munro global growth fund june quarter...

MUNROGLOBALGROWTHFUNDJUNEQUARTER2017

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DisclaimerNeither Munro Asset Management Limited, Munro Investment Holdings Pty Ltd, Munro Partners (together “Munro”) nor Grant Samuel Funds Management Pty Ltd are providing any general advice or personaladvice regarding any potential investment in any financial products within the meaning of section 766B of the Corporations Act.

• Munro Asset Management Limited is the holder of an Australian Financial Services Licence (AFSL) number 480509. Our Financial Services Guide can be located on our website: www.munropartners.com.au.This presentation is not an advertisement and is not intended for public use or distribution. Grant Samuel Funds Management Pty Limited ABN 14 125 715 004 AFSL 317587 has a distribution arrangement withMunro to represent their products in the Australia and New Zealand markets. As such, it is not to be released or made available to any other party, excepting Grant Samuel Funds Management Pty Ltd (GSFM)or used for any other purpose.

• Munro has issued a product disclosure statement (PDS) on 1 March 2017 offering investors an opportunity to subscribe for units in the Munro Global Growth Fund (Fund). If you would like to receive a copy ofthe PDS, then please contact Munro on (03) 9290 0900 or contact@munropartners.com.au and Munro will arrange for a copy of the PDS to be forwarded to you. Alternatively, a copy of the PDS for the Fund isavailable on our website www.munropartners.com.au/access. All prospective investors should consider the contents of the PDS in full prior to making a decision regarding an investment in the Fund.

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• It contains selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant. The information contained in the Presentation has not been independentlyverified, nor have they conducted any due diligence in respect of the information provided. It should be noted that any projections, references to companies or past performance are provided for generalreference purposes and are based on assumptions relating to the general economy and other factors beyond the control of Munro. Returns of the Munro Global Growth Fund are net of applicable fees, costsand taxes. Returns have not been annualised. Past performance is not a reliable indicator of future performance. The MSCI AC World TR Index (AUD) refers to the MSCI All Country World Net Index in Australiandollars. The Top 5 Holdings depict end of month figures and may have changed materially from holdings during the month or not disclosed due to confidentiality reasons. Numbers may not sum due torounding. Please also see our Financial Services Guide, Privacy Policy and Terms of Use via www.munropartners.com.au/legals/.

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• This Presentation may contain forward-looking statements, forecasts, historical performance, estimates, projections and opinions ("Forward Statements"). No representation is made or will be made that anyForward Statements will be achieved or is correct. Actual future results and operations could vary materially from the Forward Statements. Similarly no representation is given that the assumptions disclosed inthis Presentation upon which Forward Statements may be based are reasonable. The recipient acknowledges that circumstances may change and the contents of this Presentation may become outdated as aresult.

CONTENTSGLOBALMARKETOUTLOOK 5

MGGFPERFORMANCEANALYSIS 9

KEYINVESTMENTTHEME:VIDEOGAMES(LONG) 15

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GLOBALMARKETOUTLOOK

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GLOBALMARKETOUTLOOKGrowthhasstabilised,withEuropestillimproving.

Source:BloombergConsensusData

54.7 54.9

52.4

51.4

45.2

56.055.2

52.7

51.3

44.0

57.7

55.4

53.3

51.6

46.9

57.2

56.2

52.451.8

49.6

54.8

56.7

52.7

51.2

50.1

54.9

57.0

53.1

51.252.0

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US Eurozone Japan China Brazil

GlobalPurchasingManagersIndices(PMI's)

Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

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GLOBALMARKETOUTLOOKS&P500Indexvaluationishigh,howeverearningsgrowthhasnowinflectedpositivelyandlookslikelytocontinue.

Source:BloombergConsensusData

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S&P500IndexForwardValuation(RHS)andEPS(LHS)

S&P500FwdEPS(LHS) S&P500FwdP/E(RHS)

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GLOBALMARKETOUTLOOKYieldcarryforequitieshasshrunk,butimportantlyremainspositive.

Source:BloombergConsensusData

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Jan-62 Jan-66 Jan-70 Jan-74 Jan-78 Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02 Jan-06 Jan-10 Jan-14

S&P500EarningsYield- US10yrBondYield(%)

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Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17

NetExposure(trailing10dayaverage) GrossExposure(trailing10dayaverage)

GLOBALMARKETOUTLOOKTheMunroGlobalGrowthFundhasreducedmarketexposureoverrecentmonthsasvaluationsandseasonalitystarttoslowmarketperformance.

