA NA NA 0 0 0 0 0 % of Sales NA NA NA

R&D NA NA NA 0 0 0 0 0 % of Sales NA NA NA

Operating Leases NA NA NA 0 0 0 0 0 % of Sales NA NA NA

Other Expenses NA NA NA 12.400 12.648 12.901 13.159 13.422 % of Sales NA NA NA 30,6% 30,6% 30,6% 30,6% 30,6%

- Total Operating Expenses 13.159 12.863 12.388 12.400 12.648 12.901 13.159 13.422 % of Sales 33,2% 32,0% 30,6% 30,6% 30,6% 30,6% 30,6% 30,6%

+ Other Operating Income 0 0 0 0 0 0 0 0 % of Sales 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0% 0,0%

EBITDAR NA NA NA NA NA NA NA NA % of Sales NA NA NA NA NA NA NA NA

EBITDA 6.390 6.766 6.793 6.848 6.985 7.125 7.268 7.413 % of Sales 16,1% 16,8% 16,8% 16,9% 16,9% 16,9% 16,9% 16,9%

EBITDA MARGIN SHORTCUT

ABC

Fundamental ResearchInvestment Case & Company Meeting Notes

Investment Case• Key facts and drivers

relating to our investment view

• Our fair value 1, 3 and 5 year price targets or target bond rating

• Main points and explanation of DCF / sensitivity analysis outcomes / Relative Value

• Key catalysts (1Y)• 2-5 year recommendation

points and risks• Where and how much do

we differ from consensus• Absolute and relative

valuations• ESG Issues

Eq / FI: EquityDate: 25 mrt 10

Last update: 04 feb 10

BASIC DATATicker PBI US Market cap ($m) 5.083 Share Price 24,5 S&P A NEGSedol 2690506 ADV ($m) 51,2 Target (1 yr) 30,2 MOODY'S A1 STABLECountry UNITED STATES 52 wk high / low 26,41 - 20,38 Upside (1 yr) 23% Fitch A- STABLEGICS industry group Commercial Serv Beta 0,97 Upside (3 yr) 45% CDS spread 5YR 94,7

COMPANY DESCRIPTIONUnited States 69%Rest of the World 31%

INVESTMENT CASE

CATALYSTS

RISKS TO VIEW

UNDERPINNING OF PRICE TARGET / RATING

EST EV THIS YR SEV THIS YR EBBEST PE RATIOEST PE NXT Y #N/A X TO BOOK RAT #N/APEER GROUPVALUATION

PITNEY BOWES INC 12/10 1,7 7,2 10,2 9,9 21,9% NM 128% NEOPOST SA 01/10 2,8 8,4 12,0 12,5 19,6% 4,2 102% HEWLETT-PACKARD 10/10 1,0 6,8 11,7 10,9 7,0% 3,0 14% IBM 12/10 1,8 7,3 11,5 10,6 11,7% 7,4 9% XEROX CORP 12/10 0,9 7,2 12,1 10,1 8.1% 1,2 130%

COMPANY GUIDANCE ING CONSENSUS ING CONSENSUS2010 2009 2009 2010 2010 2009 2010

Revenue "flat to up 3%" 5.570 5.629 5.570 5.676 DPS 1,40 1,40 EBITDA 1.287 1.311 1.331 1.309 Dividend Cover 1,5x 1,7x EBITA NM NM NM NM FCF Cover 2,0x 1,8x EPS "$2.30-$2.50" 2,04 2,41 2,31 2,47 Yield 5,7% 5,7%

DIVIDEND METRICS

Our estimates in the model are not too different compared to consensus and company guidance although we have put them at the low-end of the range just out of conservatism. PBI clearly has an attractive dividend yield with

a fairly safe dividend in our view

EV / Sales (FY1) EV / EBITDA (FY1) P / E (FY1) P / E (FY2) Avg EBIT %

since '98 Price / Book

Only Neopost is a proper peer in terms of business model and PBI is trading at a clear ~20% discount on several metrics. Although not great peers (see margin difference) US analysts often compare PBI to the likes of HPQ, IBM and XRX to which it also trades at a discount when looking at P/E (although I am not a fan of using these peers).

Key to our call is pure & simple: It's ValuationThe Pitney Bowes shares have underperformed both the MSCI Industrials and the MSCI World by some 40% in the last 12 months and are now trading at almost 7% dividend yield, a P/E '11 of only 9x (vs 15x+ historic avg), DCF showing almost 40% upside while also still having over 40% upside to its historic mid-cycle value. The shares are pricing in only ~14% long-term EBIT margin which compares to an average of 22% in the last 10+ years and 17,5% we use in our DCF as LT margin. All of the above indicate to us that this is a great buying opportunity and the shares should do well in the coming period.

Pitney Bowes should benefit from a recovery in economic activityThe correlation between economic activity, mail volumes and Pitney Bowes' revenue development has historically been fairly high. As a result, we believe the company should be able to show modest sales growth in the coming years, coming out of the downturn, more than compensating for the secular decline trend we do expect to continue (pressure on general mail volumes). The company sees 2010 sales being "flat to up 3%" and we expect a sales CAGR of 1-3% in the next decade while assuming terminal growth of 0%.

Solid margins & cash flow generation are here to stayThe company's business model is fairly resilient, yielding solid margins (22% on average in the last 10+ years) and generating strong cash flows (FCF margin of 10% in the same period, currently 12%+ FCF Yield). We do not expect too much pressure on these margins in the coming years, hence proper execution should illustrate the value present at the moment. Important to note is that given the level of FCF generation, the dividend yield should also be fairly safe in our view. All of this we feel is possible despite the likely ongoing pressure on topline from a secular decline in mail volumes globally in the coming decade.

