REGIONAL COMMENTARY JUNE 2007

Asia Pacifi c region Overview

Asian markets performed strongly in May, supported by a bullish Wall Street and continued merger and acquisition activity. Leading the gainers was the Philippine market, where stocks got a boost from data showing that the economy had expanded at its fastest pace in more than two years in the fi rst quarter of 2007. Chinese stocks had a volatile month: despite increased warnings about a bubble and further measures imposed to cool economic growth, stocks hit record highs but then fell sharply at month-end after the authorities raised the stamp duty on share transactions. On the policy front, lower infl ation in April and a strong rupiah prompted Bank Indonesia to cut its key interest rate by 0.25% to 8.75%; Thailand’s central bank also pared interest rates by 0.5% to spur domestic consumption. Once again, China stole the headlines after the central bank simultaneously raised its key deposit and lending rates, hiked the reserve requirement ratio for banks by another 0.5%, and widened the trading band for the renminbi to 0.5%, from 0.3%. Elsewhere, the Reserve Bank of lowered its 2007 infl ation forecast, at the same time unveiling a family-friendly Budget, which includes child-care subsidies, one-off cash bonuses for aged pensioners and A$31.5bn worth of income tax cuts, ahead of an election later this year. Economic news from the region generally bettered expectations, particularly in Indonesia, where GDP grew by a faster-than-expected 6% in the fi rst quarter from a year earlier; Taiwan’s fi rst-quarter GDP growth rose by 4.15% year-on-year, whilst Singapore’s fi rst-quarter GDP rose by a better-than-expected 6.1% year-on- year. Meanwhile, Japan recorded its ninth straight quarter of expansion, with fi rst-quarter GDP growing by 2.4% year-on-year, as increased exports to Asia and Europe countered slowing shipments to the US. Finally, the Thai government is to delay increasing the valued-added tax from 7% to 10% by another year, in light of the sluggish economy and weak consumer confi dence, which fell to a fi ve-year low in April. By contrast, Singapore is on course to raise the Goods and Services Tax to 7% from the current 5% from July 1. Asian markets have continued to make solid gains year-to-date, supported by strong domestic economies, positive corporate profi t growth and increasing levels of risk appetite. Asian currencies have also performed well, in part due to the weakness of the US dollar. Asset prices (not just equities but also real estate, art etc.) have risen across the board, some to levels which we believe are unsustainable, although we recognise that prices can run even further before they consolidate. Notwithstanding this positive macro operating environment, our focus remains at the corporate level. We continue to monitor company results quarterly, meet management on a regular basis to make sure the companies are executing their stated strategies effectively, with due regard to business risk and the interests of minority shareholders, whilst keeping a disciplined eye on valuations. Australia

Buoyed by continued takeover activity, the domestic stock market recorded its 10th consecutive month of positive performance in May. The key driver was a strong rise in the materials sector, with both BHP Billition and rising on takeover talk of the former buying the latter. The energy sector was the next strongest, with the driver being the continued theme of rising gas prices. The fi nancials sector fi nished slightly higher, with the banks’ reporting season providing no surprises. By contrast, the weakest performing sectors were consumer staples and discretionary. M&A activity continued to drive the market, but the real interest was in two high profi le failed bids - and APN Media - which were both dominated by existing shareholders voting down private equity bids. Meanwhile, the is still subject to potential offers from rival groups (one by a private equity group and the other ) although there is talk that Woolworth’s may enter the fray. China/Hong Kong

Shanghai’s A-share market broke the 4,000-mark for the fi rst time, with a record US$50bn worth of stocks traded. In addition to implementing a series of tightening measures, the authorities also eased restrictions on offshore equity-related investments under its Qualifi ed Domestic Institutional Investor scheme that will mainly benefi t Hong Kong. Ahead of trade talks with the US, China’s government imposed taxes on a range of goods. Although no headway was made on the currency issue, China made several concessions, including more US fl ights to the mainland and greater access to its fi nancial markets. In other news, Dah Sing Banking Group completed its acquisition of a 17% stake in Chongqing Commercial Bank, China Merchants Bank’s move to buy 33.4% of an affi liated fund management venture was approved, and China Mobile added a record 5.28m new subscribers in April. In fi rst-quarter earnings, ASM Pacifi c posted a 32% year-on-year fall in profi ts; Convenience Retail Asia reported higher net profi ts; whilst Aeon Credit’s full-year earnings rose 5.8%.

