Glenview Capital Management, LLC

Report
Wow, That’s Cheap!
Gotta Stick to the Fundamentals
We Want (and He Needs) the Cup!
19th Annual Ira Sohn
Investment Conference
May 5, 2014
Slides available at
www.sohnconference.org
Larry Robbins, CEO 0
LEGAL DISCLAIMER
MAY 2014
THIS PRESENTATION DOES NOT CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION OF AN OFFER TO BUY ANY INTEREST IN ANY INVESTMENT FUND
MANAGED BY GLENVIEW CAPITAL MANAGEMENT, LLC (“GLENVIEW”). SUCH OFFER OR SOLICITATION MAY ONLY BE MADE BY DELIVERY OF THE APPLICABLE
FUND’S OFFERING DOCUMENTS, INCLUDING A PRIVATE PLACEMENT MEMORANDUM, APPLICABLE SUBSCRIPTION DOCUMENTS, APPLICABLE GOVERNING
DOCUMENTS AND GLENVIEW’S FORM ADV PART 2, ALL OF WHICH MUST BE READ IN THEIR ENTIRETY. EACH FUND’S OFFERING DOCUMENTS CONTAIN A
DESCRIPTION OF THE MATERIAL TERMS OF THE FUND, INCLUDING, WITHOUT LIMITATION, RISK FACTORS AND CONFLICTS OF INTERESTS RELATING TO THE
FUND AND GLENVIEW. AMONG OTHER THINGS, THE RISK FACTORS PROVIDE THAT: AN INVESTOR MAY LOSE ALL OR PART OF ITS INVESTMENT, PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, THE FUNDS MAY NOT ACHIEVE THEIR INVESTMENT OBJECTIVES, THE FUNDS MAY
UTILIZE LEVERAGE, AND THERE ARE RESTRICTIONS LIMITING AN INVESTOR’S ABILITY TO REDEEM OR TRANSFER ITS INVESTMENT IN THE FUNDS. ANY
OFFERING WILL BE MADE ON A PRIVATE PLACEMENT BASIS TO A LIMITED NUMBER OF ELIGIBLE INVESTORS WHO MEET THE SUITABILITY REQUIREMENTS
RELATING TO AN INVESTMENT IN THE APPLICABLE FUND AND WHO ARE WILLING AND ABLE TO CONDUCT AN INDEPENDENT INVESTIGATION OF THE RISKS
INVOLVED. THE INFORMATION CONTAINED HEREIN WILL BE SUPERSEDED IN ITS ENTIRETY BY THE APPLICABLE FUND’S OFFERING DOCUMENTS.
THE INVESTMENT FUNDS MANAGED BY GLENVIEW (EACH, A “FUND”, TOGETHER THE “FUNDS”) MAY HAVE POSITIONS IN THE SECURITIES OF COMPANIES
REFERENCED IN THIS PRESENTATION. THESE PORTFOLIOS ARE ACTIVELY MANAGED AND ANY SECURITIES DISCUSSED HEREIN MAY OR MAY NOT BE HELD IN
THE PORTFOLIOS AT ANY GIVEN TIME. THE SECURITIES DISCUSSED HEREIN DO NOT REPRESENT AN ENTIRE PORTFOLIO OF A FUND AND IN AGGREGATE MAY
ONLY REPRESENT A SMALL PERCENTAGE OF A FUND’S HOLDINGS. SPECIFIC SECURITIES HIGHLIGHTED HEREIN HAVE BEEN SELECTED TO ILLUSTRATE
GLENVIEW’S INVESTMENT APPROACH AND ARE NOT INTENDED TO REPRESENT THE FUND’S PERFORMANCE NOR HAVE THEY BEEN SELECTED ON THE BASIS
OF PERFORMANCE OR ANY PERFORMANCE-RELATED CRITERIA. NOTHING CONTAINED HEREIN SHALL CONSTITUTE AN ADVERTISEMENT, A SOLICITATION,
RECOMMENDATION OR ENDORSEMENT TO BUY OR SELL ANY SECURITY OR OTHER FINANCIAL INSTRUMENT REFERENCED IN THIS PRESENTATION.
ANY PROJECTIONS, TARGETS OR ESTIMATES IN THIS REPORT ARE FORWARD LOOKING STATEMENTS AND ARE BASED ON GLENVIEW’S RESEARCH, ANALYSIS,
OPINIONS AND ASSUMPTIONS MADE BY GLENVIEW. THERE CAN BE NO ASSURANCE THAT SUCH PROJECTIONS, TARGETS OR ESTIMATES WILL OCCUR AND
THE ACTUAL RESULTS MAY BE MATERIALLY DIFFERENT.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
THE FUNDS HAVE NOT BEEN APPROVED BY OR LICENSED OR REGISTERED WITH ANY LICENSING AUTHORITY OR GOVERNMENTAL AGENCY. THE
INFORMATION CONTAINED IN THIS PRESENTATION IS FOR DISCUSSION AND INFORMATIONAL PURPOSES ONLY AND IS BEING FURNISHED ON A
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OR DISTRIBUTED IN ANY WAY WITHOUT THE EXPRESS WRITTEN CONSENT OF GLENVIEW.
THIS PRESENTATION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TO BE RELIED UPON AS INVESTMENT, LEGAL, TAX OR FINANCIAL ADVICE. ANY
PROSPECTIVE INVESTOR MUST CONSULT WITH HIS OR HER INDEPENDENT PROFESSIONAL ADVISORS AS TO THE LEGAL, TAX, FINANCIAL OR OTHER MATTERS
RELEVANT TO THE SUITABILITY OF AN INVESTMENT IN ANY INTEREST IN ANY INVESTMENT FUND MANAGED BY GLENVIEW.
FOR IMPORTANT ADDITIONAL DISCLOSURES, PLEASE REFER TO PAGES 46-48 OF THIS PRESENTATION.
SO NICE WE’LL SAY IT TWICE
MAY 2014
“Plain English” Legal Disclaimer
IN ORDER TO ENHANCE CURRENT AND PROSPECTIVE INVESTOR UNDERSTANDING OF OUR PROCESS, APPROACH AND VIEWS, THIS
PRESENTATION INCLUDES DETAILED DISCUSSIONS REGARDING SELECTED POSITIONS IN OUR FUNDS’ PORTFOLIOS. IN DOING SO,
WE HOPE THIS TRANSPARENCY ENHANCES YOUR UNDERSTANDING OF OUR VIEWS ON THE INVESTMENT OPPORTUNITIES WE SEE
IN THE MARKETPLACE AND WHY WE HAVE POSITIONED THE FUNDS’ PORTFOLIOS THE WAY WE HAVE. WITH SUCH INFORMATION
AVAILABLE TO YOU, WE BELIEVE CURRENT AND PROSPECTIVE INVESTORS ARE BETTER INFORMED AND EQUIPPED TO CHALLENGE
OR DILIGENCE OUR VIEWS AND APPROACH TO DETERMINE WHETHER AN INVESTMENT IN A FUND IS CONSISTENT WITH THE
MANDATE OF EACH INDIVIDUAL INVESTOR. AS OUR FOCUS IS ON CURRENT POSITIONS, WE NATURALLY HAVE A CONSTRUCTIVE
BIAS TO THESE COMPANIES, WHICH INVESTORS SHOULD WEIGH IN DETERMINING THEIR OWN VIEWS ON OUR APPROACH AND
THE FORWARD RETURN OPPORTUNITIES OF THE FUNDS.
AS THE LEGAL DISCLAIMERS MAKE CLEAR, WE ARE NOT DISCUSSING POSITIONS TO HIGHLIGHT THOSE THAT HAVE PERFORMED
WELL FOR US. BY AND LARGE THE HIGHLIGHTED POSITIONS ARE CURRENT PORTFOLIO POSITIONS AND THEIR PERFORMANCE
REMAINS TO BE SEEN. WE HAVE ALWAYS HAD A MIX OF WINNERS AND LOSERS AND EXACTLY HOW THESE POSITIONS PERFORM
OVER TIME WILL BE JUDGED WITH TIME. TO UNDERSTAND THE PAST PERFORMANCE OF OUR FUNDS, YOU SHOULD REFER TO THE
TABLES IN THE APPENDIX WHERE WE LAY OUT THE MONTHLY PERFORMANCE OF OUR FUNDS SINCE INCEPTION. WE HAVE ALSO
INCLUDED A SECTION THAT SHOWS OUR TOP 5 WINNERS AND BOTTOM 5 LOSERS DURING THE LAST FULL CALENDAR YEAR TO
PROVIDE YOU WITH ENHANCED TRANSPARENCY. OF COURSE, THIS WOULDN’T BE A DISCLAIMER, IF WE DIDN’T REMIND YOU
THAT OUR PAST PERFORMANCE IS NOT AN INDICATOR OF HOW WE WILL DO IN THE FUTURE. NONETHELESS, OUR ACTUAL
PERFORMANCE SHOULD BE YOUR GUIDE FOR HOW WE’VE DONE IN THE PAST, NOT THE PERFORMANCE OF INDIVIDUAL
SECURITIES.
WE RECOGNIZE THAT THESE MATERIALS ARE DETAILED AND SOMEWHAT “OPINIONATED”. WE HAVE DESIGNED THEM THAT WAY
SO YOU CAN UNDERSTAND WHY WE ARE ENTHUSIASTIC ABOUT CERTAIN OPPORTUNITIES AND WHAT INFORMS OUR MARKET
OUTLOOK. IN OUR VIEW, TRANSPARENCY IS PARAMOUNT AND WE HOPE THAT THESE MATERIALS SERVE AS A USEFUL GUIDE AS
YOU EVALUATE WHETHER AN INVESTMENT IN OUR FUNDS IS APPROPRIATE FOR YOU.
TIME OUT: WHAT’S THE PLAY?
The Best Things About May:
1.March and April are over
2.Stanley Cup Playoffs
3.The Sohn Investment Conference
The Winning Playbook
1
Perceived Bad Guys May
Be Great Teammates
HMOs, GMOs, and Hedge
Fund CEOs
2
Make the Easy Play
Secular Growth in Healthcare
and Agriculture
3
Ignore the Crowd Noise
and Focus
Watch Fundamentals Closely
4
Give Yourself Multiple
Chances to Win
“Convertible Equities”
5
110% Effort
Respectful Shareholder
Engagement
Long Investment Ideas
 Humana
(HUM: $109)
 WellPoint
(WLP: $101)
 Monsanto (MON: $112)
THE BIG PICTURE
1. While there’s risk in the world, we aren’t in systemic crisis
2. More times than not, the environment stays the same one year to the next
3. Conditions are favorable for fundamental long investing over the medium term
Year
1994
Stage
FED
Tightening
Market
Multiple1
S&P 500
Performance2
15x
1995
1996
1997
1998
1999
Goldilocks
13x
13x
(2%)
26x
26.2% per annum
2000
2001
2002
Tech Wreck
26x
15x
(40%)
2003
2004
2005
2006
2007
2008
Credit-fueled
Expansion
15x
2009
2010
2011
2012
2013
System Failure
17x
17x
10.8% per annum
12x
(7%)
2014
2015
2016
Convergence
12x
16x and counting
22.5% per annum and
counting
Conditions
 7 Fed
hikes in
one year




