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United Kingdom: Gateway to Royalty Be a part of it Silverman Sachs Financial Services Investment Proposal for UK Team Brit Dilip Agrawal Dhanush Chandrasekaran Mohan Govind Manjot S Grewal Jenny Huang Sherry Shen Introduction Purpose: Seek board’s approval on our investment recommendation in the UK We present our findings on: ● Evolution of corporate governance and current corporate government practices in UK ● Micro and macro economic and political conditions of UK ● Risk analysis of the investment decision in UK ● Cross comparison of UK with other potential countries Investment Recommendation Invest in the UK Evolution of Corporate Governance in UK Key stages in the evolution of UK governance (Last 25 years) 1992 - Cadbury Report 1998 – The Combined Code of Corporate Governance (renamed as the UK Corporate Governance Code) 1999 – Turnbull Guidance on Internal control 2010 – Stewardship Code. 2013 – Companies Act (Strategic Report and Directors' Report Regulations) 2016 - UK Corporate Governance Code - Financial Reporting Council (FRC) Ratings of Corporate Governance by Country GMI Corporate Governance Country Ratings Rank Country Companies Average Overall Rating 1 United Kingdom 394 7.6 3 Ireland 19 7.21 4 United States 1,761 7.16 12 Germany 79 5.8 GMI Rating Methodology - 19 France 100 4.7 20 India 56 4.54 29 Brazil 67 3.91 34 China 91 3.37 35 Japan 392 3.3 Incorporates more than 450 data points across the following categories: • board accountability • financial disclosure and internal controls • executive compensation • market for control and ownership base • reputational and socially responsible investment issues • corporate behavior • shareholder rights 37 Mexico 21 2.43 Source: GMI Ratings (formerly, GovernanceMetrics International) — Country Rankings as of September 27, 2010 Corporate Governance Principles’ Comparison UK vs USA Equitable Treatment & Rights of Shareholders • • • • • Shareholder voting Related party transactions Takeover bid rules The roles and responsibilities of institutional investors The roles and Board representation of minority shareholders Disclosure and Transparency • • Notification of general meetings and information provided to shareholders Shareholder rights to request a meeting and to place items on the agenda The Responsibilities of Boards • • • • • Board Structure Board Tenure Board level committee Board Responsibility for Risk Management Board Nomination & Election Stronger Similar Weaker Country Comparison for Protection of Investors UK OECD USA Index of Transaction Transparency 10.0 6.0 7.0 Index of Manager’s Responsibility 7.0 5.0 9.0 Index of Shareholders’ Power 7.0 7.0 9.0 Index of Investor Protection 8.0 6.1 8.3 Source: Doing Business 2016 Political and Macroeconomic factors - Positives Political: Our Closest Ally for decades Long standing democracy Supportive economic and fiscal policies Macro: Stable and liquid financial markets Well Developed Infrastructure Ranked high on innovation index English as business language GINI Coefficient Comparison OECD Avg.: 0.318 UK : 0.358 USA: 0.396 Research suggests that decrease in GINI coefficient raises GDP per capita for advanced economies Source: OECD.org Political and Macroeconomic Factors - Negatives Political: Uncertainty post Brexit Rise of Nationalism in the west Risk of tariffs on Trade and investments Macro: High trade and current account deficit Decreasing long term per capita income Low productivity growth Consumer dependent economy Conclusion We recommend investing in UK as it makes good economic sense due to the following reasons: • • • • One of the world's largest & mature financial markets Strong Corporate Governance Structure Good investor protection Low impact of Macroeconomic/ Political issues United Gateway to Royalty ThankKingdom: You Gates are now open..