Aberdeen Asset Management

Aberdeen Asset Management Double-digit growth at a reasonable price Institutional update Investment companies In line with the sell-off in emerging markets, Aberdeen s share price has fallen c 20% since its high in May 2013. Although recent net new money (NNM) flows were negative, they reflected the new measures introduced to reduce fund flows and maintain investment efficiency. Long-term investment performance remains strong, which, along with relatively attractive valuations in emerging markets, should help facilitate a return to positive NNM flows. Our asset management DCF implies a fair value of 5.00, justified by its strong investment performance, favourable product portfolio, broad distribution capabilities and enviable margins. 23 September 2013 Price 387.7p Valuation 500.0p Difference 29% Market cap 4,649m Net cash ( m) as at FY12 266 Shares in issue 1,199.2m Free float 80% Year end Revenue ( m) EBITDA ( m) EPS* (p) Net (debt) / cash 09/11 784 317 18.7 127 20.7 2.3 09/12 869 362 21.9 266 17.7 3.0 09/13e 1,022 470 30.2 545 12.8 4.1 09/14e 1,124 517 33.5 837 11.6 4.6 Note: *PBT and EPS (diluted) are normalised, excluding intangible amortisation, exceptional items and share-based payments. P/E (x) Yield (%) Code Primary exchange Secondary exchange Share price performance ADN LSE N/A Short term: Net AUM inflows set to return Aberdeen has experienced its first quarterly net outflow from its equity products in over five years. This was largely driven by the measures introduced to limit flows taking effect, coupled with an increase in risk aversion, which led to a sell-off in emerging markets. While these trends continued into July and August (total net outflows: 1.2bn), they were an improvement on the previous quarter net outflows (Q3: 3.4bn outflow). We believe net inflows will recover as investors favour Aberdeen s strong long-term performance and reputable brand name. The steady improvement in the performance of its fixed income products should also help stem outflows, providing further support for a return to positive net inflows. Medium term: Emerging markets attractively valued Emerging markets have underperformed their more developed peers over the past three years. As a result, emerging market equity valuations now look relatively more attractive than those for developed markets (forward P/E ratio MSCI EM 9.6x vs MSCI World 13.4x), suggesting a relative argument in favour of emerging markets for long-term investors. This should help provide further support for net fund inflows as c 45% of Aberdeen s AUM is invested in emerging markets (EM). Long term: Growth at a reasonable price Favouring Aberdeen s strong investment performance, enviable product range, successful distribution network and robust margins, we forecast adjusted EBIT to continue to grow at a CAGR of 18% over the next three years (28% pa since FY07). Aberdeen currently trades on a CY14e EV/EBITDA of 7.7x (peers: 9.1x) and a P/E ratio of 11.5x (16.0x), reflecting the sell-off in emerging markets and increase in investors risk aversion. Our asset management DCF generates a fair value of 5.00, highlighting Aberdeen s strong growth prospects. % 1m 3m 12m Abs 2.2 5.1 27.0 Rel (local) 0.0 (2.4) 10.6 52-week high/low 492.1p 306.8p Business description Aberdeen Asset Management is an independent asset management group with global distribution and fund management investing across all the main asset classes. Next events FY13 results Est. Nov 2013 Analysts Jonathan Goslin +44 (0)20 3077 5765 Martyn King +44 (0)20 3077 5745 financials@edisongroup.com

