Hermes fund managers

For professional investors only

Hermes Emerging Asia

March 2013

Jonathan Pines, Portfolio Manager

Characteristics

Strategy AUM £100.9m / $160.0m

Inception date 1 January 2010

Fund Manager Jonathan Pines, CFA

Benchmark MSCI Asia ex Japan IMI1

Absolute Performance 15.7% (annualised) since inception

Relative Performance 9.0% (annualised) since inception

Number of stock holdings 45-60

Typical tracking error range 6-8%

Maximum individual position 10%

Investment style Value with a contrarian tilt

1 Benchmark MSCI AC Asia ex Japan IMI Net from 01/12/2012. Previous benchmark: MSCI Emerging Markets Asia IMI. Source: Hermes; all data as at 31 January 2013. Note: The composite performance record of the Fund Manager is shown for illustrative purposes only and data refers to returns of the Hermes Emerging Markets Asia IMI Active Equity measured in US Dollars, net of 75 bps management fees and costs. Performance shown is illustrative, and a supplemental track record to the Hermes Emerging Asia Fund launched in 1 November 2012. Past performance is not a reliable indicator of future results. CFA® is a trademark owned by the CFA Institute

Hermes Emerging Asia

www.hermesfundmanagers.com | Hermes Emerging Markets Asia 1

Hermes Emerging Markets investment team

2

Gary Greenberg Lead Fund Manager

Global Emerging Markets 28 years’ investment experience

2 years Hermes

Jonathan Pines Fund Manager Asia ex Japan

14 years’ investment experience 4 years Hermes

Samir Patel Deputy Fund Manager GEMS, Latin America

24 years’ investment experience 3 years Hermes

Elena Tedesco Fund Manager

EMEA 13 years’ investment experience

11 years Hermes

Kunjal Gala Investment Analyst

8 years’ investment experience 1 year Hermes

Client Relations

Quant Research

Economics Team

Dedicated Trading Risk Analysis

Performance Measurement

Equity Ownership Services

Investment Office

Supplemented by wider Hermes team — Research, Analytics and Trading

www.hermesfundmanagers.com | Hermes Emerging Markets Asia

Investment philosophy

Quality

Potential Ideas Quality at any price Price at any quality

Pric

e

Dots represent stocks in our universe

We believe alpha can best be generated by bottom-up analysis: by buying high quality companies at a reasonable price or reasonable quality companies at an exceptional price. Jonathan Pines – Fund Manager


Avoiding quality at any price

Source: Hermes, Bloomberg at 20 January 2013. Note: earnings per share have been multiplied by 10 simply to facilitate better comparison with tangible book value per share and the share price. The stock has never been purchased for the strategy and is not among the stock holdings.

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Book value per share Share price earnings per share x 10

Recent sharp fall on single piece of negative newsflow (increase in royalty rate to parent)

Unilever Indonesia Indonesian rupees per share

Between 2002 and 2012, earnings per share has increased nearly 5 fold and tangible book per share has more than doubled but the share price has increased more than 18 fold


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Cyclical vs. non-cyclical

Source: Morgan Stanley, 2012.

Global staples vs. broad market Relative P/E valuation

The current high relative regard in which consumer staples are held by investors are similar to during the 2008 financial crisis; and virtually the mirror image of the disdain that these stocks were held in during the 1999/2000 internet bubble


Value opportunity: Cosco Pacific (China)

Source: Hermes , Bloomberg at 20 January 2013. Note: earnings per share have been multiplied by 10 simply to facilitate better comparison with tangible book value per share and the share price. The stock was initially purchased for the strategy in December 2010. and is currently among the largest 10 stock holdings.

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Select mispriced stocks relative to assessment of long-term prospects: more than 90% of names initially identified are ultimately rejected

Size positions by emphasizing downside risk rather than upside potential Invest with conviction: typically hold 45-60 companies with approximately 40% of the portfolio being invested in top 10

Portfolio construction

Top 10 absolute holdings Actual weight

(%)

Cosco Pacific 5.27

Youngone Holdings 4.17

Samsung Electronics (Pfd) 3.81

Gwangju Shinsegae 3.77

Travelsky Technology 3.36

Samsung Fire & Marine 3.24

Hana Financial Group 3.12

China Mengniu Dairy 3.07

China Dongxiang 2.97

Genting Malaysia 2.95

35.72

Portfolio style characteristic

# of standard deviations away from median benchmark stock

Book/price ratio +3.7

Earnings yield +2.0

Dividend yield +0.0

Free cash flow yield +3.9

Debt to equity ratio -2.2

Earnings growth -1.4

Source: Hermes; all data as at 31 January 2013. Note: The composite performance record of the Fund Manager is shown for illustrative purposes only and data refers to returns of the Hermes Emerging Markets Asia IMI Active Equity measured in US Dollars, net of 75 bps management fees and costs. Performance shown is illustrative, and a supplemental track record to the Hermes Emerging Asia Fund launched on 1 November 2012. Past performance is not a reliable indicator of future results. Benchmark MSCI AC Asia ex Japan IMI Net from 01/12/2012. Previous benchmark: MSCI Emerging Markets Asia IMI.


