agribusiness and water · 2014-05-13 · tech global agri global water 10 years msci msci msci msci...

of 12/12

Post on 25-Jul-2020




0 download

Embed Size (px)


  • © Kleinwort Benson Investors

    KleInwort Benson Investors whIte PaPer

    Agribusiness And WAter: Compelling sourCes of groWth for

    globAl equity investors

  • 2

    Agribusiness And WAter: Compelling sourCes of groWth for globAl equity investors

    steven Falci, CFaHead of Strategy Development - Sustainable Investment

    Equity investors who are searching for long term sources of return for their portfolios must consider investing in water and agribusiness stocks. These stocks have delivered outstanding performance over the last ten years, and more importantly, the long term drivers of growth that are firmly grounded in the need to provide solutions to resource scarcity remain firmly in place.

    Water and agribusiness stocks provide new and diversifying sources of return to a global equity allocation, and can be introduced to a portfolio in a manner that achieves the aggregate style, size and risk characteristics.

    Over the last ten years a modest 5% allocation to either water or agribusiness would have added positive incremental return to a global equity portfolio with almost no impact on portfolio risk.

    Due to a low correlation of excess returns between water and agribusiness, a combined allocation to both would have resulted in even better risk adjusted returns.

    executive summary

  • 3

    As equity investors pore over quarterly returns, monthly economic data and near-term market trends, many lament the ability to find sources of sustainable returns in their equity allocations. A dominant focus on near-term drivers of return may inadvertently result in relegation of long term drivers of return to the back burner. Looking back ten years, equity investors who were early to identify the long-term trends driving the need for resource solutions in water and agribusiness were handsomely rewarded:

    Specifically investments in water and agribusiness delivered both strong absolute and risk adjusted returns over the last 10 years, as indicated by the strong Sharpe ratios. Yet we would argue that despite the success, these themes remain underinvested in global equity allocations. While short term focus may be part of the problem, there are other challenges including where thematic equity strategies “fit” in a global equity allocation and the management of these allocations.

    In this paper we will discuss the long term sources of growth that continue to be embedded in water and agribusiness equities, propose a framework to help meet the challenge of allocating to thematic equity strategies and discuss the benefits of specialist management that can deliver alpha above the theme.







    0%0% 5% 10% 15% 20% 25% 30%

    volatIlIty % P.a.



    n %



    Source: Kleinwort Benson Investors and Datastream. Returns in USD.

    risk and return ten years to 31 august 2012 (usD)DAX GLOBAL




    lmScI WORLD lmScI AcWI INfO TEcH




























    returns, p.a.


    sharpe ratio

    world rI

    Frontier Growth

    Frontier MktseM


    Info tech

    Global agri

    Global water 10 years

    MsCI MsCI MsCI MsCI MsCI aCwIDax s-network MsCI aCwI

    Source: Kleinwort Benson Investors and Datastream. Returns in USD.

  • 4

    Drivers of return

    The long term trends that brought resource scarcity to the fore and drove returns in water and agribusiness equities during the last ten years remain very much in place, and in fact are arguably stronger today: very simply, a growing world population will continue to put increasing pressure on the finite supply of vital resources and drive the need for investment in solutions to assure their provision.

    World population increased nearly four-fold during the 20th century from 1.6 billion to 6 billion people.1 population growth was accompanied by a twenty-fold increase in global economic output, resulting in an explosion in demand for various resources of 600% to 2000%.2 Amazingly, despite this massive increase in demand, prices of most key resources fell dramatically during that century. However, the last decade has seen a dramatic shift in this trend, as the resource price declines of the prior hundred years were completely undone by an unprecedented rise in resource prices in the first eleven years of the new millennium.