Investment summary Aberdeen has grown into one of the largest listed asset managers in the UK. Its broad distribution and product portfolio combined with good fund performance in high-margin areas has helped it to grow earnings despite volatile markets. The group is particularly strong in equities and is now one of the leading emerging markets equity managers in the market (c 45% of AUM invested in EM). Exhibit 1: FY13e AUM Alternative 13% Money Market Property 4% 9% Exhibit 2: FY13e revenue dominated by equities Alternative 5% Fixed Income 9% Property 10% Money Market 1% Equities 56% Fixed Income 18% Equities 75% Source: Edison Investment Research Source: Edison Investment Research Investment performance Equities performance over the longer term has been excellent in Aberdeen s key global and emerging market equity products, which has helped drive high AUM growth over recent years. As at 31 June 2013, we estimate 73% of equity mandates by AUM have outperformed their stated objectives over the past year and 72% over the past three years. Although some indicators show Aberdeen has underperformed over recent months as emerging markets have sold off (Exhibit 5), we believe investors will continue to focus on longer-term performance, which remains strong. Aberdeen takes a long-term view and rather than regularly trading in and out of stocks, aims to build positions in high-quality companies. Fixed income in 2008, Aberdeen s fixed-income funds endured a difficult year due to their exposure to troubled US asset- and mortgage-backed securities. Performance has since been hindered by its long-held view that government bonds were overpriced. This underperformance has led to large outflows from its fixed-income products. However, it now appears that performance has begun to improve; we estimate c 90% of funds by AUM have outperformed over the past year and 73% over the past three years. If this recovery can be maintained, then outflows from fixed income products may begin to slow, which could help to diversify future revenue growth. Fund flows driving change in asset mix Aberdeen has benefited from its diversified asset base, which it has developed through its selective acquisition-led growth. Acquisitions have contributed c 4% to Aberdeen s total AUM growth of 27% over the past three years to June 2013. Recent flows (Exhibit 3) have been characterised by large inflows into its equity products, particularly global, global emerging, and Asia-Pacific, offsetting outflows from its more generic bond funds. However, these outflows have largely been mitigated by inflows into its higher-margin, more specialised fixed-income products such as EMD and Asian debt. Like some of its peers, Aberdeen has been receiving significant gross flows into its emerging market products. Large inflows may force the manager to either buy more of the same stocks and/or broaden its investment range. Neither of which are ideal, as buying more of the same stocks Aberdeen Asset Management 23 September 2013 2

increases investment risk and is often restricted by foreign ownership laws, while broadening its investment range requires greater resources to research and monitor and can dilute fund performance. To manage these inflows, Aberdeen had initially hard- closed some funds to new segregated accounts that have lower margins, and instead only accepts flows into pooled funds that have much higher margins. But in early 2013 it introduced a 2% initial fee to all new investors in these funds to manage the rate of these gross inflows. These measures appear to have finally taken effect in Q313. Coupled with a sell-off in emerging markets, they contributed to the first net outflow from equities since September 2008. This trend has continued into the first two months of the final quarter. While we do not expect net equity flows to return to their previous elevated levels, we believe they will return to positive territory as investors favour their strong long-term performance and reputable brand name. This should be helped by the very recent improvement in emerging market equity indices. We forecast total NNM inflows to grow at 4% per year over the medium term (equity: 5%; all others: 3%). Exhibit 3: Strong NNM flows into primary equity business NNM flows ( bn) 7.0 6.0 5.0 4.0 3.0 2.0 First net equity outflow since Q408 Forecast 5% long-term NNM equity flows pa 1.0 0.0-1.0-2.0 Q108 Q308 Q109 Q309 Q110 Q310 Q111 Q311 Q112 Q312 Q113 Q313 Q114e Q314e Q115e Q315e Source: Company data, Edison Investment Research Revenue margins expected to improve further Strong growth in its equities business and rotation into higher-margin fixed income products has helped Aberdeen improve revenue margins from 38bp in 2008 to an estimated 49bp in H113. We expect average revenue margins to improve 1-2bp in FY14e as measures to limit flows into equities begin to take effect and the improving performance of fixed income products reduces the outflows from these funds. Exhibit 4: Revenue margin improvement to gradually slow 100% 60 % AUM 80% 60% 40% 20% 50 40 30 20 10 Revenue margin (bp) 0% FY07 FY08 FY09 FY10 FY11 FY12e FY13e FY14e FY15e Equities Fixed income Alternative Property Money market Revenue margin 0 Source: Company data, Edison Investment Research Aberdeen Asset Management 23 September 2013 3

