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RISING RATES & ROTATING STOCK LEADERSHIP A Changing Landscape for Equity Investors

© KBI Global Investors

KBI Global Investors

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Rising Rates & Rotating Stocks - A Changing Landscape for Equity Investors

The S&P 500 Index of US stocks recently recorded its longest winning streak for 90 years, and echoing the global trend, the index finished 2017 over 300% higher than its post-financial crisis low in March 2009. Equites tend to behave cyclically, so this extended run is almost unprecedented.

While many reasons are cited for the remarkable rally in stocks, the persistently low and declining level of interest rates, bond yields and therefore discount rates has been a consistently strong tail-wind. After all, the choice of a discount rate is an unavoidable decision in the valuing of any asset, and everything else being equal, the lower the rate the higher the asset value and vice versa.

Clearly, the policy choice since the global financial crisis of extraordinarily low official interest rates and quantitative easing has been of key importance in the behaviour of equity markets and their component companies, with high multiple or “growth” stocks benefitting disproportionately. Significantly, this era of historically low interest rates and bond yields has been fundamentally underpinned by consistently low inflation, and inflationary expectations.

Investor confidence that very low inflation remains securely anchored is a key ingredient to enable this Goldilocks paradigm to persist. However, 2018 began with worries about potential overheating as strong wage inflation data combined with rising CPI levels and worries about badly-timed fiscal stimulus in the US triggered a jolt to this consensus in February. In addition, while it created no market reaction, the stated policy of central banks has already changed from Quantitative Easing to Quantitative Tightening and their balance sheets have materially begun to shrink.

Financial markets have been dominated by the artificial stimulant of an unprecedentedly easy monetary regime since the global financial crisis. Indeed, an environment of generally falling interest rates has held sway since the early 1980’s, and despite some recent tightening, rates remain close to historic lows:

However, this accelerator of declining rates is now likely at or near an end. For the first time in 35 years, investors must seriously consider the impact of a world without this significant stimulus. Arguably, the dominant driver of returns for a generation has all but run its course.

1985 1990 1995 2000 2005 2010 20150

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Source: Thomson Reuters Datastream

US interest rates over the last 35 years

US TREASURY BENCHMARK BOND 10 YEAR YIELDUS TREASURY BENCHMARK BOND 5 YEAR YIELDUS TREASURY BENCHMARK BOND 3 YEAR YIELDUS FED FUNDS RATE

Time for a change of style?

Long-term equity return components

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So where to next? How should equity investors adapt to the growing likelihood of a fundamentally changed monetary regime? In a lower return and more volatile environment, investors need to understand that the WAY they get their returns going forward will likely be very different. The last decade has been dominated by a singular reliance on multiples to generate returns. As the chart below shows this is historically very unusual and we expect markets to revert to their long-term averages.

There is a very strong relationship between the movement of bond yields & the performance of investing “styles”

Like equities themselves, the relative performance of Value and Growth is always cyclical.

The most recent cycle has been lengthened and strengthened by Quantitative Easing and ultra low interest rates.

This disproportionately benefited growth stocks and supported multiple expansion as a source of return.

Rising yields should be a catalyst for Value, and in particular dividends, to outperform.

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1.8

1.6

1.4

1.2

1.0

5

4

3

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1 04 06 08 10 12 14 16

Source: Thomson Reuters Datastream, 31st December 2017. See disclaimers for description of index information.

Source: MSCI Research, decomposition of MSCI ACWI Index total return, analysis over period Dec 1994 to Dec 2017. In some tables and charts, due to rounding, the sum of the individual components may not appear to be equal

to the stated total(s). See disclaimers for description of index information.

US 10 year Bond Yield MSCI World Value vs. Growth (US $)

The dominance of multiple expansion over the last 10 years (and beyond) is anomalous and we expect markets to revert to their long-term norms going forward

Valuation Adjustment

DividendGrowth

DividendYield

51.4%35.8% 37.4%

21.2%11.5%

36.9%46.2%

42.5%

59.0%67.0%

11.7% 17.9% 20.1% 19.7% 21.5%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%20 YearAverage

10 YearAverage

5 YearAverage

3 YearAverage

1 YearAverage

Managing dividend portfolios through a changing landscapeThe ability to adapt, not only to changing interest rates but to any regime change, is central to any successful investment process. Consequently, we believe that long-term alpha requires a combination of systematic discipline and pragmatic judgement. For us, given (a) our long-term style convictions and ongoing preference for dividends (see below), (b) the typical assumptions that investors normally associate with the label “yield” and (c) the perceived sensitivity of yield based investments to rate changes, there are many misconceptions that can enter the conversation about a tightening monetary environment.

