INVESTMENT FUNDS OVERVIEW FOR CORPORATE TREASURERS

1. INVESTMENT FUNDS OVERVIEW FOR CORPORATE TREASURERS Eimear Cowhey Independent Director/Consultant 26 September 2007

2. AGENDA • Overview of Irish Funds Market • Market Developments in Europe • Opportunities for banks in servicing investment funds • Investment Funds for Corporate Treasurers

3. AGENDA • Overview of Irish Funds Market • Market Developments in Europe • Opportunities for banks in servicing investment funds • Investment Funds for Corporate Treasurers

4. Overview of Irish Funds Market • Backdrop - Growth in Sector • Main Players • Information on Promoters • Types of Activities • Types of Funds

5. Backdrop – Growth in Sector • Over the last 5 years, assets under administration (AUA) in Dublin have more than trebled to over $1.2 trillion. AUA ($bn) and Number of Funds 28% 24% 12% 47% 11% 32% -8% 34% 23% 17% • This represents CAGR of more than 30%- truly phenomenal growth. • Obviously the growth is due in part to an increase in asset values over the period but the number of funds serviced by Irish administrators has nearly doubled which is a measure of the growth in volumes. Source: Lipper Fitzrovia 2006

6. Backdrop – Growth in Sector (Money Market funds) 2001 109,793.89 2002 141,302.90 22% 2003 150,127.62 6% 2004 175,481.85 14% 2005 213,424.11 18% 2006 276,072.47 29% Jun 2007 318,597.87 15.4% ytd Table prepared from figures provided by Central Bank and Financial Services Authority of Ireland.

7. Backdrop – Growth in Sector • Why is this happening? • Demographics – Ageing of the European population resulting in an accumulation of financial assets for retirement. • Increased sophistication – A growing demand for mutual funds in Europe which has traditionally favoured other forms of investments for LT savings such as bank deposits and government bonds. • Growth trend in outsourcing – Asset managers continue to outsource administration activities and other services to specialist providers. • Growth in hedge funds - Ireland has a strong relative position for administration compared to other jurisdictions.

8. Backdrop – Growth in SectorSuccess • The fastest growing international fund domicile • $1.3 trillion in assets • Global recognition as a centre of excellence • Leaders in Asset Management have chosen Ireland • Largest centre in the world for alternatives • Leading European hub for global funds distribution to more than 60 countries

9. Backdrop – Growth in SectorInnovation • First regulated jurisdiction to commit to alternative investment funds • At the forefront of implementing new UCITS Directive • First in product innovation has been rewarded by scale • Largest European domiciled money market fund assets • Largest European ETF administration centre • Largest hedge fund administration centre globally • Largest Stock Exchange listing for investment funds • Speed to market for sophisticated products – immediate approval • Development of asset/pension pooling solutions - CCF

10. Main Players

11. Promoters - Geographical Representation USA UK Italy Germany Ireland Total % 43.5% 36.9% 4.07% 2.7% 2.5% 89.7% (represented by top 5)

12. Promoters – Top Twenty 11.Mediolanum 12. Northern Trust 13. HSBC 14. Standard Life Investments 15. State Street 16. Merrill Lynch 17. Aberdeen Asset Managers 18. SEI 19. Citigroup 20. Royal Bank Of Scotland 1. Barclays 2. Goldman Sachs 3. Russell Investment 4. Vanguard Group 5. Scottish Widows 6. PIMCO 7. Coutts & Co 8. Axa Rosenberg 9. Insight Investment 10. Mellon Fund Managers

13. Types of Activities • Auditing and Tax Advisers • Custodians • Fund Administrators • Investment Managers/Asset Managers • Legal Advisers • Listing Sponsors • Transfer Agencies/ Shareholder Services

14. Types of Funds (Traditional) • Investment Companies • Unit Trusts • Investment Limited Partnerships • CCFs – pooled structures All available as • Umbrella funds; or • Single entity funds.