Emerging market: Attractive value opportunity Experience suggests the link between economic trends and stock market performance is not direct, but, as Exhibit 5 shows, the benchmark MSCI Emerging Markets Index has outperformed the MSCI World Index over the long term (10 years) by a comfortable margin (arithmetic annualised outperformance 5.1%), lending some support to the idea that faster GDP growth should eventually feed through to related equity values (subject to governance and a range of other issues). The emerging market underperformance shown for the three- and five-year periods reflected the market impact of the financial crisis in 2008 and concerns in 2011 about the eurozone and general economic fragility. Both increased risk aversion, which damaged emerging market equity prices despite many of these countries having more robust financial positions. Exhibit 5: Emerging markets have underperformed over recent years Performance (%) 20 15 10 5 0-5 -10-15 17.6 11.7 13.3 12.2 11.7 7.1 5.8 7.1 4.1 5.3 0.5 0.5 1.1 1.9-7.0-4.7-4.6-10.2 3 months Year to date 1 year 3 years 5 years 10 years MSCI World MSCI Emerging Markets MSCI AC Asia-Pacific ex-japan Index Source: MSCI factsheet (August 2013). Note: All returns are net and are in US$. Where do we stand now? As the chart above shows, as a group, the emerging markets have been through a period of relative weakness over five years. Exhibit 6, below, indicates that on a range of simple valuation measures, the category has, to a greater or lesser extent, more attractive metrics than those for developed markets. This suggests a relative argument in favour of emerging markets for long-term investors. Exhibit 6: Emerging and Asia Pac markets appear cheap relatively to more developed markets 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 2.6 16.3 13.4 13.4 11.8 11.3 9.6 2.9 3.1 1.9 1.5 Div Yld (%) P/E P/E Fwd Price/book 1.6 MSCI World MSCI Emerging Markets MSCI AC Asia-Pacific ex-japan Index Source: MSCI factsheet (August 2013) Favourable valuation Over recent years, Aberdeen has traded at a 10-20% premium to UK-listed peers as investors have favoured its strong growth track record. However, since reaching a record high in May 2013 of 4.92, its share price has fallen c 20% and now trades at a c 15% discount based on CY14e Aberdeen Asset Management 23 September 2013 4

EV/EBITDA. This was largely due to an increase in investors risk aversion as concerns were raised over signs of slowing economic growth in emerging markets, an increase in geo-political risk and that US quantitative easing measures may be removed earlier than expected. Despite this, Aberdeen s investment performance remains strong and its broad distribution network is able to access investors in different markets with a wide range of growth rates. Operating margins have been steadily improved (although we expect this to stabilise over coming years) and emerging markets appear attractively valued relative to more developed peers, which could help encourage further demand for these products. Exhibit 7: Relative valuation table (adjusted to calendar year end) EV/EBITDA P/E Dividend yield (%) Total return (%) 2014e 2015e 2014e 2015e 2014e 2015e Ytd (to 13/09/13) Aberdeen 7.7 6.4 11.5 10.3 4.6% 5.1% 6.9 Mean 9.1 8.1 16.0 14.7 4.0% 4.5% Ashmore Group 9.5 8.7 14.1 12.9 4.4% 4.8% 12.5 Henderson Group 9.5 8.1 14.1 12.9 4.3% 4.7% 52.1 Jupiter Fund Mgmt 8.9 7.8 15.2 13.8 4.4% 5.3% 39.7 Schroders 11.6 10.3 17.3 15.8 2.3% 2.6% 57.4 Man Group 5.8 5.3 19.5 18.2 4.7% 5.0% 18.1 Source: Edison Investment Research. Note: As at 20 September 2013. To determine the relative value of the sector we have created a composite of the six asset managers that we cover (Aberdeen, Ashmore Group, Jupiter Fund Management, Henderson Group, Schroders and Man Group) and weighted this by their respective historical market caps. From this we can see the sector has traded at an average 23% premium to the FTSE All Share, but following the recent sell-off in markets, this has fallen to 15%. This presents an opportunity to benefit from not only Aberdeen re-rating relative to the sector but also from a re-rating of the whole sector. Exhibit 8: UK asset management sector trading below long-term average Forward PER (x) 25.0 70% 20.0 Average sector premium: 23% 60% 50% 15.0 40% 30% 10.0 20% 5.0 10% Current sector premium: 15% 0% 0.0 Jan/06 Aug/06 Mar/07 Oct/07 May/08 Dec/08 Jul/09 Feb/10 Sep/10 Apr/11 Nov/11 Jun/12 Jan/13-10% Aug/13 Sector average 12-month forward PER (LHS) Average premium Premium/(discount) to FTSE All-Share Index (RHS) Source: Bloomberg. Notes: Sector average is the market cap weighted average forward PER of Aberdeen, Ashmore, Jupiter, Henderson, Schroders and Man. Further rotation towards higher margin products has encouraged us to marginally increase our FY13e PBT to 466 (previous: 442). But we have slightly lowered our long-term annual EBIT growth forecast (2012-15e) from 20% to 18% to reflect the lower NNM inflows due to the capacity constraint measures taking effect, although this still remains the highest in its peer group. We have updated our asset management DCF model to FY14e, which generates a fair value of 5.00 (previous FY13e: 5.25) using a 10% discount rate, 3% long-term growth rate and an ROCE gradually faded to 10% over 25 years. This equates to a CY14e EV/EBITDA of 10.7x, which is at a premium of 18% to its peers (CY14e P/E 15.3x, 4% discount to peers). Although this appears high, it is an absolute valuation being compared to a sector trading below its long-term average. We believe a premium rating is justified by Aberdeen s strong investment performance, favourable product portfolio, broad distribution capabilities and enviable margins. Aberdeen Asset Management 23 September 2013 5