PBI's Transformation Strategy should keep margin & cash flows highTo deal with the secular trend of mail volume pressure, PBI has initiated on its "Transformation" strategy, which focusses on developing a more flexible and responsive operational structure, reduce overall costs and expand into growth areas (like more software & services, i.e. more recurring revenue streams). Management targets to save $150m-$200m in costs by end of '11 (~3% of sales) through this program which should enable the company to compensate pressure and profitability and keep margins at high levels and hence show the resilience and attractiveness of its model and its shares.

PITNEY BOWES INC

% to PeakFY1 ends

Jeroen Bos, CFA +31 70 378 1118 [email protected]

GEOGRAPHIC REVENUE MIXFounded in 1920, Pitney Bowes is a leading supplier of mail processing equipment and related services and software. Simply put, the company does the outsourcing of mail workflows, i.e. printing, binding, (often regulated) postage, distribution etc. all to improve document workflow and mail performance, through delivering hardware, software and services. These long-term outsourcing relationships result in fairly resilient revenue and cash streams. The company operates in some 130 countries, achieving Revenues/EBIT of $6.3bn/$1.1bn in 2008.

- Recovery in GDP should lead to a rebound in mail volumes and PBI revenues, profitability and cash flows- Broker coverage could intensify (only covered by 6 analysts of which only 2 large brokers), lacking buys among the large brokers- Some 8% short-interest could create a short-squeeze in case of solid results in the next few quarters- Its cash flow generation could lead to a renewed share buyback program (only $73m left in the previous one), supporting the share price- 7% dividend yield should help PBI shares ranking high in investor's value screens and could drive renewed interest in the shares- Potentially quicker than expected benefits from its announced cost savings initiatives could boost the shares

- Double dip in the economy would lead to further cyclical pressure on mail volumes and likely pressure the PBI shares (on an absolute basis)- Secular decline in mail volumes could continue to weigh on the shares, irrespective of valuation- Value trap or not ? We don't think so but this is the largest risk in our view.- Inability of management to redistribute its cash flow generation effectively (up to now management has remained fairly disciplined)

We primarily base our price target on discounted cash flow (DCF) which leads to a 1-year PT of $29,70 (40% upside), assuming a WACC of 8%, Beta of 1.1x, longer-term EBIT margin of 17.5% (vs 22% in the last 10-14 years) and 0% terminal growth.

Furthermore, from a multiple perspective the shares are only trading at ~10x '10 EPS and ~9x '11 EPS, while compares to its historic average of 15x+. In addition, PBI shares are trading at some 20% discount to its closest peer (Neopost). From a EV/Sales perspective, the shares still have almost 50% upside to its historic mid-cycle valuation, screening very well on a relative basis.

Lastly, the shares trade at a free cash flow yield of some 12%+ and a dividend yield of almost 7%, a yield we believe its fairly secure.

Date: 25 mrt 10Last update: 04 feb 10

- Environmental - Positive PBI scores 51 vs 47.9 sector average - Social - Neutral PBI scores 47.5, inline with the 47.7 sector average - Corporate Governance - Positive PBI scores 63.5 vs 58 sector average

2010 - 2008 2009 2010 20112011 1.531 EBITDA 1.509 1.287 1.331 1.378 2012 550 EBITDA Margin 24% 23% 24% 25%2013 375 Net debt 4.307 4.005 3.752 3.482 2014 450 Adjusted Net Debt 4.307 4.005 3.752 3.482 2015 400 Net Total Debt / EBITDA 2,9x 3,1x 2,8x 2,5x 2016 500 EBITDA / Gross Interest Expense 6,6 6,0 6,6 7,2 2017 500 EBITDAR / (Net interest+leases) NA NA NA NA 2018 600 FFO 876 761 817 856

Thereafter 800 FCF 462 281 230 246 Gross Debt 4.705 Expected Liquidity Excess (Shortfa 131 79 225 494

1M 3M 6M 12M QTD YTDPITNEY BOWES INC 6,8 8,4 1,3 12,7 9,4 9,4Rel. to MSCI WORLD/INDUSTRL -0,3 1,2 -9,3 -49,2 1,6 1,6Rel. to MSCI WORLD 1,6 6,3 -5,8 -35,8 7,0 7,0

OTHER ITEMS

PBI has ~$900m in cash & net debt of ~$4bn, implying 3x net debt/EBITDA which we believe is no issue given its margin resilience & CF generation ('10 CF guidance is $700m). Also note that given its financing activities, part of the net debt have a contractual future revenue stream to compensate for them. So we see very little issue and also expect PBI to continue providing at least the same dividends (i.e. at least 7% dividend yield).

SHARE PRICE PERFORMANCE (%)

- PBI has some 20% exposure to financial customers, i.e. any change in behaviour could negatively impact PBI business- Ongoing restructuring needs pressure profitability and cash flows in the near-term- Corporate Governance structure with CEO being Chairman as well is mentioned sometimes by the bears

- Substitution of mail into electronic forms of communication as a secular trend - Potential negative effect of future postal regulatory changes on equipment and services- Potential for a price war between Neopost and PBI if discipline is not maintained- A prolonged economic recession pressuring mail volumes

ESG

MATURITIES LONG TERM DEBT CREDIT METRICS

- Strong, long-standing customer relationships, leading to high market shares in the US (~80%) and Internationally (~65%)- High Barriers-to-entry as the market for Postage meters is highly regulated- Attractive recurring revenue stream from its installed base- Fairly resilient margin & cash flow profile

- Cash generation could lead to a new share buyback program- Recently initiated cost initiatives should support/benefit margins in the coming years (up to $50m in net benefit in '10, up to $200m by 2012)- Potential positive effect on postal regulation/forced equipment refresh- Further International expansion possibilities (already grew from 18% of total in 2000 to 30%+)- Increasing expansion of services & software in the mix should support future margins and cash flows

