20%

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Digital is Eating the World Seeking Companies on the Correct Side of the Divide

Doug Rao Portfolio Manager

Dematerialization Using less to produce more

Use of third party names, marks or logos is purely for illustrative purposes and does not imply any association between any third party and Janus Henderson Investors, nor any endorsement or recommendation by or of any third party. Unless stated otherwise, trademarks are the exclusive property of their respective owners. 2

Is the Growth Trade Over? S&P 500® growth vs. value 80% 4.5 S&P 500 ® Growth Index S&P 500 ® Value Index

4.0

Growth of 1

Cumulative Outperformance

Calendar Year Returns Growth

Value

3.5

2009

31.6%

21.2%

3.0

2010

15.0%

15.1%

2.5

2011

4.7%

-0.5%

2012

14.6%

17.7%

2013

32.8%

32.0%

2014

14.9%

12.4%

2015

5.5%

-3.1%

2016

6.9%

17.4%

2017

27.4%

15.4%

2.0 1.5 1.0 0.5 Dec-17

Dec-16

Dec-15

Dec-14

Dec-13

Dec-12

Dec-11

Dec-10

Dec-09

Dec-08

0.0

Source: Morningstar, Inc., as of 12/31/17. Past performance is no guarantee of future results. S&P 500® Growth Index reflects the performance of U.S. large cap growth equities. S&P 500® Value Index reflects the performance of U.S. large cap value equities. Index performance does not reflect the expenses of managing a portfolio as an index is unmanaged and not available for direct investment.

3

Will it Continue? In periods of disruption, past is not prologue “The horse is here to stay but the automobile is only a novelty – a fad.” President of the Michigan Savings Bank in 1903, advising Henry Ford’s lawyer, Horace Rackham, not to invest in the Ford Motor Company Piccadilly Circus, London

c. 1900

Piccadilly Circus, London

c. 1912

The opinions are as of 6/22/18 and are subject to change without notice. Janus Henderson may have a business relationship with certain entities discussed. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. Investing involves risk, including the possible loss of principal and fluctuation of value.

4

Moore’s Law In 1965, Gordon Moore predicted that chip capacity, i.e., the number of transistors on a chip, would double every 18-24 months. This prediction has proven more or less accurate over the past 53 years …despite repeated calls for its demise.

“Incredible shrinking transistor nears its ultimate limit: The laws of physics.”  New York Times

1997

2000

“The End of Moore’s Law. Given the state of today’s technology, chips can only get so small.”  Slate Magazine

2005

“The End of Moore’s Law? The current economic boom is likely due to increases in computing speed and decreases in price. Now there are good reasons to think that the party may be ending.”  MIT Technology Review

2016 “After a glorious 50 years, Moore’s Law is running out of steam.”  The Economist

5

Moore’s Law 1

1

2

3

4

1 5 9 13

2 6 10 14

3 7 11 15

4 8 12 16

Chess Example “As legend has it, when chess was invented in sixth century India, the inventor was given an audience with the emperor. When asked to name his reward, the inventor said he would like just one grain of rice for the first square of the chessboard, and double that number for each succeeding square…”

?

? Source: http://www.michiganfuture.org/01/2017/chessboards-and-rice/

6

Moore’s Law At square 32, how many grains of rice does the emperor owe the inventor?

?

4.3 billion grains of rice!

7

Moore’s Law

On square 64, the last square on the chess board, how many grains of rice does the emperor owe the inventor?

?

18,446,744,073,709,600,000 Eighteen quintrillion grains of rice!

8

Moore’s Law 1 grain of rice. 0.2 inches long.

1965

13.6 thousand miles of rice. ~2018

Enough rice to stretch halfway around the world!

1

58 trillion miles of rice.

Enough rice to wrap around the world 2.3 billion times.

9

Growth in Mobile Devices “ Cellular phones will absolutely not replace local wire systems.” - Marty Cooper, inventor of cellular telephone in 1981 Global Population vs. Mobile Phone Subscriptions

Mobile phone subscriptions have grown at ~23% Compound Annual Growth Rate (CAGR) while population has grown at a 1.3% CAGR

Billions

Global Mobile Phone Subscriptions 8 7 6 5 4 3 2 1 -0

1995

1998

2001 Global Population

2004

2007

2010

2013

2016

Mobile Cellular Subscriptions

Source: World Bank, as of December 2016.

