Recovery potential for UK equities

Jupiter UK Growth Investment Trust 13 May 2019 Review
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Jupiter UK Growth Investment Trust

Recovery potential for UK equities

Investment trusts
UK equities

13 May 2019

Price

289.0p

Market cap

£50.4m

AUM

£69.8m

NAV*

287.5p

Premium to NAV

0.5%

NAV**

294.9p

Discount to NAV

2.0%

*Excluding income. **Including income. As at 2 May 2019.

Yield

2.4%

Ordinary shares in issue

17.4m

Code

JUKG

Primary exchange

LSE

AIC sector

UK All Companies

Benchmark

FTSE All-Share

Share price/discount performance

Three-year performance vs index

52-week high/low

352.0p

257.0p

355.4p

259.2p

**Including income.

Gearing

Gross*

18.2%

Net*

10.3%

*As at 30 April 2019.

Analysts

Helena Coles

+44 (0)20 3681 2522

Mel Jenner

+44 (0)20 3077 5720

Jupiter UK Growth Investment Trust is a research client of Edison Investment Research Limited

Jupiter UK Growth Investment Trust (JUKG) aims to generate long-term capital growth, primarily through investing in UK-listed equities. The fund manager, Steve Davies, follows a detailed and fundamental approach to find companies with growth or recovery potential. Unconstrained by benchmark considerations, he is not afraid of being contrarian, and his approach is patient and highly selective. The portfolio consists of just 30–35 holdings and is very different from the FTSE All-Share index, therefore, short- and medium-term performance can diverge from the benchmark. The trust’s NAV total return performance has lagged the benchmark over the past one and three years. This partly reflects JUKG’s significant holdings in UK domestic stocks, which have been very out of favour with investors, but where the manager finds compelling long-term value.

UK equities’ forward P/E discount to world equities

Source: Refinitiv, Edison Investment research

The market opportunity

As shown in the chart above, UK equities have de-rated significantly since early 2016 when it traded at similar forward P/E multiples to global equities. Following the UK’s EU referendum in mid 2016, its equity market moved to a discount, which has continued to widen. Currently trading at a c 14% discount to global equities, UK shares may be of interest to contrarian and longer-term investors.

Why consider investing in JUKG?

The portfolio has significant exposure to domestic UK stocks, which have been particularly out of favour in recent years.

Well-placed for recovery potential should Brexit negotiations progress.

Differentiated approach to corporate engagement; Davies meets with the chairmen of all portfolio companies.

Relatively concentrated, high-conviction portfolio.

Shares trade close to NAV, nil-discount policy

JUKG currently trades at a 2.0% discount to its cum-income NAV, which is the same as its the three-year average. The shares typically trade close to its NAV, reflecting the board’s nil-discount policy. The trust has a dividend yield of 2.4% and, as at end-April 2019, had net gearing of 10.3%.

Exhibit 1: Trust at a glance

Investment objective and fund background

Recent developments

Jupiter UK Growth Investment Trust aims to achieve capital appreciation by holding predominantly listed investments. It invests in a concentrated portfolio made up of the manager’s best ideas from any sector. The trust was known as Jupiter Global Trust from November 2015 until April 2016 and was previously Jupiter Primadona Growth Trust. It adopted its new name, fund manager, investment strategy and FTSE All-Share benchmark on 18 April 2016.

29 March 2019: Interim report for six months ending 31 December 2018. NAV TR -19.8% versus benchmark FTSE All-Share index TR -11.0%.

20 September 2018: Annual report for the year ending 31 December 2018. NAV TR+4.0% versus benchmark FTSE All-Share index TR +9.0%.