It is hardly surprising that we have addressed this topic on two occasions in recent years.

Our 2015 paper “Surprise, Dividends become more important when interest rates rise” and our 2011 paper “Dividend Growth: the key to real investment success” as linked here: http://www.kbiglobalinvestors.com/whitepapers both address the different return components of equities and the efficacy of dividend growth as a source of return during historic periods of rising inflation.

Both pieces focussed on the market level relationship between interest rates and dividends - rather than our own approach to portfolio management - and emphasised that the actual market dynamics at work in equity markets are typically at odds with many conventional rules of thumb.

For this paper we wanted to focus more directly on our own investment approach, rather than a market level decomposition.

To start with the key conclusion: we welcome rising interest rates.

Aside from the dynamics discussed above, they don’t go up in isolation. An increase in interest rates generally indicates a better environment for the economy, and therefore a broadening earnings and dividend base.

Historically, this tends to favour more attractively valued stocks relative to their more expensive counterparts - when growth is more widely available, investors don’t need to pay as large a premium for companies that promise to grow independently of the broader economy.

We launched our flagship Global Developed Strategy in April 2003, and some of our best periods of relative performance have been when rates were rising.

For example, from the summer of 2003 to the summer of 2006 rates and yields rose sharply. Fed funds rates went from 1% in August of 2003 to 5.25% in August of 2006, while 10-year yields rose from 3.2% to 5.2% over a similar period.

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A quick summary of these papers: 1. Equities are a total return asset class (DY+DG+P).

2. The dividend contribution to equity returns (DY+DG) is positively correlated to interest rates.

3. Dividend Growth is very responsive during rate rises and dominates to become the key driver of returns. However this generally goes unnoticed (and mis-priced) by investors.

4. Valuation multiples are negatively correlated to interest rates and display a very high degree of sensitivity to changes. Multiples expand when rates fall but equities de-rate when interest rates rise.

5. Some equities de-rate more than others. Stocks on higher valuation multiples (i.e. Growth stocks) suffer more than their higher yielding and value counterparts when rates rise.

6. Generic classifications like “yield” are oversimplifications and tend to cloud the debate - many other things matter as well (e.g. overall capital structure, debt to equity, valuation, free cashflow coverage etc.).

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Our fund outperformed the benchmark over the period:

KBI outperform when rates rise

Source: Thomson Reuters

Oct-03

Aug-03

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Dec-03

Feb-04

Apr-04

Jun-0

4Aug

-04Oct-

04Dec

-04Feb

-05Apr-

05Ju

n-05

Aug-05

Oct-05

Dec-05

Feb-06

Apr-06

Jun-0

6Aug

-06

3.00

3.50

4.00

4.50

5.00

5.50

-4.00

-2.00

0.00

14.00

12.00

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KBGI Relative Return % (RHS)10Y Constant Yield % (LHS)

To a lesser extent, we have also benefitted from shorter periods of rising rates and yields in more recent years, such as the “taper tantrum” of 2013 and the “trump trade” of 2016. On both occasions, while only lasting a few months, our North America Equity Strategy outperformed the MSCI North America benchmark (by 2.7% and 2.7% net of fees in USD in 2013 and 2016 respectively).

Time to debunk some conventional thinkingGiven the clear rationale, and strong evidence, for our approach to out-perform as rates rise, why do so many investors assume that our approach will lag? We think there are three main reasons for this flawed conventional thinking:

(a) Many generically equate dividends with yield and then make further generic assumptions about yield. Their attitudes are framed by a view of dividend-paying stocks as mere “bond-proxies”, where rising yields are understandably associated with falling prices.

(b) The psychology of “instead of” rather than “as well as” often dominates. The assumption that dividends are paid “instead of” growth and reinvestment rather than “as well as” growth and reinvestment is regularly made. However, the stocks we seek and buy are different and will have a more optimal equilibrium between payout, reinvestment and retention. The companies will be more efficient at capital management and as a result will deliver higher returns on capital investments and better cashflows as well as strong dividend growth. Most crucially, the dividends paid are not fixed like a bond coupon, but are deliberately chosen because they tend to grow over time.

