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Quality growth through environmental solutions

Jupiter Green Investment Trust PLC 28 August 2017 Review
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Jupiter Green Investment Trust

Quality growth through environmental solutions

Investment trusts

29 August 2017

Price

181.8p

Market cap

£38.4m

AUM

£40.0m

NAV*

190.5p

Discount to NAV

4.6%

NAV**

192.3p

Discount to NAV

5.5%

*Excluding income. **Including income. As at 24 August 2017.

Yield

0.7%

Ordinary shares in issue

21.1m

Code

JGC

Primary exchange

LSE

AIC sector

Sector specialist - environmental

Benchmark

MSCI World Small Cap

Share price/discount performance

Three-year performance vs index

52-week high/low

181.8p

156.5p

194.0p

165.8p

**Including income.

Gearing

Gross*

0.0%

Net cash*

4.2%

*As at 31 July 2017.

Analysts

Sarah Godfrey

+44 (0)20 3681 2519

Mel Jenner

+44 (0)20 3077 5720

Jupiter Green Investment Trust is a research client of Edison Investment Research Limited

Jupiter Green Investment Trust (JGC) invests in companies around the world that are providing solutions to environmental challenges. It aims for capital growth from a portfolio of c 60 companies, chosen through a disciplined, bottom-up investment process with a focus on quality and valuation. The trust is managed by a team at Jupiter Asset Management who also run the UK’s first environmentally focused collective investment fund, Jupiter Ecology. The managers report that their investment universe has expanded considerably as environmental issues have become more mainstream and technological advances have made companies in areas such as renewable energy more competitive. JGC’s small size and closed-end structure allow the managers more flexibility to invest in smaller, less liquid and potentially higher-growth companies than in their larger open-ended mandates, including up to 5% in unlisted stocks.

12 months ending

Share price (%)

NAV (%)

MSCI World Small Cap (%)

FTSE ET50 (%)

MSCI World (%)

FTSE All-Share (%)

31/07/13

41.3

30.9

35.1

41.0

28.1

24.3

31/07/14

9.7

7.4

3.5

8.7

4.7

5.6

31/07/15

(0.5)

4.1

14.5

10.5

14.1

5.4

31/07/16

6.6

12.4

20.4

14.7

17.7

3.8

31/07/17

21.6

16.0

18.5

19.5

17.6

14.9

Source: Thomson Datastream. Note: All % on a total return basis in GBP.

Investment strategy: Meeting ecological challenges

Jupiter’s environmental and sustainability investment team monitor a large, global universe of stocks in three intersecting thematic areas: demographics, resource efficiency and infrastructure. JGC has a particular focus on companies providing solutions through technology. The team undertakes c 300-400 company meetings each year, and all potential holdings are subject to detailed due diligence before investment, focusing on areas such as valuation and management quality. Investments are made for the long term and turnover is low at c 10% a year.

Market outlook: ‘Green’ goes mainstream

Strong equity market performance across many sectors and global markets has persisted in the face of rising geopolitical tension. In the environmental arena, the market has largely shrugged off Donald Trump’s statement of his intent to withdraw the US from the Paris climate change agreement, arguably illustrating the extent to which the adoption of solutions to environmental challenges has moved from a top-down policy decision to one based on competitive and economic realities.

Valuation: Active buyback policy limits discount

At 24 August, JGC’s shares traded at a 5.5% discount to cum-income NAV. This was broadly in line with the 12-month average discount of 5.8%, and a little wider than the three- and five-year averages of 4.8%. JGC’s board aims to keep the share price close to NAV, and regularly buys back shares to limit the discount. The trust invests for capital growth, but also offers a current dividend yield of 0.7%, broadly in line with its closest peer.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Jupiter Green Investment Trust (JGC)’s investment objective is to generate long-term capital growth through a diverse portfolio of companies providing environmental solutions. The company invests globally across three key areas: infrastructure, resource efficiency and demographics. It has a bias towards small and mid-cap companies and may invest up to 5% of total assets in unlisted companies. Performance is measured against the MSCI World Small Cap Index.

