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The beginning of a sustained bull market?

BlackRock Latin American Investment Trust 16 January 2017 Review
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BlackRock Latin American IT

The beginning of a sustained bull market?

Investment trusts

16 January 2017

Price

413.5p

Market cap

£163m

AUM

£187m

NAV*

477.2p

Discount to NAV

13.3%

NAV**

487.7p

Discount to NAV

15.2%

*Excluding income. **Including income. As at 12 January 2017.

Yield

2.1%

Ordinary shares in issue

39.4m

Code

BRLA

Primary exchange

LSE

AIC sector

Latin America

Benchmark

MSCI EM Latin America

Share price/discount performance

Three-year performance vs index

52-week high/low

455.1p

248.0p

534.0p

284.5p

*Including income.

Gearing

Net*

3.3%

*As at 30 November 2016.

Analysts

Tom Tuite Dalton

+44 (0)20 3077 5700

Mel Jenner

+44 (0)20 3077 5720

BlackRock Latin American Investment Trust is a research client of Edison Investment Research Limited

BlackRock Latin American Investment Trust (BRLA) is a long-established fund investing in Latin American equities. Manager Will Landers runs a 50-75 stock portfolio with daily input from a dedicated Latin America team. BRLA aims to generate an attractive total return, superior to that of its benchmark, the MSCI Emerging Markets Latin America Index. The fund is overweight Brazil, which surged when impeachment proceedings were brought against former president Dilma Rousseff, and underweight Mexico, where sentiment soured following the surprise Trump victory.

12 months ending

Share price (%)

NAV (%)

MSCI EM Latin America (%)

FTSE All-Share (%)

MSCI World (%)

31/12/12

1.6

6.5

4.1

12.3

11.4

31/12/13

(13.7)

(14.3)

(14.8)

20.8

25.0

31/12/14

(4.0)

(4.0)

(6.6)

1.2

12.1

31/12/15

(26.6)

(26.1)

(26.8)

1.0

5.5

31/12/16

45.8

47.6

56.8

16.8

29.0

Source: Thomson Datastream. Note: All % on a total return basis in pounds sterling.

Investment strategy: Vigilant and active

The manager combines a bottom-up and a top-down investment strategy. Much emphasis is placed on monitoring existing portfolio companies and seeking new investment opportunities. At the same time, the team keeps itself well briefed in order to be able to anticipate and respond quickly to political and economic developments deemed likely to affect Latin American stock values.

Market outlook: Uncertainty high, valuation low

A year ago, Brazil, whose stock market represents c 58% of the trust’s benchmark and dominates the region, was mired in both corporate and political scandal. Share prices were depressed following a prolonged slump in demand for global resources. However, rising resource prices and the replacement of the incumbent president mid way through the year with reform-minded Michel Temer saw the equity market rally sharply, and the currency strengthen. Elsewhere, the outlook for Mexico, which represents nearly 26% of the index, appears better than some initially feared: on the one hand Donald Trump’s victory has potentially negative implications for Mexico/US trade relations, and has hurt sentiment; on the other, Mexican valuations appear reasonable following sharp currency depreciation, while arguably President-elect Trump’s protectionist bark will prove worse than his bite.

Valuation: Potential for discount to narrow

In terms of market valuation as reflected in its relative forward P/E multiple versus the rest of the world, the Latin American market appears relatively attractive. In terms of BRLA’s valuation, its current share price discount to cum-income net asset value of 15.2% compares to an average of 13.5% over the last 12 months. It seems possible that this discount could narrow in a rising market fuelled by continuing firm commodity prices and in the absence of majorly negative newsflow for Brazil and Mexico.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

BlackRock Latin American Investment Trust seeks long-term capital growth and an attractive total return, primarily through investing in quoted Latin American securities. The trust was launched in 1990 and management was transferred to BlackRock on 31 March 2006 following a tender process. The manager follows a mainly bottom-up approach (with top-down views taken into account) that is flexible, but seeks growth at a reasonable price. The trust has an indefinite life subject to a two-yearly continuation vote. The benchmark is the MSCI Emerging Markets Latin America Index.

