First Quarter 2018 Report English Translation

First Quarter 2018 Report English Translation

First Quarter 2018 Report Juno Selection Fund Performance We finished the first quarter, which ended on March 31, with a net asset value of 357.45 per participation. That represents an increase of 9.7% during the first three months of the year. The return during the first quarter was clearly stronger than could be achieved elsewhere in Europe with an investment in an index. The Euromoney Smaller Company Index decreased by 3.1%, while the Dutch AEX index also declined, by 2.4%. An important milestone was reached during this quarter. On January 11, 2018, the Juno Selection Fund celebrated its ten-year anniversary. The returns that were achieved over this period and the growth in the assets under management in the Fund, both developed in a satisfactory manner. 2

Key developments in the portfolio In February Technogym was added to the portfolio. The Italian manufacturer of premium fitness equipment was founded in 1983 by Nerio Alessandri, who is still the CEO of this family business in Cesena. The name and philosophy of the company are a combination of Technology and Fitness. The vision of Alessandri was to improve the fitness experience through technology. At the age of 22 he put together his first strength fitness equipment in his garage and a year after the company was founded the first strength-product line was launched. Soon after, a full line of sports equipment was launched, including cardio machines, with as a common element high-end and high-quality technology combined with stylish Italian design. Since 2000 Technogym is the exclusive supplier of the Olympic Games. In the 1990s, Technogym has grown to become the technological market leader with introductions such as built-in heart rate monitors and a mobile personal electronic key, on which the user can keep track of sports programs and associated data achieved on each fitness machine. Technogym's sports devices have been connected to the Internet for more than 10 years and training programs can be followed on mobile phones via the 'MyWellness Cloud' software. In addition, the fitness club operators get access to data on the use of their equipment via the same Cloud software. This improves preventive maintenance, but also provides useful insights into the behavior of their customer base: visitors who do not achieve their sporting objectives, visit the club less frequently and possibly consider cancelling their membership, can be identified and motivated with new promotions and customized sports programs. The increasing use of Technogym software in fitness studios gives an extra reason to remain loyal to the supplier; existing customers make up the majority of the annual incremental sales growth. The replacement cycle of 5 to 7 years, ensures a high level of recurring turnover. In the fiercely competitive fitness market, sports schools with new(er) equipment can more easily attract members. In addition, the perception of Technogym s high level of innovation gives it an edge on the competition due to the associated superior customer experience. The main competitors, Precor and Life Fitness, are both still part of large conglomerates in which sports equipment does not play a central role. As a result, they have invested relatively little in their fitness products or sales teams in recent years. This offers great opportunities for Technogym with technologically better products and its own direct sales team. Technogym has grown into a focused global player that is active in more than 100 countries. Every day, 40 million people train on Technogym equipment in more than 65,000 gyms and 200,000 households. Over 90% of the turnover is realized outside Italy and 40% outside Europe, with strong growth currently being recorded in the US and China. In the US, Technogym is still underrepresented with a market share of less than 15%, but since several years it has started to catch up and in the past year alone the turnover improved by an impressive 20%. 3

In 2016, Technogym had its Stock Exchange debut in Milan. Founder and CEO Alessandri held on to his shares, representing a 51.7% stake in the company. The company has shown very healthy growth for several years now, as well as margin improvements through more efficient management of the organization and economies of scale in production. Very recently, it reported organic sales growth of 9% to EUR 598 million in 2017 and the operating margin increased significantly to 15.3%. The company generated a profit level of EUR 61 million (+ 61%), with the annual depreciation covering the capital expenditure requirements, resulting in significant free cash flows. In addition to the aforementioned factors, such as intercontinental expansion, particularly in the US, the increasing focus on 'Wellness' is a positive trend that the company is greatly benefiting from. The gym is no longer the exclusive domain of 'buddy builders', but it appeals to a much broader and growing target group. The share of the population that has a membership at a gym is increasing; notably in Asia, but also in European countries such as France, Germany and Italy, where this share is still much lower than in mature markets such as the Netherlands and the US, where growth will have to be realized through fighting for a larger market share. That is why we believe that Technogym can maintain its impressive growth in the coming years. Last quarter we took a new position in the fund: Paradox Interactive, developer and publisher of computer games. This Swedish company, founded in 1999, has become successful as a developer with strategy games with a historical perspective for use on the PC. The games are known for their depth and challenge and are very popular within a niche of the gaming audience. Well-known titles are, for example, Europa Universalis IV, where one takes command of a country in the early modern times and Hearts of Iron IV, where one does the same at the time of the Second World War. More than one million copies of both games were sold. Characteristic of the Paradox games is their large degree of replayability. The player can rewrite history in the play session and replay it from different perspectives. The games are designed in such a way that each play session is essentially different from the previous one. This is a crucial part of the business model: because the player remains active for so much longer with the game, it is attractive for Paradox to develop alternative game scenarios and game content extensions ( DLCs ) for many years to come. For example, Paradox games launched in 2012 and 2013 recorded their best sales year in 2017. From an investment perspective, Paradox's revenue profile looks more like a content library, than the blockbuster model in the game world, which brings us the predictability that we look for. The success of Paradox is also made possible by the rise of digital distribution of computer games. Previously, using the physical distribution channel, it was difficult for a small publisher like Paradox to reach its audience. The rise of digital distribution platforms such as Steam, with currently 300 million users, has resulted in nearly 2 million people playing a Paradox game every month. Also, without digital distribution it would have been impossible for Paradox to offer its large library of game 4

