The following quantitative process is applied to all funds management companies that have NZ resident retail investment funds. Those managers who pass the screens form the nominee list from which the eventual Fund Manager of the Year Award winner is determined.

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

The analytical screens used to select nominees are processed based on information as at 30 June 2002.

To pass the nominee screens a fund manager must have:

1. NZ based investment capability.
2. Ownership stability (no destabilising change in the year to 30 June 2002).
3. Commitment to active asset management.
4. Minimum of 3 years organisational performance history.
5. At least 50% retention of key investment personnel over the last 2 years.
6. Mainstream fund services available in flexible, cost competitive retail form, in the following fund sectors: Diversified, NZ/Australian Equity, Global Equity and Bond/Income.
7. The mainstream asset class products (4 sectors above) made available by each fund manager fulfil criteria 6 – 10 of the Sector nominee criterion. These being:

• General fund availability to the public (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 $5,000.

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 their 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 Jensen alpha, with at least a 50% correlation with its index, for each of the six months up to and including 30 June 2002 are collated from the FundSource monthly performance tables.
3. The average of the 6 monthly Jensen alphas is then calculated. However, where a manager does not have a minimum 3-year history for a fund in any category, then 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 15%
• Bonds/Income 5%
• Global Equity 30%
• Diversified 40%

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 Research Process

The New Zealand 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.

A) Nominee Process
A range of screens (detailed below) are then applied to each fund sector to generate a nominee list from which the eventual sector winners are selected. Under this quantitative process all retail NZ based fund managers and their funds are considered for fund sector nominations and awards.

The analytical screens used to select nominees were processed based on information as at 30 June 2002. To pass all screens a fund must satisfy the following:

1. NZ residency status and be open for new investment
2. Qualitatively researched by FundSource
3. Actively managed
4. Minimum 3 years of performance history
5. Key person retention of minimum 2 years
6. General availability to the public i.e. not a private fund
7. No cost to the investor outside those costs which impact on fund performance
8. No potentially high up-front costs
9. Prima facie liquidity of 1 year or less
10. Minimum initial investment sum not above $5000
11. Reasonable fund mandate consistency within last 2 years
12. Minimum fund size $10m (or feed into a pool of $10m or above)
13. Average of 4 or greater star FundSource fund rating over the last 6 months.

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 last six months Jensen alphas. The fund with the highest Jensen alpha will be the fund sector winner.

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.