Eastern Promise: Can Asian growth be sustained? Speakers Tristan Hanson Jonathan Schiessl Craig Farley Investment Presentation Jersey - October 2009

Eastern Promise | Ashburton Investment presentation | October2009 Ashburton Investment Models Craig Farley Chinese consumption From Supplier to Buyer October 2009

Eastern Promise | Ashburton Investment presentation | October2009 A period of extraordinary change…

Eastern Promise | Ashburton Investment presentation | October2009 A period of extraordinary change…

Eastern Promise | Ashburton Investment presentation | October2009 A period of extraordinary change…

Eastern Promise | Ashburton Investment presentation | October2009 Chairman Mao Chairman Hua Guofeng Chairman Deng Xiaoping Chairman Jiang Zemin Chairman Hu Jintao How did we get there?

Eastern Promise | Ashburton Investment presentation | October Laying the foundations… Deng Xiaoping: Paramount leader of the PRC from 1978 to Inherited country wrought with social and institutional woes left over from the Cultural Revolution. Led Chinese economic reform through synthesis of theories known as ‘socialist market economy.’ Opened China to foreign investment, the global market and limited private competition. ‘I don’t care if it’s a white cat or a black cat. It’s a good cat so long as it catches mice.’ (quote from Guangzhou conference, 1961)

Eastern Promise | Ashburton Investment presentation | October2009 Revolutionary steps taken in the 1990s 1) 50 million state workers sacked over 6 years. 2) Beijing privatised China’s housing market, moving quickly from 15% to 70% urban ownership. 3) The Party relaxed controls over entrepreneurs.

Eastern Promise | Ashburton Investment presentation | October Fast forward to the current day… From a low base in the early 1990s, consumption accounted for almost 50% of GDP growth in underlying demand drivers: 1) Increasing consumer confidence 2) Absence of household debt 3) Strong income growth 4) Mild deflation 5) Emerging consumer class 6) Government stimulus

Eastern Promise | Ashburton Investment presentation | October Rising urban population Source: CEIC, Nomura Global Economics Number of Migrants - Rural to Urban Year Million

Eastern Promise | Ashburton Investment presentation | October Strong income growth Source: CEIC, Nomura Global Economics Real GDP growth and GDP per Capita Year US$ %y-o-y

Eastern Promise | Ashburton Investment presentation | October Mild deflation Source: Bloomberg China CPI, % YOY Jun-01Jun-03Jun-05Jun-07Jun-09 % CPICPI FOOD

Eastern Promise | Ashburton Investment presentation | October Very low leverage Source: CEIC, Datastream, RBI, RBA, CLSA UK Australia USA Korea Japan Malaysia Taiwan HK Singapore Thailand China Indonesia India Philippines Consumer debt as % of GDP, 2Q09 (%)

Eastern Promise | Ashburton Investment presentation | October2009 China: Additional fiscal stimulus aimed at consumption DateGovernmentPeriodProjectsAmounts (RMB bn) 5-Mar-09Central2009 Subsidies for rural households to purchase electric appliances, motor cycles and automobiles 40 5-Mar-09Central2009Agricultural subsidies123 Subsidies for purchases of agricultural machinery13 5-Mar-09Central2009 Interest subsidies to support firms’ technology upgrade 20 5-Mar-09Central2009Employment42 5-Mar-09Central2009Social security293 5-Mar-09All levels In the following three years Healthcare reform (RMB331.8bn by central government) 850 Total1381 Data source: Premier Wen Jiabao’s Working Report to the NPC (March 5, 2009) and Nomura Global Economics. RMB500bn tax cuts and RMB1.4trn non-investment spending Non-investment Spending Plan in 2009

Eastern Promise | Ashburton Investment presentation | October A multi-decade investment story Household Consumption Growth Year % y-o-y JapanUSChina

Eastern Promise | Ashburton Investment presentation | October A multi-decade investment story Consumer Goods Ownership (2007) TVPhoneWMRefrigeratorACPC Units per 100 households Rural householdUrban household

Eastern Promise | Ashburton Investment presentation | October2009 How is the Fund benefiting? Source: Ashburton Ashburton Chindia Equity Fund thematic weights Commodities Banks Real asset plays Consumer related Cash Others Infrastructure Clean & Green Energy

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