First State UK Business Overview July 2003. 1 Agenda Company history Current position Strategic...

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

Colonial First State Investments Group £ 34.9bn*

First State Investments (UK) £ 5.3bn

Global Equity Assets £ 1.9bnAs at Mar 2003

All figures as at 30 May 2003 except Group figure which is as at 31 Mar 2003.

Client Type: Product Type:

Institutional

73%

Retail

27%UK Equity

2%

European Equity

3%

US Equity

4%

Asia Pacific

ex Japan / GEM

20%

Global Equity

37%

Balanced

8%

Fixed Interest

& Cash

26%

7

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

22

18

14 14

7 6

0

10

20

30

40

Pre Wave Post Wave

FSI M & G Jupiter Investec New Star

9

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

10

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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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

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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

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

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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

20

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

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

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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 SectorAnalysts

Global 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