Exhibit 9: Financial summary Aberdeen 'm 2011 2012 2013e 2014e 2015e Sep IFRS IFRS IFRS IFRS IFRS IFRS PROFIT & LOSS Revenue 784 869 1,022 1,124 1,251 Operating expenses (467) (508) (551) (607) (675) EBITDA (norm) 317 362 470 517 576 Depreciation & amortisation (8) (9) (7) (7) (7) Operating profit (norm) 307 343 463 510 569 Goodwill and amortisation of acquired intangibles (66) (68) (68) (54) (43) Exceptionals 0 0 (7) 0 0 Other (10) 0 (0) (0) 0 Operating Profit 232 275 388 456 526 Net Interest (8) (5) 2 2 2 Other 0 0 0 0 0 Profit Before Tax (norm) 300 338 466 513 571 Profit Before Tax (FRS 3) 224 270 390 458 528 Tax (40) (46) (70) (83) (95) Profit After Tax (norm) 246 280 382 420 468 Profit After Tax (FRS 3) 184 224 320 376 433 Average Diluted Shares Outstanding (m) 1,235.8 1,213.6 1,200.0 1,200.0 1,200.0 Diluted EPS - Company reported (total) 14.1 17.6 25.3 29.8 34.6 Diluted EPS - Company reported (clean) 18.7 22.6 31.6 34.4 38.2 Adjusted diluted EPS - Edison 18.7 21.9 30.2 33.5 37.5 Dividend per share - proposed (p) 9.0 11.5 15.9 17.6 19.7 Revenue Margin - AM (%) 41.2 45.1 49.4 51.7 52.6 EBITDA Margin norm. (%) 40.4 41.6 46.0 46.0 46.0 Operating Margin norm. (%) 39.2 39.5 45.3 45.4 45.5 BALANCE SHEET Fixed Assets 1,159 1,099 1,031 977 935 Intangible Assets 1,060 994 926 872 829 Tangible Assets 20 19 19 19 19 Investments 79 86 86 87 87 Current Assets 1,727 2,973 3,214 3,537 3,897 Debtors 326 254 299 329 366 Cash 209 348 545 837 1,161 Other 1,192 2,371 2,371 2,371 2,371 Long Term Liabilities (160) (71) (71) (71) (71) Long term borrowings (82) 0 0 0 0 Other long term liabilities (78) (71) (71) (71) (71) Current Liabilities (1,491) (2,700) (2,632) (2,649) (2,670) Creditors (330) (269) (283) (300) (321) Short term borrowings 0 (82) 0 0 0 Other (1,162) (2,349) (2,349) (2,349) (2,349) Net Assets 1,235 1,301 1,543 1,794 2,091 CASH FLOW Operating cash flow 366 369 436 504 556 Capex (6) (8) (6) (6) (6) Cash flow from investing activities (18) (15) (1) (1) (1) Dividends (106) (126) (150) (204) (226) Other financing activities (176) (83) (82) 0 0 Other 0 0 0 0 0 Net Cash Flow 61 137 197 292 323 Opening net debt/(cash) 8 (127) (266) (545) (837) Decrease / (increase) debt (78) 0 42 0 0 Other 4 (2) (124) 0 0 Closing net debt/(cash) (127) (266) (545) (837) (1,161) FUM Opening FUM 179 170 187 202 221 Net new money flows (2) (0) (0) 9 9 Investment performance (7) 16 4 11 12 Other 0 1 11 0 0 Closing FUM 170 187 202 221 243 Source: Company data, Edison Investment Research Aberdeen Asset Management 23 September 2013 6

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Frankfurt +49 (0)69 78 8076 960 Aberdeen Schumannstrasse 34b Asset Management 280 High Holborn 23 September 2013 245 Park Avenue, 39th Floor Level 33, Australia Square Level 15, 171 Featherston St 7 60325 Frankfurt Germany London +44 (0)20 3077 5700 London, WC1V 7EE United Kingdom New York +1 646 653 7026 10167, New York US Sydney +61 (0)2 9258 1162 264 George St, Sydney NSW 2000, Australia Wellington +64 (0)48 948 555 Wellington 6011 New Zealand