The Cerno Pacific portfolio is a geographically specific fund, which invests primarily across the Pacific area but also the wider

emerging markets. The fund’s objective is to produce capital growth over the long term through a focus on companies that are

judged to be innovators or are beneficiaries of innovation through their products, services or business models. The optimal route

to access the full benefit of innovation is likely to be, directly or indirectly, in the form of equity, which will be the predominant

asset class in the portfolio. The manager takes an active approach to currency exposures and may hedge where deemed appropriate.

Q4 19 Investment Report

Fund Managers

Fay Ren - Co Managerren@cernocapital.com

Michael Flitton - Co Managermichael@cernocapital.com

Fund Activity

Position changes in the portfolio during the quarter.

Delta Electronics: riding the next power cycle

The world’s largest power supply vendor positioned for the

integration of renewables and EV demand to the grid

Techtronic Industries: power ranger

A leading supplier of power tools and floor care brands

globally

NAV/Share £12.79

Fund Size (£mn) £16.8mn

Currency Share Class GBP (Base)

ACD Thesis Unit Trust Mgt

Custodian Northern Trust

Legal Structure OEIC (UCITS)

Inception Date - Fund Jan 2017

Inception Date - Strategy Oct 2009

Saving Structures SIPPs & ISAs

Share Type Acc & Inc

Fund Data

UCITS Regional Equity Portfolio

Q4 2019

TM Cerno Pacific

Investment Objectives

Fund Activity

The fund returned +6.5% in the final quarter of the year against

the benchmark MSCI AC Asia Pacific Index, which rose 1.4%

in GBP. This takes the cumulative 2019 performance to +25.9%,

representing a pleasing outperformance of 11%.

TSMC was again a key contributor during the quarter (+1.1%).

However, unlike Q3 performance was less concentrated in the

semiconductor supply chain. Murata rose 21% in local currency

(+0.96% contribution) as visibility improved over the global

rollout of 5G infrastructure, for which Murata manufactures

key signal filters and related passive components. Another

beneficiary of improved investor sentiment was Alibaba, which

contributed 1.19%, primarily a function multiple expansion.

As the most liquid and accessible vehicle for foreign investors

to express a China view the stock has suffered from trade war

malaise for most of 2019. Amongst our stock holdings there

were few absolute negatives. Sysmex (-0.28%) and Kingdee

(-0.53%) both ground slowly lower, reflecting more a lack of

near term market ‘narrative’ than any discernible fundamental

headwinds.

The primary drag on performance through the year was,

perhaps unsurprisingly, currency. Your managers aim to find,

and invest, in innovative firms with visible growth trajectories.

This is a fundamentally bottom up approach. Aside from

ameliorating the risks in specific currencies, for example CNY

hedging through most of 2019, we believe we add little value

involving ourselves in the macro world. However, as the fund

is denominated in GBP the UK election presented a sufficiently

specific risk such that we entered December 2019 c45% hedged

back into Sterling. This position contributed +1.2% and helped

our relative performance during the month. Naturally the

overall effect of GBP was a negative but the hedge worked to

lessen the impact. As of writing all outstanding currency hedges

have been closed bar a small INR forward to smooth the FX

volatility of our Emerging India investment back into GBP.

Turnover was higher than usual in the quarter as we continued

to shift portfolio focus towards high conviction equity names.

We exited our holding in Matthews China Small Companies

fund in full and the majority of the Baillie Gifford Shin Nippon

Trust. Capital was recycled into existing names and three new

positions were initiated. Detailed write ups follow on Delta

Electronics and Techtronic Industries. The third new holding is

Kose, a leading Japanese cosmetics company tapping into the

expanding global market for skin care.

Established in 1971 Delta Electronics is the world’s largest

power supply vendor. Originally focused on PC applications

the group has evolved into power infrastructure and, more

latterly, new markets in automation and electric vehicles.

Delta’s management team has shown itself capable of

recognising future trends, repositioning the business and

profiting from these changes. From 1995 to 2005 its core

revenue stream was switched power supply for notebooks and

PCs. As the smartphone era dawned the company expanded into

networking power products to provide power management for

servers and telecom towers. More recently, in 2010, as it became

clear that the PC market was facing prolonged contraction

management articulated a strategic shift away from its legacy

core. PC now accounts for only 8% of revenues against 50% in

2009. In its place is a growing business in industrial automation,

EV charging and datacentre management.

The connecting thread running through the different focal

points of growth is a continued focus on the company’s core

competence in power management. This has enabled the group

to leverage its deep reservoir of IP to lead in new demand

environments. Over time its market share position has become

more entrenched and we are confident in the ability of the

business to remain relevant over time.

As with Nidec, which manufacturers efficient motors, Delta’s

portfolio sits comfortably alongside the structural need

for improved sustainability. Their core business is power

efficiency. The superior conversion rates of their products

differentiate Delta from its competitors across industries. In

addition, as the power generation mix increasingly shifts to

Delta Electronics: riding the next power cycle

Delta Electronics: riding the next power cycleSource: Delta Electronics

renewables, alternative storage assets are added to the grid and

EV charging demands rise, we see a long runway for growth in

transformation equipment.

Delta Electronics was invested in the Pacific portfolio in

November.

- Michael Flitton

Techtronic Industries (TTI) is the second largest global

manufacturer of power tools and floor care tools. Its products

are sold through 12 recognizable brands including Milwaukee

and Ryobi in power tools, and Hoover and Vax in the floor care

space.

