INVESTMENT EXCELLENCE IN EUROPEAN EQUITIES

1
INVESTMENT EXCELLENCE IN EUROPEAN EQUITIES

• James Buckley

2
Europe economic overview

• Economic growth forecasts have been upgraded

October 06 Forecasts
January 07 Forecasts
yoy
2007
2007
2.0
1.9
GDP
7.6
7.5
Unemployment Rate ()
2.0
2.2
Industrial Production
2.1
2.2
CPI

• Interest rates have begun to rise
• Eastern Europe provides a boost
• Unemployment rates are declining
• Domestic demand is picking up
• Business sentiment has plateaued

Source Consensus Economics Inc, January 2007
3
Pan European MA Here to stay
Source Citigroup Investment Research and
Datastream, Jan 2007
MA Activity has been a key theme in the last year
4
Growth theme in Peripheral Europe intact

• Economic growth in the euro zone has improved
• Peripheral euro zone economies are even more
  attractive

Source Consensus Forecast December 11th, 2006
5
Traditional InvestingPerformance by country is
not linked to index weight
Source MSCI Europe in at 29 December 2006
6
Traditional InvestingSector performance doesnt
help either
Source MSCI Europe in at 29 December 2006
7
Stock picking is the only tool left

• Opportunity for active managers to benefit from
  market inefficiencies

8
Investment ProcessFundamental Research
strong idea generation
Four Key Measures
VALUE CREATION
VALUATION
MANAGEMENT
GROWTH
Clear, credible strategy Company
culture Corporate governance Demonstrable track
record Acquisitions and disposals
Pace and duration Competitive position Opportuniti
es for real growth Quality of earnings Culture of
innovation
Cashflow returns Improving returns Economic value
added Capital allocation Balance sheet structure
EV/EBITDA Price/cash flow Price/earnings Asset
undervaluation Sector/market/cross border
comparison
Favourable risk / reward
Enhanced shareholder value
Unrecognised growth
Credible management
Enterprise Value/Earnings Before Interest, Tax,
Depreciation and Amortisation
Research augmented by regular contact with
target companies
9
Buy Sell Disciplines

• We buy when we identify
• Earnings growth prospects better than consensus
  estimates
• Undervaluation, based on comprehensive
  understanding of corporate strategy, fundamentals
  and peer comparables
• Catalysts that will lead to the stock being
  re-rated within a defined time frame

• Triggers for a sell
• Stock achieves absolute valuation target
• We detect deterioration in fundamental outlook
• Changes in strategic/economic overlay
• Best and worst performing stocks review

A disciplined approach to investment
10
Baring Europa Fund Portfolio Characteristics as
at 31th January 2007

• Fund Size (USD million) 382.1
• Number of holdings in portfolio 58
• Large-cap eurgt5bn () 59.72
• Mid-cap eur2-5bn () 13.48
• Small Cap eurlt2bn () 23.27
• Tracking Error 4.05

Source Baring Asset Management, data as
31/01/2007
11
Baring Europa Top 10 holdings
Top 10 current overweight stocks
Top 10 current underweight stocks

Source Baring Asset Management as at 31/01/07
Relative to MSCI Europe index
For Comparative Purposes Only
12
Baring Europa FundPerformance as at 31st January
2007

Source Baring Asset Management, Standard
Poors. (bid to bid, in sterling, with net income
reinvested).
49/236
26/301
7/367
Rank
1st
1st
1st
Quartile
An Offshore Fund recognised under the Laws of the
UK, managed by Baring International Fund Managers
(Ireland) Limited and marketed by Baring Asset
Management Limited (Authorised and regulated by
the Financial Services Authority). Annualised
Returns. Index is MSCI Europe. Micropal, UK
Registered Investment Funds Equity Europe ex
UK Reference to the index is for comparative
purposes only.
13
Important Information

• This document is issued by Baring Asset
  Management Limited and in jurisdictions other
  than the UK it is provided by its investment
  advisory affiliates. It has been produced for,
  and is intended for receipt by, professional
  investors/advisers and must not be relied on by
  any other category of recipient.
• The value of any investments and any income
  generated may go down as well as up and is not
  guaranteed. Past performance is not a guide to
  future performance. Quoted yields are not
  guaranteed. We reasonably believe that the
  information contained herein from 3rd party
  sources, as quoted, is accurate as at the date of
  publication. This document must not be relied on
  for purposes of any investment decisions. This
  document may include forward-looking statements
  which are based on our current opinions,
  expectations and projections. 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 information in
  this document does not constitute investment,
  tax, legal or other advice or recommendation or,
  an offer to sell or an invitation to apply for
  any product or service of Baring Asset
  Management.
• 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.
• Complied (London) 14th February 2007

Ensure Complied Date is added at foot of
Disclosure