4% GDP growth
1% inflation
Internet growth
Compressed multiples
moved to irrational
exuberance
 Tech bubble
burst
 Y2K unwind
 9/11
 Enron/
WorldCom
frauds
 Credit crunch
 Commercial credit repair
 Consumer credit
indulgence
 Global growth
 China/Dubai
 LBO craze
 Activism







Mortgage crisis
“Too big to fail” repealed
Credit Freeze
Eurozone periphery crisis
Mortgage fraud
US AAA downgrade
Risk Averse/Capital
Hoarding
 Recoupling of financial
assets to their intrinsic
value
 Large scale M&A
 Capital deployment
 Activism
 Capital deployment
drives EPS growth
1 Market
multiples sourced from Baseline. ² S&P 500 Performance reflects (i) total price return for periods of negative performance and (ii) annualized price return for periods of positive performance. Please
refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are based on
Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 4
PREVIOUSLY, ON THE LAST 104 WEEKS’ EPISODES….
Systemic Risk
May 2012
May 2014
Comments
High
European Uncertainty
Low
OMT, Germany stepped up3
S&P 500 Rolling 250-Day Correlation
0.80
Stock Correlations
0.75
all risk on/off
0.55
stock pickers market
0.70
0.60
0.50
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
S&P 500
1325 (12.7x)
1884 (16.1x)
+45%
10-Year Treasuries
1.76%
2.58%
Tapering now ½ done
High Yield Bonds
7.9%
5.6%
Debt cheap and available
Corporate Boards
Hoarding cash
Deploying cash
Success with Buybacks/M&A
M&A LTM1
$463B
$798B
Acquirers being rewarded
Annual Share Repurchase2
$366B
$518B
+41%
Engagement
Little / None
Strong across
all market caps
Unprecedented Wave
Mats Zuccarello &
Carl Hagelin
AHL/NHL
1
Round 2 Playoffs,
9th leading scorers
1st /
Lockout / Workout / Worked Out!
Source: Strategas Group. 2 Represents Q4 2011 and Q4 2013 annualized. 3 250-day correlation amongst S&P 500 stocks (each stock in index correlated to one another) is sourced from Strategas
PAGE 5
DRIVERS OF CONVERGENCE
We believe the fundamental backdrop for equity based investing strategies is constructive based upon the
following factors:
Leg 1: Cheap Valuations
Leg 2: Excess Cash
2014 P/E
2015 P/E
10 Yr Range
Glenview
14.7
11.8
8-19x
S&P 500
16.1
14.4
10-17x
S&P 500
Internet Retail
48.6
34.2
20-106x
US Non-Financial Corps. Cash % Total Assets
(4Q13 is most recent data)
6%
4.8%
% Total
4%
Assets
2%
'60
Leg 3: Exceedingly Low Borrowing Costs
1
'70
'80
'90
'00
'10
Leg 4: Shareholder Engagement1
Examples of Shareholders Engagements. Data sourced from Strategas and Glenview figures. Please refer to pages 46-48 for important disclosure on highlighted securities, benchmark comparisons,
performance data and forward looking statements, opinions and projections.
FROM DRIFT UP TO LIFT UP
Hard Work and Good Decisions Will Differentiate
Drivers
2H 2012 &
all of 2013
Lower Systemic Risk
2014 &
beyond
Capital Deployment
Results
Stocks “drifted up”
 Valuation rebounded from lows
 Modest 6% earnings growth