(c) Traditional high-yielding industries are mature or defensive, like consumer staples or telecoms. As truer “bond proxies” they perform poorly when rates rise. The assumption is that stocks with high yields will belong to these industries and that all high-yield stocks are the same. We note that the marketplace continually refers to yield/income/dividend stocks as if they are a generic or homogeneous group. By contrast, the reality of our investable universe is the opposite: there is a very rich diversity of industries and stocks in our universe.

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Importantly and in stark contrast to the traditional approach to yield, there are no industry tilts in what we do. There is a world of difference between buying stocks within each industry group based on their level of dividends (and other factors) and buying stocks based on their absolute level of dividends (which forces a very restricted and potentially homogeneous universe. This means we can own stocks that yield less than the benchmark for example). They are fundamentally different animals. We are using a dividend based analysis that we apply “within” rather than “across” regional industry groups. This considerably lessens the impact of interest rates (and many other things) on the portfolio and increases the consistency of the return profile.

Related to this we find that investors tend to assume a level of homogeneity within industry groups that really doesn’t exist. Yield levels and stock performance are generally quite diverse within industry groups.Take for example the telecoms industry group, which is not exactly the most dynamic hunting ground in the world. The table below shows the variance on offer.

Historic and academic analyses of yield strategies are therefore meaningless when assessing the potential impact on KBI’s Global Equity portfolios of a changing monetary landscape. They don’t correct for the industry effect, or properly balance out the blend of metrics that we look for in choosing stocks. Indeed idiosyncratic or stock-specific risk remains the dominant driver of our risk budget.

Increasing volatility and more normal downmarket behaviourTwo of the direct outcomes of the extraordinary monetary environment of recent years have been a general absence of negative returns and an artificial flattening of volatility.

The artificial flattening of volatility has meant an increase in complacency and an increased exposure to more risk oriented stocks. Any increase in volatility is likely to be accompanied by a more normal pattern of asset returns. Investors are likely to prefer stocks with more stable and predictable return components, while becoming less comfortable with more speculative elements of return.

In addition, the types of stocks that outperform in down-markets are likely to return to normal. One of the ironies of a world dominated by easy money is that investors have become bullish about negative economic events because they fully expect (have come to “know”) that they will be accompanied by aggressive policy responses and monetary stimulation. These policy responses have tended to favour very large, growth-oriented stocks rather than their smaller less expensive counterparts.

Despite the dominance of these Megacap Tech and Staples stocks in the relatively few down periods that we have experienced, our downside numbers are competitive. Our Global Strategy outperformed the MSCI World Index by 4.1% (net USD) in 2008 and since the strategy inception we have outperformed in 9 out of the 11 negative quarters that have occurred (as of 31st December 2017). Our historic tendency to outperform when stock-markets are under pressure should be further bolstered by this market rotation and a movement back towards normality.

Adaptability of our process More generally, we look for companies with a different type of capital structure in a changing monetary regime. The type of companies we choose in a rising rate environment will likely be very different to those we choose in a falling rate environment. Remember, our investible universe is very large and diversified across industries, regions and capitalisation and is not constrained to typical high dividend stocks.

Take for example the role of debt. We have a cyclical attitude. A company that is engineering an aggressive dividend growth policy through debt can be attractive to us when rates are effectively zero. However, the company is unlikely to be able to maintain that pattern when rates start to rise. Quality and balance sheet strength will become more important to us and such a company will no longer be selected.

Successful stewards of capital adapt their pay-out, retention and capex choices to a changing environment. A company’s capital structure will change over time as it matures and evolves but also as the monetary and economic environment changes.

Low HighDividend Yield Zero (T Mobile) 6% (Vodafone)

Dividend Growth -14% (Orange) +26% (KDDI)

As at 31/12/2017

Source: MSCI. Stocks mentioned in this document are a representative sample of stocks that may or may not be in the strategy. The securities listed are selected based on objective, consistently applied, non-performance-based criteria. Size or profitability of stocks mentioned have not been used in determining the selection of stocks and their inclusion should not be construed as a stock recommendation. A complete list of all securities recommended for the immediately preceding year is available upon request.