9 September 2016: Interim results for the six months ended 30 June. NAV TR +23.0% in US$ (35.6% in £) vs benchmark +25.7% in US$ (+38.6% in £). Share price +19.3% in US$ (+31.6% in £). Interim dividend of 6c declared.

8 March 2016: Annual results for the year ended 31 December 2015. NAV TR -30.9% in US$ (-27.0% in £) vs benchmark -30.8% in US$ (-26.8% in £). Share price -30.6% in US$ (-26.6% in £). Final dividend of 6c declared.

27 November 2015: Appointment of Carolan Dobson as a non-executive director.

Forthcoming

Capital structure

Fund details

AGM

April 2017

Ongoing charges

1.1%

Group

BlackRock Fund Managers

Final results

March 2017

Net gearing

3.3%

Manager

William Landers

Year end

31 December

Annual mgmt fee

0.80% of NAV

Address

12 Throgmorton Avenue, London, EC2N 2DL

Dividend paid

September, April

Performance fee

No

Launch date

July 1990

Trust life

Indefinite

Phone

+44 (0) 20 7743 3000

Continuation vote

Two-yearly – next 2018 AGM

Loan facilities

Up to $40m

Website

www.blackrock.co.uk/brla

Dividend policy and history

Share buyback policy and history

The board no longer operates a progressive dividend policy.

BRLA is authorised both to repurchase up to 14.99% of its ordinary shares and to allot shares up to 5% of the issued share capital.

Shareholder base (as at 29 December 2016)

Portfolio exposure by sector (as at 30 November 2016)*

Top 10 holdings (as at 30 November 2016)*

Portfolio weight %

Company

Country

Sector

30 November 2016

30 November 2015**

Petrobras

Brazil

Energy

9.5

N/A

Itau Unibanco

Brazil

Banks

8.9

6.1

Banco Bradesco

Brazil

Banks

8.0

3.9

AmBev

Brazil

Food, beverages & tobacco

4.9

5.6

Vale

Brazil

Materials

4.9

N/A

FEMSA

Mexico

Food, beverages & tobacco

3.8

6.6

BM&F Bovespa

Brazil

Diversified financials

3.6

N/A

Grupo Financiero Banorte

Mexico

Banks

3.4

5.1

BRF

Brazil

Food, beverages & tobacco

3.2

N/A

Walmart de Mexico

Mexico

Food & staples retailing

3.1

4.3

Top 10

53.3

47.0

Source: The BlackRock Latin American Investment Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *Excludes net current assets/liabilities and fixed interest. **N/A where not in November 2015 top 10.

Market outlook: Favourable demographics

In 2016 the MSCI Emerging Markets Latin America Index resumed its upward trend rising by 57% in sterling terms following three years of negative returns. In spite of the strong rally in markets, the index is yet to retrace its all-time high (Exhibit 2 left-hand side) and Latin American equities continue to appear reasonably valued when compared to the rest of the world (Exhibit 2, right-hand side). In terms of forward P/E multiples, Latin America is currently trading at 12.8x, broadly in line with the five-year average of 12.9x. On a relative basis, it is trading at a 16.9% discount to world markets, which is meaningfully below the five-year average of 4.6%.

Putting to one side the current market valuation discount, and taking a long-term perspective, Latin America has one frequently overlooked but unassailable structural advantage over developed markets, and that is demographics. In short, Latin America does not have an ageing population and therefore, unlike the UK and most other developed markets, it remains unencumbered by spiralling healthcare, housing and pension costs. Combine this with the market’s relatively attractive valuation, and the fact that the region’s young population should accelerate household formation, further driving domestic consumer demand, and the case for investing in an actively managed specialist fund is potentially worth consideration.