30 June 2017: Annual results for the year ended 31 March. NAV TR +22.2% and share price TR +32.4% versus +35.2% TR for the benchmark.

7 April 2017: 554,321 new shares issued as a result of annual subscription rights exercise.

29 November 2016: Half-year results for the six months ended 30 September. NAV TR +16.5% and share price TR +23.6% versus +20.9% TR for the benchmark.

Forthcoming

Capital structure

Fund details

AGM

September 2017

Ongoing charges

1.58%

Group

Jupiter Unit Trust Managers

Interim results

November 2017

Net cash

4.2%

Manager

Charlie Thomas & team

Year end

31 March

Annual mgmt fee

0.75%

Address

The Zig Zag Building, 70 Victoria Street, London SW1E 6SQ.

Dividend paid

September

Performance fee

Yes, see page 7

Launch date

June 2006

Trust life

Indefinite, subject to vote

Phone

+44 (0) 20 3817 1000

Continuation vote

Three-yearly, next 2017

Loan facilities

£3m

Website

www.jupiteram.com/JGC

Dividend policy and history (financial years)

Share buyback policy and history (calendar years)

While the trust has a capital growth objective, substantially all distributable revenues generated by portfolio companies are expected to be paid as dividends. Dividends will not be paid unless they are covered by income from underlying investments.

The board uses share buybacks and issuance with the aim of ensuring that in normal market conditions, the trust’s share price does not materially differ from its net asset value. Up to 14.99% of shares can be bought back and up to 10% allotted annually. Allotments below include exercise of subscription rights.

Shareholder base (as at 12 June 2017)

Portfolio exposure by sector (as at 30 June 2017)

Top 10 holdings (as at 31 July 2017)

Portfolio weight %

Company

Country

Sector

Business area

31 July 2017

31 July 2016*

Vestas Wind Systems

Denmark

Industrials

Wind turbines

3.7

3.2

AO Smith

US

Industrials

Water heaters

3.7

5.9

Tomra Systems

Norway

Industrials

Recycling machinery

3.6

3.1

LKQ

US

Industrials

Auto parts

3.4

3.8

Emcor

US

Industrials

Construction & engineering

3.2

3.4

Cranswick

UK

Consumer staples

Food producer

3.2

3.7

Wabtec

US

Industrials

Railway engineering

2.8

3.6

Xylem

US

Industrials

Water technology

2.7

N/A

Valmont Industries

US

Industrials

Engineering & irrigation

2.6

N/A

Toray Industries

Japan

Industrials

Plastics & chemicals

2.3

2.6

Top 10

31.2

34.6

Source: Jupiter Green Investment Trust, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in July 2016 top 10.

Market outlook: Climbing a wall of worry

In spite of heightened geopolitical tension and emerging evidence that the world’s largest economy, the US, might be past its cyclical peak, global equity markets have continued to perform strongly. As shown in Exhibit 2 (left-hand chart), smaller companies have outperformed large-caps globally over the past five years, and environmental technology stocks – in common with technology stocks more generally – have led the pack. However, as shown in the right-hand chart, equity valuations are also high on both forward P/E and price/book measures, while there is limited support from dividends in an environment where bond yields could start to rise. Against such a backdrop, a disciplined investment process that focuses on finding genuinely innovative companies at reasonable valuations could find favour with investors.

Exhibit 2: Market performance and valuation

Index performance (total returns, rebased to 100)

Valuation metrics (as at 24 August 2017)

Source: Thomson Datastream, Edison Investment Research, Bloomberg

Fund profile: Global investment in eco-solutions

Jupiter Green Investment Trust (JGC) was launched in 2006, the third in a succession of environmentally-focused investment trusts managed by Jupiter Asset Management, which had pioneered the sector with the launch of the open-ended Jupiter Ecology Fund in 1986. The trust is managed by Charlie Thomas – head of environmental and sustainability investment at Jupiter, and also manager of the Ecology fund – and Abbie Llewellyn-Waters.

