An introduction May 2018
Our strategy To grow our specialist asset management activities 2 Invest selectively Grow assets under management Manage portfolios to maximise value Generate strong shareholder returns to invest in growth and pay sustainable dividends
INVESTMENT IN NEW FUNDS Operating model 3 INVESTING Fund deployment Fund performance and track record FUNDRAISING Gross fundraising to average 6.0bn on a 3 year rolling basis Maintain fee level Selective product expansion IC PROFITABILITY IC gross return on assets Manage risk across all portfolios FMC PROFITABILITY FMC operating margin above 43% Manage risk across all portfolios CAPITAL ALLOCATION Return on equity above 13% Gearing 0.8 1.2x BUSINESS GROWTH Reinvest to drive returns Optimise co-investment ratio for each strategy SHAREHOLDER RETURNS Dividend policy targets paying out 80%-100% of FMC post tax profits Return surplus cash
Strategic priorities 4 FY10 FY18 Strategic transition FY19 FY23 Recognised as the leading European specialist asset manager Enhanced brand and client base Developed new strategies to deliver gross fundraising target Developed a scalable infrastructure platform Established an in-house distribution platform Achieved greater capital efficiency Optimising co-investment ratio Increased FMC operating margin Increased fundraising target of three year rolling average 6.0bn per annum FMC becomes dominant profit contributor FMC operating margin to exceed 43% Selectively expand number of strategies, and optimise profit from existing strategies Optimise balance sheet to drive growth in the fund manager Maintain an efficient capital base Dividends linked to FMC profit
Diverse product offering Accelerated growth across our four strategic asset classes 5 Corporate Investments Senior direct lending, subordinated debt & equity investments 15.3bn AUM AUM ( bn) 30 25 28.7 Capital Markets Investments Multi-asset credit, syndicated loans, CLOs and structured credit strategies 20 21.6 8.1bn AUM Real Asset Investments Real estate investment in senior debt, subordinated debt & equity 3.6bn AUM 15 10 5 11.2 11.4 13.0 Secondary Investments Private equity fund restructuring and private equity fund of funds 1.7bn AUM - FY10 FY12 FY14 FY16 FY18 Secondary Investments Real Asset Investments Capital Market Investments Corporate Investments
Maturity of existing strategies Significant, foreseeable growth from existing strategies 6 Mature investment strategy Europe CLOs Europe Mezzanine ICG Enterprise Trust European Senior Debt UK Real Estate Mezzanine US CLOs Asia Pacific Mezzanine Real Estate Senior Debt Strategic Equity North America Private Debt Japan Mezzanine Real Estate Development Australia Senior Loans European Loans Total Credit Alternative Credit Sale and Leaseback Global Loans New investment strategy Time
Potential new strategies Proven ability to add complementary strategies 7 1989 1999 2 strategies 2000 2009 4 strategies 2010 to date 18 strategies Potential new strategies European Mezzanine European Mezzanine Asia Pacific Mezzanine ICG Enterprise Trust Real Estate Europe Real Estate PRS European CLOs European CLOs European Mezzanine Real Estate Senior Debt Private Equity Solutions Asia Real Estate Opportunities Fund Asia Pacific Mezzanine European Loan Fund European CLOs European Loans US Private Debt Total Credit Private Debt Latin America European Mezzanine Small Cap Fund of Funds Secondaries US CLOs Real Estate Development North America Separate Account Global Senior Debt Strategic Equity Alternative Credit Real Estate Asia Infrastructure Japan Mezzanine European Senior Debt Australian Senior Debt Real Estate Mezzanine Global Loans Sale and Leaseback
Strength of closed end funds Long term value creation and market downside protection 8 Increased multi-year fundraising target Visibility of fundraising Long term predictable fee streams Protection in a market downturn Increasing operating leverage Capital available for deployment Increased operating margin target Protection in a market downturn
Performance
Financial highlights FMC profits exceed those of the IC for the first time 10 12 months to 12 months to m 31 March 2018 31 March 2017 Fund Third party fee income 167.1 138.6 Management IC management fee 17.8 18.1 Company Other income 25.2 23.0 Operating costs (114.8) (105.7) FMC profit 95.3 74.0 Investment Interest income 113.2 144.7 Company Other income 7.4 14.7 Net capital gains 144.7 201.4 Impairments (25.2) (48.0) Net investment returns 240.1 312.8 Interest expense (56.6) (53.9) Operating costs (86.2) (77.3) IC management fee (17.8) (18.1) IC profit 79.5 163.5 Group Profit before tax 1 174.8 237.5 Management fees are charged on either a committed or invested capital basis, depending on the fund Performance fees are earned on direct lending funds, subject to meeting the performance hurdle All costs associated with the raising and investing of funds, including central infrastructure, are incurred by the Fund Management Company Investment returns are earned either as interest income or capital gains, depending on the instrument, less Impairments incurred on underperforming assets All costs associated with being a listed company are incurred by the Investment Company, plus the FMC charges for managing these assets ¹These are non IFRS GAAP alternative performance measures and represent internally reported numbers excluding the impact of fair value movements on derivatives (FY18: 6.5m; FY17: 1.3m). Internally reported numbers exclude the impact of the consolidation of 14 credit funds following the adoption of IFRS 10