Exhibit 2: Market performance and valuation

Latin America index performance (in £ unless stated otherwise)

Latin America forward P/E and relative P/E (last five years)

Source: Thomson Datastream, Edison Investment Research

Fund profile: Diversified Latin American exposure

BRLA was launched in 1990 as F&C Latin American Trust and BlackRock took over management in March 2006. Will Landers has managed the fund since that time. He is based in New York and has been investing in Latin American assets at BlackRock since 2002 and has 26 years’ investment experience. The manager is assisted by four other investment professionals based in New York and Sao Paulo, Brazil. BRLA is an actively managed fund with 50-75 holdings in Latin American companies aiming to deliver an attractive total return. The portfolio is diversified by sector, geography and market cap and the manager is encouraged by the board to look at opportunities outside of the benchmark. BRLA is listed in London and its shares are quoted in sterling. However, its financial statements are reported in US dollars and its NAV is quoted in both sterling and dollars.

When BlackRock assumed the management of BRLA in 2006, there followed a strong run of absolute return performance as extremely positive sentiment fuelled Latin American equity markets to new highs. There then followed an extreme swing in investor sentiment, which resulted in widespread indiscriminate selling of shares regardless of how individual companies were performing in terms of profitability. This environment proved challenging for pure bottom-up active stock pickers and resulted in the management team adopting more of a top-down focus in recent years, as well as bottom-up.

The fund manager: Will Landers
The manager’s view: Brazil on the mend, Mexico fears overdone

At c 58% and c 26% of the index respectively, Brazil and Mexico represent the two economic powerhouses of the region and are therefore arguably the most important for the manager to get right. At the start of 2016, many were pessimistic about Brazil’s economic future. However, the appointment of Michel Temer mid-year as ‘acting’ president raised expectations of market reform and a clamp-down on widespread government corruption. This move reversed negative sentiment and resulted in positive stock market returns. Landers turned positive on Brazil in March, believing that sounder economic management under Temer will in turn result in sustained corporate earnings growth as new market friendly reforms can now more easily be passed into law. He recognises that economic recovery will be a long, slow process but takes the view that expectations had previously been so low that only a minimal improvement in market sentiment can result in decent share price returns. As a result, he is prepared to look beyond current valuations that are based on 2016 earnings, further into the future. In short, Landers believes that Brazil, which has been mired in the worst recession in decades, is likely to resume growth by the end of this year.

While the impact of a Trump presidency on Mexico remains uncertain, Landers is positive on his portfolio holdings there, which comprise largely domestic market focused companies. Moreover, Landers has consistently argued that the knee-jerk sell-off in the wake of the surprise Trump victory was overdone. In his view, while Trump successfully attracted media attention during the campaign by threatening to slap steep tariffs on Mexican imports, he will likely be more cautious when president. His argument is supported by the following observation: trade between the Mexico, the US and Canada, the major partners in NAFTA (the North American Free Trade Agreement), topped $1.1tn in 2016, while c 6m US jobs depend on trade with Mexico, according to figures cited in a recent report produced by the Wharton Business School. As Landers observes: “There are things that can be enhanced in any trade agreement, including NAFTA, but I don’t believe a rational negotiation will be as harmful as the market had expected”. In short, BRLA’s manager guards against being too pessimistic about Mexican equities, suggesting that self-interest will ensure that the US does not risk rupturing its trading relationship with Mexico. See ‘current portfolio positioning’ below for comments on smaller countries in the region.