    This is a sea change driven by secular trends in population and demographics that are putting enormous pressure on the supply/demand relationship for vital resources. Renowned investor Jeremy Grantham in his April 2011 Quarterly Letter described this change as a paradigm shift. “Statistically, most commodities are so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most significant event since the Industrial Revolution.”3

    While this “paradigm shift” has primarily caught investors’ attention through rising commodities, more importantly, the same supply/demand dynamic is driving the need for investments in solutions to close the resource gaps that are driving resource prices higher. We believe the under-recognised opportunity is investment in companies providing solutions to the challenges of resource scarcity. contrary to the last century where new sources of supply became available, we must now rely exclusively on innovation and technology to meet the challenges.

    Since the turn of the century, world population has continued to grow to more than 7 billion people and is expected to grow to more than 9 billion by 2050. The challenge of meeting the demand for resources from this growing, more affluent population is particularly evident in the provision of our most essential resources: food and water.

    Water is a finite resource for which there is no substitute and demand for this precious resource continues to grow significantly faster than population:• Less than 1% of the world’s water is available for use and this limited supply is increasingly threatened

    by pollution, particularly in emerging market countries as they grow and industrialise.• Historically, water demand has grown at twice the rate of population growth and is expected to grow

    by 41% by 2030.4 • Water is essential for feeding the world with nearly 70% of water supply going to agriculture. Industrial

    use accounts for a little more than 20% of the water supply and further highlights its importance for economic growth.5

    • While water for domestic use may be approximately 10%, this should not obscure the vital need to provide domestic water as today nearly 800 million people do not have access to clean drinking water and 2.5 billion people lack access to basic sanitation.6

    A growing global population along with increased affluence and changing diets in the developing world will continue to drive increased demand for food.• Demand is expected to expand by 27% by 20307 , accelerating to an increase of at least 70% by mid

    century.8 • With approximately 38%9 of the earth’s land already used for farming, the supply of arable land for

    farming is relatively fixed. • Additionally, the extreme weather conditions that we have witnessed across the globe over the last

    few years could very well continue to cause shocks to the supply of global grains when droughts and floods occur, exacerbating the long term supply demand imbalance.

    • In order to meet the demand for food, we will have to find ways to dramatically increase crop yields which will require massive investment in machinery, precision agricultural technology and infrastructure to effectively develop and manage the required supply.

  • 5

    An estimated $22 trillion investment will be required to meet the need for water through 2030,10 which will be the largest component of global infrastructure spending in the next 20 years. The food and Agricultural Organization (fAO) estimates that in the developing world alone, $9.2 trillion in investment will be needed to meet agricultural needs through 2050.11

    This extensive capital commitment to meet the world’s food and water needs will be deployed through companies working to provide solutions. Therein lies the significant opportunity for equity investors; but how do they allocate to this opportunity in their equity portfolio and how should these allocations be managed?

    water and agribusiness equities - Components of an Alpha Core

    Specialist thematic investments have historically found homes relatively easily within investor private equity allocations. Exposure to commodities has a natural home in the alternatives bucket or in real asset allocations. The challenge for including thematic strategies like agribusiness and water in public equity allocations has been that most investors have constructed their equity allocations from a traditional style box perspective and struggle with how thematic funds fit in this framework. However, the same fundamental investment reasons – new sources of return and diversification of risk – that have led investors to include focused thematic strategies in private equity and alternatives allocations are the foundation for including agribusiness and water in global equities.

    Agribusiness and water equities provide exposure to unique sources of returns that are not prevalent in many global equity allocations. The table below looks at the correlations of excess returns relative to the mScI World index of:• The MSCI Growth Index, a proxy for the universe of growth managers12 • Information technology and pharmaceuticals/bio tech, two areas where investors have traditionally

    looked for growth• Water and agribusiness The low or negative correlation of the excess return of water and agribusiness to growth oriented strategies is a clear indication that these strategies can bring a new source of low correlated growth to a global equity allocation and combining them with other specialist equity strategies can provide more diversified, risk efficient returns.