WEAKNESSES THREATS

Jeroen Bos, CFA +31 70 378 1118 [email protected]

STRENGTHS OPPORTUNITIES

PITNEY BOWES INC

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Fundamental Research ProcessMonthly Price Target Sheets

Monthly Price Target Sheet• Analyst publish monthly price

target sheets to distribute among PMs

• Return based framework• 1-3-5 years price target

Industrials Sector Company IC CMN 1 year 3 year 5 year 1 year 3 year 5 year

3M 2595708 MMM HK 6-2-2009 10-06-09 95 110 129 80,87 20% 44% 67%

ABB 7108899 ABBN HK 1-11-2008 12-12-07 05-11-08 25 30 35 22,15 13% 35% 58%

Adecco 7110720 ADEN JB 6-2-2009 53 63 74 54,50 0% 23% 44%

AGCO 2010278 AGCO JB 23-12-2009 06-11-08 41 48 58 34,86 16% 39% 66%

Alfa Laval 7332687 ALFA JB 20-12-2009 104 122 143 103,80 2% 24% 44%

Alstom B0DJ8Q5 ALO HK 1-11-2008 21-01-08 49 57 67 48,47 3% 25% 45%

Andritz B1WVF68 ANDR JB 2-6-2008 02-06-08 02-06-08 48 57 67 42,97 15% 40% 63%

Asahi Holding B60DQZ7 5857 JB 6-2-2009 26-06-08 30-05-08 2.015 2.350 2.742 1.360,00 50% 78% 107%

Assa Abbloy 5698789 assab HK 6-2-2009 120 135 159 139,90 -12% 4% 21%

Atlas Copco "B" B1QGR41 ATCOA JB 6-2-2009 30-07-08 11-09-08 85 100 119 103,50 -15% 6% 23%

Boeing 2108601 BA HK 6-2-2009 63 74 87 64,91 0% 22% 42%

Bombardier 2109723 BBD/B HK 6-2-2009 6 7 9 5,91 7% 29% 57%

Bouygues 4002121 EN HK 5-4-2009 05-04-09 40 44 52 35,65 17% 37% 59%

Bureau Veritas B28DTJ6 BVI JB 6-1-2010 18-09-09 43 50 57 37,60 16% 38% 58%

Canadian National Railways 2180632 CNR JB 5-1-2010 28-08-07 19-03-09 66 77 89 56,46 19% 41% 63%

Canadian Pacific Railway 2793115 CP JB 5-1-2010 16-11-09 55 64 75 52,91 6% 27% 48%

Capita B23K0M2 CPI JB 6-1-2010 18-09-09 811 930 1.067 726,00 14% 35% 54%

Cargotec B09M9L0 CGCBV JB 10-12-2009 25 30 36 20,55 26% 56% 84%

Caterpillar 2180201 CAT JB 6-2-2009 27-03-09 50 59 71 58,34 -12% 10% 30%

Cintas 2197137 CTAS JB 24-12-2009 01-12-09 32 37 44 25,01 29% 56% 83%

Cooper B40K911 CBE HK 1-12-2008 10-05-07 44 52 61 46,68 -4% 18% 37%

CSX 2160753 CSX JB 5-1-2010 16-11-09 52 61 72 48,25 10% 32% 54%

Daikin Industries 6250724 6367 HK 5-1-2010 2.971 3.500 4.113 3.455,00 -13% 4% 22%

Danaher 2250870 DHR JB 10-12-2009 16-11-09 67 77 89 75,52 -11% 3% 19%

Deere 2261203 DE JB 6-2-2009 20-06-08 18-06-08 56 66 79 58,25 -3% 19% 41%

Demag Cranes B16LY78 D9C JB 23-12-2009 07-08-09 02-04-09 30 36 42 25,46 24% 57% 82%

Deutsche Post 4617859 DPW HK 1-8-2009 28-08-08 16-11-07 18 21 25 12,46 49% 83% 115%

Dover Corp 2278407 DOV JB 23-12-2009 11-06-07 11-05-07 45 54 64 46,07 1% 24% 45%

Dun & Bradstreet 2636254 DNB JB 15-12-2009 95 110 128 70,10 39% 65% 89%

EADS 4012250 EAD HK 20 23 27 15,41 31% 53% 79%

East Japan Railways 6298542 9020 JB 6-2-2009 18-05-09 08-12-08 8.261 9.213 10.273 6.170,00 36% 55% 72%

Eaton 2300883 ETN JB 20-12-2009 68 80 93 70,06 1% 22% 41%

Emerson 2313405 EMR HK 1-12-2008 24-08-07 09-08-07 51 60 71 47,66 10% 34% 57%

Experian B19NLV4 EXPN JB 6-1-2010 18-09-09 731 854 998 624,00 19% 43% 66%

Fanuc 6356934 6954 JB 6-2-2009 22-08-08 08-12-08 8.156 9.481 11.022 8.770,00 -6% 10% 28%

Fedex 2142784 FDX HK 1-10-2009 10-10-07 84 97 114 86,33 -2% 14% 34%

Sedol code BB Ticker Analyst

Last update

Last Update Current price

Price target Exp. total return

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Fundamental Research ProcessSector Outlook

Sector Outlook includes• 3 times a year per sector• Sector performance review• (Consensus) estimates

review• Top ideas• Main themes• (Sub) sector views

Fundamental Research ProcessCommunication – Reuters Knowledge & Bloomberg

Integrated front office tool• Global Analyst address book• Analyst biographies• Team pages• Company research

Fundamental Research ProcessCommunication: Meetings

Daily Morning Meeting (attended by Analysts & PMs)Discuss major news & events and the impact on investment ratings & price targets

