020 7648 4300 info@bedlamplc.com www.bedlamplc.com

20 Abchurch Lane, London, EC4N 7BB

BEDLAM ASSET MANAGEMENT

BEDLAM JAPAN FUND

2

• Fund has delivered a total return of -0.7% (to 30 June 2007) since launch (1 November 2004), compared to cash (13.4%) and to the equity index (34.0%).

• Performance in 2006 hit by weak yen and domestic mid-cap focus. Despite this corporate profitability at all-time highs and leverage at 50 year lows. Domestic mid-caps offer some of the best value globally.

• Fund bets are: Banks (16%): beneficiary of corporate profitability as corporations borrow

and NPLs fall. Property (10%): best value global property market. Rental rates now rising. Autos (8%): truck sector consolidation and improved Asian demand. Electronics (0%): geared to China/US slowdown IT & Telecoms (7%): beneficiary of corporate expansion & IT investment.

• Buy Japan Fund : Domestic recovery story to continue as corporates reverse conservative approach to expansion and wages in 1H07. The yen should strengthen in 2007.

Summary

3

Investment objectives delivered

Low stock turnover Volatility

Bedlam Japan NAV performance

* Performance data to 30.06.07; ** A & B shares launch date 01 November 2004.

Excess returns over cash and the index

Fund Turnover

31.8%35.3%

0%

20%

40%

60%

80%

100%

2006 2005

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

2004 2005 2006 2007 Since Launch

SD of NAV SD of Daily Index

Japan Equity Risk free Japan Japan

TR Index rate Fund A Fund B

20044.7% 0.8% 4.7% 4.7%

200540.0% 4.7% 48.6% 42.8%

2006 -8.7% 4.9% -29.4% -29.1%

2007* 0.2% 2.8% -9.9% -9.3%

Since Launch** 34.0% 13.4% -0.7% -3.6%

Japan Fund A Share NAV (£) since launch

90

100

110

120

130

140

150

160

170

31/10/2004 30/06/2007

4

Performance - Attribution Analysis (1)30th June 2006 to 31st December 2006

KEY POSITIVE DRIVERS

SectorsProperty +1.1%Pharmaceuticals +0.2%

Stocks Isuzu Motors +1.2%Aeon Mall +0.8%Mitsui Fudosan +0.2%Astellas Pharma +0.2%

Overall Fund Return 2H 2006 -14.9%

KEY NEGATIVE DRIVERS

SectorsCurrency (JPY vs GBP) -10.2%Financials -3.7%Consumer -3.7%Put options -2.7%

Stocks Sega Sammy -1.4%Waida Manufacturing -1.2%Gentosha -1.2%Eighteenth Bank -1.2%Chiba Bank -1.2%Imperial Hotel -0.8%Tokyu Store Chain -0.8%

N.B. overall fund return figure is not the sum of the above

5

Performance - Attribution Analysis (2)31st December 2006 to 30th June 2007

KEY POSITIVE DRIVERS

SectorsNone

Stocks Isuzu Motors +0.7%Mitsui Fudosan +0.6%Shinagawa Refractories +0.5%Tokyo Tatemono +0.4%Parco +0.4%

Overall Fund Return 2007 to date -9.9%

KEY NEGATIVE DRIVERS

SectorsFinancials -1.7%IT/Telecoms -1.7%Consumer -1.3%Support Services -1.2%Industrials -0.6%Media/Entertainment -0.6%

Stocks Nihon Unisys -0.9%Hamakyorex -0.8%Nippon -0.7%Bank of Yokohama -0.7%Kenedix -0.7%Daifuku -0.6%Gentosha -0.5%

N.B. overall fund return figure is not the sum of the above

6

Sector breakdown

Big bets are: Industrials (25%), Financials (16%), Consumer (16%).

Fund Sector Weightings

Support Services10%

Financials16%

IT & Telecoms7%

Industrials25%

Media & Entertainment

11%

Property10%

Cash5%

Consumer16%

7

Global Overview

• UK and US credit cycle to deteriorate as housing market sides.

• US slowdown results in an increase in the global savings glut. Good for yielding sectors (e.g. telecom) but bad for cyclicals (energy and base metals). Wild card here is whether Asians start consuming!

• Industry consolidation and restructuring to be a continuing global trend in the face of slowing top line growth as companies are forced into growth by acquisition and rationalisation. Good for mid caps and quasi-monopolies.

• Wage growth to improve in both Germany and Japan fuelling domestic demand. Good for domestic corporate profitability and currency.

• Precious metals to benefit as central banks try to inflate away consumer debt mountain.

• Euro to be the strongest currency versus the dollar, yen and sterling.

8

Where the Fund will invest

• Regional banks & property – beneficiary of the credit cycle upturn.

• IT Systems providers (e.g. Hitachi Systems).

• Sector consolidation plays (e.g. Isuzu, Fukuoka Financial).