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CASESTUDY:VIDEOGAMES

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THERISEOFGAMING

GAMING

CONSOLEMAKERS

SOFTWAREMAKERS

GAMINGENABLERS

ESPORTSANDHOSTING

GRAPHICS

AoI WinnersSub- Trends

Theintroductionofnextgenerationconsoles,smartphonesandusingtheinternetforconnectedgameplayhasresultedinvideogamesmovingfromthebedroomsofteenagerstothehandsofallindividuals,soldoutsportsstadiumsandprimetimeTV.Theaddressablemarketisexplodingandmultiplevendorsacrosstheeco-systemlookwellplaced.

SECULARCONTENTLOSERS

ImagesdonotnecessarilyrepresentassetsoftheFundorconstitutefinancialadvice.

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2012 2013 2014 2015 2016 2017E 2018E

$Billion

THEGLOBALGAMINGMARKETTheglobalgamingmarketingrossdollarsspentisgrowingatroughly8%perannum,drivenbythegrowthinscreens,therise in casualgamersandthedigitalisation ofgameplay/gamedownloads.

Globalgamingmarketgrowingat8%perannum,drivenbythreekeyseculartrends:

• More screens: Smartphone / tablet penetration gives everyone theirown hand held gaming device for publishers to target a much largeraudience via casual gaming.

• MMO (Massively Multiplayer Online): Internet connected games allowplayers to play each other from all over the world, giving rise to hugeplaying communities around the top games.

• In game purchases: Digitalization allows players to purchase moregoods in the game, it also allows publishers to hook casual gamers withinitially free games. Widening the community and widening therevenue opportunity.

Globalgamingmarket$bn’s 2012-2018

7%CAGR

8%CAGR

9%CAGR

2%CAGR

15%CAGR

Source:NewZoo

PC,Webgames&MMO

Smartphones

Tablets&Handhelds

Consoles

Globalgamingmarketgrowth

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FEWERGAMESBUTMORESUSTAINABLEFRANCHISESThestockmarketisincreasingrecognisingthatthemajorvideogamepublishershavemorphedfrom“hitdriven”businessmodelsaroundAAAgamereleases,tocompaniesthathavebeenabletobuildmoresustainablefranchisesviasteadygamerengagement.

ActivisionMonetisationModel

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2010 2011 2012 2013 2014 2015 2016 2017e

Electron

icArts

EarningsPerSha

re(N

on-GAA

P)

Electron

icArts

Num

bero

fNew

Titlesp.a.

EA#oftitlesp.a. EAEPS(RHS)

450millionusers

43billionhoursplayed/watched

$3.6billionindigitalin-game

sales

$2.2bnofoperatingcashflow

Source:ActivisionBlizzard,ElectronicArts,MorganStanley

EAGameTitlesvs.EarningsPerShare

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DIGITALMONETISATIONVideoGameshavemovedfromthephysicaltothedigitalworldandthisnotonlyallowsforamoresustainablerevenueprofile foreachtitle,italsoadrasticallyimprovesmargins.Digitaldownloadsare~20%highermarginthatphysicalandextradigitalcontentisevenhighermargin.

DigitalDramaticallyImprovesMarginsForElectronicArts

Source:ElectronicArts,MorganStanley,MunroPartnersestimates

Packaged

Mobile

ExtraContent

Subscriptions

FullGameDownloads

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FY12 FY16 FY20e

Electron

icArtsR

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ues($U

Sm)

ElectronicArtsMetrics

Digital(asa%ofSales) 29% 55% 71%

GrossMargin 63% 71% 75%

OperatingMargin 9% 28% 34%

Earnings(US$million) 284 1,018 1,449

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E-SPORTSPROVIDESSIGNIFICANTPOSSIBLEUPSIDETOEARNINGSGROWTHE-Sportsisrapidlybecomingachallengertotraditionalsports,withregularviewerssettotop400mnin2017.E-Sportslookslikelytoprovidethegamingcompanieswithawholenewchannelofengagementandearningsgrowthoverthecomingyears.

EsportsCaseStudy:OverwatchEsportsCaseStudy:FIFAOnline

Source:ElectronicArts,ActivisionBlizzard,FIFA

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Q2-2016 Q3-2016 Q4-2017 Q1-2017 Q2-2017

Registered

Players(m

illions)

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KEYSTOCKIDEA:ACTIVISIONBLIZZARD(LONG)ActivisionBlizzardpublishes,developsanddistributesinteractiveentertainmentsoftwareandperipheralproducts.Thecompany’sproductscoveradiverserangeofgamecategoriesincludingaction,sports,roleplaying,simulation,strategyandmore.