20 September 2018: Declaration of annual dividend for FY18 of 7p per share.

Forthcoming

Capital structure

Fund details

AGM

November 2019

Ongoing charges

1.14%

Group

Jupiter Unit Trust Managers

Final results

September 2019

Net gearing

10.3%

Manager

Steve Davies

Year end

30 June

Annual mgmt fee

0.5% (see page 7)

Address

The Zig Zag Building, 70 Victoria St, London SW1E 6SQ

Dividend paid

Annually

Performance fee

Yes (see page 7)

Launch date

June 1972 (April 2016 for new strategy)

Trust life

Indefinite

Phone

+44 (0) 20 3817 1000

Continuation vote

No

Loan facilities

£17m with Scotiabank

Website

www.jupiteram.com/JUKG

Dividend policy and history (financial years)

Share buyback policy and history (financial years)

Dividends, historically paid quarterly, moved to a single annual dividend from FY17. Only three dividends were paid in 2014, owing to a change in dividend policy that year.

The board aims to maintain the share price close to NAV through the use of share buybacks and allotments. Allotments in FY18 include 7.8m new shares issued from the rollover of JDG into JUKG in November 2017.

Shareholder base (as at 10 April 2019)

Portfolio exposure by geography (as at 30 April 2019)

Top 10 holdings (as at 30 April 2019)

Portfolio weight %

Company

Sector

30 April 2019

30 April 2018*

Experian

Industrials

5.8

4.2

Legal & General

Financials

5.5

7.5

Lloyds Banking Group

Financials

5.4

7.4

Diageo

Consumer goods

4.7

N/A

Talktalk

Telecommunications

4.5

4.1

Inmarsat

Telecommunications

4.5

N/A

Barclays

Financials

4.3

6.5

Manchester United

Consumer services

4.1

N/A

Merlin Entertainments

Consumer services

4.0

N/A

Sirius Minerals

Basic materials

3.8

7.2

Top 10 holdings

46.6

54.6

Source: JUKG, Edison Investment Research, Bloomberg, Morningstar. Note: *N/A where not in end-April 2019 top 10.

Market outlook: Influenced by geopolitical factors

The FTSE All-Share index appreciated by c 8% in Q119, following one of the weakest fourth quarters in its history in 2018, reflecting a rapidly deteriorating outlook for global growth, which was exacerbated by geopolitical factors. These included the ongoing US-China trade dispute and uncertainty over Brexit outcomes. Since the start of 2019, fears for a sharp slowdown in major economies have receded, led by the US, where the Federal Reserve signalled that interest rate rises are on hold for the time being. Meanwhile, investors are more optimistic that recently implemented Chinese government policies to help stimulate its economy are taking effect, and that talks to resolve the US-China trade dispute may succeed. However, uncertainty over Brexit outcomes remains and, as shown in the chart on page 1 and Exhibit 2 (LHS), continues to weigh on the relative performance of UK equities, which are at a significant discount to global equities. According to the Bank of America Merrill Lynch survey of global fund managers, allocations to UK equities are at a 20-year low, at levels significantly below those of 2008 and 2009 when the banking system was facing a systemic crisis. Valuations are not stretched (as shown in Exhibit 2 RHS), but there is a wide dispersion between the highest- and lowest-valued securities presenting opportunities for stock pickers. However, the direction of UK equities in the near term will likely continue to be influenced by geopolitical factors.

Exhibit 2: Market performance and valuation

UK and rest of the world equity markets over 10 years (in GBP)

Valuation metrics of Datastream UK index

 

Last

High

Low

10-year
average

Last as % of
average

P/E 12 months forward (x)

12.4

15.7

8.5

12.6

99

Price to book (x)

1.4

2.1

1.3

1.7

86

Dividend yield (%)

4.3

4.8

2.7

3.4

123

Return on equity (%)

9.9

14.7

2.5

9.7

102

Source: Refinitiv, Edison Investment Research. Note: Index valuations at 10 May 2019.

Fund profile: Concentrated, high conviction

JUKG was launched in 1972 as Jupiter Primadona Growth Trust (JPG) and renamed the Jupiter Growth Trust in November 2015. In April 2016 the trust changed its mandate to a UK growth strategy and appointed Steve Davies as its new manager. It was renamed the Jupiter UK Growth Investment Trust; JUKG largely mirrors the strategy of the equivalent £1.1bn open-ended Jupiter UK Growth Fund, which has been managed by Davies since 2015 (he was the deputy manager between 2009 and 2015). In November 2017, the Jupiter Dividend and Growth Trust was rolled up into JUKG, which resulted in increased assets of £24.6m and the issue of 7.8m shares.

