Colonial First StateAn Introduction to Managed Funds

This presentation is given by a representative of Colonial First State Investments Limited AFS License 232468 (Colonial First State). The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36.

All products are issued by Colonial first State Investments Limited ABN 98 002 348 352. Prospectuses or Product Disclosure Statements (PDSs) describing the products are available from Colonial First State. The relevant prospectus or PDS should be considered before making a decision about any product.

This presentation does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.

The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation.  

Disclaimer

Agenda

What is a Managed Fund? Asset Classes What is the right balance for me? Why managed funds Investing for the long term

What is a Managed Fund?

Your money is pooled with other investors

You decide on the type of fund (e.g. Australian share fund, international share fund, balanced fund)

Your fund manager researches and selects the companies (or assets) in which to invest

Risk

Retu

rn

= Australian shares

= Fixed Interest & Cash

= Global shares

= Listed property

= Global property

Risk / return trade off

Asset Classes

Shares

Ownership in a company

Growth Asset Capital growth (earnings) Income (dividends)

Potential for high return

Higher risk

Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

J un-84

J un-86

J un-88

J un-90

J un-92

J un-94

J un-96

J un-98

J un-00

J un-02

J un-04

Australian shares

Global shares

$ Annualised return = 13.2%

Annualised return = 12.7%

Source: IRESS - S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

Property

Investment in property securities Growth asset Income (rent) Capital Growth (increase in value of property)

Hedge against inflation 1980’s

Diversify Hotels, office towers, shopping centres

Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

J un-84

J un-86

J un-88

J un-90

J un-92

J un-94

J un-96

J un-98

J un-00

J un-02

J un-04

Australian shares

Global shares

Property securities

Annualised return = 12.7%$

Source: IRESS - S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

Bonds

Income producing asset Purchase of bond = lending funds to issuer Income payments (coupons)

Can be traded on secondary market

Can generate both a profit & a loss

Distinct relationship between Bond prices Interest rates

Bond example

Fund Manager holds $1,000 worth of Govt. bonds with a interest rate of 8%pa ($80) Interest rates fall to 6% ($60) Investor prefers 8% (profits) Interest rates rise to 10% ($100) Investor prefers 10% (loss)

There is an inverse relationship between interest rates and bonds

Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004

Annualised return = 11.0%

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

J un-84

J un-86

J un-88

J un-90

J un-92

J un-94

J un-96

J un-98

J un-00

J un-02

J un-04

Australian shares

Global shares

Property securities

Australian fixed interest

$

Source: IRESS - UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

Cash

Security Capital Short term, i.e. 12 months or less

Cash Management Trust Generally provides better return than a bank account

Asset Class ComparisonValue of $10,000 invested Jun 1984 – Jun 2004

Annualised return = 9.1%

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

J un-84

J un-86

J un-88

J un-90

J un-92

J un-94

J un-96

J un-98

J un-00

J un-02

J un-04

Australian shares

Global shares

Property securities

Australian fixed interest

Cash

$

Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

What is the Right Balance?

What is the right balance?

List income & growth needs

Consider time horizon & degree of risk

Consider investment alternatives (which meet your needs)

Reassess your balance of investments as your needs and the economic environment change

Cash

Fixed Interest

Property

Shares

Spreading your savings helps your chances of achieving your retirement goals

$ $ $

What is the right balance?Diversification across asset classes

What is the right balance?Risk / return trade off

CFS Diversified Fund

CFS High Growth Fund

= Australian shares

= Fixed Interest & Cash

= Global shares

= Listed property

= Global property

Risk

Retu

rn

CFS Balanced Fund

CFS Conservative Fund

Why managed funds?

Why managed funds?