Weekly Corporate Analytics team meetingDiscuss major news flow and changes in views

Bi-Weekly Equity PM meeting & Daily Ad-Hoc DiscussionsFocus on portfolio positioning and risk management

Weekly strategy MeetingGlobal economic trends and asset allocation discussion

3 times per year a Sector outlook meetingMajor sector trends and themes and how to play these to generate outperformance

Analyst and Sector PMs sit together to maximize contact and idea flows throughout the day

Quantitative Screens Research1

ING (L) Invest Euro High Dividend MSCI EMU Variation Attribution Analysis

Port. Bench. Variation inEnding TotalContribution Ending TotalContribution Ending TotalContribution AllocationSelection + Total

High Div Custom Sectors Weight Return To Return Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 7,56 27,58 2,89 9,19 20,24 2,17 -1,63 7,33 0,72 0,48 0,36 0,84Consumer Staples 10,50 54,64 5,65 8,63 35,30 2,75 1,87 19,34 2,90 0,02 1,71 1,73Energy 9,69 25,81 2,31 7,98 26,98 2,04 1,72 -1,17 0,28 0,30 -0,31 -0,01Financials 19,74 30,09 5,17 25,20 38,03 9,97 -5,47 -7,94 -4,80 -1,22 -1,34 -2,56Health Care 5,70 36,95 2,04 6,07 26,17 0,99 -0,37 10,78 1,05 0,14 0,63 0,77Industrials 14,79 49,54 5,11 10,81 34,11 3,52 3,99 15,44 1,58 0,09 1,73 1,83Information Technology 3,70 -4,02 0,20 4,19 12,03 0,78 -0,48 -16,06 -0,58 0,21 -0,66 -0,45Materials 5,66 46,78 3,50 8,30 49,07 3,52 -2,64 -2,29 -0,02 -0,12 -0,04 -0,16Real Estate 3,40 49,02 1,93 1,04 48,83 0,38 2,36 0,19 1,56 0,74 -0,02 0,71Telecommunication Ser 5,95 13,15 1,00 8,36 13,02 0,89 -2,41 0,13 0,11 0,42 0,05 0,47Utilities 13,31 12,95 1,71 10,25 8,21 0,31 3,06 4,74 1,41 0,50 0,53 1,03Total 100,00 31,51 31,51 100,00 27,32 27,32 -- 4,19 4,19 1,56 2,63 4,19


Performance attribution ING (L) Euro High DividendFY 2009

• Strong stock selection in Consumer Staples & Industrials

• Negative contribution from allocation & selection in Financials

ING (L) Invest Euro High Dividend VariationMSCI EMU Attribution Analysis

Port. Bench. Variation inEnding TotalContribution Ending TotalContribution Ending TotalContribution Total

Security Name - Client II Weight Return To Return Weight Return To Return Weight Return To Return Effect

Soc Generale -- 120,94 2,74 1,29 46,65 0,53 -1,29 74,29 2,21 1,41Volkswagen Ag 1,58 49,98 0,70 0,43 -45,34 -0,71 1,15 95,32 1,42 1,41Man Se -- 71,49 1,75 0,24 46,17 0,12 -0,24 25,32 1,63 0,94Metro Ag 1,40 85,21 1,75 0,20 52,94 0,12 1,20 32,27 1,63 0,81Bayer Motoren Werk -- 4,44 0,24 0,49 50,30 0,29 -0,49 -45,85 -0,05 0,72Delhaize Group -- 10,57 0,23 0,23 24,04 0,08 -0,23 -13,47 0,15 0,57Cie De St-Gobain 1,31 59,79 0,89 0,62 28,31 0,16 0,70 31,48 0,73 0,50Deutsche Telekom -- -- -- 1,23 2,23 -0,09 -1,23 -2,23 0,09 0,46Symrise Ag 1,40 58,02 0,90 -- -- -- 1,40 58,02 0,90 0,43Total 2,81 22,10 0,63 4,00 20,48 0,79 -1,18 1,63 -0,16 0,43Lvmh Moet Hennessy -- 52,83 1,10 0,81 67,26 0,49 -0,81 -14,42 0,62 0,41

Iberdrola Sa 2,90 8,45 0,44 1,03 8,45 0,07 1,86 0,00 0,37 -0,38Anheuser-Busch Inb -- -- -- 1,10 121,49 0,77 -1,10 -121,49 -0,77 -0,40Banco Popular Espa 1,35 -17,48 -0,35 0,19 -9,69 -0,00 1,16 -7,79 -0,35 -0,45Reed Elsevier Nv 2,16 -0,60 0,09 0,26 6,42 -0,00 1,90 -7,03 0,09 -0,47Unicredit Spa -- -- -- 1,40 58,72 0,88 -1,40 -58,72 -0,88 -0,48Sodexo 2,08 3,96 0,17 0,16 2,67 -0,01 1,92 1,29 0,18 -0,49Arcelormittal -- -- -- 1,16 91,67 0,71 -1,16 -91,67 -0,71 -0,50Unione Di Banche I 1,59 2,33 -0,54 0,24 1,80 -0,00 1,35 0,53 -0,53 -0,56Deutsche Bank Ag -- -- -- 1,23 78,93 1,04 -1,23 -78,93 -1,04 -0,61Bnp Paribas 2,92 4,68 0,16 2,23 93,30 1,63 0,69 -88,62 -1,47 -0,94Axa -- -55,49 -2,00 1,18 9,38 0,02 -1,18 -64,87 -2,02 -1,22