Corporate actions / M&A
Accelerated earnings
Strengthening economy
Potential for continued P/E restoration
 2/3 of index return from multiple
enhancement
Board, Management and Owners
must “lift up”
 Excess returns achievable but work
needed
 Increased focus on contrarian ideas
Opportunity Set - “Convertible Equities”
A fictional concept that describes a low risk “base business” with one or more call options on value accelerants
to lift up an ordinary investment return to an extraordinary return
Convertible Equity
Company Sale
Share Repurchase
=
Cheap, Defensive Secular Growth
Accretive M&A
Portfolio Restructuring
+
Call Options on:
Management Change
Activist Engagement
Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are
based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 7
EVERYMAN’S TRASH IS GLENVIEW’S TREASURE
Past and Present Sohn Conference Contrarian Longs
2002
2005
2012
2014
2014
“What was said” vs. “Glenview’s view”
Results
Returns
PBMs are fraudulent middlemen
vs.
PBMs reduce pharma costs
Pharma Inflation:
7.5x
Long Express Scripts (ESRX)
Long McKesson (MCK)
Long Hospitals – Tenet
Healthcare (THC)
Long Managed Care Companies –
Humana (HUM), WellPoint (WLP)
12%  2%
over 10 years
Distributors can’t survive
business model changes
vs.
“Pills in ‘06”
in 10 years
Obamacare will damage Hospitals
vs.
More coverage = more revenues,
shareholders will be rewarded
Consolidation
Repurchase
Reform Uplift
and climbing
HMOs are the problem
with healthcare
vs.
HMOs reduce costs,
shareholders will be rewarded
Strong basis
for optimism
We see
excess returns
GMOs will fall out of favor
vs.
GMOs are the only answer
to growing food yields
Strong basis
for optimism
We see
excess returns
EPS up
5x
Outperformed SPX by
293%
2x
(we own more than these two)
Long Monsanto (MON)
Securities highlighted in this slide have been selected to illustrate Glenview’s investment approach and/or market outlook and are not intended to represent the Funds’ performance or be an indicator for
how the Funds have performed or may perform in the future. These examples have been selected solely for this purpose and have not been selected on the basis of performance or any performance‐related
criteria. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct. Please
refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
HMOS: DON’T LET THE FACTS GET IN THE WAY OF A GOOD ARGUMENT
HMOs Profits are the reason
healthcare costs are too high
Myth 1:
“We right now give $15 billion every year as subsidies to private
insurers under the Medicare system. It doesn’t work any better
through these private insurers; they just skim off $15 billion. That
was a giveaway.”
Myth 2:
A Single-Payor System would be more
efficient than the Big Bad Private HMOs
“What’s hard is what millions of families and small businesses are
going through because we allow the insurance industry to run wild
in this country.”
- President Obama, Mar 2010
- President Obama, Sep 2008
Actions speak louder than words
Entire Net Income of Public
For-Profit HMO Industry
Mythbuster:
HMO Profits
US Healthcare Spending
2008
2014E
2000
2010
2020E
$10B
$14B
$1,377B
$2,600B
$4,416B
Mythbuster: Through consumer choice and policy decisions,
government has increasingly transferred more
business to the private sector:
National Medicare Advantage Penetration:
2010: 24%  2014: 30%
Medicaid Managed Care
Management of Dual Eligibles
Expansion or adoption
since 2011
States pursuing Duals demos
2014E HMO Profits as a % of Healthcare Spending
US Healthcare
Spending
HMO Profits
~0.4%
Plus – ACA Medicaid Expansion
Source: CMS, Kaiser Family Foundation, Credit Suisse. Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In
addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
HOW DO WE KNOW HMOS ARE HATED? MULTIPLE WAYS!
HMOs only group yet to recover
S&P 500
Healthcare Index
Managed Care1
Pharma
Biotech
Med Tech
HC Services
HCIT
(4%)
30x
NTM
20x
P/E
Multiples
(2%)
(3%)
(6%)
(6%)
(18%)
10x
0x
8%
12%
11.7X
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
Jun Oct Today
2007 2008
HMOs are ABSOLUTELY Cheap
20x
15x
2015
Multiples2
14.4x
15.3x
10.6x
12.3x
9.9x
10x
9.7x
11.5x
10.5x
8.4x
7.5x
5x
0x
S&P 500
1
Healthcare Managed
Index Care Average1
UNH
CI
AET
WLP
WLP
Bull Case
HUM
HUM
Bull Case
Large cap managed care firms (UNH, CI, AET, WLP) excluding HUM. 2 Multiples based on consensus and GCM 2015 EPS estimates. Please refer to pages 46-48 for important disclosures regarding the use of
forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by
Glenview, which may not prove to be accurate or correct.
DIDN’T THE AFFORDABLE CARE ACT HURT HMOS? YES, BUT THEY ARE HEALING WELL…
Sources of Pain: 2007-2013
Let the Healing Begin: 2014-2019
Profit Caps
Federal MLR Requirements
Profit Caps 2
Federal and State Rate Review
Added Costs
Industry Taxes and Fees
Medicare Advantage
reimbursement cuts to FFS
Medicare Parity
Reduced
Reimbursement
High Unemployment
Falling Interest Rates
5% decline in commercial
enrollments, 10% at trough
1-2% EPS headwind annually
from lower investment income
Unemployment1
95%
93%
Employment
Rate
(%)
91%
89%
Jan-08
8%
Jan-12
MA Volume AND
Price Growth
3% population, 3-5% penetration
and 1-2% pricing growth in 2016
and beyond, plus share gains
Increased Medicaid
Penetration
Medicaid Expansion and
Outsourced Medicaid will nearly
double market size in 3 years
Rising Employment
Estimated to add 2% per year to
commercial enrollments
Rising Interest Rates
1-2% EPS tailwind annually from
higher investment income
Growth in Private
Exchanges
Moving from ASO to Risk increases
profit per member 4x-5x
projected
Jan-14
Jan-16
Jan-18
Private
Exchanges3
– Projected Adoption –
4%
30
Members
(M)
19
20
9
2%
0%
Apr-07
40
40
1-2%/year
EPS headwind
6%
2013-18 Commercial
Enrollments
+9%
~2% per year
Jan-10
Greater exposure to faster-growing
Medicare & Medicaid: 9% in 2007,
22% today
Interest Rates2
– Historical & Projected AA Corporate Yields –
projected
2008-13 Commercial
Enrollments
(5%)
Better Business Mix
and Better Business
1-2%/year
EPS tailwind
Apr-09
Apr-11
Apr-13
Apr-15
Apr-17
1
0
2014 2015 2016 2017 2018
1
Bureau of Labor Statistics, WLP estimates. 2 Historical data based on the JPM AA-rated JULI index. Projected AA yields are based on the current JPM AA-rated JULI index spread + the 7-year US Treasury
forward curve. 3 Accenture 2013 report on Private Exchanges. Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this
presentation. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 11
HMOS – FROM INVESTOR HELL TO DOING WELL
The negatives were absorbed or never happened…
Single Payor couldn’t get traction in 2009 with the Democratic sweep
 Early read of ACA population is “acceptable” within risk corridors
 MLR Floors, MA cuts absorbed in 2011
 Managed Care Tax, “Dumping” absorbed in 2014
Leaving a clear road ahead…
Strong Secular Growth
Enrollment +3% driven by population, employment, newly insured
Medium Term Tailwinds
Interest rates, employment, free cash flow deployment
Room for Multiple Restoration
Group 10.6x EPS = return to over 14x over 3 years adds +10% above earnings growth
Fresh & Engaged Management
Most management teams have new CEO/CFO in last 3 years
Levers to Drive Value
Balance sheet optimization
 Commercial pricing stable with cost trend, Medicare headwinds abating
 M-HSD% premium growth leading to 13-15% EPS growth before extraordinary returns
 Accelerating demographics in MA




Repurchase
M&A
Asset reshuffling
Monetizing “hidden assets”
Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are
based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 12
SINCE THE ACA, A TALENTED AND FOCUSED WAVE OF NEW LEADERS
Title
Name
Duration (yrs)
Prior Experience
CEO
Bruce Broussard
1
US Oncology/Harbor Dental
CFO
Brian Kane
Starts June 1
Goldman Sachs
CEO
Joe Swedish
1
Trinity Health/ Catholic Health
Association/ HCA
CFO
Wayne DeVeydt
7
PricewaterhouseCoopers
CEO
Mark Bertolini
3
Cigna
CFO
Shawn Guertin
1
Coventry Health Care
CEO
David Cordani
4
Coopers & Lybrand
CFO
Tom McCarthy
1
Kemper Insurance
Corporate Actions
 Hired 3rd party advisor to investigate
opportunities for their PBM
 Divested 1-800 CONTACTS division
 Repurchased >50% of shares outstanding
during his tenure
 Acquired AGP for $4.6B
 Acquired Coventry for $7.3B
 Repurchased ~9% of shares outstanding
 Acquired HealthSpring for $3.8B
 PBM outsourcing deal
 VADB carve-out
Securities highlighted in this slide have been selected to illustrate Glenview’s investment approach and/or market outlook and are not intended to represent the Funds’ performance or be an indicator for
how the Funds have performed or may perform in the future. The securities discussed herein do not represent an entire portfolio and in the aggregate may only represent a small percentage of a Fund’s
holdings. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 13
CASE STUDY
HUMANA: HEALTHY INVESTMENT OUTLOOK
Health Insurance Provider
1.