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UK Banking Sector Assets as a % of GDP

Source: ‘Banking on the State’, Andrew G Haldane, Bank of England, Minack

1880 1904 1928 1952 1976 2000

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So what can management do? Changing how capital is allocated is part of the solution. Most pointedly, US companies respond to signals from investors. There is a much stronger relationship between shareholder pay-outs and valuation than capex and valuation. History shows that the more is paid-out in dividends and buybacks, the greater the positive response of the market (recent FANG anomaly aside). From our “KBI Global Investors Paper “Payout, Earning Quality and Valuation” 2015 as linked here: http://www.kbiglobalinvestors.com/whitepapers. Additional sources: Minack Advisors “Payout and Earnings” and “Good for Investors Bad for Growth”.

Conversely, there is little relationship between capex and valuation. This investor suspicion of capex is supported by the data. The more spent on capex, the lower future profitability tends to be. That does not mean all capex is bad. Companies must invest to generate future returns. But if they collectively over-invest, particularly stocks in the same industry group, future profitability is likely to suffer and they may even become capital destroyers. Source: Robert Buckland, CitiGroup “Capex or Payout? Avoiding the Capital Destruction Cycle” and “The Market want Cash Cows”.

Imagine you are the CFO of a large corporation. Will you have the same return expectations for your capex projects if you think rates are going to rise by 3% over the next 5 years, as you would if you thought rates would fall by the same amount? Because expected returns from capex decline as its cost rises, successful stewards of capital tend to invest less as rates rise.

Most crucially, management come under increasing pressure to maintain the value of their shares. Rising interest rates will cause a derating of their valuation multiple and all other things being equal their share price will fall as a result.

What we’ve done alreadyTo date, asset markets seem complacent about debt. By contrast, we think that high leverage may be an increasing problem as the monetary regime tightens. Importantly, debt growth has significantly outpaced GDP in recent times - the UK being an extreme but not untypical example:

While a high level of indebtedness means that rates rises are likely constrained, it also means that they don’t need to rise by much to have a big impact on balance sheet health and profitability, and indeed on other things like consumer demand and volatility. While gross corporate debt is at all time highs, it is not evenly spread. Many parts of the market are in a very healthy condition but other pockets are clearly stressed. We see most of the concentration and the highest risk of default, in the small cap universe. Again it is not uniformly spread and this gives us a significant opportunity to differentiate our portfolio position against the market.

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We’ve deliberately reduced our exposure to companies with higher levels of debt (albeit with strong cashflows) and are now significantly underweight. The chart below shows how we have adjusted our portfolio positioning in the face of a tightening monetary regime (1 unit of style tilt is significant. 2 units is very significant). In addition to the debt reduction and in tandem with the observations earlier in this paper, we’ve been increasing our exposure to companies with higher rates of dividend growth. Also, because value tends to get rewarded when economic conditions are better and inflation is more likely, we have increased the value bias by investing in stocks at a deeper discount or higher earnings yield, so you can buy the above mentioned attributes at a near 50% discount to the market:

North America Strategy Characteristics

Our conviction is that the monetary environment is changing, rotation is near and our portfolio exposures are being adjusted to maximise the impact of that outcome.

Market Cap$bn

North American

Strategy %

MSCI North America Index %

+/-%

< 3 0.0 0.2 -0.2

3 - 5 0.2 0.7 -0.5

5 - 10 9.7 5.3 4.4

10 - 25 19.1 16.9 2.2

> 25 71.0 77.0 -6.0

North American Strategy

Active Share 83%

Excess Return Target 3% p.a.

Style Characteristics Core / Value

Tracking Error 2 - 4%

Number of Stocks 68

MSCI North America Index

Number of Stocks 722

North American Strategy

MSCI North America

IndexDividend Yield (%) 3.2 2.0

BetterTotal

Return

Dividend Payout (%) 60.3 45.5

Dividend Growth (%) 12.1 9.7

Total Payout Yield (%) 5.1 2.3

ROE (realised, %) 24.9 20.1 Better Quality

Management & Balance

Sheets

ROIC (realised, %) 14.5 12.0

Net Debt / Equity (%) 35.9 51.7

Accruals (%) 1.6 2.6

P/E 16.6 22.8BetterValue & Risk

Price / Book 4.0 4.8

Price / Cashflow 11.4 17.3

Weighted Avg. Mkt. Cap $bn 107.2 159.8

Source: KBI Global Investors, 31 March 2018 (using representative strategy data). Index Data sourced from Datastream. See disclaimers for description of index information.