    Correlation of excess returns

    mScI AcWI Info TechmScI AcWI pharma and BiotechmScI World GrowthDax Global AgribusinessS-Network Global Water Index

    1.00-0.330.22-0.02-0.19 1.00




    ten year Correlations of excess returns above MsCI world

    Source: Kleinwort Benson Investors and Datastream.

    s-network Global water Index

    Dax Global


    MsCI aCwI

    Info tech

    MsCI aCwI

    Pharma and


    MsCI world


    “We believe the under-recognised opportunity is investment in companies providing solutions to the challenges of resource scarcity.”

    “The low or negative correlation of the excess return of water and agribusiness to growth oriented strategies is a clear indication that these strategies can bring a new source of low correlated growth to a global equity allocation.”

  • 6

    One framework for the consideration of specialist thematic equities in an equity allocation borrows from an asset allocation concept that has generally been used by forward looking investors in allocating to non traditional assets in an overall asset allocation. This framework groups assets into an “alpha core” consisting of non traditional, less liquid, more risky but diversifying assets and “swing assets” consisting of more traditional assets such as equities and bonds.13 While the components of an alpha core bring new sources of return and diversification to an asset allocation, there are generally some limiting factors to their inclusion related to risk, liquidity and available managers/vehicles. The concept is relatively straight forward; construct an alpha core of assets with new sources of alpha and diversifying characteristics, determine an appropriate size for the alpha core and then use the swing assets to adjust the overall portfolio to achieve the desired risk and reward characteristics.

    conceptually, this can be transferred to the construction of a global equity allocation that is looking to allocate to unique, specialist thematic equity strategies. It also can be implemented within the traditional style box framework. Since we are working within the equity category, we have isolated the sources of return above the market as a proxy for new sources of excess return and the correlations of excess return as indications of their diversifying potential.

    The alpha core can be constructed from specialist strategies, taking into account:• Correlations of excessive returns across active equity strategies• Conviction in the component themes• Availability of skilled specialist managers• Liquidity in each thematic universe

    Once the alpha core of specialist thematic strategies is in place, the remaining components of the global equity allocation would act as the swing assets to achieve the desired characteristics for global equities. Depending on preferences, this could include:• targeted levels of expected return • targeted levels of beta and volatility • active passive mix• maintenance of size and style allocations

    The size of the alpha core could vary based on overall strategy, desired aggregate equity characteristics and degree to which you want exposure to specialist thematic strategies in your global equity portfolio. Implementation could range from “dipping your toe in the water” for a specific strategy or as a part of a larger transition in global equity strategy. funding for the alpha core could be done in a measured fashion; either investing new cash or reducing existing equity holdings in a manner that would result in the final allocations across all equity strategies achieving the desired aggregate equity characteristics.

    cumulative return10 Years p.a.10 Years volatility p.a.BetaInformation Ratio


    16.84%1.00 NA


    16.80%1.00 0.70


    16.95%1.01 0.85


    16.91%1.00 1.00

    10 years ended 31 august 2012MsCI

    world rIMsCI w

    + 5% water MsCI w

    + 5% agri

    MsCI w +5%water 5% agri

    Source: Kleinwort Benson Investors and Datastream. Returns in USD.

    allocating to water and agribusiness: Global equities

  • 7

    Let’s take a look at the return and risk profiles over the last 10 years of hypothetical global equity allocations that added modest increments to water and agribusiness. The mScI World is a proxy for the global equity allocation. As the table above shows, a naïve (unoptimised) allocation strategy of 5% to water would have added a modest incremental cumulative return while slightly reducing volatility. A similar 5% allocation to agribusiness would have added a significant increment to cumulative returns to a global equity allocation over the last 10 years. This would have been achieved with comparable levels of volatility to the mScI World index, but with a slight increase in beta to 1.01. The information ratio provides a measure of the outperformance generation per unit of risk. The information ratios for these incremental allocations to water and agribusiness are very strong,14 indicating the excess returns were delivered in a very risk efficient manner.

