Eastern Promise: Can Asian growth be sustained?

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

2. Climate change Tristan Hanson Investment Outlook October 2009

3. 105 100 95 90 Performance since last Investment Briefings 115 +10.9% 110 +8.5% +6.9% +3.7% Ashburton M-A Aggressive £ Ashburton Replica AM £ MSCI World (local ccy) Global Bonds (local ccy) Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

4. Performance since last Investment Briefings Regional Equity Performance 120 Asia ex Japan 115 Europe US Japan 110 105 100 95 90 Jun-09 Jul-09 Aug-09 Sep-09

5. Performance since last Investment Briefings Performance vs US$ (Jun 9th - Oct 2nd) Performance vs US$ (2009 YTD) Swedish Kr 9.2 AUS $ 23.1 Norwegian Kr 9.2 Norwegian Kr 19.9 Jap Yen 8.4 CAD $ 12.9 AUS $ 8 Swedish Kr 11.3 GBP Swiss Fr. 9.3 4.2 Euro 4.3 Euro 3.6 Swiss Fr. 3.3 CAD $ 2.3 Jap Yen 0.9 US $ 0 US $ 0 GBP -2.2 0 5 10 15 20 25 -4 -2 0 2 4 6 8 10

6. Key points – June 2009 • Equities – further upside potential • Government bonds (US/Europe) -oversold and no longer overvalued • Sterling preferred currency major Macro views • Global economy poised for recovery • Long-term structural growth concerns remain • Inflation fears overdone

7. Current Views – October 2009 • Valuations of risk assets are no longer at distressed levels • However, current policy mix is very positive for asset prices • Potential for economic rebound to be stronger than consensus expectation • Longer-term structural concerns remain Market Views • Positive backdrop for risk assets: equities, commodities, emerging markets • Government bonds supported by low interest rates, but look overbought • Asian, EM & Commodity currencies to outperform majors • Sterling oversold on a short-term basis

8. Leading Indicators point to growth rebound OECD Leading Indicator (6m chg, annl %) 20% 10% 0% -10% -20% Jul-76 Jul-79 Jul-88 Jul-94 Jul-82 Jul-85 Jul-91 Jul-06 Jul-09 Jul-97 Jul-70 Jul-73 Jul-61 Jul-64 Jul-67 Jul-00 Jul-03

9. Leading Indicators point to growth rebound China: OECD Leading Indicator (6m % chg, annl) China: industrial production (% YoY, 6m avg) Source: FactSet, Nomura

10. IMF Growth Projections Source: IMF

11. 1948-49 1957-58 1960-61 1990-91 1981-82 1969-70 1973-75 1980 2001 Sharper recovery 2007-2009 (MA forecast) Deeper recession Consensus expectation is a modest recovery Strength of recovery versus severity of preceding recession 10 9 8 7 1953-54 6 "% growth in recovery phase 5 4 3 2 1 0 5 7 1 2 3 4 6 8 9 Negative growth in recession (versus trend) Source: Macroeconomic Advisers

12. Why global recovery can be sustained in 2010: • China is growing rapidly • Massive global inventory cycle underway • Significant global fiscal stimulus in the pipeline • Monetary policy takes 12-18 months to be fully effective • US/UK housing is stabilising • Banking system risks have abated • Corporate profitability is recovering (productivity gains) • The global defibrillator is working: ‘animal spirits’ alive once again

13. Share of World Growth (volume) % 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 1981-1990 1991-2000 2001-2008 2009-2014 EU US China G7’s share of world GDP growth is shrinking Source: Ashburton, IMF

14. “Sweet spot” – no pressure yet on interest rates Source: Ashburton, Bloomberg

15. “Sweet spot” – no pressure yet on interest rates US GDP & trend 9.7 9.2 8.7 US GDP: deviation from trend 10% 5% 0% -5% -10% Source: Ashburton, Bloomberg Mar-95 Mar-99 Mar-03 Mar-93 Mar-97 Mar-01 Mar-05 Mar-91 Mar-07 Mar-87 Mar-89 Mar-09 Mar-85

16. Why are bond yields so low? 7 6 5 4 % 3 UK 10yr yield UK 2yr yield 2 1 0 Jan-01 Jan-03 Jan-05 Jan-07 Jan-99 Jan-09 Source: Ashburton, Bloomberg

17. Valuations: no longer distressed Source: Cazenove, iBoxx

18. Valuations: no longer distressed World Equity Market PE (12mf EPS) 30 25 20 15 10 5 Oct-93 Oct-95 Oct-97 Oct-99 Oct-01 Oct-03 Oct-91 Oct-05 Oct-07 Source: FactSet

19. Valuations: equities attractive compared to bonds, cash 10 8 6 4 % 2 0 US Earnings Yield -2 US Real Bond Yield US Real Fed Funds Rate -4 Sep-98 Sep-04 Sep-95 Sep-01 Sep-92 Sep-07 Sep-89 Source: Ashburton, Bloomberg

20. Strong rebound in profits likely • Barclays Capital US operating earnings model Source: Barclays Capital, Haver Analytics

21. Strong rebound in profits likely • Unit labour costs falling faster than prices Shading indicates rising US profits as share of GDP Source: Ashburton, FactSet, Barclays Capital

22. Risks to rosy 12-month view

23. Long-term consequences of the crisis Source: IMF

24. Long-term consequences of the crisis Source: IMF

25. Long-term consequences of the crisis Source: IMF

26. Investment Strategy

27. Investment Strategy - Ashburton Asset Management Fund Source: Ashburton as at 5 October 2009

28. Investment StrategyReplica Asset Management Fund– currency overlay

29. Ashburton Multi Asset Funds • Exposure to a diverse set of risks: equity, interest rate, FX, credit, regional • Exploit inefficiencies at the asset class level • Fundamental research • Valuation • Sentiment • Technical analysis • Inter-market analysis • Active asset allocation • Unconstrained • Absolute return mindset Aim: Cash-plus returns over the cycle with low volatility • “Tortoise vs Hare” } Are probabilistic outcomes mis-priced?