henderson horizon technology fund march 2012

G;\Dist\G\BS\Pres\Equ\Glob Tech Fund\Hori Glob Tech\Horizon Global Technology Presentation – November 2011.ppt

Stuart O’GormanDirector, Technology Equities

Ian WarmerdamDirector, Technology Equities

March 2012

This document is solely for the use of professionals and is not for general public distribution

1G;\Dist\G\BS\Pres\Equ\Glob Tech Fund\Hori Glob Tech\Horizon Global Technology Presentation – November 2011.ppt

The Henderson Global Technology team

Henderson has managed specialist technology assets since 1983

Henderson is one of the largest specialist technology fund managers in Europe*

Technology AUM approx. US$3.3BN**

History of outperformance

Source: * Micropal ** Henderson Global Investors, as at 29 February 2012

Stuart O’GormanDirector of Technology InvestmentFund Manager15 years investment experienceJoined Henderson in 2001

Ian WarmerdamDirector of Technology InvestmentFund Manager15 years investment experienceJoined Henderson in 2001

Gordon HappellInvestment Manager5 years investment experienceJoined Henderson in 2010

Giles TullochInvestment Analyst1 year of investment experienceJoined Henderson in 2009

Ronan KelleherFund Manager AssistantJoined Henderson in 2011

Technology team


Combined fund manager/analyst roles

Global sub-sector coverage

Well defined areas of responsibility

Interaction with other Henderson teams

Why Henderson?Team responsibilities

Sectors:Telecommunications

EquipmentInfrastructure Software

IT ServicesTelecoms

Stuart O’GormanSectors:

Entertainment SoftwareInternet

Office EquipmentAlternative Energy

Computer Hardware

Ian Warmerdam

Sectors:Semiconductors

Healthcare TechnologyData Processing

Gordon Happell

Sectors:Application Software

Consumer ElectronicsElectronic Components

Giles Tulloch


Consistent Outperformance vs Peer Group

21

1

1yr

14

1

7yr

2322161111122423Percentile

11111111Quartile

10yr9yr8yr6yr5yr4yr3yr2yr

Fund: Henderson Horizon Global Technology FundPeer Group: GIF OS Sector Equity TechnologySource: Morningstar's Workstation v4.0, Bid to Bid, Gross income reinvested, Net of fees as at 29 February 2012


Horizon Global Technology vs Tech vs World

40

60

80

100

120

140

160Fe

b-07

Jun-

07

Oct

-07

Feb-

08

Jun-

08

Oct

-08

Feb-

09

Jun-

09

Oct

-09

Feb-

10

Jun-

10

Oct

-10

Feb-

11

Jun-

11

Oct

-11

Feb-

12

Henderson Horizon Global TechnologyMSCI AC World ITMSCI AC World

Source: Morningstar, Henderson Global Investors at 29 February 2012Period from 27 February 2007 to 29 February 2012. Total USD returns rebased to 100 on 27 February 2007. Index returns include dividends. Fund returns are calculated on a bid-bid basis, gross income reinvested, Net of fees. Past performance is not an indicator of future results.


Risk statistics

0.50.07Information ratio

3.11.5Alpha (%)

89.989.8Down capture (%)

105.9101.4Up capture (%)

0.31.5Sharpe ratio

5 Year3 Year

Source: Henderson Global Investors/ Factset as at 29 February 2012, based on USD returns, Gross of fees.Fund is the Henderson Horizon Global Technology Fund and benchmark is the MSCI AC World IT index

Sharpe ratio is a risk-adjusted measure, calculated using standard deviation and excess return to determine reward per unit of risk. Information Ratio is the quotient of the annualized excess return and the annualized standard deviation of excess return. Up and down capture is a measure of how well a manager can improve on phases of positive benchmark returns, or how badly the manager was affected by phases of negative benchmark returns. The up capture is the quotient of the annualized return of the Fund after dropping all time periods where the benchmark return is zero or negative, divided by the annualized return of the benchmark after dropping similar time periods. The down capture is calculated analogously. For example, up capture of 120.0 and down capture of 80.0 shows that in the past, when the overall market went up, the Fund’s returns increased more than the increase in the market. Correspondingly, when the market went down, the Fund’s returns decreased less than the market. Alpha is a measure of risk (beta)-adjusted return. Beta is the measure of a fund’s relative volatility as compared to its benchmark, where a Beta less than 1 means that the security will be less volatile than the Index and more than 1 means the security will be more volatile than the Index.


Philosophy & Process


Moore’s Law - Driving Innovation

Source: Intel, 2006


Moore’s Law - Driving Innovation

Peak Download Speeds

Device

HSDPA: 7.2 Mbps3G: 384 KbpsGPRS: 56 Kbps

iPhone 4Nokia 6630Nokia 7110

201120052001

Source: Mobile data from Vodafone, Images from companies’ website


Investment philosophy: Drivers of technology valuations

Organic growth potential Does the product solve a pressing problem for

customers? What is the payback period for adopting the technology? What is the “pain of adoption” of the technology? Is management investing in the correct areas for the future?

