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First State UK Business Overview July 2003
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1 Agenda Company history Current position Strategic drivers Core strategies Appendix: Investment approach
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2 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
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3 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
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4 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
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5 First State UK FUM breakdown May 03 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. Client Type: Product Type:
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6 Fund ratings Feri Trust Forsyth OBSR Fund Rating Standard & Poor's Fund Manager Rating Standard & Poor's Fund Stars BlueratingCitywire Wassum Investment Network Asia Pacific A AAA AAA 5 W- Rating Global Emerging Markets A AAA AAA 5 W- Rating European Smaller Companies AAAA 4 W- Rating Global Growth -AA A 4 W- Rating Global Health & Biotechnology --A - Global Opportunities -A- -A- British Mid-Cap --A---- British Smaller Companies --A --- Corporate Bond --- --- UK Gilt --A --- As at 30 May 2003
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7 Brand : Awareness of Competitors (Total) Source : Continental Research, Ashes research 2003 % Yes
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8 Strong asset flow in a difficult environment
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9 Strategic drivers 1.Advent of compulsion 2.Shift from “balanced” to “specialist” mandates 3.Growing demand for “global” approach 4.Asset management for Group entities
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10 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.
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11 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
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12 3. Growing demand for global approach
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13 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
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14 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)
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15 ‘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.
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16 Core strategies 1. Drive pan European distribution Low cost of incremental business flows Solid margins Improved market accessibility Relative ease of distribution
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17 Core strategies 2.Focus on institutional & mezzanine distribution Leverage global consultant recommendations Low cost of incremental business Limited registry needs Solid margins First State operational strength
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18 Core strategies 3.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
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19 Core strategies 4.Focused manufacturing Strong support of prime funds/teams Build skills over medium term Investment environment attracts talent
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20 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
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21 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
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22 Equity Investment Team Global/International Equities David Leary Andrew Dalrymple Tom Mermagen Alistair Staddon Nicole Mardell Trent Koch Global Emerging Markets Angus Tulloch Alan Nesbitt Charles Heenan Susie Rippingall Alistair Thompson David Gait Vijay Tohani Millar Mathieson Glen Finegan Scott McNab Health & Biotechnology Dr Joe Anderson Oliver Trefgarne Lorenza Castellon Technology &Communications Graham Hay Nigel Masding Financial Services Rob Grant Vincent Houtteville Consumer Products Neil Abbott Lynne Braddick Resources David Whitten Dr Joanne Warner Dr Chris Baker Todd Warren Continental European John Ewart Jimmy Burns North American Susan O’Brien Julian Bishop United Kingdom Derek Lygo Dr Paul Jourdan Adam White Mikhail Zverev Regional Teams Global Sector Analysts Global Teams Asia Pacific Angus Tulloch Alistair Thompson Susie Rippingall David Gait Vijay Tohani Scott McNab Equity Dealing Ian Firth Jeremy Campbell Stephen Petersen Matthew McKeith Chief Investment Officer Global Asset Management Stuart Paul Investment Operations Shaun Forster Michael Summers As at 30 th June 2003
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23 Head of Global Fixed Interest Kevin Colglazier Head of Global Credit Malcolm White Head of UK Fixed Interest John Creet Senior Portfolio Manager - Global Steven Murphy Portfolio Manager Cash Murray Collis Dealer Stuart Doyle Hong Kong Credit Team Staff: 4 Sydney Credit Team Staff: 8 Global Fixed Interest Team
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24 Source: Reuters Hindsight, bid to bid, net income reinvested, in £ sterling FS Global Growth Fund Performance since inception to 30/05/03
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