Introducing Forsyth Barr and Diversified Investments

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Mr Guy Johnson Mr Rob Mercer Mr Paul O’Driscoll Authorised Financial Adviser Authorised Financial Adviser Authorised Financial Adviser Forsyth Barr Forsyth Barr Forsyth Barr

16:30 - 17:25 WS #190: Discovering Value in Global Pharma and Biotech Stocks 17:35 - 18:30 WS #202: Discovering Value in Global Pharma and Biotech Stocks (Repeated) Introducing Forsyth Barr and Diversified Investments

June 2019

Guy Johnson and Paul O’Driscoll: Investment Advisers

0800 367 227 | forsythbarr.co.nz Disclosure Statement

The Financial Advisers Act 2008 and the Financial Advisers (Disclosure) Regulations 2010 require written disclosure of specific information by people providing financial advice. In accordance with this legislation we have distributed a copy of our Investment Adviser Disclosure Statements. If anyone does not have a copy of these Disclosure Statements can you please advise us now before we commence the presentation. Not personalised financial advice: The recommendations and opinions in this presentation do not take into account your personal financial situation or investment goals. The financial products referred to in this presentation may not be suitable for you. If you wish to receive personalised financial advice, please contact your Forsyth Barr Investment Adviser. The value of financial products may go up and down and investors may not get back the full (or any) amount invested. Past performance is not necessarily indicative of future performance.

0800 367 227 | forsythbarr.co.nz | 3 Disclaimer

Disclosure: Forsyth Barr Limited and its related companies (and independently verified or investigated by Forsyth Barr. Forsyth their respective directors, officers, agents and employees) Barr does not make any representation or warranty (express or (“Forsyth Barr”) may have long or short positions or otherwise implied) that the information in this presentation is accurate or have interests in the financial products referred to in this complete, and, to the maximum extent permitted by law, presentation, and may be directors or officers of, and/or provide excludes and disclaims any liability (including in negligence) for (or be intending to provide) investment banking or other any loss which may be incurred by any person acting or relying services to, the issuer of those financial products (and may upon any information, analysis, opinion or recommendation in receive fees for so acting). Forsyth Barr is not a registered bank this presentation. Forsyth Barr does not undertake to keep within the meaning of the Reserve Bank of New Zealand Act current this presentation; any opinions or recommendations 1989. Forsyth Barr may buy or sell financial products as may change without notice. Any analyses or valuations will principal or agent, and in doing so may undertake transactions typically be based on numerous assumptions; different that are not consistent with any recommendations contained in assumptions may yield materially different results. Nothing in this presentation. Forsyth Barr confirms no inducement has this presentation should be construed as a solicitation to buy or been accepted from the researched entity, whether pecuniary or sell any financial product, or to engage in or refrain from doing otherwise, in connection with making any recommendation so, or to engage in any other transaction. Other Forsyth Barr contained in this presentation. business units may hold views different from those in this presentation; any such views will generally not be brought to Analyst Disclosure Statement: In preparing this presentation the your attention. This presentation is not intended to be analyst(s) may or may not have a threshold interest in the distributed or made available to any person in any jurisdiction financial products referred to in this presentation. For these where doing so would constitute a breach of any applicable laws purposes a threshold interest is defined as being a holder of or regulations or would subject Forsyth Barr to any registration more than $50,000 in value or 1% of the financial products on or licensing requirement within such jurisdiction. issue, whichever is the lesser. In preparing this presentation, non-financial assistance (for example, access to staff or Terms of use: Copyright Forsyth Barr Limited. You may not information) may have been provided by the entity being redistribute, copy, revise, amend, create a derivative work from, researched. extract data from, or otherwise commercially exploit this presentation in any way. By accessing this presentation via an Disclaimer: This presentation has been prepared in good faith electronic platform, you agree that the platform provider may based on information obtained from sources believed to be provide Forsyth Barr with information on your readership of the reliable and accurate. However, that information has not been presentations available through that platform.

0800 367 227 | forsythbarr.co.nz | 4 Who is Forsyth Barr?

0800 367 227 | forsythbarr.co.nz | 5 Independently and Whangarei New Zealand owned North Shore Auckland Auckland East

Hamilton Tauranga • Forsyth Barr has been around for over 80 Cambridge years as a NZ-owned and controlled, full service investment house New Plymouth Napier • One of NZ’s largest discretionary private Hastings wealth managers, over $7 billion of client Palmerston North Kapiti Coast funds managed on Discretionary or Lower Hutt Advisory basis Nelson Wellington • Partner of Forsyth Barr Stadium, Dunedin • NZ’s largest equity research team Christchurch Ashburton

Timaru

Queenstown

Dunedin Invercargill

0800 367 227 | forsythbarr.co.nz | 6 Investments

0800 367 227 | forsythbarr.co.nz | 7 Benefits of a Diversified Investment Portfolio • We aim to provide the best risk-adjusted return for your capital. • Different asset classes have different return profiles and blending a portfolio of different asset types can lower overall portfolio risk and achieve superior, less volatile long-term returns. • A portfolio of financial assets (equities, bonds, cash) could provide uncorrelated returns offering smoother long term returns. For example, global equities have had over the past ten years an excess return above that of property. Global equities could therefore add to overall portfolio returns if the primary asset class is under- performing.

