China Equity

1st Quarter 2008

Four Embarcadero Center, San Francisco, CA 94111 T:(415) 954-5400

RCM Homepage

Overview

The China Equity strategy aims to provide investors with long term capital appreciation through investment in the shares of companies listed in China and companies located elsewhere which have significant interest in China.

Investment Process

• Our philosophy and process aims to add value in three key areas, namely stock selection, portfolio construction, and implementation.
• Research coverage is shared between the country specialists and the regional sector analysts representing a subtle difference from the RCM global approach. Country specialists tend to cover those companies that relate to local factors more than any regional (or global) factor. Sector specialists cover the larger capitalized names and typically would compromise stocks that could be recommended for regional or global portfolios.
• The team’s goal is to build integrated portfolios on a bottom-up basis, comprising the best companies in the region.
• Working in a team-oriented meritocracy, our investment professionals focus on constructing portfolios offering attractive risk-adjusted returns .

The RCM Advantage

• Innovative dual research platform – producing bottom-up stock selection:
  • Fundamental research analysts specialize in their sector of expertise
  • Proprietary GrassrootsSM Research* network with 50,000 industry contacts and approximately 300 independent reporters and field force investigators
  • Institutionalized investment culture/Consultative client relationships

Performance**

Representative Account Characteristics^† - Supplemental Information

Beta 0.87 P/E (Next 12 Mo. EPS) 14.7x Earnings Growth (Next 3-5 yrs) 25.5% P/E (Next 12 Mo.) to Growth (Next 3-5 yrs) 0.6x Wgtd Avg Market Cap US$52.9 billion Number of Holdings 26

Top Ten Holdings China Mobile Ltd  10.2% China Unicom 8.0% CNOOC Ltd 7.4% China Shipping Dev 5.8% China Petroleum & Chemical 5.2% China Construction Bank 4.8% Digital China Hldgs 4.8% Industrial & Commercial Bank of China 4.7% Beijing Enterprise Holdings Ltd 4.6% Petrochina Co Ltd 3.8%

Sector Composition (% of Portfolio and Benchmark)^† - Supplemental Information

Performance Composite Statistics

RCM China Equity Composite
Period	Composite Gross Return (%)	Composite Net Return (%)	Benchmark (%)	Tracking Error (%)	Information Ratio	Composite Dispersion (%)	No. of Accounts	Period-End Total Assets (US$ M)	Total Firm Assets ($ M)
2007	63.29	60.47	66.24	8.79	-0.34	N/A♦	2	432	168,131
2006	95.80	92.57	82.87	3.67	3.52	N/A♦	2	346	164,876
2005	2.98	1.20	19.77	5.78	-1.56	N/A♦	2	141	147,527
2004	5.46	3.61	1.89	9.74	0.92	N/A♦	2	142	128,432
2003	96.32	93.04	87.57	12.02	0.62	N/A♦	2	99	123,142
2002	8.88	6.97	-14.05	2.74	6.27	N/A♦	2	31	111,780
2001	-16.40	-17.90	-24.70	9.15	-1.09	N/A♦	2	31	141,056
2000	-15.27	-16.80	-30.54	19.76	-0.31	N/A♦	2	45	82,483
1999	43.39	40.90	13.33	19.40	0.23	N/A♦	2	61	84,715
1998	-21.16	-22.57	-42.37	37.69	0.57	N/A♦	2	47	64,825

*Grassroots^SM Research is a division of RCM.  Research data, used by Grassroots^SM Research to generate recommendations, are received from reporters and field force investigators who work as independent contractors for broker-dealers. These broker-dealers supply research to RCM and certain of its affiliates in connection witd brokerage services tdat is paid for by commissions generated by orders executed on behalf of RCM's clients.