Balance sheet and capital strategy Balance sheet flexibility supports growth 11 m 31 March 2018 31 March 2017 Assets Loans and investments 1,899 1,712 Assets for syndication 107 90 Cash 248 490 Other 273 209 Total assets 2,527 2,501 Liabilities Borrowings 1,021 1,119 Other metrics Other 188 209 Shareholders funds 1,318 1,173 Total liabilities 2,527 2,501 Gearing ratio 0.77x 0.95x Debt facilities 1,503 1,600 Available headroom 730 971 Cash flows from operating activities (49) 710 Balance sheet portfolio comprising of investments made either alongside funds as co-investment or as seed capital Generally shorter term investments. Utilised to support fundraising activities or the development of new strategies Total drawn debt facilities with diversified sources and maturities of financing. Provided by relationship banks and private placements. ICG s target range is 0.8-1.2x. It is expected that gearing will return to this range over the course of the year with investment in new strategies Internally reported numbers exclude the impact of the consolidation of 14 credit funds following the adoption of IFRS 10
Balance sheet Supporter of fundraising and development of new strategies 12 Mature investment strategy Supports Accelerates Develops Time New investment strategy Enabler and accelerator of growth = competitive advantage
Balance sheet returns A reflection of historic investment decisions 13 Net investment return trend m 2,500 2,000 1,980 1,958 1,891 1,903 1,500 1,000 12.1% 12.1% 13.7%* 12.6% 500 240 237 258 240 - FY15 FY16 FY17 FY18 Average Balance Sheet Portfolio (inc. AFS) Net Investment Return * Net Investment return in FY17 disclosed excluding realised gains recycled from AFS
Performance drivers
Fundraising market Long term, structural trend towards alternatives 15 Available capital for investment by asset class $bn 1,800 1,600 1,400 1,200 1,000 800 600 400 200-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Private equity Real Estate Infrastructure Private debt Natural resources Source: Preqin 2018, assets under management by asset class
Fundraising success Record fundraising year driven by Senior Debt Partners 16 bn 9 8 7 6 Fundraising expectations c 6bn pa* Funds raised in FY18 by strategy ( m) Non US strategies 5.1bn 69 392 581 1,053 Australian Senior Loans European CLOs Real Estate Funds 5 Credit Funds 4 7.8 3,003 SDP - Europe sleeve 3 2 3.8 6.4 5.2 4.0 74 709 Secondaries US Private Debt 1 0 FY14 FY15 FY16 FY17 FY18 US strategies 2.7bn 716 1,222 US CLOs SDP - Non Europe sleeve * Average on a three year rolling basis
Client base Sticky institutional investor base and new client wins 17 Investors by Geography 2012 Investors by Geography 2018* 16% 13% 69 investors 51% EMEA (excl.uk & Ireland) Americas UK & Ireland 21% 331 investors 38% EMEA (excl. UK & Ireland) Americas UK & Ireland Asia Pacific 20% Asia Pacific 20% 21% Investors by Type 2012 Investors by Type 2018* 10% 7% 6% 2% 2% 26% Pension 69 investors Fund of Funds (FoF) Insurance Company Asset Manager Bank 5% 3% 6% 8% 5% 3% 34% Pension 331 investors Fund of Funds (FoF) Insurance Company Asset Manager Bank Other 10% 19% Other Sovereign Wealth Fund Endowment/Foundation 11% 6% Sovereign Wealth Fund Endowment/Foundation Family Office 18% Family Office 20% Consultant *As at 31 March 2018
Investing our direct investment funds Capital deployment strong for all our larger strategies 18 Direct investment funds¹ m 5,000 4,500 4,000 3,500 3,551 63 4,046 140 579 4,876 411 678 Fund invested at 31 March 2018 120% 100% North America I SDP II Longbow IV 3,000 1,064 80% Europe Fund VI Asia Pac III 2,500 60% Strategic Secondaries II 2,000 3,787 Japan 1,500 3,327 40% 1,000 500 2,424 20% SDP III 0 FY16 FY17 FY18 0% 0% 20% 40% 60% 80% 100% 120% Investment period Corporate Investments Real Asset Investments Secondary Investments ¹ Amounts invested include third party and balance sheet capital Size of bubble indicates third party AUM
Global platform Strong deployment whilst retaining investment discipline 19 Nordics US/ Canada UK France Spain Benelux Germany Japan Hong Kong Singapore Key: Corporate Investments Capital Market Investments Real Asset Investments Secondary Investments Australia Single investment framework Long term relationships Local access Highly selective Proprietary information database