Capital structure inefficiencies – Korean common vs. preferred stock Examples

Price (KRW) Dividend yield (%) One year price

change (%)

Samsung Electronics common 1,454,000 0.4 32 Preferred (42% discount) 848,000 0.7 25

LG Electronics common 76,300 0.3 3 Preferred (73% discount) 20,500 1.2 -14

Hyundai Motor Co common 210,500 0.8 -9 Preferred (#2) (65% discount) 73,400 2.5 5

Source: Hermes, Bloomberg, 20 January 2013.


Why we are extra vigilant when analysing Chinese stocks Case studies

Earnings being too consistent with too little volatility

Less well known auditors

Management selling shares or not having a high shareholding

Low effective and cash tax rates

Low cash generation, including high capital expenditure or capitalised expenses

Low dividends relative to earnings

Reverse (back door) listings

Recent management changes

Frequent, apparently unnecessary share or debt issues

Management changes

Highly acquisitive companies

Very high gross or operating margins in absolute terms or relative to competitors

Intelligence from competitors, customers and analysts

Abnormal short selling activity

Company Industry Listing Stock Impact Chaoda Modern Agriculture Agriculture Hong Kong Suspended

China Energy Savings Tech. Technology US Delisted

China Expert Technology Technology US Delisted

China Forestry Forestry Hong Kong Suspended

China Integrated Energy Energy US Stock fallen +75% from recent peak

China Media Express Advertising US Stock fallen +75% from recent peak

China Sky Medical Pharmaceutical US Stock fallen +75% from recent peak

China Yingxia Food US Delisted

Deer Consumer Products Retail US Stock fallen +75% from recent peak

Fuqi International Manufacturer US Stock fallen +75% from recent peak

Fuwei Films Industrial US Stock fallen +75% from recent peak

Huabuo Tobacco Flavouring Hong Kong Stock fallen +75% from recent peak

Longtop Fin. Technologies Technology US Delisted

Orient Paper Publishing US Stock fallen +75% from recent peak

Ports Design Retail Hong Kong Suspended

Puda Coal Energy US Stock fallen +75% from recent peak

Rino International Waste US Stock fallen +75% from recent peak

Sinoforest Forestry US/Canada Suspended

Source: Hermes. For illustrative purposes only.

Potential accounting irregularity indicators Listed Chinese companies recently impacted by fraud allegations or accounting abnormalities:


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Emerging Markets Asia IMI Active Equity (75bps fees) MSCI Emerging Markets IMI

Performance since inception

Hermes Emerging Asia Equity Strategy GIPS® Composite monthly performance since inception (%)

Up:Down month analysis Outperformed in 88% of

months Outperformed in 57% of

months when the benchmark rose

Outperformed in 70% of months when the benchmark fell

Source: Hermes; all data as at 31 January 2013. Note: The composite performance record of the Fund Manager is shown for illustrative purposes only and data refers to returns of the Hermes Emerging Markets Asia IMI Active Equity measured in US Dollars, net of 75 bps management fees and costs. Performance shown is illustrative, and a supplemental track record to the Hermes Emerging Asia Fund launched on 1 November 2012. Past performance is not a reliable indicator of future results. Benchmark MSCI AC Asia ex Japan IMI Net from 01/12/2012. Previous benchmark: MSCI Emerging Markets Asia IMI. www.hermesfundmanagers.com | Hermes Emerging Markets Asia 10

57%

20%

Quality cyclicals

Cash rich and low PE ADRs listed in the US

Capital structure inefficiencies

Chinese recovery

Current themes and positioning

Sector active weight (%)

Country active weight (%)

-15 -10 -5 0 5 10 15 20

Financials

Telecom. Services

Materials

Utilities

Health Care

Energy

Consumer Staples

Industrials

Information Technology

Consumer Discretionary

-15 -10 -5 0 5 10 15 20

Hong Kong

Singapore

India

Indonesia

Malaysia

Philippines

Thailand

Taiwan

Republic Of Korea

China

Source: Hermes; all data as at 31 January 2013. Note: The composite performance record of the Fund Manager is shown for illustrative purposes only and data refers to returns of the Hermes Emerging Markets Asia IMI Active Equity measured in US Dollars, net of 75 bps management fees and costs. Performance shown is illustrative, and a supplemental track record to the Hermes Emerging Asia Fund launched on 1 November 2012. Past performance is not a reliable indicator of future results. Benchmark MSCI AC Asia ex Japan IMI Net from 01/12/2012. Previous benchmark: MSCI Emerging Markets Asia IMI. Cash position is 2.84%. www.hermesfundmanagers.com | Hermes Emerging Markets Asia 11

