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29 October 2004

From Principles to Prosperity How we Integrate Corporate Governance into our Investment Process. Guy Jubb Head of Corporate Governance. Shanghai Stock Exchange Asian Corporate Governance Association. 29 October 2004. Standard Life Investments. Global, long-term active investor

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29 October 2004

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  1. From Principles to Prosperity How we Integrate Corporate Governance into our Investment Process Guy Jubb Head of Corporate Governance Shanghai Stock Exchange Asian Corporate Governance Association 29 October 2004

  2. Standard Life Investments • Global, long-term active investor • Standard Life founded in 1826 • Head Office in Edinburgh, Scotland • Investment offices in Canada, USA, Hong Kong and India • Retail and institutional clients • Reputation for performance and service • Manage assets of US$162 billion • Invested in equities, bonds and property • Progressive global diversification • Winning new money. Last year of US$4.1 billion: this year U$4.5 billion • Investment style: ‘Focus on Change’ • Economic change • Corporate change eg strategy and corporate governance

  3. Our approach to corporate governance • Principles based guidelines • UK & North American guidelines long established • Approved by Board and on our website • Global principles > Regional principles > Guidelines • Applied with flexibility and professional care • Developing additional guidelines for other countries in 2005 • Engagement • Proactive and reactive • Helps build mutual understanding • Breathes life into written word • Global governance platform integrated into investment processes • Launched 2004. Progressive implementation • Strengthening our global processes • Sensitive to local custom and practice

  4. Country governance analysis • Legal and regulatory frameworks • Listing rules • Disclosure requirements • Roles of advisers • Tone and enforcement • Voting environment • Ease • Cost • Availability of information eg annual report, AGM notice • Language • Reform agenda • What’s in the pipeline? • Reform process • Consistent with ‘Focus on Change’

  5. Stock selection: governance analysis • Board balance and composition • Supervisory or unitary? • Role of chairman • At least 3 independent directors • Nominations process • Remuneration policies and practices • Fixed v. variable pay • Incentive or reward schemes? • Long-term alignment • Dilution • Audit environment and internal control • Audit committee role and composition • Who are the auditors? • Nature and quantum of non-audit service • Corporate social responsibility • Emphasis on disclosure quality • Impact of reputational risk • Culture critical • Ownership profile and voting regulations • Who controls the company’s destiny? • Strong preference for one-share one-vote • Poison pills aversion

  6. From Edinburgh to Shanghai Our governance roadmap

  7. Managed process integration • Hub and spoke management approach • Hong Kong based governance co-ordinator • Professional support from Edinburgh based team • Regular two-way communication • Scope • Analysis • Engagement • Consultations • Benefits • Local ownership and knowledge • Consistent global application of governance principles • Cost optimisation • Portfolio enhancement

  8. Our next steps • Develop and publish corporate governance guidelines applicable to China • Assist our evaluation: not a code • Similar architecture to UK guidelines • Refreshed and polished at regular intervals • Strengthen analysis processes • Prominent incorporation in quarterlies • Morning meeting discussion • Increased commitment by analysts • Implement systematic engagement • Generally initiated by Standard Life Investments • To improve our understanding • To explain our approach as investors • There to help • Building long-term relationships • Individual and corporate • Partnership not confrontation

  9. Conclusion • Principled, flexible and professional approach • Analysis and engagement are key process components • Listening, learning and sharing • Exceptional performance for our clients

  10. FROM PRINCIPLES TO PROSPERITY THANK YOU!

  11. Remember - past performance is no guarantee of future performance. Past performance is not necessarily a guide to future performance. The value of investments and any income from them may go down as well as up and cannot be guaranteed. Standard Life Investments Limited, tel. 0131 225 2345, is a company registered in Scotland (no. SC 123321) Registered Office 1 George Street Edinburgh EH2 2LL. The Standard Life Investments Group includes Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Standard Life Investments (Corporate Funds) Limited and Standard Life Investments (Private Equity) Limited. Standard Life Investments Limited acts as Investment Manager for The Standard Life Assurance Company and Standard Life Pension Funds Limited. Standard Life Investments may record and monitor telephone calls to help improve customer service. All companies are authorised and regulated by the Financial Services Authority. 2004 Standard Life Investments

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