JUKG’s objective is to generate capital growth, primarily from investing in UK-listed equities. Davies has an equities research background, which is reflected in his detailed and fundamental approach to selecting a relatively small number of 30–35 high-conviction stocks for the portfolio. He is supported by an analyst, James Moir, who joined Jupiter in 2017. There are no constraints against the benchmark and the manager is also permitted to invest in listed equities outside of the UK; as a result, JUKG’s portfolio is typically very different from its FTSE All-Share index benchmark.

The fund manager: Steve Davies

The manager’s view: UK equities are relatively attractive

Davies believes that the UK equity market has been driven by investor sentiment over the past few years, heavily influenced by Brexit developments, with seemingly little regard for fundamental factors such as valuation. He thinks that the valuations of many UK-listed companies are at “extreme” low levels, particularly for domestically oriented stocks, which have significantly underperformed those with international exposure since the results of the UK’s EU referendum. Davies believes the UK economy has shown resilience; employment levels are at an all-time high, wages are rising and inflation is low, conditions that he would normally expect to support more optimistic equity valuations. However, consumer and investment sentiment are very depressed. As a result of this, merger and acquisition (M&A) activity has been extremely weak recently, even though the manager thinks many businesses are trading on very low multiples. Davies believes any clarity on Brexit could allow for a return of M&A activity to the market. In his view, UK equities are also relatively attractive on a global basis, are very under-owned by international fund managers, and have significant re-rating potential.

Asset allocation

Investment process: Bottom-up, constructive engagement

The manager undertakes detailed fundamental analysis of companies and has a long-term investment horizon. He looks for two broad categories of investments, recovery and growth. Recovery stocks are those that have been ‘written off’ or deemed ‘un-investible’ by the market but have catalysts (such as new management and a change in strategy) that could lead to a re-rating. These companies typically trade on forward P/Es of less than 10x, have free cash flow yields above 10% and have significant share price upside potential. Growth companies are those that can deliver consistently strong growth over the medium term with forecastable business models, yet are reasonably valued. At present, the portfolio is equally balanced between these two categories, reflecting the very unloved nature of UK domestically oriented stocks. In more normal market conditions, Davies would expect recovery stocks to constitute around 20–30% of the portfolio.

Management engagement is an important part of JUKG’s investment process and is undertaken by Davies himself. In addition to meeting senior managements of companies, he aims to meet with chairmen at least once a year, and more frequently when necessary. The nature of the engagement is constructive rather than activist, and the scope can include assessing value in mergers and acquisitions (GKN and Zoopla), giving advice on restoring shareholder value through better communication with investors (Barclays) and day-to-day issues such as remuneration. Davies believes this engagement adds significant insight to his understanding of companies and differentiates JUKG from its peers. The active engagement approach can be accommodated due to the relatively small number of holdings in the portfolio and the additional resource of a dedicated analyst, James Moir.

Current portfolio positioning

As shown in Exhibit 3, JUKG’s largest exposure as at end-April 2019 was to consumer services (40.8%) and, combined with consumer goods (11.6%), over half of the portfolio are in these two consumer-related sectors. One of the largest holdings is a new position in alcoholic beverages company Diageo. The company has a leading position in many of its market segments and a portfolio of premium brands, including Tanqueray (gin) and Johnny Walker (whisky). Davies believes its management is innovative in its approach to strengthening the value of its brands, responding to changing consumer tastes and optimising its portfolio of products. Over recent years, Diageo has invested in fast-growing beverage segments including tequila (Casamigos) and Chinese baijiu (Shui Jing Fang) and disposed of lower-growth products. The company’s sales are well diversified internationally, with strong growth prospects in emerging markets, particularly in India, and it has the potential to expand margins. The manager believes the company can continue to generate organic sales growth of c 6–7% pa and strong free cash flow.

