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Neptune Global Technology Fund Ali Unwin, Fund Manager & Chief Technology Officer

For Investment Professionals Only – Not for Retail Clients

Neptune Global Technology Fund

1

1. The technology market

• Performance

• Valuation

• Outlook

2. Three things consensus is missing

3. The Neptune Global Technology Fund

These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.

Technology sector performance

Tech has outperformed YTD and over past 2, 3 and 5 years

2

Source: Bloomberg, July 2016. Indexed to 100. Returns in GBP. Past performance is not a guide to future performance. References to specific sectors are for illustration purposes only and should not be taken as a recommendation to buy or sell these sectors. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

8595

105115125

Performance YTD in GBP - indexed to 100

MSCI World Tech MSCI World

S&P 500 FTSE All Share

80100120140

2yr performance in GBP - indexed to 100



80

130

180

Aug-

13O

ct-1

3D

ec-1

3

Feb-

14Ap

r-14

Jun-

14Au

g-14

Oct

-14

Dec

-14

Feb-

15Ap

r-15

Jun-

15Au

g-15

Oct

-15

Dec

-15

Feb-

16Ap

r-16

Jun-

16

3 yr performance in GBP - indexed to 100



80100120140160180

Aug-

13O

ct-1

3D

ec-1

3Fe

b-14

Apr-1

4Ju

n-14

Aug-

14O

ct-1

4D

ec-1

4Fe

b-15

Apr-1

5Ju

n-15

Aug-

15O

ct-1

5D

ec-1

5Fe

b-16

Apr-1

6Ju

n-16

5 yr performance in GBP - indexed to 100



Is the technology sector overvalued?

US Technology sector is not overvalued versus other US sectors

3

Source: Neptune, Bloomberg, July 2016. Past performance is not a guide to future performance, These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific sectors are for illustration purposes only and should not be taken as a recommendation to buy or sell these sectors.

Versus other sectors:

6

8

10

12

14

16

Mar

-04

Nov

-04

Jul-0

5M

ar-0

6N

ov-0

6Ju

l-07

Mar

-08

Nov

-08

Jul-0

9M

ar-1

0N

ov-1

0Ju

l-11

Mar

-12

Nov

-12

Jul-1

3M

ar-1

4N

ov-1

4Ju

l-15

Mar

-16

S&P 500 Sector EV/T12M EBITDA Multiples

Staples Info Tech Utilities Discretionary

1011121314151617181920

Tech Sector vs S&P 500 P/E Ratio

S&P Tech companies P/E ratio S&P Overall P/E Ratio

Is the technology sector overvalued?

4

0

2

4

6

8

10

12

14

Mar

-06

Sep-

06M

ar-0

7Se

p-07

Mar

-08

Sep-

08M

ar-0

9Se

p-09

Mar

-10

Sep-

10M

ar-1

1Se

p-11

Mar

-12

Sep-

12M

ar-1

3Se

p-13

Mar

-14

Sep-

14M

ar-1

5Se

p-15

Mar

-16

MSCI World IT EV/EBITDA

MSCI World Tech EV/T12m EBITDA

+1 STD

-1 STD

Source: Neptune, Bloomberg, July 2016. Past performance is not a guide to future performance. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific sectors are for illustration purposes only and should not be taken as a recommendation to buy or sell these sectors.

05

1015202530354045

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

MSCI World IT EV/EBITDA

MSCI World Tech EV/T12m EBITDA

+1 STD

-1 STD

Versus history:

Technology sector is neither cheap nor expensive versus its history

Outlook: we are all tech companies now

The case for holding tech is strategic rather just cyclical

5

Source: *Citi (March 2015) http://www.citigroup.com/citi/news/executive/140225Ea.htm; **Fortune (June 2016). These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.

• “We are a technology company with a banking license”

Michael Corbat, Citigroup CEO*

• Fortune 500 CEOs cited the “rapid pace of technological change” as the single biggest challenge facing companies.**

http://www.citigroup.com/citi/news/executive/140225Ea.htm

Three things consensus is missing

Three things consensus is missing

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1. The internet is in its infancy

2. Corporate IT spending is not coming back

3. Hybrid cloud is not a strategy

These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.

