1. THE UK FUND MANAGEMENT INDUSTRYRoundtable on investment trusts & fund management Seoul, Korea 16 April, 2002 SYD BONE Managing Director Baring Asset Management, Asia

2. Agenda

The UK Market Today

The UK Pension System

• three tier approach

• investment freedom

• taxation incentives

• protection of assets

• challenges faced

BAM as an example

3. The UK Market Today 4. The UK Market Today 1995 1997 1999 2001 Pension Funds 522 815 907 859 Insurance 507 744 935 1097 Unit & Investment Trusts 167 240 283 360 Private clients 65 131 341 410 Others 62 125 89 49 Total 1,323 2,055 2,555 2,775* * 79% UK clients, 21% overseas clients Source : ONS, Com Reer, Fund Managers' Asso, Moneynet Funds under management havedoubled over the last six years GBP Bn 5. The UK Pension System Three Tier Approach 6. Spending on State Pension Systems Less dependence on tier one thanother European countries Source : PricewaterhouseCoopers UK 7. Investment Freedom 8. Asset Allocation of European Pension Funds Prudent man approach UK 9. Pension Fund Holdings of International Securities Investment freedom UK 10. Performance of Pension Funds Excellent long-term results UK 11. Global Equity Risk Map 94 - 99 Source: Baring Asset Management Germany France Denmark Austria Switzerland UK New Zealand Spain Netherlands Finland Italy Japan Norway Hong Kong Singapore Eire Australia Canada Belgium Portugal Sweden USA Indonesia Taiwan Brazil Venezuela China Thailand Mexico Korea Korean investors have significantdiversification opportunities 12. Taxation Incentives 13. Taxation of Pension Funds Taxation incentives work! 14. Protection of Assets 15. Protection of Assets

Trust structure

• separate the pension fund from the employer

Governing bodies

• Pension Schemes Office

• Occupational Pensions Regulatory Authority (OPRA)

• Pensions Ombudsman

Legislation

• Pensions Act 1995

• Financial Services Regulations

Expertise

• Fund managers, lawyers, actuaries & investment consultants

16. Challenges Faced 17. Challenges Faced

Pension mis-selling Personal pensions introduced in 1988

Theft Maxwell case led to the Pensions Act 1995 and to OPRA being formed

Annuities Conversion rates are low, sopensions may less than desirable

Myners Report Broad based review of

• • • 1.Investment process for pension schemes

• • • 2. Security of pension fund promise, and

• • • 3. Other collective investment vehicles

AccountingMay be the last straw for defined Standard FRS17benefit plans.IAS 19 preferred

18. BAM as an example 19. Baring Asset Management

Member of ING Group

US$34.6 billion assets under management

13 offices world-wide

• 4 main investment offices

• Hong Kong office set up in 1975;launched first ever Korean equitymutual fund for foreign investors

125 investment professionals

Taiwan Isle of Man Tokyo LONDON Boston Toronto San Francisco Hong Kong Dublin Frankfurt Guernsey Bahrain Jersey Paris Assets as at 28 thFebruary 2002, Investment Professionals as at 31 stMarch 2002 20. Client Base Clients By Mandate Clients Assets Invested Fixed Income Equities Balanced 40% 33% 27% 28 thFebruary 2002 United Kingdom 16% Continental Europe North America Emerging Asia Pacific Intl Fixed Interest UK Fixed Interest Cash/Near Cash 12% 9% 4% 8% 33% 13% 3% 2% Japan 21. Client Base Clients By Type Clients Assets By Origin 28 thFebruary 2002 *Middle East,Africa, Latin America Pension Funds Others Governments Private Clients Pooled Vehicles 52% 11% 11% 9% 13% 4% Charities/Foundations United Kingdom North America Continental Europe Offshore Pacific MEALA* 40% 25% 9% 4% 14% 8% 22. InvestmentOrganisation 125 Investment Professionals AsiaPacific 6 Hong Kong 31 stMarch 2002 Director of Investment Process 17 London, Boston,Tokyo ASSETALLOCATION REGIONAL EQUITY FIXED INCOME& CURRENCY Fixed Income & Currency Strategic Policy Group& Investment Management Teams 21 London, Boston Tokyo Hong Kong Number of investment managers.All teams share some resources. RESEARCH Global Sector Teams Quantitative Research Team5 UK & Europe 13 London Japan 7 Tokyo North America 9 Boston PRIVATE CLIENTS Emerging Markets 13 London Boston Hong Kong CHIEF INVESTMENT OFFICER Healthcare Industrials Telecoms Media Consumer Goods Natural Resources Technology Financials 23. Investment Philosophy Inflation & Credit Fundamentals Applying rigorous fundamental research to identifyunrecognised value in real yields and credit spreads ValuationHIGH LOW Growth CHEAP EXPENSIVE Equity Deteriorating Value Torpedoes Recognised Value Unrecognised Value Fixed Income IMPROVING DETERIORATING Real Yield & Spread HIGH LOW Torpedoes Value Traps Growth at a Reasonable Price We seek under-recognised growth companies that will deliver positive surprise 24. Four Step Investment Process A Structured Investment Process Global Model Portfolio Model Stock Portfolios Stock Research & Selection 1 Global Strategy 2 Client Portfolio Portfolio Construction 3 Client Portfolio Implementation 4 25. Portfolio Construction & Risk Control Note: From time to time, broad characteristics may be outside these limits/ranges.This is closelymonitored and adjustments made when appropriate, to avoid unnecessary portfolio turnover.

90-120% of benchmark P/E

(using IBES FY1 earnings)

5% relative

3% relative