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Quarterly Market Outlook

KDN/PP9025/5/2008

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Disclaimer on Market Outlook/Quarterly Updates

June 2007

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This document has been prepared by Perkasa Normandy Advisers Sdn Bhd, a licensed investment adviser under the Securities Industry Act 1983. The information, tools and material presented in this document are provided for information purposes only and are not to be construed as a solicitation of an offer to sell, or buy any securities. The information advice discussed or recommended in this report may not suitable for all investors. It does not take into account your objectives, financial situation or needs. No liability can be accepted for any loss that may arise from the use of this report. No steps have been taken to ensure that the recommended strategies referred to in this document are suitable for any particular investor. The views and recommendations contained or referred to in this document may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such recommendation. Nothing in this document constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation to you. The information and opinion presented in this document were obtained or derived from sources which Normandy believes are reliable and all reasonable care has been taken to ensure its accuracy and completeness. Normandy is not responsible or liable for any damages suffered as a result of using, modifying, copying, distributing any information from this fact sheet. In no event will Normandy be responsible or liable for any consequential, incidental, indirect or special damages (including damages for loss of investments, business profits and the like) arising from the use, abuse, misuse or inability to use the information provided in this document, even if Normandy has been advised of the possibility of such damages.

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Global Market Review

2007 Global M arket Performance

2nd Quarter Return (April - June 2007 ) 1 Year Return (01/07/2006 - 30/06/2007)

90% 77.0% 68.2% 14.4%

E PS C om p.

48.1%

60% 40.9%

45.7%

33.8%

34.6%

25.4%

32.5%

19.8%

20.0%

30%

20.3%

23.0%

38.1%

22.1%

15.8%

17.0%

13.3%

12.7%

15.3% 14.5%

10.0%

8.5%

7.5%

5.4%

5.5%

8.6%

0%

CI Eu ro pe FT SE 10 0 C om p.

4.8%

4.9%

Global Equity Market

Major global equity markets fared well in 2Q07. In the US, economic news swung from raising optimism one day to dampening it the next but the DJIA and NASDAQ recorded gains of 8.53% and 7.5% respectively on healthy corporate profit growth which exceeded analysts' expectations and strong merger and acquisition activity. Sub-prime mortgage woes continue to worry the market. Bear Stearns increased its exposure to the sub-prime mortgage market when it spent US$3.2 billion to bail out one of its hedge funds. Merrill Lynch, a creditor to the funds, seized more than US$1 billion of assets prompting fears of a fire sale adding further to an already suffering housing sector. Higher oil prices present an inflationary concern and could add to investor nervousness over the equity market in the next quarter. In its recent meeting, the US Federal Reserve stated its concern over inflation at 2% in May which is still on the high side of its comfort zone of between 1% and 2%. However, the Feds maintained interest rate at 5.25% adding that they would closely monitor inflation. Should inflation pressures force an interest rate rise then the economy would be further dampened resulting in increased volatility. The US equity market volatility has picked up again as measured by the volatility index (VIX), now averaging at 13-14% compared to less than 10% previously. While liquidity will continue to keep the equity market buoyant, the investor has become more cautious. European markets performed also performed well in 2Q07 compared to the previous quarter supported by strong business and consumer confidence on its economic outlook. However, European investors raised concerns over interest rates as the European Central Bank (ECB) raised interest rates from 3.75% to 4% in June to ward off inflationary pressures. Rising oil prices and repercussions of the US sub-prime mortgage crisis saw volatility in the broader Euro equity market including the UK and impacted the retail, property and financial stocks. The FTSE 100 was

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TW PI ST I

9.8%

T CI C hi na Se ns ex 30

22 5

D JI A

D AQ

KL C I

en g

rd .