2.


Government pays private companies to manage Medicare
coverage & develop their own plan designs, which results
in richer benefit designs including vision, hearing, & dental
care
75% MA / 25% Other Managed Care
Revenues 9%
EBIT 13%
EPS 17%
Numerous Areas of Upside Optionality




HUM
Share Price
$108.89
Shares Out
156 M
Market Cap
$17.0 B
Parent Cash
$0.5 B
Debt
$2.6 B
EV
$19.1 B
Overcapitalized
5.
Cheap and Getting Cheaper

Debt/Cap
PBM Outsourcing
Adding leverage for accretive M&A / repurchase
Expanding membership from retiree private exchanges,
public exchanges, and state-based “Duals” contracts
Long term: Potential acquisition target
4.
22%
“Dry Powder”
% of Market Cap
23 - 26%
23% to 26% dry powder as % of market cap
P/E
2015E
2016E
11.5x
9.9x
+ PBM Outsource
10.1x
8.9x
+ Debt / Cap 35%
9.6x
8.2x
+ PBM Outsource & Debt/Cap 35%
8.4x
7.3x
Base Estimates
6.
Symbol
Attractive Core Waterfall 2015 and Beyond

3.
Financials
MA Description
2014E
2015E
EPS
~$8
>$9
P/E
~14x
<12x
Enhanced Focus on Shareholder Value

New CEO and CFO focused on driving core value and
addressing upside levers
Data sourced from company materials and Glenview’s projections, which may not prove to be accurate or correct. This example has been selected to illustrate Glenview’s investment approach and/or market outlook and is not intended
to represent the Funds’ performance or be an indicator for how the Funds have performed or may perform in the future. This example has been selected solely for this purpose and has not been selected on the basis of performance or
any performance-related criteria. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct. Please refer to
pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
THERE’S AN ALARMING OUTBREAK OF OLD PEOPLE
As Baby Boomers turn 65, population growth of 65 and over is 3% vs 0.70% national average…
And they prefer Medicare Advantage over Straight Fee For Service Medicare…
+5%
40%
growth/yr
Medicare
Advantage
Penetration of
>65 Population
(%)
35%
+3%
30%
growth/yr
MA penetration has grown steadily1
25%
20%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Year
And they prefer Humana over other MA providers…
50%
Other
40%
Medicare
Advantage
Market Share
(%)
HUM share has grown steadily1
30%
UHC
20%
HUM
10%
AET KFHP
CIG WLP
0%
2009
2010
2011
Year
2012
2013
UHC
CIG
WLP
AET
KFHP
HUM
Other
(<100K)
Consolidation of plans with
<100K members could add 35% growth as smaller rivals
exit over next 5-10 years
Other
(>100K)
2013 Market Share1
1
Based on CMS data. Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements
contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 16
SENIORS VOTE FOR MA – EVEN THE CBO GETS IT
Share of Medicare Beneficiaries Enrolled in MA1
MA Plans are high-quality &
Seniors are very satisfied
30%+

