Baring Asset Management Limited155 Bishopsgate, London EC2M 3XY

Authorised and regulated by the Financial Services Authority

Tel: +44 (0)20-7628 6000Fax: +44 (0)20-7638 7928www.baring-asset.com

Fondsprofessionell FondskongressMannheim 2. Feburar 2006

Nicholas Williams

Auf der Suche nach neuem Potenzial:

Outperformance mit europäischen Nebenwerten

2

Relative performanceSmall Cap vs Large Cap

JCEEXU$/MSEXUK$FROM 1/1/99 TO 12/1/06 WEEKLY INDEXED

1999 2000 2001 2002 2003 2004 2005 200680

90

100

110

120

130

140

150

160

HIGH 155.554 23/ 9/05 LOW 89.683 5/10/01 LAST 151.206Source: DATASTREAM

Since 1/1/1999

3

Relative PerformanceSmall Cap vs Large Cap

JCEEXU$/MSEXUK$FROM 1/1/90 TO 12/1/06 MONTHLY INDEXED

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 0650

60

70

80

90

100

110

Source: DATASTREAMSince 1/1/1990

4

Why European Mid and Small Cap?

FTSE 100

MSCI Europe

MSCI Europe Small Cap

MSCI Europe ex UK Small Cap

FTSE 250

FTSE Smaller Co's

0

2

4

6

8

10

12

14

0 5 10 15 20 25

Annual Volatility (% pa)

Annual

Retu

rn (

%pa)

Small and Mid Caps have generated higher return, with comparable volatility to large caps

European and UK Small and Mid Cap returns and volatility very comparable

Source: Baring Asset Management; Factset chart November 2005, based on index returns for last 7 years

Risk and Return (EUR)

5

Smaller Companies –Riskier than larger companies?

Source: Cheuvreux

6

Smaller Companies – Riskier than larger companies?

Source: Cheuvreux

7

Valuation Small vs Large (Europe)

MSCI Europe ex UK

HSBC Europe ex UK

Small Cap Premium

P/E 2006 14.65x 19.17x +30.8%

P/E 2007 13.34x 15.81x +18.5%

P/B 2.48x 2.20x -11.3%

EPS Growth 06/05

9.54% 16.6% +7.06pp

-74%

ROE 18.5% 13.9% -4.6%

+24.9%

EV/EBIT 11.03x 13.4x +21.5%

Dividend Growth 05/04

10% 9% -1pp

+10%

Source: UBS, Factset

8

Small Cap Premium –Forward P/E

Source: Cheuvreux

9

Structural Changes in European Equity Markets

Improved disclosure standards

Corporate tax rate declining

Competition for investor attention

Improved financing

More active M&A environment

Decreased power of labour

Improved liquidity

10

Structural ChangesLabour Costs

Source: UBS smallcaps charts

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Germany United Kingdom

Labour costs as a percentage of sales

11

Small er Companies – Financing and M & A Attractions

0

1

2

3

4

5

6

7

8

2000 2001 2002 2003 2004 2005E

Equity FCF Yield Av g Credit Yield

Eurozone equity free cashflow yield v average iBoxx € BBB credit yield

Source: UBS estimates; CreditDelta (UBS)

12

M&A

Smallcap MidCap LargeCap

$mDeal Value # Deal Value # Deal Value #

2000 113,164.74 781 122,064.10 91 210,681.37 61

2001 71,251.99 602 44,031.73 44 118,654.43 44

2002 78,577.06 576 61,773.39 69 77,712.45 31

2003 72,186.99 643 59,765.55 67 106,544.44 42

2004 75,392.01 579 49,297.45 66 164,083.18 39

2005 67,078.16 509 64,253.83 74 255,841.86 79

Subtotal

477,650.94 3,690 401,186.04 411 933,517.73 296

Total 477,650.94 3,690 401,186.04 411 933,517.73 296

Source: Dealogic, UBS estimates. M&A deals by size of target company.

