A Standard Life Investments presentation12 September 2007

This communication is intended for investment professionals only and must not be relied on by anyone else.

Smaller Companies: Reasons to keep the faith

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Harry Nimmo

Investment Director

Head of UK Smaller Companies

Where now for Smaller Companies?

Buying tomorrow’s smaller companies today

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• Current definitions• Alternative Investment Market• Sector exposure – Hoare Govett• Sector exposure – AIM• UK & USA Small Cap relative performance• Valuations & Growth• Smaller Companies transformed• Growth themes

Where now for Smaller Companies?

Reasons to keep the faith

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Full List Market

Source: LSE, Investec, 03 June 2007

102%100%

92%

97%

44%

0100

1,100

38,000

0% 132,100

Hoare Govett Smaller Companies Index

FTSE250

FTSE100

Market Cap (£m)

%Rank

1

100

195350680

1139

Drax

Hiscox

QXLAgcert Intl

BP

81% 3,500

Rio Tinto 10FTSE

All Share

FTSE Smallcap

5

Alternative Investment Market (AIM)

100%

84%

48%

0

50

180

0% 1,259

Market Cap (£m)

%Rank

1

100

525

1654

CPL Resources

Intercytex Group

Sibir Energy

Source: LSE, Investec, 03 June 2007

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Smaller Companies and Large Cap sector exposure

Source: Investec, LSE, 30 June 2007

Support Services

Real Estate

General Retailers

Software

General Financials

Industrial Engineering

Electronic & Electrical Equipment

Nonlife Insurance

Media

Travel & Leisure

0% 5% 10% 15%

14.7

7.6

7.2

7.5

6.5

5.2

4.6

4.5

4.1

4.1

Hoare Govett Index (ex ITs)

0% 5% 10% 15%

16..4

15.1

6.5

8.0

4.7

3.8

3.5

3.4

3.2

Support Services

Banks

Oil & Gas

Mining

Pharmaceuticals

Telecoms

Life Insurance

Media

Travel & Leisure

FTSE All Share

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AIM Market sector exposure: 2000 & 2007

Source: LSE, Market Statistics

Support Services

Real Estate

Mining

Software

General Financials

Industrial Metals

Oil & Gas

Pharmaceuticals

Media

Travel & Leisure

0 5 10 15

13.1

11.8

9.6

9.6

7.0

5.3

4.9

4.0

3.3

3.2

FTSE AIM Index June 2007

General Financials

0 5 10 15 20 25 30

30.1

12.7

7.18.7

7.1

5.9

2.6

2.41.9

1.8

FTSE AIM Index March 2000

Software

MediaSupport Services

Travel & Leisure

Real Estate

RestaurantsEngineering

Household Goods

Automobiles

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UK & USA Small Cap relative performance

Source: DATASTREAM

3/9/07

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 070.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.30

0.35

0.40

0.45

0.50

0.55

0.60

HGSCEXT/FTSE100 FRUSSL2/S&PCOMP(R.H.SCALE)

UK

USA

UK and USA move in line

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Are valuations stretched?

1 January

8

7

8

10

11

14 1414

1616

13

12

9

12

15

20

1617 17 16

12

1615 15

13

17

18

2020

1.11

1.20

1.26

1.041.02

1.35

1.20

1.15 1.16

.62

.71

.77

.88

.83

.87.89.90

.98.98

.89

.93

1.13

.94

1.12

1.08

.89 .86

1.2

1.0

0

5

10

15

20

80 85 90 95 00 050.6

0.8

1.0

1.2

1.4

P/E ratio P/E relative

Price/earnings ratio of HGSC P/E relative to market

Source: E Dimson and P Marsh; ABN Amro

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UK Market Valuations

Source: Datastream, I.Williams Oriel Securities, 28/08/2007

11.7 14.1 14.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

12 months forward PE ratio (ex loss makers)

FTSE100 FTSE250 Hoare Govett +AIM

6% 10% 14%

0%

2%

4%

6%

8%

10%

12%

14%

16%

12 months forward EPS growth

PEG ratio is best for Smaller Companies

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The Transformation of Smallcaps

DecliningSectors

GrowthSectors

ChemicalsEngineeringPackaging

Textiles

I.T.Support ServicesPharmaceuticals

HealthcareSpecialty Financials

MediaElectronicsRetailers

Travel & Leisure

Dec ‘94 July ‘06

Source: Hoare Govett plus Aim

From maturity to growth

28%

31%

OthersOthers

59%

8%

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Exposure to growth themesSLI UK Smaller Companies Fund (OEIC)

Social Housing 6.9%Global Growth Niche Leaders

19.6%Geographic Roll Out

(Incl. Restaurants)15 .6%

Morgan Sindall 1.9% Autonomy 2.7% Domino’s Pizza 2.9%

Kier 1.5% Aveva 2.3% Lavendon 2.3%

Connaught 1.3% Expro International 2.1% Restaurant Group 1.5%

Rok 1.1% Chemring 1.9% Speedy Hire 1.5%

Galliford 1.1% ICG 1.9% Clapham House 1.5%

Software 11.6% Fidessa 1.8% Majestic Wine 1.5%

Aveva 2.3% Raymarine 1.8% Topps Tiles 1.2%

Autonomy 2.7% Genus 1.4% Goals Soccer Centres 1.1%

Axon 1.9% Detica 1.3% Workspace 1.1%

Fidessa 1.8% Latchways 1.3% Carluccio’s 1.0%

Detica 1.5% Stanley Gibbons 1.1% Online 9.4%

SDL 1.4% Paddy Power 2.7%

East Europe / Russia 5.2% QXL Riccardo 1.7%

ITE 2.0% Datacash 1.3%

QXL Ricardo 1.7% ASOS 1.1%

JKX Oil & Gas 1.5% Stanley Gibbons 1.1%

Abcam 0.9%

Yougov 0.6%Source: Standard Life Investments, 20 August 2007

The essence of Smaller Companies investing

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Reasons to keep the faith with Smallcaps

• Results season is shaping up well

• Directors are buying

• You get more growth

• Interesting themes

• Alpha

Smaller Companies return 3.6% higher then FTSE All Share (1955-2006)Source: Dimson & Marsh, London Business School, January 2007

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Standard Life UK Smaller Companies Fund

• Total assets: £400m• Total return 2006: +43.5%

• Ten years old on 6/01/07• Ten year return: +398%• Annualised growth rate: +16.4%

One manager, one process

“Investment Week” smaller fund manager of the year 2001“What Investment” Unit trust manager of the year 2006“PLC Awards” Best Smaller Companies Fund 2007

Source: S&P Retail share class, SLI, 6 August 2007

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Remember - past performance is no guarantee of future performance.

Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and cannot be guaranteed.

Standard Life Investments Limited, tel. +44 131 225 2345, a company registered in Scotland (SC 123321) Registered Office 1 George Street Edinburgh EH2 2LL.

The Standard Life Investments group includes Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Standard Life Investments (Corporate Funds) Limitedand Standard Life Investments (Private Equity) Limited. Standard Life Investments Limited acts as Investment Manager for Standard Life Assurance Limited and Standard Life Pension Funds Limited.

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