Asset allocation
Investment process: Current emphasis on top-down

Landers seeks to limit downside and capture market upside by being ready to make swift and sometimes significant changes to the portfolio at key trigger points, be it a change in government or change in the outlook for commodity prices. The manager aims for long-term outperformance versus the benchmark with below-average volatility, using a combination of top-down and bottom-up analysis. In recent years emphasis has shifted more towards top-down factors as they are deemed to have been having the most influence on shareholder returns. From a top-down perspective the manager assesses factors such as politics, inflation and currency. In 2016, politics, both domestic (Dilma Rousseff impeachment) and overseas (the election of Donald Trump), have had the greatest influence on Latin American equity markets, but the manager observes that top-down influences will vary over time. From a bottom-up perspective, the process involves a liquidity screen whereby more than 400 listed companies in the region are narrowed down to c 175, after which bottom-up analysis and due diligence is carried out. The team has a network of professional contacts within the region, which provides additional insight.

Portfolio holdings are regularly monitored and may be sold if there is a significant change in fundamentals or valuation. When a stock gets to within 5% of its target price the analyst reviews the model and asks the question, “Is there much more juice left?” Portfolio turnover varies but the average holding period is currently around two years. When making a new investment careful attention is paid to liquidity by analysing historical share trading volumes.

Current portfolio positioning: Staying overweight in Brazil

At end-November 2016, the top 10 holdings accounted for 53.3% of the portfolio, an increase from 47.0% a year before. In terms of sectors the manager continues to favour financials and consumer staples. In terms of country allocation, BRLA started calendar year 2016 with a significant underweight in energy stocks but as the oil price showed signs of sustained recovery and as the political backdrop in Brazil improved in March, with clear signs that leadership would change, so the energy sector went from being one of the biggest portfolio underweight positions, to one the biggest overweights (Exhibit 3) as Landers looked to rebuild Brazilian exposure. The shift in energy exposure reflected the purchase of one new position – Petrobras, now the largest holding (Exhibit 1, page 2). This purchase was predicated primarily on the basis of the company being a large and liquid bellwether for the Brazilian economy, but the fact that the corruption scandal was to be concluded by the end of the year was also positive. As well as Petrobras, Landers added to Itaú and Banco Bradesco (financials), AmBev (beverages) and Vale (materials). BRLA is now has c 65% of its assets invested in Brazil and is overweight relative to the benchmark.

Although Mexico has shifted from overweight to underweight, this arose primarily out of the manager turning more positive on Brazil in March, rather than becoming negative on Mexico. Trump’s protectionist rhetoric has not altered Landers’s long-term positive stance on BRLA’s Mexican holdings, which tend to be domestic plays like Walmart de Mexico and diversified food and beverage producer FEMSA, rather than exporters. At the same time, while Trump’s rhetoric on Mexico is seen as potentially damaging, it can also be argued that his efforts at stimulating the US economy, if successful, should benefit the rest of the world, including Mexico. The overweight position in Peru has been maintained, reflecting the market friendly outcome of the presidential election. BRLA has modest exposure to Argentina, which is not part of the benchmark, on the back of progress on economic reforms and attractive valuations. Finally, the manager remains underweight Chile due largely to political concerns.

Exhibit 3: Portfolio sector exposure vs benchmark (% unless stated)

Portfolio end-November 2016

Portfolio end-November 2015

Change (pp)

Benchmark weight

Active weight vs index (pp)

Trust weight/ index weight (x)

Financials

29.7

32.2

-2.5

29.8

-0.1

1.0

Consumer staples

23.4

24.2

-0.8

18.1

5.3

1.3

Materials

13.8

14.8

-1.0

15.5

-1.7

0.9

Energy

13.3

4.7

8.6

9.7

3.6

1.4

Industrials

5.2

6.8

-1.6

5.9

-0.7

0.9

Utilities

4.1

2.8

1.3

6.0

-1.9

0.7

Information technology

3.6

2.2

1.4

1.9

1.7

1.9

Consumer discretionary

3.1

5.1

-2.0

5.8

-2.7

0.5

Telecommunication services

3.0

6.1

-3.1

5.5

-2.5

0.5

Real estate

0.8

N/A

N/A

1.4

-0.6

0.6

Healthcare

0.0

1.0

-1.0

0.4

-0.4

0.0

Total

100.0

100.0

100.0

Source: BlackRock Latin America Investment Trust, Edison Investment Research. Note: The trust weightings exclude net current assets/liabilities and fixed interest.

