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1 st February 2006

FondsKongress Presentation The Outlook for Global Emerging Market Equities. 1 st February 2006. Schroder Investment Management Limited 31 Gresham Street, London, EC2V 7QA Telephone: 020 7658 6000 Fax: 020 7658 6965 Authorised and regulated by the Financial Services Authority.

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1 st February 2006

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  1. FondsKongress Presentation The Outlook for Global Emerging Market Equities 1st February 2006 Schroder Investment Management Limited 31 Gresham Street, London, EC2V 7QA Telephone: 020 7658 6000 Fax: 020 7658 6965 Authorised and regulated by the Financial Services Authority 27026

  2. Emerging Markets Efficient Frontiers vs Europe 10 year (Annualised)* 5 year (Annualised)* 3 year (Annualised)* Annualised return (%p.a.) Annualised return (%p.a.) Annualised return (%p.a.) Annualised Risk (%SD pa) Annualised Risk (%SD pa) Annualised Risk (%SD pa) Cumulative Return MSCI EM +54.1% MSCI Europe +100.2% Cumulative Return MSCI EM +111.7% MSCI Europe +6.5% Cumulative Return MSCI EM +141.9% MSCI Europe +69.2% Emerging markets are excellent diversifiers Source: Factset, MSCI. *All figures are US$ MSCI Price returns to 30 December 2005 27026

  3. Economics Cyclical recovery Relative Performance of MSCI EM/World and OECD G7 Lead Indicator yoy % change yoy % change Cyclical upturn supportive for gems Source: Thomson DataStream, data shown to December 2005 27026

  4. Global Economic Outlook for 2006 Country 2005 Scenario 1 Base Case Scenario 2 Growth Resurgence Scenario 3 Ice Age (60% probability) (30% probability) (10% probability) Global Growth CPI Interest Rates EM Performance 3.2% 2.9% 2.8% +35% 2.9% 2.1% 3.2%* +10% to +15% 3.7% 2.8% 4.0% +20% 2.1% 1.5% 2.3% 0% to -10% *Fed fund rates to peak at 4.75% Q1 2006 Source: Schroders 27026

  5. Economics Outlook remains positive World GDP Growth 2004 Consensus % 2005 Consensus % 2006 Consensus % World US Japan European Union Latin America North East Asia South East Asia Eastern Europe +3.8 +4.2 +2.3 +2.3 +5.8 +7.9 +6.3 +7.2 +3.2 +3.6 +2.4 +1.6 +4.2 +7.2 +5.0 +5.3 +3.2 +3.4 +2.0 +2.1 +3.9 +6.9 +5.0 +5.3 Source: Consensus Economics December 2005 27026

  6. Economics Emerging Market economies decoupling Difference in real GDP Growth (Emerging vs Developed) and Relative Performance Differential (MSCI EM vs MSCI World) Global GDP represented by Emerging Markets (%) Mar 1989 = 100 2005 2004 2003 2000 26.0* 25.9 24.9 24.2 *CLSA estimate Source: CLSA Source: CSFB, data shown to December 2005 27026

  7. Economics Emerging Market* Exports Share in Emerging Market* Exports % China now accounts for almost same share of emerging economies’ exports as the US Source: BCA Research December 2005 * Includes Brazil, Chile, Turkey, Taiwan, Korea, Thailand, Singapore, Malaysia, Indonesia, The Philippines and India ** Smoothed except for final data points 27026

  8. Economics Decoupling… continues • Economic Forecast 2011 – 2015 (Average) GDP Growth Industrial Production Current Account (% of GDP) CPI G7 NorthEast Asia SouthEast Asia Eastern Europe Latin America +2.4 +6.5 +5.2 +5.0 +3.8 +2.5 +10.8 +6.9 +5.8 +4.3 -0.9 +1.2 +5.1 -0.5 -0.8 +2.0 +2.9 +3.4 +4.0 +4.4 Source: Consensus Economics October 2005 27026

  9. Economics GEM Industrial Production Outperforming G7 Industrial Production Industrial Production Source: Thomson Datastream, EIU, Factsheet, ML GEM Equity Research, August 2005* Weighted by MSCI, includes: Brazil, Mexico, Korea, Taiwan, China, India, Turkey and South Africa. Data rebased to 1/2000 27026