At end-April 2019, financials was the second-largest sector exposure at 26.0%. Year-on-year this exposure had fallen 5.9pp, which partially reflects the manager’s tactical reduction to UK domestically oriented stocks to de-risk the portfolio in view of uncertain Brexit outcomes during the latter half of 2018. Due to the tactical nature of these sales, the manager focused on the more liquid names in the portfolio, including RBS, Legal & General, Lloyds Bank and Barclays. The sales do not reflect a change in the manager’s fundamental views about these companies and Davies remains very positive on their prospects. He thinks that UK banks’ valuations are unjustifiably low when considering their returns on tangible equity (ROTE), high levels of capital adequacy and increasing dividends. Although the overall exposure to financials has fallen, during H218, the manager started to purchase a new position in life insurer Prudential. The company is exposed to global equity markets and has significant businesses in emerging markets through its Hong Kong-listed subsidiary, Prudential Asia. Global equity markets suffered one of their weakest quarters in Q418 and emerging markets risk was amplified by acute currency weakness in some countries, including Argentina and Turkey. These factors contributed to a sharp fall in Prudential’s share price, to levels which Davies believed reflected very bleak outcomes, and where he saw compelling long-term value.

Exhibit 3: Portfolio sector exposure vs benchmark (% unless stated)

Portfolio end-April 2019

Portfolio end-
April 2018

Change (pp)

Index weight

Active weight
vs index (pp)

Trust weight/
index weight (x)

Consumer services

40.8

39.0

1.8

11.7

29.1

3.5

Financials

26.0

31.9

(5.9)

26.4

(0.4)

1.0

Industrials

12.9

13.4

(0.5)

11.5

1.4

1.1

Consumer goods

11.6

6.4

5.2

14.3

(2.7)

0.8

Telecommunications

9.0

8.5

0.5

2.7

6.3

3.4

Healthcare

6.2

3.5

2.7

8.0

(1.8)

0.8

Basic materials

3.8

7.2

(3.4)

7.8

(4.0)

0.5

Technology

0.0

2.7

(2.7)

1.1

(1.1)

0.0

Oil & gas

0.0

0.0

0.0

14.0

(14.0)

0.0

Utilities

0.0

0.0

0.0

2.7

(2.7)

0.0

Cash & gearing

(10.3)

(12.5)

(0.2)

0.0

(12.7)

N/A

Total

100.0

100.0

100.0

Source: Jupiter UK Growth Investment Trust, FTSE Russell, Edison Investment Research. Note: subject to rounding.

The portfolio’s exposure to technology was reduced by 2.7pp to zero weight in the year ended 30 April 2019, largely reflecting the sale of US-listed Apple. The manager re-evaluated the company’s business in China following its profit warning in January 2019 and concluded that the weakness could only be partially attributed to economic factors. Davies believes the company faces many structural impediments to its China operations, including more intense local competition than expected. Despite the sale of Apple, the portfolio’s exposure to internationally listed companies has increased 2.5pp to 12.2% as Davies sought to balance the portfolio’s UK risk. This reflects gradual additions to existing positions and strong share price performances from overseas holdings, including Yum China and Ferrari.

Given the short-term uncertainty surrounding Brexit that persisted at the tail end of 2018, Davies tactically de-risked the trust’s exposure to UK domestic companies in the FTSE 100 (for example, householders and UK banks), reallocating that capital to the international companies that would perform well were sterling to fall sharply in the wake of a no-deal Brexit (for example, Diageo). In early 2019, as the manager judged the likelihood of a chaotic no-deal Brexit to have reduced, he has begun to increase the trust’s positions in domestically exposed names. He thinks one of JUKG’s advantages is its ability to be flexible and respond to changing market conditions.

