IMPORTANT INFORMATION - Viostream · Memorandum or other offer document (collectively ‘ Offer Document ’) relating to a Magellan financial product or service. A copy of the relevant

IMPORTANT INFORMATION

This presentation (‘Presentation’) has been produced by Magellan Asset Management Limited (‘Magellan’) ABN 31 120 593 946, AFS Licence No 304 301and has been prepared for informational and discussion purposes only and does not constitute an offer to sell or a solicitation of an offer to purchase anysecurity or financial product or service. Any such offer or solicitation shall be made only pursuant to a Product Disclosure Statement, InformationMemorandum or other offer document (collectively ‘Offer Document’) relating to a Magellan financial product or service. A copy of the relevant OfferDocument relating to a Magellan product or service may be obtained by calling Magellan on +61 2 9235 4888 or by visiting www.magellangroup.com.au.This Presentation does not constitute a part of any Offer Document issued by Magellan. The information contained in this Presentation may not bereproduced, used or disclosed, in whole or in part, without the prior written consent of Magellan.Past performance is not necessarily indicative of future results and no person guarantees the performance of any Magellan financial product or service orthe amount or timing of any return from it. There can be no assurance that a Magellan financial product or service will achieve any targeted returns, thatasset allocations will be met or that a Magellan financial product or service will be able to implement its investment strategy and investment approach orachieve its investment objective.Statements contained in this Presentation that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs ofMagellan. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon.Additionally, this Presentation may contain “forward-looking statements”. Actual events or results or the actual performance of a Magellan financial productor service may differ materially from those reflected or contemplated in such forward-looking statements. Certain economic, market or companyinformation contained herein has been obtained from published sources prepared by third parties. While such sources are believed to be reliable, neitherMagellan or any of its respective officers or employees assumes any responsibility for the accuracy or completeness of such information. No person,including Magellan has any responsibility to update any of the information provided in this Presentation.This Presentation must not be regarded as advice or a recommendation in relation to a Magellan financial product or service, or that an investment in aMagellan financial product or service is suitable for you or any other person. This Presentation does not take into account your investment objectives,financial situation or particular needs. In addition to carefully reading the relevant Offer Document you should, before deciding whether to invest in aMagellan financial product or service, consider the appropriateness of investing or continuing to invest. Magellan strongly recommends that you obtainindependent financial, legal and taxation advice before deciding whether to invest in a Magellan financial product or service.© 2019 Magellan. All Rights reserved. MAGELLAN and EXPERTS IN GLOBAL INVESTING and the Magellan logo are registered and unregisteredtrademarks of Magellan Asset Management. Third-Party trademarks, logos, and service marks contained herein are the property of their respectiveowners.

The gravity of interest rates

US 10 YEAR BOND YIELD 1992 - 2020

Source: Refinitiv. As at 12 February 2020

0%

2%

4%

6%

8%

1992 1996 2000 2004 2008 2012 2016 2020

1.7%

0%

10%

20%

30%

40%

1992 1996 2000 2004 2008 2012 2016 2020

GREEK 10 YEAR BOND YIELD 1992 - 2020

Source: Refinitiv. As at 12 February 2020

1.0%

WHAT IS DRIVING LOWER INTEREST RATES?

Ageing population

Quantitative easing

Persistent low inflation

Bank capital liquidity

requirements

Global saving

surplus

Anchoring effect of low rate

Secular stagnation

Low growth

Long term wealth

accumulation

LOWER INTEREST RATES LIFT VALUATIONS

17x 21x

26x

35x

-

10x

20x

30x

40x

10% 9% 8% 7%

Forw

ard

Price

-to-F

CF M

ultip

le

Discount Rate

Theoretical forward P/FCF multiple For 4% growth company

Source: Magellan Data

Lower rates have a positive valuation impact

THE PHILLIPS CURVE

Source: Magellan Data. Image: Wikipedia

0%

2%

4%

6%

0% 2% 4% 6% 8% 10%Unemployment rate

Wag

es g

row

th

William Phillips MBENew Zealand

economist1914 – 1975

IS THE PHILLIPS CURVE DEAD? PAST 30 YEARS – A LONGER TERM PERSPECTIVE

Source: Refinitiv. PCE Inflation ex. food and energy

0%

2%

4%

6%

8%

10%

12%

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Where is the

inflation?