Barriers to entry What are the barriers to entry – technological, scale, brand, distribution? How strong and sustainable are these barriers? What are management doing to preserve/strengthen these barriers

Execution

Portfolioconstruction

Risk analysis

Stock analysis

Thematicanalysis


Good story + low barriers = dreadful returns

Solar industry

Source: Bloomberg, as at 31 December 20115 Year share price performance 31 Dec 2006 – 31 Dec 2011

0

50

100

150

200

250

300

350

Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11

Q-Cells RECSolarworldConergy

%


Beware when barriers to entry break down

Source: Bloomberg, as at 31 December 20115 Year ADR share price performance (USD) 31 December 2006 – 31 December 2011

0

50

100

150

200

250

300

350

Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11

RIMM

NOKIA

%

The collapse of Nokia and Research in Motion


We use a range of valuation metrics Price/earnings Price/sales Enterprise value/free cash flow Price/book value

Price target determined by Organic growth potential Barriers to entry The cyclicality of the business Balance sheet

Each Stock rated 1(strong buy) to 5(strong sell) determined by Upside potential Conviction level/risk

Stock analysis: Valuation

Execution


Risk analysis

Stock analysis

Thematicanalysis


Thematic Analysis

Food chains in technology tend to move together

Leverage one idea into many

Control thematic vs stock specific risk

Execution


Risk analysis

Stock analysis

Thematicanalysis


Portfolio Construction

Execution


Risk analysis

Stock analysis

Thematicanalysis

Initial target weights 1 rated = 1 - 2% overweight vs benchmark 2 rated = 0.5 - 1% overweight vs benchmark

These weights are then adjusted to take into account Liquidity issues Overall thematic exposure Individual stock risk Sector/Geographic exposure


Risk Controls

Index risk (Index aware model) Use MSCI AC World IT index as an anchor Used for performance attribution

Thematic risk Portfolio is constructed with themes in mind Experience in understanding the linkages between companies and sectors

Individual stock risk Price targets Liquidity controls

Overall risk Monthly meetings with senior Henderson management

Execution


Risk analysis

Stock analysis

Thematicanalysis


Why Technology?


Spending on Technology capital equipment and software as a percentage of US GDP

Source: Nomura, Bureau of Economic Analysis, as of December 2011Data for Q1 1947 to Q4 2011. Data last revised on 27 January 2012.

Current spending below long-term trend

0

1

2

3

4

5

1947

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

InvestmentLinear (Investment)

%

US private fixed investment on information processing equipment and software as a share of GDP

Linear trend

Over-investment

Under-investment


Technology relative de-rating ending?

Source: Bernstein, as at 24 January 2012MSCI World Technology Sector, price-to-forward earnings relative to MSCI World January 1988 to October 2011

Relative Technology to World P/E forward

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5

Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Pric

e-to

-forw

ard

earn

ings


Best balance sheets & free cashflow

0.4%

6.4%

6.7%

7.2%

5.4%

5.0%

4.0%

8.6%

10.7%

EV/FCF Yield

-91%

-53%

-42%

-35%

-20%

-19%

-16%

-7%

7%

Net cash as % of market cap

Health Care

Utilities

Consumer Discretionary

Materials

Consumer Staples

Telecommunication Services

Industrials

Energy

Information Technology

Sector

Source: Credit Suisse, as at 13 February 2012Note: Data is for MSCI World Sector Indices excluding Financials sector. Net cash shows the total cash on the balance sheet minus debt, cash shows purely the cash on

the balance sheet. Net cash as a % of market cap is a measure of the net cash on a company’s balance sheet as a percentage of its total market capitalisation. EV/FCF Yield is the reciprocal of Enterprise Value (EV)/ Free Cashflow (FCF). Analysts Estimates used to compute 2012 FCFs.


Not as cyclical as it used to be?

45IBM

50Accenture

52SAP

55Check Point

55Intuit

58Oracle

% recurring revenues 2010Company

Source: Credit Suisse, September 2011


Technology – a low beta investment

Source: Datastream as at 10th February 20125 year rolling beta of MSCI AC World IT index vs MSCI AC World index using weekly data

5 year rolling beta

0.50

0.75

1.00

1.25

1.50

1.75

2.00

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Bet

a


Demographic shifts driving technology adoption

Digital natives

Digital immigrants

Digital refugees


Positioning – favoured themes

Mastercard, Visa, eBay, Wirecard, VerifonePaperless payment

Apple, Telecity, Qualcomm, F5 Networks, Samsung, CiscoConnectivity

NetApp, Oracle, EMC, SAP, Fusion IOData growth

Google, Baidu, Rightmove, Online advertising

MercadoLibre, Priceline, eBayE-Commerce

Source: Henderson Global Investors, February 2012Note: References to individual companies or stocks should not be construed as a recommendation to buy or sell the same.