1. The internet is in its infancy

7

Source: Federal Reserve Economic Data (St Louis Fed). Seasonally adjusted data (Q216). *Pew Research Centre (2015). These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities. Neptune does not give investment advice and only provides information on Neptune products.

Consensus: the internet is maturing

• Growth rates will slow

• Scale of disruption will fade

Our view: • Early phase of internet’s growth• Millennials now largest generation

in US* • EMs may lead DMs• China online shopping GMV likely to

double 2015-2018

0

2

4

6

8

10

1999 2001 2003 2005 2007 2009 2011 2013 2015

US E-Commerce Retail Sales as % of Total Sales

90

70

50

30

10

2015 2028 2036 2050

Projected population by generation Millennial

Silent

Gen X

Boomer

The internet is in its infancy

8

Source: BAML Report (Jan 2016). These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities. Neptune does not give investment advice and only provides information on Neptune products.

• Industry economics highly attractive

– Network effects means winner-takes-most market structure

– Competition is for the market notwithin the market

– High (and growing) ROIC

88

78 70

77

96

0

20

40

60

80

100

Google Facebook Baidu Naver Kakao Talk

%

Market share in domestic market

2. Corporate IT spending is not coming back

We believe expectations for a rebound in corporate IT spending are misguided

9

Source: Gartner (May 2016), Bernstein (May 2016). These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.

Consensus: Corporate IT spending will return to old ‘1.5 - 2.0x GDP’ growth rate

• Sustained underinvestment post-2008 will mean-revert

• Lack of productivity improvement necessitates IT investment

Our view: • Deflationary forces

overwhelming • Speed of change favours opex

over capex • Cloud spend more efficient than

on premise (mainly utilization) -30%

-20%

-10%

0%Servers per core Storage per TB IP routers per

port

Average selling price decline CAGR 2006-2012

8.0% 6.5%

8.5% 8.0%

5.1%

-7.0%

9.4%

3.7% 2.1%

3.7% 1.7%

0.2% 2.0%

-8%-6%-4%-2%0%2%4%6%8%

10%

IT spending growth YoY

Corporate IT spending digital enterprise

As digital disrupts everything, IT is no longer just a part of the enterprise – it is the enterprise

10

Source: *Gartner, May 2015. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities. Forecasts are not a reliable indicator of future performance.

What does ‘digital’ mean?

“The creation of new business models and processes by integrating technology with the physical world”*

• Internet of Things

• Software eating the world

• Big data

• AI and self-optimization

• X-as-a-service

3. ‘Hybrid Cloud’ is not a long-term strategy

Hybrid cloud is a staging post on the way to public cloud

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Source: Morgan Stanley 2Q16 CIO Survey*. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities.

Consensus: enterprises will adopt a ‘hybrid cloud’ approach

• Complexity

• Security

• Stasis

Our view: • Hybrid cloud unsustainable• DevOps becomes dominant• Public Cloud more secure than

hybrid

0

5

10

15

20

25

30

Today 1 year from now

Percentage of compute in cloud (% average response)*

Public cloud looks set to inflect

Cloud adoption likely to accelerate as we move up the S-curve

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Source: Morgan Stanley 2Q16 CIO Survey; Infrae.com; Rogers: Diffusion of Innovations, (2003). These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views.

S-curve adoption about to kick in

Fund Process: >4000 to 40-60

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These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. Neptune does not give investment advice and only provides information on Neptune products.

• Industry research

– Technological disruption– Models of innovation/adoption– Pricing power– Industry structure

• Stock screening

– Analyst research– Quant/Qual screens– Company meetings

• Valuation

– DCF of base, bull, bear– Relative to history/peers/market– % risk/reward

• Portfolio construction

– Diversification– Index Aware– Factor models

Global Technology Fund key views

14 Source: Neptune as at 19.08.16. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the benchmark quoted. For this reason the comparison index should be used for reference only.

78.54

12.59 6.8 2.07

82.38

7.70 9.92

0

20

40

60

80

100

North America Asia Pacific Europe Cash

Region positioning versus index (%)


MSCI World Information Technology

0

5

10

15

20

25

30

35

Internet Software Hardware Semiconductors Networking Cash

Sector positioning versus index (%)


MSCI World Information Technology

57.6

14.1

25.1

2.0 0

10

20

30

40

50

60

70

>$100bn $15-$99bn <$15bn Cash

Fund split by market cap (%)

Current top 10 holdings

We are not index trackers: 51.7% active share

15

Source: Neptune and Bloomberg as at 19.08.16. *Index: MSCI World Technology Index. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only. References to specific securities are for illustration purposes only and should not be taken as a recommendation to buy or sell these securities.

