Australasian Equities Outlook September 2019 Devon Funds Management Skilled and Experienced Investment Team

Australasian Equities Outlook September 2019 Devon Funds Management Skilled and experienced investment team

Mark Brown, CFA Chris Gaskin, CFA Over 20 years’ industry experience Over 15 years’ industry experience Mark has primary responsibility for stock Chris has primary responsibility for stock selection and portfolio construction for the selection and portfolio construction for the Alpha Fund and the New Zealand Equity Australasian Equity funds. Chris also has funds. Mark is also responsible for primary research responsibility for the overseeing the overall research and Healthcare, Telecoms, and Utilities sectors. investment process at Devon.

Tama Willis Nick Dravitzki, CFA Over 15 years’ industry experience Over 13 years’ industry experience Tama has primary responsibility for stock Nick has primary responsibility for stock selection and portfolio construction for the selection and portfolio construction for the Trans-Tasman and Australian funds. Tama Dividend Yield Fund, and the Diversified also has primary research responsibility for Income Fund. Nick also has primary the Resources and Financials sectors. research responsibility for the Property, Discretionary and Staples sectors.

Shenci Tang Slade Robertson, Managing Director 2 years’ industry experience Over 20 years’ industry experience Shenci has primary responsibility for stock After spending 6 years as a Portfolio selection and portfolio construction for the Manager for Devon, in March 2017 Slade Devon Sustainability Fund. He also has became the Managing Director and as such primary research responsibility for the now has overall responsibility for the Industrial sector. business. Slade continues to contribute to the investment process as a member of the Shenci has held positions at KPMG Investment Committee. Corporate Finance, Goldman Sachs, and the For the Royal New Zealand Navy. 2 informed investor. Performance of global markets

New Zealand has been a remarkably consistent performer (local currency terms including dividends) +20.0%

+15.0%

+10.0%

+5.0%

+0.0%

-5.0%

-10.0%

-15.0% NZX 50 ASX 200 S&P 500 FTSE 100 Nikkei Hang Seng 1yr 5yr 10yr Source: Forsyth Barr

For the 3 informed investor. Australia and New Zealand growth outlook

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% Annual GDP Growth (%) 0.5% 0.0% 2013 2014 2015 2016 2017 2018 2019 2020 AU GDP Growth NZ GDP Growth UBS AU Forecasts UBS NZ Forecasts

Source: UBS

For the 4 informed investor. New Zealand market looks expensive on a PE basis

Source: Forsyth Barr

For the 5 informed investor. … but relative to bonds, equities look cheap

BY/EY 0.8

0.7

0.6

0.5

0.4

0.3

0.2 Oct-15 Oct-17 Oct-16 Oct-18 Oct-14 Apr-15 Apr-17 Apr-16 Apr-18 Apr-19 Feb-15 Feb-17 Jun-15 Dec-15 Feb-16 Feb-18 Feb-19 Jun-17 Dec-17 Jun-16 Jun-18 Jun-19 Dec-16 Dec-18 Dec-14 Aug-15 Aug-17 Aug-16 Aug-18 Aug-14

Source: IRESS

For the 6 informed investor. Australian earnings growth

30 25 FY18 FY19 FY20 FY21 20 15 10 5 0 -5 -10 -15 Market Resources Banks Market ex Healthcare Resources

Source: Citi

For the 7 informed investor. Style performance for the ASX200

Performance of value versus growth over time Resources versus Banks 300 250 ASX 200 Growth ASX 200 Value ASX 200 Banks 250 ASX 200 Resources 200 200

150 150

100 100 50

0 50 Sep 09 Sep 11 Sep 13 Sep 15 Sep 17 Sep 19 Sep 09 Sep 11 Sep 13 Sep 15 Sep 17 Sep 19

Source: MST

For the 8 informed investor. Earnings, not rates, continue to drive the market

Long bull market has been driven by earnings And near term earnings look reasonable

Source: Citi For the 9 informed investor. But the risk to earnings is lurking as more tariffs due

Tariffs to date resulted in sharp contraction of Most likely cause of sharp slowdown in Q4 18 imports from China

For the 10 Source: UBS informed investor. Newscorp Management “acutely focused” on value creation

WSJ the key value driver of News & Information New York Times Valuation Implies Material Upside N&I Divisional Valuation FY19F FY20F Multiple Value Multiple Value

Estimated EBITDA Dow Jones 202.2 214.8 Growth Consumer 193.2 205.7 8.0x 1,646.0 18.5x 3,806.4 Growth Institutional 9.1 9.1 8.0x 72.5 8.0x 72.5 Growth Australia 39.4 39.8 8.0x 318.5 8.0x 318.5 Growth UK 59.3 59.9 8.0x 478.9 8.0x 478.9 Growth News America Marketing 134.1 125.2 8.0x 1,002.0 8.0x 1,002.0 Growth NY Post -38.8 -38.8 8.0x -310.3 8.0x -310.3 Growth Total EBITDA 396.3 401.0 3,207.7 5,368.0 Growth

