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1 ASX/Media Release 19 July 2011 NOT FOR PUBLICATION OR DISTRIBUTION IN THE UNITED STATES, CANADA OR JAPAN BT Investment Management Limited announces the acquisition of J O Hambro Capital Management for 209 million (A$314 million) and an A$275 million entitlement offer Highlights London-based, boutique active equity investment manager FUM of 7.1 billion across 15 investment strategies Consistent with BTIM s stated strategy Complementary investment capabilities and strong cultural fit Will drive growth, increase margins and enhance diversification Expected to be Cash NPAT EPS accretive 1 in the first full year of acquisition Creates a diversified investment management business with two powerful brands BT Investment Management Limited (BTIM) today announced it has agreed to acquire J O Hambro Capital Management, a privately owned, London-based, boutique active equity investment manager with 7.1 billion (A$10.7 billion) 2 of funds under management (FUM), for a purchase price of 209 million (A$314 million), subject to certain approvals (the Acquisition). The Acquisition will be funded by BTIM through a combination of equity, debt and cash. Mr Emilio Gonzalez, BTIM CEO, said, I am delighted to announce this Acquisition to the market today, which aligns with our long term strategic objectives. J O Hambro Capital Management is a highly successful investment manager, recently named Specialist Group of the Year by a leading UK investment publication. The strong cultural fit, aligned business models and investment philosophies make for a powerful long-term partnership. BTIM s acquisition of J O Hambro Capital Management will help drive growth, increase margins and enhance diversification. Our combined businesses will create a diversified investment management business with two powerful brands. Importantly, the Acquisition will make a meaningful contribution to earnings. It is expected to be EPS accretive in the first full year of ownership on a Cash NPAT basis, delivering value to BTIM shareholders. Commenting on the transaction Mr Gavin Rochussen, CEO of J O Hambro Capital Management, said, This represents a significant step in the evolution of J O Hambro Capital Management and provides certainty in the form of a committed long-term partner. Together with BTIM, we will continue to deliver strong investment performance for clients. We also see significant growth potential for J O Hambro Capital Management, with a robust framework in place to attract, incentivise and retain the best investment management talent while continuing to offer them full autonomy in their investment decision-making. 1 Cash NPAT EPS accretion statement is based on diluted EPS and the assumptions and qualifications in section of the Prospectus (available at or by calling ) including in relation to the level of subscriptions under the Entitlement Offer and the level of performance fees. The actual results of the combined business could be materially different given performance in any period and depends on a range of matters, many of which are outside of BTIM's control. The Acquisition is expected to be EPS dilutive on a statutory NPAT basis. 2 GBP denominated amounts have been translated at a rate of to A$

2 J O Hambro Capital Management 3 J O Hambro Capital Management is a privately owned, London-based, boutique active equity investment manager with 7.1 billion (A$10.7 billion) in FUM and 84 employees as at 30 June It has fifteen specialist investment strategies across UK, Europe, Global/EAFE, Japan, Asia and emerging markets. All funds have outperformed their benchmarks since inception. J O Hambro Capital Management has experienced strong growth in its funds, with net inflows of 2.6 billion (A$3.9 billion) for the 12 months to 30 June It offers diversification across distribution channels and geography of client base. J O Hambro Capital Management s client base comprises retail and institutional clients, the latter including UK and overseas public and corporate pension funds. Given the complementary nature of the businesses, there will be no change in day-to-day operations at J O Hambro Capital Management as a result of the Acquisition. J O Hambro Capital Management will operate as a stand-alone boutique. It will continue to be managed by the existing management team, with Gavin Rochussen and James Hambro continuing as Chief Executive Officer and Non-Executive Chairman respectively. J O Hambro Capital Management investment managers will continue to have full discretion over investment decisions and investment oversight. The key principles of fund manager compensation remain unaltered, but have been enhanced to provide additional long-term retention to promote alignment between employees, clients and shareholders in the business. Under the new and existing schemes, J O Hambro Capital Management s staff will receive equity in BTIM. Rationale for the Acquisition One of BTIM s three key strategic objectives is to build out its boutique model to attract and expand into other investment capabilities, providing growth and diversification to the business. The acquisition of J O Hambro Capital Management is consistent with this stated strategy. Drive growth The Acquisition will provide new growth opportunities for BTIM through the addition of: a high-growth business, with a track record of strong fund inflows a broader set of products with significant capacity entry into new markets and access to new clients Increase revenue margins The Acquisition is expected to increase BTIM s average revenue margins. J O Hambro Capital Management s strong and consistent investment performance coupled with capacity management have resulted in revenue margins consistently in excess of 60 basis points across its portfolio. 3 Collectively the assets being acquired by BTIM are defined as J O Hambro Capital Management and consist of 100% of J O Hambro Capital Management following the Demerger, which will comprise: J O Hambro Capital Management Group s equity investment management business; J O Hambro Capital Management Group s property administration activities; and a 9.9% interest in James Hambro & Partners LLP, J O Hambro Capital Management Group s private clients business. 2