  10. Economics Structural improvement Change in leading emerging market parameters end 1994 - 2005 Area 1994 2005 2005 minus 1994 Debt/GDP EMBI+ Sovereign rating Inflation Fiscal balance Current account balance Gross external financing requirement as % of GDP GDP growth Exports to GDP Average 3 month volatility 43.0% BB- 56% -3.1% -2.1% 4.2% 6.7% 19.0% 8% 43.1% BB+ 4% -1.0% 1.8% 5.7% 4.7% 34.2% 10.4% 0.1% 2 points -52% 2.1% 3.9% 1.5% -2.0% 15.2% 2.4% Source: Deutsche Bank January 2006 27026

  11. Emerging Markets Some structural shifts Emerging markets*: Foreign reserves Foreign debt Trade balance % of GDP % of GDP A sharp decline % of GDP Record high A dramatic turnaround *Includes 20 Emerging Market economies Source: BCA Research December 2005 27026

  12. Economics Structural Improvement Inflation well and truly beaten ...Exchange rates undervalued, not overvalued … Current accounts now in surplus Jan 90 =100 % % GDP Source: JP Morgan, data shown to November 2005 Source: JP Morgan, data shown to December 2005 Source: JP Morgan, data shown to December 2005 27026

  13. GEM and Developed Markets Key macroeconomic data Country CPI (%) Total Govt Debt (% GDP) Fiscal Bal (% of GDP) CA Bal (% of GDP) 06 (%) 05 (%) 06 (%) 05 (%) 06 (%) 05 (%) 4.2 3.0 0.5 1.9 2.3 1.9 2.1 -6.4 3.3 0.0 -3.2 5.3 1.3 -6.8 3.3 0.3 -3.3 4.6 -1.7 -2.7 -5.7 -2.8 -3.1 1.4 -1.9 -3.3 -5.0 -2.8 -3.3 1.4 44.4 65.7 174.3 70.0 79.9 35.5 EM US Japan Europe Developed Markets EM minus Developed Markets Source: Deutsche Bank, MSCI, Bloomberg. Data shown at 16 November 2005 27026

  14. Economics Structural improvements have led to improved credit rating Market Cap Weighted GEM Credit Rating BBB+ BBB BBB- Source: UBS December 2005 27026

  15. Risk As economies have improved, volatility has declined MSCI EM Historical volatility Source: Bloomberg, data shown to December 2005 27026

  16. GEMS S&P 500 Russell 2000 Nasdaq ACWI EAFE DAX Nikkei 18.4% 22.6% 1.22 16.5% -1.1% -0.07 19.8% 6.8% 0.35 25.8% -2.2% -0.09 15.1% 0.6% 0.04 15.6% 2.4% 0.15 24.8% 1.1% 0.05 22.7% 2.6% 0.11 5 Years: Volatility (%) $(%) Return Sharpe Ratio Risk: … Resulting in excellent Sharpe ratios • 5 year market performance Source: Deutsche Bank GEMs Strategy, Bloomberg, MSCI, data shown for 30 December 2005 27026

  17. MSCI World MSCI EM 24.3% 180.6% Relative price still well below 1994 highs MSCI EM Relative to MSCI World US$ 31 December 1998 to 30 December 2005 Dec 1988 = 100 Source: Factset, MSCI. MSCI Gross indices quoted Source: Thomson DataStream, data shown to December 2005 27026

  18. Valuations P/E ratio also at low historic levels MSCI EM Price Earnings Ratio* * P/E ratio shown is MSCI EM from 30 September 1995. Prior to 30 September 1995 IFCI P/E ratio is shown Source: Factset, Thomson DataStream, data shown to December 2005 27026

  19. Valuations … Forward P/E also at low historic levels Forward Price Earnings US$ Emerging Markets USA World P/E EPS PE/G 10.8 14.3 0.8 15.3 13.9 1.1 14.8 12.2 1.2 Source: Factset, MSCI As at December 2005, IBES – 12 month forward Source: Factset, MSCI, data shown to December 2005 27026

  20. Valuations Cheap relative to developed markets Price Earnings Discount % Emerging Markets at a Premium Emerging Markets at a Discount Source: Thomson Datastream, data shown to December 2005 27026

