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The 14th FundSource NZ Managed Funds Awards

19th October, 2005

The 14th Annual FundSource New Zealand Managed Funds Industry Awards

- Awards Process and Nominations –

The 14th annual FundSource New Zealand Funds Management Industry Awards judging and analysis has commenced! The structure of the Awards process reflects FundSource’s broad desire to;

a) ensure the Awards criteria are understood by the target audience (members of the public who may use the Awards in the selection of managed funds) and,

b) ensure a high level of transparency of the Awards judging process to maximise objectivity, clarity and understanding of the Awards process.

The criteria for the Fund Manager of the Year Award are detailed on the attached “FundSource Fund Manager of the Year Research Process”.

The Sector Awards process, is outlined on the attachment “FundSource Fund Sector Research Process”.

AWARDS NOMINATIONS

This first component of the FundSource Awards process has now been completed. Fund Manager of the Year and Fund Sector Award nominations have been made, the details of these are attached.

AWARDS PUBLICITY

As in past years, FundSource seeks to obtain maximum media coverage of the Awards.

FundSource has a comprehensive publicity program covering print, radio, Internet and television media to be implemented at the time of the Awards results release.

THIS YEAR’S FUNDSOURCE AWARDS WINNERS AND RELATED DETAILS WILL BE RELEASED ON FRIDAY MORNING, 28th OCTOBER 2005.

Should you have any questions or queries on the Awards Process, nominations or planned publicity don’t hesitate to call myself or one of the FundSource team.


The FundSource Award Nominees

Fund Manager of the Year Nominees

ING (NZ)
National Bank of New Zealand
TOWER Managed Funds


Fund Sector Nominees

NZ Cash
Fund Manager Fund

AXA New Zealand AXA Cash Management
Guardian Trust Financial Services Guardian CashPlus Fund
National Bank of New Zealand Thoroughbred Cash Fund

NZ Mortgages
Fund Manager Fund

First Mortgage Managers Ltd First Mortgage Trust
Fund Managers Auckland Ltd Auckland Mortgage Trust
Fund Managers Canterbury Ltd Canterbury Mortgage Trust

NZ Property
Fund Manager Fund

ING (NZ) Ltd ING Property Securities Fund
Guardian Trust Financial Services Guardian Property Fund

NZ Equity
Fund Manager Fund

ING (NZ) Ltd ING New Zealand Share Fund
National Bank of New Zealand Thoroughbred NZ Equity Growth Trust
TOWER Managed Funds TOWER NZ Equity Trust

International Equity
Fund Manager Fund

TOWER Managed Funds Tower GAM Global Gateway Fund

NZ Fixed Interest
Fund Manager Fund

Asteron Life Ltd Asteron Corporate Bond Trust
National Bank of New Zealand Thoroughbred Corporate Bond Trust

International Fixed Interest
Fund Manager Fund

NO NOMINEES

Diversified Balanced
Fund Manager Fund

ING (NZ) Ltd ANZ Balanced Growth Fund
ING (NZ) Ltd ING Balanced Fund
National Bank of New Zealand Thoroughbred Balanced Trust

Diversified Defensive
Fund Manager Fund

National Bank of New Zealand Thoroughbred Conservative Trust

Diversified Growth
Fund Manager Fund

National Bank of New Zealand Thoroughbred Growth Flexible
National Bank of New Zealand Thoroughbred Growth Trust
Public Trust Public Trust Growth Priority Fund


FundSource Fund Manager of the Year Award
Research Process

The following is a summary of FundSource’s investment research process that is used to select nominees and the eventual winner of the Fund Manager of the Year Award.

All NZ based funds management companies that have retail investment funds promoted to NZ based investors are considered for the Fund Manager of the Year nominations and awards. A range of qualitative screens is applied to each Fund Manager to generate a nominee list. Quantitative screens based on information as at 30 June 2005 are then used to select the eventual Fund Manager of the Year Award winner, from the nominee list.

An exception to this will be those funds management groups who contract asset allocation and manager selection to FundSource.