13

Sector Variations – Small cap vs. Large Cap

MSCI Europe ex UK Large Cap

MSCI Europe ex-UK Small Cap

Difference

Industrials 9.75 24.68 14.93

Consumer Discretionary

16.72 9.91 6.81

Information Technology

11.80 5.89 5.92

Materials 8.01 6.27 1.74

Energy 6.81 7.15 -0.35

Consumer Staples 6.25 8.06 -1.81

Health Care 6.55 9.67 -3.12

Telecommunicat-ions Services

0.89 6.61 -5.72

Financials 17.46 30.60 -13.15

source: Factset, Baring Asset Management

14

Market inefficiencies increasing

EU – Number of stocks researched down 15% from 2002

Source: Citigroup Small Cap Panorama February 2005

5

10

15

20

25

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2003 2004

Currently 17 analysts on average cover a large-cap stock

Currently 6 analysts on average cover a small-cap stock

Analyst Coverage

Source: Financial Times 8th November 2004

15

Some Examples

Sell-side Analyst Coverage remains low despite good returns

Jan 2006 2005 2004

Banco Pastor 7 5 5

FBD Holdings 4 1 N/A

Mariella Burani 8 3 5

Source: Factset, Baring Asset Management

16

Example – Current HoldingBanco Pastor S.A

Spanish domestic Spanish domestic retail bank network.retail bank network.

Initial purchase on Initial purchase on 24/2/05 at €26.9. 24/2/05 at €26.9. Target price €45.Target price €45.

Valuation ignored Valuation ignored strong growth, strong strong growth, strong B/S, speculative appeal.B/S, speculative appeal.

New 5 year plan New 5 year plan announced December.announced December.

Market Cap Market Cap €2,848m€2,848m

Source: Factset January 2006

See Important InformationSee Important Information

17

Example – Current HoldingFBD Holdings

Irish domestic P & C Irish domestic P & C insurance group.insurance group.

Initial purchase 23/3/05 Initial purchase 23/3/05 at €21. Target price €28.at €21. Target price €28.

Valuation ignored Valuation ignored strong cash generation, strong cash generation, low combined ratio, low combined ratio, capital strength, organic capital strength, organic growth.growth.

Target price revised to Target price revised to €41 19/12/05 based on €41 19/12/05 based on continued growth, Irish P continued growth, Irish P & C market and & C market and combined ratio.combined ratio.

Market Cap Market Cap €1,517m€1,517m

Source: Factset January 2006

See Important InformationSee Important Information

18

Example – Current HoldingsMariella Burani Fashion Group

See Important InformationSee Important InformationSource: Factset January 2006

Italian fashion retail Italian fashion retail and apparel groupand apparel group

Initial purchase Initial purchase 13/10/05 at 13/10/05 at €11.79. €11.79. Target price €16Target price €16

Strong management Strong management with venture approach with venture approach creating valuecreating value

Corporate restructuring Corporate restructuring ongoing highlights ongoing highlights discountdiscount

Market Cap €378mMarket Cap €378m

19

Why Smaller Companies?

Stock specific factors have a far greater impact on the returns of smaller companies

Proportion of performance related to stock specific as opposed to macro factors

Source: Citigroup Small Cap Panorama March 2005

0%

20%

40%

60%

80%

100%

Large Cap Small Cap

Stock specificfactors

Macro factors

90% of small companies’ historic returns have been driven by stock specific factors

Only 10% of smaller companies’ historic returns have been driven by macro factors

A bottom-up investment style addresses the key drivers of smaller companies’ returns

20

41,3

33,6

7,1

30,9

6,6

35,9

Select % I ndex % Median %

29.428.5

-3,6

Baring Europe Select Trust Performance as at 30th December 2005

1 Jahr 3 Jahre* (%p.a.) 5 Jahre* (%p.a.)

Quartile 1 1 1

Source: Baring Asset Management, Standard & Poor’s. (bid to bid, in Euro, with net income reinvested), as at 30/12/2005. Baring Europe Select Trust is a UK Authorised Unit Trust managed by Baring Fund Managers Limited (authorised and regulated by the Financial Services Authority). Index is HSBC Smaller Companies Europe ex UK. Reference to the benchmark is for comparative purposes only. * Annualised. Median fund refers to the median fund listed within the peer Group as defined by Standard & Poors.

Standard & Poor’s:

*****