• Japan consumption plays (e.g. Parco, HIS & Imperial Hotel)

• Corporate restructuring (e.g. Tokyu Store & Hamakyorex)

• Companies with accelerating free cash flow (e.g. NTT)

• “Quasi monopolies” (e.g. Waida)

9

Where the Fund won’t invest

• Retail sector.

• Exporters geared to global growth.

• Electronics sector.

• Commodities geared to global growth (base metals & energy)

10

• There is now a production capacity shortage. Companies have been too conservative in their expansion plans – supply is the problem not demand!

• Good for future investment, loans growth and inflationary trends.

• Capital expenditure already up 16.6% in 2Q06: fastest in 16 years.

Source: Capital Economics

Production capacity-20

-15

-10

-5

0

5

10

15

20

25

30

35

91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

-20

-15

-10

-5

0

5

10

15

20

25

30

35

Production CapacityDiffusion Index(Inverted)

Capacity "Insufficient"

Capacity "Excessive"

11

Machine orders backlog (no. of months)

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

• Demand is robust - machinery demand back up to all time highs.

12

Bank Lending

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

07/2001 01/2002 07/2002 01/2003 07/2003 01/2004 07/2004 01/2005 07/2005 01/2006 07/2006

3,900

4,000

4,100

4,200

4,300

4,400

4,500

4,600

4,700

Outstanding loans (RHS) % Change y-o-y (LHS)

Bank Lending

Yen/ trillion

• After rising in 2H05 outstanding loans have flat lined due to weak loan demand from public sector and housing.

• Loan demand now being driven by corporate expansion; consumer demand should pick up in 1H07 as wage growth improves.

13

Unemployment vs. Wages3.0

3.5

4.0

4.5

5.0

5.5

6.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

-5.0

-4.0-3.0

-2.0-1.0

0.0

1.02.0

3.04.0

5.0

Unemployment Rate (%, Inverted, LHS) Wage Earnings (3m % y/y, RHS)

Unemployment lower, wage growth higher

• Wage growth remains lacklustre. Nominal wage growth fell -0.2% y-y in November.

• Strong investment and tightening Labour Market should feed through to wage growth.

Source: Capital Economics

Unemployment vs Wages

14

Labour Shortages

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57

Large Non-ManufacturersLarge Manufacturers

"Insufficient" employment (labour shortages)

"Excessive" employment (labour surpluses)

• There are now labour shortages for both the manufacturing and service sectors.

• Should lead to improved wage growth. Nippon Steel to hike wages in 2Q07(its 1st hike in 6 years). Other companies to follow.

15

Yields on Bank Loans

• Loan yields now benefiting from July rate hike with yields on new loans rising to 1.64% in October from 1.5% in September. Yields on existing loans also rising.

• Good news for bank profitability.

Yields on Bank Loans

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

1993 1994 1996 1997 1998 1999 2000 2001 2003 2004 2005 2006

%

New Loans Existing Loans

16

Commercial property

• Office vacancy rates have fallen from 8.3% in 2Q03 to now under 3.0% with broad demand coming from all corporate sectors.

• Commercial rental rates now rising for first time in 17 years.

Tokyo vacancy rates and rents(new and existing bldgs in the five main wards)

16.0

17.0

18.0

19.0

20.0

21.0

22.0

10/98 10/99 10/00 10/01 10/02 10/03 10/04

Asking rents per tsubo

(thousand yen)

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Vacancy rates(%)

Avg. asking rents (5 wards)Avg. vacancy rate (5 wards)

Source: Citigroup

17

Electronic Parts and Components

Electronic Parts and Components

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

1999 2000 2001 2002 2003 2004 2005 2006

%

0

20

40

60

80

100

120

140

160

180

200x

Production L.H.S. Shipment L.H.S. Inventory Ratio R.H.S.

• Inventory levels and shipments of electronic goods at high levels

• Electronic production (and manufacturer’s earnings) at serious risk from US/ Global slowdown.

18

ROE vs Price to Book

• Both Japan and Germany stand out as good value with potential to leverage up the curve

• Spain, US and to a lesser extent UK are most at risk due to bad value and potential de-leveraging.

19

STOCK EXAMPLES

20

• Office vacancy rates below 2% with rental rates rising between 4-6% per annum.

• Sizeable multi-use properties set to come on-stream in 1Q07.

Stock Examples: Mitsui FudosanMitsui Fudosan (yen)

900

1400

1900

2400

2900

3400

3900

Ja

n-0

4

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Entry Price: 1626

Target Price: 4090

21

• Beneficiary of global consolidation amongst truck makers.

• Grabbing market share in Japan and growing strong in Asia/Middle East.

• Cheapest trucker globally with Toyota having just taken a 5% stake.

Stock Examples: Isuzu

Isuzu (yen)

150200

250300350400

450500550

600650

Jan

-04

Jun

-04

De

c-04

Jun

-05

De

c-05

Jun

-06

De

c-06

Entry Price: 410

Target Price: 1124

22

• In contrast to the sector loans growth expanding (75% of loan book to SMEs) in 1H06 and non-performing loans falling.