10

E-commerce Penetration Still Low Growth in U.S. Retail E-commerce

Total Sales

14%

Share of Total Retail Commerce

$600

12%

$500

10%

$400

8%

$300

6%

$200

4%

$100

2%

$0

Market Share

Sales in Billions

$700

0% 2016

2017

2018E

2019E

2020E

2021E

Source: Statista, estimates as of 12/31/17.

11

Retail Consumers Preferring Online Convenience Amazon (AMZN) vs. Walmart (WMT) AMZN has shown faster growth and higher margins than WMT Total Revenue

300

Nike Reviews Distribution Strategy

Fortune

… And is close to catching WMT on a total sales basis Revenue as a % of total U.S. retail sales Projected

Walmart

Billions ($USD)

250

12 %

“Nike held firm year after year when Amazon executives returned to Beaverton…while the meetings were friendly, Nike was clear. It had no plans to add the online retail giant as a distribution partner.”

Amazon - $223B

First 20 years of growth for WMT and AMZN after each hit $1B in sales

200 150

9 Walmart $131B

Fortune

Nike CEO

6

June 2017

December 2017

3

“Nike confirms it will sell directly on Amazon.”

“We’re extending our pilot with Amazon…it’s going well.”

Amazon

100 50

0

0 Y0

Y5

Y10

Y15

Source: Cowen and Company, Janus Henderson Research as of December 2017. Note: 1.) $131B in 1998 is worth ~$196B today. 2.) Using Gross Merchandise Value (GMV) for AMZN. As of 6/30/18, Janus Henderson Forty Fund holdings include: Amazon.com Inc 6.62%, Nike Inc 2.63%, and Walmart 0.00%. Holdings are subject to change.

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Cash & Check Being Disintermediated Spend is Shifting from Physical to Digital

1 Conversion of Cash

Total Global Retail Spend

2 o Cash and check replacement

Shift to Digital

o Growth in digital o New form factors

CAGR

Physical

91%

85%

3 Expanding Access

Digital

9% 2016

15%

20%

4 o o o o

New acceptance points Internet of Things Commercial Geographic expansion

PCE Growth

2020E

Source: Visa, as of 12/31/17.

13

Payments in China Going mobile at light speed

Starbucks (SBUX) & Mobile

Mobile Payments

China

$10T 8

Starbucks launches mobile payments in the U.S.

Homeless in

Mobile Payments ($ Trillion) USA China

2011

accept mobile

2016

payment 6

SBUX launches mobile payments in China in December

4

Mobile accounts for

2 0

Tithe in China 2012

2013

2014

2015

2016

20% of all payments in the U.S.

Mobile accounts

2017

for 40% of all payments in China

with mobile

payment

Source: Wall Street Journal, Starbucks Company Reports, Andreessen Horowitz, December 2017. As of 6/30/18, Janus Henderson Forty Fund holdings include: Starbucks Corp 1.97%. Holdings are subject to change.

14

Rise of Online Travel Bookings Growth in Online Travel Penetration $400

16% Penetration Rate

$300

14%

$200

12%

$100

10%

$0

Market Share

Revenue in Billions

Online Travel Booking

8% 2016

2017E

2018E

2019E

2020E

2021E

2022E

Source: Statista, estimates as of December 2017.

15

Advertising, Shift from Print to Digital Internet eats print ads: Google & Facebook eat digital

Global Advertising Revenue

Change in Dollars (1999-2021E)

$200

350 Print

Google

Facebook

Other Internet

$155

300

$150

250

$87

$100

200

Billions

Revenue in Billions ($)

$171

150

$50

$19

$0

100

Total

Print

-$50

50

-$100

0

Google

Facebook

Other Internet

-$90

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 -$150

Source: Magna Global as of June 2017, Projected 2017-2021. As of 6/30/18, Janus Henderson Forty Fund holdings include: Facebook Inc 3.75%. Holdings are subject to change.