Performance attribution ING (L) Euro High DividendFY 2009


Performance attribution ING (L) Europe High DividendFY 2009

• Strong stock selection, especially in Consumer Staples

• Negative contribution from allocation & selection in Financials & Commodities

ING (L) Invest Europe High Dividend MSCI Europe Variation Attribution Analysis

Port. Bench. Variation inEnding Total Contribution Ending Total Contribution Ending Total Contribution Allocation Selection + TotalWeight Return To Return Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 8,01 40,25 3,90 7,17 32,21 2,70 0,84 8,03 1,20 0,44 0,63 1,08Consumer Staples 10,09 50,68 6,47 12,00 32,11 3,35 -1,90 18,57 3,11 -0,13 2,37 2,24Energy 12,76 27,55 3,27 11,27 30,29 3,34 1,48 -2,74 -0,08 0,46 -0,56 -0,10Financials 18,58 29,53 5,01 23,12 39,38 9,79 -4,54 -9,85 -4,78 -1,02 -1,71 -2,73Health Care 13,14 23,16 2,11 10,33 18,14 1,09 2,81 5,02 1,02 0,01 0,52 0,53Industrials 10,82 39,19 4,04 9,53 35,81 3,46 1,29 3,37 0,57 0,03 0,39 0,42Information Technology 2,52 19,01 0,99 2,68 14,09 0,64 -0,16 4,92 0,34 0,22 0,40 0,62Materials 5,14 49,01 3,54 9,51 74,10 5,71 -4,37 -25,09 -2,16 -0,46 -1,28 -1,74Real Estate 3,72 32,84 1,44 0,93 33,36 0,29 2,80 -0,52 1,14 0,27 -0,03 0,24Telecommunication Serv 8,53 21,03 1,76 7,06 17,85 0,99 1,47 3,18 0,77 -0,16 0,37 0,21Utilities 6,69 4,94 -0,05 6,41 9,46 0,23 0,28 -4,52 -0,28 0,33 -0,22 0,11

Total 100,00 32,47 32,47 100,00 31,60 31,60 -- 0,87 0,87 -0,02 0,88 0,87


Performance attribution ING (L) Europe High DividendFY 2009

ING (L) Invest Europe High Dividend VariationMSCI Europe Attribution Analysis

Port. Bench. Variation inEnding Total Contribution Ending Total Contribution Ending Total Contribution TotalWeight Return To Return Weight Return To Return Weight Return To Return Effect

Volkswagen Ag 1,22 49,98 0,56 0,22 -45,34 -0,34 1,00 95,32 0,90 0,90Soc Generale -- 124,21 1,76 0,65 46,65 0,27 -0,65 77,56 1,49 0,87Metro Ag 1,19 85,21 1,38 0,10 52,94 0,06 1,09 32,27 1,32 0,65Man Se -- 83,24 1,28 0,12 46,17 0,06 -0,12 37,06 1,22 0,57Bayer Motoren Werk -- 4,44 0,20 0,25 50,30 0,14 -0,25 -45,85 0,05 0,56Kingfisher -- 46,81 0,49 0,13 89,61 0,10 -0,13 -42,80 0,38 0,52Roche Hldgs Ag 1,82 8,77 0,12 1,75 10,29 0,16 0,07 -1,52 -0,04 0,52Nordea Bank Ab -- 40,71 0,82 0,48 87,19 0,41 -0,48 -46,49 0,41 0,48Gdf Suez -- -- -- 0,79 -9,04 -0,18 -0,79 9,04 0,18 0,44Cie De St-Gobain 1,20 62,21 0,76 0,31 28,31 0,08 0,89 33,90 0,68 0,43Arm Hldgs -- 34,19 0,41 -- -- -- -- 34,19 0,41 0,42

United Utilities G 1,28 -8,15 -0,09 0,08 -8,15 -0,02 1,20 -0,00 -0,07 -0,39Standard Chartered -- -- -- 0,75 105,31 0,64 -0,75 -105,31 -0,64 -0,39Xstrata Plc -- -7,03 -0,10 0,51 236,70 0,53 -0,51 -243,73 -0,63 -0,42Deutsche Post Ag -- -19,56 -0,55 0,24 18,86 0,02 -0,24 -38,42 -0,57 -0,46Bnp Paribas 1,28 4,68 0,07 1,11 93,30 0,82 0,17 -88,62 -0,75 -0,48Unione Di Banche I 1,27 2,43 -0,28 0,12 1,80 0,00 1,15 0,63 -0,28 -0,48Reed Elsevier -- -10,69 -0,18 0,15 14,97 0,02 -0,15 -25,67 -0,19 -0,51Credit Suisse Grp 1,74 -7,20 -0,14 0,82 79,47 0,67 0,92 -86,67 -0,80 -0,59Aviva -- -46,91 -1,11 0,26 23,01 0,00 -0,26 -69,92 -1,11 -0,65Rio Tinto -- -- -- 1,10 207,06 1,08 -1,10 -207,06 -1,08 -0,79

2009 Performance attribution ING (L) Global High Dividend

Portfolio Weight

Return Benchmark Weight

Return Relative Weight

Allocation Effect

Selection/ Interaction

Effect

Total Effect

Consumer Discretionary 8,84 38,29 9,33 35,30 -0,49 0,14 0,11 0,25Consumer Staples 15,97 32,16 10,16 17,88 5,81 -0,04 1,96 1,92

Energy 11,88 15,22 10,94 22,29 0,94 0,02 -1,07 -1,05Financials 16,06 21,46 18,43 26,85 -2,36 -0,84 -1,08 -1,93

Health Care 11,37 17,78 10,07 15,18 1,31 0,19 0,38 0,57Industrials 7,18 15,74 10,40 22,75 -3,22 0,23 -0,47 -0,24

Information Technology 6,33 15,30 11,96 47,62 -5,63 -0,97 -1,61 -2,58Materials 2,11 52,93 7,52 56,49 -5,41 -0,16 0,52 0,35

