Navigating the globe for investment opportunities – it is safe to get back into the water May 2012

1. Navigating the globe for investment opportunities – it is safe to get back into the water May 2012 Hamish Douglass Chief Executive Officer & Portfolio Manager, Magellan Global Fund

2. Agenda • European debt crisis • China: Hard of soft landing? • US Recovery • Stock insight: Lowe’s • Magellan Global Fund: key investment themes • Magellan Global Fund update

3. European debt crisis

4. Greece and Portugal • The Greek bailout packages and private sector write down of government debt, are fundamental steps in the right direction • Greece is insolvent • Portugal is likely to need more aid • Greece and Portugal 2 year funding requirement is around €130 billion • EU and IMF have adequate resources to fund Greece and Portugal

5. Italy and Spain • Italy and Spain total sovereign funding is estimated at €421 billion for 2012 and €345 billion for 2013 • Italy and Spain have funded around 41% of their 2012 requirement • ECB LTRO has reduced funding risk for banks, Italy and Spain. • Spain’s economic situation is deteriorating • ECB has additional policy flexibility to deal with funding stress in Spain & Italy

6. European funding stress

7. China: Hard or Soft Landing

8. Loan Growth in China Outstanding Loans (RMB Bil) Outstanding Loans in China YoY Growth (%) 60,000 35% 33% 30% 50,000 25% 22% 21% 40,000 20% 17% 16% 16% 30,000 20% 15% 13% 15% 12% 10% 20,000 10% 6% 10,000 5% 9,373 9,937 11,240 13,111 15,900 17,736 19,469 22,529 26,169 32,005 42,560 50,923 56,242 - 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q3 2011* * Q3 2011 YoY% growth represents loan growth between Q3 2010 and Q3 2011 [8] Source: Bloomberg & Magellan Asset Management

9. China – Urban Fixed asset investment [9] RMB, bn 1995 - 2005 CAGR = 17% pa 2005 – 2010F CAGR = 26.2% pa 28 24 20 16 12 8 4 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total urban FAI Source: CEIC, BoA Merrill Lynch and Magellan estimates

10. China – Fixed Asset Investment Facts Fixed asset investment - 25% pa growth over the past decade Absolute value has dramatically accelerated: Last 2 years FAI RMB 43 tn (USD 6.43 tn) Last 4 years FAI RMB 70 tn (USD 10.5 tn) Prior decade FAI RMB 43 tn (1997 – 2006) [10]

11. US Recovery

12. U.S. HousingAt 60+ year lows as a share of GDP Average: 4.7% Current: 2.3% Source: Calculated Risk Blog

13. US Population (m) 312.8 5yr CAGR of Population Growth 0.8% Annual Incremental Population (m) 2.54 Assumed Occupancy Rate for Incremental Property 2.10 Annual New Housing Unit Demand (m) 1.21 Assumed Demand from Net Replacement of Existing Units (Units x 0.25%, m) 0.33 Total Annual New Housing Demand (m) 1.54 U.S. HousingHousing demand Source: United States Census Bureau, United States Department of Commerce, Bloomberg, Magellan Estimate

14. U.S. HousingHousing supply Source: United States Department of Commerce

15. U.S. HousingExcess vacant units should be absorbed in ~3 yrs Source: Census Bureau, Commerce Department, Bloomberg, Magellan Estimates

17. Lowe’s • Lowes is the #2 home improvement retailer in North America • Home Depot and Lowes have 50% market share • 2011 revenue of $50b from its 1,745 stores • 98% of stores are located in the U.S. Source: Company filings

18. Investment Case 24% CAGR Source: Company filings, Magellan estimates

19. The Rise of the Eastern Consumer

20. South East Asia 2010 - 2030 2030 - 2050 China BRIC Total Emerging mkts Developed Nations 0 500 1000 1500 2000 2500 The Rise of the Eastern Consumer Long-term urbanisation… Urban Population Growth Forecasts (million) Source: United Nations, Population Division of the Department of Economic and Social Affairs

21. The Rise of the Eastern Consumer … and quality multinationals already embedded Source: Company data, Magellan Research * % of Operating profit

22. The Move to a Cashless Society

23. The move to a cashless society Percentage of transaction volumes conducted in cash still very high Source: McKinsey Global Payments Map, 2007

24. Convergence Technological developments drive the birth of an “electronic wallet”

25. [25] The move to a cashless society Non-cash penetration in personal consumption expenditure on goods and services 90 80% non-cash penetration 80 70 CAGR = 8.7% 60 50 Non-Cash Payments for Personal Consumption (US$b) 60% non-cash penetration CAGR = 7.2% 40 44% non-cash penetration 30 20 10 0 2030 2009 Source: Arthur D Little, Feb 2010

26. The Age of the Internet and the Rise of e-Commerce

27. [27] The size of the e-Commerce Opportunity Significant e-Commerce opportunities await Total Global Retail Sales $US 13.9 trillion “Addressable” Online Categories $US 6.5 trillion • Food and beverages • Electronics & Appliances • Health & Personal Care • Clothing • Sporting and hobby goods • Music • PLUS: • Services (travel, rent, utilities, insurance etc) Actual Global Online Sales $US 806 billion Source: Economist Intelligence Unit, US Census Bureau, comScore, MasterCard. US subdivisions have been applied to global sales to establish size of addressable online categories.

28. 9,000 8,000 7,000 6,000 5,000 Global Online Sales (US$b) 4,000 3,000 2,000 1,000 0 2009 2030 [28] The size of the e-Commerce Opportunity Growth as online penetrates retail sales 20% online penetration CAGR = 11.9% CAGR = 10.4% 15% online penetration 5.8% online penetration Source: Economics Intelligence Unit, Mastercard & comScore

29. Magellan Global Fund Update

30. [30] Portfolio strategy Always focus on quality and minimising the risk of permanent capital loss • Invest into extremely high quality “cash cows” with low risk exposure to consumer growth in the developing world • The age of the Internet and the rise of e-commerce • The move to a cashless society

31. Magellan Global Fund Top Ten Holdings as at 31 December 2011

32. [32] Magellan Global Fund Net Performance as at 31 March 2012 * Relative to MSCI World Index Net Total Return ($A). Performance calculated after fees. Fund inception 1 July 2007

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34. Thank you.