The company has heritage in Asia, founded in Hong Kong in

1985 by Horst Julius Pudwill and Roy Chi Ping Chung. TTI’s

history mirrors the technical development of much north

Asian industry: migration up the value chain from outsourcer

for Western incumbents to competitor. TTI began life lining

up suppliers for Western brands, subsequently taking on the

manufacturing as an OEM, to eventually becoming owners of

brands themselves.

The professional power tools market is dominated by American,

German and Japanese players. TTI was the first power tool

company to set up a manufacturing base in China, competing

with high-end makers who historically shunned ‘Made in China’

tools, opting for US or Japan made products for quality reasons.

Their first big break came from Japan’s Ryobi brand in 1988,

who commissioned TTI to make their tools and subsequently

took a 20% stake in the company as a vote of confidence.

Techtronic Industries: power ranger

Another definitive deal that propelled TTI to global status was

the acquisition of the Milwaukee & AEG brands from Sweden’s

Atlas Copco in 2005. Milwaukee now represents over 70% of

TTI’s revenues and growing at over 20% per annum, much

higher than the single digit industry average. The hiring of their

current CEO Joseph Galli Jr. in 2006 was another significant

decision. Mr Galli built a reputation at rival Stanley Black &

Decker for taking their DeWalt tool brand to global No. 1 player

in the 1990s.

Innovation has also been a major growth driver: TTI generates

30-40% of its sales from new products every year and has

expanded their tool portfolio from 100+ products to 400+

over the last 6 years. They were the first to introduce wireless

tools, which has now become the industry standard, and

with earlier experience as an OEM, TTI has the technical

capability to research and develop core components in house,

having extensive knowledge in brushless motors and battery

techniques, comparing to peers who tend to use third party

componentry.

Since 2013 the company has inexorably gained market share

from other global players, such as Bosch and Makita, rising to

global No. 2 player after Stanley Black & Decker from No. 5.

The company was invested in December 2019 in the Pacific

portfolio.

- Fay Ren

Techtronic Industries’ brandsSource: Techtronic Industries

Allocation by Theme

Track Record

Top/Bottom Quarterly Contributors

Geographic Allocation (Ex Cash)

Performance is based on a Net Asset Value (NAV) price basis with income reinvested, net of fees. Past performance is not a guide to future performance.

Top 10 Holdings Tencent 7.6%

TSMC 6.6%

Alibaba 6.0%

Samsung Eletronics 5.1%

Wuxi Apptec 5.0%

Nidec 4.5%

Murata 4.4%

Midea 4.1%

Sunny Optical 4.0%

Advantech 3.9%

Tech Hardware & Suppliers 22%

Niche Manufacturers 22%

Online Disruptors 17%

Consumer Products 13%

Health Care 12%

Software & Services 5%

Cash 4%

China/HK40%

Japan23%

Alibaba

TSMC

Murata

Nidec

Sysmex

Kingdee

Year Ended Dec 2019 Dec 2018 Dec 2017 Since Inception*

Fund (Class B) +25.9% -13.3% +18.0% +28.8%

MSCI AC Asia Pacific +14.8% -8.1% +20.3% +23.0%

*Inception as a UCITS: 27 January 2017

- TM Cerno Pacific (Class B) - MSCI AC Asia Pacific Index

Taiwan14%

Korea6% India

4%

ISIN:

GB00BDCJ9Z32

GB00BDCJB138

SEDOL:

BCDJ9Z3

BDCJB13

Bloomberg:

TMCPEAA LN

TMCPEBA LN

A Acc

B Acc

Fund Codes

Ongoing Charges

Counterparties

Contact

Class A Management Fee 1.00% Allocated manager’s Fees 0.52%Other Fees (Inc running costs) 0.71%OCF 2.23%

Class B Management Fee 0.75% Allocated manager’s Fees 0.52%Other Fees (Inc running costs) 0.71%OCF 1.98%

Authorised Corporate Director: Thesis Unit Trust ManagementTrustee: NatWest TrusteesCustodian: Northern TrustAuditor: Grant Thornton UK LLP

Tom Milnes0207 036 4126tom@cernocapital.com

Key Fund Information

Disclaimer for TM Cerno Pacific: TM CERNO PACIFIC (the “Fund”), which is a sub fund of TM Cerno Investment Funds, is organised under the laws of the United Kingdom and qualifying as an undertaking for collective investment in transferable securities (“UCITS”) under Directive 85/611/EEC (as amended) and is regulated by the Financial Conduct Authority. This document is issued by CERNO CAPITAL PARTNERS LLP and is for private circula-tion only. CERNO CAPITAL is authorised and regulated by the Financial Conduct Authority in the United Kingdom. The information contained in this document is strictly confidential and does not constitute an offer to sell or the solicitation of any offer to buy any securities and or derivatives and may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of CERNO CAPITAL PARTNERS LLP. The value of investments and any income generated may go down as well as up and is not guaranteed. You may not get back the amount originally invested. Past performance is not necessarily a guide to future performance. Changes in exchange rates may have an adverse effect on the value, price or income of investments. There are also additional risks associated with investments in emerging or developing markets. The information and opinions contained in this document are for background purposes only, and do not purport to be full or complete. Nor does this document constitute investment advice. No representa-tion, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this document by CERNO CAPITAL PARTNERS LLP, its partners or employees and no liability is accepted by such persons for the accuracy or completeness of any such information or opinion. As such, no reliance may be placed for any purpose on the information and opinions contained in this document.

Cerno Capital Partners LLP 34 Sackville Street, London, W1S 3ED Telephone: +44 (0) 207 036 4110 Website: cernocapital.com