Asia – The re-rating continues “What’s been driving Asia’s re-rating and can this continue?”

1. Asia – The re-rating continues“What’s been driving Asia’s re-rating and can this continue?” Greg Kuhnert Fund Manager Investec Asset Management March 2007

2. Outline • Macroeconomics – structural growth • Governance is improving • Valuations • The Risks

3. Macroeconomics – structural growth

4. Macroeconomics • C = Consumption • I = Investment • G = Government expenditure • (X – M) = Net exports GDP C I G (X – M) = + + +

5. What’s driving the re-rating? • Exports: Global outsourcing continues • Rise in consumerism • Investment needs to rise • Rising Asian wealth and savings • Improved macroeconomic stability

6. Global outsourcing continues… • Outsourcing driven by Chinese entry to WTO in 2001 (and low wages) • Further growth from higher value added products (e.g. automotive and machinery) • Outsourcing from Europe in its infancy Manufacturing wages, $ per hour Chinese share of US sea imports Outsourcing from Europe to catch up with USA Machinery Automotive US China Brazil Asia * Includes Hong Kong, Korea, Singapore, and Taiwan. Source: National sources, Morgan Stanley Research Source: “China: Is the outsourcing party over? Part II”, UBS, 20 September 2005 Source: Eurostat, US Census Bureau, UBS

7. % of Chinese disposable income Real GDP growth ex Japanand China Source: CSFB research Source: CEIC, UBS estimates Consumption • Consumption as % GDP is low compared to historical • Savings (in cash) is high • Potential for emerging Asian consumers to leverage up further Gross household financial debt1990 vs 2004 Source: CEIC, UBS estimates

8. Source: CEIC, HSBC Investment needs to rise • Investment as a share of GDP is low • Ex China, capacity utilisation unsustainably high • Companies have capacity on their balance sheets • Regional infrastructure needs upgrading/expanding Gross investment share of GDP Rising capacity utilisation rates Source: CEIC, UBS estimates. Note: “Asian export economies” refers to Asia excluding Japan, China and India

9. Investment – examples Government Private * Subject to legislative approval Source: JP Morgan

10. Development of savings market • Demographics point to rising dependency ratios by 2025 • Currently most savings in cash and bonds • Asian wealth forecast to rise substantially • Required increase in equity allocation is substantial

11. Improved macro-economic stability Different to 1998 • Current accounts are in surplus • Core inflation is moderate • Currencies are undervalued • Lower risk premia Source: “Asian Economic Monitor”, UBS, Jan2007 Source: The Economist

12. Governance is improving Political Change Corporate Governance

13. Political change

14. Improving corporate governance Higher returns on equity = higher valuation multiples

15. Valuations

16. Scope for returns to rise through gearing Source: Goldman Sachs Gearing levels are falling

17. G:\Depts\Marketing\Presentations\Hamilton Brown Graphics\¬MASTER GSF\MASTER_Asian Equity Fund UK_Switz_US_SAm (Greg Kuhnert)\Evidence\ASIAN Equity Fund Charts.xls\Valu Chts Valuation levels are attractive… Valuations are attractive on a price to book basis. Source: UBS G:\Depts\Marketing\Presentations\Hamilton Brown Graphics\~Working documents\00171_Asia Edinburgh (G Kuhnert)\Copy of Asia PE vs World_SP.xls\Sheet1 Source: UBS Source: UBS

18. The Risks

19. The Risks • Trade war with the US • Hard landing in China • Global risk aversion

20. Summary • Asian re-rating driven by: • Structural growth • Improving governance • Valuation still attractive relative to history and global equities

21. Contact information • Stephen Capon • Sales Manager • Tel: + 44 (0)207 597 2142Email: stephen.capon@investecmail.com • Investec Asset Management2 Gresham StreetLondonEC2V 7QPUnited Kingdom • www.investecfunds.co.uk Telephone calls may be recorded to confirm your instructions March 2007

22. Thank you