16

eSports Overtake Traditional Sports eSports Have the Lowest Revenue per Unique Viewer… 350

326

Unique Views (Millions)

250

60

200

100

50 $47

118

40

$38 115 133

79

$34

30 20

50

Revenue per Viewer ($)

70

150

CBS Super Bowl 50 (2016)

111.9M

80

$76

300

90

…Despite Having Comparable Viewership to Other Sports

LoL World Championship (2015)

36M

CBS Thanksgiving Day (2015)

32.5M

Twitch ESL Cologne (2015)

27M

NBC Rio Olympics (2016 Avg)

25.4M

NBC Sunday Football (2015 Avg)

22.5M

ABC NBA Finals (2016)

20.3M

10 $3

0 NHL

MLB

eSports

Unique Viewers (mm)

Source: Company Reports, Barclays Research, as of 2016.

0 NBA

NFL

Revenue / Viewer

0

50 100 Viewership (Millions)

150

Source: Twitch, Nielsen, NFL Press Release, as of 2016.

17

Move to Cloud, Still Early Innings 900

30%

Total Infrastructure & Software Spend Public Cloud Services Spend

800

Cloud Market Share

25%

600

20%

500 15% 400 300

Market Share

IT Spend ($ Billions)

700

10%

200 5% 100 0

0% 2013

2014

2015

2016E

2017E

2018E

2019E

2020E

Source: FactSet, as of 12/31/17.

18

Autos, Reaching a Tipping Point Powering up demand for electric vehicles (EVs) EVs to Grow at 15% CAGR and Amount to 60% of Deliveries by 2050

EV Battery Pack Price Forecast

Unit Share of Automotive Sales

100%

$/kWh 400 Mainstream

80%

350 300

60%

250 40%

Best in class

200 150

20%

100

~$100/kWh = ICE cost parity

2025E

2024E

2023E

2022E

2021E

2020E

2019E

2018E

2017E

2016

0 2015

2050E

2048E

2046E

2044E

2042E

2040E

ICE

2014

Hybrids

2038E

2036E

2034E

2032E

2030E

2028E

PHEV

50

2013

BEV

2026E

2024E

2022E

2020E

2018E

2016

2014

2012

0%

Source: Alliance Bernstein as of December 2017. BEV – Battery Electric Vehicle. PHEV – Plug-in Hybrid Electric Vehicle. ICE – Internal Combustion Engine.

19

Declining Battery Prices Spur Demand for EVs Every time the global supply of batteries doubles, price drops 19%

Battery Prices $/kWh

The council’s 20year prediction was proven incorrect within 5 years.

$1,000

“Over the next 20 years, we felt that a 50 percent reduction in battery costs would take place.” - Michael Ramage, Former U.S. Dept. of Energy National Research Council Chair, 2009 Report

$750

$500

$250 Battery Price Forecast $0 2010

2015

2020

2025

2030

Source: Bloomberg New Energy Finance as of June 2017, http://www.nytimes.com/2009/12/15/business/15hybrid.html

20

So What’s Next?

2018

21

A Transformation in Health Care? The Operating Theater of Tomorrow?

Individualized Medical Care of Tomorrow? Cost per genome

A doctor of tomorrow?

Source: Welcome Images, Intuitive Surgical, National Human Genome Research Institute, as of July 2017.

22

AI, Autonomous Driving and Blockchain “J.P. Morgan’s Jamie Dimon May Hate Bitcoin, but He Loves Blockchain.” - WSJ, Oct. 2017

“Facebook CEO Mark Zuckerberg announced he plans to study cryptocurrencies.” - Facebook, January, 5 2018 “J.P. Morgan’s Jamie Dimon May Hate Bitcoin, but He Loves Blockchain.” - WSJ, Oct. 2017 “How blockchains could change the world.” - McKinsey, May 2016

1

Artificial Intelligence

2

Autonomous Driving

3

Blockchain

23

“

The big ideas in business are often very obvious, but it’s very hard to maintain a firm grasp of the obvious at all times.” - Jeff Bezos

24

Tech Sector Outperformance Where to now? P/E Multiple

Cap Weighted Performance Total Returns

12/31/13

12/29/17

Change in Multiple

Change in NTM EPS Est.

