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Neptune European Opportunities Fund

Neptune Investment Management

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Neptune European Opportunities Fund

• Launched on 29th November 2002

• Managed by Rob Burnett

• ‘A’ rated by Forsyth-OBSR

• Fund size – over £95m (as at 08.02.07)

• Income class introduced in January 2005

• Available via key platforms & third party distributors

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The Performance Story

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5

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2003 2004 2005 2006

Sector AverageMSCI Europe ex UKNeptune European Opps

Discrete calendar year performance (source: Lipper)

1st / 95

1st / 97

1st / 103

%

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Three Overarching Fund Themes

Cash New & Old Europe New World Order

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Cash Outperformance: Yield, M&A, Private Equity

• Fund has income class, current yield c.1.5%, numerous opportunities

• European FCF generation has trebled in the last 5 years

• Cash balances at an all time high, gearing at a decade low

Source: Morgan Stanley

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Why M&A will continue to be strong in 2007

• History suggests caution

• Clear financial imperative and fire power is strengthening

• We are mid-way through this cycle, but danger of protectionism

Source: Exane BNP Paribas

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New Europe

• Mainstream European fund

• Opportunities continue to abound from

the GDP per capita convergence theme

• Optimal: western listed, but with

emerging Europe growth profile.

Greece, Turkey

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“Old Europe”: German Competitiveness & Consumption

• Entered euro at a competitive disadvantage, now level playing field

• Consumers unleveraged. VAT increase, but savings rate decline

• Asset reflation

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German Residential Property: Downside Limited

* Federal Statistics Office

• Low prices. No more subsidies

• Today’s construction level too low

• Population growth to decline from 2010 but households will continue to rise until 2018*

Source: VDM

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German Residential Property: Downside Limited

• Low house ownership ratio to rise, particularly in cities. Privatisation

• Prices turned up in 2005 in all 5 major cities. Impact on consumer confidence

• But historic tenant protection keeps yields low

Source: Federal Statistics Office

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New World Order: Europe the Gateway to Global Growth

• Basic demographic and economic implications. Strong US parallels from 20th century

• Savings rate at 30% will fall. Banking sector consolidation. Welfare provision

• Civil unrest

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New World Order: Opportunity and Threat

• Stage 1: Infrastructure Stage 2: Consumption

• Changing patterns of global trade, lengthening business cycles: industrials

• Exclusive consumption and staples

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After strong growth already: Energy in 2007

• 2007: All about non-OPEC &

Saudi Arabia

• Oil Services. Liquidity. Avoid

the crowd

• Alternative Energy: the

political imperative

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Outlook

• US economy was walking a tightrope in mid 2006

• Path to the next economic cycle, rocky in the summer, less so now. US 10 year, Oil

• Inflationary trends. Stability of interest rates and growth at elevated levels. Risk premia

Neptune European Opportunities Fund is a core European Fund

offering outperformance, yield and low absolute risk profile

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Important Information

This document is issued by Neptune Investment Management Limited (“Neptune”) which is authorised and regulated by the Financial Services Authority.

Neptune Funds are available to any persons that may be marketed to under the Financial Services and Markets Act (Promotion of Collective Investment Schemes) (Exemptions) Order 2001. Private customers should consult their Independent Financial Adviser or other authorised intermediary.

Please check with your professional financial adviser as to whether such products are available in the country in which you are resident. None of our products are available to residents in the United States.

The information and statistical data herein have been obtained from sources we believe to be reliable but in no way are warranted by us as to accuracy or completeness. We do not undertake to advise you as to any change of our views. This is not a solicitation or an offer to buy or sell. Neptune Investment Management Limited has produced this report for private circulation to professional and institutional clients only. The material is not intended for the use of private investors. All information and advice is given in good faith but without any warranty. Please remember that past performance should not be seen as a guide of future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.

Any past performance data that has not been shown is due to the information not being available.Neptune is not authorised to give investment advice and only provides information on Neptune products.