JGC invests globally in a portfolio of c 60 companies that provide solutions to environmental challenges, with the aim of benefiting from the secular growth of environmental and sustainable investment, and achieving capital appreciation. The portfolio is diversified across the market capitalisation spectrum, although the trust’s relatively small size and closed-end structure means it can invest in smaller and less liquid companies than would be appropriate or permissible for the £574m Ecology fund. JGC is not constrained by any benchmark, although it measures its performance officially against the MSCI World Small Cap index and informally against the environmental technology-focused FTSE ET100 index. At launch the trust outsourced its US stock selection to Winslow Asset Management, and until 2010 had a composite benchmark made up of the FTSE Global Small Cap ex-US and Russell 2500 Growth indices, in proportions dependent on the percentage of assets managed by Jupiter and Winslow. The current benchmark was adopted in June 2010 at the same time as stock selection was brought fully in-house.

The trust may invest up to 5% of total assets (at the time of investment) in unlisted securities, and the managers may use derivatives and short positions in order to mitigate risk. A two-tier monitoring process aims to ensure that JGC is appropriately diversified by stock, sector and geography.

The fund managers: Charlie Thomas and team
The managers’ view: Forget Paris?

We spoke with managers Charlie Thomas and Abbie Llewellyn-Waters after Donald Trump’s vow to withdraw the US from the Paris climate agreement, ratified late in 2016. They commented that while the development is outwardly negative, it has had a strong galvanising effect for other countries, as well as many states within the US that have their own targets on emissions reduction, to get on and deal with the issues. Regardless of the rhetoric, there is also a strong political imperative for the Trump administration to support renewable energy, with 80% of US wind farms being located in Republican heartlands such as Ohio and Texas, and providing an important source of employment.

Thomas comments that as environmental solutions become more developed and less dependent on subsidies, political risk diminishes. Technological advances in wind turbines are reducing downtime through remote reporting and the ability to schedule maintenance for non-wind days, so no output is lost. This is bringing down costs for wind power generation and making it more competitive with other energy sources. JGC portfolio companies benefiting from this trend include Vestas Wind Systems and recent purchase, Dong Energy. The managers are also tapping into greater acceptance of the need for a move towards electric vehicles, although they prefer to access the sector through parts suppliers such as semiconductor manufacturer Infineon Technologies.

Meanwhile, Llewellyn-Waters notes that it has become a little harder to find compelling investment opportunities, as valuations on portfolio holdings and stocks on the watch list are high relative to history. However, with companies being punished more for missing earnings expectations than they are rewarded for beating them, there may be opportunities to buy on the dips.

Asset allocation
Investment process: Disciplined focus on growth and value

Jupiter’s environmental and sustainability investment team selects stocks on a bottom-up basis from three interlinked areas where it believes environmental and economic issues connect:

Infrastructure includes areas such as utilities, alternative energy, construction and planning, waste management and communications networks, energy grids, carbon emissions trading/ strategies, water supply, transport infrastructure, waste management facilities and buildings.

Resource efficiency intersects with infrastructure in the areas of grid, carbon, water supply, waste and buildings, and also includes fuel, water treatment and usage, electricity, metal recovery and recycling, land use and pollution reduction.

Demographics overlaps with infrastructure in the area of transport, with resource efficiency in the areas of land use and pollution, and with both for waste management and buildings. It also includes food production, transport operators, agriculture, health and education.

JGC focuses on companies that can have a deep and lasting impact on these areas through the provision of environmental solutions. It classifies its investments as transformational – companies that are disrupting the status quo through new technologies – or transitional, meaning those that are improving environmental sustainability in areas that might not usually be considered ‘green’. The increasing global acceptance of the need for environmental solutions has expanded the trust’s investment universe from fewer than 100 companies at the strategy’s inception to c 1,200 today.