S&P 500 Information Technology Sector

88.3%

16.8x

21.3x

26.8%

48.5%

Top 1500 U.S. stocks by cap size

48.5%

16.2x

19.0x

17.3%

26.5%

Relative (Tech – Mkt)

39.8%

9.4%

22.0%

(December 2013  December 2017)

P/E Multiple

Equal Weighted Performance Total Returns

12/31/13

12/29/17

Change in Multiple

Change in NTM EPS Est.

S&P 500 Information Technology Sector

61.5%

19.5x

19.3x

-1.0%

63.2%

Top 1500 U.S stocks by cap size

39.8%

17.9x

18.9x

5.7%

32.2%

Relative (Tech – Mkt)

21.8%

-6.8%

31.0%

(December 2013  December 2017)

Source: Alliance Bernstein, as of 12/31/17. NTM EPS – Next Twelve Months Earnings Per Share Estimate. Price-to-Earnings (P/E) Ratio measures share price compared to earnings per share for a stock or stocks in a portfolio.

25

Durable and Competitively Advantaged Business Models

Brand

Technology

Sustainable Competitive Advantages

Distribution

Network Effect

Cost Structure

26

Characteristics – Forty Fund As of June 30, 2018 Top Holdings (28.95% of Fund)

(%)

Sector Breakdown (%)

Forty Fund

Russell 1000® Growth Index

Mastercard Inc

6.23

Information Technology

43.16

41.55

Amazon.com Inc

6.22

Consumer Discretionary

15.40

17.93

Health Care

14.60

13.37

Microsoft Corp

5.71

Financials

9.81

4.44

Alphabet Inc

5.70

Industrials

5.79

11.87

Salesforce.com Inc

5.09

Materials

4.76

1.80

Real Estate

3.53

2.16

Cash & Equivalents

2.95

‒

Forty Fund

Russell 1000® Growth Index

39

542

Weighted Average Market Cap

$245.9B

$275.7B

Median Market Cap

$83.3B

$12.1B

Active Share

67.16%

–

Characteristics Number of Securities

Holdings are subject to change without notice. For a complete list of holdings as of the most recent publicly available disclosure period, visit janushenderson.com/info. Sector weights based on GICS. Active Share represents the portion of portfolio holdings that differ from an index. Active share is not an indicator of past or future performance. Higher active share may present increased risk of volatility and does not protect against loss.

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Characteristics – Forty Fund General Characteristics Inception Date 5/1/97

Primary Benchmark Russell 1000® Growth Index

Fund Assets $12.5B (as of 6/30/18)

Peer Group Category Morningstar Large Growth

Investment Style High-conviction large-cap growth equities

Weight in Top Five Holdings 28.95% (as of 6/30/18)

Typical Investment Guidelines and Risk Parameters Holdings Range 30 – 40

Expected Tracking Error Range 300 – 700 bps

Expected Turnover 20% – 40%

Beta 0.85 – 1.15

Max Position Size 8.0% (2.5% – 3.0% core weight)

Liquidity Max of 20% of 10 day average daily volume

Target Market Cap Range Up to 70% of the portfolio > $15 billion Actual results may vary, and the information should not be considered or relied upon as a performance guarantee. Russell 1000® Growth Index reflects the performance of U.S. large-cap equities with higher price-to-book ratios and higher forecasted growth values. Beta measures the volatility of a security or portfolio relative to an index. Less than one means lower volatility than the index; more than one means greater volatility. Tracking Error is the divergence between the price behavior of an investment and an index. Turnover is a measure of portfolio trading activity. Higher turnover may indicate higher transaction costs and vice versa. The fund is classified as “nondiversified”, meaning it has the ability to take larger positions in a smaller number of issuers than a “diversified” fund. Nondiversified funds may experience greater price volatility.

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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus Henderson at 800.668.0434 or download the file from janushenderson.com/info. Read it carefully before you invest or send money. Investing involves market risk and it is possible to lose money by investing. Investment return and value will fluctuate in response to issuer, political, market and economic developments, which can affect a single issuer, issuers within an industry, economic sector or geographic region, or the market as a whole. Technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. A concentrated investment in a single industry could be more volatile than the performance of less concentrated investments and the market as a whole. Janus Henderson is a trademark of Janus Henderson Investors. © Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC. Janus Henderson Distributors C-0718-18522 10-15-18

199-44-417609 07-18

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