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Succeeding as a fund manager

Richard Penny - Senior Fund Manager This is not a consumer advertisement. It is intended for professional financial advisers and should not be relied upon by private customers or any other persons

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Fund Manager, Richard Penny

Richard is a Senior Fund Manager of the UK
Smaller Companies team and the manager of the L&G UK Alpha Trust.

He has over 18 years of investment experience

across 3 economic cycles.

Richard joined LGIM in 2002 having previously

worked for five years as a Fund Manager for M&G Investment Management and four years as a Fund Manager at Scottish Amicable Investment Management. Richard began his career in 1992 at Scottish Amicable Investment Managers.

Richard has a Masters degree in Engineering and

Economics, Oxford University.

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View From the Ivory tower James Montier

Be a stock picker Be an independent thinker Run a focus fund : wait for the fat pitch Know when to sell Have some skin in the game Do something different

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How we do something different

Our Philosophy Market behaviour

Owner of businesses Long term investments

Trader of shares Short term

Aggressive stock picking

Fundamental analysis (trust in valuations)

Benchmark hugger
P/E upgrades

Contrarian

Consensus

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Investment Process
Trusted network Company meetings AAA advantage Refinancing/Rights Issues Third party research Directors dealing Management owning Cross fertilisation Management Return on Capital Cash Conversion Predictability Growth Target bottom decile of P&L based: P/E, EV/EBITDA BS based: P/B, P/Sales EV/FCF%

Price targets continuously reviewed Automatic review when target hit Momentum factors considered for optimal timing for disposal Potential triggers: change in management, corporate activity, a high fair value score

Typically 30-40 holdings Deep value and strong growth Set to double over 2-3 years

Sell

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What makes a good business

Sales Growth Cash profit margin Competitive Advantage period Working Capital intensity Fixed Capital intensity Cost of Capital

Organic sales growth Business franchise - Cash return on capital

- Competitive advantage

Cash tax rate

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Valuation/Risk
Only buy an investment if it has upside! Include a new investment if it raises your average portfolio upside A good business is only a good investment at the right price

A bad business can be a good investment at a very cheap price Excessive debt kills

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Common mistakes/Behavioural finance

I am over optimistic I think investments I own are more valuable than those I don't I am a bad seller of stock

I look for factors which confirm my point of view

Review lots of investments/ invest in few Set price targets Write down assumptions when entering an investment Eagerly seek factors that oppose own point of view.

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Books/Learning from other peoples mistakes and success

Business analysis
Value Growth Investing

Valuation/Finance

Behavioural Finance

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Advice Slide
Do something you enjoy for a living In investment if you get it right 55% of the time you are doing well. Learn from your own mistakes Learn from the mistakes of others/read Books Work out the motivations of other people
- Interviews, directors, Brokers, Corporate Finance

Think Global

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11

L&G UK Alpha selected success stories

Immunodiagnostics Tanfield Supergroup* Coal of Africa Hutchinson China M Tepnel Restore Eservglobal Easydate/Cupid iomart Endace Redstone Xaar Nord Anglia Ncipher TT Electronics Cap-XX 3i DSG Smart Metering Exillon 344% 274% 212% 195% 180% 170% 168% 153% 147% 144% 121% 109% 108% 102% 92% 87% 78% 51% 51% 50% 50%

*Initial IPO purchase Price increases calculated as per average prices as at 31st January 2012. All figures represent absolute returns over holding period and may reflect realised or unrealised gains.

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Disclaimer
Important Information This presentation, and any information it contains, has been produced for use by professional managers and advisors only and should not be distributed without the permission of Legal & General Investment Management Limited or Legal & General (Unit Trust Managers) Limited. The UK Alpha Trust (the Fund) is authorised unit trust, established as UCITS fund, managed by Legal & General (Unit Trust Managers) Limited. Legal & General Investment Management Limited has been appointed as the Investment Advisor and Distributor of the Funds and its main function is to invest the assets of the Fund. Both companies are authorised and regulated by the Financial Services Authority. The Fund is designed to be held for the longer term. The risks associated with this Fund are set out in the Prospectus and these should be understood before making any investment decisions. Additional information in relation to the Risk Management process is available on request. A copy of the Prospectus can be obtained from: Legal & General Investment Management Limited - Telephone number 020 3124 3583 All rights in the FTSE All Share (the Index) vest in FTSE International Limited (FTSE).FTSE is a trade mark of the London Stock Exchange Plc and The Financial Times Limited and is used by FTSE under licence. The Legal & General UK Alpha Trust has been developed solely by Legal & General (Unit Trust Managers) Limited. The Index is calculated by FTSE or its agent. FTSE and its licensors do not sponsor, advise, recommend, endorse or promote this fund and are not in any way connected to it and do not accept any liability (including in negligence or otherwise) to any person for any loss arising out of use of the Index by any person or in relation to the funds issue, operation or trading or as a result of an investment in the fund. FTSE makes no claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the fund or as to the fitness or suitability of the Index for the particular purpose to which it is being put by Legal & General Investment Management

The information in this document and the views expressed are provided by Legal & General Investment Management who act as investment adviser to the Legal & General UK Alpha Trust