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Asia Pacifi c region

India

Notwithstanding concerns over infl ation and further hikes in interest rates, Indian stocks rose strongly in May, amid healthy data on domestic consumption and still ample liquidity. May proved a busy month for equity issuers: HDFC privately placed US$768m worth of shares or about 7% of its enlarged capital; HDFC Bank announced plans to raise US$1bn via both the domestic and ADR market; ICICI Bank intends to raise US$500m through a sale of a 5% stake in the company; whilst Tata Power unveiled plans to raise US$600m to fund its acquisition of coal mines in Indonesia. On the acquisition front, Sun Pharmaceutical Industries agreed to buy Israeli generic drug maker Taro Pharmaceutical Industries for US$454m. The purchase will provide Sun with a basket of new products for the US market. In other news, the Reserve Bank of India has allowed HDFC Bank to start a non-bank fi nance company. Full-year earnings results were broadly positive for our core holdings, including HDFC, and IT holdings Satyam Computer Services and Infosys.

Indonesia

Most of our holdings reported strong results for the fi rst quarter of the fi nancial year. Astra International, Dynaplast, Multibintang and Indosat enjoyed a rebound in earnings after a weak 2006. Our bank holdings- NISP, Permata, Buana and Panin- all reported improved loan growth and net interest margins in the current favourable rate environment. Inco Indonesia’s earnings continue to be buoyed by higher nickel prices; however, the government may look to renegotiate the current royalty agreement with the company. Merck Indonesia maintained steady earnings growth driven by higher pharmaceutical sales. In contrast, Petra Foods profi ts were fl at as softer cocoa yields offset higher sales at the branded consumer division, whilst BAT Indonesia continues to struggle in a tough operating environment. Perusahaan Gas Negara reported weaker results as currency losses offset higher distribution volumes. Finally, Telkom Indonesia’s net profi ts grew 16% in FY’06 as higher cellular revenue was partially offset by fl at fi xed line revenue and higher operating costs.

Japan

The corporate results season dominated the headlines, with companies generally releasing good numbers but being pessimistic about their outlook. For example, automobile giant Toyota Motor and Takeda Pharmaceutical both announced strong performance thanks to solid sales in the US. However, the companies released rather conservative projections, stemming from concerns regarding the sustainability of the growth numbers. Meanwhile, real estate company Sankei Building released good numbers thanks to higher rental income, while machinery manufacturer Amada benefi ted from solid orders from domestic and overseas clients. On the fl ip side, broadcaster Nippon Television forecast diffi cult times ahead, as the advertising market remains fairly sluggish.

Korea

First-quarter corporate earnings news was mixed: Kookmin Bank posted higher profi ts, due mainly to disposal gains from LG Card shares; Korean Re’s earnings improved slightly on higher investment income, but Hyundai Motors’ net profi ts were hurt by weak export sales and lower contributions from its overseas plants. Retailer Shinsegae saw fi rst-quarter net profi ts fall on higher interest costs, as well as early losses from the Wal-Mart acquisition and higher advertising and promotion expenses related to the opening of two new department stores, even though operating profi ts held steady on improved margins at E-mart and higher department store sales.

Malaysia

First quarter corporate results came in at or below expectations, partly due to expectations running ahead of what could be achieved. On the corporate front, several more privatisation bids were announced: AGA Aktiebogel, a subsidiary of Linde AG of Germany, made a general offer for Malaysian Oxygen at RM15 cash per share; whilst Binariang, a subsidiary of Sri Ananda Krishnan’s private vehicle Usaha Tegas, bid RM15.60 cash in a offer for Maxis. These come after an offer to merge eight listed companies under Sime Darby into one conglomerate, Synergy Drive, was announced earlier this year. In other news, the civil service received a pay rise of 7-35%, the higher rises accorded to those with lower basic wages. The pay increase is estimated to cost the federal government RM8bn over 12 months, and will enhance GDP by an estimated 0.4% over a year.

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Asia Pacifi c region

Philippines

Fast food chain Jollibee is set to open its 12th US outlet in Las Vegas in partnership with Seafood City; it also plans to open four more outlets in California by the year-end. Ayala Land will unveil its fi rst high- end residential project in Mindanao next month launched by subsidiary, Ayala Land Premier. Results were positive for most of our holdings: Bank of the Philippine Islands reported preliminary fi rst-quarter net profi ts growth of 28% year-on-year, helped by strong consumer and mortgage loan growth, as well as a gain from the sale of property. Ayala Land’s fi rst-quarter profi ts rose 10% from a year ago, despite a fall in operating income. By contrast, Ginebra San Miguel continued to report poor numbers due to high raw material costs.