KeyStock ActivisionBlizzardKeyDetails Market Cap:USD45.6bn

Listed:USRevenue2017:USD6.4bn

QualitativeTests

Growth:The totaladdressablemarketforgamingisincreasingviamorescreens,moreinteractivegamingande-sports.ActivisionBlizzardhasover90millionmonthlyactiveusers(MAU’s)playingover43billionhours ofvideogamesperyear,up50%y/y.EconomicLeverage:Marginupsidefromshifttodigitalsalesandingamesales.Marginscanexpandfrom35%in2016toover40%in4years.Sustainability:RiseofMMO(MassivelyMultiplayerOnline)communitiesandE-sportsleadstousersamalgamatingaroundplatformgames.Control:RobertKotick(CEOsince1991)&BrianKelly(Chairman)controlUS$1.3bnofstockinthecompany.CustomerPerception:Activisionreceivesexcellentreviewsforitspremiumfranchises.

QuantitativeTests

Earnings upside:MarketobservationssuggestedthattheshifttodigitalandsubsequentEPSgrowthwasunderappreciatedbythemarket.Multipleupside:Stockwastradingonamultipleoflessthan15xforwardEPSondiscovery.Catalysts/Sizing:Earningsresults,newfranchisereleases.

Outcome Stock discovered:June2015,tradingbelow15xforwardEPS.EPSestimateshaveexpandedbyover50%astheshifttodigitalincreasedprofitability.Stockmovedfrom$25toover$50.

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EPSupover50%sincediscovery

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PEre-ratedbyover50%

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FUNDPERFORMANCE

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HANGSENGINDEX NIKKEI225 DOWJONESINDUS.AVG

S&P500INDEX HANGSENGCHINAENTINDX

FTSE100INDEX STXE600€Pr SHANGHAISECOMPOSITE

MSCILocal MGGFlocal

April1toJune302017(%)

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MGGFVS.MAJORMARKETINDICES- QUARTERLYLocalcurrencyreturnsofvariousglobalmarketsandthereturnoftheMSCIWorldACIndexinAUDnexttothereturnoftheMGGF inAUD.

=FXContribution

IndexReturn3.7%

FundReturn6.4%

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MGGFLONG/SHORTATTRIBUTION- QUARTERLYApril1toJune30basispointattributionoftheMGGFbyinvestmentcategory.

-200 -100 0 100 200 300 400 500 600 700 800

FX

Long

Short

Hedging

MGGFAttribution(bps)

Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.

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MGGFSTOCKANDREGIONATTRIBUTION- QUARTERLYApril1toJune30basispointattributionoftheMGGFbystockandbyregion.

Top5Performers Bps

BluePrism 186

RenesasElectronics 95

ActivisionBlizzard 56

ElectronicArts 49

Siltronic 40

Bottom5Performers Bps

ASML -33

UnitedRentals -32

Sumco -20

Criteo -20

WellsFargo -180

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UnitedStates UnitedKingdom

EuroRegion Japan Sweden HongKong Taiwan Korea

RegionalPerformance(bps)

Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.

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Snapshot of Munro Global Growth Fund since inception – 30 June 2017

MGGFPERFORMANCESINCEINCEPTION

PerformanceSummaryasat30June2017 1MTH 2MTHS 3MTHS 6MTHS 9MTHS INCEPTION

MunroGlobalGrowthFund(LocalCurrency) -0.4% 3.6% 6.7% 13.3% 12.0% 15.5%

+/- CurrencyImpact -0.9% -0.7% -0.2% -2.4% -1.5% -2.3%

MUNROGLOBALGROWTHFUND(AUD) -1.3% 2.8% 6.4% 10.6% 10.4% 12.9%

MSCIACWorldTRNetIndex(LocalCurrency) 0.2% 1.8% 3.1% 8.9% 13.4% 14.4%

+/- CurrencyImpact -2.7% -1.7% 0.6% -3.5% -0.6% -1.4%

MSCIACWorldTRNetIndex(AUD) -2.5% 0.1% 3.7% 5.2% 12.5% 12.8%

Pastperformanceinformationgiveninthispresentationisgivenforillustrativepurposesonlyandshouldnotbereliedupon as (andisnot)anindicationoffutureperformance.

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MGGFCURRENTEXPOSURESnapshot of Munro Global Growth Fund – as at 30 June 2017

Top5Holdingsas at30June2017

Stock Country Industry Weight(%)

BLUEPRISM UK INFO.TECH. 4.3

AMAZON US CONSUMERDISC. 3.8

FACEBOOKINC. US INFOTECH. 3.5

ASMLHOLDING NE INFO.TECH. 3.4

MICRONTECH. US INFOTECH. 3.3

SectorExposureasat30June2017

InformationTechnology,43.8%

Industrials,13.1%

ConsumerDiscretionary,6.7%

Financials,2.0%

ConsumerStaples,2.0%

RealEstate,2.2%

Cash, 30.3%

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