Regulated by the Securities and Futures Commission Baring Asset Management (Asia) Limited 19th Floor Edinburgh Tower 15 Queen’s Road Central Hong Kong Tel: (852) Fax: (852) April 2012 The Asia Pacific Fund, Inc. Investment Outlook & Strategy

2 Market Sentiment Last year’s macro concerns have diminished, opening the door to a more positive outlook in 2012 Monetary tightening in BRIC continuing Global Imbalances + High Food prices >>> Global political tension Would the US economy ‘double-dip’ without QE3 or fiscal boost ? “Club Med” nations’ sovereign debt crisis US government credit downgrade by S&P >>> Equities: BACK TO BEAR MARKET ??? <<< Political gridlock and weaker economic trends in largest OECD nations 2011 : “Wall of worries” 2012: A more positive outlook US economy has surprised on the upside ECB and BOJ injected liquidity in their banking system Monetary easing in BRIC “Club Med” nations’ sovereign debt crisis easing More resolve among largest OECD nations to stabilise their banking system and reflate their domestic economy Lower commodity prices compared to 12 months ago >> less political tension (except Middle East ?) >>> Equities : RALLY since Dec of last year <<<

3 Consensus upgraded US but downgraded of Europe and Asia. Barings assigns a 20% probability to a global recession scenario. Global Economic Outlook We expect slow growth, but not a recession Source: JP Morgan, March 2012 GDP Growth (%) 2010E2011F2012F World US Eurozone Japan China Asia ex Japan Global Emerging

4 China Economic Outlook Soft landing forecast Despite current negative news flows, we forecast a ‘soft landing’ scenario for China, with GDP growth between % in 2012/13 Real GDP Growth (Year-on-year change, %) 9% swing 10% swing 8% swing Source: CEIC, JP Morgan, April 2012

5 China Monetary Trend A more positive trend soon to emerge ? M2 growth and Reserve Requirement Ratio (“RRR”) trends Source: CLSA, March 2012 As inflation falls, room for RRR to be cut and M2 growth to rise >>> positive for equity markets ?

6 Indian Economy Persistently high inflation Trends in the Repo Rate and Inflation (%YoY) Source: RBI, Office of the Economic Advisor, CIRA, Citi, December 2011 Unlike China, India’s inflationary trend remains persistently high, hence the continuing tightness in its monetary policy

7 Barings’ Valuation of Global ‘Safe Haven’ Assets Still relatively expensive ‘Safe’ quality government bonds, as well as ‘defensive’ stocks, remain expensive, as we are living in a ‘financial repression’ environment Source: Barings, SPG, March year US bond real yield ( based on ‘headline’ inflation ) 10 year US bond real yield ( based on ‘core’ inflation )

8 Barings’ Valuation of Global ‘Risk’ Assets Still relatively cheap Implied equity risk premium (ERP) of US market While less attractive than in Oct ’11, equities still offers the best long-term value among major asset classes Source: Barings, SPG, March 2012

9 Asian & Global Equities Earnings growth forecasts and valuations Source: JP Morgan, March 2012 *Market forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using I/B/E/S estimates. US trailing PE is calculated as per reported earnings. For all other markets and sectors, forecast numbers are derived from bottom-up calculations of each individual MSCI constituents using JPM estimates for covered stocks and I/B/E/S estimates for the rest. Companies with different yearends are calendarised to December yearends and are free float adjusted for aggregation. Historical numbers are from MSCI. Are IBES analysts still too optimistic in , or are share prices too cheap ? P/E (x) Div. Yield (%) P/BV (x)Earnings growth (%)ROE (%) Country Current Trailing 12m fwd Current Trailing E2012E2013E2012E Global * USA * Emerging Asia China

10 Asia Pacific Equity Market Valuation Attractive MSCI Asia Pacific ex Japan 12M forward PE Source: Factset, IBES, MSCI, Goldman Sachs Global ECS Research, March 2012 Asia Pacific markets appear to continue to trade at price levels reminiscent of past global and regional crises MSCI Asia Pacific ex Japan 12M trailing PB

11 Source: Credit Suisse (April 2012) Investor Risk Appetite Sentiment has turned more positive

12 Source: Bloomberg (10 April 2012) Technical Momentum Equity markets likely to have returned to bull trend Short-term correction, then 2nd leg of rally to come ? S&P 500 Price Index (strong)Hang Seng Price Index (weaker)

13 Key Risks to Our Bullish Scenario Sustainability of US growth recovery ? Possibility of sovereign defaults in Europe Will the Chinese economy ‘hard-land’ ? High oil prices amid continuing political risks in Middle East Return to “growth recession” scare in H2 of 2012 ? Monitoring the above macro issues closely

14 The Fund’s Investment Strategy & Themes Asian equities rebounded in Q1-2012, helped by the removal of the tail- risk of possible European banking failures following the recent ECB’s LTRO programme, plus continuing positive economic surprises in the US, monetary easing in Asia, and an underweight global investor. The Fund has been accumulating quality growth stocks, businesses with strong global or domestic brand names. The Fund is overweight in Consumer Discretionary and Technology sector. We continue to believe that the strong fundamentals of Asian economies and corporates will be reflected in higher share prices longer-term, once the European debt crisis is resolved.

15 This document is provided as a service to professional investors/advisers. It is issued in the United Kingdom by Baring Asset Management Limited and/or by its investment adviser affiliates in other jurisdictions. The affiliate serving as the Asia Pacific Fund’s investment adviser is Baring Asset Management (Asia) Limited. In the United Kingdom this document is issued only to persons falling within a permitted category under (i) the FSA’s rules made under section 238(5) of the Financial Services and Markets Act 2000 and (ii) the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order This is not an offer nor a solicitation to buy or sell any investment referred to in this document. Baring Asset Management group companies, their affiliates and/or their directors, officers and employees may own or have positions in any investment mentioned herein or any investment related thereto and from time to time add to or dispose of any such investment. This document may include forward-looking statements, which are based upon our current opinions, expectations and projections as of the date on the cover hereof. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. Compensation arrangements under the Financial Services and Markets Act 2000 of the United Kingdom will not be available. Private investors in the Company referred to herein should obtain their own independent financial advise before making investments. This document must not be relied on for purposes of any investment decisions. Before investing in the Company, we recommend that all relevant documents, such as reports and accounts and prospectus should be read, which specify the particular risks associated with investment in the Company, together with any specific restrictions applying and the basis of dealing. The Company may not be available for investment in all jurisdictions. There may also be prohibitions or restrictions on distribution of this document and other material relating to the Company and accordingly recipients of any such documents are advised to inform themselves about and to observe any such restrictions. Research Material Baring Asset Management only produces research for its own internal use. Where details of research are provided in this document it is provided as an example of research undertaken by Baring Asset Management and must not be used, or relied upon, for the purposes of any investment decisions. The information and opinions expressed herein may change at anytime. For data sourced from Morningstar: © 2012 Morningstar, Inc. all rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Complied (Boston): 10 th April, 2012 Important Information