• Industry consolidator within its region – set to merge with two smaller banks in 2007.

Stock Examples: Fukuoka FinancialsFukuoka Financials (yen)

400

500

600

700

800

900

1000

1100

Ja

n-0

4

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Entry Price: 769

Target Price: 1275

23

• Nihon Unisys seeing strong earnings growth from increased demand (particularly financial sector) and cost cutting.

• License fee to Unisys falls away in FY03/08 to Y5b from Y15b in FY03/07.

• By far the cheapest IT service company.

Stock Examples: Nihon Unisys

Nihon Unisys (yen)

700

900

1100

1300

1500

1700

1900

2100

2300

2500

Ja

n-0

4

Ju

n-0

4

De

c-0

4

Ju

n-0

5

De

c-0

5

Ju

n-0

6

De

c-0

6

Entry Price: 1909

Target Price: 2420

24

• Bedlam at a glance i

• Investment Process ii

• Japan Fund:

– Characteristics iii– Risk Controls iv

• Value-added capacity constraints v

Appendices

25

Bedlam at a glance• Steady growth in funds under management

to £220m in 4 years

• All mandates are absolute return from equity investment

• One of the strongest balance sheets in the industry

• The only totally transparent funds in the UK

• 90 professional shareholders

UK/Global blend

Specialist geographic

Global

UK

FUM by client type (total £220m)

FUM by mandate type (total £220m)

Public funds

Pension funds/charities

E/M

Japan

Global

UK

Europe

Multi-manager

HNW

Segregated Accounts

Total Assets Under Management (£m)

0

50

100

150

200

250

2003 2004 2005 2006

i

26

Investment process

• Single investment process solely targeting absolute returns, independent of market movements, through investing in a company’s cash earnings cycle.

• Key valuation filters and thematic screens (credit cycle and capacity) generate a

short list of stocks to analyse.

• All holdings are internally modelled and have the following attributes:– Stable or rising margins.– Clear earnings catalysts (over 2 -year forecast period).– Good free cash flow to meet future capex and dividends obligations.– Target price must show a minimum 20% upside to hurdle rate (10 year government

bond yield + 3% equity risk premium).

• A team-driven approach based upon adherence to proven investment process.– Stripping out market emotion and noise while ensuring returns are repeatable.

ii

27

Japan fund characteristicsas at 30 June 2007

Average Weighted Market Cap at 30 June 2007 £5.1bn

Fund Market Cap Breakdown (GBP)

0%

5%

10%

15%

20%

25%

30%

35%

40%

<250m 250m-750m 750m-1.5bn 1.5bn-5bn 5bn-12.5bn 12.5bn>

Japan Fund Sectors vs FTSE Japan Index

-15%

-10%

-5%

0%

5%

10%

ConsumerHealthcareFinancials &Property

General IndustrialsI.T. & Telecoms

Fund +/- Index

5%Max 60%Ability to use cash

0%Max 100%Ability to use derivatives

35.3%20-40% p.a.Low average turnover

3025-50Concentrated Investments

Current portfolioTypical portfolio

5%Max 60%Ability to use cash

0%Max 100%Ability to use derivatives

35.3%20-40% p.a.Low average turnover

3025-50Concentrated Investments

Current portfolioTypical portfolio

1.01.01.00.00.3TOPIX

0.90.81.1-12.9-0.5BedlamJapan

CorrelationR Sq.BetaAnnual Alpha

Annual Sharpe

Statistics

1.01.01.00.00.3TOPIX

0.90.81.1-12.9-0.5BedlamJapan

CorrelationR Sq.BetaAnnual Alpha

Annual Sharpe

Statistics

28

Risk controls

Sector Index Weight %

Max fund Weight %

Resources 24.1 40

General Industrials

4.8 30

Consumer Goods

17.5 40

Media & entertainment

3.6 20

Healthcare 9.5 30

Utilities 5.2 20

Financials & property

28.9 45

IT and Telecoms

6.4 30

• Must be at least 40% invested in Japan equities

• No holding more than 10% of a fund

• Combined total holdings over 5% may not exceed 40% of the funds

• Stocks are categorised into small, medium and large cap with max. size limits of 3%, 5% and 7.5% at cost

Sector limits

• Allowed for Efficient Portfolio Management purpose only

• Up to 100% of any fund’s equity portfolio can be protected at any one time

• Maximum cost of 1% per quarter and 4% per annum of the total value of the fund

Individual Stock limits

Use of derivatives

iv

29

Value-added capacity constraints

v

Public Funds Limits (£m)

Emerging Markets Fund

(175)

Japan Fund(250) Global Fund

(300)

UK Fund(250)

Europe Fund(250)

Total Asset Class Limits (£m)

Europe(1,200)

UK(1,200)

Global(3,000)

Japan(1,200)

Emerging Markets(1,200)