expansions so easily. Thanks to digital distribution, Paradox's business model has become much more scalable and therefore more attractive. In addition to developing and publishing titles, Paradox is also active as a publisher for third-party computer games. As a publisher, the company finances smaller studios with promising titles in the development phase and offers them support in the area of marketing. One of the great successes is, for example, the city builder game Cities Skylines. Of this game, developed by the small Finnish studio named Colossal Order, five million copies have already been sold since March 2015 and the number of players is still growing daily. Paradox also takes acquires these small studios. For example, in 2017, in The Netherlands, the Delftbased Triumph Studios was acquired. Paradox expects its activities in this area to increase in the coming years and become an important stepping stone for future growth. Many small developers of computer games have a hard time; On the one hand development costs are increasing and on the other hand reaching a new audience van be very costly. CEO (and major shareholder with 33%) Fred Wester sees so many opportunities in this area that he wants to fully concentrate on this in a new role as Executive Chairman. The newly appointed female CEO Ebba Ljungerud will take over of the daily operational affairs of Wester this August. The company has no debt and a very high free cash flow. Despite the fact that Paradox released only one (small) new title in 2017, turnover increased by 24% to Euro 80 million. Net profit came to EUR 26 million. With the several new titles already announced for 2018 and 2019, a strong foundation is laid for further profit growth in the coming years. Outlook Despite the occasional flurry in press attention to rising interest rates, we currently see very little proof of that actually happening. Risk-free interest on Government bonds remain stable around 0.5%. However, that the level of interest rates will normalize over time, is clear. Nevertheless, we believe that the current low levels can continue for a long time, despite initial signs of European labor shortages, often a good predictor of rising inflation. Over the past 10 years, we have seen that the reported earnings of companies quoted on European equity markets have only increased slightly. Aided by lower interest rates and the resultant higher price-earnings ratios, a compound annual return of 6% (Euromoney Smaller Europe) to 4% (Netherlands AEX Index) per year could be earned by investors. The annual return of 13.3% achieved over the past 10 years in the Juno Selection Fund is therefore more than twice as high than could be achieved elsewhere in Europe when investing in an index. The secret lies foremost in Juno's strict selection of highly quality, well-run family businesses, which can 5

grow their profits in a reasonably predictable manner year on year. In 2017, the aggregate profit of the companies you own in the Juno portfolio rose again within the target bandwidth of 10-15%. Continually low interest rates, combined with our (prudent) expectations for future earnings growth, make that we remain optimistic for both the short and longer term and we look forward to continuing to achieve strong investment results for you for the next 10 years again. On behalf of the manager of the Juno Selection Fund, Frans Jurgens Lennart Smits 6

Juno Selection Fund: Historical Returns Juno Selection Fund Euromoney Smaller Europe Index (net) AEX Index (reinvested) Barcap PanEuro Index 2008 * -33% -49% -47% 2009 +70% +63% +42% 2010 +12% +17% +9% 2011 +3% -23% -9% 2012 +19% +27% +13% 2013 +22% +33% +20% 2014 +19% +5% +8% 2015 +33% +21% +7% 2016 +2% +2% +13% 2017 +6% +17% +16% +1% +8% +4% +6% +11% +1% +12% +2% +2% -0% Q1 2018 +10% -3% -2% +1% 2018 +10% -3% -2% +1% Since inception * +257% +86% +51% +56% CAGR 13.3% 6.2% 4.1% 4.5% *) Inception of the fund: January 11, 2008 Top 5 Positions Name SimCorp Grenke Brembo Sartorius Stratec Country Denmark Germany Italy Germany Germany 7