Absolute

%

Microsoft 9.6

Alphabet 9.6

Apple 8.7

Facebook 4.5

Visa 3.8

Amazon 3.3

SAP 3.2

Oracle 2.9

Cisco 2.7

Sabre 2.5

Total 50.8

Relative Portfolio % Index %* Active

Amazon 3.34 0.00 3.34

Sabre 2.49 0.11 2.38

Alibaba 2.08 0.00 2.08 Taiwan Semiconductor 2.05 0.00 2.05

Mellanox 1.98 0.00 1.98

Ringcentral 1.96 0.00 1.96

Baidu 1.83 0.00 1.83

Tencent 1.8 0.00 1.80

JD 1.76 0.00 1.76

Pegasystems 1.73 0.00 1.73

How exposed are you to technology?

The UK is particularly underexposed to technology

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Source: FTSE, MSCI, 19.08.16. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

Materials 7% Consumer

Discretionary 10%

Consumer Staples 17%

Information Technology

3%Energy 11%

Financials 23%

Health Care 10%

Industrials 10%

Telecoms 5%

Utilities 4%

FTSE All Share Consumer

Discretionary 13%

Consumer Staples

11%

Energy 7%

Financials 19% Materials

5%

Health Care 13%

Industrials 11%

Information Technology

15%

Telecoms 3%

Utilities 3%

MSCI World

How exposed are you to technology?

Your funds may not be giving you the tech exposure you would expect or want

17

Source: Morningstar, 19.08.16. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of our views. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

Name Tech exposure (%)

IA UK Equity Income 2.6

IA UK All Companies 4.9

IA Europe ex UK 6.4

IA Global Equity Income 7.7

IA Global 12.1

IA North America 16.7


Unconstrained approach† aiming to deliver outperformance

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Source: Neptune as at 19.08.16. †Subject to prescribed regulatory limits. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and your clients may not get back the original amount invested. Neptune funds are not tied to replicating a benchmark and holdings can therefore vary from those in the index quoted. For this reason the comparison index should be used for reference only.

Global Technology

Fund Manager Ali Unwin

IA Sector Technology and Telecoms

Launch Date 15 December 2015

Benchmark MSCI World Information Technology

Fund size £6m

Active share 51.3%

No. of stocks 40-60

This document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, W6 8DA which is authorised and regulated by the Financial Conduct Authority, FCA number 416015. Details of Neptune’s regulatory status and authorisation by regulators in other countries are available from us on request. The Neptune web address is www.neptunefunds.com Neptune has 23 United Kingdom (UK) domiciled open-ended collective investment company funds authorised for public distribution in the UK by the FCA of which the Neptune China Fund, Neptune European Opportunities Fund, Neptune Global Equity Fund, Neptune Japan Opportunities Fund, Neptune Russia & Greater Russia Fund and Neptune US Opportunities Fund have been authorised by the following regulatory bodies: the Financial Market Authority (FMA) for public distribution in Austria; the Commission Bancaire Financiere et Des Assurances (CBFA) (which has now been succeeded by the Financial Services and Markets Authority (“FSMA”)) for public distribution in Belgium; the Autorité des Marchés Financiers (AMF) for public distribution in France; the Federal Financial Supervisory Authority (BaFin) for public distribution in Germany; the Commission de Surveillance du Secteur Financier (CSSF) for public distribution in Luxembourg; the Netherlands Authority for the Financial Markets (AFM) for public distribution in the Netherlands; and the Swiss Financial Markets Supervisory Authority (FINMA) for public distribution in Switzerland. Further details can be found on the relevant regulatory authority’s website. The presentation may contain information about other Neptune funds which are not contained within the list of registered funds above and which are therefore not registered for sale outside of the UK. This presentation is designed for UK and current investors only. All attendees have been made aware of this as part of the registration process and by attending this session it is assumed that you have requested further information about these funds and are aware that they are not for sale in European jurisdictions.

Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you as to any change of

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