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First State UK Business Overview

First State UK Business Overview. July 2003. Agenda. Company history Current position Strategic drivers Core strategies Appendix: Investment approach. Company history. Colonial First State UK Legacy of Colonial Life UK Established in 1998 1998 - acquired Co-op Investment Mgt

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First State UK Business Overview

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  1. First State UKBusiness Overview July 2003

  2. Agenda • Company history • Current position • Strategic drivers • Core strategies • Appendix: Investment approach

  3. Company history Colonial First State UK • Legacy of Colonial Life UK • Established in 1998 • 1998 - acquired Co-op Investment Mgt • Mar 1999 - offered first external fund range in • May 1999 – combined investment teams • Investment/ business management separation • At SICO acquisition: • £6.0bn FUM • 45 staff (ex investments) • Poor external assets, profile and performance • Strong life company links

  4. Company history Stewart Ivory & Co • Management origins from 1873 (SAINTS) • Quasi-partnership in need of capital • Diverse business: • Private clients • Listed trusts • UK pension funds • Small retail presence • US institutional accounts • At SICO acquisition: • £3.0 bn FUM • 110 staff • Poor external assets, profile and performance • Lack of investment across the business

  5. Current position • Focused business and investment entity • Funds under management £5.3B (May 03) • 180 staff, 59 investment staff • Single product range • Strengthened investment team, and improving investment performance • Investment in systems, brand and distribution • Increasing brand awareness • Robust distribution development • Strong asset flow in a difficult environment

  6. First State UK FUM breakdown May 03 Client Type: Product Type: • Colonial First State Investments Group £ 34.9bn* • First State Investments (UK) £ 5.3bn • Global Equity Assets £ 1.9bn As at Mar 2003 All figures as at 30 May 2003 except Group figure which is as at 31 Mar 2003.

  7. Fund ratings As at 30 May 2003

  8. Brand : Awareness of Competitors (Total) % Yes Source : Continental Research, Ashes research 2003

  9. Strong asset flow in a difficult environment

  10. Strategic drivers • Advent of compulsion • Shift from “balanced” to “specialist” mandates • Growing demand for “global” approach • Asset management for Group entities

  11. 1. Advent of compulsion The UK • £27 bn “savings gap” (source:ABI Sept ’02) • No consumer take-up (mistrust/understanding) • Failure of ‘Stakeholder’ • Poor standards of retail intermediation • Scheme deficits • Move from DB to DC France & Germany • Proportionately similar savings gaps • Growing occupational pension sector • Same demographic profiles.

  12. 2. Shift from balanced to specialist mandates • Single manager, asset allocator model unsuccessful • Development/results of specialist houses • Role of asset consultants • “Core” and “satellite” approach • Loss of mandates from traditional managers: • Schroders – lost 40% of balanced mandates in ‘02 • Merrill Lynch – lost 25% of balanced mandates in ‘02

  13. 3. Growing demand for global approach

  14. 3. Growing demand for global approach • Views of the global consulting firms • Fewer regional diversification opportunities: • Technology • Communications • Cross-border investment • Continued opening of markets • Increased analytical focus on global industries • Lack of consistent results in asset allocation

  15. 4. Investment mgt for Group entities • One centre of excellence: • Global equities • Global fixed income • Consistency of approach • Leverage infrastructure • Economies of scale • Future avenue of growth for Investment and Insurance Services (IIS)

  16. ‘Local’ leverage opportunity • Expected development of intermediation • Growth in consumer awareness • Growth in platforms • Alignment of retail and institutional markets • Poor local standards of business management • Restrictions of legacy products and systems • Proven business model, refined for UK/Europe.

  17. Core strategies 1. Drive pan European distribution • Low cost of incremental business flows • Solid margins • Improved market accessibility • Relative ease of distribution

  18. Core strategies • Focus on institutional & mezzanine distribution • Leverage global consultant recommendations • Low cost of incremental business • Limited registry needs • Solid margins • First State operational strength

  19. Core strategies • Develop institutional distribution in the US • GEM market US$3.7bn, Global market $25bn (2002) • Quality of our key funds • Growing demand for global equity strategies • Solid margins • Babson acquisition • Leverage global consultant recommendations

  20. Core strategies • Focused manufacturing • Strong support of prime funds/teams • Build skills over medium term • Investment environment attracts talent

  21. Summary • Four key strategic drivers: • compulsion; specialist funds; global approach; Group. • Competitive advantages: • business management; Group; heritage; global; use of technology. • Robust business structure • Growing market recognition • Key growth opportunity for IIS

  22. Appendix: Investment Philosophy • EPS GROWTH • drives long term share prices • QUALITY • determines the sustainability of EPS growth • VALUATION • is all important. Everything has a price

  23. Equity Investment Team Global Teams Global Sector Analysts Regional Teams Chief Investment Officer Global Asset Management Stuart Paul Global/International Equities David Leary Andrew Dalrymple Tom Mermagen Alistair Staddon Nicole Mardell Trent Koch Technology &Communications Graham Hay Nigel Masding Asia Pacific Angus Tulloch Alistair Thompson Susie Rippingall David Gait Vijay Tohani Scott McNab Health & Biotechnology Dr Joe Anderson Oliver Trefgarne Lorenza Castellon Continental European John Ewart Jimmy Burns Equity Dealing Ian Firth Jeremy Campbell Stephen Petersen Matthew McKeith Financial Services Rob Grant Vincent Houtteville Global Emerging Markets Angus Tulloch Alan Nesbitt Charles Heenan Susie Rippingall Alistair Thompson David Gait Vijay Tohani Millar Mathieson Glen Finegan Scott McNab North American Susan O’Brien Julian Bishop Consumer Products Neil Abbott Lynne Braddick Investment Operations Shaun Forster Michael Summers Resources David Whitten Dr Joanne Warner Dr Chris Baker Todd Warren United Kingdom Derek Lygo Dr Paul Jourdan Adam White Mikhail Zverev As at 30th June 2003

  24. Head of Global Fixed Interest Kevin Colglazier Head of Global Credit Malcolm White Senior Portfolio Manager - Global Steven Murphy Head of UK Fixed Interest John Creet Portfolio Manager Cash Murray Collis Sydney Credit Team Staff: 8 Hong Kong Credit Team Staff: 4 Dealer Stuart Doyle Global Fixed Interest Team

  25. FS Global Growth FundPerformance since inception to 30/05/03 Source: Reuters Hindsight, bid to bid, net income reinvested, in £ sterling

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