North America Style Exposure

Portfolio:Benchmark:

Snapshot Date:Currency:

KBI North AmericaMSCI NTH AMERICA

March 31st 2018USD

Source: KBI Global Investors (using representative strategy data), Style Research, 31st March 2018, MSCI NA in USD. See disclaimers for description of index information.

Portfolio Style SkylineTM

VALUE GROWTH VOLATILITY MO ESG

Sty

le T

iltTM

6543210

-1-2

Return on

Invested Capital

Return on Equity

EBITDA

to EV

Dividend Growth

5Y Market C

ap

Market B

eta

Momentum 12-1

MSCI ESG

OverallFree Cash

Flow YieldDivid

end

Yield Earnings

YieldBook

to Price

Dividend Payout

Ratio

Name of Firm:

Office Location:

Website:

Contact:

www.kbiglobalinvestors.com

KBI Global Investors

Tel: (+353) 1 438 4400 | Email: info@kbigi.com

Headquarters3rd Floor, 2 Harbourmaster Place, IFSC, Dublin 1, D01 X5P3, Ireland

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1) We believe we are at or close to a major change in the monetary regime.2) We expect to see a significant rotation within the stock-market away from the highly-valued

growth names towards their less expensive counterparts.3) Contrary to conventional thinking, our approach is likely to benefit significantly from such a

rotation - we welcome rising interest rates.4) Capped/declining multiples, the benefits of dividend growth, the likely increase in volatility &

more normal downmarket behaviour, should all work in our favour.5) The adaptability of our active process - particularly to the changing dynamics of capital

structure - is a further notable advantage.6) Reducing debt, increasing dividend growth and enhancing valuation protection, has been our

main response to date.

Summary Conclusions

Back Row (left to right): James Collery Senior Portfolio Manager, Ian Madden Senior Portfolio Manager, Gareth Maher Head of Portfolio Management, John Looby Senior Portfolio Manager, Massimiliano Tondi Senior Portfolio Manager

Front Row (left to right): David Hogarty Head of Strategy Development, Senior Portfolio Manager, Noel O’Halloran Chief Investment Officer, Director

KBI Global Investors Global Equity Strategies Team, March 2018

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DISCLAIMERS:

ALL MARKETS: KBI Global Investors Ltd is regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority in the UK. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request. KBI Global Investors (North America) Ltd is a registered investment adviser with the SEC and regulated by the Central Bank of Ireland. KBI Global Investors (North America) Ltd is a wholly-owned subsidiary of KBI Global Investors Ltd. ‘KBI Global Investors’ or ‘KBIGI’ refer to KBI Global Investors Ltd and KBI Global Investors (North America) Ltd.

IMPORTANT RISK DISCLOSURE STATEMENT Under MiFID II this is deemed marketing material and should not be regarded as investment research. This 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 KBI Global Investors. The information contained herein does not set forth all of the risks associated with this strategy, and is qualified in its entirety by, and subject to, the information contained in other applicable disclosure documents relating to such a strategy. KBI Global Investors’ investment products, like all investments, involve the risk of loss and may not be suitable for all investors, especially those who are unable 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 KBI Global Investors. The information contained in this introductory material has not been filed with, reviewed by or approved by any 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 KBI Global Investors and should not be 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. Past performance may not be a reliable guide to future performance and the value of investments may fall as well as rise. Investments denominated in foreign currencies are subject to changes in exchange rates that may have an adverse effect on the value, price or income of the product. Income generated from an investment may fluctuate in accordance with market conditions and taxation arrangements. In some tables and charts, due to rounding, the sum of the individual components may not appear to be equal to the stated total(s). Additional information will be provided upon request. Performance for periods of more than 1 year is annualized. Gross results shown do not show the deduction of investment management fees. A client’s actual return will be reduced by the management fees and any other expenses which may be incurred in the management of an investment account. For example, a €1,000,000 investment with an assumed annual return of 5% with a management fee of 0.85% would accumulate €8,925 in fees during the first year, €48,444 in fees over five years and €107,690 in fees over ten years.

Representative Strategy Performance Disclaimer:The performance results are that of a representative strategy which has been managed on a discretionary basis since its inception.

KBIGI Global Developed Equity Representative Strategy Performance Disclaimer: Returns from 06/01/03 to 07/31/2004 are based on a Belgian Fund which followed the KBIGI Developed Equity Strategy and was managed by KBIGI. Returns from 08/01/2004 are actual returns from the KBIGI Developed Equity Strategy.