Real Estate 2,52 43,82 2,16 28,55 0,36 0,10 0,31 0,40Telecommunication Services 7,77 13,24 4,41 10,14 3,36 -0,31 0,44 0,13

Utilities 9,98 9,38 4,61 2,91 5,37 -1,05 0,74 -0,30[Unassigned] 0,00 0,00 0,03 -35,34 -0,03 0,03 0,00 0,03

Total 100,00 23,50 100,00 25,94 0,00 -2,66 0,22 -2,44

Holdings Data As Of ING (L) Invest Global High Dividend 12/31/2008 through 12/30/2009 MSCI World 1/01/2009 through 12/31/2009

• Strong stock selection in Consumer Staples

• Negative contribution from allocation & selection in Financials & IT

2009 Performance attribution ING (L) Global High Dividend

Top Contributors Portfolio Weight Return Benchmark

Weight Return Relative Weight

Allocation Effect

Wesfarmers Ltd 1,06 140,83 0,15 141,48 0,91 0,80Dow Chem Co 0,00 80,12 0,15 82,03 -0,15 0,80

Aust & Nz Bank Grp 0,98 97,06 0,24 97,06 0,74 0,54Toronto Dominion Bk Ont 0,00 69,67 0,25 79,39 -0,25 0,44

Exxon Mobil Corp 1,13 -8,44 1,51 -15,90 -0,38 0,40

Bottom Contributors Portfolio Weight Return Benchmark

Weight Return Relative Weight

Allocation Effect

Aviva 0,00 -46,78 0,08 23,01 -0,08 -0,53Precision Drilling Tr 0,00 -67,60 0,00 -25,06 0,00 -0,71

Bank Of America Corporation 0,00 -61,01 0,60 3,99 -0,60 -0,76Legal & General Gp 0,00 -57,84 0,04 20,83 -0,04 -0,88

Nintendo Co Ltd 1,53 -36,10 0,11 -36,26 1,43 -0,97

Holdings Data As Of ING (L) Invest Global High Dividend 12/31/2008 through 12/30/2009 MSCI World 1/01/2009 through 12/31/2009


Performance attribution ING (L) US High DividendFY 2009

• Positive stock selection in most sectors and underweight Financials

• Negative allocation contribution from underweight IT and overweight Cons. Staples

ING (L) Invest US High Dividend SP500 Variation Attribution Analysis

Port. Bench. Variation inEnding Total Contribution Ending Total Contribution Ending Total Contribution Allocation Selection + TotalWeight Return To Return Weight Return To Return Weight Return To Return Effect Interaction Effect

Consumer Discretionary 8,95 46,54 3,23 9,65 38,98 3,68 -0,70 7,56 -0,45 -0,01 0,34 0,34Consumer Staples 23,13 29,46 6,35 11,28 13,91 1,49 11,85 15,55 4,86 -1,22 4,03 2,81Energy 10,12 26,19 2,49 11,55 13,10 1,42 -1,43 13,09 1,08 0,06 1,21 1,28Financials 9,41 40,17 3,63 13,16 6,88 1,14 -3,75 33,29 2,49 0,96 2,27 3,23Health Care 16,87 26,89 4,91 12,64 18,41 1,85 4,23 8,48 3,06 -0,27 1,52 1,25Industrials 4,49 25,78 1,56 10,14 19,94 1,60 -5,65 5,83 -0,04 0,55 0,57 1,12Information Technology 8,27 51,69 4,92 19,87 61,64 10,72 -11,60 -9,96 -5,81 -3,02 -0,33 -3,35Materials 5,53 103,09 4,27 3,60 46,96 1,59 1,93 56,12 2,68 0,58 1,98 2,56Real Estate 1,24 19,78 0,47 1,23 25,22 0,25 0,01 -5,43 0,22 0,16 0,05 0,22Telecommunication Services 4,01 2,68 0,36 3,17 7,16 0,26 0,84 -4,48 0,11 -0,09 -0,17 -0,27Utilities 8,00 11,45 1,01 3,71 10,32 0,11 4,28 1,13 0,90 -0,26 0,18 -0,09


Performance attribution ING (L) US High DividendFY 2009

ING (L) Invest US High Dividend VariationSP500 Attribution Analysis

Port. Bench. Variation inEnding Total Contribution Ending Total Contribution Ending Total Contribution Total

Security Name - Client II Weight Return To Return Weight Return To Return Weight Return To Return Effect

Labrador Iron Ore Royality 1,47 155,89 1,20 -- -- -- 1,47 155,89 1,20 0,92Alcon Inc 0,92 91,25 1,04 -- -- -- 0,92 91,25 1,04 0,56National Bk Cda Montreal Qu -- 88,93 0,96 -- -- -- -- 88,93 0,96 1,16Herbalife Ltd -- 31,28 0,91 -- -- -- -- 31,28 0,91 0,82Applied Matls Inc 1,65 40,46 0,96 0,19 39,60 0,09 1,46 0,86 0,87 0,49Citigroup Inc -- -- -- 0,65 -50,58 -0,86 -0,65 50,58 0,86 0,83Exxon Mobil Corp 1,13 -11,23 -0,17 3,26 -13,20 -0,99 -2,13 1,97 0,82 1,26Nyse Euronext -- 33,16 0,80 0,07 -4,34 -0,00 -0,07 37,49 0,80 0,53Pepsi Bottling Group Inc 0,75 58,63 0,67 0,05 69,47 0,03 0,69 -10,85 0,64 0,28Eastman Chem Co -- 161,73 0,66 0,04 96,11 0,03 -0,04 65,61 0,63 0,44

