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

Climate change Tristan Hanson Investment Outlook October 2009

Eastern Promise | Ashburton Investment presentation | October2009 Performance since last Investment Briefings +10.9% +8.5% +6.9% +3.7% Jun-09Jul-09Aug-09Sep-09Oct-09 Ashburton M-A Aggressive £ Ashburton Replica AM £ MSCI World (local ccy) Global Bonds (local ccy)

Eastern Promise | Ashburton Investment presentation | October2009 Performance since last Investment Briefings Regional Equity Performance Jun-09Jul-09Aug-09Sep-09 Asia ex Japan Europe US Japan

Eastern Promise | Ashburton Investment presentation | October2009 Performance since last Investment Briefings Performance vs US$ (2009 YTD) US $ Jap Yen Swiss Fr. Euro GBP Swedish Kr CAD $ Norwegian Kr AUS $ Performance vs US$ (Jun 9th - Oct 2nd) GBP US $ CAD $ Euro Swiss Fr. AUS $ Jap Yen Norwegian Kr Swedish Kr

Eastern Promise | Ashburton Investment presentation | October2009  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 Key points – June 2009

Eastern Promise | Ashburton Investment presentation | October2009  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 Current Views – October 2009

Eastern Promise | Ashburton Investment presentation | October2009 Leading Indicators point to growth rebound OECD Leading Indicator (6m chg, annl %) -20% -10% 0% 10% 20% Jul-61Jul-64Jul-67 Jul-70Jul-73 Jul-76Jul-79Jul-82Jul-85Jul-88Jul-91Jul-94 Jul-97 Jul-00Jul-03 Jul-06Jul-09

Eastern Promise | Ashburton Investment presentation | October2009 Leading Indicators point to growth rebound Source: FactSet, Nomura China: OECD Leading Indicator (6m % chg, annl) China: industrial production (% YoY, 6m avg)

Eastern Promise | Ashburton Investment presentation | October2009 IMF Growth Projections Source: IMF ProjectionsDifference from Jul 09 WEO projections World output Advanced economies United States Euro area Japan United Kingdom Newly industrialised Asian economies Emerging and developing economies China India Brazil Mexico

Eastern Promise | Ashburton Investment presentation | October2009 Consensus expectation is a modest recovery Source: Macroeconomic Advisers (MA forecast) Strength of recovery versus severity of preceding recession Negative growth in recession (versus trend) Sharper recovery Deeper recession "% growth in recovery phase

Eastern Promise | Ashburton Investment presentation | October2009 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 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

Eastern Promise | Ashburton Investment presentation | October2009 G7’s share of world GDP growth is shrinking Source: Ashburton, IMF Share of World Growth (volume) % 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% EUUSChina

Eastern Promise | Ashburton Investment presentation | October2009 “Sweet spot” – no pressure yet on interest rates Source: Ashburton, Bloomberg

Eastern Promise | Ashburton Investment presentation | October2009 “Sweet spot” – no pressure yet on interest rates Source: Ashburton, Bloomberg US GDP: deviation from trend -10% -5% 0% 5% 10% Mar-85 Mar-87Mar-89Mar-91 Mar-93Mar-95Mar-97Mar-99Mar-01Mar-03Mar-05 Mar-07 Mar-09 US GDP & trend

Eastern Promise | Ashburton Investment presentation | October2009 Why are bond yields so low? Source: Ashburton, Bloomberg Jan-99 Jan-01Jan-03Jan-05 Jan-07 Jan-09 % UK 10yr yieldUK 2yr yield

Eastern Promise | Ashburton Investment presentation | October2009 Valuations: no longer distressed Source: Cazenove, iBoxx

Eastern Promise | Ashburton Investment presentation | October2009 Valuations: no longer distressed Source: FactSet World Equity Market PE (12mf EPS) Oct-91 Oct-93Oct-95Oct-97Oct-99Oct-01Oct-03 Oct-05Oct-07

Eastern Promise | Ashburton Investment presentation | October2009 Valuations: equities attractive compared to bonds, cash Source: Ashburton, Bloomberg Sep-89 Sep-92 Sep-95Sep-98Sep-01Sep-04 Sep-07 % US Earnings Yield US Real Bond Yield US Real Fed Funds Rate

Eastern Promise | Ashburton Investment presentation | October2009 Strong rebound in profits likely  Barclays Capital US operating earnings model Source: Barclays Capital, Haver Analytics

Eastern Promise | Ashburton Investment presentation | October2009 Strong rebound in profits likely  Unit labour costs falling faster than prices Source: Ashburton, FactSet, Barclays Capital Shading indicates rising US profits as share of GDP

Eastern Promise | Ashburton Investment presentation | October2009 Risks to rosy 12-month view HedgesLikelihood – Ashburton view 1. Significant China slowdownGovt bonds, US$Low 2. Public finance crisis in G7 country Cash, Gold, Asian/Cmdty. govt bonds & FX Low 3. Banking crisis relapseCash, Gold, Govt bondsLow 4. US dollar crisisCommodities, Cmdty FXLow/Moderate 5. Weak G7 recoveryGovt Bonds; Asian FXModerate 3. Rapid growth → interest rate hikesCommodities, Equities, CashModerate/High 7. Geopolitical risk increasesGovt bonds, Cash, Gold?

Eastern Promise | Ashburton Investment presentation | October2009 Long-term consequences of the crisis Source: IMF

Eastern Promise | Ashburton Investment presentation | October2009 Long-term consequences of the crisis Source: IMF

Eastern Promise | Ashburton Investment presentation | October2009 Long-term consequences of the crisis Source: IMF

Eastern Promise | Ashburton Investment presentation | October2009 Investment Strategy

Eastern Promise | Ashburton Investment presentation | October2009 Investment Strategy - Ashburton Asset Management Fund Asset allocationOct-09Jun-09 Bonds (max = 70%)43%54% Govt/Govt Guaranteed26%24% Supranational-13% Inflation-linked bonds11%13% Corporate6%4% Equities (max = 50%)33%39% US13% Pan Europe10%11% Asia7%15% Alternatives1%- Cash/Tbills23%7% 100% Source: Ashburton as at 5 October 2009

Eastern Promise | Ashburton Investment presentation | October2009 Investment Strategy Replica Asset Management Fund– currency overlay Currency Weightings (%) - Oct £€$ GBP878- EUR-67- USD-382 JPY--- AUD-62 NOK-3- TWD555 INR555 Other Asia336 Currency Weightings (%) - Jun £€$ GBP8955 EUR-75- USD-482 JPY--- AUD-3- NOK35- TWD555 INR--- Other Asia338

Eastern Promise | Ashburton Investment presentation | October2009 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?

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