  21. Valuations Cheap relative to developed markets Price Earnings / Growth Ratio* % * 12m rolling average of I/B/E/S 12m Forward P/E to Long Term average EPS growth (3–5 years) Source: Factset data shown to December 2005 27026

  22. Valuations Cheap relative to other asset classes Yields from different asset classes Yield % * Forward Earnings Yield for Equities ** Corporate Bond Source: BCA Research December 2005 27026

  23. Valuations Underpinned by improving ROE MSCI EM ROE relative to MSCI World ROE Source: CSFB, data shown to December 2005 27026

  24. Valuations Reasonably priced relative to size of economies GEM Aggregate Index / GDP % +1Std Avg -1Std Source: UBS, data shown to December 2005 27026

  25. Liquidity Fund flow was supportive during second half of 2005 Monthly change in flows for Emerging Market dedicated funds US$m Volatile flows have not affected performance Source: EmergingPortfolio.com, data based on 352 dedicated GEM funds and is shown to November 2005 27026

  26. Foreign Fund Flows into Emerging Markets Global US$m Emerging Markets Equity New Inflows 1998 1999 2000 2001 2002 2003 2004 YTD 30/11/05 2,228.5 3,563.6 -164.4 -350.8 -868.6 5,896.2 -2,268.3 2,265.3 Source: EmergingPortfolio.com, data based on 352 dedicated GEM funds and is shown to November 2005 27026

  27. Concerns • $ weakness • Rising interest rates 27026

  28. Concerns A weak Dollar has been positive for Emerging Markets Monthly change in flows for Emerging Market dedicated funds Inverted Scale US$m Source: Thomson Datastream, data shown to December 2005 27026

  29. Concerns Interest rate cycles have been associated with financial crises % % • Bubbles? • High yield • EM Debt • Real Estate Tech Bubble Burst MexicanPeso Crisis 1987 Crash S&L Crisis Asian Crisis Do we need another crisis for Fed Tightening to stop? LCD Crisis Continental III First Penn Source: BCA Research December 2005 27026

  30. Concerns Emerging Markets tend to falter when US rates peak Emerging Markets Perf. Rel to US peaks 2 to 3 months before US Rate Hike Cycle Peaks Source: Citigroup Investment Research, Datastream, MSCI, Worldscope and IBES 27026

  31. 5 year correlation of key factors to GEM GEMs are positively correlated with rising US 10 year yields Source: Deutsche Bank, MSCI, Bloomberg. Data shown for October 2005 27026

  32. Summary • Economics • Global slowdown, but modest • Emerging Market economies have been decoupling • Emerging Market economies have gone through structural improvement • Valuations • Remain attractive • Concerns • $ weakness supportive, provided not excessive • Over zealous monetary tightening 27026

  33. Global Emerging Markets Strategy Source: Schroders, 6th January 2006 27026

  34. The Case for BRIC 27026

  35. World Population 2003 Population(2003, millions) Brazil Russia India China 176.6 143.4 1,064.4 1,288.4 OECD World 914.6 6,272.5 BRICs nearly 3 times the population size of the OECD Source: World Bank, World Development Indicators Database April 2005 27026

  36. Emerging Markets stages of development Hong Kong/Singapore G7 Taiwan Israel S. Korea Maturity Czech/Hungary/Poland Mexico Malaysia Sub-Saharan Africa Brazil Russia China India Frontier markets deregulation Emerging markets Premium growth (5%-7%) Established growth (3%-5%) Mature economies (2%-3%) Time BRICs at early stage of development …… therefore should grow faster Source: World Bank, World Development Indicators Database April 2005 GNI/capita 2003 data Schroders 27026

  37. GDP 2003* 2040** GNI per capita*2003 (US$) Brazil Russia India China USA 2,720 2,610 540 1,100 37,870 OECD World 29,360 5,510 BRICs small but growing percentage of World GDP Source: * World Bank, World Development Indicators Database April 2005 ** Goldman Sachs 27026

  38. Global Growth Split 2005E 2040 BRICs to be 67% of global growth by 2040 GS BRICs Model Projections Source: Goldman Sachs, ‘How solid are the BRICs ’ Global Economics Paper No:134 (Dec 2005) 27026