The investment team monitors this universe, looking for themes and trends, such as increased development and adoption of electric vehicles. Through the use of financial screens, monitoring market and technological developments, attending industry conferences, talking to companies (the team undertakes 300-400 company meetings each year) and making use of broker networks, the managers identify potential investments. Candidate companies should have proven technologies, strong balance sheets and cash flows and good-quality, experienced management teams.

Potential investments undergo a financial assessment, looking at capital structure and the ability to generate sustainable profits and return on equity. The managers also analyse end markets and factors such as political risk – which can cause volatility in share prices even where the genuine impacts are less than headlines may suggest – and specific risks such as a lack of take-up of a particular technology. Detailed financial modelling is used to analyse a range of historical and forward valuation metrics, while the team also assesses governance and sustainability factors.

Where the managers decide to invest in a company, they will usually take an initial position of less than 1% of the portfolio, with a view to increasing it over time as their investment thesis is validated. The portfolio has c 60 stocks, and positions will normally be trimmed if they exceed 5% of assets. Holdings may be sold if the managers feel valuations have become overstretched, if a product or service is no longer viable or competitive, if challenging conditions occur in an area of the market, if long-term return expectations are not met, or in cases of management change. The strategy has low turnover of c 10% pa, but the managers keep a ‘shopping list’ of companies they would like to own but where valuations are too high; names from this list may be added to the portfolio on any dips.

Current portfolio positioning

At the 31 March 2017 year-end, JGC had 61 holdings. The top 10 stocks at this date made up 32.6% of the portfolio, with concentration falling marginally to 31.2% at 31 July 2017 (31 July 2016: 34.6%). Holdings are well spread by geography and industry, with the largest sector weightings currently being in industrial engineering and support services (see Exhibit 1) and the largest geographical weightings in the US, UK and Japan (Exhibit 3).

Exhibit 3: Portfolio geographic exposure vs MSCI World Small Cap (% unless stated)

Portfolio end-July 2017

Portfolio end-July 2016

Change (pp)

Index weight

Active weight vs index (pp)

Trust weight/ index weight (x)

US

36.7

39.4

(2.7)

55.3

(18.6)

0.7

UK

15.8

19.0

(3.2)

7.6

8.3

2.1

Japan

12.7

12.7

0.0

12.1

0.6

1.0

Denmark

6.1

6.7

(0.6)

N/S

N/A

N/A

Germany

4.3

3.0

1.3

2.8

1.5

1.5

Austria

4.2

3.3

0.9

N/S

N/A

N/A

Norway

4.2

3.1

1.1

N/S

N/A

N/A

France

4.1

4.2

(0.1)

N/S

N/A

N/A

Canada

N/S

3.0

N/A

3.9

N/A

N/A

Others

7.6

5.7

1.9

18.4

(10.8)

0.4

Cash & gearing

4.2

(0.2)

4.4

0.0

4.2

N/A

100.0

100.0

100.0

Source: Jupiter Green Investment Trust, Edison Investment Research. Note: N/S = not separately stated.

The managers have taken a number of new positions in recent months. These include Dong Energy, Fjord 1, Innogy, Lenzing and va-Q-tec. Thomas says Dong Energy is a classic transitional stock – originally the Danish national oil & gas supplier, it is now the world’s largest developer of offshore wind power. Lenzing is an Austrian textiles company that makes Tencel fibre out of wood pulp. Llewellyn-Waters says the fibre has superior performance characteristics to cotton, while being far less resource-intensive: Lenzing uses a closed-loop manufacturing system so no water is wasted; conversely, it takes 2,700 litres of water to manufacture just one cotton T-shirt. Two new holdings since the year-end are Norwegian local ferry operator Fjord1 and Prysmian, which is an Italian cable manufacturer selling into the energy and utility sectors. Most exits from the portfolio have been as a result of M&A (see Performance section). Other recent notable changes in the portfolio include additions to holdings in US companies Clean Harbors (environmental services) and Itron (energy solutions) and reducing the size of the positions in Cranswick (UK food producer) and Wabtec (US provider of technology products and services to the transportation industry).

