ISI Far East Things will never be the same again …

Overview ISI facts Important Far Eastern trends Far Eastern trade Sound businesses Characteristics of the Far East and China Country and industry preferences Risks Investment philosophy and investment process Questions

Urbanisation in Asia current migration Migration from rural to urban areas a long-term trend contributing to growth and demand for commodities

Rising income in China - also for rural population Rising income = growing private consumption

Disposable income and house price developments in China Wage rise faster than house prices Wages House prices

China an agricultural country? Too many employed on inefficient farms Source: GaveKal

Household debt/GDP Mortgage debt Other debt Source: GaveKal

Chinese savings motivations Source: HSBC

USD/RMB USA Kina Japan Korea. kilde: BCA Research The only way is …

Exports from Asia to USA declining USA Kina Japan Korea Result: less dependency on debt-ridden US consumers. Source: BCA Research

Declining debt/equity ratio but ROE remains high Reduced risk at lower global growth Debt/equity ROE Source: CLSA

Equity yields exceed bond yields Source: CLSA Numerous opportunities of finding secure equities in Far East

Far East Economic growth is stable and high –likely to remain so in years Rapidly rising purchasing power among private households –new consumers appear every day Positive demographic development Swelling trade in the Far East – reduces dependency on USA Positive development of various balances –countries capable of countering recession Sound companies with good earnings

China Share markets are liquidity driven –90,000 new stock accounts every day Reduction in corporation tax –from 33% to 25% Rising exchange rate High growth in earnings Listing of H shares in China –PetroChina and China Mobile 2008 Olympics

Country weights Overweights China, Hong Kong and Macau Singapore Malaysia Underweights Korea Taiwan Thailand

Industry preferences Real property –private homes, office buildings and hotels Retail sales Financials Infrastructure Telecommunication Food Commodities –food, metals and oil Technology – substantial underweight

Risks Measures imposed by Chinese authorities to bring booming economy to a halt are too stringent US housing market to weaken and USD to plunge Growth in global economy triggers rising inflation and interest rates Oil price to exceed USD 100 per bbl

Investment philosophy 1) Active management enables us to generate outperformance. 2) We access the market with a top-down approach, focussing on getting countries and sectors right. 3) We believe that investing in long or short themes can add value to the portfolio. 4) Identification of differences between market value and fair value that are not due to fundamental issues can contribute to outperformance. 5) We believe that ability to act fast on new information is crucial for our outperformance. 6) We believe that teamwork and a disciplined investment process is necessary in order to be fast-reacting. 7) We believe that cooperation with external advisors is necessary and value adding. Sydbank Emerging Markets & Structured Credit aims to offer customized, premium quality investment products as well as active investment management ensuring high, long-term performance. By investing in Emerging Markets we believe that we can generate risk adjusted excess value based on seven fundamental elements:

Global factors and themes Interest rates Currency Inflation Growth Geopolitics Commodities Structural changes Market analysis Relative pricing Risk aversion Supply/demand GLOBAL VIEW Portfolio risk profile and themes COUNTRY / SECTOR ALLOCATION Quantitative factors Macro economy Valuation Geographical placement Trading relations Credit rating Qualitative factors Political stability/prospects Reform agenda Budget planning Financial system International relations Central bank Country / sector selection STOCK SELECTION Micro research External advisors Valuation Management quality Top line growth Earnings growth / quality CF generation Balance sheet strength Investment horizon: Strategic/tactical Final portfolio PHASE 1PHASE 2PHASE 3 Feedback to the process: Investment guidelines, legislative investment rules, attribution analysis etc. Investment process