KBIGI North America Equity Representative Strategy Performance Disclaimer: Returns from 01/11/13 are actual returns from the KBIGI North America Strategy. Returns since inception to 31/10/13 are based on the KBIGI North America Developed Equity component of a segregated account (KBIGI Developed Equity Strategy) managed by KBIGI to an identical process applied to all KBIGI Global Equity Strategies. KBIGI Global Developed Equity Strategy Performance: Returns from 01/06/03 to 31/07/2004 are based on a Belgian Fund which followed the KBIGI Developed Equity Strategy and was managed by KBIGI. Returns from 08/01/2004 are actual returns from the KBIGI Developed Equity Strategy.

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USA/CANADA SPECIFIC:Information about indices is provided to allow for comparison of the performance of the Adviser to that of certain well-known and widely recognized indices. There is no representation that such index is an appropriate benchmark for such comparison. You cannot invest directly in an index, which also does not take into account trading commissions and costs. The volatility of the indices may be materially different from that of the strategy. In addition, the strategy’s holdings may differ substantially from the securities that comprise the indices shown. All 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. Net total return indices reinvest dividends after the deduction of withholding taxes, using (for international indices) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. MSCI World: The MSCI World index covers more than 1,600 securities across large and mid-cap size segments and across style and sector segments in 23 developed markets.

MSCI North America: The MSCI North America Index covers more than 700 securities across large and mid-cap stocks and across style and sector segments in the USA and Canada markets.

S&P 500 Index: The S&P 500 Index is a market-cap weighted index including 500 of the leading large-cap US equities.

MSCI EMU: The MSCI EMU Index covers more than 200 securities across large and mid-cap stocks and across style and sector segments in the 10 developed market countries in the EMU. MSCI World Value: The MSCI World Value Index covers more than 800 securities across large and mid-cap stocks exhibiting overall value style characteristics in 23 developed markets. MSCI ACWI: The MSCI ACWI Index covers more than 2,400 securities across large and mid-cap size segments and across style and sector segments in 46 developed and emerging markets.

Gross results shown do not show the deduction of Adviser’s fees. A client’s actual return will be reduced by the advisory fees and any other expenses which may be incurred in the management of an investment advisory account. See Part 2 of Adviser’s Form ADV for a complete description of the investment advisory fees customarily charged by Adviser. For example, a $1,000,000 investment with an assumed annual return of 5% with an advisory fee of 0.85% would accumulate $8,925 in fees during the first year, $48,444 in fees over five years and $107,690 in fees over ten years. Performance returns for individual investors may differ due to the timing of investments, subsequent subscriptions/redemptions, share classes, fees and expenses. Stocks mentioned in this document may or may not be held in this strategy at this time. Any projections, market outlooks or estimates in this document are forward-looking statements and are based upon certain assumptions. Other events which were not taken into account may occur and may significantly affect the returns or performance of the strategy. Any projections, outlooks or assumptions should not be construed to be indicative of the actual events which will occur. Discussions of market conditions, market high/lows, objectives, strategies, styles, positions, and similar information set forth herein is specifically subject to change if market conditions change, or if KBIGI believes, in its discretion, that investors returns can better be achieved by such changes and/or modification. Style descriptions, market movements over time and similar items are meant to be illustrative, and may not represent all market information over the period discussed. Form ADV Part 1 and Part 2 are available on request.

AUSTRALIA SPECIFIC:KBI Global Investors (North America) Ltd is exempt from the requirement to hold an Australian Financial Services licence in respect of the financial services it provides to wholesale investors in Australia and is regulated by both the Central Bank of Ireland and the Securities and Exchange Commission of the US under US laws which differ from Australian laws. Any services provided in Australia by KBI Global Investors Ltd or other affiliates will be provided by the relevant entity as representative of KBI Global Investors (North America) Ltd. This material and any offer of investments is intended for and can only be provided and made to persons who are regarded as wholesale clients for the purposes of the Corporations Act of Australia and must not be made available or passed on to persons who are regarded as retail investors. It may not be reproduced or distributed, in whole or in part, without the express prior written consent of KBI Global Investors (North America) Ltd. The information contained in this introductory material has not been filed with, reviewed by or approved by any Australian or United States 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.