Exhibit 4: Portfolio geographic exposure vs benchmark (% unless stated)

Portfolio end-November 2016

Portfolio end-November 2015

Change (pp)

Benchmark weight

Active weight vs index (pp)

Trust weight/ index weight (x)

Brazil

65.2

45.7

19.5

58.3

6.9

1.1

Mexico

23.8

42.0

-18.2

26.3

-2.5

0.9

Peru

4.8

5.9

-1.1

3.0

1.8

1.6

Argentina

3.4

1.6

1.8

0.0

3.4

N/A

Chile

1.6

3.6

-2.0

9.2

-7.6

0.2

Total

100.0

100.0

100.0

Source: BlackRock Latin America Investment Trust, Edison Investment Research. Note: The trust weightings exclude net current assets/liabilities and fixed interest.

Performance: Weak relative, improving absolute

Latin American markets have lagged world stock markets in recent years, partly due to political issues within the region and partly due to impact of weak commodity prices. In 2016, however, the partial resolution of political issues in Brazil, the strengthening of the real and a rise in commodity prices saw Latin American equities outperform most other world markets. As a result, BRLA’s NAV total return was 47.6% in sterling terms. While a robust absolute return however, it lagged the benchmark index, which rose by 56.8% in sterling terms. Much of the underperformance can be accounted for by the difficulty in getting invested quickly enough in Brazil when it became clear that president Rousseff would be impeached. While the expectation of leadership change prompted the immediate decision to rebuild Brazilian exposure, it was a race against time as the market bounced back both sharply and quickly. The time taken to restructure the portfolio saw returns lag the benchmark due to cash drag. Looking forwards, the removal of BRLA’s progressive dividend policy announced last year should allow the management team greater flexibility and this arguably improves scope for future outperformance. It is noteworthy that returns to sterling investors were significantly enhanced as Latin American currencies strengthened relative to the pound. In recent years prior to 2016, Latin American currencies have generally depreciated relative to sterling, thereby detracting from returns.

Exhibit 5: Investment trust performance to 31 December 2016

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI EM Latin America

(0.5)

(4.5)

(2.1)

(7.0)

(4.2)

(5.3)

(18.2)

NAV relative to MSCI EM Latin America

(1.6)

(4.1)

(3.4)

(5.8)

(2.3)

0.4

(12.5)

Price relative to FTSE All-Share

(3.3)

(4.1)

(1.0)

24.9

(13.9)

(44.3)

(20.5)

NAV relative to FTSE All-Share

(4.4)

(3.7)

(2.3)

26.5

(12.2)

(40.9)

(15.0)

Price relative to MSCI World

(2.0)

(7.1)

(4.3)

13.0

(32.6)

(57.6)

(44.0)

NAV relative to MSCI World

(3.0)

(6.7)

(5.6)

14.4

(31.3)

(55.0)

(40.1)

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-December 2016. Geometric calculation.

Exhibit 7: NAV total return performance relative to benchmark over three years

Source: Thomson Datastream, Edison Investment Research

Discount: Price lags NAV in 2016

The current 15.2% share price discount to cum-income NAV compares to the average of 13.5% over the last 12 months (range of 8.1% to 18.1%). This is a widening from the averages of the last three, five and 10 years (11.7%, 10.6% and 7.4%, respectively). In spite of the sharp rally in Latin American stocks in the second half of 2016, the share price has not kept pace with the improved NAV return (see Exhibit 5).

With effect from 1 January 2016, a 24.99% tender offer will occur in 2018 if BRLA has underperformed the benchmark in terms of US dollar total returns by more than 1% per year over the previous two financial years and the share price discount to cum-income NAV has averaged more than 5% over the same two-year period.