Performance: Strong record of absolute returns

Exhibit 4: Investment trust performance to 31 July 2017

Price, NAV and benchmark total return performance, one-year rebased

Price, NAV and benchmark total return performance (%)

Source: Thomson Datastream, Edison Investment Research. Note: Three, five and 10-year performance figures annualised. *Prior to 1 April 2010 JGC had a composite benchmark; see Fund profile on page 3. 10-year returns are versus a blended benchmark.

JGC has performed strongly over the past year (Exhibit 4), with its share price total return also surpassing the return on the MSCI World Small Cap index. Medium-term returns have also been compelling on an absolute basis, annualising at close to 15% a year over five years. As shown in Exhibits 5 and 6, the trust has tended to lag the large-cap ‘green’ FTSE ET50 index, although its global portfolio has helped it to outperform the main UK FTSE All-Share index over most periods.

Positive performance drivers in FY17 included Republic Services and AO Smith, on the expectation of a pick-up in US industrial activity following Donald Trump’s election, while Xylem and Itron were rewarded by a strong demand environment, and Japanese stocks also did well. US solar power stocks First Solar and Sun Power fell on fears of less support for renewables under the new regime. More recently, M&A has boosted returns, with the takeovers of EDPR, WS Atkins and Whole Foods, while Vestas Wind Systems and waste-sorting specialist Tomra Systems also performed well. Whole foods supplier United Natural Foods and Shimano have detracted from returns.

Exhibit 5: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

10 years

Price relative to MSCI World Small Cap*

(0.9)

0.4

2.7

2.6

(21.2)

(12.7)

(45.9)

NAV relative to MSCI World Small Cap*

0.2

(0.1)

2.3

(2.2)

(17.0)

(16.6)

(42.5)

Price relative to FTSE ET50

0.0

(2.2)

(3.5)

1.7

(14.8)

(13.9)

14.4

NAV relative to FTSE ET50

1.1

(2.6)

(3.8)

(2.9)

(10.4)

(17.8)

21.8

Price relative to FTSE All-Share

(1.3)

0.2

0.6

5.8

2.6

21.1

(13.9)

NAV relative to FTSE All-Share

(0.2)

(0.3)

0.3

0.9

8.0

15.6

(8.4)

Source: Thomson Datastream, Edison Investment Research. Note: Data to end-July 2017. Geometric calculation.

Exhibit 6: NAV total return performance relative to FTSE ET50 over 10 years

Source: Thomson Datastream, Edison Investment Research

Discount: Back in a range, supported by active policy

At 24 August 2017, JGC’s shares traded at a 5.5% discount to cum-income NAV. This is broadly in line with the one-year average of 5.8%, but a little wider than the three- and five-year averages of 4.8%. Having widened in a period of risk-aversion in early 2016 and again in the immediate aftermath of the UK’s EU referendum (reaching a five-year high of 13.4%), the discount has settled back into a 4-6% range. JGC’s board aims to keep the share price close to the NAV and may buy back or issue shares to manage a discount or a premium. In the past 12 months, c 0.8m shares have been bought back at a cost of c £1.4m.

Exhibit 7: Share price premium/discount to NAV (including income) over three years (%)

Source: Thomson Datastream, Edison Investment Research

Capital structure and fees

Structured as a conventional investment trust, JGC has one class of share, with 21.1m ordinary shares in issue at 24 August 2017. The shares have subscription rights that entitle shareholders to subscribe for one new share for every 10 shares held at 31 March each year, at a price equal to the undiluted NAV per share at the previous year-end. A discount/premium management programme aims to ensure that the share price does not materially vary from the NAV. Gearing is permitted up to 25% and is available via a £3m flexible loan, which, if fully drawn, would equate to gearing of 7.5% based on 24 August net assets. So far none of the borrowing has been drawn.

