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First State UKBusiness Overview
July 2003
2
Agenda
Company history Current position Strategic drivers Core strategies Appendix: Investment approach
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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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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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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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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:
Institutional73%
Retail27%
UK Equity2%
European Equity3%
US Equity4%
Asia Pacific ex Japan / GEM
20%
Global Equity37%
Balanced8%
Fixed Interest & Cash26%
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Fund ratings
Feri Trust
Forsyth OBSR Fund Rating
Standard & Poor's Fund
Manager Rating
Standard & Poor's
Fund StarsBluerating Citywire
Wassum Investment
Network
Asia Pacific A AAA AAA AAA5 W-
Rating
Global Emerging Markets A AAA AAA AAA
5 W-Rating
European Smaller Companies A AA A
4 W-Rating
Global Growth - A A A4 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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Brand : Awareness of Competitors (Total)
Source : Continental Research, Ashes research 2003
% Yes
9
26
38
32
2218
14 14
7 6
0
10
20
30
40
Pre Wave Post WaveFSI M & G Jupiter Investec New Star
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Strong asset flow in a difficult environment
Inflows
Outflows-800-600-400-200
0200400600800
1,0001,2001,400
Jun-01 Jun-02 Jun-03 est
Pou
nds
£m
Retail Institutional
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Strategic drivers
1. Advent of compulsion2. Shift from “balanced” to “specialist” mandates3. Growing demand for “global” approach4. Asset management for Group entities
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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 DCFrance & Germany Proportionately similar savings gaps Growing occupational pension sector Same demographic profiles.
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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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3. Growing demand for global approach
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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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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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‘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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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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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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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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Core strategies
4. Focused manufacturing
Strong support of prime funds/teams Build skills over medium term Investment environment attracts talent
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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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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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Equity Investment Team
Global/International EquitiesDavid LearyAndrew DalrympleTom MermagenAlistair StaddonNicole MardellTrent Koch
Global Emerging MarketsAngus TullochAlan NesbittCharles HeenanSusie RippingallAlistair ThompsonDavid GaitVijay TohaniMillar MathiesonGlen FineganScott McNab
Health &BiotechnologyDr Joe Anderson Oliver TrefgarneLorenza Castellon
Technology &Communications Graham HayNigel Masding
FinancialServicesRob GrantVincent Houtteville
ConsumerProductsNeil AbbottLynne Braddick
ResourcesDavid WhittenDr Joanne WarnerDr Chris BakerTodd Warren
ContinentalEuropeanJohn EwartJimmy Burns
North AmericanSusan O’BrienJulian Bishop
United KingdomDerek LygoDr Paul JourdanAdam WhiteMikhail Zverev
Regional TeamsGlobal SectorAnalystsGlobal Teams
Asia PacificAngus TullochAlistair ThompsonSusie RippingallDavid GaitVijay TohaniScott McNab
Equity DealingIan FirthJeremy CampbellStephen PetersenMatthew McKeith
Chief InvestmentOfficerGlobal Asset ManagementStuart Paul
InvestmentOperationsShaun ForsterMichael Summers
As at 30th June 2003
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Head of Global Fixed Interest
Kevin Colglazier
Head of Global Credit
Malcolm White
Head of UKFixed Interest
John Creet
Senior Portfolio Manager - Global
Steven Murphy
Portfolio ManagerCash
Murray Collis
DealerStuart Doyle
Hong KongCredit Team
Staff: 4
SydneyCredit Team
Staff: 8
Global Fixed Interest Team
25 Source: Reuters Hindsight, bid to bid, net income reinvested, in £ sterling
FS Global Growth FundPerformance since inception to 30/05/03
-40
-20
0
20
40
60
Mar-99
Aug-99
Jan-00
Jun-00
Nov-00
Apr-01
Sep-01
Feb-02
Jul-02
Dec-02
May-03
First State Global Grow th A (MF) AUTIF/IMA Global Grow th (IN)
MSCI World