Spread investment risk

Potential for higher returns

Liquidity of asset holding

Fund manager expertise

Ability to invest in overseas markets that are otherwise difficult to access

Asset class returns (%pa)Annual Returns to 30th June 2004

INTERNATIONAL

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Cash 7.1 7.8 6.8 5.1 5.0 5.6 6.1 4.7 5.0 5.3

Bonds 11.9 9.5 16.8 10.9 3.3 6.2 7.4 6.2 9.8 2.3

Listed Prop 7.9 3.6 28.5 10.0 4.3 11.9 13.9 14.9 12.1 17.2

Shares 5.7 15.8 26.6 1.6 15.3 15.1 9.1 -4.5 -1.6 21.7

Global shares 14.1 6.7 28.5 41.6 8.2 23.7 -5.8 -23.3 -18.3 19.4

Percentage return over 1 year to 31st March 2004. Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), and the SSB World Government Bond Index *ex Australia Hedged to A. All dividens reinvested excluding fees and charges

AUSTRALIAN

Why managed funds?Taking the best of each asset class

Source: UBS Australia Bank Bill Index (91 day Commonwealth Treasury Note Index pre Jan 1999), UBS Australian Composite Bond Index, S&P/ASX 200 Property Accumulation Index (ASX Property Accumulation Index pre April 2000), S&P/ASX 300 Accumulation Index, (ASX All Ordinaries Accumulation Index pre April 2000), MSCI World Price Index (A$), All dividends reinvested, excluding fees and charges

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

J un-84

J un-86

J un-88

J un-90

J un-92

J un-94

J un-96

J un-98

J un-00

J un-02

J un-04

Australian shares

Global shares

Property securities

Australian fixed interest

Cash

Diversified

$

0%

10%

20%

30%

40%

50%

60%

US UK Europe (exUk)

Japan Asia Pacific(ex Japan)

Aust

Why managed funds?Gain access to global markets

World equity markets by market capitalisationas at 30th November 2003

Source: RimesData to 30th November 2003

Why managed funds?Putting it into perspective

Australia USAA$bill A$bill

48% of ASX 300 A$649 bill 23% of S&P 500 US$10,408 bill

News Corp 49

BHP 47

NAB 45

Commonwealth Bank 41

ANZ 33

Telstra 31

Westpac 31

AMP 12

Woolworths 12

St George 11

General Electric 479

Microsoft 411

Exxon Mobil Corp 409

Pfizer 360

Citigroup 323

Wal Mart 312

AIG 253

Bank of America 240

Intel 233

Johnson & Johnson 226

Source: IRESS, ITG. Data as at 30th June 2004. Global stock data as at 12th July 2004

Understanding the current market

1200

2200

3200

4200

5200

6200

Dec-90 Dec-93 Dec-96 Dec-99 Dec-02

Understanding the current marketInternational shares… we’ve seen better!

The 21st CGlobal shares in AUD

MSCI – World Net Index ($A) Source: IRESS. Data to 30th June 2004

500

1000

1500

2000

2500

3000

3500

4000

4500

Mar-90 Mar-93 Mar-96 Mar-99 Mar-02

US company earnings

US Sharemarket

Source: Bloomberg. Sharemarket data and earnings data to October 2003

Understanding the current market US sharemarket and company earnings

0

5

10

15

20

25

30

35

Sep-59 Sep-70 Sep-81 Sep-92 Sep-03

0

1000

2000

3000

4000

Corporate profits -Source: RBA Bulletin table G12. Data to 31st March 2004Australian Share price index – Source: IRESS. Data to June 2004

Australian share price index

Corporate profits

$bill

Share prices & company profits grow together

Understanding the current market A ‘new’ era?

Recessions – USA, Europe, Japan

Wars – Afghanistan, Iraq Pestilence – SARS Terror – September 11 Scandals – Enron

Recessions in 1970s, 1980s, 1990s

Korea, Cold War, Gulf War AIDS IRA, Red Brigade, Black

September Barings, S&L crisis

Investing for the Long Term

Investing for the long termPatience has been rewarded

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

1 year rolling returns(% )

Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

Patience has been rewarded

-20%

-10%

0%

10%

20%

30%

40%

50%

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

3 year (% )

Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

Patience has been rewarded

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

5 year (% )

Source: Rimes. Returns from the MSCI World Net Index $A, calendar years to 30th November 2003

Time in the market, not timingAustralian shares to 30th June 2004

10.50%

8.61%

7.33%

5.07%

3.04%

0% 2% 4% 6% 8% 10% 12%

10 year return (% p.a)

10 years less 5 bestdays

10 years less 10 bestdays

10 years less 20 bestdays

10 years less 30 bestdays

Source: IRESS, Colonial First State*All Ordinaries Accum Index used prior to April 2000

Conclusion

Understand how sensitive you are to changes in the market & know your investment time frame

Managed funds making accessing a range of asset classes easy

Invest for the long term

Diversification is the key