Shares 584.8 Per share at 8x $ 5.49 Per share at 18.5x $ 9.18

For the 11 informed Source: Devon, Factset, Company Information investor. Newscorp Global Real Estate key valuation question

REA a big part of value, but move negligible Theoretical US market potential is gigantic

Source: Devon, Zillow

For the 12 informed investor. James Hardie US housing market and market share gains

US housing starts James Hardie US primary demand growth

10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 Q1 FY20

Source: Devon, JP Morgan, UBS

For the 13 informed investor. James Hardie A big “small” company to a small “big” company

Targeting EUR1bn in revenue in Europe within 10 years

Source: Devon, James Hardie

For the 14 informed investor. Vista Group Cinema has been a very resilient business

Source: Cinemark For the 15 informed investor. Vista Group Global market share growth continues despite weaker near-term revenue guidance

Vista global market share of 20+ screen market Vista share price since listing

0 8-Aug-14 8-Aug-15 8-Aug-16 8-Aug-17 8-Aug-18 8-Aug-19 Source: Cinemark, IRESS

For the 16 informed investor. Trans-Tasman Portfolio

Company Name Country % Fund Contact Energy NZ 7.0 NAB AU 5.5 Asset allocation Spark NZ 5.0 CSL AU 5.0 Aristocrat Leisure AU 4.3 Meridian AU 4.0 Westpac AU 3.5 a2 Milk NZ 3.5 BHP AU 3.5 James Hardie AU 3.0 Z Energy NZ 3.0 Suncorp AU 3.0 Fisher & Paykel Healthcare NZ 2.8 Newscorp AU 2.8 Vista Group NZ 2.8 Atlas Arteria AU 2.8

For the 17 informed investor. Dividend Yield Portfolio

Company Name Country % Fund Contact Energy NZ 6.0 Spark NZ 6.0 Asset allocation NAB AU 5.5 Meridian NZ 5.0 Z Energy NZ 5.0 Unibail-Rodamco AU 4.0 BHP AU 4.0 Scentre Group AU 4.0 Sydney Airport AU 4.0 SkyCity NZ 4.0 Mercury NZ 3.0 Kiwi Property NZ 3.0 Air New Zealand NZ 2.8 Rio Tinto AU 2.8 Genesis NZ 2.5 Fletcher Building NZ 2.5

For the 18 informed investor. Alpha Portfolio

Company Name Country % Fund Z Energy NZ 7.0 Asset allocation Contact Energy NZ 7.0 CSL AU 6.0 Aristocrat Leisure AU 6.0 Spark New Zealand NZ 6.0 James Hardie AU 5.0 NAB AU 5.0 EBOS NZ 5.0 Newscorp AU 5.0 a2 Milk NZ 4.0 Resmed AU 3.5 Brambles AU 3.0 Vista Group NZ 3.0

For the 19 informed investor. Australian Portfolio

Company Name Country % Fund NAB AU 7.5 CSL AU 6.0 Asset allocation BHP AU 7.0 Westpac AU 6.0 Aristocrat AU 5.5 Rio Tinto AU 5.0 Newscorp AU 4.5 Suncorp AU 4.5 James Hardie AU 4.0 Woodside Petroleum AU 4.0 CBA AU 4.0 Atlas Arteria AU 3.5 ANZ AU 3.0 Scentre Group AU 3.0 Sydney Airport AU 3.0 Macquarie AU 2.5

For the 20 informed investor. INFORMATION AND DISCLAIMER: This document is not a Product Disclosure Statement (PDS) under New Zealand law or under any other law. It is for information purposes only and contains summarised information. Accordingly, this document neither purports to be exhaustive nor contains all of the information which a prospective investor or the recipient may require to make an investment decision. This document does not contain all of the information which would otherwise be required by New Zealand law or any other law to be disclosed in a PDS or similar disclosure document required under foreign law. Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant.

A PDS for the fund/s mentioned in this presentation is available free from Devon Funds Management Limited. Investors should read and understand the PDS for the relevant fund(s) in which they invest and satisfy themselves they understand all the terms and conditions of investment in the fund/s. The information in this document is not intended to be advice. In preparing this document, Devon Funds Management Limited did not take into account the investment objectives, financial situation and particular needs of any particular person. Devon Funds Management Limited recommends that potential investors consult their financial adviser and obtain professional financial advice on their individual requirements before making any investment decisions.

Past performance is not indicative of future results. Investments in any of the Devon Funds are subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither Devon nor any related company of Devon, guarantees any particular rate of return on, or the performance of, the Devon Funds, nor do they guarantee the repayment of capital from the Devon Funds.

For the informed investor.