Neptune

EUROPE: FINDING OPPORTUNITIES IN A CHALLENGING MARKET

Rob Burnett

Head of European Equities

7-9 November 2012

THIS PROMOTION IS NOT FOR PRIVATE CLIENTS. FOR INVESTMENT PROFESSIONALS ONLY

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NEPTUNE BY NUMBERS

Neptune Investment Management

– London-based independent fund management company founded in 2002

– Grown assets to €7.6bn under management

– 10 long-only Equity UCITS funds spanning global geographies from pan-

regional to single country portfolios

A very different investment approach

– 27 investment professionals covering 10 global industry sectors

– Unique investment process combining top down macro view, global sector

research and bottom up company valuations

– Team driven high conviction approach through concentrated portfolios of

30-50 stocks

Source: Unless otherwise stated, information is provided by Neptune as at 30.09.12. FX rate as at 30.09.12, £1/€1.2606 Past performance is not a guide to future performance. 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.

EUROPEAN EQUITY MARKETS UPDATE

Market is still pricing in two tail risk events: Euro failure and global recession. Neither are likely in the medium term

Sovereign crisis in 3 charts

How our process works

The world economy is recovering, yet the market is sceptical. Sell safety

Fund positioning: why overweight agriculture and luxury goods now?

What would make us bearish? Have corporate profit margins peaked?

We believe there is a significant alpha opportunity in 2H 2012

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. Please remember that forecasts are not a reliable indicator of future performance.

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70

80

90

100

110

120

130

140

1995 1998 2001 2004 2007

Ireland

Italy

Portugal

Spain

Greece

1995 level

Germany

Current accounts, not debt, impact bond yields

During the boom, wages rose and current account deficits widened

When credit stopped flowing, excesses had to be unwound. Normally, countries would fix this by collapsing their currency

Euro area unit labour costs % change 1995-2008 (1995=100)

DIVERGENT COMPETITIVENESS CREATED THE CRISIS, NOT DEBT

EU countries have to devalue internally

Source: European Commission, Neptune calculations, May 2012. 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.

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THE MARKET IS FIXING THE PROBLEM: EX ITALY, COMPETITIVENESS IS CONVERGING

Source: European Commission, Neptune calculations, May 2012. 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.

High bond yields in periphery causing deflation; low yields in Germany stoking inflation

Competitiveness on track to converge in 1-2 years

Policy is buying time

Changes in unit labour costs 1995-2012 (1995=100)

“Kicking the can down the road” is largely working

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Source: Bloomberg, IMF, Neptune. September 2012. 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.

CURRENT ACCOUNT DEFICITS ARE CLOSING

Current account balances to Q1 2012

A current account surplus is a sign of competitiveness; it means the country is self-funding

The crisis is over for Ireland; Spain, Portugal and Greece are on track

Italy has a manageable adjustment – but cutting Unit Labour Costs “ULC” would make it easier

Lower unit labour costs and small current account surpluses can end the crisis

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EU RISKS ARE MORE POLITICAL THAN ECONOMIC

Source: IMF. September 2012. 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. Please remember that forecasts are not a reliable indicator of future performance.

Unemployment rate for under 25 years of age (%) Most EU countries can close

current account deficits during 2013. Economically, system is on track

Risks are political. Greek elections were a massive test

Expect more volatility but pressure should abate within a year 0%

10%

20%

30%

40%

50%

60%

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Euro collapse no longer imminent. This will help global growth

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HOW DOES OUR INVESTMENT PROCESS WORK?

I N V

E S

T M

E N

T

U N

I V

E R

S E

• Concentrated Portfolio

• 45-55 stocks

• Target tracking error of 6-9%

• Can double weight sectors

• Can zero weight 3 out of 10 sectors

EUROPEAN PORTFOLIO

Country Economic Forecasts

3 PARALLEL STREAMS OF RESEARCH

Global Sector

Reports

Company Research &

Valuation

Highest Conviction

Stocks in Best

Sectors

PORTFOLIO

CONSTRUCTION

PORTFOLIO MONITORING

AND RISK CONTROL

• Target prices

• Sell discipline

• Stop-loss discipline

• Performance and risk analysis

MONETARY POLICY UPDATE: CENTRAL BANKS STILL WORKING HARD

Central banks have put a floor under the global economy

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Almost no country has not cut rates over last 1 year

Fed balance sheet has been flat for 15 months

As of last week, Fed now expanding at $40bn per month indefinitely

Source: Neptune as at 13.07.12. Please remember that forecasts are not a reliable indicator of 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.

