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

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

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

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

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

7. 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?

8. Eastern Promise | Ashburton Investment presentation | October2009 7 Laying the foundations… Deng Xiaoping: Paramount leader of the PRC from 1978 to 1997. 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)

9. 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.

10. Eastern Promise | Ashburton Investment presentation | October2009 7 Fast forward to the current day… From a low base in the early 1990s, consumption accounted for almost 50% of GDP growth in 2008. 6 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

11. Eastern Promise | Ashburton Investment presentation | October2009 7 Rising urban population Source: CEIC, Nomura Global Economics Number of Migrants - Rural to Urban 0 5 10 15 20 198319881993199820032008 Year Million

12. Eastern Promise | Ashburton Investment presentation | October2009 7 Strong income growth Source: CEIC, Nomura Global Economics Real GDP growth and GDP per Capita 0 800 1600 2400 3200 1993199820032008 Year US$ 0 2 4 6 8 10 12 14 16 %y-o-y

13. Eastern Promise | Ashburton Investment presentation | October2009 7 Mild deflation Source: Bloomberg China CPI, % YOY -6 -2 2 6 10 14 18 22 Jun-01Jun-03Jun-05Jun-07Jun-09 % CPICPI FOOD

14. Eastern Promise | Ashburton Investment presentation | October2009 7 Very low leverage Source: CEIC, Datastream, RBI, RBA, CLSA 0 20 40 60 80 100 120 UK Australia USA Korea Japan Malaysia Taiwan HK Singapore Thailand China Indonesia India Philippines Consumer debt as % of GDP, 2Q09 (%)

15. 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

16. Eastern Promise | Ashburton Investment presentation | October2009 7 A multi-decade investment story Household Consumption Growth -4 0 4 8 12 16 20 1996200020042008 Year % y-o-y JapanUSChina

17. Eastern Promise | Ashburton Investment presentation | October2009 7 A multi-decade investment story Consumer Goods Ownership (2007) 0 35 70 105 140 TVPhoneWMRefrigeratorACPC Units per 100 households Rural householdUrban household

18. 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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