Hewlett Packard Co -- -- -- 1,23 42,80 0,41 -1,23 -42,80 -0,41 -0,15Wolverine World Wide Inc -- -32,98 -0,44 -- -- -- -- -32,98 -0,44 -0,16Tyco Electronics Ltd Switze -- -40,96 -0,43 -- 36,53 0,03 -- -77,49 -0,46 -0,30Legg Mason Inc -- -50,75 -0,46 0,05 39,89 0,01 -0,05 -90,65 -0,47 -0,26International Business Mach 0,34 52,05 0,40 1,73 57,68 0,99 -1,39 -5,63 -0,58 -0,24Cisco Sys Inc -- -- -- 1,39 46,87 0,71 -1,39 -46,87 -0,71 -0,32Goldman Sachs Group Inc -- -- -- 0,88 101,79 0,72 -0,88 -101,79 -0,72 -0,48Google Inc -- -- -- 1,51 101,52 0,99 -1,51 -101,52 -0,99 -0,67Jpmorgan Chase & Co -- -30,95 -0,38 1,66 33,70 0,75 -1,66 -64,65 -1,13 -0,61Apple Inc -- -- -- 1,91 147,05 1,66 -1,91 -147,05 -1,66 -1,20

Investment Team - Biographies

Nicolas Simar – Head of Value Investment experience: 14 years

Nicolas Simar is Head of the Value team in the Equity Investments department. In this capacity he is responsible for all Value strategies. He started his career at the Banque Bruxelles Lambert in 1996 (now part of ING) as Investment Manager Fixed Income and moved three years later to the Equity team to manage the Euro High Dividend strategy. He holds a degree in Civil Engineering from the Université Catholique de Louvain (1994) and a degree in Business Administration from the Institut Français du Pétrole (Paris, 1995).

Manu Vandenbulck - Senior Investment Manager Investment experience: 13 years

Manu Vandenbulck is a Senior Investment Manager and manages the Europe High Dividend Fund since its inception in 2004. From 2001 to 2004, he was senior manager of equities and balanced portfolios at INGIM. Between 2000 and 2001, he was a private equity analyst for FLV Fund (Technology). He began his career as a fixed income manager in 1997. Manu has a degree in Economics, and is a Certified European Financial Analyst


Moudy El Khodr - Senior Investment Manager Investment experience: 12 years

Moudy El Khodr is a Senior Investment Manager and co-manages the Global High Dividend (since January 2006) and managed the US High Dividend fund until Adour Sarkissian’s arrival in Spring 2007. Prior to this, he was in charge of the Belgian funds (including the Belgian High Dividend Fund) and worked on the Euro High Dividend Fund since he joined INGIM in 2001. Before that he was an equity fund manager at Banque Générale du Luxembourg (BGL). He started his career at the Belgian stock exchange (now Euronext Brussels) in 1997 in the study & statistical department. Moudy holds a degree in Economics and is a European Certified Financial Analyst.

Kris Hermie, CFA – Senior Investment Manager Investment experience: 12 years

Kris Hermie is a Senior Investment Manager and joined the Value team in January 2007. Prior to joining INGIM he worked at Dexia Asset Management where he managed value-based portfolios for pension funds and insurance companies. He started his career in 1998 at Bank Corluy where he worked initially as an analyst and progressed to the role of Fund Manager managing regional Belgian funds and the Global technology fund. Kris has a Masters in Commercial Sciences from Ehsal in Brusels and received his Chartered Financial Analyst designation in 2002.


Adour Sarkissian, CFA - Senior Investment Manager Investment experience: 11 years

Adour Sarkissian is a Senior Investment Manager and joined the High Dividend team as US specialist in 2007. Adour started his finance career with Exane in New York in 1999, analysing and selling US equities to an institutional client base. He moved to Standard & Poor’s in 2001 as a global fund analyst, soon becoming the emerging markets equities specialist. In 2005 he joined CapitalatWork as a US equities fund manager and research analyst. Adour graduated in Computer and Communications Engineering from the American University of Beirut, and holds an MBA from the University of Washington DC. He became a CFA charter holder in 2003.

Pierre Nicolas - Senior Investment Manager Investment experience: 18 years

Pierre Nicolas is a Senior Investment Manager and is in charge of research and development for the European Value strategies. Pierre has been an investment manager since 1998, and iInitially he managed the Global and Emerging Markets funds. Prior to this, he worked for the investment strategy department between 1991 and 1998. Pierre joined Banque Bruxelles Lambert (now part of ING) in 1989 as a Stock Exchange analyst. He holds a degree in Mathematics, a degree in Economics and a M.Sc. in Econometrics and Mathematical Economics from the London School of Economics in 1985.

ING (L) Invest Euro High Dividend

0.052.000.03€1,000,0000.050.60LU0293043609S capitalisation

0.053.000.07-0.151.50LU0127786431P capitalisation

2.00

2.00

2.00

5.00

3.00

Maximum Subscr Fee (%)

0.010.04-0.041.50LU0407160505V capitalisation

0.03

0.03

0.07

0.07

Cust Fee (%)

€250,000

€250,000

-

-

Minimum Investment

0.60

0.60

2.00

1.50

Mgt Fee (%)

0.05

0.05

0.15

0.15

Admin Fee (%)

0.01LU0191250090I capitalisation

0.05LU0127786860X capitalisation

0.05LU0127786605P distribution

I distribution

Share Classes

0.01LU0273690817

Subscr Tax (%)ISIN

Base currency: EUR

ING (L) Invest Europe High Dividend



2.00

2.00

2.00

5.00

3.00


0.010.04-0.041.50LU0354743741V capitalisation

0.03

0.03

0.07

0.07

Cust Fee (%)

€250,000

€250,000

-

-

Minimum Investment

0.60

0.60

2.00

1.50

Mgt Fee (%)

0.05

0.05

0.15

0.15

Admin Fee (%)