    combining 5% allocations to both water and agribusiness would also have added very nice incremental cumulative returns to a global equity allocation. The low correlation of excess returns between water and agribusiness results in a material increase in the information ratio for the global equity allocation employing an allocation to both strategies. Interestingly, the scenario of allocating 5% to both water and agribusiness maintains a market beta of 1, less than the beta of 1.01 to the 5% allocation to agribusiness alone. This combined allocation to agribusiness and water also resulted in slightly reduced volatility relative to a lone 5% allocation to agribusiness.

    allocating to water and agribusiness: Global Growth equities

    A look at the same allocations of water and agribusiness to the growth component of an equity allocation yields similar improvements in cumulative returns, with strong information ratios. The information ratio of the combined allocation to water and agribusiness when considered within a growth context is marginally higher than the allocations in the broader equity allocation.

    An alpha core provides an interesting illustrative approach to allocate specialist thematic strategies to a global equity portfolio, but the basic concept of introducing new sources of low correlated excess returns and funding in a manner that maintains/achieve the desired total equity risk characteristics can be achieved within any process used to manage global equity allocations. Similarly, the examples above are admittedly simplified for illustration. The MSCI World Growth is an aggregate proxy for active growth managers, but managers of global equity allocations can do a more robust analysis, looking at other growth strategies/managers in their portfolio and how their excess returns correlate with water, agribusiness and other thematic growth strategies. Additionally, rather than arbitrary 5% allocations, managers of global equity allocations can allocate to agribusiness and water in ways that optimises their risk and return objectives for their entire global equity portfolio.

    cumulative return10 Years p.a.10 Years volatility p.a.BetaInformation Ratio









    10 year ended 31 august 2012

    MsCI world


    MsCI w Gwt

    + 5% water

    MsCI w Gwt


    MsCI w Gwt

    +5% water+5% agri

    Source: Kleinwort Benson Investors and Datastream. Returns in USD.

  • 8

    Managing water and agribusiness strategies

    While the long-term drivers of the returns to water and agribusiness remain firmly in place, achieving returns can be enhanced by active management. As both themes mature there will be clear winners and losers, and new technologies and products will continue to evolve that will require specialist judgement as to which will be truly disruptive or merely a fad. Winnowing the universe of companies providing water and agribusiness solutions to identify the superior companies should position the portfolio for better returns above those available purely from the water and agribusiness theme. Specialist active management can focus on those companies best positioned to deliver the strongest solutions. Through fundamental analysis of the companies, their exposure to drivers of growth and evaluation of their management, technologies and competitive advantages, specialist managers gain unique insights regarding who will best be able to successfully execute solutions and deliver strong returns.

    Before determining the long term winners, it’s important to precisely define what we mean by investing in water and agribusiness:

    • water: Includes all companies active across the water cycle, from water collection and treatment to distribution and waste-water remediation. This includes the pump, pipe, and valve makers to companies involved in the design, construction and management of large scale water infrastructure projects to the technology companies providing filtration, disinfection, test and measurement and metering products.

    • agribusiness: Includes all companies across the agricultural value chain. from the producers of grains, vegetables and livestock, to the suppliers of seeds, fertilisers and machinery that help the producers increase yields, to the service providers who assure quality, provide storage and transport for the produce, to the processors who prepare the raw produce for delivery to consumers.

    This precise definition of the opportunity set for investment is essential to assuring that the unique diversifying characteristics that are part of the investment rationale for introducing water and agribusiness are truly being introduced into an equity allocation. For example in water, we don’t regard bottled water production and distribution as part of the water cycle as the companies involved in bottled water are consumer staple companies that display the return characteristics of that sector and are not driven by the long term trends to provide solutions to water scarcity.

