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The Fund

FMG China Fund – A Shares

“The 19th century belonged to England, the 20th century belonged to the US, and
the 21st century belongs to China. Invest accordingly.” -Warren Buffett
Source: The Australian (April 2009)

Disclaimer: This summary is for information purposes only and does not constitute an offer to sell or a solicitation to buy. Citizens or residents of
the United States may not invest in this Fund. Opinions and estimates constitute the manager’s judgment and are subject to change without notice.
Past performance is not indicative of future results. Investments in emerging markets should be considered high risk where a portion or total loss of
capital is conceivable. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part
of his/her initial capital, and investment results can fluctuate substantially over any given time period. Please refer to the Fund’s prospectus which
contains brief descriptions of certain risks associated with investing in the fund. Questions should be directed to your local representative or financial
advisor. This document may not be reproduced, distributed, or published for any purpose without the prior written consent of the manager.

Ver 6-2010 1
China A-shares Market

……going forward, we expect the A-shares to outperform the H-shares

1200

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H-Share S&P 500 A-Share MSCI Pacific ex Japan

YTD Performance % 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
A-shares -20% -3% 0% -20% -3% 113% 89% -58% 65% -27%
H-shares 11% 4% 132% 3% 13% 65% 68% -37% 79% -10%
S&P 500 -16% -22% 30% 7% 6% 11% 2% -34% 35% -8%
MSCI Pacific ex Japan -15% -10% 40% 22% 11% 20% 26% -47% 83% -13%
Source: Bloomberg, June 2010
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From H-shares to A-shares

A-shares are trading at a discount to


H-shares for the first time since 2006

Source: Bloomberg

 We believe in the next 2-5 year, we will witness a massive shift from Hong Kong
listed H-shares into A-shares listed in domestic China (Shanghai and Shenzhen).

 Foreign investors, like FMG has so far almost exclusively invested in China via H-
shares as A-shares has been restricted to foreigners.

 We estimate that today there are four times as many liquid A-shares traded in
mainland China as H-shares traded in Hong Kong.
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Why China A-shares?

 Direct Exposure to Chinese Markets, wider stock selection – about more than 2000
listed companies

 Abundant liquidity

 Closed Market - Scarcity of Foreign Investors

 Reasonable Valuation and a shrinking A/H premium

 Potential future RMB Currency appreciation

 Quality Chinese companies are encouraged to list as A-share Improving corporate


governance and regulations

This is why FMG China Fund is shifting its focus from H-shares to A-shares.

4
Chinese Share Classes

 A-Shares(about 2,000) – Securities of Chinese incorporated companies traded on Shanghai or


Shenzhen exchanges by residents of the PRC and China Qualified Foreign Institutional Investors
and quoted in RMB . -Limited Access for foreign investors, this is where FMG China Fund will
concentrate 50-100% of its investments.

 B-Shares(about 100) – Securities of Chinese incorporated companies traded on Shanghai or


Shenzhen exchanges. They can be traded by residents and non-residents of the PRC. Quoted in
US $ in Shanghai and HK $ in Shenzhen. -Poor liquidity, we will from time to time own 0-25% B-
shares

 H Shares(about 150) – Companies incorporated in the PRC and nominated by the Chinese
Government for listing in Hong Kong. -We will from time to time hold some stocks if the
premium is favorable and if stocks are not listed in A-shares.

 Red-Chips(about 100) – Securities of Hong Kong incorporated companies with assets in China,
traded in Hong Kong - We will from time to time hold some stocks if the premium is favorable
and if stocks are not listed in A-shares.

 P-Chips(about 150) – Privately owned companies listed predominately in Hong Kong, Singapore
or NASDAQ -We will from time to time hold some stocks if the premium is favorable and if
stocks are not listed in A-shares. 5
China A-shares Market

Strong Liquidity and trading Volume

Source: UBS estimates, Shanghai and Shenzhen Stock Exchanges, WIND

6
China A-shares Market

 Wider selection of Stocks – more than 2000


 No. of listed H-shares represent only 10% that of listed A-shares.

Source: World Federations of Exchanges, Bloomberg

7
Reasonable Valuation

2011E
PEX14

Source: IBES, Morgan Stanley Research, Goldman Sachs, May 2010

8
China is far from over-invested

Source: UBS AG, May 2010

9
China will continue to deliver growth

China’s growth is estimated to be 2-4 times higher China’s Shares in World Foreign Reserve
than most major developed economies.
GDP (%)

Source: China National Bureau of Statistics

Source: China NBS, US BEA, Eurostat, Japan ESRI

10
High Savings and Little Debt

Source: Euro monitor, May 2010

11
Growing Middle Class – more will spend

About 600 million middle class households by year 2014, growing at nearly 11% p.a.

Source: CLSA Asia Pacific Markets, Euromonitor, World Bank, April 2010

12
Abundant Liquidity

Source: CEIC, China Statistical Year Book, WIND, NBS Household income survey, 25/3/09

13
China accounts for 2% of global index weight but 9-12% of
global GDP

Source: Bloomberg, FactSet, I/B/E/S, IMF, MSCI, GS Global ECS Research estimates

14
FMG - Marketing Contacts

Asia Europe Global & Malta


Charles Cantlie & Jeffery Shen Johan Kahm & Fredrik Edensvärd Erik Nelson & Mark Mallia
Tel: +44 20 7581 3149 Tel: +46 8 545 06 180 Tel: +356 21314011
Fax: +44 20 7584 5484 Fax: +46 8 545 06 189 Fax: +356 21312880
e-mail: charlie@fmgfunds.com e-mail: fredrik@fmg.se e-mail: mark@fmgfunds.com
e-mail: jeff@fmgfunds.com e-mail: johan@fmgfunds.com e-mail: erik@fmgfunds.com

UK Scandinavia Middle East


Charles Cantlie & Avon Cayzer Fredrik Edensvärd & Karl Grewin Erik Hultsberg
Tel: +44 20 7581 3149 Tel: +46 8 545 06 180 Tel: +46 8 545 06 180
Fax: +44 20 7584 5484 Fax: +46 8 545 06 189 Fax: +46 8 545 06 189
e-mail: charlie@fmgfunds.com e-mail: fredrik@fmg.se e-mail: erik.h@fmgfunds.com
e-mail: avon@fmgfunds.com e-mail: karl@fmg.se

Fund Administrator
Apex Fund Services (Malta) Ltd., Floor 6, Airways House, Gaiety Lane, Sliema, SLM 1549, Malta
Tel: 356 2131 1330 - Fax: 356 2131 2880 - e-mail: anthony@apexfunds.com.mt

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