Jupiter is paid an annual management fee of 0.75% of net assets (reduced from 0.85% with effect from 1 January 2017), after deducting the value of any Jupiter-managed investments. A performance fee structure is in place whereby the manager receives 15% of outperformance of the MSCI World Small Cap index over a financial year, subject to various conditions (see our initiation note) and an overall fee cap of 1.75%. The last time a performance fee was paid was in FY14, and ongoing charges as at end-FY17 were 1.58% (FY16: 1.63%).

Dividend policy and record

JGC invests for capital growth, and only pays dividends to the extent required to maintain its investment trust status, the rules for which state that no more than 15% of income received in the course of a financial year may be retained. Dividends have been paid each year since FY11 and have tended to reflect portfolio income, meaning that they have fluctuated from year to year. The FY17 dividend of 1.2p per share is equal to the revenue earnings per share for the year. This is 85% higher than the FY16 dividend, partly reflecting the translation effect of a weaker sterling on income received from overseas investments. The dividend will be paid on 6 October to shareholders on the register at 15 September, and represents a yield of 0.7% on the current share price.

Peer group comparison

The AIC’s Sector Specialist: Environmental sector is a small group but still includes a diversity of funds with more and less similar mandates to JGC’s. The Impax and Menhaden funds invest broadly like JGC, while Leaf Clean Energy has a narrower focus on renewables. The sector is dominated by the large Impax fund, whose strong performance skews the weighted averages, whereas JGC is the smallest in the group. JGC’s NAV total returns are ahead of the simple average for the sector over one, five and 10 years, and broadly in line over three years. The trust ranks second in the group over all these periods. Performance has been broadly similar to the open-ended Jupiter Ecology fund, although the two portfolios are quite different, with JGC having more of a focus on smaller companies. JGC’s ongoing charges are above the weighted average but below the simple average. The trust is ungeared and has the narrowest discount in the peer group. It is one of only two closed-ended peers with a yield, and it also yields more than its open-ended cousin.

Exhibit 8: AIC Sector Specialist: Environmental peer group as at 24 August 2017*

% unless stated

Market cap/ fund size £m

NAV TR 1 year

NAV TR 3 year

NAV TR 5 year

NAV TR 10 year

Ongoing charge

Perf. fee

Discount (ex-par)

Net gearing

Dividend yield (%)

Jupiter Green IT

38.4

14.4

32.3

87.4

66.5

1.6

Yes

(4.8)

100

0.7

Impax Environmental Markets

437.2

19.5

62.3

132.3

140.6

1.1

No

(10.4)

106

0.8

Leaf Clean Energy

44.9

(9.8)

15.4

(32.6)

(37.2)

2.4

No

(37.4)

100

0.0

Menhaden Capital

53.6

6.6

2.1

Yes

(25.9)

100

0.0

Simple average

143.5

7.7

36.7

62.4

56.6

1.8

(19.6)

102

0.4

Weighted average

15.7

56.0

114.7

119.8

1.3

(13.5)

105

0.8

JCG rank in sector

4

2

2

2

2

3

1

2

2

Open-ended funds

Jupiter Ecology

573.2

15.1

39.1

84.2

77.6

1.7

No

0.1

Weighted average

14.7

40.8

89.2

77.8

1.9

1.5

Source: Morningstar, Edison Investment Research. Note: *Performance to 23 August 2017. TR=total return. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).

The board

As a small trust, JGC’s board is cognisant of the impact of fixed costs such as directors’ fees on the ongoing charges ratio. As a result, the board is small, with only three directors, but all are experts in the environmental sector. Chairman Michael Naylor was appointed to the board in 2009 and took on his current role in 2015. His background is as a private equity investor in the sustainable asset class. Dame Polly Courtice is a leading environmental academic and has been on the board since launch in 2006. Simon Baker was appointed in 2015 following a career in fund management. He headed Jupiter’s green investment department from 1994 to 2006.

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As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority (Financial Conduct Authority). Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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