    Once the universe for investment is designed and broad characteristics of water and agribusiness in place, we believe active management can add value above the theme by identifying companies best positioned to deliver the winning

    water: a sample of themes Driving Growthemerging Market Infrastructure. New infrastructure to assure quality drinking water throughout the developing world is a secular driver of water investment. This takes the form of more spending on water infrastructure for distribution networks, waste water treatment and irrigation. It is anticipated that china and India combined will spend more than $450 billion in water infrastructure over the current 5 year period. That’s nearly 10-fold growth from a decade ago, when the combined spending for the two countries was just $50 billion.15 Developed Market Infrastructure. The massive underspending on water infrastructure rehabilitation and replacement simply means more pent-up demand for water equipment and services going forward. The current replacement rate of pipes of 0.4% per year implies a 250-300 year replacement cycle, far in excess of the 75-100 year life of pipes.16 common sense dictates that the pipes will eventually fail and need to be fixed. Additionally, industrial water Infrastructure required to run large industrial plants experienced its last wave of investment from 2003-2008, but was halted by the financial crisis. These projects are years in process from their initial planning, approval, engineering through to completion and are driven by long-term secular drivers such as population growth and urbanisation. We have seen signs that the next investment cycle has recently begun.

    regulation. Whether it is the European Union’s Water Framework Directive, the US Environmental Protection Agency’s (EpA) broad efforts to assure water quality, or China’s water standards, regulation – both economic and environmental - has been a backbone of support for investment in water. An emerging area of interest is ballast water. The International Maritime Organization’s ballast water regulations are designed to assure the removal of invasive species from entering foreign waterways. Upon final approval, international vessels will need to be retrofitted with ballast water treatment systems requiring an estimated $35 billion in capital spending over the next 9 years.17

    Mergers and acquisition. There are benefits from owning strong, growing, market leading companies that are positioned to enhance their franchise from earnings accretive acquisitions as well as by owning niche water companies with unique, scalable products that are well positioned to have their valuation realised through potential take-overs.

  • 9

    solutions and purchasing them at prices below their long term intrinsic value. Our analysis has shown that currently there are approximately 140-150 companies in both the universe of water and agribusiness companies that can provide exposure to the water and agribusiness theme. However we firmly believe that, through an active management process, specialist managers can construct a high conviction portfolio of 40-50 stocks that can add consistent value above the theme.

    Key to understanding which companies will outperform is identifying the themes that will drive revenue growth (see side bars) through the cycle and which companies are best positioned to benefit. For example, with emerging market demand a key driver of both water and agricultural solutions, an analysis of end-market revenues helps identify which global and emerging market based companies are best positioned to generate significant revenues from providing solutions to markets in the developing world.

    Evaluation of management, its long term strategy and its ability to execute is an essential ingredient of identifying companies that have both strategic and operational vision to succeed. companies in nascent market segments or introducing disruptive technologies may have great strategic vision, but may lack the ability to execute and take their vision to full scale. We feel that there is no substitute for sitting across the table from management teams across the globe and testing their mettle and evaluating their capability for delivering on their strategic vision.

    As with any sound investment process, portfolio managers must assess the degree to which company fundamentals are priced into the long term value of a stock. Through the ability to globally cross reference valuations across business models in the water and agribusiness space, specialist managers can often gain greater insight that can result in the conviction to access long term opportunities at extremely attractive valuations where generalists might perceive too much risk. for example, during the European economic crisis in the summer of 2011, many water infrastructure stocks were sold off well beyond their intrinsic value. Specialists who were focused on the long term need for infrastructure, a knowledge of which companies were best positioned in growing markets and which companies had the most sustainable growth models, were able to look through the near term concerns that dominated the thinking of many generalist portfolio managers and see outstanding opportunities. many of these water infrastructure stocks have delivered very strong returns in the subsequent year.

    agribusiness - a sample of themes Driving Growthemerging Market Growth. Emerging market growth is a strong driver of returns as the growing, increasingly more affluent population in the developing world will be the dominant driver of the growth in food demand. These are also the regions where the opportunities to increase yields are greatest. for example, in the 5 years ending 2011, US crop yields were nearly 2 times greater than those of china and 2.5 times that of Brazil, an indication of the magnitude of the opportunity for improvement in these two countries.18 Given the accelerating demand for food in these countries, there will be strong opportunities for companies providing solutions to increase yields in these regions.

