The primary investment objective of the Scheme is "to seek capital appreciation by investing predominantly in units of BlackRock Global Funds-World Agriculture Fund (BGF-WAF). The scheme may, at the discretion of the investment manager, also invest in the units of other similar overseas mutual fund schemes, which may constitute a significant part of its corpus. However, there is no assurance that the investment objective of the scheme will be realised. It shall be noted that "similar overseas mutual fund schemes" shall have investment objective, investment strategy and risk profile/consideration similar to those of BGF-WAF.

Is this fund for you?

DSP BlackRock World Agriculture Fund (DB-WAF) is an open ended fund of funds scheme from the stable of DSP BlackRock Mutual Fund. It is a feeder fund which will predominantly invest in units of BlackRock Global Funds-World Agriculture Fund (BGF-WAF), and thus take opportunities emerging within the agriculture theme.

Since DB-WAFs investments will be predominantly in the BGF-WAF (along with units of other similar overseas mutual fund as deemed fit by the investment manager) its performance will be directly linked to the performance of BGF-WAF and other similar such overseas mutual funds; which invests in the equity and equity related securities of agricultural companies across the globe.

Outlook of Global Agriculture Sector

Growing global population requires countries either to accelerate on their agriculture commodities production or import them (if they are deficient in natural resources and technological resources), in order to satisfy the growing demand. However, supply of arable land and other natural resources remains limited and improvement in the farm productivity is imperative. The Governments across nations are looking to reduce the ill effects of using conventional fuels, as global warming have caught the attention of environmentalist and Governments who are now attempting to diversify their fuel supply.

The consumption pattern too, has undergone a change - thanks to growing wealth of emerging nations. Countries such as China and India, which are accelerating on their economic growth rate, have a robust consumption theme, and thus FMCG sector (which for some products is fed by agriculture commodities) has shown resilience despite having faced the brunt of rising cost of living. They have outperformed on this consumption theme due to healthy consumer confidence as compared to developed nations.

Hence, we believe that investors' need to be careful and assess their risk appetite and their preference of geographical diversification before committing to a feeder fund like DB-WAF, because the exposure to developed nations such as the U.S, is dominant in the underlying fund.

Portfolio & Investment Strategy: DSPBR-WAF

DSP BlackRock World Agriculture Fund (DB-WAF) is an offering from DSP BlackRock Mutual Fund which will predominantly invest in units of BGF-WAF (along with units of other similar overseas mutual fund as deemed fit by the investment manager), by allocating it assets in the under-mentioned manner:.

Portfolio & Investment Strategy: BGF-WAF

BGF-WAF seeks to maximise the total returns. The fund invests globally at least 70% of its total assets in the equity securities of agricultural companies. Agricultural companies are those which are engaged in agriculture, agricultural chemicals, equipment and infrastructure, agricultural commodities and food, bio fuels, crop sciences, farm land and forestry.

The Fund invests across market capitalisations and geographies and holds stocks in the range of 40-70. However, the number of stocks held by the fund may actually breach the mentioned range.

The aforementioned table reveals that exposure to the U.S. occupies a dominant portion to the BG-WAF's portfolio, which in turn closely links the performance of DB-WAF to the U.S.'s agriculture sector, in a time when the global economic scenario is experiencing a gloom.

Risk Factors associated with BGF-WAF

• Currency Risk: As the underlying scheme will invest in securities which are denominated in foreign currencies (e.g. US Dollars), fluctuations in the exchange rates of these foreign currencies may have an impact on the income and value of the scheme.
• Sector Concentration Risk: Being a thematic fund of fund scheme, DB WAF is exposed to the sector concentration risk. Although the fund has flexibility to invest in other schemes similar to BGF-WAF; these investments too would be limited to a narrow theme of agriculture and hence could be sensitive to movements in underlying sectors.
• Country Risk: The fund has invested the dominant proportion of its corpus in the United States, and hence the performance of BG-WAF would be closely linked to economic, political, and social risks imbibed in the United States.

Performance of BG-WAF

Being benchmarked against DAX Global Agribusiness Index, BGF-WAF has a track record of a little over 1 ½ year (launched on February 9, 2010), and as on August 31, 2011 the fund has managed asset worth USD 587.8 million. So far the performance table of BGF-WAF reveals that it has been more or less in sync with that of the DAX Global Agribusiness Index; but a noteworthy point is alpha returns haven't been delivered.

Fund Manager Profile

DB-WAF will be managed by Mr. Mehul Jani - the dedicated fund manager for managing overseas investments at DSP BlackRock Mutual Fund. He holds a Masters' degree in Banking and International Finance (from Cass Business School at City University, London) and has to credit a CFA Charter. Mr. Jani has a total experience of 6 years in investment management, and prior to joining DSPBlackRock in October 2008, he was associated with the Morgan Stanley, London.

Fund Outlook

While agriculture theme per se is evergreen, DB-WAF's performance would be closely linked to the performance of its underlying fund – BGF-WAF, as DB-WAF is a fund of funds scheme. BGF-WAF's portfolio reveals a dominance of investing in the U.S which exposes its investors to a country specific risk. Moreover, though the strategy of capitalising on the opportunities available in the global agriculture space appears to be a prudent one; investors would be exposed to several risks including some explained above.

Also from a cost point of view, since DB-WAF is a fund of fund scheme, its investors would have to bear additional cost (in terms of dual management fees and expense ratio. Recurring expenses are estimated to be around 2.5% of average daily net assets. Besides, BGF-WAF charges initial fees as high as 5%. Higher expenses such as these would definitely eat into your returns.