Performance: Weighed down by Brexit

Exhibit 4: Five-year discrete performance data

12 months ending

JUKG*
share price (%)

JUKG*
NAV (%)

Blended benchmark^ (%)

FTSE All-Share
(%)

FTSE All-World
(%)

30/04/15

10.5

10.1

10.4

7.5

18.0

30/04/16

(3.9)

(6.7)

(3.4)

(5.7)

0.5

30/04/17

14.4

16.1

20.1

20.1

31.0

30/04/18

(4.6)

(1.6)

8.2

8.2

7.5

30/04/19

(1.5)

(5.3)

2.6

2.6

11.7

Source: Refinitiv, Jupiter UK Growth Trust. Note: All % on a total return basis in pounds sterling. *JUKG track record is for Jupiter Primadona Growth (Jupiter Global Trust until 18 April 2016). ^Blended benchmark is 75% FTSE All-Share and 25% FTSE World ex-UK until 17 April 2016, and FTSE All-Share thereafter.

JUKG adopted its current mandate and appointed Davies as its manager in April 2016. Therefore, the most relevant performance periods to consider are one and three years. As shown in Exhibits 5 and 6, the trust’s NAV total return has underperformed the FTSE All-Share index over one and three years (and also over five years). The manager is focused on capital growth over the long term and has a contrarian bias to invest in companies that are very out of favour or have strong growth prospects which are not being appreciated by the market. As a result, the portfolio is meaningfully different from the FTSE All-Share index, and the performance divergence can be expected, especially over short- and medium-term periods. Over one year, the fund’s performance suffered a setback, attributable to a narrow number of stocks, including Apple (now sold), Sirius Minerals and Thomas Cook. Davies has engaged with the managements and chairmen of both Sirius Minerals and Thomas Cook and believes the investment cases remain intact. The three-year underperformance largely reflects the portfolio’s positioning for a Remain vote in the UK’s EU referendum in June 2016. JUKG had significant exposure to UK domestically oriented stocks and small- and mid-caps, which have suffered disproportionately in the subsequent years, as investors have favoured large-caps and stocks with multinational exposure.

Exhibit 5: Investment trust performance to 30 April 2019

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

Price, NAV and benchmark total return performance (%)

Source: Refinitiv, Edison Investment Research. Note: Three- and five-year performance figures annualised. Blended benchmark is 75% FTSE All-Share and 25% FTSE World ex-UK until 17 April 2016 and FTSE All-Share thereafter.

Exhibit 6: Share price and NAV total return performance, relative to indices (%)

 

One month

Three months

Six months

One year

Three years

Five years

Price relative to FTSE All-Share

4.3

2.6

(1.4)

(4.0)

(19.3)

(15.5)

NAV relative to FTSE All-Share

1.3

0.4

(4.5)

(7.7)

(18.8)

(17.8)

Source: Refinitiv, Edison Investment Research. Note: Data to end-April 2019. Geometric calculation.

Exhibit 7: NAV total return performance relative to benchmark over three years

Source: Refinitiv, Edison Investment Research

Discount: Trades close to NAV, nil-discount policy

JUKG currently trades on a 2.0% discount to cum-income NAV, which is the same as the three-year average. The board adopted a nil-discount policy in 2014 and (as shown in Exhibit 8) the trust has traded close to its NAV over the past few years. JUKG is the only trust in the UK All Companies sector to have this zero-discount commitment.

Exhibit 8: Share price premium/discount to NAV (including income) over three years (%)

Source: Refinitiv, Edison Investment Research

Capital structure and fees

JUKG is a conventional investment trust with one class of share. The reconstruction of Jupiter Dividend and Growth Trust on 30 November 2017 resulted in the issue of 7.8m new shares at 315p per share, increasing assets by £24.6m. During FY19 to date, the board has repurchased 4.5m shares at a cost of £1.5m; there are currently 29.7m shares in issue, of which 12.3m are held in treasury. In FY18, 2.2m shares were repurchased (1% of the shareholder base).

Jupiter Asset Management is paid an annual management fee of 0.50% on net assets up to £150m, reducing to 0.45% between £150m and £250m, and 0.40% above £250m. JUKG is entitled to a performance fee of 15% of the outperformance above 2% of the FTSE All-Share index total return, with a high watermark of the NAV as at the end of the prior year. The combined total fee is capped at 2% of the year-end adjusted net assets. As at end FY18, the ongoing charge was 1.14%. This is down from 1.20% in FY17 reflecting an enlarged asset base. The trust has a loan facility with Scotia Bank and as at end-April 2019, had net gearing of 10.3%.