12.1%

D AX

O

N ik ke i

N AS

Al l

H an g

S

Ko re a

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M S

SE

Source : Normandy Research

JC I

16.8%

63.3%

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impacted by the heavy profit taking after leading retailer, Tesco reported disappointing growth and a `tougher year' due to rising interest rates and increasing competition. Economists believe that there will be a second round of interest rate increase in the second half of 2007. Most Asia Pacific markets performed well in 2Q07 with Japan, Australia, South Korea and Singapore reaching record highs. The Hang Seng Index which recorded a gain of almost 10% compared to a loss of 1% in 1Q07, benefited from the announcement that the Chinese Government would allow mainland brokerages to invest outside the mainland. This saw a flurry of funds into Hong Kong shares with a China exposure as they were relatively cheaper compared to China stocks and contributed some 4.7% of the Hang Seng's 2Q07 gain. Japan's TOPIX hit a seven year high with the release of strong export numbers for May as exporters benefited from a weak Yen. Its economy grew 3.3% on an annualised basis, higher than the US and the Euro Area. However, industrial output declined for 3 months consecutively which does not lend a case for the Bank of Japan to raise interest rates from its current 0.5%. The IMF is upbeat about the near-term outlook for Japan expecting it to expand 2.3% this year. In China, the Government acknowledged the need to make the Yuan more flexible in a controlled manner as a large appreciation would severely impact the economy. The Yuan would be allowed to rise or fall 0.5% a day against the US Dollar, an increase from the former 0.3%. Measures to reduce trade imbalances and mop up excess liquidity have been introduced by raising the oneyear benchmark lending rate for the fourth time since April and also tripling the stamp duty on stock market trades to 0.3%. India's Sensex 30 increased 12% in 2Q07 compared to a fall of 5% in 1Q07 and became the third emerging stock market after China and Russia to surpass US$ 1 trillion in value helped by robust economic growth of 9.4%, a strengthening Rupee which is at a nine year high against the US Dollar and expanding foreign direct investments projected at US$30 billion for the current year fromUS$14.5 billion the year before. Global Bond Markets

In a period that saw major central banks reiterate their primary focus on the control of inflation, yields on government bonds rose which appears to be a contradiction in financial market theory. The theory suggests that bond investors should expect higher returns as economic growth improves in line with the higher returns from the equity market. What has happened is that the US bond market has taken its lead from the equities market rather than economic fundamentals. The US ten-year Treasuries yields of 5.2% were at the same level as last year, while the UK Gilts and Bunds yields touched 5.5% and 4.65% respectively, the highest yields in the last 10 years. Based on the economic outlook, economists estimate real bond yields in the US and UK to be between 3% and 4% and this could be slightly lower after allowing for the impact of pension fund liability matching. Another possible explanation to the high bond yields is the savings glut built up in recent years in forex holdings of exporters in Asia and OPEC. Local Market The KLCI recorded a slower growth of 8.6% in 2Q07 compared to 13.74% in 1Q07. Nonetheless, it is among Asia's top performers for the first six months of 2007 after Pakistan, Vietnam and China recording a 23.5% increase to 1354.4 points. The KLCI recovered from the heavy sell down in the 1Q07 to record a high of 1391.6 points in June. Volatility caused mainly by external factors affected the KLCI in the month of June. Analysts remain upbeat as equity valuations in Malaysia are cheap supported by improving fundamentals which offer growth opportunities and rerating as corporate earnings are likely to

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exceed consensus figures. Year-end target for the KLCI ranges averages between 1500 and 1700. All said and done, the higher share prices will make investment decisions in the next half of the year more challenging. Stock picking will be more important and more focus will be placed on mid and small cap stocks. In addition, investors should be mindful of risks in the horizon namely rising inflationary pressures globally and its effect on interest rates as well as volatility of fund flows in emerging markets. Aside from the sudden upward spikes, the KLCI has been trading largely at the 1350 level over the last couple of months showing signs of waning. However, the KLCI and Asian markets are flushed with liquidity and will continue to seek returns. Unit Trust Industry Update Single Pricing Regime Effective from 1 July 2007, unit trust funds will be priced on a single pricing regime (SPR) and that price is the NAV (Net Asset Value) of the fund. Unlike dual pricing, under the SPR, prices will reflect the NAV of a unit and all charges will be separately disclosed. Transparency will be enhanced and investors will be able to compare costs of investing in different unit trusts and through different channels when making investment decisions. Corporate Unit Trust Advisors