20-29%

10-19%
MA outperformed fee-for-service on
10 of 12 quality measures2
~9 out of 10 enrollees are satisfied
with every aspect of their MA plan3
0-10%
Despite ACA cuts, seniors stay
in MA & CBO has increased its
MA enrollment estimates
States
50
25
2007
8
5
2014
18
24
18
14
Senate Leadership State with 20%+ MA
12
20
Swing State with 20%+ MA
6
0
18
High % MA States are Swing States & Populous
States
1
Senators
House Members
D
R
D
R
% US
Electoral
College
Weighted
Average
MA %
30%+ States
(18)
23
14
107
112
47%
37.1%
20%+ States
(32)
32
32
162
188
78%
32.9%
CBO
2014
Projected
MA Enrollees
(M)
CBO
2012
12
CBO
2010
6
2009 2011 2013 2015 2017 2019
Kaiser Family Foundation, 2014. 2 Am J Manag Care 16(11): 841-848, 2010 and 18(2): 96-104, 2012. 3 National Survey of Seniors Regarding Medicare Advantage Plans, North Star Opinion Research, Feb. 2013.
Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are
based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
WHICH ALL ADDS UP TO 10-15% ORGANIC REVENUE GROWTH
Humana MA Revenue Growth 2015 & Beyond
15%
3-5%
10%
5%
10-15%
1-2%
9-13%
Share
Gains
3-5%
=
3%
Penetration
+
=
Population
Growth
0%
Population
Growth
Penetration
Market Share
Gains
Total Member
Growth
9-13% MA growth is inline with recent organic growth…
…and accelerates the earnings waterfall over time
15%
2009-13
12.7% CAGR
2,500
2015+ Organic
Growth
Opportunity
Pricing Growth
15%
15%
15%
15%
12.4%
12.7%
12.5%
12.9%
Medicare
Advantage
Consolidated
2,000
HUM Medicare
Advantage
Members
(‘000)
10%
1,500
HUM EBIT
Growth (%)
1,000
5%
5%
5%
5%
5%
Other
500
0%
0
2009
2010
2011
Year
2012
2013
2015
2016
2017
2018
Year
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
PAGE 18
RELIEVING ELBOW PAIN
After 5 years of absorbing rate cuts resulting in no earnings growth, the pig is finally
through the python, leading to sustained, defensive growth + convertible options
Options:
120%
Phase-In of
Medicare
Advantage
ACA Cuts1
110%
12%
100%
10%
7%
4%
2%
Option 1
1%
PBM
90%
+
80%
2011
2012
2013
FFS Parity
2014
2015
2016
Remaining ACA Cuts
2017 and
beyond
1-2%
2%
Annual Rate
Increase/Decrease2
Option 2
Cash Use /
Returns on Cash
+
0%
-2%
Convertible
(~2%)
(~2%)
About flat
(~1%)
-4%
Option 3
(~3%)
-6%
(~5%)
2011
2012
2013
2014
2015
2016
2017 and
beyond
Retiree Private
Exchanges
+
Option 4
$12
15-20%
EPS Growth
New Markets
+
$10
Humana EPS
Option 5
Long Term
Consolidation
$8
$6
2011
2012
2013
2014
2015
2016
2017 and beyond
1
Based on JP Morgan estimates. 2 2011-15 estimated based on Humana’s disclosures. Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages
46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 19
OPTION 1: PBM – TIME TO STEP ON THE SCALE
We believe that HUM could outsource parts of its PBM operations to another scale provider to reduce costs &
enhance earnings from its PBM operations
“We’ve Seen This Movie Before”
Scale Matters – Significant Saving
Opportunity to Humana
AET
Integrated medical / Pharmacy Management
Adjusted Rx Volume (Millions)1
2,000
1,709
1,500
CI
Formulary Design
1,478
Clinical program development
Sales & marketing
1,000
572
500
444
275
200
170
136
CI
AET
CVS
ESRX UNH CTRX HUM WLP
Customer facing functions
Direct engagement with physicians
Management of mail order facilities
X
Ownership of specialty pharmacies
TBD
PBM Optionality
PBM
Rx Volume
(MM)
Buyer /
Partner
Year
Structure
Impact
WLP
~200
ESRX
2009
10-yr asset purchase
$4.7 B Cash
AET
~136
CVS
2010
Outsourcing Agreement
10% Accretive to EPS
CI
~170
CTRX
2013
Outsourcing Agreement
7% Accretive to EPS
HUM
~275
??
??
Likely Outsourcing
Could be 10-15% Accretive
“…We continuously – in fact we're in the process right now of evaluating our cost structure both from a fulfillment point of
view and from a purchasing point of view to ensure that we are competitive. We've hired a third-party to do that evaluation
and nothing to-date has given us an indication that we need to change that perspective.” - CEO Bruce Broussard (March 11, 2014)
1
CVS includes 890 M prescriptions filled at the pharmacy & 819 M through the PBM. CTRX totals are pro-forma and include CI scripts. Calculations are based on Glenview’s projections, which may not prove
to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this
presentation.
PAGE 20
OPTION 2: DRY POWDER – THE GENERAL CAN FIRE BACK
2015 Debt / Cap
Dry Powder
13%
HUM Valuation
22%
Dry
Powder
16-19%
Dry Powder
23-26%
25%
Old “Target” of
outgoing CFO
40%
30%
35%
Peers
CI
33%
UNH
34%
AET
36%
WLP
37%
Max leverage to
maintain investment
grade as per rating
agencies
2015
2016
Current leverage
11.5x
9.9x
30% Debt / Cap
9.9x
8.4x
35% Debt / Cap
9.6x
8.2x
40% Debt / Cap
9.3x
7.9x
While investors continue to value Humana using a rear view mirror,
management should aggressively repurchase shares
Data sourced from company materials and Bloomberg. Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures
regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are based on Glenview’s
research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 21
OPTION 3: RETIREE PRIVATE EXCHANGES – MORE THAN HOT AIR
Private Exchange: A marketplace of health insurance & related products open to employees/retirees of a given employer sponsor
10-12M retirees
have employersponsored
health coverage
1.5-4.5M
could move to
Private Exchanges
in the next 5 years
400k-1.5M of those will
likely adopt MA plans:
A membership tailwind
for MA of up to 9%
Large Employers
across 8 surveys1
Retirees on Private
Exchanges of AON &
Extend Health, two
leading managers
Actively
pursuing
Near-term
adoption
8-10%
On MA plans
22-28%
25%
Based on current
market share,
50k-225k new MA
lives for Humana
0.5-2% Revenue
Growth per year,
10-40c EPS Growth
1
Source: Aon 2013 Corporate Exchange Survey, Benfield 2013 Employer Healthcare Reform & Private Exchanges Survey, PwC 2013 Focusing on the Future of Healthcare Benefits Survey, TW 2013 Health Care Changes Ahead Survey, KFF
2013 Employer Health Benefits Survey, Alegeus 2013 Defined Contribution & Private Exchange Survey, Willis 2012-13 Healthcare Reform Survey, PwC 2012 Health & Well-Being Touchstone Survey, International Foundation of Employee
Benefit Plans 2013 Employer-Sponsored Health Care Survey, Aon 2012 Retiree Health Care Survey, Aon 2013 Retiree Healthcare Survey. Calculations are based on Glenview’s projections, which may not prove to be accurate or correct.
Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 22
OPTION 4: NEW MARKETS
Public Exchanges
Medicare/Medicaid “Duals”
Humana Public Exchange Lives (M)

1.2
1.00
Lives
(M)
1.04

There are ~9M dual-eligible enrollees, accounting
for $250B+ in annual healthcare spending
17 states are running or plan to run demonstration
projects to coordinate care for these “Duals”
0.8
0.54
0.4
0.25
Project cleared by CMS
Proposal pending
Considered
0.0
2014 Guidance 2015E
2016E
2017E
Total (CBO)
6M
13M
24M
25M
HUM Share
4%
4%
4%
4%


1M public exchange lives
would add ~40-80c to EPS
HUM recently won Duals contracts worth $5-7B
HUM’s long-term target margin for state-based
contracts is 3%
Already-won contracts
add ~40-60c to EPS
Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are
based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 23
VALUATION
Consistent with the framework of a “Convertible Equity” we see healthy
gains ahead for Humana, with the opportunity for extraordinary returns
driven by PBM outsourcing and sound capital deployment.
2015E
Multiple
Target Price % Upside
Base Case
~$10
15-16x
$143-152
31-40%
+ PBM Outsource
~$11
15-16x
$162-172
48-58%
+ PBM Outsource & Debt/Cap of 35%
~$13
15-16x
$194-207
78-90%
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
PAGE 24
CASE STUDY
WELLPOINT: HEALTHY INVESTMENT OUTLOOK
1.
Health Insurance Provider
WLP Description


2.
Diversified health benefits company providing health, drug,
dental, vision benefits including Blue Cross & Blue Shield plans
The Blue network as 3x the market share of its next closest rival
in the commercial health insurance market, and WLP has
dominant 28% share in its markets


Revenue 6%
EBIT 9%
EPS 14%
Numerous Areas of Upside Optionality




PBM asset value
Cash EPS
Excess subsidiary revenues
Adding leverage for accretive M&A/repurchase
4.
Overcapitalized
5.
Cheap and Getting Cheaper

6.
WLP
Share Price
$100.87
Shares Out
293 M
Market Cap
$29.5 B
Parent Cash
$2.0 B
Debt
$14.5 B
EV
$41.9 B
Attractive Core Waterfall 2015 and Beyond

3.
Financials
Symbol
Debt/Cap
37%
“Dry Powder”
% of Market Cap
24 - 27%
~24-27% dry powder as % of market cap
P/E
2015E
2016E
Base Estimates
10.5x
9.3x
+ “Cash EPS”
10.0x
8.9x
+ New PBM Deal
9.4x
8.4x
+ Debt/Cap 45%
8.6x
7.8x
+ All 3 of the Above
7.3x
6.7x
2014E
2015E
EPS
~$9
~$10
P/E
~11x
~10x
Enhanced Focus on Shareholder Value


New CEO (March 2013), new Head of Government Division,
new Chief Strategy Officer, new CIO
New Chairman of the Board and 4 new Directors
Data sourced from company materials and Glenview’s projections, which may not prove to be accurate or correct. This example has been selected to illustrate Glenview’s investment approach and/or market outlook and is not intended
to represent the Funds’ performance or be an indicator for how the Funds have performed or may perform in the future. This example has been selected solely for this purpose and has not been selected on the basis of performance or
any performance-related criteria. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct. Please refer to
pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
WHO DOESN’T LOVE OPTIONS?
WellPoint = All the benefits of the base case for HMOs, trading at 10x 2015 earnings
+
Option 1
PBM Options in 2017-2019
+
Option 2
Move to “Cash Earnings” to conform to “Buffett Math”
+
Option 3
Excess Capital Deployment
+
Option 4
Rising Interest Rates
+
Option 5
Duals Opportunity
+
Option 6
Medicaid Expansion
Please refer to pages 46-48 for important disclosures regarding the use of forward-looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are
based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
SO NICE, LET’S SELL IT TWICE
In 2009, WLP announced the sale of their PBM assets and operations
for the next 10 years to Express Scripts for $4.7B


