DIGITAL HEALTH - INVEST IN NEW SOLUTIONS

Julius Baer Structured Products

March 2016

2

• Healthcare costs continue to rise around the globe due to

– ageing population

– growing prevalence of chronic diseases

• The healthcare industry is turning to digital solutions that

– aim to connect the entire value chain to improve quality and patient management

– are more preventive, predictive and personalised

– reduce waste and costs

• From high cost and low access to high access at lower costs

– Example: Keeping patients out of the hospital and in alternate care sites (e.g. home) is

already a focus of providers. Digital Health will further enable this trend.

• For the full research report please see the appendix

DIGITAL HEALTH – RESHAPING HEALTHCARE Tracker Certificate on the Digital Health Basket

3

INDICATIVE TERMS*

Issuer Bank Julius Baer & Co. Ltd., Guernsey Branch (Rating: Moody’s A2)

Currency USD (composite)

Maturity 1 year

Underlying Digital Health Basket (14 shares, equally weighted)

Dividends Discounted

Participation 100%

Settlement type Cash settlement

Initial value USD 100

Issue price USD 100.50

Valor / ISIN / Symbol 30.689.191 / CH0306891919 / JFRTL

Subscription period Until 14 April 2016, 17:00 CET

Tracker Certificate on the Digital Health Basket

*Terms are indicative and subject to change

4

BASKET COMPONENTS Tracker Certificate on the Digital Health Basket

UnderlyingBloomberg

TickerISIN Exchange Initial Level Weight*

CERNER CORP CERN UW Equity US1567821046 NASDAQ GS USD 53.14 7.14%

MEDIDATA SOLUTIO MDSO UW Equity US58471A1051 NASDAQ GS USD 36.18 7.14%

TELADOC INC TDOC UN Equity US87918A1051 New York USD 11.23 7.14%

COGNIZANT TECH-A CTSH UW Equity US1924461023 NASDAQ GS USD 59.52 7.14%

MEDTRONIC PLC MDT UN Equity IE00BTN1Y115 New York USD 75.21 7.14%

PREMIER INC-CL A PINC UW Equity US74051N1028 NASDAQ GS USD 32.97 7.14%

RESMED INC RMD UN Equity US7611521078 New York USD 56.19 7.14%

CVS HEALTH CORP CVS UN Equity US1266501006 New York USD 101.74 7.14%

GENERAL ELECTRIC GE UN Equity US3696041033 New York USD 31.09 7.14%

MCKESSON CORP MCK UN Equity US58155Q1031 New York USD 156.86 7.14%

ILLUMINA INC ILMN UW Equity US4523271090 NASDAQ GS USD 155.13 7.14%

LABORATORY CP LH UN Equity US50540R4092 New York USD 114.12 7.14%

NOVARTIS AG-REG NOVN VX Equity CH0012005267 SIX Swiss Ex CHF 71.45 7.14%

ROCHE HLDG-GENUS ROG VX Equity CH0012032048 SIX Swiss Ex CHF 233.9 7.14%

*on initial fixing date

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For distribution in Switzerland only. This presentation constitutes marketing

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© Julius Baer Group, 2016

IMPORTANT LEGAL DISCLAIMER

6

APPENDIX: FULL RESEARCH REPORT

7

8

• The growing prevalence of chronic diseases and ageing populations places a heavy burden on

health systems around the globe as healthcare costs continue to rise.

• Increasingly, the healthcare industry is turning to digital solutions. Digital health aims to

connect the entire healthcare value chain to improve quality of medical care while reducing

costs.

• Growing abundance of new actionable health data coming from cheap medical devices and

cheaper gene sequencing bring the promise to make medicine more preventive, predictive and

personalised.

• We think the first wave of digital health technologies that prove successful will be those that

drive specific action to improve patient care and correspondingly reduce cost.

• We see tangible growth potential in the fields of healthcare IT enabling to improve the care

delivery chain. Besides health IT, we also identified remote patient monitoring, telehealth and

genomics applications as attractive digital health growth areas.

DIGITAL HEALTH – RESHAPING HEALTHCARE Rising healthcare cost ask for new solutions. Health IT, remote patient monitoring,

telehealth and genomics could benefit from the transition to digital health.

9

HEALTHCARE COSTS KEEP RISING Growing prevalence of chronic diseases and ageing populations places a heavy

burden on health systems around the globe as healthcare costs continue to rise.

