RobecoSAM Smart Materials Fund Monthly manager report GBP July 2014 Smart Materials: investing into profitable solutions to resource scarcity Focus on o innovative materials that substitute traditional ones, and o process technologies that deliver efficiency gains in resource utilization Present-day commodity consumption levels are not sustainable: business-asusual behavior must be replaced by innovative, more circular usage concepts The application of various innovative materials and processes has reached a scale where profitability rapidly increases, generating significant investment opportunities in the companies that supply them. This trend has been validated by consultants/thought leaders (e.g. McKinsey s Resource Revolution). Smart Materials past performance shows o Lower risk versus traditional resources o Better returns than peers and indices The value of your investments may fluctuate. Past results are no guarantee of future performance. RobecoSAM AG Josefstrasse 218-8005 Zurich - Switzerland - www.robecosam.com - Phone +41 44 653 10 10 - Fax +41 44 653 10 80
1. Markets Global equity markets generally rose in July, with the IT and telecommunications sectors leading the way. Among the strategy s underlying sectors, IT and materials outperformed the MSCI World Index, while industrial stocks lagged the broad market index. The lithium industry received some positive cross-reads from Tesla s announcement regarding plans for a Gigafactory to make batteries for electric vehicles, with Panasonic as its key partner. The plant is expected to be located in Nevada in the United States and scheduled to produce enough battery cells to power 500,000 vehicles every year. This would roughly correspond to a doubling of current battery capacity and would require significantly more lithium until 2020. 2. Portfolio and performance The RobecoSAM Smart Materials Fund - A (GBP) decreased -2.21% in July, while the MSCI World Index generated a negative return of -0.34%. In the year to date, the fund has deteriorated -2.65%, while the MSCI World Index has gained 2.50%. As a better reference for the resources exposure we use the MSCI AC 50% World / 50% Materials index which returned 1.26% in July and 3.37% for the Year to date period (all data in GBP terms). The fund aims to offer better risk-adjusted returns versus traditional materials investments and to outperform global equity markets over a full market cycle. The fund s performance during the reporting month was below the MSCI World and lower than the 50/50 AC World/Materials index. Performance versus peers was mostly lower as well. In 2013, the fund substantially outperformed the 50/50 World/Materials index as well as the traditional materials peer group. The strongest year-to-date performance contributions came from the basic resources sector where the aluminum in cars theme is catching up. Similarly, the recycling and disposal cluster is also rebounding, thanks mostly to recycling exposure. Innovative specialty materials also outperformed. The process technologies cluster saw the weakest performance, driven by automation and analytic instruments. Osaka Titanium is a Japanese company and the world's second-largest producer of titanium sponge. Titanium is increasingly used in modern airplanes, making up a substantial share of the weight (>25% of the Boeing 787). Titanium can be alloyed with iron, aluminum, vanadium and molybdenum, among other elements, to produce strong lightweight alloys for aerospace, industrial processes, automotive and other applications. Osaka Titanium s stock increased 35 percent in July. Alcoa, the U.S. leader in lightweight metals technology, engineering and manufacturing, is fully integrated and produces aluminum and aluminum alloys for transportation, from automotive and commercial transport to air and space travel, and for improvements in industrial and consumer electronics products. The company is improving its position on the cost curve as well as increasing its downstream exposure in such markets as aerospace with its Firth Rixson acquisition. The stock increased 13 percent in July. 2 / 5
Hexcel Corp, the U.S.-based, advanced composites company, focuses on lightweight, high-performance composites including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures for use in commercial aerospace, space and defense, wind energy and industrial applications. Commercial aerospace, in particular, has continued to show strong growth and Hexcel benefits from the increasing amount of composites in newly built airplanes. The stock corrected in July after the company reported earnings in line with expectations, with the share price dropping 7 percent over the month. The fund s basic resources exposure is mainly concentrated in aluminum and lithium producers. The fund s positioning in innovative materials remains focused on functional materials and lightweight materials such as carbon fibers, which benefit from airplane build rates. The fund also has substantial exposure in automation and modeling, which is set to benefit from the drive toward increasing manufacturing efficiency. The fund s position in Hexcel was increased. 3. Periodic performance comparison (in GBP terms) YTD 2013 2012 2011 2010 2009* since inception RobecoSAM Smart Materials Fund -2.65% 20.92% 3.37% -12.00% 32.68% 21.30% 72.34% MSCI World TRN 2.50% 24.32% 10.74% -4.84% 15.76% 16.51% 79.08% Excess Return -5.15% -3.40% -7.37% -7.16% 16.92% 4.79% -6.74% MSCI ACWI/Materials TRN 3.37% -2.56% 6.14% -20.87% 25.45% 24.03% 31.62% Excess Return -6.02% 23.48% -2.77% 8.87% 7.23% -2.73% 40.72% *31.07.2009 *31.07.2009 Periodic performance comparison (in EUR terms) YTD 2013 2012 2011 2010 2009 2008 2007 2006* since inception RobecoSAM Smart Materials Fund 2.19% 17.85% 6.46% -9.73% 37.48% 43.48% -51.62% 11.51% 7.86% 32.86% MSCI World TRN 7.60% 21.20% 14.05% -2.38% 19.53% 25.94% -37.64% -1.66% 4.57% 40.15% Excess Return -5.41% -3.35% -7.59% -7.35% 17.96% 17.54% -13.98% 13.17% 3.30% -7.29% MSCI ACWI/Materials TRN 8.51% -5.01% 9.31% -18.83% 30.08% 64.84% -49.46% 24.62% 10.03% 35.90% Excess Return -6.32% 22.86% -2.85% 9.10% 7.41% -21.36% -2.16% -13.10% -2.17% -3.04% *01.10.2006 3 / 5