Singapore

Corporate earnings for the fi rst quarter were encouraging, with our holdings such as SembCorp Marine, ST Engineering, Straits Trading, Robinson & Co., OCBC, UOB Group, Fraser & Neave, Singapore Airlines, Hong Leong Finance, ComfortDelgro and City Developments all posting encouraging profi t growth. The property market continues to demonstrate strength with Bukit Sembawang replenishing its landbank by acquiring Fairways Condo for S$244m. Singapore companies also remain active in their overseas expansion with United Overseas Bank signing a preliminary agreement to buy a stake in China’s Evergrowing Bank whilst Singapore Airlines is in talks to buy a stake in Shanghai-based China Eastern Airlines. On the listing front, the Singapore Exchange proposed changes, including a greater focus by the mainboard to attract larger companies with the right pedigree, while second board-listed fi rms will move to a sponsor-supervised regime. Finally, Temasek Holdings, the government investment arm, set up two charity bodies – Temasek Trust, which will manage the operation, and Temasek Foundation, which is to be in charge of helping benefi ciaries.

Sri Lanka

Dialog Telekom’s shareholders approved its Rs15.5bn rights issue, the largest in the domestic market. However, the company’s fi rst-quarter results missed expectations, with net profi ts rising just 1% year-on- year, due to increased costs. National Development Bank’s fi rst-quarter net interest income rose on growth of its loan book, whilst Commercial Bank of Ceylon recovered from a weaker December quarter to post a 37% year-on-year increase in fi rst-quarter profi ts.

Taiwan

President Chen Shui-bian named Chang Chun-hsiung, a former top negotiator with mainland China, as prime minister. Elsewhere, the country’s ruling parties have reportedly reached an agreement to raise the cap on overseas investments for insurance companies, from 35% to 45%. This clears the way for a passage of the law in June. Turning to our holdings, Fubon Financial posted a 7.7% year-on-year rise in fi rst-quarter net profi ts, helped by lower loan provisions and improving net interest margins. The company expects this year’s loan loss provisions to be between NT$8-10bn, signifi cantly lower than the previous year. Fitch Ratings awarded TSMC an A-, or stable rating, in recognition of the company’s improved profi tability on the back of increased shipments and a stable outlook. Philips pared its stake in TSMC by selling 240m shares on the ADR market for US$2.56bn, while Taiwan Mobile plans to acquire Taiwan Telecommunicatinos Services, a provider of value-added data communications services for corporates and consumers.

Thailand

In corporate results, fi rst quarter fi scal year 2007 earnings were generally mixed. Companies which reported good results included Thai Reinsurance, whose net profi ts rose14% year-on-year on the back of an improved underwriting business; Siam Makro’s earnings rose 23% year-on-year from improved margins and new store openings; and Minor International posted a 7% annualised increase in net profi ts on steady expansion in both foods and hotels. Contrasting these were companies such as PTT Exploration and Production, which reported a decline in net profi ts of 13.6% year-on-year as production delays at Nang Nuan and technical problems at the Oman 44 project affected volumes. Meanwhile, Eastern Water Resources’ was hurt by a one-time provision for unsold inventory held by its subsidiary, Eastern Hobas Pipe, whilst Hana Microelectronic’s earnings also fell from rising raw material prices as well as the continued strength in the baht.

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Asia Pacifi c region

Performance of Asia Pacifi c stock markets

31/05/07 1 month (%) Year to date (%) Local Local Index currency US$ £ currency US$ £

Msci Ac Asia Pacifi c 144.27 3.72 2.74 3.87 7.04 6.90 5.77 Australia Asx All Ordinaries 6341.80 2.98 2.40 3.52 12.36 17.98 16.73 China Shanghai Se B Share 301.62 30.49 30.49 31.93 131.80 131.80 129.35 Hong Kong Hsi-Hang Seng 20634.47 1.55 1.69 2.81 3.35 2.91 1.82 India Bse Sensex(Bse30) 14544.46 4.84 6.36 7.52 5.49 14.99 13.77 Indonesia Jsx Composite 2084.32 4.26 7.28 8.46 15.44 17.62 16.37 Japan Topix 1755.68 3.21 1.26 2.37 4.44 2.16 1.08 Korea Kospi Composite 1700.91 10.29 10.53 11.74 18.57 18.77 17.51 Malaysia Klse Composite 1346.89 1.86 2.57 3.70 22.86 27.55 26.20 New Zealand Nzx All(Grs) 4382.43 3.31 2.53 3.65 6.41 11.28 10.10 Pakistan Kse 100 12961.14 4.78 4.62 5.77 29.09 29.39 28.02 Philippines Psei 3474.67 6.24 9.29 10.49 16.50 23.37 22.07 Singapore Sti 3511.13 4.46 3.79 4.93 17.59 17.97 16.72 Sri Lanka Cse All Share 2508.30 -10.78 -10.99 -10.02 -7.86 -10.70 -11.65 Taiwan Taiex 8144.95 3.42 4.29 5.44 4.11 2.68 1.59 Thailand Set 737.40 5.47 5.90 7.06 8.47 13.21 12.01 MSCI India 593.89 5.39 6.91 8.08 5.90 15.44 14.21 Source: Factset.