The Securities Commission (SC) has agreed to the formation of Corporate Unit Trust Advisors (CUTAs). This move allows independent financial planners (IFPs) to sell unit trusts after they fulfill the licensing requirements of the SC and are registered with the Federation of Malaysian Unit Trust Managers (FMUTM). Presently there are about 100 IFPs. The new CUTAs, like the Institutional Unit Trust Agents (IUTAs), will be able to represent multiple Unit Trust Management Companies (UTMCs). The proposed ruling requires the CUTAs to distribute from at least two different UTMCs. Among the benefits of this move include greater penetration rate of unit trusts and a wider choice for the investor. Perhaps the most beneficial long term impact is that there will be greater professionalism in the unit trust industry. Coupled with the new SPR to remain unit trust industry, unit trust agents must move from a pure sales oriented mentality to a portfolio oriented approach. The emphasis is for the retention of investors and actively managing their funds by switching between asset classes to optimise returns. A win-win situation for all EPF funds not for investing in foreign unit trusts The EPF informed fund managers that investors can no longer use their EPF savings to invest in overseas funds in view of the higher risks carried by offshore funds which included currency and geopolitical concerns. The fund houses are also to stop selling new units or investments for all offshore unit trust funds approved earlier. The ruling does not affect savings used to invest in 100% domestically focused funds. About two years ago the EPF had allowed its members to invest part of their savings in overseas unit trust funds as part of its liberalisation in the wake of globalisation. FMUTM will appeal to the Finance Ministry over this new ruling on the basis that investors have over the last two years understood the features of offshore investing and are willing to place some money to increase wealth through portfolio diversification. In addition, the new ruling would restrict investment opportunities for investors wishing to invest their savings offshore.

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Exchange Traded Funds (ETFS) What and Why? An ETF is an index-based investment product which offers diversity to a portfolio. Given the nature of the ETF, it does not require active management as would a unit trust equity fund where the capability of the fund manager plays a major factor. Simply put, investing or managing an ETF adopts a top-down strategy approach. To illustrate this, let's consider the FTSE/Asean 40 Exchange Trade Fund which listed on the Singapore Exchange in September 2006. What is this ETF? This ETF tracks the FTSE index of the 40 largest securities ranked by market capitalization and free float in the ASEAN stock markets with access to 58% of Singapore's Straits Times Index; 48% of Malaysia's KLCI and 46% of the Stock Exchange of Thailand. Investors can also tap 46% of Indonesia's JCI and 20% of the Philippine Stock Exchange Index. Why this ETF? The ASEAN countries are good proxies to the strong growth outlook in Asia. Equities are expected to be the major beneficiaries and the preferred sectors are banking, commodities, construction and services. ETF Structure ­ Pros and Cons

The first Asian ETF, the Hong Kong Tracker Fund (HKTF), was listed in 2000 and it closely tracked the Hang Seng Index. It is a good example of a broad single country index fund with sector allocation based on the economic outlook. In terms of performance, the ETF delivered lack luster returns in the first 3 years but thereafter from a low NAV of HK$12.02 in 2003, it grew to a high of HK$20.18 in 2006. ETFs are similar to stocks and unlike unit trust funds in that they can be bought and sold at any time during market hours. Hence, investors of the HKTF could realize strong gains immediately by any one of the following methods; 1. by active trading;

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2. by selling the ETF short (or sell borrowed shares with the intention of buying them back at a lower price); and 3. by writing options on the ETF. The flip side to these advantages is that hedge funds and traders use these strategies, hence making the ETF market one of their favoured investment product. These speculative tactics require short term market calls which very few investors can get right over the long term. Market timing and sector rotation strategies will not get any easier through the use of ETFs. Clearly, the small investor may likely be at the losing end of the game. ETFs are said to be cost effective in terms of lower expense ratios and load fees. This is typical of index funds which do not require the services of a well established fund manager whose engagement is normally at a high cost. In addition, ETFs do not require all the backroom offerings of a typical unit trust manager such as record keeping, trustee and custody services given that investors deal directly with a broker. However, there's no such thing as a free lunch and the ETFs' `hidden costs' presents itself from the accumulation of broker commissions paid out on all trades and regular investments ­ just like stocks.

