Introduction – Janine Starks

2. Introduction – Janine Starks • Order of events for today: • Who is Liontamer – our background • Beyond New Zealand – the UK picture • What is a structured product? • Nuts & Bolts – how a product gets built • What alters pricing? • A case study – accelerated growth vehicle • Who needs protection over the longterm? The evidence • Rethinking portfolio construction • What makes a good product? • Benefits for wholesale investors

3. About Liontamer • First specialist provider of capital protected investments in New Zealand • Issue retail products and also manufacture products for other providers or specialist investors • A talking point – why are we called ‘Liontamer’ • Set up as an Australian unit trust • Our New Zealand Management Team – brief backgrounds Laetitia Peterson Michael Lodge Neville Giles Janine Starks Managing Director, Head Investor Head of Investment Director of Distribution Relations Solutions

4. Our extended team • Supported by leading industry professionals: • Morgan Stanley– A+ rated Investment Bank who structure products and provide the underlying Equity Linked Notes • Morgan Stanley Capital International– calculate and own MSCI indices. Liontamer has a licensing agreement with MSCI • New Zealand Permanent Trustees– Statutory Supervisor who looks after the interests of unit-holders. They are very supportive of new innovative products • Bell Gully– NZ Legal & Tax Adviser • PricewaterhouseCoopers– NZ Auditor • BK Registries– NZ Registrar, based in Ashburton and a NZ success story • New Zealand Guardian Trust– custodian & JPMorgan – sub-custodian

5. Snapshot of the UK – annual sales (£) • Average growth +38% a • year since 1994 • Market has grown more • than 10 fold in a decade • Sales have doubled in • last 5 years • 306 products issued by • 68 providers in 2002 • Products sold throughout • bull and bear markets 6.2B 3.2B 0.7B Source: www.structuredretailproducts.com & Janine Starks

6. What’s a protected investment? • An investment where your capital is protected from falls in • the price of any asset – fully or partially • Generically called ‘structured products’ as they don’t have to offer any protection at all. • Alters the risk and return payoff of a traditional fund. Created using ‘derivatives markets’ e.g. Options • Scope in the wholesale or professional investor market • Lower or raise portfolio risk – predominantly lower • Achieve risk/return payoffs not possible with traditional funds • Used to gain exposure to assets not normally invested in as risk can be controlled

7. What do investors get? • A fixed formula of returns • Linked to a sharemarket index, individual stocks, commodities or bonds • You receive a fixed % of the growth in the index • e.g. 70%, 80%, 100% or 150%+ ‘participation rate’ • No dividends on growth • Can have income products, fixed income • Term – generally 3-10 years • A fixed formula of risks • Fully protected at maturity • Partially protected with ‘hard protection’ • Partially protected; ‘soft protection’ using ‘knock in options’ • No protection; lose 1:1 on the market • Geared downside risk; lose >1:1

8. The Nuts & Bolts $100 investment – how we create capital protection + growth $60 put in zero coupon bond for fixed term Interest accumulates back to $100 $40 buys an options contract on the index. ATM call option Provides capital protection at maturity Gives a % of sharemarket growth on our full $100 investment • ‘Options contract’ – the right to buy the index in 8 years time, but at • TODAY’S level. No obligation to buy. • Example: MSCI index trading at 922 today • 8 years - index trading at 700 = 25% loss. So we do nothing. • 2. 8 years - index trading at 1660 = 80% profit x participation rate x $100

9. What changes product pricing? It’s not wizardry! • 1. Interest rates rising and falling • Rising rates, less in zero, more money to buy options gives more participation • 2. Volatility • Like insurance e.g.25 yr old driving Ferrari or a 55 yr old in a Ford • Increased vol = more expensive options = less growth in index • Differential between NZD and USD interest rates • wider the better for hedging back into kiwi. Gives a pick up • Length of term – longer term more participation • Any averaging of index levels – gives higher participation • 6. Level of fees – should be no annual management fees • 7. Credit risk – products structured into an Equity Linked Note eg Morgan Stanley A+ (S&P)

10. MSCI XINHUA KOSPI COMMODITIES SECTORS BIO TECHS SINGLE STOCKS Product scope enormous • Return structures • Uncapped call: % participation in upside • Cliquets: +/- quarterly returns • Digital: fixed return based on asset not falling • Lock-ins: lock-in % of profits on the way up • Callable structures: close early • Geared call spread: accelerated upside with cap • Reverse convertible: fixed or variable income • Protection structures • Hard Protection • Soft protection – created using knock-in options • CPPI – Constant proportion portfolio protection, imitates options • No protection – e.g. recent product 132% Eurostoxx • Geared downside - increased risk, for increased returns GLOBAL TITANS TOPIX GOLD FTSE NASDAQ PROPERTY EUROSTOXX

