ING Investment Management's ("INGIM") investment philosophy for equities is based on the belief that earnings and cash-flow growth drive stock returns. We therefore focus our investment style on the analysis of the earnings and cash-flow potential of individual companies using a bottom-up fundamental approach.

We apply an investment style called Growth at a Reasonable Price (GARP) with the INGIM label being Price for Growth . INGIM is neither a value nor a growth investor as both growth and value stocks can be overvalued. It is our objective to find underpriced earnings and cash-flow growth in the market by making our own assessment of what a reasonable price is for the earnings and cash-flow growth that companies offer.

Our analysis focuses primarily on stock bets and secondarily, on the sector positioning. We do not allocate actively on the basis of country or currency and work on the basis of relative value. Our approach is modified slightly for Asia, where the country allocation decision is more important than the sector allocation decision as the markets in Asia are not unified (as in the European Union) and are at significantly different stages of economic development. We prefer to take a large number of small bets instead of a small number of large bets.

Equity Investment Process

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• Step 1. Determination of universe / screening

  The first step is designed to exclude those stocks from our fundamental analysis that offer insufficient size and/or liquidity to allow for an entry or exit with limited market impact. The remaining stocks are analysed using proprietary screens. The output of these screens is a ranking of stocks, which is used to prioritise research in step 2. Screening in principle is done on a monthly basis.

• Step 2. Fundamental research

  The second step is the core of our investment process. The purpose of this step is to identify those stocks that offer underpriced earnings and cash-flow growth as compared to a reasonable valuation. This fundamental research process results in two important inputs for the next step of our investment process: a level of conviction about the attractiveness of individual stocks and about the universe of stocks in the sector. We use own research, company visits/contacts, research from preferential brokers and valuation models to assess the Price for Growth attractiveness each company in our universe.

• Step 3. Model portfolio construction

  In the third step of our investment process the model portfolio is constructed. This step starts with the weekly Investment Meeting. Starting from the existing model portfolio, each fund manager presents proposed investments for peer group review. The size of the position taken will be linked to the level of conviction the fund manager has on the stock.

  Subsequently the portfolio's active bets are aggregated per sector and over all sectors. Typically the portfolio thus constructed will not add up to 100%, nor does it need to satisfy the risk control (most notably tracking error) standards.

  On each run in this iterative process, risk control (ex ante tracking error, sector weights, individual holdings) is carried out, until convergence is achieved.

• Step 4. Implementation

  The resulting model portfolio is implemented in the mandate of the client by the designated portfolio management team, which has no leeway to deviate from the model portfolio, unless required by client's guidelines and mandate restrictions.