Dividend policy and record

JUKG’s primary objective is to concentrate on capital growth. It pays an annual dividend and the board aims to at least maintain the dividend at the prior year’s level, while growing it over time. For FY18, the board paid a dividend of 7p per share, the same as the previous year, representing an historic yield of 2.4%.

Peer group comparison

Exhibit 9 shows the members of the AIC UK All Companies sector, comprising 14 trusts. JUKG is one of the smallest, ranking 13th. To capture the current manager’s tenure (since 18 April 2016), the most relevant performance periods are one and three years, over which JUKG’s NAV total returns rank 13th and 12th respectively. The dividend yield ranks eighth and is above the peer group average. The trust’s ongoing charge is also above average, ranking third, reflecting the relatively smaller size of the fund. The discount to cum-fair NAV is one of the narrowest in the group, ranking third, and JUKG is the only fund with a no-discount policy.

Exhibit 9: AIC UK All Companies investment trusts as at 10 May 2019

% unless stated

Market cap/

fund size £m

NAV TR
1 year

NAV TR
3 year

NAV TR
5 year

NAV TR
10 year

Discount (cum-fair)

Ongoing charge

Perf. fee

Net gearing

Dividend yield (%)

Jupiter UK Investment Trust

50.4

(13.2)

5.8

6.1

106.5

(2.0)

1.1

Yes

110

2.4

Artemis Alpha Trust

120.5

(12.2)

21.6

10.7

99.4

(15.7)

0.9

No

100

1.7

Aurora

123.9

(4.9)

30.9

17.6

79.9

3.6

0.4

Yes

100

1.3

Baillie Gifford UK Growth

284.1

(3.7)

27.7

22.3

178.8

(5.4)

0.6

No

100

2.4

Crystal Amber

208.8

4.3

56.5

63.3

121.4

(7.5)

2.0

Yes

100

2.3

Fidelity Special Values

712.7

(6.0)

33.4

42.4

209.7

2.0

1.0

No

102

2.3

Henderson Opportunities

81.4

(3.2)

34.2

39.1

320.9

(14.8)

0.8

Yes

114

2.0

Invesco Perp Select UK Equity

57.6

(5.1)

19.7

36.8

238.3

(1.2)

0.8

Yes

114

3.8

JPMorgan Mid Cap

256.2

(7.7)

29.0

55.5

292.4

(9.5)

0.8

No

104

2.6

Keystone

219.7

(5.1)

12.5

20.9

174.6

(13.2)

0.5

Yes

106

3.4

Mercantile

1,656.3

(2.9)

32.6

54.1

248.0

(8.5)

0.5

No

103

3.0

Sanditon Investment Trust

40.6

(6.2)

(11.9)

(8.4)

1.3

Yes

100

0.6

Schroder UK Mid Cap

190.4

(5.1)

29.9

36.5

283.5

(13.6)

0.9

No

105

3.0

Woodford Patient Capital Trust

726.9

11.2

0.8

(12.9)

0.2

Yes

117

0.3

Sector weighted average

337.8

(4.3)

23.1

33.8

196.1

(7.7)

0.9

105

2.2

JUKG rank in sector

13

13

12

12

10

3

3

4

8

Source: Morningstar, Edison Investment Research. Note: *Performance to 9 May 2019. TR = total return. Net gearing is total assets less cash and equivalents as a percentage of net assets.

The board

The board has five independent non-executive directors. Chairman Tom Bartlam was appointed in July 2013 and assumed his current role in November of that year. The other board members and their years of appointment are Lorna Tilbian (2001), Jonathan Davis (2011), Graham Fuller (2013) and most recently, Keith Bray (2018).

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United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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Germany

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United Kingdom

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United States of America

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Australia

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New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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