Fed Balance Sheet 2oo6 to Oct 2013(E) $tn

WHY IS LOW INFLATION SO IMPORTANT FOR GROWTH?

Because nominal wage growth is low, it does not take much inflation to push real incomes into negative territory

Inflation now the major variable in consumer spending power

Low inflation lifts spending and vice versa

Global inflation YoY, China, US, EU CPI from 05/2010 to date

Source: Wolfe Trahan and Neptune Research, June 2012. 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.

Inflation is an important element in economic momentum

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0

1

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4

5

6

7

Jun 10 Dec 10 Jun 11 Dec 11 Jun 12

US CPI YoY

China CPI YoY

EU CPI YoY

%

INFLATION HAS JUST BECOME A TAILWIND IN THE US

No wonder the US slowed down US real incomes went negative to Q1 2012

But turned positive in Q2 2012

Low CPI is now a big help to consumer spending, and high CPI is a hindrance

Nominal wage growth and CPI 1948 to date

Lower inflation is now helping consumers in US & China Source: Bloomberg and Neptune Research, September 2012. 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. 11

%

%

SHORT TERM, INFLATION ALSO HELPING REAL INCOMES IN EUROPE

Rate cuts, lower inflation & euro stabilisation to help world growth

Real incomes turned positive in Germany during Q2

German unemployment at 20 year low; Germany likely to surprise positively

Euro area still facing negative real incomes, but may turn positive during Q3

Source: Ameco European Commission Database, August 2012. Please remember that forecasts are not a reliable indicator of 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.

Nominal wage growth and CPI YoY

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%

%

Given panic we have seen an extreme flight to safety and exit from risk

Only ever been more extreme in March 2009

With global growth stabilising the elastic should snap back in Q3 and Q4

High vs. low risk price performance vs. equal weight benchmark

Sells: Swedish Match, L’Oreal

Buys: Yara, Lanxess

We expect secure growth companies to underperform in Q3 & Q4

Source: BofA Merrill Lynch Global Research, European Quantitative Strategy, Factset. RISK = EPS estimate dispersion and Beta, August 2012. Past performance is not a guide to future performance. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

PORTFOLIO: SELL SAFETY

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0

20

40

60

80

100

120

140

160

Dec 92 Dec 98 Dec 04 Dec 10

High risk relative performance

Low risk relative performance

NEPTUNE EUROPEAN OPPORTUNITIES FUND: SECTOR SPLIT (%)

Source: Neptune as at 30.09.12 14

Materials18.0%

Consumer Staples3.2%

Consumer Discretionary

16.2%

Energy17 .3%

Financials12.0%

Information Technology

13.6%

Industrials18.4%

Health Care0.3%

Cash1.0%Overweights

— Energy

— Materials

— Consumer Discretionary

— Industrials

Underweights

— Consumer Staples

— Healthcare

— Telecoms

— Utilities

Global grain prices well supported long term

China will soon be a net importer of 130m tonnes of grain

We like fertiliser (Yara), seeds & pesticides (Syngenta) and tractors (Agco)

Agriculture stocks to outperform long term

Source: Ministry of Land and Resources, BofA Merrill Lynch, February 2012. Grain=Corn, Wheat, Rice, Soy, August 2012. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

AGRICULTURE: STRATEGIC OVERWEIGHT

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WHY OVERWEIGHT EUROPEAN CONSUMER STOCKS WITH SALES TO CHINA?

We expect a surge in Chinese consumption of European goods to 2020

Market has become negative on Chinese growth

Yet China has catch-up growth potential until 2020; Neptune 2013 GDP forecast 8.3%

The consumer market has strong growth potential

Source: Euromonitor, CLSA and Neptune as at 13.07.12. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

Population changes (millions) by earnings group 2012-2020E

Luxury (Richemont), Autos (VW)

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WHAT WOULD MAKE US BEARISH? HAVE CORPORATE PROFIT MARGINS PEAKED?

Hourly wage growth rises when unemployment is below 6%

Today we still have slack in labour market

Margins have more upside until labour gets pricing power

Margins have not yet peaked 17

0

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01/80 01/84 01/88 01/92 01/96 01/00 01/04 01/08 01/12

US unemployment rate %

0

2

4

6

8

10

01/80 01/84 01/88 01/92 01/96 01/00 01/04 01/08 01/12

Hourly wages % 1yr change

Source: ISI, Bloomberg. September 2012. 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.