Source: World Bank, Julius Baer Source: OECD, Julius Baer

0

1'000

2'000

3'000

4'000

5'000

6'000

7'000

8'000

9'000

10'000

1995 1998 2001 2004 2007 2010 2013

US Switzerland

Germany Japan

UK Brazil

China

Per capita spending for healthcare, USD PPP

Spending for healthcare keeps rising on a per capita …

GDP per capita vs health spending per country

16

.4

11

.1

11

.0

10

.2

8.9

8.8

8.8

8.5

6.9

6.5

5.6

4.0

2.9

0

2

4

6

8

10

12

14

16

18

US

Sw

itze

rla

nd

Ge

rma

ny

Ja

pa

n

OE

CD

Ita

ly

Sp

ain

UK

Ko

rea

Ru

ssia

Ch

ina

Ind

ia

Ind

on

esi

a

% GDP

Public Private

10

INCREASED DEMAND FOR HEALTHCARE Growing prevalence of chronic diseases and ageing populations are triggering

increased demand for healthcare

Source: OECD, Julius Baer Source: National Medical Expenditures Panel Survey of 2012, Julius Baer

The 65+ demographics, spend on average double on healthcare than the rest

Over 70% of healthcare budgets in the Eurozone and US are spent on chronic diseases

41'304

41'333

47'229

59'249

73'823

75'906

83'598

87'538

92'137

100'996

0 100'000 200'000

Pancreatic & liver disease

Back problems

Hypertension

Diabetes

Osteoarthritis & jointissues

COPD*, asthma

Mental disorders

Cancer

Trauma-related disorders

Heart conditions

USD annual costs

Top 10 diagnoses ranked by average aggregate annual expenditure

13

16

21

21

23

24

24

27

28

33

33

36

37

39

5

5

13

13

7

8

16

15

17

20

21

17

11

23

0 10 20 30 40

India

Indonesia

United States

Russia

Brazil

China

United Kingdom

OECD

Switzerland

Italy

Germany

Spain

Korea

Japan

% share of population aged 65 and older

2010 2050

11

CATALYSTS ENABLING DIGITAL HEALTH 1) Shift to value; 2) Patients becoming more engaged; 3) Rapid digitalisation of

clinical data (EMR); 4) Tech companies moving in; 5) Investment into digital health

Source: American Hospital Association, Commonwealth Fund, Julius Baer Source: Rock Health, Julius Baer

Wide adoption of electronic medical records (EMR) as a backbone for digital health

Venture funding increased in digital health businesses

100% 100% 100% 100% 100%97%

83%

0%

20%

40%

60%

80%

100%

Au

stra

lia

Ne

the

rla

nd

s

No

rwa

y

Sw

ed

en

UK

Ge

rma

ny

US

% share

0.9

1.4

1.8

4.34.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2011 2012 2013 2014 2015

USD bn

• The first wave of digital health technologies

that prove successful will be those that

drive specific action to improve patient

care and correspondingly reduce waste and

cost.

• Better patient management, streamlining

the care chain, reducing costly admissions

all have the potential to improve the future

economics for healthcare services.

• Keeping patients out of the hospital and in

alternate care sites (e.g. home) is already a

focus of providers. We see digital health as

a further enabler.

12

INCREASING ACCESS AND LOWERING COSTS Digital health promises affordable, more efficient and better access to patient

solutions

Source: Goldman Sachs, Julius Baer

From high cost and low access to

high access at lower costs

Past Present Future

low tech

low access

low cost

high tech

low access

high cost

high tech

high access

low cost

Digital Health

• Remote patient monitoring (RPM): Enables

healthcare providers through devices and

applications to frequently keep track of

high-risk patients.

• Telehealth: Allows patients to seek expert

medical advice without having to visit a

doctor’s office via telecom. technologies.

• Healthcare IT: Connecting the health care

value chain with platforms and providing

analytics.

• Genomics: More efficient genomic

sequencing has massively lowered the price

of DNA sequencing. Genomics assessment

of cancers is a major application field

opening up.

13

THE EMERGING DIGITAL HEALTH SEGMENTS Digital health is still in an early stage of development, but a select few segments

are approaching critical mass.

Source: Goldman Sachs, Piper Jeffrey, UBS, Morgan Stanley, Julius Baer

Savings opportunity exceeds addressable market

0

100

200

300

400

500

600

Addressable market Savings opportunity

USD bn

Health IT RPM Telehealth Genomics

Additional savings opportunity combining health IT and genomics

14

THE DIGITAL HEALTH EQUITY UNIVERSE (1/2) Health IT, remote patient monitoring, telehealth and genomics could benefit from

the transition to digital health.