4. Outlook Stock markets continue to rely on a continuation of a rather benign monetary policy. Our current scenario assumes a rather modest economic recovery, which should give central banks enough room to opt for a modest, step-by-step approach to withdrawing their monetary stimulus. The fund management is likely to continue to focus on high-quality companies with stable cash flows, high barriers to entry and proven management teams. Current market developments clearly reflect concerns over the global growth outlook. Nonetheless, select companies in the process technologies and innovative materials sectors are seeing strong increases in demand and successfully reduced their cost base in 2009, enabling them to achieve better profitability than previously possible. We are positive on select secular growth stories such as equipment producers in some industrial applications, which seek to take cost out of their processes and make them more efficient. Secular growth stories like factory automation and specifically fiber laser companies offer particularly attractive opportunities. Energy storage materials are set to benefit from continued growth in electric vehicles. Display materials and lightweight materials are other areas that provide above-market growth rates. Specialty and advanced materials producers benefit from their products reaching an inflection versus legacy materials. Process technologies help cope with increasing commodity prices or are driven by higher commodity prices to cope with inflationary pressure. Innovative materials benefit from increasing commodity prices as they offer better properties and functionality. Zurich, August 7, 2014 Pieter Busscher Portfolio Manager 4 / 5
Important legal information: The details given on these pages do not constitute an offer. They are given for information purposes only. No liability is assumed for the correctness and accuracy of the details given. The value of the units and the return they generate can go down as well as up. They are affected by market volatility and by fluctuations in exchange rates. Past performance is no indication of future results. The values and returns indicated here do not consider the fees and costs which may be charged when subscribing, redeeming and/or switching units. The breakdown into sectors, countries and currencies as well as possibly indicated benchmarks is liable to change at any time in line with the investment policy determined in the Prospectus. Performance is calculated using the NAV per share of the GBP share class. Performance is calculated using the benchmark price in reference currency (USD) at the end of the calculation period multiplied by the foreign exchange rate (numerator in foreign currency, denominator in reference currency) at the end of the calculation period divided by the benchmark price in reference currency at the start of the calculation period multiplied by the foreign exchange rate (numerator in foreign currency, denominator in reference currency) at the start of the calculation period minus one. The translation into action of fund recommendations contained in these documents shall always lie in the sole responsibility of the intermediary or investor. Investments should only be made after a thorough reading of the current Prospectus and/or the Fund Regulations, the current Key Investor Information Document (KIID) and articles of association, the latest annual and semi-annual reports and after advice has been obtained from an independent finance and tax specialist. The documents mentioned can be obtained free of charge by calling the local RobecoSAM office, on www.robecosam.com or from any address indicated below. The range of RobecoSAM investment funds with domicile in Luxembourg (SICAV) is registered for public offering in Luxembourg, Switzerland, Germany, Austria, France, Holland, Sweden, Spain, Belgium, Ireland, United Kingdom, Singapore* and Italy. However, due to the different registration proceedings in the various countries, no guarantee can be given that each fund or share category is or will be registered in every jurisdiction and at the same time. For an up to date registration list, please refer to www.robecosam.com. Please note that in any jurisdiction where a fund or share category is not registered for public offering, they may, subject to the applicable local regulation, only be sold in the course of private placement or institutional investments. Particularly, the RobecoSAM funds are not registered and, therefore, may not be offered for sale or be sold in the United States of America and their dependencies. In a case of private placement this pages are destined exclusively for internal use by the intermediary appointed by RobecoSAM and/or the institutional investor and shall not be passed over to third parties. Particularly, this document shall under no circumstances be used as material for public offering or any other kind of promoting to the public of the RobecoSAM funds or their share categories. Switzerland: Representative is Swiss & Global Asset Management Ltd., Hardstrasse 201, Postfach, CH-8037 Zurich. Paying Agent: Bank Julius Bär & Co. AG, Bahnhofstrasse 36, Postfach, CH-8010 Zurich. Germany: Information Agent is Swiss & Global Asset Management Kapital AG, Taunusanlage 15, D-60325 Frankfurt am Main. Paying Agent is DekaBank, Deutsche Girozentrale, Hahnstrasse 55, D-60528 Frankfurt am Main. Austria: Paying Agent is Erste Bank der österreichischen Sparkassen AG, Graben 21, A-1010 Vienna. Spain: RobecoSAM investment funds are registered in the Registry of Foreign Collective Investment Institutions Commercialized in Spain of the CNMV: Julius Baer Multipartner (No. 421). For a list of registered distributors in Spain, please refer to www.cnmv.es. Copyright 2014 RobecoSAM - all rights reserved. *restricted recognition for institutional investors in Singapore 5 / 5