Euro stabilisation, global central bank easing and lower inflation has stabilised the world economy

The flight to safety leaves many defensives looking expensive and many cyclicals in chemicals, oil service, industrials, consumer discretionary looking compelling

Risks would be a sharp drop in unemployment that would hurt margins

EUROPEAN MARKET UPDATE

We believe there is a significant alpha opportunity in European equities

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. 18

NEPTUNE EUROPEAN OPPORTUNITIES FUND

*Source: Neptune as at 30.09.12. FX rate as at 30.09.12, £1/€1.2606. †Yield on A income share class as at 30.09.2012. This Fund may have a high historic volatility rating and past performance is not a guide to future performance. This Fund may invest more than 35% in government and public securities in a number of jurisdictions. For further details please see the Prospectus.

Fund Manager: Rob Burnett

Launch date: 29 November 2002

Fund size: £808.9m* (€1bn)

c.40-60 stock portfolio

Net yield on income share class: 1.19%†

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FUND PERFORMANCE

Period Neptune European Opportunities Fund

MSCI Europe ex UK

To 30.09.12 % return % return

YTD 10.84 13.81

2011 -9.31 -11.63

2010 11.74 9.56

2009 32.85 29.76

2008 -40.40 -42.19

2007 5.10 5.94

2006 38.45 22.00

2005 43.40 28.30

2004 31.24 13.60

2003 17.47 19.48

Source: Lipper as at 30.09.12, A Accumulation share class performance, in euro with net income reinvested and no initial charges. Calendar year performance as at the end of each year. The performance of other share classes may differ. This Fund may have a high historic volatility rating and past performance is not a guide to future performance. 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.

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PERFORMANCE VS. BENCHMARK UNDER CURRENT MANAGER

Source: Lipper 06.05.05 to 30.09.12. A Accumulation GBP share class cumulative performance, in euros with net income reinvested and no initial charges. The performance of other share classes may differ. This Fund may have a high historic volatility rating and past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuation and your client may not get back the amount originally 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.

%

-50.00

0.00

50.00

100.00

150.00

200.00

250.00

Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11

Neptune European Opportunities Fund

MSCI Europe ex UK

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APPENDIX

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BOND YIELDS ARE GOING TO RISE

Yields could rise sharply in the US in 1H 2013

Since 2007 this is the first bond market rally unaccompanied by deflation risk

Powerful divergence with inflation expectations rising and bond yields falling

Fear is driving this rally. Real yields are negative and data is improving

Source: Neptune as at 30.10.12. Past performance is not a guide to future performance. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

5 Yr Fwd Inflation Breakeven (blue) vs. 10 yr Treasury Yield (red)

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IF THE WORLD ECONOMY IS NOT COLLAPSING WHY OWN TREASURIES AT A LOSS NOW?

We believe equities will outperform bonds

5 year forward inflation rate is 3%, 10 year bond yield is 1.7%

10 yr yield should be >3%

Sell treasuries and buy equities

Bond proxy equities also to underperform. Market to buy true inflation hedges: energy, materials, industrials


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US DEFICIT DRIVEN GROWTH BEGAN IN 1982

US moved into a structural deficit in 1982, powering global growth

Growth had to be accompanied by higher leverage

If US deleveraging is over, growth can pick up


US Current Account

US still in deficit driven growth, ought to weaken USD

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CHINA TO MOVE TO STRUCTURAL CURRENT ACCOUNT DEFICIT TO BENEFIT THE WORLD

Chinese consumption to rise faster than exports in coming years, moving them to structural deficit

China has huge scope to raise leverage to finance deficit driven growth, like US 1982-2006

Europe a major beneficiary

China Current Account 1981 to date

China’s move to a deficit a key driver for world economy


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EU BEST POSITIONED TO BENEFIT FROM CHINESE DEMAND IN COMING DECADE

EU Sovereign crisis is likely to push EU current account higher

Surplus means EU can reduce debt and grow at the same time

Chinese move to deficit can assist Sovereign crisis


EU Current Account 1998 to date

German Current Account 1970 to date

Euro likely stronger than dollar

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ECB BALANCE SHEET

ECB may carry out LTRO3

Fed balance sheet now growing faster than ECB

Source: Neptune as at 30.10.12. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

ECB Balance Sheet 2oo6 to Oct 2012

$ trilli

on

Consumer staples need a significant global recession to outperform

Long-term business models strong but relative value missing, and margin erosion possible in 2013

Expect 10-20% underperformance from June to year end

Consumer Staples have become too expensive

We believe investors are still too cautious

Source: BofA Merrill Lynch Global Research, European Quantitative Strategy, 2012. Please remember that forecasts are not a reliable indicator of future performance. The forecasts 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.