3 Enhance diversification Importantly, the Acquisition will create an investment management business with greater diversification across its revenue streams, asset classes and geography of client base. The combination of the businesses will reduce reliance on any single fund, strategy or individual and will create a more balanced portfolio with 30 per cent of FUM in Australian equities, 31 per cent in international equities and 39 per cent in cash, fixed interest and other assets. Aligned investment philosophy Aligned with BTIM s own investment philosophy, J O Hambro Capital Management s culture promotes independent investment decision-making. Investment teams act independently, adopting an active management style based on a stock-picking approach to building portfolios. Investment professionals are rewarded on the success of their own funds. J O Hambro Capital Management s equity business is consistent with BTIM s core capability. It s global and regional equities funds are complementary to those BTIM currently offers through its alliance partners, AQR Capital Management LLC and MFS (UK) Limited. Consideration and funding BTIM will acquire J O Hambro Capital Management for a purchase price of 209 million (A$314 million). BTIM will also acquire seed capital invested in J O Hambro Capital Management funds with a current value of 15 million (A$23 million). The purchase price is being paid in the form of cash or equivalents, including Loan Notes, and Converting Notes. The Acquisition will be funded by BTIM through a combination of: Equity - a pro rata entitlement offer to raise up to approximately A$275 million, underwritten and committed to A$212 million 4 Debt a bridge debt facility for up to 65 million, with final drawdown subject to the amount raised under the Entitlement Offer Cash - A$6 million cash resources BTIM will issue approximately 18 million Converting Notes to management and employees of J O Hambro Capital Management, which will convert into BTIM ordinary shares on a one for one basis over vesting periods, subject to certain conditions. The Acquisition is expected to complete on 4 October 2011 subject to conditions precedent being satisfied. The Acquisition is subject to approval by the UK Financial Services Authority and certain termination events. The Entitlement Offer, to partially fund the Acquisition, is conditional on shareholders approval by an ordinary resolution in a general meeting. UBS Limited acted as sole financial adviser on the Acquisition. Entitlement Offer BTIM also announced today a 4 for 5 pro rata entitlement offer of new BTIM ordinary shares at an offer price of $2.15 per share, to raise up to A$275 million, underwritten and committed to A$212 million 4 (Entitlement Offer). The offer price represents a discount of 12.2 per cent to the closing market price of BTIM shares yesterday, 18 July New shares issued under the Entitlement Offer will rank equally with existing BTIM shares. The first dividend payable on the new shares will be the final dividend for the year ending 30 September The Board expects to maintain the final dividend on a cents per share 4 The Joint Lead Managers have underwritten the Entitlement Offer up to $47 million and Westpac has separately committed to take up its Entitlement in respect of its direct holding for $165 million, subject to the Entitlement Offer not being withdrawn and the underwriting agreement not being terminated. 3

4 basis for the year ending 30 September 2011 in line with the prior year subject to market conditions. Information in relation to the Entitlement Offer, including key risks, eligibility of shareholders, and the shortfall bookbuild process is set out in a prospectus dated 19 July 2011, which has been lodged with ASIC and ASX today (Prospectus). It will be despatched to shareholders on or around 26 August BTIM has appointed Macquarie Capital (Australia) Limited and UBS AG, Australia Branch as Joint Lead Managers. Under BTIM s constitution the issue of new securities in excess of ten per cent of the existing share capital requires approval by shareholders in a general meeting by an ordinary resolution. An Extraordinary General Meeting (EGM) to approve the issue of new BTIM securities will be held on Thursday 18 August A notice of meeting and explanatory memorandum in respect of the EGM is being despatched to all shareholders today. Westpac Financial Services Group Limited (Westpac), a wholly owned subsidiary of Westpac Banking Corporation, has a direct ownership of 60 per cent of BTIM and has given an undertaking to vote in favour of the resolution at the EGM and has confirmed today that it intends to take up its full entitlement in the Entitlement Offer (subject to the Entitlement Offer not being withdrawn or the underwriting agreement being terminated). Following the EGM, eligible shareholders will be able to purchase 4 new shares for every 5 existing BTIM shares held at the record date of 7:00 pm AEST on 24 August The Entitlement Offer will open on 26 August 2011 and will close at 5:00pm AEST on 9 September After the close of the Entitlement Offer, entitlements not taken up will be offered for sale in a shortfall bookbuild process to eligible institutional investors and any premium received above the offer price will be distributed to non-participating shareholders. Details of selling restrictions relating to the Entitlement Offer are set out in Appendix 3. Debt facility A bridge debt facility of 65 million (A$98 million) has been put in place. It is intended to replace the bridge debt facility with a bank debt facility prior to completion of the Acquisition. The final amount of the debt required to fund the Acquisition will depend upon the proceeds raised under the Entitlement Offer but will not be less than 23 million (A$35 million). Capital management The BTIM Board intends to continue its current dividend policy, targeting a pay-out ratio of between 80 and 90 per cent of Cash NPAT 5. Dividends are expected to remain fully franked for the next few years. Thereafter franking levels are expected to decline significantly given that a large portion of earnings will be generated offshore. Depending on the level of debt post Acquisition, BTIM may activate its dividend reinvestment program from the financial year 2012 and use the proceeds to contribute to the pay down of debt. 5 Cash NPAT is calculated by adding to statutory profit the amortisation for employee equity schemes and then deducting the annual cash cost of buying BTIM shares to satisfy employee equity schemes. As a result of the Acquisition introducing new forms of employee equity schemes, the definition of Cash NPAT is being expanded see Section of the Prospectus. 4

