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OpenWorld Listed Infrastructure Investing

Attractive and resilient dividends

January 2012

Infrastructure assets are long term, capital intensive long-term, investments that serve the community through the provision of essential community services. Good infrastructure provides key economic services efficiently, improves the competitiveness of, and generates high productivity for the economy.

A defensive asset class

When economies experience periods of weakness, unlike many industrial companies, the revenues of eriods listed infrastructure stocks tend to be res resilient because consumers use water, electricity and gas for heating, cooling and lighting irrespective of economic conditions, drive their cars on toll roads and use other essential infrastructure. Also, the revenues of these companies are usually underpinned by regulation or long term contracts. A natural hedge against inflation exists for many infrastructure assets (such as utilities and toll roads) through tariff movements or toll increases being explicitly linked to oads) inflation. We believe that dividend yields from infrastructure assets should provide at least a partial hedge against inflation for investors.

Attractive income yields

Infrastructure companies tend to provide predictable, attractive income distributions, especially during the mature stage of the asset cycle. Due to the earnings certainty of the assets, distributions are usually sustainable over the long term. Our manager will typically have 80% of their strategy invested in the mature stage assets, with the bulk of the balance in developing, which also pay out healthy dividends. Chart 1 below shows a comparison of the dividends received from comparable asset class opportunities over the last 5-6 years. We have shown 12 month rolling actual dividends received on a 6 USD 100 investment (can also be seen as a percentage of initial investment). Dividends from general equities and even real estate have demonstrated a high degree of correlation to the economic cycle and stock market. However, infrastructure dividends have tended to be less volatile and less dependent on the macro cycle (rising less in the boom years and falling much less in the bear market). It is especially pertinent in the 2008-2009 period, where the 12 month rolling dividend payments hardly 2009 flinched. In fact, given the nature of the assets (long dated, monopoly and stable cash flows), (long-dated, infrastructure companies had little problems in refinancing their debt (both through loans and issuance through of bonds).



Chart 1: Better, resilient and secure dividends, Rolling 12 month yield payments

$4.5 $4.0
Rolling 12 month $ return*

$3.5 $3.0 $2.5 $2.0 $1.5

S&P GLIF - Rolling 12 month Net distribution (LHS) MSCI World Utilities - Rolling 12 month Net distribution (LHS)

MSCI ACWI - Rolling 12 month Net distribution (LHS) FTSE EPRA/NAREIT Developed - Rolling 12 month Net distribution (LHS)

Source: Bloomberg & MSCI. Data as of end January 2012. The calculations are based on the implied net of tax yield (derived geometrically from the difference between the Total Return (Net) and Price versions of the respective indices). * The rolling 12 month US$ returns are calculated based on a buy-and-hold US$100 investment, as at the end of Dec. 2005.

This makes infrastructure and utility companies more attractive as yield investments. What is important to note is that companies were paying dividends from their core operations, and not through issuance of bonds, taking out loans or out of capital. Utilities, which make up anywhere between 45-75% of the strategy, are more defensive than the transports, and offer more stable dividend payments given their regulated business model. Having said that, much to most peoples surprise, transports (toll roads, airports, railways and ports) also offer very attractive and secure dividends (see chart 2 below).

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Chart 2: Attractive dividend yields, not just a utility story (Primary sectors in the S&P Gbl Infrastructure Index (weight in index in brackets) % Yields 7 6 5 4 3 2 1 0
Electric Multi-Utilities Utilities (24.5) (12.9) IPPs (0.7) Water Utilities Highways & Airport Marine Ports Oil & Gas (0.2) Railtracks Services (10.4) & Services Storage & (17.1) (11.5) Trans. (22.6)

Sector (S&P Gbl Infra) - DY

Russell Global Index - DY

S&P Global Infrastructure - DY

Based on extensive analysis of the underlying infrastructure assets of companies, our global manager will allocate across sectors primarily from a bottom-up perspective. Our Sydney-based manager, RARE, will invest in a conviction portfolio of 35-50 pure infrastructure companies from a total return perspective, irrespective of index weightings.

20% 15% 10% 5% 0% -5% -10%

OW Global Listed Infrastructure (Gross) cumulative XS return vs. S&P Global Infrastructure Index Net OW Global Listed Infrastructure (Gross) cumulative XS return vs. MSCI World Index Net

Source: Russell, Bloomberg and FactSet. Data as of end of December 2011 Page 3



Table 1: Returning positive returns in declining markets last year, and healthy dividends makes for a

very attractive investment proposition.


2009* OW GLIF (Gross) S&P Global Infrastructure Index Net MSCI World Index Net
Source: Confluence, all returns are in USD

2010 13.1% 4.8% 11.8%

2011 4.8% -1.3% -5.5%

37.6% 44.6% 42.1%

*Since inception of the OpenWorld fund (8th April 2009)

Yield 2009 OW GLIF (Gross)* S&P Global Infrastructure Index* MSCI World Index Net* 4.2% 4.0% 2.6% 2010 4.8% 4.1% 2.4% 2011 4.6% 4.7% 2.8%

*Market weighted running yield of the underlying holdings as of the end of the year Source: FactSet, all yields are in USD

For more information:

Call: +44 207 024 6000


Faisal Rahman Portfolio Manager, Russell Investments

Important Information Applications for shares in OpenWorld plc ("the Company") are subject to the terms and conditions set out in the Companys prospectus, simplified prospectus, memorandum and articles of association and latest annual and half-yearly reports. Investors and potential investors are advised to read these documents (and in particular the risk warnings) before making an investment in the Company. Copies are available free of charge on request from the platform provider and Russell. This material is for professional use only and is not intended for distribution to retail clients. This material does not constitute an offer or invitation to anyone in any jurisdiction to invest in any product of Russell Investments Limited (or any of its affiliates) (together "Russell") or use any Russell services in any jurisdiction where such offer or invitation is not lawful, or in which the person making such offer or invitation is not qualified to do so. Unless otherwise specified, Russell is the source of all data and to the best of Russells knowledge all information contained in this material is accurate and current at the time of issue, however this cannot be guaranteed. Unless otherwise specified, any opinions expressed are those of Russell and not a statement of fact and they do not constitute investment advice and are subject to change. Please note that the value of investment and the income derived from them may go up as well as down and an investor may not receive back the amount originally invested. The value of a Shareholders investment may be affected favourably or unfavourably by fluctuations in the rates of different currencies. As investors may be required to pay charges on the issue of Shares, an investment in a Fund should be considered to be a medium to long term investment. Openworld Public Limited Company is an umbrella fund with segregated liability between sub-funds and an investment company with variable capital incorporated under the laws of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003, as amended. Issued by Russell Investments Limited, a company incorporated in England and Wales under registered number 02086230 and with its registered office at: Rex House, 10 Regent Street, London SW1Y 4PE. Telephone 020 7024 6000. Authorised and regulated by the FSA, 25 The North Colonnade, Canary Wharf, London E14 5HS.

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