    Infrastructure. The surge in agricultural demand is increasing global trade, supporting investment in agricultural service providers in transportation, grain storage/handling and quality assurance and inspection. An astonishing 30% of the food produced across the globe goes to waste as adequate infrastructure to handle and transport produce is a key constraint in both developing and developed regions. Lack of storage has been a key challenge, where a portion of the harvest can rot and waste away due to inadequate handling and transport.

    Commodities. The continued growing demand for food will keep pressure on soft commodity prices and provide favourable economics for companies providing solutions to increase the supply of food. Unlike speculation on near term price pressure on soft commodities, we seek to provide solutions to the long term supply/demand imbalance by understanding which producers will be most effective at reinvesting profits to increase crop yields and which suppliers will develop the best yield enhancing products.

    Mergers and acquisitions. Niche companies with attractive competitive advantages are potential takeover targets for larger companies trying to get exposure to unique technologies or to grow their market presence in a particular area. Investors also benefit from owning acquiring companies with good strategic vision, who successfully deploy large cash balances on value added accretive acquisitions to further enhance the long term value of their franchise.

    “Key to understanding which companies will outperform is identifying the themes that will drive revenue growth through the cycle and which companies are best positioned to benefit.”

  • 10


    providing food and water to the world will remain a growing global priority. While investors can access the water and agribusiness themes in different asset classes in their portfolios, we believe publicly traded companies will be at the fore of providing solutions at scale. finding a home for an allocation to water and agribusiness in a global equity portfolio may require some “out of the box” thinking, but this creativity can be rewarded by the unique sources of low correlated excess returns providing strong risk-efficient returns. While the broad themes can provide above market returns, specialist active management can provide additional returns through identifying and holding conviction positions in stocks that are best positioned to be the leading solution providers.

    endnotes1 World population clock – 2 McKinsey Global Institute. November 2011. “Resource Revolution: meeting the world’s energy, materials, food, and water needs.”3 Grantham, Jeremy. April 2011. “Time to Wake Up: Days of Abundant Resources and Falling Prices are Over Forever.” GMO Quarterly Newsletter.4 McKinsey Global Institute. November 2011. “Resource Revolution: meeting the world’s energy, materials, food, and water needs.”5 Jacobs Securities. April 2011. “Global Water Primer.”6 WHO and UNICEF. 2012. “Progress on Drinking Water and Sanitation.”7 McKinsey Global Institute. November 2011. “Resource Revolution: meeting the world’s energy, materials, food, and water needs.”8 Goldman Sachs. 25 August 2011. “Rain and grain, hard to sustain.” Fortnightly Thoughts.9 Foley, Jonathan A. November 2011. “Can we feed the world and sustain the planet?” Scientific American. 10 Jacobs Securities. April 2011. “Global Water Primer.” Referencing Booz Allen Hamilton. 11 FAO. 2009. “Food Security and Agricultural Mitigation in Developing Countries: Options for Capturing Synergies”12 The mScI World Growth is an aggregate proxy for active growth managers, but managers of global equity allocations can look at other growth strategies/managers in their portfolio and how the their excess returns correlate with water and agribusiness.13 For a more detailed discussion, see Leibowitz, Bova and Hammond. 2010. “The Endowment Model of Investing”, chapter 4 “Reverse Asset Allocation Using Alpha Cores.” John Wiley and Sons.14 Information ratios of .50 are considered good, .75 very good and 1.00 outstanding 15 Kleinwort Benson Investors, using data from Standard Chartered, Elara Capital, US Congressional Budget Office. 16 KBI calculation based on data in US EPA. 2007. “Distribution System Inventory, Integrity, Water Quality.”17 American Water Intelligence. May 2012. “Ballast Water Treatment Firms Could See Windfall in 2014.”18 SLC Agricola. 2012. “Value from both Farm and Land” presentation.