Thus, in Dec. 2019 they reclaim their PBM
Investors value WLP PBM at zero. In 2019, we believe it’s worth $25-30 per share or $15
in present value today.
Options to Unlock PBM Value which could happen as early as 2017:
I. Improved Terms
Improve terms of the current outsourcing arrangement with incumbent (ESRX) or another PBM,
closer to comparable recent transactions


Achieving terms similar to AET/CVS (2010) or CI/CTRX (2013) would add ~$750M to WLP EBIT (+19%)
On reduced share count in 2019, this will add approximately $2 in EPS or $26-28 in future value
II. Up-Front Payment
Receive another up-front payment to renew the “long-term lease” on the outsourced PBM from the
incumbent or another PBM


ESRX paid $4.7B for the contract in Dec 2009
A new deal could be worth >$5B in 2017 (+16% of WLP market cap after taxes)
III. In-Source
Bring the PBM in-house (like UNH)

We believe this option is least likely
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
BUFFETT’S RIGHT—GOODWILL DOESN’T AMORTIZE
Companies should be valued based on “Cash EPS” (excl. acquisition amortization)
when this metric is a more accurate reflection of FCF/share than GAAP EPS
Several Healthcare companies have switched
to Cash EPS in recent years, including…
…and we think it is the right metric for WLP too
Last Five Years
Subsidiary Dividends
Cash Net Income
=
>120%
Switching to Cash EPS would add
~$0.50 (+6%) to WLP EPS
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
DRY POWDER – THE PENDULUM HAS MORE ROOM TO SWING
2015 Debt / Cap
WLP Valuation
Dry
Powder
27%
Dry
Powder
19%
Dry
Powder
24%
37%
45%
43%
Peers
HUM
22%
CI
33%
UNH
34%
AET
36%
2015E
2016E
Current leverage
10.5x
9.3x
+ 43% Debt / Cap
8.8x
8.0x
+ 45% Debt / Cap
8.6x
7.8x
Max leverage to
maintain investment
grade as per rating
agencies
Excess reserves at subsidiaries = 6% of market cap
Data sourced from company materials and Bloomberg. Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures
regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation. In addition, certain statements contained herein are based on Glenview’s
research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
PAGE 30
OTHER OPTIONS & TARGET PRICE
Interest Rates
Duals
Medicaid Expansion
Interest rate increase of 280 bps based on the forward
curve would worth $0.70 (+8%) to earnings power by 2018
CBO’s current schedule for Duals would be worth ~$0.60
(+7%) to earnings power by 2018
If all of WLP’s states were to expand Medicaid today, it
would be worth up to $0.30 (+4%) to earnings power
2015E
Multiple
Target Price % Upside
Base Case
~$10
13-14x
$125-134
24-33%
+ Cash EPS
>$10
13-14x
$131-142
30-40%
+ New PBM Deal
~$11
13-14x
$139-150
38-49%
+ Debt/Cap of 45%
>$11
13-14x
$153-165
52-63%
+ All 3 of the Above
>$13
13-14x
$179-193
78-91%
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
CASE STUDY
FEEDING 9 BILLION PEOPLE
The Inescapable Facts:
Global Population & Food Consumption3,4
15
1
2
1 in 7 people today do not have
access to sufficient protein and
energy in their diet, and even more
suffer from malnourishment1
Between population growth and per
capita consumption trends, food
demand will nearly double by 20502
15,000
High
estimate
60%–100% Growth in
12,500 is Needed
Calories
13
Low
estimate
Global
Population 10
(B)
10,000
Global Food
Consumption
(M kcal
per day)
Population
9.5 B
8
7,500
Population
3
Arable land is a finite resource
6.8 B
5
5,000
2009
Arable
Land
1
2050
1.4 B
~1.5 B
Hectares
Hectares
State of Food Insecurity in the World, Food and Agricultural Organization of the United Nations. 2 “Food Security: The Challenge of Feeding Nine Billion People,” Godfray, H.C. et al., Science 327, 812-818
(2000). 3 Food and Agricultural Organization of the United Nations. 4 Tilman et al. “Global Food and the Sustainable intensification of agriculture” Proc. Natl. Acad. Sci. USA. 108 (2011). Calculations are based
on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking
statements, opinions and projections in this presentation.
PAGE 33
HOW TO FEED THE WORLD…WITHOUT DESTROYING IT
GMO seeds are the world’s best option for sustainably meeting demand
Issues
Food
Inflation
Environmental
Impact
Structural
Limit
Option #1
Increase Arable Land
Option #2
Capital Equipment
Option #3
Fertilizer & Chemicals
Option #4
GMO Seeds
 High grain prices need for ROIC
 Can help with efficiency
 But, cap. intensive w/ quest. ROIC
 Positive impact on yield
 But, incr. costs at extreme prices
 Small % of farmer costs
 Seed prices increase with yields
 Comes from deforestation
 Stresses water supply
 Increased fuel and emissions
 Toxic
 Studies say no negative impact
 Lower usage of toxic chemicals
 Drought-tolerance reduces H20 req.
 Government restrictions
 Infrastructure lacking
 Saturation in developed world
 Credit limits in emerging markets
 Limits on application rates
 Quick adopt. when gov’t not in way
 No capital or credit limitations
Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 34
SEPARATING FACT FROM FICTION
Fiction
Fact
“GMOs are meddling
with Mother Nature”

Around 8500 BC people started breeding the desirable traits of wild plants into their crops to increase
yields… it’s called farming

“The WHO, the AMA, the U.S. National Academy of Sciences, the British Royal Society, and every other
respected organization that has examined the evidence has come to the same conclusion: consuming
foods containing ingredients derived from GM crops is no riskier than consuming the same foods
containing ingredients from crop plants modified by conventional plant improvement techniques.”
“GMOs are unsafe”
- American Association for the Advancement of Science, October 2012
“Seed manufacturers
benefit at the expense
of farmers and society”


MON earns a 25% incentive fee
Revenues go up proportional to higher yields their products create
Value to the Farmer
U.S. Corn & Soy Since the Launch of GMO
130
23% increase in
yields¹
115
Yield &
Insecticide Use
(Indexed,
1996 = 100)
100
85
70
55
40
72% decrease in
insecticide usage²
25
Pre-MON
Income
Higher Seed
Price
Yield Benefit
and Cost Saves
Post-MON
Income
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
1
Yield data per USDA. 2 Benbrook: Impacts of genetically engineered crops on pesticide use in the U.S. – the first sixteen years. Environmental Sciences Europe 2012 24:24. Calculations are based on
Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking
statements, opinions and projections in this presentation.
PAGE 35
MONSANTO: ALL THE TRAITS OF A GREAT INVESTMENT
Financials
Seed & Trait Manufacturer
1.
2.
3.
Great Business

Seeds and Traits (80% of profit)

Defensive, recurring, acyclical
Attractive Core Waterfall

Revenues 7%

GP 8%

EBIT 12%

EPS 15%
Numerous Upside Levers

Near-term: COGS, LatAm Soy

Medium-term: Greater Yield, New Traits, DD Pricing

Long-term: Precision Farming
4.
Massively Overcapitalized

27% to 56% dry powder
5.
Cheap and Getting Cheaper
P/E
CY 2014E CY 2015E
With current
19x
15x
capitalization
Pro forma at 2.5x
17x
12x
Debt/EBITDA
6.
Symbol
Enhanced Focus on Shareholder Value
MON
Share Price
$112.00
Shares Out
533M
Market Cap
$59.7B
Cash
$3.8B
Debt
$3.2B
EV
$59.0B
Net Debt/EBITDA
(0.1x)
“Dry Powder”
$15.8B
% of Market Cap
27%
CAGR 13-17
Revenue Growth
9%
EBIT Growth
21%
EPS Growth
24%
2014E
2015E
EPS
~$6
~$7
P/E
19x
15x
Data sourced from company reports. Debt is pro forma for $1.0B of debt issued subsequent to FY2013 related to acquisition of Climate Corporation. Calculations based on Glenview’s projections , which
may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections
in this presentation.
PAGE 36
NOT TO SOUND DEFENSIVE, BUT ITS GROWTH IS ORGANIC