  39. GDP The largest economies in 2050 • Per OECD China is already bigger than 2 of G7 – Canada and Italy • By 2010 China will be 4th largest economy after US, Japan and Germany • “If China were cut off from foreign trade and investment its growth would be just 1-2% p.a. less.” China-India (Chindia) . . . the second-largest economy in 2004 on PPP basis GDP (2005 US$bn) Proportional world GDP (PPP) % Source: World Bank Source: GS BRICs Model Projections Source: Professor Lucas, University of Chicago – Sunday Times 25th September 2005 27026

  40. BRICs growth of middle class Number of people above $3,000 in the BRICs vs G6 population Number, millions BRICs discretionary consumption will be key driver of global growth GS BRICs Model Projections Source: Goldman Sachs, Dreaming with BRICs: the Path to 2050 (Oct 2003) 27026

  41. BRICs growth of middle class Consumer durable growth* Nuber, millions 200% 230% 140% 720% 770% 170% 510% 550% …driving strong consumer growth • *Schroders estimation using 50% and 70% of current developed market penetration rates. Assuming world population growth from 6.3bn to 7.6bn between 2003 and 2005 • Source: Population forecasts - Goldman Sachs, Dreaming with BRICs: the Path to 2050 (Oct 2003), Penetration rates- HSBC Earthtrends, Schroders 27026

  42. Currency Purchasing power parity* (against US$) BRICs currencies are undervalued on a PPP basis… • PPP based on inflation differentials (not trade weighted) • Source: Bloomberg, Schroders. All data to Dec 2005 (based from Jan 2002) 27026

  43. BRICs Efficient Frontiers BRICs vs MSCI China 5 year (Annualised)* BRICs vs MSCI India 5 year (Annualised)* Annualised return (%pa) Annualised return (%pa) BRICS 100% BRICS 100% BRICS 80% BRICS 80% BRICS 60% BRICS 60% BRICS 40% BRICS 40% BRICS 20% BRICS 20% MSCI China 100% MSCI India 100% Annualised return (%SD pa) Annualised return (%SD pa) BRICs give higher returns and lower risk than single country portfolios Source: Factset, Bloomberg, Schroders * all returns to 31 Dec 2005 27026

  44. Precedent of Korea KOSPI Price Index GNI/capita US$ KOSPI growth % 1975 to 1986 1987 to 1994 $602 to $2,643 $2,643 to $9,459 150% 438% GNI/capita 2003 US$ Brazil Russia India China $2,720 $2,610 $540 $1,100 Source: World Bank, World Development Indicators Database April 2005 Source: Korean National Statistical Office 27026

  45. Precedent of Taiwan TAIEX Index GNI/capita US$ TAIEX growth % 1979 to 1983 1984 to 1992 $758 to $2,573 $2,573 to $9,591 40% 343% GNI/capita 2003 US$ Brazil Russia India China $2,720 $2,610 $540 $1,100 Source: Directorate – General of Budget Accounting & Statistics Taiwan, Bloomberg Source: World Bank, World Development Indicators Database April 2005 27026

  46. Country Allocation BRICs *Index levels calculated internally intra-month Source: Schroders, 6th January 2006 27026

  47. Disclosure Statement • The returns presented represent past performance and are not necessarily representative of future returns which may vary. The value of investments can fall as well as rise as a result of market or currency movements • Potential investors should be aware that investment in Emerging Markets involves an above average degree of risk and should be seen as long-term in nature. Less developed markets are generally less well regulated than mature markets, they may be less liquid and may have less reliable custody arrangements • Opinions • Schroders has expressed its own views and opinions in this presentation and these may change • Data Protection • For the purposes of the United Kingdom’s Data Protection Act 1998, the data controller in respect of any personal data you supply is Schroder Investment Management Limited. Personal information you supply may be processed for the purposes of investment administration by the Schroders Group which may include the transfer of data outside of the European Economic Area. Schroder Investment Management Limited may also use such information for marketing activities unless you notify it otherwise in writing • Taped Telephone Lines • For your security communications with our London office may be taped or monitored • Identification • Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA • Telephone: 020 7658 6000, Fax: 020 7658 6965 • Authorised and regulated by the Financial Services Authority 27026

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