Fund performance Portfolio performance provides track record for fundraising 20 Fund Target MM Realised MM ICG Europe Fund IV 2006 (fully realised March 2015) 1.5x 1.6x IRR on realised assets ICG Minority Partners Fund 2008 (fully realised January 2016) 1.9x 2.0x ICG Recovery Fund 2008 (fully realised March 2017) 2.0x 1.9x Longbow UK Real Estate Debt Investments II (fully realised April 2017) 1.4x 1.6x ICG Mezzanine Fund III 2003 1.6x 1.9x ICG Europe Fund V 1.6x 1.8x Senior Debt Partners I n/a 1.2x Senior Debt Partners II n/a 1.2x Asia Pacific Mezzanine Fund I 2005 1.6x 1.9x Asia Pacific Fund II 2008 1.6x 1.9x Intermediate Capital Asia Pacific Fund III 1.7x 1.5x Nomura ICG Fund 1.3x 1.1x North America Private Debt Fund n/a 1.4x ICG-Longbow UK Real Estate Debt Investments III n/a 1.3x ICG-Longbow UK Real Estate Debt Investments IV n/a 1.2x 0% 10% 20% 30% 40% Performance hurdle Performance above hurdle
Profitability Fee rates maintained across asset classes 21 Weighted average fee rate¹ by strategy FY18 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% Corporate Investments - Private Debt Corporate Investments - SDP Capital Market Investments Real Asset Investments Secondary Investments Group FY16 FY17 FY18 ¹ Weighted average fee rates based on average fee earning AUM during the year and excludes any performance fees and catch-up fees
FMC operating margin Operating margin above target with increased scalability 22 m 250 200 150 100 50 Target Operating m argin 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0 FY14 FY15 FY16 FY17 FY18 Costs (lhs) Income (lhs) Operating margin (rhs) 0%
Summary and conclusion
Investment case Well positioned for growth and increased shareholder value 24 Excellent fundamentals Fundraising supported by long term trend towards alternatives AUM and fee streams replenished with recent fundraising activity Plentiful third party capital, supported by a strong balance sheet, available for investment Locked in value Earnings are underpinned by long term, predictable and highly cash generative fee income streams Proven through the cycle investment performance over 29 years AUM growth Sticky institutional investor base and new client wins Extensive product pipeline Operating and capital efficiency Investment in our platform has positioned us for growth Commitment to enhance operating and capital efficiency
Appendix 25
Fee profile Private Debt & Secondaries PE Funds Fees earned on committed capital 26 Management fees are charged on commitments from first closing of the fund Fee profile Management fees are charged on invested capital after end of investment period and run-off over years 5-12 as assets are realised Investment period end Visibility of locked-in management fee income stream over total fund life of 10-12 years Performance fees are available in later years of fund life, subject to performance conditions Private Debt & Secondaries PE funds are raised sequentially with a typical fundraising cycle of 4-5 years Typical fee rates: Management fee of 1.5% on commitments during investment period; 1.25% of invested capital thereafter Performance fee is 20% of 20% profit, subject to 8% net IRR cash hurdle 1 2 3 4 5 6 7 8 9 10 11 12 Year Management fees Performance fees AUM
Fee profile - Real Estate Funds Fees earned on invested capital basis 27 Management fees are charged on invested capital Fee profile Management fees are earned as fund invests over a 2-3 year investment period Fees run-off over years 3-8 as assets are realised Investment period end Visibility of locked-in fee income stream over total fund life of 6-8 years Performance fees are available in later years of fund life, subject to performance conditions Real estate funds are raised sequentially with a typical fundraising cycle of 2-3 years Typical fee rates: Management fee of 1.0-1.3% on invested capital for Private Debt and Development funds; 0.4% for Senior Debt Certain funds pay performance fee, subject to cash IRR hurdles (no catch up) 1 2 3 4 5 6 Year Management fees Performance fees AUM
Fee profile - Credit Funds Fees earned on invested capital basis 28 Management fees are charged on invested capital Fee profile Management fees are earned as fund invests over a c.3 year investment period Fees run-off over years 3-8 as assets are realised Investment period end Visibility of locked-in fee income stream over total fund life of 6-8 years Performance fees are available in later years of fund life, subject to performance conditions Credit funds are raised sequentially with a typical fundraising cycle of c.3 years Typical fee rates: Management fee of 0.75% on invested capital Certain funds pay performance fee, subject to cash IRR hurdles 1 2 3 4 5 6 Year Management fees Performance fees AUM
Fee profile - CLO Funds Fees earned on invested capital and fully invested from close 29 Management fees are charged on invested capital Management fees are earned on fully invested portfolio from close which remains fully invested for 4 year re-investment period Fee profile Investment period end Fees run-off over years 4-8 as assets are realised Visibility of locked-in fee income stream over total fund life of up to 8 years CLO platform is highly scalable and funds can be raised sequentially (multiple funds per year) Typical fee rates: Management fee of c.0.5% on invested capital No performance fee 1 2 3 4 5 6 7 8 9 10 Year Management fees AUM
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