Source: Bloomberg Finance L.P., Julius Baer; This list contains covered and not covered (n.c.) companies by Julius Baer, Julius Baer offers no recommendation; *The exposure rating follows the Next Generation investment selection process which analyses a company's exposure to structural market growth. CCY = Currency; ESG = Environmental, social and governance; P/E 12m fwd = Price / Earnings Ratio 12 month forward estimate; Div yld = Dividend yield

Company Exposure* Julius Price CCY Price Market cap. ISIN P/E Div yld

Baer target (USD bn) 1M 3M 12M 12m fwd (%)

Health IT / Remote patient monitoring / Telehealth

ATHENAHEALTH INC High n.c. 130.0 USD n.c. 5.1 2.8 -16.5 4.1 US04685W1036 58.5 n.a.

CERNER CORP High n.c. 52.3 USD n.c. 17.8 0.3 -11.4 -27.0 US1567821046 19.3 n.a.

DEXCOM INC High n.c. 59.4 USD n.c. 4.9 -3.7 -27.7 -5.0 US2521311074 171.2 n.a.

EVERYDAY HEALTH INC High n.c. 5.5 USD n.c. 0.2 24.3 -8.6 -56.0 US3004151060 6.4 n.a.

INOVALON HOLDINGS INC - A High n.c. 18.5 USD n.c. 2.8 -5.2 5.1 -36.5 US45781D1019 25.8 n.a.

MEDIDATA SOLUTIONS INC High n.c. 35.7 USD n.c. 2.0 0.8 -22.6 -27.0 US58471A1051 28.8 n.a.

TELADOC INC High n.c. 10.7 USD n.c. 0.4 -26.7 -41.2 n.a. US87918A1051 n.a. n.a.

VEEVA SYSTEMS INC-CLASS A High n.c. 25.3 USD n.c. 3.4 14.4 -9.2 -7.9 US9224751084 35.1 n.a.

ALLSCRIPTS HEALTHCARE SOLUTI Medium n.c. 12.4 USD n.c. 2.3 -0.2 -16.0 5.8 US01988P1084 18.1 n.a.

ALPHABET INC-CL A Medium Buy 758.5 USD 850 513.7 5.7 0.2 34.0 US02079K3059 26.3 -

CASTLIGHT HEALTH INC-B Medium n.c. 3.4 USD n.c. 0.3 23.8 -20.3 -62.3 US14862Q1004 n.a. n.a.

COGNIZANT TECH SOLUTIONS-A Medium Buy 58.7 USD 71 35.8 4.9 -0.2 -7.9 US1924461023 19.6 -

EVOLENT HEALTH INC - A Medium n.c. 10.4 USD n.c. 0.6 12.8 -19.1 n.a. US30050B1017 n.a. n.a.

INTL BUSINESS MACHINES CORP Medium Hold 147.0 USD 135 141.3 11.0 9.0 -8.0 US4592001014 9.2 4.1

KONINKLIJKE PHILIPS NV Medium Hold 24.5 EUR 26 25.8 10.2 4.1 -10.6 NL0000009538 17.3 3.6

M3 INC Medium n.c. 2'763.0 JPY n.c. 8.0 2.4 2.8 2.1 JP3435750009 56.0 0.3

MEDTRONIC PLC Medium Buy 75.5 USD 86 105.8 0.7 -1.1 -2.7 IE00BTN1Y115 18.3 2.0

OMNICELL INC Medium n.c. 27.6 USD n.c. 1.0 0.1 -2.3 -14.5 US68213N1090 14.9 n.a.

PREMIER INC-CLASS A Medium n.c. 32.0 USD n.c. 4.5 -1.0 -5.5 -13.1 US74051N1028 17.8 n.a.

RESMED INC Medium n.c. 56.0 USD n.c. 7.8 -5.4 3.7 -22.7 US7611521078 18.7 2.1

SIEMENS AG-REG Medium Hold 91.3 EUR 100 87.9 7.6 2.6 -13.3 DE0007236101 13.7 4.0

VERISK ANALYTICS INC Medium n.c. 77.2 USD n.c. 13.0 12.8 2.8 7.6 US92345Y1064 21.4 n.a.

WEBMD HEALTH CORP Medium n.c. 58.6 USD n.c. 2.2 11.2 26.7 35.1 US94770V1026 26.8 n.a.