5 Business update For the full year results to 30 September 2011, BTIM is expecting Cash NPAT (excluding transaction costs) to be between A$28 million to A$32 million. This guidance includes realised performance fees for the financial year ending 30 September 2011 of A$6.2 million. It assumes stable equity markets 6. For further information on this media release, please contact: Mr Emilio Gonzalez, CEO Media and Investor Relations Mr Cameron Williamson, CFO BT Investment Management Symbol Strategic Communication Telephone: (02) Telephone: (02) or Further information in relation to the J O Hambro Capital Management acquisition and the Entitlement Offer including the Prospectus is available on the BTIM website at: Further information on J O Hambro Capital Management is available at: Shareholders can contact the BTIM Shareholder Information Line on (local call cost) or (from outside Australia) between 8:30am and 5:30pm AEST. 6 The actual full year results to 30 September 2011 may be outside this range and are subject to a range of factors, including many outside BTIM s control, such as market movements and changes in fund flows. 5

6 Appendix 1 Key dates Lodgment of Prospectus 19 July 2011 Extraordinary General Meeting 18 August 2011 Record Date for Entitlement Offer (7:00pm AEST) 24 August 2011 Prospectus despatched 26 August 2011 Entitlement Offer opens 26 August 2011 Entitlement Offer closes (5:00pm AEST) 9 September 2011 Shortfall bookbuild (after market close) 14 September 2011 Settlement of the Entitlement Offer 19 September 2011 Allotment of New Shares under the Entitlement Offer 20 September 2011 New Shares under the Entitlement Offer commence trading on ASX 21 September 2011 on a normal settlement basis Expected date of completion of the Acquisition 4 October 2011 Note: These dates are indicative only and are subject to change. BTIM, in conjunction with the Joint Lead Managers, reserves the right to amend this indicative timetable including, subject to the Corporations Act and Listing Rules, to extend the latest date for receipt of Applications either generally or in particular cases or to cancel any part of the Entitlement Offer without prior notice. 6

7 Appendix 2 Entitlement Offer selling restrictions and other important notices The Entitlement Offer is generally not being extended to any shareholder whose registered address is outside of Australia or New Zealand, and persons who receive this letter (including an electronic copy) in jurisdictions outside Australia and New Zealand should ignore those pages which relate to the Entitlement Offer. Any failure to comply with foreign legal restrictions in connection with the Entitlement Offer may constitute a violation of applicable securities laws, and persons who enter into possession of this letter should seek advice on and observe any such restrictions. This letter does not constitute an offer or invitation in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. This announcement is not an offer of securities for sale in the United States. The securities to which this announcement relates have not been registered under the US Securities Act of 1933, as amended (the Securities Act), and may not be offered or sold in the United States or to a US Person (as defined in Regulation S under the Securities Act) absent registration or an exemption from registration under the Securities Act. None of this announcement, the Prospectus or the accompanying Entitlement and Acceptance Form (attached to the Prospectus) may be sent to persons in the US or persons that are acting on behalf of, or for the account or benefit of, a person in the US, or otherwise distributed or released in the US. The new shares have not been and will not be registered under applicable securities laws of Canada or Japan. Subject to certain exceptions, the new shares may not be offered or sold in or into Canada or Japan or any other jurisdiction where such offer or sale would violate the relevant securities laws of such jurisdiction. The media release is not (and does not contain all the information which would be required in) a prospectus, disclosure document, product disclosure statement or other offering document under Australian or other law, nor does it contain any invitation or offer to acquire BTIM securities or interests in the BTIM funds or J O Hambro Capital Management or J O Hambro Capital Management funds. It is only for informational purposes, and does not and will not form a part of any contract for the acquisition of BTIM shares. This media release does not constitute financial product advice, and does not take into account any person s investment objectives, financial situation or particular needs. It is not intended to be relied upon by recipients for the purpose of making investment decisions and is not a replacement of the requirement for individual research or professional tax advice. Before acting on this information, recipients should consult their financial or other professional adviser to determine its appropriateness having regard to their individual objectives, financial situation and needs. 7