15. Types of Funds (Alternatives) • Retail fund of hedge funds • Fund of funds • Property funds • Private equity funds • Feeder funds • Protected cell investment companies (similar to SPCs in Cayman)

16. AGENDA • Overview of Irish Funds Market • Market Developments in Europe • Opportunities for banks in servicing investment funds • Investment Funds for Corporate Treasurers

17. Market Developments in Europe European assets by investment type - Jul 2007 (Eur m)

18. Market Trends Internationally • Mainstreaming of alternative investments • Hedge funds lead the way as institutions increase allocations and in-country markets loosen regulations against them • U.S. and Europe in full swing, Asian interest mounting • Demand for transfer agency and shareholder recordkeeping rising • Global fund managers look to offer new products and distribution to new marketsand require a platform to support growth

19. Market Trends Internationally • Reinvigorated interest in offshore investing • Promoters seeking efficient ways to support multiple distribution channels • Continued use of offshore jurisdictions for product extension and development • Reputation of offshore industry changing • Offshore known for product and service innovation rather than a money “safe haven” • Sustained outsourcing of back- and middle-office functions • Investment managers choose to focus on core objectives

20. 9000 8022 8000 7000 6372 6000 5559 5000 4400 2005: Q1 4000 2006: Q1 3000 2000 739 641 1000 462 430 327 328 0 USA Europe Australia Japan Canada Geographical trends in Investment Funds Assets(Eur Billions) + 26% + 26% + 15% + 41% + 31% UCITS Source: EFAMA International Statistical Release

21. 8000 7000 6000 5000 5485 4000 5183 4186 3000 3763 3605 3550 3331 3195 2000 2349 1818 1417 1000 1190 1123 1459 1405 1156 1052 1011 1007 961 956 692 575 413 344 291 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 NON-UCITS UCITS Net Assets of UCITS and Non-UCITS(Eur Billions) - EU 6944 6588 5342 4815 4561 4612 4287 4156 3041 2393 1830 1534 1414 Q2 Source: EFAMA International Statistical Release

22. 7000 6000 5000 4478 4000 3981 3500 3000 3410 3478 3138 3271 2000 2484 1956 1490 1000 2110 1235 1145 1451 1315 1202 1149 1083 885 557 437 340 299 269 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Dublin and Luxembourg EU Net Assets of UCITS and Non-UCITS(Eur Billions) - EU/Ireland and Luxembourg 6588 5342 4815 4561 4612 4287 4156 3041 2393 1830 1534 1414 Source: EFAMA International Statistical Release

23. Dublin and Luxembourg dominate for investment fund servicing • Over 75% of EU UCITS and Non UCITS are domiciled in 5 EU Countries • 36.6% are domiciled in Dublin and Luxembourg • France – 22.8% • Germany - 15% • United Kingdom – 10.3% • (Italy next at 6%, Spain at 5%) • Over 90% of UCITS sold cross border are Dublin and Luxembourg domiciled

24. FRANCE Net sales of EQUITY funds – Foreign v Domestic (€m) 12,000 Foreign 10,000 Domestic 8,000 6,000 4,000 2,000 2002 2003 2004 2005 2006 • Importance of Funds of Funds persists as far as sales opportunities for foreign groups are concerned; • 3rd party funds of funds responsible for net inflows of €3.3bn during Q1 (incl FF Hedge); • Foreign groups retaining increasing share of this business – around one third.

25. GERMANY 15,000 10,000 5,000 0 -5,000 Foreign -10,000 Domestic 2002 2003 2004 2005 2006 Net sales of EQUITY funds – Foreign v Domestic (€m) • Tax optimised products likely to reign supreme in 2007 and 2008 as mainstream investors move firmly out of equities; • German fund buyers react dramatically to the Feb prick in the China bubble but impact is across most equity products; • Wealth managers offer strongest distribution prospects; funds of funds remain relatively dormant.