Monsanto’s franchise and defensive characteristics
are on par with the best 'large moat' businesses:




Cell Towers
Pharmaceutical Services
Online Search, Shopping & Travel

High recurring revenue


70% seed and traits is non-discretionary
Dominant share and presence
MON Share
Massive barriers to entry:




Seed shares are perpetual local monopolies based
upon historical use
Each year of efficient breeding grows yields by 3%
Without a time machine, uncatchable lead
Traits are progressively stacked and again winners
create winners – seed industry must license MON traits

Seeds
Traits
US Soy
28%
100%
US Corn
38%
90%
Subject to weather not economic cycles
Taken together, this creates attractive and defensive organic core growth
Revenues
GP
EBIT
EPS
7%
8%
12%
15%
Data is sourced from company materials. Calculations based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosure regarding the use
of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 37
STACKING GROWTH ON GROWTH
LatAm Soy Launch
Accelerating Yields
Corn Demand Will Nearly
Double…Acres Will Not
North America


80M acres
$1.7B Revenue
today (11% of total)


8
1.2
MON Price
8% CAGR
220%
Indexed
180%
to 2003
Bushels
Harvested
(B)
Corn Yields
2% CAGR
140%
20%
0.8
South America

Future: 3% Yield = 9% MON Pricing =
15% EPS CAGR
260%
1.6
Hectares
Planted 6
(B)


2.0
Corn Demand
25%
MON Provides the Solution
Yields must grow 75% by 2030 to feed the world
2% yield CAGR must accelerate to 3%
10
MON EPS Growth1
100%
120M acres
$0 revenue today
2003
4
0.4
2
0.0
2000 2005 2010 2015 2020 2025 2030
Year
LatAm Soy with $1.75 of EPS by 2017
2005
2007
2009
2011
2013
Increase in
MON Price
($/Acre)
Increase in
Yield
(bu/Acre)
Value to the
farmer @
$4.50 Corn
ROI to
the
farmer
$10
8 bu
$36
260%
15%
New Traits

COGS Relief

Several natural disasters have led to a
buildup of extraordinary costs which
should unwind in coming years

U.S. Drought Resistant Corn
(launched 2013)
South American Corn Trade-up
(launched 2012)
 Brazil: Singles to Doubles
 Argentina: Doubles to Triples
$3,000
10%
$2,668
$2,600
Extra
Costs
10% to
20% of
EPS
$2,225
$2,200
$1,941
$1,796
DuPont price increases in Soy
create competitive halo

$1,800

$1,507

$1,400
2009
2010
2011
2012
Extraordinary COGS
2013

DD paying more for MON traits
To protect margin, they need to
raise price
Ironically, this also helps MON
soy seed pricing
1-2% pricing uplift
5%
0%
¹ EPS growth based on Glenview’s projections through end of
Fiscal Year 2017; assumes midpoint of management “price/mix”
guidance, reversal of extraordinary corn seed COGS,
contribution from Intacta rollout and management guided
South America corn trait trade up.
Data sourced from company materials and Glenview’s projections, which may not prove to be accurate or correct. This example has been selected to illustrate Glenview’s investment approach and/or market outlook and is not intended
to represent the Funds’ performance or be an indicator for how the Funds have performed or may perform in the future. This example has been selected solely for this purpose and has not been selected on the basis of performance or
any performance-related criteria. In addition, certain statements contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct. Please refer to
pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 38
HEY BATTER BATTER, SWING, BATTER!
MON Valuation
(0.1x)
Dry Powder
2014 2017
14% 37%
Dry Powder
2014 2017
27% 55%
CY 2014
CY 2015
Base
19x
15x
4.0x
1.0x Leverage
18x
14x
If We Were King
For a Day
2.5x Leverage
17x
12x
4.0x Leverage
16x
11x
Dry Powder
2014 2017
39% 72%
1.0x
Peers
2.5x
Quality Chemicals
As a defensive monopoly with multiple upside levers, Monsanto
is suboptimally hoarding capital and value is trapped
Data sourced from company materials and Bloomberg. Calculations based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosure
regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 39
ENHANCED FOCUS ON SHAREHOLDER VALUE
Over the past nine months Management and the Board have taken small steps towards convergence:
“Based on our analysis and with feedback we've gotten from many of our owners, we are
now moving to use the cash over and above our current levels to further prioritize our share
buyback and dividend programs.
1. ~$450M repurchase per quarter
The best example of that more aggressive approach is the recent authorization by our board
of a new $2 billion three-year buyback program.
2. $2B repurchase authorization
3. Discussion of enhanced dividends
Practically, this is the first time in our company's history where we've doubled the size of our
buyback program. Our current program was approved in June of last year. So between what
we spend for Q3, additional spending in the first month of Q4 and our expected program for
the remainder of the quarter, we have accelerated the current buyback program.”
– Pierre Courduroux, CFO
If Monsanto utilizes their dry powder well in addition to executing on the myriad of growth opportunities,
we expect that shareholder value will grow
~35% CAGR
$17.00
~$15
~24% CAGR
$12.00
~$11
~15% CAGR
$7.00
$4.56
Maintain 2.5x
Net Leverage
New Traits
COGS
New Traits
COGS
~$8
LatAm Soy
LatAm Soy
Base Growth
Base
Base
FY17E - Base
FY17E - Accelerants
FY17E - Balance Sheet Deployed
$2.00
FY13A
This example has been selected to illustrate Glenview’s investment approach and/or market outlook and is not intended to represent the Funds’ performance or be an indicator for how the Funds have performed
or may perform in the future. This example has been selected solely for this purpose and has not been selected on the basis of performance or any performance-related criteria. In addition, certain statements
contained herein are based on Glenview’s research, analysis, opinions and assumptions made by Glenview, which may not prove to be accurate or correct.
This chart includes the following assumptions, projections, forward looking statements and opinions: 15% Base EPS growth assumes ~9% revenue, ~13% EBIT and 15% EPS growth. Assumes MON reaches 2.5x Net Debt / EBITDA during
FY2014E and maintains that leverage. All free cash flow after dividends and proceeds from increased debt used to repurchase. Assumes 15% stock price appreciation per year. Calculations are based on Glenview’s projections, which may not
prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this presentation.
PAGE 40
VALUATION
Historically, Monsanto has traded at 20-22x forward earnings per share. Using a more
conservative 17-20x multiple on FY17 earnings yields two year price appreciation in the
range of 21% to as high as 168%, assuming capital deployment at 2.5x leverage.
 Importantly, these targets give no value to Monsanto’s investment in Precision Farming, as there is no
positive earnings contribution assumed in the near-term
Aug 2017 EPS
P/E Range
Target Price 2-Year % Return
Base Case
~$8
17x-20x
$136-$160
21%-43%
+ Accelerants: LatAm Soy, COGS relief, New Traits
~$11
17x-20x
$187-$220
67%-96%
+ Net Leverage at 2.5x
~$15
17x-20x
$255-$300
128%-168%
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
PAGE 41
PLANTING A SEED FOR AN ADDITIONAL $24 OF EPS IN 10 YEARS1
1. MON has been investing in & developing "Integrated Farming Systems" or Precision Farming