Appendix

Sell discipline, portfolio monitoring & risk management

250 stocks

Idea generation

100 stocks

Fundamental analysis

45-60 stocks

Portfolio construction

Universe of 2,500 stocks deriving revenue from Asia ex Japan

Liquidity and size screen Seek companies trading

cheaper than expected relative to quality

Select mispriced stocks

Size positions by considering risk

Invest with conviction

Study financial statements

Write report and project financial statements

Hold discussions with management

1 2 3

Investment process


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Emerging Asia – growing quicker than developed

Source: Hermes, Bloomberg.

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Developed Countries (G10) Emerging Asia

Real GDP growth (%)


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Emerging Asia and developed market stock market performance


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Developed Asia ex Japan


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Emerging Asia: reasonably cheap


Price book multiple of major benchmark countries Price book multiple (X)

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China Enterprise Korea Taiwan India


Portfolio Manager’s biography

CFA® is a trademark owned by the CFA Institute.

Jonathan Pines, Fund Manager, Hermes Emerging Asia 14 years’ investment experience Jonathan Pines joined Hermes Fund Managers in March 2009 as Portfolio Manager responsible for Asia (ex Japan) within the Emerging Markets team and launched the Hermes Emerging Asia Strategy at the start of 2010. Previously he was a Fund Manager at RAB Capital and Analyst at Orbis Investment Advisory in London. Jonathan grew up in South Africa, where he was a partner at PKF Johannesburg, Chief Investment Officer of Akul Capital (South Africa) and held non-executive directorships of several listed and private South African companies. He holds an MBA from Harvard Business School, is a CFA charterholder and is a chartered accountant.


Portfolio Manager’s biography

Kunjal Gala, Investment Analyst, Hermes Emerging Asia 8 years’ investment experience Kunjal Gala joined Hermes Fund Managers in February 2012 as an Investment Analyst in the Emerging Markets team. He joined from Her Majesty's Government, where he worked from October 2008 as an Assistant Director in The Shareholder Executive, the in-house Portfolio Management and Corporate Finance arm of the UK Government. Prior to this he was a Senior Financial Analyst at Morgan Stanley Investment Banking from December 2004, responsible for both business development and execution of M&A / Strategy mandates within the consumer products coverage banking team. Previously he worked for Thomas Cook (India) in the Management Information Systems division (September 2003), and PricewaterhouseCoopers in the Assurance and Business Advisory Service (August 2001). Kunjal has a Bachelor of Commerce from Mumbai University and is a qualified Chartered Accountant from the Institute of Chartered Accountants in India.


This document is for Professional Investors only. In Australia this document is directed at ‘Wholesale Clients’ only. Any investment products referred to in this document are only available to such clients. Investing with Hermes may be restricted in other countries and as such, any person who receives this document is required to make themselves aware of their respective jurisdictions and observe any restrictions. This document does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments; nor does it constitute an offer to purchase securities to any person in the United States or to any U.S. Person as such term is defined under the US Securities Exchange Act of 1933. It pays no regard to

the investment objectives or financial needs of any recipient. No action should be taken or omitted to be taken based on this document. Tax treatment depends on personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional and/or investment adviser as to its suitability. Any opinions expressed may change. The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Any investments overseas may be affected by currency exchange rates.

Past performance is not a reliable indicator of future results and targets are not guaranteed. Investments in emerging markets tend to be more volatile than those in mature markets and the value of an investment can move sharply down or up. All figures, unless otherwise indicated, are sourced from Hermes. For more information please read any relevant Offering Documents or contact Hermes. Issued and approved by Hermes Investment Management Limited (“HIML”) which is authorised and regulated by the Financial Services Authority. Registered address: Lloyds Chambers, 1 Portsoken Street, London E1 8HZ. This document is distributed in Australia by Hermes Fund Managers

(Australia) Pty Ltd (“HFMA”) which is registered with the Australian Securities and Investments Commission (“ASIC”) under financial services licence number 351784. HIML is a registered investment adviser with the United States Securities and Exchange Commission (“SEC”). Telephone calls may be recorded for training and monitoring purposes. Potential investors in the United Kingdom are advised that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.

Important information Hermes Emerging Markets Asia Strategy

CM132186 NonUS 03/13


For professional investors only

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