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Asia Pacifi c region

During the month we met with the following companies

Australia: AMP, BHP Billiton, Duet, Healthscope, InvoCare, Lion Nathan, MYOB, , Primary Health Care, , Sigma Pharmaceuticals, Wesfarmers, Bank China/Hong Kong: Aeon Credit Service, Café de Coral, Chaoda Modern Agriculture, China Communications Construction, China Gas, China Green, China Life Insurance, China Merchants, China Resource Land, China Resources Enterprise, China Telecom, China Unicom, Fuyao Glass, Hengan International, Hong Kong & China Gas, EcoGreen Fine Chemicals, Hung Hing Printing, Industrial Bank, LDK Solar, Pacifi c Textile, Ports Design, Public Financial Holdings, Qin Jia Yuan Media Services, Sunny Optical Technology, Scud Group, Sinotronics, TPV Technology, Xiamen International Port, Xinao Gas, Yanlord, Yingli Green Energy, Zhuzhou CSR Times Electric India: CBay Systems, Gujarat Gas, Jammu & Kashmir Bank, Paper Products, Time Technoplast Indonesia: Bank Buana, Bank Central Asia, Bank Danamon, Bank Niaga, BAT Indonesia, Indofood Sukses Makmur, International Nickel, Mandom, Multi Bintang, Petra Foods, Semen Gresik, Sepatu Bata, Tigaraksa Satria, Unilever Korea: NHN, Pohang Iron & Steel Japan: Aeon, Aisin Seiki, Denso, Descente, Kaneka, Keyence, Mandom, Murata Manufacturing, Okinawa Cellular, Okumura Gumi, Omron, San-A, Toho Real Estate, Trend Micro Malaysia: Aeon Co., Fraser & Neave Holdings, Hong Leong Bank, Plus, Quill Capita Trust, Selangor Properties, SP Setia, Tenaga Nasional New Zealand: Pumpkin Patch Philippines: International Container Terminal Services, Security Bank Singapore: City Developments, Goodpack, Hong Leong Finance, Oversea-Chinese Banking Corporation, Robinson & Co., Sembcorp Marine, Singapore Exchange, Singapore Food Industries, ST Engineering Taiwan: Sinopac Financial Holdings, Taiwan Semiconductor Manufacturing Thailand: Central Pattana, Robinson Department Store, Serm Suk, Thai Stanley Electric

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Asia Pacifi c region

For more information

Alex Boggis Mable Chan Betty Yau

Aberdeen International Fund Managers Limited Room 2605-6, 26/F., Alexandra House 18 Chater Road Central Hong Kong Tel: +852 2103 4700 Fax: +852 2103 4788 www.aberdeen-asset.com.hk

Important information

The above is strictly information purposes only and should not be considered an offer, or solicitation, to deal in any of the mentioned funds. Any research or analysis used to derive, or in relation to, the above informa- tion has been procured by Aberdeen International Fund Managers Limited (“AIFML”) for its own use, without taking into account the investment objectives, fi nancial situation or particular needs of any specifi c inves- tor, and may have been acted on for AIFML’s own purpose. The information and materials provided herein, including any expressions of opinion or forecast, have been obtained from or is based upon sources believed by AIFML to be reliable but is not guaranteed as to accuracy or completeness. The information is given on a general basis without obligation and on the understanding that any person acting upon or in reliance on it, does so entirely at his or her own risk. Any projections or other forward-looking statements regarding future events or performance of countries, markets or companies are not necessarily indicative of, and may differ from, actual events or results. AIFML reserves the right to make changes and corrections to the information, including any opinions or forecasts expressed herein at any time, without notice. Investment involves risk, emerging markets may have greater risk than developed markets. Subscriptions may only be made on the basis of the relevant prospectus, most recent annual fi nancial statement and semi-annual fi nancial state- ments if published thereafter.

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