2.
This is analogous to personalized medicine
Using informatics and data to develop optimal solutions by farm
Monsanto currently has 2 platforms

FieldScripts (internally developed product)




3.
Timing: rolling out commercially for first time this year onto “hundreds of thousands of acres”
Pricing: $10 per acre
Value to farmer: gives farmers 5-10 bushels per acre (~$30 of value to farmer)
Climate Corporation (acquired October 2013 for $930M)
At its investor day in November 2013, MON estimated that these two platforms together
can reach 1 billion acres at $20 per acre

At 85% incremental margins, this equates to $24 in EPS
on current shares, achievable over the coming decade
1 This
calculation is based on Glenview’s research, analysis, projections and opinions, which may not prove to be
accurate or correct. Please refer to pages 46-48 for important disclosure regarding the use of forward looking
statements, opinions and projections in this presentation. Securities highlighted in this slide have been selected
to illustrate Glenview’s investment approach and/or market outlook and are not intended to represent the Funds’
performance or be an indicator for how the Funds have performed or may perform in the future. This example
has been selected solely for this purpose and has not been selected on the basis of performance or any
performance-related criteria. The securities discussed herein do not represent an entire portfolio and in the
aggregate may only represent a small percentage of a Fund’s holdings.
Data sourced from company materials. Please refer to pages 46-48 for important disclosure regarding the use of highlighted securities and the use of forward looking statements, opinions and projections in this
presentation.
PAGE 42
WE LIKE THE AND BUSINESS
Often times capital allocation choices are presented as mutually exclusive “OR” choices
Will I invest in the business for the long-term?
OR
Will we pursue short-term value through share buybacks?
We prefer the AND business
Monsanto can:
1.
Continue to have strong business
AND
2.
Invest >$1.7B annually in R&D
AND
3.
Invest $300 million annually in technology acquisitions
AND
4.
Increase leverage to 2.5x net Debt/EBITDA to drive per share value
AND
5.
Have $8B available for opportunistic acquisitions
AND
6.
Retain a strong, investment grade credit rating
AND
7.
Pursue and invest in Precision Farming
If Monsanto wishes to accelerate investment in Precision Farming, they may also:
1.
IPO <20% of this segment to raise cash for accelerated investment and development
2.
Allow growth investors to capitalize this segment on earnings potential while
earnings-based investors may see the separated value of core Monsanto
Calculations are based on Glenview’s projections, which may not prove to be accurate or correct. Please refer to pages 46-48 for important disclosures regarding the use of highlighted securities and the use
of forward looking statements, opinions and projections in this presentation.
PAGE 43
FROM MANAGED CARE TO MANAGERS THAT CARE…
Glenview Capital is proud to be part of a team of hedge fund managers who
have and will continue to support the critical work of the Sohn Foundation
PAGE 44
THANK YOU
“The name on the front is a hell of a lot more
important than the one on the back!”
– Herb Brooks, Miracle
We Applaud the Men and Women Who
Make the Work of the Foundation Possible
PAGE 45
IMPORTANT ADDITIONAL DISCLOSURES
This presentation does not constitute an offer to sell nor the solicitation of an offer to buy any interest in any investment fund (each, a “Fund” or together the
“Funds”) managed by Glenview Capital Management, LLC ("Glenview"). Such offer or solicitation may only be made by delivery of offering documents
containing a description of the material terms of any investment, including risk factors and conflicts of interest. Any such offering will be made on a private
placement basis to a limited number of eligible investors. You should conduct your own investigation and analysis of Glenview and the Funds. Anyone
considering an investment in the Funds should review carefully and completely the applicable Fund’s Offering Documents, including the Offering
Memorandum of such Fund, the applicable subscription documents, the applicable Governing Documents and Glenview’s Form ADV Part 2, in their entirety
and ask questions of representatives of the Funds before investing.
Benchmark Comparisons
Information about indices is provided to allow for comparisons to that of certain well‐known and widely‐recognized indices. Such information is included
solely for the purpose of showing comparisons and general trends, as displayed in the relevant charts.
Definitions for indices used in this presentation are included below:
S&P 500 Index
The Standard and Poor’s 500 Index (the “S&P 500 Index”) is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of
the broad U.S. economy through changes in the aggregate market value of 500 stocks representing all major industries. The S&P 500 Index was developed
with a base level of 10 for the 1940-43 base period. Returns shown in this presentation for the S&P 500 Index reflect total returns, which captures the
changes in the prices of the index components and which accounts for dividend reinvestment.
S&P 500 Internet Retail Index
The Standard and Poor’s 500 Internet Retail Index is a capitalization-weighted index of 500 stocks. The index was developed with a base level of 10 for the
1941-1943 base period. The parent index is the S&P 500 Index. This is a GICS Level 4 Sub-Industry group.
PAGE 46
IMPORTANT ADDITIONAL DISCLOSURES
Past performance is not indicative nor a guarantee of future results. There can be no assurance that any Fund will achieve comparable results in the future or
that it will be able to avoid losses. There can be no assurance that Glenview will be able to implement its investment strategy or investment approach to
receive comparable results. Additionally, Glenview may not be able to dispose of its investments on the terms or at the time it wishes to do so.
Highlighted Securities
Securities highlighted or discussed in this presentation have been selected to illustrate Glenview’s investment approach and/or market outlook and are not
intended to represent the Funds’ performance or be an indicator for how the Funds have performed or may perform in the future. The securities discussed
herein do not represent an entire portfolio and in the aggregate may only represent a small percentage of a Fund’s holdings. Each security discussed in this
presentation has been selected solely for this purpose and has not been selected on the basis of performance or any performance-related criteria. The
portfolios of the Funds are actively managed and securities discussed in this presentation may or may not be held in such portfolios at any given time.
Nothing in this presentation shall constitute a recommendation or endorsement to buy or sell any security or other financial instrument referenced in this
presentation. In addition, certain statements contained herein are based on Glenview’s research, analysis, forward looking statements, opinions, projections
and assumptions made by Glenview.
Forward Looking Statements, Opinions and Projections
This presentation contains certain “forward looking statements”, opinions and projections that are based on the assumptions and judgments of Glenview and
the Funds with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of Glenview or the Funds. Because of the significant uncertainties inherent in
these assumptions and judgments, you should not place undue reliance on these forward looking statements, nor should you regard the inclusion of these
statements as a representation by Glenview or that the Funds will achieve and strategy, objectives or other plans. All forward looking statements and
projections are made as of the date of this document. The opinions expressed herein are current opinions as of the date appearing in this material only. There
is no obligation to update these forward looking statements, projections and/or opinions to reflect events or circumstances after the date hereof, nor is there
any assurance that the policies, strategies or approaches discussed herein will not change. For the avoidance of doubt, any such forward looking statements,
opinions, assumptions and/or judgments made by Glenview and the Funds may not prove to be accurate or correct.
PAGE 47
IMPORTANT ADDITIONAL DISCLOSURES
Information Obtained From Third-Party Sources
Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases has
not been updated through the date of the distribution of these materials. While such sources are believed to be reliable for the purposes used herein,
Glenview does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for
independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy,
completeness or reasonableness of the information provided herein.
Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Glenview considers to be reasonable.
IRS Circular 230 Notice
To ensure compliance with Internal Revenue Service Circular 230, each prospective investor is hereby notified that: (a) any discussion of United States federal
tax issues in this presentation is not intended or written by any of the foregoing to be relied upon, and cannot be relied upon by prospective investors, for the
purpose of avoiding penalties that may be imposed on investors under the internal revenue code; (b) such discussion is written in connection with the
promotion or marketing of the transactions or matters addressed herein; and (c) each prospective investor should seek advice based on its particular
circumstances from an independent tax advisor.
PAGE 48

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