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  • Let me tell you a little about ourselves. My partner, Steven Heinz and I founded Lansdowne Partners two and a half years ago and launched our Funds which invest in European equities on September 1st, 1998. Our assets under management are currently about $800mm which are split predominantly between an offshore fund -The Lansdowne European Equity Fund Ltd and an onshore fund -The Lansdowne European Equity Fund LP. We are up about 125% net of fees since our inception with significantly lower downside volatility than the market.

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  • 1. Lansdowne Partners Limited Authorised and regulated in the UK by the Financial Services Authority. Registered as an investment adviser with the US Securities and Exchange Commission Lansdowne Partners Limited is the General Partner of Lansdowne Partners Limited Partnership Presentation to Guanghua School of Management Financial Market Workshop 2007 Peter Davies May 2007
  • 2. Agenda
    • Introduction to Lansdowne
    • Evolution of Asset Management Industry
    • Investment Process
    • Personal aspects of managing a hedge fund
    • Current thoughts on China and other investment thoughts
  • 3. Introduction to Lansdowne Europe UK Macro Emerging Markets AUM: $5.8bn Launched: 1998 AUM: $6bn Launched: 2001 AUM: $2.8bn Launched: 2004 AUM: $663m Launched: 2005 AUM: $679m Launched: 2006 Global Financials Total Assets: $16bn Number of Employees: 91 External Limited Partner: Morgan Stanley (19%)
  • 4. Lansdowne UK Equity Fund AUM : $6.0bn Inception : August 2001 Performance (annualised) : 21.42% Volatility (Annualised) : 8.54% Beta since Inception : 0.13 Eurohedge UK Fund of the Year: 2004, 2005, 2006
  • 5. Evolution of Asset Management Industry Investment Bank Debt Market 20 years ago Now Borrower Bank Shareholders Borrower Banks Insurance Companies Pension Funds Hedge Funds Clients (Incl Banks, Ins Co’s, P/Funds) Shareholders Shareholders Policy Holders Dependents Risk globalised and fragmented
  • 6. Evolution of Asset Management – Equities Index ($4 tn) Growth Business No Capacity Constraint Very Low Fee No Human Investment Involvement Highly Automated Index Benchmark ($30+ tn) Shrinking Business Some Capacity Constraint Expensive Significant Human Investment Involvement Struggle to retain Investment Talent Culture Absolute Return ($2.5 - $3 tn) Growth Business Capacity Constraint by Strategy High Fee High Intellectual Property Content Attracts best Investment Talent Culture
  • 7. Source: Absolute Return, Alpha, Morgan Stanley estimates Institutionalisation of Hedge Funds
  • 8. Investment Approach Aim to use scale and expertise to gain competitive edge throughout process INPUTS ANALYSIS POSITIONS Company Meetings Published Data Sell-side Independent Research Observation ANALYSIS
  • 9. Independent Research Example – Buy to Let At what level of interest rate would you expect house prices to fall 10%? No impact A slight impact A very strong impact Base: All buy-to-let investors (140) Source: Circle Research Impact of interest rate rises Mean score: 7.8 11% 44% 43%
  • 10. Position Structure – Alignment of Research and Capital Risk Probability Change in share price over holding period Unhedgeable risk Hedgeable risk
  • 11. Hedge Fund Management
    • Balance
    • Original and right
    • Background
    • Motivation
    • Transparent Performance
    • Inevitable Down Periods
    • Variety
    Skills Needed Experience
  • 12. Effect of China
    • Global price of labour
    • Risk-free rates
    • Basic Resources
    • Movement into Services vs Manufacturing
    • Consumption up hierarchy of needs
    • Investment in risky vs risk-free assets
    • Geopolitics
    Future Basic Template Current ?