▬ Unemployment rate ▬ Inflation 1989 2019

1990-91 recession Tech

crash

GFC

POSSIBLE DRIVERS OF LOW INFLATION

Technology

De-unionisation

Digitalisation

Globalisation

Amazon effect Gig economy

Monopsony markets

Walmart effect

Lower growth

US shale oil

Data economyForward guidance

Automation

Negativeinterest rates

EMERGENCE OF NEGATIVE INTEREST RATES

Sources: Magellan estimates and Bloomberg. As at 31 January 2020

US$14 trillion of negative yielding bonds

24% of the world’s bonds have a negative yield

DISTORTIONS FROM NEGATIVE INTEREST RATES

Time value of money

Savings repression

Bank profitability

Asset bubbles

Hoarding of cash

Reaching for yield

Working capital management

Are negative interest rates causing asset bubbles?

ARE U.S. STOCKS EXPENSIVE?

Source: Robert R Shiller

0

10

20

30

40

50

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020

Shille

r cyc

lical

ly a

djus

ted

P/E

(CAP

E) ra

tio

▬ Shiller CAPE ▬ Median

U.S. stocks appear

expensiveStocks more expensive

Stocks less expensive

Great Depression

Tech bubble

15.8

Today

ARE U.S. STOCKS EXPENSIVE?Adjusting for interest rates

Source: Robert R Shiller, Federal Reserve Bank of St Louis

-10%

-5%

0%

5%

10%

15%

20%

Hi t i l

Stocks more expensive given interest rates

U.S. Stocks appear fairly

valued

Stocks less expensive given interest rates

Great Depression

Tech bubble

Today

IS U.S. PROPERTY EXPENSIVE?

Source: Bloomberg

5.5%

6.5%

7.5%

8.5%

9.5%

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

U.S.

CRE

cap

italis

atio

n ra

te

▬ Commercial Real Estate capitalisation rate

Property more expensive

Property less expensive

Pre GFC

U.S. property appears

expensive

Today

IS PROPERTY EXPENSIVE? Adjusting for interest rates

Source: Bloomberg and Federal Reserve Bank of St Louis

0%

1%

2%

3%

4%

5%

6%2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Property more expensive given interest ratesU.S. property appears fairly

valued

Property less expensive given interest rates

Pre GFC

Today

AREAS TO WATCH

Investors reaching for yield

High yield credit markets

Investment implications

U-TURN BY THE U.S. FEDERAL RESERVE

Source: Bloomberg, 1 January – 31 December 2018

2,000

2,500

3,000

3,500

January June November

-20%

2018 TIGHTENING

S&P

500

Rate hikes Decembermeeting

2,000

2,500

3,000

3,500

2019

U-TURN BY THE U.S. FEDERAL RESERVE

Source: Bloomberg, 1 January – 31 December 2019

29%

2019 EASING

S&P

500

January meeting

March meeting

Rate cuts

Ends quantitative tightening

0%

1%

2%

3%

4%

5%

6%

1998-2007 2008-2017 Short-term cycle Long-term cycle

Pre-GFC~5% average

WHAT HAVE WE DONE?

Sources: Refinitiv, Magellan Data.

10 year U.S. Treasury yields

Reduced our interest rate assumption

Return to QE

WHAT CAN GO WRONG?

Inflation shock Asset bubble

Prudent to be cautious

China

URBANISATION IN CHINA

Source: United Nations World Urbanisation Prospects

0%

20%

40%

60%

80%

100%

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

▬ % of population in urban areas ▬ UN forecast

2019 Middle classpopulation

2029 Middle class population

CHINA - THE CONSUMPTION ECONOMY

Source: Magellan estimates

~1.5x Mass middle class = 4% p.a.

~4x Mass affluent = 15% p.a.

~6x Affluent = 20% p.a.

~2x Middle class = 7% p.a.

IS IT TOO RISKY TO INVEST IN CHINA?

Escalation of ‘War’ with

the U.S.