Internet Advertising spend set to take share

0

5

10

15

20

25

30

35

40

45

50

Print Radio TV Online

Time spentAdvertising spend

Source: JP Morgan, 2010Advertising spend excludes advertising on billboards, street furniture, direct mailshots and other leaflets/flyers.Online includes mobile devices

%


Stock example: Online advertising - Baidu

Entry price $20.16 (April 23, 2009)Description Leading Chinese search engine Catalysts Low broadband penetration in China Ongoing trend of internet advertising Cultural differences reduce entry of

global rivalsValuation P/E 21x 2013 estimated earnings*

Source: Bloomberg as of 29 February 2012As of 29 February 2012 , the fund holds 1.2% in Baidu inclusive of cash.Past performance is not an indicator of future performance.

Price performance of Baidu (USD)

0

20

40

60

80

100

120

140

160

Apr

-09

Jul-0

9

Oct

-09

Jan-

10

Apr

-10

Jul-1

0

Oct

-10

Jan-

11

Apr

-11

Jul-1

1

Oct

-11

Jan-

12

USD

* Using Bloomberg Consensus estimates as of 9 March 2012


E-Commerce – still a long way to go…

0

1

2

3

4

5

6

7

2003 2004 2005 2006 2007 2008 2009 2010 2011(E) 2012(E)

USA

Source: US Dept. of Commerce, Cowen - January 2012

E-commerce sales as a percentage of retail sales

Per

cent

age

of to

tal r

etai

l sal

es o

nlin

e


Stock example: E-Commerce – Priceline

Entry price $80.69 (February 19, 2009)

Description A leading hotel booking website with

dominant position in Europe

Catalysts European online hotel booking

penetration lags USA considerably. More fragmented nature of market

creates a better environment for 3rd

party distributors

Valuation P/E ratio of 17x 2013 estimated

earnings*

50

150

250

350

450

550

650

Feb-

09

Aug

-09

Feb-

10

Aug

-10

Feb-

11

Aug

-11

Feb-

12

Price performance of Priceline (USD)

Source: Bloomberg as at 29 February 2012As at 29 February 2012, the fund holds 1.6% in Priceline inclusive of cashPast performance is not an indicator of future performance.

USD

* Using Bloomberg Consensus estimates as at 9 March 2012


40%

44%

48%

52%

56%

60%

2005 2006 2007 2008 2009 2010

PaperNon-paper

US payments – Non-paper vs Paper payments

Source: Credit Suisse, Euromonitor International: Country Market Insight, November 2010

Note: Paper payments include both cash and checks

Paperless payment


Stock example: Paperless payment - Wirecard

Entry Price €11.99 (09 March 2011)Description Online Payment processor based

in GermanyCatalyst• Online spending penetration still

has a long way to go in Europe• Growth in merchant base in Asia as

a result of recent deals with Alipayand China Union Pay

Valuation• P/E 16x 2013 estimated earnings*

Source: Bloomberg as of 29 February 2012As of 29 February 2012, the Fund holds 0.5% in Wirecard inclusive of cashPast performance is not an indicator of future performance.

Price performance of Wirecard (EUR)

9

10

11

12

13

14

15

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

Nov

-11

Dec

-11

Jan-

12

Feb-

12

EUR

* Using Bloomberg consensus estimates as of 9 March 2012


Connectivity

Source: Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update, 2011-2016January 2012

0

2000

4000

6000

8000

10000

12000

2011 2012 2013 2014 2015 2016

Pet

abyt

es p

er m

onth

Global Mobile Data Traffic Forecast, 2011-2016

78% CAGR 2011-2016


Stock example: Connectivity – Apple

Entry price 8.46 USD $ (9 May 2003)

Description A leading computer and consumer

electronics manufacturer

Catalysts Creating barriers to entry through

iTunes and AppStore Incremental iPhone opportunity is

very large Potential dominance of Tablet Market

Valuation P/E 11x 2013 estimated earnings*

Price performance of Apple (USD)

USD

0

50

100

150

200

250

300

350

400

450

May

-03

Nov

-03

May

-04

Nov

-04

May

-05

Nov

-05

May

-06

Nov

-06

May

-07

Nov

-07

May

-08

Nov

-08

May

-09

Nov

-09

May

-10

Nov

-10

May

-11

Nov

-11

Source: Bloomberg as at 29 February 2012as at 29 February 2012, the fund holds 10.1% in Apple inclusive of cash.Past performance is not an indicator of future performance.

