For Investment Professionals Only The importance of looking at real returns Presented by Fiona Barwick Director of Regional Research Mondrian Investment Partners 10 July 2008

For Investment Professionals Only Introduction  Inflation trends in Asia  What’s causing it?  Consequences  An investment approach that looks at inflation  Conclusion

For Investment Professionals Only Inflation in Asia trending up

For Investment Professionals Only Food and energy matters

For Investment Professionals Only Globally rice and wheat yields have levelled off

For Investment Professionals Only Rice and wheat prices spiking due to declines in inventories and concerns over supply

For Investment Professionals Only Commodities price inflation  Commodity cost curve move up sharply = cost push  Lack of investment over recent years = supply unable to keep up with surging demand = cost push  China’s rapid urbanisation and industrialisation, subsidised prices and low real interest rates leading to demand pull  Prices are rising again in 2008 Source: LME, Comex/Nymex, CRU, Clarksons, Macquarie Research, January th percentile, cash costs (base)

For Investment Professionals Only Ultimately monetary policy is key

For Investment Professionals Only Broad money growth indicates inflation looks to be trending higher

For Investment Professionals Only Overall real rates look too low

For Investment Professionals Only Monetary policy looks too loose in several countries but better in others …

For Investment Professionals Only Since 2002 low inflation has supported stable monetary policy and market returns

For Investment Professionals Only But rising inflation increases market volatility through an increase in the equity risk premium and shrinking PE multiples

For Investment Professionals Only Defensive characteristics – 1 July 1999 to 31 March 2008 Bull Mkt Periods(22 qtrs) Bear Mkt Periods (13 qtrs) Total Annualised (35qtrs) Return Annualised returns (%) (net of fees) 34.5% 41.3% -20.5% -31.9% 7.8% 10.7% 2.5%

For Investment Professionals Only Risk-Reward comparison 1 July 1999 to 31 March 2008 The returns presented in this graph are presented gross of advisory fees and other expenses associated with managing an investment advisory account. Actual returns will be reduced by such fees and expenses.

For Investment Professionals Only Conclusion  Inflation is trending higher  Monetary policy is too loose  Markets will become more volatile  Mondrian’s approach looks at real absolute returns, preserving capital, lower volatility

For Investment Professionals Only This information is intended only for professional financial advisers and should not be used or relied upon by private investors or any other persons. The price of units and the income from them can fall as well as rise and is not guaranteed. Investors might not get back their original investment. Where applicable, exchange rates may also cause the value of underlying overseas investments to go down or up. Past performance should not be taken as a guide to the future. The figures within this presentation, are provided by, and are the primary responsibility of Mondrian Investment Partners. Issued by Lincoln Unit Trust Managers Limited, incorporated in England registration number , registered office Barnett Way, Barnwood, Gloucester, GL4 3RZ. Telephone Customer Services , Fax , Lincoln Unit Trust Managers Limited is authorised and regulated by the Financial Services Authority and is a member of the Lincoln Financial Group. Member of the Investment Management Association. Any information offered will relate to the life assurance, pension and unit trust products of the Lincoln Financial Group. No personal financial advice or recommendations will be given. Calls may be monitored and recorded for security and training purposes.