  • 11

    Jens Peers, CFa, Head of portfolio management Environmental Strategies,portfolio manager Global Environmental Solutions

    andros Florides, portfolio manager - Environmental Strategies cleaner Solutions & Agribusiness

    Matthew sheldon, CFa,portfolio manager -Environmental Strategies Water

    treasa ni Chonghaile, portfolio manager - Environmental StrategiesAlternative Energy

    Colm o’Connor, portfolio manager -Environmental StrategiesAlternative Energy

    steve Falci, CFa,Head of Strategy DevelopmentSustainable Investment

    Catherine ryan,portfolio manager -Environmental Strategies Water

    sohini De, portfolio manager -Environmental Strategiescleaner Solutions & Agribusiness

    environmental strategies team

    If you would like to find out further information please contact:

    uK & Ireland John Griffith Email: [email protected]: + 44 (0) 20 3207 7291

    europe & asiaJean ryanEmail: [email protected]: +353 1 438 4720

    usGeoff BlakeEmail: [email protected]: +1 212 218 2797

    Padraig sheehyEmail: [email protected]: +353 1 438 4703

    Kieran stoverEmail: [email protected]: +1 212 218 2704

    CanadaPeter FoxEmail: [email protected]: +353 1 438 4713

  • DisclaimersIreland & uKIn Ireland Kleinwort Benson Investors Dublin Ltd is regulated by the central Bankof Ireland. In the UK Kleinwort Benson Investors Dublin Ltd is subject to limited regulation by the financial Services Authority. Details about the extent of our regulation by the financial Services Authority are available from us on request.The views expressed in this document are expressions of opinion only and should not be construed as investment advice.past performance may not be a reliable guide to future performance and the value of investments may fall as well as rise. Investments denominatedin foreign currencies are subject to changes in exchange rates that may have an adverse effect on the value, price or income of the product. Incomegenerated from an investment may fluctuate in accordance with market conditions and taxation arrangementsAll MSCI data is provided “as is”. In no event shall MSCI, its affiliates, or any MSCI data provider have any liability of any kind in connection with the MSCI data. No further distribution or dissemination of the MSCI data is permitted without MSCI’s prior express written consent. usImpORTANT RISK DIScLOSURE STATEmENTThis material is provided for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase any security,product or service including any group trust or fund managed by Kleinwort Benson Investors International Ltd, or any of its affiliates (collectively,“Kleinwort Benson Investors”). The information contained herein does not set forth all of the risks associated with this strategy, and is qualified in itsentirety by, and subject to, the information contained in other applicable disclosure documents relating to such a strategy. Kleinwort Benson InvestorsInternational Ltd’s investment products, like all investments, involve the risk of loss and may not be suitable for all investors, especially those who areunable to sustain a loss of their investment.

    pAST pERfORmANcE IS NOT NEcESSARILY INDIcATIVE Of fUTURE RESULTSThis introductory material may not be reproduced or distributed, in whole or in part, without the express prior written consent of Kleinwort BensonInvestors International Ltd. The information contained in this introductory material has not been filed with, reviewed by or approved by any UnitedStates regulatory authority or self-regulatory authority and recipients are advised to consult with their own independent advisors, including tax advisors, regarding the products and services described therein. The views expressed are those of Kleinwort Benson Investors International Ltd and should notbe construed as investment advice. We do not represent that this information is accurate or complete and it should not be relied upon as such. Opinions expressed herein are subject to change without notice.The products mentioned in this Document may not be eligible for sale in some states or countries, nor suitable for all types of investors; their value and the income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates, or other factors.Additional information will be provided upon request. Kleinwort Benson Investors International Ltd is a registered investment adviser with the SEc and regulated by the central Bank of Ireland. Kleinwort Benson Investors International Ltd is 100% owned by Kleinwort Benson Investors Dublin Limited.form ADV part 1 and part 2 are available on request.

    KBIAGRW210912October 2012