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December1,2017

DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Blockchain Summit and AI Tech World: Blockchain Can Bring Transparency to the Supply Chain and AI Can Improve the Customer Experience

Thisweek,FGRT’sLondonteamattendedBlockchainSummitandAITechWorld,twoeventsonblockchainandartificialintelligence(AI)technology,respectively.Pointstouchedonduringpresentationsattherespectiveeventsinclude:

1) Blockchainisarelativelylow-costandflexibletechnologythatenablesmanufacturerstoworkdirectlywithsuppliers.Thetechnologycouldhelpsolvetheproblemofcounterfeitproductsinthepharmaceuticalandluxuryindustries.

2) Initialcoinofferings(ICOs)areheretostayasafundraisinginstrument,butitwillbeparamounttointroducegoodgovernancetoensureitsfutureexpansionandtoavoidregulatorycrackdowns.

3) AIistransformingretailingbyenablingabettercustomerexperience,enhancingpersonalizationandmakingitpossibletoanticipatecustomerdemand.AIcontributessignificantlytotheefficiencyofbusinessoperations.DataprotectionisseenasthesinglebiggestchallengeintheadoptionofAIinretail.

FGRT’sLondonteamattendedBlockchainSummitandAITechWorld,twoeventsonblockchainandAItechnology,respectively,andtheirapplicationinindustriesincludinge-commerce,logistics,financeandbanking.BotheventstookplaceatOlympia,London—BlockchainSummitonNovember28andAITechWorldthefollowingday.Here,wereportourkeytakeawaysfromthepresentationsweattended.

BlockchainBringingTransparencytotheSupplyChainAtBlockchainSummit,weattendedatalkabouttheimpactoftheblockchainonthesupplychainanditsplayers.ParticipatinginthediscussionwereJodyCleworth,CEOatfreightforwarderMarineTransportInternational;JosephWreford,StrategyConsultantatconsultancyfirmAccenture;NickWilliamson,FounderattechfirmQadre;andChristopheOzcan,BlockchainTechnicalExpert—FranceattechfirmCrypto4All.ThepresentationwasmoderatedbyMaggieSlowik,SeniorResearchAnalyst—ManufacturingInsightsEMEA,atmarketresearchfirmIDC.

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December1,2017

DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

• Wrefordstatedthatblockchainisarelativelylow-costandflexibletechnologythatenablesmanufacturerstoworkdirectlywithsuppliersandtocutoutthepartiesthatdonotactuallyaddvaluetothesupplychain.

• Weareattheearlystageoftheapplicationofblockchaintechnologyinindustry,andcompaniesshouldconsiderwhetheritmakessensefortheirbusinessbeforetappingintoit,accordingtoWreford.Thereishugepotentialforfast-movingconsumergoods(FMCG)companiestoapplythetechnologytoprovidetraceabilitywithinthesupplychain.

• Therearealreadyexamplesoftheapplicationofblockchaintechnologyinthemanagementofthesupplychainwithinthewinemakingindustry.Wineproducersusethetechnologytoensurethatfarmerssupplygrapesthatmeetcertaincriteria,suchasbeingfreefromtheuseofpesticides,Ozcanillustrated.

• Theblockchainisusedtopreventcounterfeitproductsinthepharmaceuticalindustry,anissuethataffectsdevelopingcountriesinparticular.Globally,30%ofpharmaceuticalproductsarecounterfeitedbecauseofthelackoftransparencyinthesupplychain,Williamsonstated.

• Anotheruseoftheblockchainincludesthepreventionofcounterfeitsinluxuryandfashionbyintroducingcryptographicidentity—atamper-proofchipembeddedintheproduct—totracktheauthenticityofitems,Williamsonadded.

• Appliedtofreightforwarding,theblockchainenablesdatasharing,createstrustandunleashesautomation,accordingtoCleworth.

• Finally,Wrefordremarkedthatapplyingblockchaintechnologytoexistingoperationsprovidestheopportunitytorethinkthecurrentsupply-chainprocessandtoidentifywaystomakeitmoreefficient.

TheFutureofICOs:GoodGovernanceorGoodbyeAlsoatBlockchainSummit,weheardAleksNowak,CIOatdigitalassetsexchangeplatformBlockEx,speakaboutthecurrentstateandfutureprospectsofICOsasacorporatefundraisinginstrument.