Chinese government

risk

Lack of transparency

Economic slowdown

All investments involve risk

Quality companies

Brands or platforms

Consumption or technology

Know what you don’t know

Diversification of risk

Due diligence

MAGELLAN APPROACH TO INVESTING IN CHINA

CHINA FOCUSSED INVESTMENTS

As at 31 December 2018

12 MONTHS AGO

CHINA FOCUSSED INVESTMENTS

As at 31 December 2019

TODAY

Alibaba

ALIBABA

China’s leading e-commerce platforms

Emerging international e-commerce platforms ≈

ALIBABA

China’s leading payments platform

≈

ALIBABA

#1 cloud platform in China

≈

ALIBABA

China’s leading advertising platform

≈

ALIBABA

China’s leading logistics network

≈

ALIBABA

Local services and entertainment platforms

≈≈

ALIBABA

Alibaba Business Operating System

≈

CHINA MARKETPLACES – TMALL AND TAOBAO

Source: Euromonitor International Limited [China][2019] © All rights reserved. Company disclosures. Magellan estimates. Note: Figures shown based on the twelve months to December 2019. Market share based on Euromonitor Total Retail market share as at December 2019.

Enormous engaged user base

Strong revenue growth

Strong profitability

Enormous Gross Merchandise Value

711 million active customers

Significant market share

#1 Marketplaces in China

12% of total retail

+25% growth

US$24 billion EBITA

US$960 billion (over 2x Amazon)

Source: company disclosures

“…we know in the future no company, no

country, no business can survive without

data, so we have to focus on data.”Jack Ma, Alibaba Co-founder, 2017 Investor Day

Data integration across all channels

Precise consumer profiling

Superior consumer insights

VALUABLE DATABANK

Source: Company disclosures. Images: asiatimes.com

Unique Identity

Across 711 million active customers

ALIBABA’S VALUATION IS COMPELLING

Source: Magellan estimates, including stock-based compensation expense. Based on Bloomberg pricing and estimates as at February 2020.1 Removes losses. Assumes value of US$70bn for Alibaba Cloud and US$33bn for Alibaba’s 33% stake in Ant Financial. 2 Magellan adjustments for New Retail (Hema), Lazada, Ele.me, Digital Media and Entertainment, Innovative Initiatives and minority investments.

High quality business at an attractive valuation

~31x~27x

~20x ~19x

0x

5x

10x

15x

20x

25x

30x

35x

Alibaba Alibaba(adj. for Cloud

& AntFinancial¹)

Alibaba(other MAM

adjustments²)

S&P500

1-ye

ar fo

rwar

d P/

E

~15% ~35%

~19x

Starbucks

WHAT IS STARBUCKS?

Sources: Company data as at 31 December 2019.

31,800 Stores

82 Countries

Personalised drinks

100 million weekly visits

Digital engagement

STARBUCKS - GROWTH AT SCALE

Source: Company data as at 31 December 2019

U.S.15,200 stores

China4,300stores

Starbucks / NestleCoffee

Alliance

2019 2029

~2x

STARBUCKS CHINA – A MASSIVE OPPORTUNITY

Sources: Magellan estimates. Sources: McKinsey and Euromonitor, coffee consumption per capita for population >15 years old

CHINA MIDDLE CLASS DOUBLING COFFEE CONSUMPTION(cups per capita per year)

U.S. 420 CHINA <7

CHINA COMPELLING NEW STORE ECONOMICS

China Store Economics Tier 1 and 2 Cities Tiers 3-5 Cities

Year 1 average volume U.S.$ 0.7 million U.S.$ 0.6 million

Pre-tax cash return* 85% 87%

Source: Company data as at May 2018 for the 2017 class of stores. * ROI is calculated as total store level cash profit (pretax) over total investment in local currency.

STARBUCKS CHINA - MASSIVE GROWTH DRIVERNext decade

Source: Company data as at 31 December 2019, Magellan estimates. *Profit reflects operating profit

2019 2029

China - revenue

China Stores2019 4,300

2029 13,000

China contributes 40% of profit

growth*

STARBUCKS - DRIVERS OF SHAREHOLDER RETURNSNext decade

Source: Company data, Magellan estimates, priced as at 6 February 2020.

Net incomegrowth

Buybacks Dividend yield Totalshareholder

return

6% - 9% p.a

2% p.a

2% p.a 10% - 13% p.a

Don’t miss the next decade