    • Industrial Revolution
  • 13. Key other issues
    • Environment / Healthy-Eating / Global food consumption
    • Capital Markets Development (Investment Risks / Shareholder value)
    • Commodities vs Financials
    • Government Spending / Elections
  • 14. Macro view – Debt vs Equity vs Property US Corporate Bond Yield – S&P Earnings Yield Source: Ned Davis Research Housing Rental Yield Relative to Equity Dividend Yield Source: BCA Research 3 2 1 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 3 2 1 1.0 .8 .6 .4 1.0 .8 .6 .4 U.K . U.S . 1
  • 15. Disclaimer
      • This presentation and the accompanying documents (the “Presentation”) do not provide or offer financial or other advice. You should not rely on it as financial advice. The contents of Presentation may not be reproduced or redistributed without the written consent of Lansdowne Partners Limited.
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      • You should appreciate that the value of any investment, and any income from any investment, may go down as well as up and that an investor may not receive back, on redemption of his investment, the amount which he invested. Past performance is not necessarily indicative of future results. Changes in rates of currency exchange may cause the value of an investment to go up or down.
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      • The investments covered in the Presentation may not be dealt on a recognised or designated investment exchange for the purposes of the Financial Services and Markets Act 2000 and it may therefore be difficult for an investor to dispose of such investments otherwise than by way of redemption or to obtain reliable information about the extent of the risks to which his investment is exposed.
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      • The Presentation is for information purposes only and does not constitute or form part of any offer to issue or sell, or any solicitation to buy or invest in any investment or investment vehicle nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract thereof.
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      • Whilst the Presentation may be based on research carried out by Lansdowne Partners Limited, and our understanding of the relevant companies, the industrial sectors, the economy and the markets in which they operate, we do not accept liability to any person who relies on the content of the Presentation.
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      • All information contained in the Presentation is obtained from sources we believe to be reliable, but which have not independently been verified. We therefore make no guarantee, representation or warranty and accept no responsibility or liability as to the completeness of the information contained in this material.
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      • All the opinions, forecasts, estimations and comparable information given in the Presentation are the non-binding opinions of our research personnel and neither Lansdowne Partners Limited nor any of Lansdowne Partners Limited’s officers, directors, or employees makes any guarantee, representation or warranty, nor does any person accept any responsibility or liability for any loss of profit, indirect or other consequential losses or other economic losses suffered by any person arising from reliance upon any information, statement or opinion contained in the Presentation (whether such losses are caused by the negligence of such person or otherwise).
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      • The information contained in the Presentation shall not be considered as legal, tax or other advice.
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      • Lansdowne Partners Limited and/or its directors, officers or employees may have, or have had interests in, and may at any time make purchases and/or sales as principal or agent or may provide or have provided corporate finance and or other advice or financial services to the relevant companies.
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      • All information in the Presentation is expressed as at its date and is subject to changes at any time without prior notice or other publication of such changes.
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      • This Presentation is being issued inside and outside the United Kingdom by Lansdowne Partners Limited, which is authorised and regulated by the Financial Services Authority, to and/or is directed at (a) persons who are intermediate customers or market counterparties for the purposes of the FSA Conduct of Business Sourcebook (“COBS”) and (b) to the extent that the investments or investment services referred to herein constitute unrecognised collective investment schemes, to persons who are also of a kind to whom such schemes may lawfully be promoted by a person authorised under the Financial Services and Markets Act 2000 (the “Act”) by virtue of Section 238(5) of the Act and Annex 5 to Chapter 3 of COBS. This Presentation is exempt from the scheme promotion restriction (in Section 238 of the Act) on the communication of invitations or inducements to participate in unrecognised collective investment schemes on the grounds that it is being issued to and/or directed at only the types of person referred to above.
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      • Lansdowne Partners Limited and Lansdowne Partners Limited Partnership are registered as investment advisers with the US Securities and Exchange Commission.
      • Lansdowne Partners Limited Telephone: 44 (0) 20-7290-5500
      • 15 Davies Street London W1K 3AG Fax: 44 (0) 20-7409-1122