ThefirstICOtookplaceinJuly2013withthelaunchofdigitalcurrencyMastercoin.Ethereum—ablockchainwithsmartcontractfunctionality—wasthenlaunchedinAugust2014.Sincethen,theICOmarkethasgrownexponentially.ICOmarketcapitalizationalmostdoubledbetweenJulyandSeptember2017,goingfrom$50billionto$98billion,withcompaniessuchasdatastorage-sharingFilecoinraising$250million.

TherapidgrowthofICOsdrewtheattentionoffinancialauthoritiesconcernedaboutthelackofregulationswithinthesector.AregulatorycrackdownwasimplementedinChina,wherethegovernmentintroducedatemporarybanonthefundraisinginstrumentinSeptember2017.IntheUS,thefinancialauthoritiesequatedICOstosecuritiesand,assuch,ruledthattheyneedtoabidebythesamelegislation.

Despitetheregulators’interventions,NowakbelievesthatICOsareheretostayandthattheinstrumentwilltransformthewaycorporateswillraisemoneyinthefuture.However,NowakstressedthatitwillbekeytointroducegoodgovernancetoensurethefuturesuccessofICOsasafundraisingtool.Inparticular,ICOissuersshoulddemonstrategoodgovernance,soundmanagementandeffectivefinancialcontrols,whileinvestorsshouldundertakecommercialandtechnicalduediligencebeforeinvestinginICOstoassesstherealpotentialofthecompanyraisingcapital.

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December1,2017

DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

• WediscussICOsinmoredepthinourreportICOs:TheRiseofaBlockchain-BasedFinancingInstrument.

AIforaBetterCustomerExperienceAtAITechWorld,weattendedtwopresentationswithparticipationbyprominentBritishretailers.

• Inthefirst,WhatDoesAIMeanforDifferentIndustries,AnthonyMorris,DirectorofStrategyandAnalyticsatconsumerelectronicsretailerDixonsCarphone,discussedtheimpactofAIonretail.

• Inthesecond,UsingMachineLearningandAnalyticstoEnhanceConsumerExperience,DanielNelson,HeadofDataatonlinegrocerOcado,andSteveLimbirons,BusinessIntelligenceProgramManageratdepartmentstoreHouseofFraser,sharedtheirinsightsontheapplicationofAIintheretailers’operations.

Herearethekeypointsfromthetalks:

• AIistransformingretailinginmanyways.Theabilitytoeffectivelyanalyzeshoppers’dataishelpingretailersenhancethecustomerexperienceandtopredictconsumerdemand,makingoperationsmoreefficient,accordingtoMorris.

• AtHouseofFraser,AIisprimarilyusedtoprovideamorepersonalizedshoppingexperienceforcustomers,Limbironssaid.Inparticular,AIhelpstosendrelevantmarketinginformationtocustomers,andhasbeenusedtoredesignthelayoutofstores—basedontheintelligencegatheredoncustomers’behaviourin-store—tomakethebrick-and-mortarshoppingexperiencemoreseamlessandeffective.

• AtOcado,AIissuccessfullyappliedtoreducefrictionwithinthecustomershoppingexperienceandtoincreasethespeedofdelivery,Nelsonshared.DemandforecastingisanotherkeyapplicationofthetechnologyatOcado.AIenablesretailerstohelpcustomersfindwhattheywanttobuy,resultinginbettersalesconversionrates,Nelsonadded.

DataprotectionisthesinglebiggestchallengethatretailersseeintheimplementationofAIinbusinessoperations,whichwasunanimouslyagreedonbyspeakersatbothtalks.Inparticular,compliancewiththeEuropeanUnion(EU)GeneralDataPropectionRegulation(GDPR)isperceivedasparticularlychallengingbyretailersusingcustomerdata.

• Morrissaidthatitisimportanttobeabsolutelyclearwithcustomersaboutwhattheretailerisusingtheirdatafor.

• Nelsonnotedthattransparencyiskeywhenusingcustomerdata,andthatretailersneedtostateclearlywhattheoutcomewillbeandwhatbenefitsthecustomerwillsee.

WediscussinmoredepththechallengesthattheimplementationofGDPRposestoretailersinourreportTheGDPRandEUDataProtection—ChallengesAheadforRetailers.

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December1,2017

DeborahWeinswig,ManagingDirector,FGRTdeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comFilippoBattainiResearchAssociate

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