Source: ANZ, Bloomberg

0800 367 227 | forsythbarr.co.nz | 8 General risk profile and asset allocation

Fixed Shares Investing WHEN retired Interest 30% 65% Low

Property 5%

Fixed Shares Interest 40% 50% Medium

Property 10%

Fixed Interest 20%

Property AGE High 10% Shares 70% Investing FOR retirement

0800 367 227 | forsythbarr.co.nz | 9 Forsyth Barr service offering

0800 367 227 | forsythbarr.co.nz | 10 Forsyth Barr Investment Services

• We are relationship focused. We build bespoke investment portfolios tailored to your personal situation. Forsyth Barr offers a personalised investment approach that places the client first.

• We aim to provide the best risk-adjusted return for your capital, based on your financial circumstances and investment objectives.

• We create investment portfolios that match clients needs – capital preservation, income or a focus on growth.

0800 367 227 | forsythbarr.co.nz | 11 Structured, disciplined, team approachto managing our client’s assets

Macroeconomic Asset Allocation and (Strategic and Geopolitical Tactical)

Tailored Investment Portfolio

Industry Fundamental Thematic Security Selection Geographic

0800 367 227 | forsythbarr.co.nz | 12 Building a World Class Equity Portfolio

Rob Mercer Head of Private Wealth Research

0800 367 227 | forsythbarr.co.nz Disclosure Statement

Not personalised financial advice: The recommendations and opinions in this presentation do not take into account your personal financial situation or investment goals. The financial products referred to in this presentation may not be suitable for you. If you wish to receive personalised financial advice, please contact your Forsyth Barr Investment Adviser. The value of financial products may go up and down and investors may not get back the full (or any) amount invested. Past performance is not necessarily indicative of future performance.

0800 367 227 | forsythbarr.co.nz | 14 Disclaimer

0800 367 227 | forsythbarr.co.nz | 15 Building a World Class Equity Portfolio

0800 367 227 | forsythbarr.co.nz | 16 Building a world class equity portfolio

We view equities from a global perspective

Building a portfolio in four key steps: Step 1. New Zealand equities: Base load the best ideas from New Zealand Step 2. Australian equities: Add in complementary sectors/stocks Step 3. Global thematic trusts for portfolio diversification Step 4. International stocks to raise overall quality of the portfolio

Our guiding principal is “North-West” i.e. achieve a higher return with less risk

0800 367 227 | forsythbarr.co.nz | 17 Our guiding principle is “North-West” The goal: To achieve a higher return with less risk

18%

16%

14%

12% Expected 10% return 8% Px 6%

Risk Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 18 Process to identify investment opportunities

• Economic backdrop •Value for risk • Outlook •Fundamentals • FX expectation

1. Global 2. Value thematic metrics

4. 3. Earnings Creating record long-term • EPS trends value •Creating value for • Track record shareholders •Past record and belief in how • Understanding capital is being invested in the earnings risk future

0800 367 227 | forsythbarr.co.nz | 19 Building the perfect portfolio The ‘Golf Swing’ metaphor

Finesse Global equities Strength Risk management New Zealand and Australian equities

Core Fixed Interest and Cash

Structure • Portfolio construction • Administration • Custodial services

Source: Forsyth Barr Research …How it works as a whole is what matters

0800 367 227 | forsythbarr.co.nz | 20 Earnings Growth We want to find companies that can consistently grow earnings

300.00

250.00

200.00

150.00

100.00

50.00

0.00

Mar-17 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-18 Mar-19 Mar-20 Mar-21

12m fwd EPS (USD) (indexed to price)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 21 Share price should trend in line with earnings

300.00

250.00

200.00

150.00

100.00

50.00

0.00

Mar-17 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-18 Mar-19 Mar-20 Mar-21

12m fwd EPS (USD) (indexed to price) Stock price (USD)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 22 Introducing the Dynamic PE

300.00

250.00 Expensive Dynamic PE = 30x 200.00

Cheap 150.00

100.00

50.00

0.00

Mar-17 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-18 Mar-19 Mar-20 Mar-21

12m fwd EPS (USD) (indexed to price) Stock price (USD)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 23 What a top performer! But what about the future?