* Using Bloomberg Consensus estimates as at 9 March 2012


Conclusion

Growth drivers for technology intact New products & services Pent up corporate demand Demographics

Valuations attractive

Focus on barriers to entry and valuation

Beware of both hype and value traps


Appendix


Fund statistics

0.93%

19.9%

2.6x

31.9%

14.7x

Horizon Global Technology Fund

1.38%

15.4%

1.6x

29.5%

13.5x

MSCI AC World IT Index

Dividend yield

Hist. 3yr sales growth

Price/sales

Hist. 3yr EPS growth

FY1 est. P/E

Fund statistics

Source: Henderson Global Investors/ Factset, as at 29 February 2012Harmonic P/E figures used


3.9Communications EquipmentUSCisco Systems

4.0Semiconductors & Semiconductor Equipment USIntel

4.6Semiconductors & Semiconductor Equipment S KoreaSamsung

3.8SoftwareUSOracle

2.8Computers & PeripheralsUSEMC

3.7Semiconductors & Semiconductor EquipmentUSQualcomm

5.0Internet Software & ServicesUSIBM

5.1IT ServicesUSGoogle

6.4SoftwareUSMicrosoft

10.1Computers & PeripheralsUSApple

% of fundSectorCountrySecurity

Source: Henderson Global Investors/ Factset, as at 29 February 2012Fund is the Henderson Horizon Global Technology Fund

Top 10 holdings


1.1Semiconductors & Semiconductor EquipmentUSAnalog Devices

1.2Semiconductors & Semiconductor EquipmentUSTexas Instruments

1.2IT ServicesUSMasterCard

1.2Computer & PeripheralsUSEMC

1.3Semiconductors & Semiconductor Equipment S KoreaSamsung

1.1SoftwareUSIntuit

1.2Internet Software & ServicesChinaBaidu

1.0IT ServicesUSCognizant Technology Solutions

1.1Software & ServicesIsraelCheck Point Software

1.5Internet & Catalog RetailUSPriceline

Relative weight %SectorCountrySecurity

Relative top 10 holdings

Source: Henderson Global Investors/ Factset, as at 29 February 2012Note: Fund is the Henderson Horizon Global Technology Fund. Relative holdings are to the MSCI All Country World Information

Technology Index. Inclusive of cash.


Source: Henderson Global Investors and Hiport, as at 29 February 2012Fund is the Henderson Horizon Global Technology Fund and index is the MSCI All Countries World Information Technology Index

Note: Figures may not add up to 100% due to rounding up/down; inclusive of cash.

Sector and regional breakdowns

-0.6Wireless Telecommunication Services

-0.4Diversified Telecommunication Services

-2.2Internet & Catalog Retail

16.917.6Software

21.416.7Computers & Peripherals

2.2-Office Electronics

18.318.4Semiconductors & Semiconductor Equipment

-0.2Diversified Consumer Services

16.415.4IT Services

9.79.8Communications Equipment

7.812.0Internet Software & Services

-0.4Commercial Services & Supplies

N/A3.6Cash

7.51.8Electronic Equipment Instruments & Components

% of Index

% of portfolioSector

7.70.4Japan

N/A3.6Cash

5.78.6Europe

0.61.6ROW

13.810.2Asia Pacific

72.375.7North America

% of Index

% of portfolioRegion


Henderson Global Investors201 Bishopsgate, London EC2M 3AETel: 020 7818 1818 Fax: 020 7818 1819

Important InformationThis document is solely for the use of professionals and is not for general public distribution. The Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985. This document is intended solely for the use of professionals and is not for general public distribution. Any investment application will be made solely on the basis of the information contained in the Fund’s full prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the Fund’s full prospectus before investing. A copy of the Fund’s full and simplified prospectuses can be obtained from Henderson Global Investors Limited in its capacity as Investment Manager and Distributor.

Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355) (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE and authorised and regulated by the Financial Services Authority) provide investment products and services. Telephone calls may be recorded and monitored.

Past performance is not a guide to future performance. The performance data does not take into account the commissions and costs incurred on the issue and redemption of units. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

The securities included in this document are not registered in the Foreign Securities Registry of the Superintendencia de Valores y Seguros for public offering and, therefore, the use of this document is only for general information purposes.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

The Fund is a recognised collective investment scheme for the purpose of promotion into the United Kingdom. Potential investors in the United Kingdom are advised that all, or most, of the protections afforded by the United Kingdom regulatory system will not apply to an investment in the Fund and that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.

A copy of the Fund’s full and simplified prospectuses, articles of incorporation, annual and semi-annual reports can be obtained free of cost from the Fund’s: Austrian Paying Agent Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider Dresdner Van Moer Courtens S.A./N.V. Société de bourse, Drève du Prieuré 19, 1160 Bruxelles; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

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