THE RISK TO CONSUMER STAPLES IN Q3 & Q4

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CONTACT DETAILS

Neptune Investment Management Limited

3 Shortlands, London W6 8DA

Tel: +44(0)20 3249 0100

Fax: +44(0)20 3249 0123

[email protected]

www.neptunefunds.com

Philippe Bretaudeau +44(0)20 3249 0179

Sales Manager [email protected]

Henry Foster +44(0)20 3249 0180

Sales Manager [email protected]

Calls may be recorded for monitoring and training purposes and for your protection

mailto:[email protected]



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IMPORTANT INFORMATION

This presentation is only for Investment Professionals resident or domiciled in Germany. This material is not for the use of Retail Clients.

This presentation document has been provided in English as additional information for those readers with a sufficient command of the English language. This

document is issued by Neptune Investment Management Limited (“Neptune”), 3 Shortlands, London, W6 8DA which is authorised and regulated by the

Financial Services Authority (“FSA”), 25 The North Colonnade, Canary Wharf, London, E14 5HS. Details of our 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 31 UK domiciled funds authorised for public distribution by the FSA. The Neptune Emerging Markets Fund was authorised by the Federal Financial Supervisory Authority (BaFin) as at 05.05.10 for public distribution in and from Germany. The remaining nine funds were authorised by the Federal Financial Supervisory Authority (BaFin) as at 24.09.09 for public distribution in and from Germany. Further details can be located on the following German website http://www.bafin.de. Retail Clients should consult their Independent Financial Adviser or other authorised intermediary. This communication is only for persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. The provision of investment services may be restricted in certain jurisdictions. You are required to acquaint yourself with any local laws and restrictions on the availability of any services described. None of our products are available to residents in the United States. 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 our views. This is not a solicitation or an offer to buy or sell. Neptune Investment Management Limited has produced this presentation for private circulation to Investment Professionals only and this document is not for onward distribution. All information is given in good faith but without any warranty. Please remember that this Fund may have a high historic volatility rating and past performance is not a guide to future performance. 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 amount originally invested. Any forecast, projection or target is indicative only, is not guaranteed in any way and is not a reliable indicator of future performance. Investments in Emerging Markets are higher risk and potentially more volatile than those in established markets. These and other risks are described in the Prospectus which should be read carefully prior to investing. This Fund may invest more than 35% in government and public securities in a number of jurisdictions.


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IMPORTANT INFORMATION

Any past performance data that has not been shown is due to the information not being available. The information provided is for information purposes only and is not intended to be considered as advice to invest in a particular fund. Neptune does not give investment advice and only provides information on Neptune products. The offer in Germany is made solely by means and on the basis of the published Prospectus, including any supplements which also contain investment restrictions and Key Investor Information Documents. The Prospectus and any supplements therefore have been electronically published on the website at www.neptunefunds.com. The information provided is for information purposes only and is not intended to be considered as advice to invest in a particular fund. The Prospectus (in German), the articles of incorporation or the certificate of incorporation, the audited annual and unaudited semi-annual report, the ACD contract from 10th February 2006 between the investment company and the ACD as well as the contract with the custodian bank from 10th February 2006 between the investment company, the custodian bank and the ACD are available from the Information Agent in printed form and free of charge: MARCARD, STEIN & CO AG Ballindamm 36 20095 Hamburg Furthermore, the issuing price and conversion price of the investment certificated are available from the German Information Agent free of charge. For further information including the relevant definitions, please see the Prospectus Informationsstelle in Deutschland MARCARD, STEIN & CO AG Ballindamm36 20095 Hamburg hat in Deutschland die Funktion der Informationsstelle übernommen. Der vereinfachte und der ausführliche Verkaufsprospekt, die Satzung der Gesellschaft beziehungsweise die Gründungsurkunde, die geprüften Jahres und ungeprüften Halbjahresberichte, der ACD- Vertrag vom 10. Februar 2006 zwischen der Investmentgesellschaft und dem ACD sowie der Vertrag mit der Depotbank vom 10. Februar 2006 zwischen der Investmentgesellschaft, der Depotbank und dem ACD sind kostenlos in Papier bei der deutschen Informationsstelle erhältlich. Weiterhin sind bei der deutschen Informationsstelle kostenlos die Ausgabe- Rücknahme- und Umtauschpreise der Investmentanteile erhältlich.