26. ITALY 6,000 3,000 -3,000 -6,000 Foreign -9,000 Domestic -12,000 2002 2003 2004 2005 2006 Net sales of EQUITY funds – Foreign v Domestic (€m) • Gross sales for foreign groups double in 2006 but net sales constant – increase in portfolio turnover; • 3rd party funds of funds responsible for net inflows of €4bn in 2006 and a further €2.2bn in Q1; • Monumental exit from domestic funds - €59bn since 2003.

27. SPAIN Net sales of EQUITY funds – Foreign v Domestic (€m) 5,000 Foreign Domestic 4,000 3,000 2,000 1,000 0 -1,000 2002 2003 2004 2005 2006 • Funds of funds dead in the water since the 2006 market correction; • This has severely dented prospects for foreign groups, which previously took around half of FoF volumes; • Bank-led move out of money market and bond funds into deposits.

28. UK Net sales of EQUITY funds – Foreign v Domestic (€m) 11,000 Foreign Domestic 8,000 5,000 2,000 -1,000 2002 2003 2004 2005 2006 • Annual ISA season coinciding with upward momentum from the FTSE led to significant Q1 inflows – but all into domestic stock products; • Real Estate funds remain the strongest domestic sector; • Funds of funds remain reasonably buoyant but overall volumes light compared with other European markets e.g.. France

29. AGENDA • Overview of Irish Funds Market • Market Developments in Europe • Opportunities for banks in servicing investment funds • Investment Funds for Corporate Treasurers

30. Opportunities for banks in servicing investment funds • Excess cash management • Conversion of subs/reds • Currency Hedged share classes • Cash Overlay • FX for portfolio dealings • Products – derivatives, structured notes etc

31. Opportunities for banks in servicing investment funds • Major advantage to be the custodian to the investment fund • Strength of the relationship • Knowledge of future needs • Ability to cross sell • Lower transaction fees • Timeliness • Less legal and corporate sign offs

32. Opportunities for banks in servicing investment funds • However: • Promoters very cost conscious • Benchmarking done routinely • Opportunities in cash overlay services • Also in products such as derivatives, structured notes, swaps etc

33. AGENDA • Overview of Irish Funds Market • Market Developments in Europe • Opportunities for banks in servicing investment funds • Investment Funds for Corporate Treasurers

34. Investment Funds for Corporate Treasurers • Security • Track Record • Liquidity • Investment Returns • Administration • Fees and Charges

35. Investment Funds for Corporate Treasurers – Security • Most investment funds rated AAA • Higher than many deposits! • Limits and set criteria of rating agency • Easier to meet internal limits of the CT • Ring fencing/segregation of assets • Role of custodian • Investment Funds laws • Regulatory regime • Risk Spreading – concentration and yield

36. Investment Funds for Corporate Treasurers – Track Record • Linked with security of investment • Internal limits often refer to longevity of product • Irish investment funds market for MM funds not as long as other countries – approx 10 years

37. Investment Funds for Corporate Treasurers – Liquidity • Investment Funds are very liquid • Large fund sizes and diversified asset bases • Same day settlement normal • Late cut off times also usual • Penalties for breaking bank deposits are avoided

38. Investment Funds for Corporate Treasurers – Investment Returns • Important factor after security issues • MM fund returns can lag deposits in a rising environment • In volatile markets it can be difficult to place money on deposit so good to have MM funds as alternative • Mix of assets at different points of the yield curve • Large buying power of MM funds ensures good pricing

39. Investment Funds for Corporate Treasurers – Administration • Service standards generally very advanced • Multi lingual customer service reps • Usually available in different time zones • SWIFT, fax, telephone dealing • Online dealing – secure, quick • Often online statement access and bespoke reporting available

40. Investment Funds for Corporate Treasurers – Fees and Charges • Calculations to be done net of fees and charges • Normally are charged within the fund – stable NAV funds • Vary between 10 and 20 bps • Usually CTs willing to give up some returns in return for other benefits of MM funds

41. INVESTMENT FUNDS OVERVIEW FOR CORPORATE TREASURERS Eimear Cowhey Independent Director/Consultant 26 September 2007