300.00

250.00 Expensive Dynamic PE = 30x 200.00

Cheap 150.00

100.00

50.00

0.00

Mar-17 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-18 Mar-19 Mar-20 Mar-21

12m fwd EPS (USD) (indexed to price) Stock price (USD)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 24 Healthcare Sector Review: Best in Class Locally & Globally

0800 367 227 | forsythbarr.co.nz | 25 Process for Stock Selection

>500 Healthcare Stocks

200 Stocks, UBS/Citi How do we distil the huge global 50 Stocks of Interest list of healthcare companies down 30 Stocks Aligned to our Philosophy to a manageable

15 Stocks in and relevant list? our Short List

9 Stocks in Super Health Group

0800 367 227 | forsythbarr.co.nz | 26 Our Super Health Group

Biologics Cardiovascu Diabetes Epigenetics Oncology Vaccines Consumer Life Sciences Services / lar Health / Diagnostics Distribution / Equipment

0800 367 227 | forsythbarr.co.nz | 27 Healthcare Super Group Delivering earnings growth of +7-12%pa

$300

$250 Equally Weighted Dynamic PE = 19x

$200

$150

$100

$50

May13 May14 May15 May16 May17 May18 May19 May20 May21

EPS in denominated currency indexed to 100 Share price (USD, indexed to 100)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 28 The Perfect Swing has a good chance of executing The Perfect Score

0800 367 227 | forsythbarr.co.nz | 29 Appendix

0800 367 227 | forsythbarr.co.nz | 30 Appendix: Visa

Mkt Cap 12-mth Forecast 1 Forecast 2 Dividend Price (US$) PEG ROE (US$ billion) Change PE PE yield 324.9 $162.79 +24.4% 30.3x 26.2x 1.9x 40% 0.7%

Share price and EPS 300.0 Visa is a global leader in digital payments technology 250.0 Dynamic PE = 30x that should continue to see solid volume growth over 200.0 the medium-to-long-term, enabled by expanding 150.0 merchant adoption, growing mobile usage, and 100.0 greater prepaid and commercial activity. 50.0 0.0

Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Mar14 Mar15 Mar16 Mar17 Mar18 Mar19 Mar20 Mar21 Given Visa’s earnings are driven by the value of transactions Visa also provides exposure to global 12m fwd EPS (USD) (indexed to price) growth (activity) and inflation. Stock price (USD)

Visa’s June quarter result was ahead of consensus Historical and consensus forecast EPS growth expectations. Positives included a sequential +33% acceleration in payments in almost every region +26% apart from Europe and robust credit growth globally. +20% +16% +16% +16% +15% +16% The technology migration for Visa Europe is on track while the double-digit earnings accretion is ahead of plan.

FY09- FY14- FY09- FY19 FY20 FY21 FY22 FY19- Source: Forsyth Barr Research 14 19 19 22 0800 367 227 | forsythbarr.co.nz | 31 What are we observing

Clouds are Swirling….. • Banks are tightening credit availability, particularly to the Rural and Property sectors • House prices are falling in Auckland • Lending to Agriculture sector has hit its aggregated cap • Increasing financial distress is evident across the Dairy sector, including Fonterra • Disruption to the Beef & Dairy sector is imminent from vegetable and synthetic substitute product The Good News…… • NZ has enjoyed 18 years of excellent returns across all segments: Equities, Property, Farming, Fixed Interest • NZ has been the best performing market in the world over the past 18 years • NZ has outperformed the Australian equity market by 100% over the past 7 years • The level of outperformance by the NZ market is set to partially reverse, as economic conditions deteriorate relative to the world Call to Action……. • Now is a good time to bank a good proportion of the gains made from NZ’s outperformance

0800 367 227 | forsythbarr.co.nz | 32 NZ equities and property: world beaters

$4,000

NZ Prop $3,500

NZ Equities $3,000

$2,500 AU Equities

$2,000 MSCI Equities $1,500

$1,000

$500

Jul 05 Jul 12 Jul

Apr 07 Apr 10 Oct 14 Apr 17 Oct

Jun 08 Jun 09 Jan 15 Jun 16 Jan

Mar 10 Mar 17 Mar

Feb 06 Feb 13 Feb

Dec 04 Dec Nov 07 Nov 11 Dec 14 Nov 18 Dec

Aug 16 Aug Sep Sep 06 Aug 09 Sep 13

May 11 May 18 May

0800 367 227 | forsythbarr.co.nz | 33 Risk return: NZ equities moving South East

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 34 Introducing the Dynamic PE and 3 year return framework

250 Expensive

200 Dynamic PE = 30x

150 Cheap

100

Mar20

Mar19

Mar18

Mar17

Mar16

Mar15

Mar14

Mar13

Mar12

Mar11

Mar10

Mar09 Mar08

12m fwd EPS (USD) (indexed to price) Stock price (USD)

Source: Forsyth Barr Research

0800 367 227 | forsythbarr.co.nz | 35 Thank you

Any questions?

0800 367 227 | forsythbarr.co.nz