I distribution

Share Classes

0.01LU0218792157

Subscr Tax (%)ISIN

Base currency: EUR

ING (L) Invest Global High Dividend


2.00

2.00

2.00

5.00

3.00


0.050.03€1,000,0000.050.60LU0293045216S capitalisation

0.03

0.03

0.07

0.07

Cust Fee (%)

€250,000

€250,000

-

-

Minimum Investment

0.60

0.60

2.00

1.50

Mgt Fee (%)

0.05

0.05

0.15

0.15

Admin Fee (%)




I distribution

Share Classes

0.01LU0228650569

Subscr Tax (%)ISIN

Base currency: EUR

ING (L) Invest US High Dividend



2.00

2.00

5.00

3.00


0.03

0.03

0.07

0.07

Cust Fee (%)

€250,000

€250,000

-

-

Minimum Investment

0.60

0.60

2.00

1.50

Mgt Fee (%)

0.05

0.05

0.15

0.15

Admin Fee (%)




I distribution

Share Classes

0.01LU0228653746

Subscr Tax (%)ISIN

Data as per the end of December 2008Base currency: USD


Strategy characteristics – Euro High Dividend

ObjectivesInvestment objective : We aim to outperform the market over a full market cycle with a lower volatility

Benchmark : MSCI (DM) EMU (Net) Index

Target tracking error : No constraint

Other characteristicsInvestment universe : EMU equities

Investment style : Value, Contrarian bias

Maximum sector exposure : + 10% relative to the benchmark

Maximum country exposure : + 10% relative to the benchmark

Other (internal) guidelines : Stock are held in approximately equal weights, quarterly rebalanced, sell discipline based on dividend yield

Number of stocks : 50 – 70

Assets under Management : €1.2bn as per the end of September 2009

Turnover : 60% - 80% generally (per annum, both ways)

Active Share Aim is typically above 60%.


Strategy characteristics – Europe High Dividend

ObjectivesInvestment objective : We aim to outperform the market over a full market cycle with a lower volatility

Benchmark : MSCI (DM) Europe (Net) Index

Target tracking error : No constraint

Other characteristicsInvestment universe : European equities

Investment style : Value, Contrarian bias

Maximum sector exposure : + 10% relative to the benchmark

Maximum country exposure : + 10% relative to the benchmark

Other (internal) guidelines : Stock are held in approximately equal weights, quarterly rebalanced, sell discipline based on dividend yield

Number of stocks : 60 – 90

Assets under Management : €720mio at the end of March 2010

Turnover : 60% - 80% generally (per annum, both ways)

Active Share Aim is typically above 60%.

Strategy characteristics – Global High Dividend

Stock are held in approximately equal weights, quarterly rebalancing, sell discipline based on dividend yield

:Other (internal) guidelines

Value, contrarian:Investment style

Global equities:Investment universe

Other characteristics

+ 10% relative to the benchmark:Maximum sector overweight

+ 15% relative to the benchmark, North America, Europe, Emerging Markets, Developed Asia (Australia, New Zealand, HK and Singapore) & Japan 15%

:Maximum region overweight

No objective:Target tracking error

We aim to outperform the benchmark over a full market cycle with a lowervolatility

:Investment objective

:

:

:

:

:

Aim is typically above 60%Active share

60% - 80% generallyTurnover

€2.43bn as per the end of December 2009Assets under Management

100 – 120Number of stocks

Benchmark

Objectives

MSCI (DM) World (Net) Index

Strategy characteristics – US High Dividend

Aim is typically above 60%:Active share

60% - 80%:Turnover

Stock are held in approximately equal weights, quarterly rebalancing, sell discipline based on dividend yield. Base currency: USD

:Other (internal) guidelines

Value, contrarian:Investment style

US equities:Investment universe

Other characteristics

+ 15% relative to the benchmark:Maximum sector exposure

Maximum allocation Canada: 15%, minimum 0%:Maximum country exposure

No objective:Target tracking error

We aim to outperform the benchmark over a full market cycle with a lower volatility

:Investment objective

:

:

:

€270mn as per the end of December 2009Assets under Management

80 – 100Number of stocks

Benchmark

Objectives

S&P 500


Disclaimer

The elements contained in this document have been prepared solely for the purpose of information and do not constitute an offer, in particular a prospectus or any invitation to treat, buy or sell any security or to participate in any trading strategy. This document is intended for qualified investors, as defined in the Swiss Federal Collective Investments Schemes Act and its implementing ordinance and as interpreted by the Swiss Financial Market Supervisory Authority FINMA as well as private investors and describes a strategy. However, investments may be suitable for private investors only if they are recommended by an authorised self-employed or a professional employed adviser acting on behalf of the investor on the basis of a written agreement. While particular attention has been paid to the contents of this document, no guarantee, warranty or representation, express or implied, is given to the accuracy, correctness or completeness thereof. Any information given in this document may be subject to change or update without notice. Neither ING Investment Management / ING Fund Management B.V. / ING Investment Management (Europe) B.V. nor any other company or unit belonging to the ING Group, nor any of its officers, directors or employees can be held direct or indirect liable or responsible with respect to the information and/or recommendations of any kind expressed herein. The information contained in this document cannot be understood as provision of investment services. If you wish to obtain investment services please contact our office for advice. Use of the information contained in this document is solely at your risk. No direct or indirect liability is held for any loss sustained or incurred by readers as a result of using this publication or basing any decisions on it. Investment sustains risk. Please note that the value of your investment may rise or fall and also that past performance is not indicative of future results and shall in no event be deemed as such. This presentation and information contained herein is confidential and must not be copied, reproduced, distributed or passed to any person at any time without our prior written consent. Any claims arising out of or in connection with the terms and conditions of this disclaimer are governed by Swiss law.

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