A) Nominee Selection Process
To pass the qualitative screens a fund manager must satisfy the following:

1. NZ-based funds management capability.

2. Ownership stability (no destabilising change in the year to 30 June 2005).

3. Commitment to active asset management – direct and indirect.

4. Minimum of 3 years organisational performance history.

5. Mainstream fund services available in flexible, cost competitive retail form, in the following fund sectors: Diversified, NZ/Australian Equity, Global Equity and Bond/Income.

6. The mainstream asset class products (4 sectors above) made available by each fund manager must fulfil criteria 4 – 11 of the Sector nominee criterion. These being:

- Qualitatively researched by FundSource.

- Must have reasonable critical mass (fund size).

- Key personnel retention of minimum 2 years.

- General availability to the public, (i.e. not a private fund).

- No cost to the investor outside those costs which impact on fund
performance.

- No potentially high up-front costs.

- Prima facie liquidity of 1 year or less.

- Minimum initial investment sum not above $5000.

B) Nominee List
The nominee list is then constructed containing all fund managers who have passed the range of qualitative criteria set out in the nominee selection process.

C) Fund Manager of the Year Selection
Selection of the Fund Manager of the Year is derived from a performance-based process that aims to fairly represent the achievement of each fund manager on behalf of its clients.

The performance calculation stages are:
1. A representative fund is chosen for each fund manager across each of the four mainstream fund categories. The fund chosen, in each fund category for each manager, will be the most representative, flexible and transparent fund offered by that fund manager.

2. Each fund’s quantitative Fund rating, for each of the six months up to and including 30 June 2005 are collated from the FundSource monthly performance tables.

3. The average of the six monthly quantitative Fund ratings is then calculated.

However, where a manager does not have a minimum 3-year history for a fund in any category, they will receive a zero performance score for that category.

4. The following weights are applied to each of these average performance calculations:

- NZ/Australian Equity 12.5%

- Bonds/Income 20%

- Global Equity 27.5%

- Diversified 40%

D) Fund Manager of the Year Award
Based on these performance calculations the nominee fund manager with the highest
totaled performance rating will then be awarded the Fund Manager of the Year Award.

FundSource Fund Sector Award Research Process

The following is a summary of FundSource’s investment research process that is used to select nominees and the eventual winners of the Fund Sector Awards.

New Zealand’s funds management industry has over 500 open-end funds covering a wide diversity of investment portfolio types and objectives delivered under several legal structures. FundSource’s Fund Sector Award research process groups these available funds into their relevant investment sector categories.

All retail NZ based fund managers and their funds are considered for fund sector nominations and awards. A range of qualitative screens is applied to each fund sector to generate a nominee list. Quantitative screens based on information as at 30 June 2005 are then used to select the eventual Sector Award winners, from the nominee list.

A) Nominee Selection Process

To pass the qualitative screens a fund must satisfy the following:
1. NZ resident promoter and be open for new investment.

2. Actively managed – direct and indirect.

3. Minimum 3 years of performance history.

4. Qualitatively researched by FundSource.

5. Reasonable critical mass (fund size).

6. Key personnel retention of minimum 2 years.

7. General availability to the public, (i.e. not a private fund).

8. No cost to the investor outside those costs which impact on fund performance.

9. No potentially high up-front costs.

10. Prima facie liquidity of 1 year or less.

11. Minimum initial investment sum not above $5000.

12. Reasonable fund mandate consistency within the last 2 years.

13. Deferred tax assets below material levels.

Where two or more funds qualify for nomination, which are mirror funds (in investment terms), the most flexible and transparent fund receives the nomination.

B) Sector Award Winner Selection
The funds that successfully pass the above screening process are then analysed on a performance-based approach. This entails calculating the average of each fund’s quantitative Fund ratings for each of the six months up to and including 30 June 2005.

The fund with the highest average quantitative Fund rating will be the fund sector winner. The fund with the second highest average quantitative Fund rating will be the runner-up.

In the instance where two funds have the same average quantitative Fund Rating, the average of their Modified Sharpe ratios for the prior six months will be compared and the Fund with the highest average ratio will be chosen.

All of the above screens are embedded within FundSource’s normal fund research process, several of these forming key hurdles required by a fund to attain FundSource’s recommended or better qualitative fund rating.

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