APPLE INC Low Hold 105.8 USD 110 586.6 9.9 -0.2 -17.6 US0378331005 10.3 2.2

CVS HEALTH CORP Low Buy 101.1 USD 115 111.1 4.4 6.6 -2.3 US1266501006 18.9 1.8

DANAHER CORP Low Buy 93.6 USD 105 64.3 7.9 2.5 7.2 US2358511028 21.6 0.7

GENERAL ELECTRIC CO Low Buy 31.0 USD 33 287.5 6.5 2.2 20.7 US3696041033 23.8 3.4

MCKESSON CORP Low n.c. 151.7 USD n.c. 34.7 -2.7 -21.6 -33.7 US58155Q1031 11.3 0.7

MICROSOFT CORP Low Buy 54.7 USD 62 432.3 4.7 1.0 28.6 US5949181045 17.0 2.7

WALGREENS BOOTS ALLIANCE INC Low Hold 83.3 USD 85 89.9 8.8 1.0 -4.5 US9314271084 18.3 1.8

Performance (%)

15

THE DIGITAL HEALTH EQUITY UNIVERSE (2/2) Health IT, remote patient monitoring, telehealth and genomics could benefit from

the transition to digital health.

Source: Bloomberg Finance L.P., Julius Baer; This list contains covered and not covered (n.c.) companies by Julius Baer, Julius Baer offers no recommendation; *The exposure rating follows the Next Generation investment selection process which analyses a company's exposure to structural market growth. CCY = Currency; ESG = Environmental, social and governance; P/E 12m fwd = Price / Earnings Ratio 12 month forward estimate; Div yld = Dividend yield

Company Exposure* Julius Price CCY Price Market cap. ISIN P/E Div yld

Baer target (USD bn) 1M 3M 12M 12m fwd (%)

Genomics

ILLUMINA INC High Buy 147.2 USD 172 21.6 -2.0 -19.1 -24.5 US4523271090 47.8 -

FOUNDATION MEDICINE INC Medium n.c. 16.2 USD n.c. 0.6 14.3 -22.5 -65.9 US3504651007 n.a. n.a.

GENOMIC HEALTH INC Medium n.c. 22.6 USD n.c. 0.7 -15.4 -30.7 -30.0 US37244C1018 186.8 n.a.

LABORATORY CRP OF AMER HLDGS Medium n.c. 112.3 USD n.c. 11.4 3.4 -7.7 -11.4 US50540R4092 11.7 n.a.

NOVARTIS AG-REG Medium Buy 70.9 CHF 92 196.2 -3.7 -16.4 -27.9 CH0012005267 17.3 3.8

ROCHE HOLDING AG-GENUSSCHEIN Medium Buy 238.8 CHF 315 213.5 -6.8 -11.2 -10.9 CH0012032048 20.5 3.4

THERMO FISHER SCIENTIFIC INC Medium Hold 138.3 USD 130 54.8 6.6 2.8 3.3 US8835561023 19.2 0.5

Performance (%)

16

NEXT GENERATION A holistic approach to thematic investing and sustainable growth

Source: Julius Baer

Structural Growth

First, seek growth beyond the

business cycle

> Identification of fundamental

imbalances within the economy and society at large

> Analysis of megatrends and their potential for structural change

> Collaboration with think tank WIRE.

Competitive Companies

Second, identify competitively

positioned companies

> Positive cash flows enabling long

term investments > Solid financial health allowing for

sustainable growth > Superior services and products > Strong organisation which fosters

a forward looking culture.

Risk Management

Third, manage thematic

investing's above average risks

> Diversification within themes

and industries > Portfolio tilt to quality > Active risk management

17

Source: Julius Baer

NEXT GENERATION INVESTMENT THEMES Mapping the future to seven key themes

Themes Description Themes Description

Arising

Asia

Growing economies in

emerging markets and

changing consumer

demands.

Frontier

markets

Economies that start from a

low base and have not yet

been discovered by the

investment community.

Digital

Disruption

The phenomenon of

digitisation, and how it is

affecting every corner

of our lives.

Growing

urban

The megatrend of

urbanisation, where by

2050, most of the world’s

population will live in cities.

Energy

Transition

The shift from fossil fuels to

new sources of energy.

Shifting

lifestyles

Considering the impacts

that the world’s increasing

ageing population will have.

Feeding

the world

Sustainable production for

the additional 2.4 billion

people the world will have

by 2050.