 

** Past performance is no guarantee of future results. Individual performance will vary. Gross returns were calculated on a total return basis, including all dividends and interest, accrued income, realized and unrealized gains or losses, and are net of all brokerage commissions and execution costs, and do not give effect to investment advisory fees which would reduce such returns. Net returns, where appropriate, were calculated on a total return basis, including all dividends and interest, accrued income, realized and unrealized gains or losses, and are net of all brokerage commissions, execution cost, and investment advisory fees. Currency hedging may be effected as a normal part of the discretionary fund management where it is considered beneficial in order to minimize exposures to fluctuations in exchange rates prevailing between the different country currencies and the portfolio base currency. Composite returns include any benefits or costs of such currency hedging transactions. The dispersion of annual returns is measured by the standard deviation across equal-weighted account returns represented within the composite for the full year. Additional information regarding policies for calculating and reporting returns and a complete list and description of all of the firm’s composites are available upon request. Unless otherwise noted, index returns are presented as total returns, which reflect both price performance and income from dividend payments, if any, but do not reflect fees, brokerage commissions or other expenses of investing.

 

^†   The Representative Account information is for illustrative purposes only and reflects one account within the composite. Rounding may cause figures to vary from 100%. Portfolio holdings and sector composition are subject to change without notice and should not be considered a recommendation of any particular securities or investment strategy. The supplemental information above compliments the GIPS® compliant presentation on the following page.

 

♦ Standard deviation is not considered statistically meaningful when tdere are fewer tdan five accounts in tde composite during tde period.

 

RCM (the “Firm”) is a global investment advisory organization, consisting of separate affiliated firms, which operates under the brand name RCM. The affiliated firms that comprise the Firm include, among others, RCM Capital Management LLC (“RCM Capital”), an investment advisory firm registered with the Securities and Exchange Commission, which has been in operation since 1970, either directly or through its predecessors, and RCM Asia Pacific Ltd. ("RCM AP"), an investment advisory firm registered with the Securities and Exchange Commission, which has been in business since 1984, either directly or through its predecessors. RCM Capital presents the China Equity strategy in the United States. RCM has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). For the periods ended December 31, 1998, 1999 and 2000, the composite presentation does not comply fully with GIPS, because RCM has not been able to confirm the total firm assets for those periods. To obtain a list and description of all of the Firm’s composites, please call 415-954-5400 or write to RCM, Four Embarcadero Center, Suite 3000, San Francisco, CA 94111.

 

This composite was created in October 2003 and includes all fee-paying, discretionary China equity portfolios managed by RCM AP that invest in the shares of companies listed in China or that have significant business operations there with the investment objective to achieve long-term capital growth. The benchmark applied to the composite is MSCI China Index (CLSA China World Index prior to 1/6/2005) which tracks the performance of a China equity universe that captures a majority of the investment opportunities that are available to foreign investors. The MSCI China universe includes equity securities issued by companies incorporated in the People's Republic of China (PRC), and listed in the form of B shares on the Shanghai Stock Exchange (in US$) or Shenzhen Stock Exchange (in HK$), H shares on the Hong Kong Stock Exchange (in HK$) or N-shares on the New York Stock Exchange (in US$). The MSCI China universe also includes China Private Enterprises (P-Chips) listed on the Hong Kong Stock Exchange. In contrast to the benchmark, the portfolios, forming this composite, do contain cash. The Portfolios within this composite may and do invest in non-benchmark securities. Unless otherwise shown in the composite table, no composites contain carve-outs from balanced portfolios. Performance results and valuation presented are in US dollars.

 

Composite performance is net of any applicable withholding taxes on dividends, interests and capital gains. The standard management fee scale for segregated accounts for this product starts at 0.75% p.a. on the first US$20 million and will be lower by tiers. Actual fees may vary depending on, among other things, the type of client (the fees for registered investment companies, for example, are generally significantly higher) and the amounts of assets under management. Advisory fees are described in Part II of RCM's and RCM AP's Form ADV.

 

 

All data as of March 31, 2008, unless otderwise noted.