Exhibit 8: Share price discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

With effect from 1 January 2017, the management fee was reduced from 0.85% of NAV per annum to 0.80% of NAV per annum. In addition, the performance fee has been removed.

BRLA is a conventional investment trust with one class of share in issue; there are currently 39.4m shares outstanding. The trust is subject to a continuation vote every two years; the next one is due at the AGM in 2018. Gearing of up to 25% of net assets is permitted. At the end of November 2016, net gearing was 3.3%.

Dividend policy and record

Dividends are paid twice a year in September and April. In 2015 the final dividend was reduced to 6c due to a shortfall in earnings. It was decided that future dividends would be paid in line with earnings rather than seeking to maintain or increase the dividend each year as had hitherto been the trust’s policy. Following the declaration of a 6c interim dividend in September the current dividend yield based on the share price at the time of writing is 2.1%.

Peer group comparison

BRLA is one of only two companies in the AIC Latin America sector, so we have also compared it to two closed-end funds listed in the US. The largest of all five funds, BRLA’s performance is currently behind the closed-end listed fund peer group weighted average over one, three, five and 10 years, but ahead of the open-ended peer group weighted average over all four periods.

Exhibit 9: Selected peer group as at 10 January 2016

% unless stated

Market cap £m

NAV TR 1 Year

NAV TR 3 Year

NAV TR 5 Year

NAV TR 10 Year

Sharpe 1y (NAV)

Sharpe 3y (NAV)

Discount (ex-par)

Ongoing charge

Perf. fee

Net gearing

Dividend yield (%)

BlackRock Latin American (LSE)

158.9

66.2

11.7

(5.8)

57.6

1.4

(0.2)

(12.3)

1.1

No

103

2.1

Aberdeen Latin American Inc. (LSE)

43.6

68.0

12.6

3.3

1.9

(0.3)

(11.3)

2.0

No

111

5.1

Aberdeen Latin America Eq. (NYSE)

152.2

75.1

14.1

4.5

105.4

1.8

(0.2)

(11.6)

1.4

No

100

1.5

Latin American Discovery (NYSE)

65.3

68.5

6.5

(7.6)

44.9

1.6

(0.3)

(11.9)

1.7

No

100

0.7

Weighted average

70.0

11.9

(1.4)

74.7

1.6

(0.2)

(11.9)

1.4

102

2.0

Rank

1

4

3

3

2

4

2

4

4

2

2

Open-ended funds

Aberdeen Latin American Equity

77.2

13.7

3.1

1.8

(0.2)

No

Fidelity Latin America

59.0

9.6

(5.7)

69.5

1.3

(0.3)

No

Schroder ISF Latin American

59.7

4.1

(13.4)

29.3

1.4

(0.4)

No

Templeton Latin America

62.1

4.9

(15.5)

43.6

1.5

(0.4)

No

Threadneedle Latin American

61.9

0.4

(15.2)

38.2

1.4

(0.4)

No

Weighted average

61.0

5.3

(12.5)

48.7

1.4

(0.4)

Source: Morningstar, Edison Investment Research. Note: TR=total return. Sharpe ratio is a measure of risk-adjusted return. The ratios shown are calculated by Morningstar for the past 12- and 36-month periods by dividing a fund’s annualised excess returns over the risk-free rate by its annualised standard deviation. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

There are six non-executive directors on the BRLA board. Chairman Peter Burnell joined in 1990 and was appointed chairman in 1997. He is due to retire at the end of the current financial year and his replacement is expected to be announced in due course. The Earl St Aldwyn was appointed in 1996, Laurence Whitehead in 2003, Antonio Monteiro de Castro in 2007 and Mahrukh Doctor in 2009. The newest member is Carolan Dobson, who joined the board in January 2016.

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Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place,

88 Phillip Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place,

88 Phillip Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place,

88 Phillip Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place,

88 Phillip Street, Sydney

NSW 2000, Australia

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