11. Case study of an innovative product • SUPERgrow 150 • First accelerated growth structure in NZ • 150% x growth in MSCI Index • 100% growth cap (9% compound return) • 40% protection from market falls • 1% annual return each year • Fixed term of 8 years • Morgan Stanley equity-linked note Cap at double your money 1.5 x MSCI Protection from market falls up to 40% + +

12. Example : Index rises 69% Client gets geared growth above 8% +69% -20% • 61 x 1.5 = 92% • Plus 8% income • Total return = 92+8=100% How does geared growth work? +100% Maximum Gain +8% Minimum Return 0% Time Year 1 Year 8 Soft protection -40%

13. Why invest in accelerated growth vehicles? • Two main reasons: • Recovery – accelerated returns, speeds up the recovery of losses from the bear market • 2. A hedge against low to medium growth - a mediorce return will become a superior return • Type of institution / investor who invests: • One which doesn’t believe in a raging bull market • Or, does believe in the raging bull, but can’t afford to ignore the range of possible outcomes • Prudent to insulate portfolio with investments that: • Outperform when low or average levels of growth • Stay stable in adverse conditions

14. Who needs protection over the long-term? • UBS RESEARCH • Alexander Ineichen – ‘Fireflies before the storm’ • Report forsees a change in the industry from managing assets • to managing risk. Absolute return funds are the fireflies • Argument superiority of asymmetric returns over symmetric • Symmetric = long only tracking fund • Asymmetric = not available in ‘nature’, artifically managed to meet investors risk preferences. E.g. structured products or hedge funds • Investors are loss adverse: volatility on the downside is not the • same as volatility on the upside!

15. Who needs protection over the long-term? UBS RESEARCH Alexander Ineichen – ‘Fireflies before the storm’ Figures 1994 to June 2003 Quote: “It probably is pretty safe to assume that those private investors who have been in guaranteed structures during the bull as well as the bear market that followed, are likely to never do anything else again” FIREFLIES BEFORE THE STORM JUNE 2003

16. Who needs protection over the long-term? • Zve Bodie & Dwight Crane: Harvard Business School • Pension Savings • Employee starts saving at age 25, retiring at 65 • Benchmark investment is inflation adjusted US Treasuries • Approx 12% of wages invested each year • 6 investment alternatives looked at: • US Treasuries • S&P 500 index full investment • 60/40 equities / bonds • Age adjusted with equities declining nearer retirement • 1 year capital protected investment rolling over • 5 year capital protected investment rolling over • 100,000 scenarios of stock prices and inflation rates used to • study each strategy

17. Who needs protection over the long-term? SOURCE: BODIE/CRANE HAVARD BUSINESS SCHOOL WORKING PAPER #98-070

18. Re-thinking portfolio construction Quote “Although structured plans have been around for many years, in one form or another, they have only recently become recognised as a specific asset class in their own right”. Michael Aaron – Technical Director of a UK IFA Cash Low risk Capital secure structures Bonds Spectrum Structured investments Pooled equity fundsMedium risk Capital at risk structures International equities / hedge funds Direct shareholdings Alternative investments High risk

19. Research and product comparisons Tips – what to look for in growth products

20. Benefits for wholesale investors Slice and dice risk & return • Superior long-term risk adjusted returns • Ability to reduce risk or alter the risk/return equation • Ability to invest higher than prescribed %’s in equities • Ability to get exposure to assets or markets not normally selected, because the risks were too high • More flexibility with remaining investments. Core satellite approach • Diversification – hybrid, elements of shares and bonds • A passive investment – requires little monitoring • Low costs – no annual fees • No currency risk (if you choose)

21. Heading Goes Here Disclaimer: Liontamer Investment Management Pty Limited makes every effort to check the accuracy of information in this presentation. Opinions are reasonably held at the time of publication.  However, no responsibility can be taken for any error or omission at the time of publication or due to subsequent changes occurring.  This presentation is for information purposes only and is intended for professional advisers, not private investors. It is not intended for personal investment advice or a recommendation to invest.  Advisers and investors should read the Liontamer investment statement and/or prospectus carefully and satisfy themselves that investments referred to are appropriate for their circumstances and portfolio.  Past performance should not be used as a guide to future performance.  Information about taxation of Liontamer investments does not constitute taxation advice to individual investors and is indicative of the likely tax treatment only. Liontamer is not responsible for any changes in tax law or interpretation which might adversely affect the returns for investors.  Investors should consult their tax adviser on the tax implications of investing, with regards to their specific circumstances.  • Points go here • Points go here • Points go here • Points go here Thank you…