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Unlike mutual funds, trading is highly likely for ETFs in order to realize respectable returns. One could argue that given the nature and attractiveness of the ETFs to hedge funds and traders, this investment product would suit an investor with an assertive or high risk profile. Over the years, different types of ETFs have been produced based on theme plays to capture a share of the booming liquidity. Some ETFs track a sector index or basket of stocks within a specific sector. While the outlook is good and provided the timing of the investment is right - i.e. the ETF is invested at the start of the upward trend of the sector - the ETF would be a secure option. However, very narrow ETFs, many of which are specialized offerings, tend to be more volatile i.e. higher risk. In recent years, oil, gold and other commodities as well as emerging markets have given strong returns and in turn encouraged performance chasing. When and how to use ETFs? As an investment product, ETFs can provide the diversification or balance required in a portfolio in order to enhance returns. For example, if a portfolio's allocation to smaller stocks has exceeded its target weighting, it would be a good time to rebalance the portfolio in favour of blue-chip stocks via an ETF which are passively managed and can be easily sold. When there is a change in returns from the various asset classes, instances may arise where investors may choose to temporarily alter their investment profile to enhance their returns over a short period. For example, an investor with a stable profile may decide for the short term to adopt an assertive style which requires a change in asset allocation from 30% in stocks to 70% in stocks. This can be done effectively through an index or sector specific ETF Somewhat similar to the instance above, institutional investors would consider placing excess funds temporarily into ETFs while deciding where to invest in the longer term. For example, a fund manager using Hong Kong's Hang Seng Index as a benchmark could use the HKTF to place new funds before deciding on which stocks to buy. Institutional funds could also use ETFs to manage their cashflows and limit extent of loss on their portfolio particularly when faced with liquidation of funds either for redemption or to reinvest in assets offering better returns. Going forward....

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According to a recent Wall Street Journal report, there are about 430 ETFs in the U.S. holding about US$430 billion in assets. Although small in comparison to the 8,100 traditional mutual funds totaling US$10.5 trillion, the appeal of the ETF is spurring fast growth of this segment. Many of the new ETFs are targeted mainly at professional investors. Even Vanguard, the famous pioneer of the S&P 500 index fund popular with the mom-and-pop investor, now offers ETFs and is marketing them directly to the hedge funds. The basic thinking is that while index funds are good for the individual investor, ETFs are better suited to sophisticated investors using fast trading strategies. The market maker is more dominant in ETFs than in stocks and hence has the ability to create or eliminate a share of an ETF by betting on the underlying value which may diverge from the intrinsic value of the underlying assets. ABF Malaysia Bond Index Fund (ABFM), the first Malaysian bond ETF was listed on the KLSE in July 2005. ABFM consists of Government and quasi Government bonds and is benchmarked against the iBoxx ABF Bond Index. Under current market conditions, this ETF represents the bond asset class which will underperform compared to equities. However, it is likely to be suitable for a Very Secure portfolio as 97% is in various Malaysian Sovereign Bonds while 2% is in Corporate Bonds leaving the balance in cash. The diversification and immediate accessibility all in one stop is an attractive proposition. Furthermore, the semi annual income distribution (if any) together with the ability to liquidate at any time without any loss of income (like fixed deposits) are added advantages.

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Aside from the ABFM, Bursa Malaysia has indicated its intention to launch an ETF with a local investment bank based on FTSE BM 30 Index which comprises 30 largest companies on the FTSE Bursa Malaysia 100 index by market capitalization. In addition, the Government recently announced that there are plans to list different forms of ETFs worth RM3.5bn on the KLSE by the year end. The GLCs including Khazanah are expected to participate by selling a portion of their portfolio in exchange for units in the ETF. These moves are expected to raise liquidity and interest in the Malaysian market. However, unlike the U.S., the capital markets of Singapore, Hong Kong and Malaysia lack the depth, breadth and liquidity to support a variety of ETFs with local market exposure. Nonetheless, the appeal of the ETF can neither be ignored nor underrated as it evolves to meet investor needs particularly those of high net worth investors through more ETF product-hybrids offerings. ETFs are in Asia and expected to continue their growth. The question is whether the ETF is here to stay or is this another themed-asset class to challenge the savvy fund manager.

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Company Philosophy

Perkasa Normandy Advisers Sdn Bhd is a licensed investment advisor under the Securities Industry Act 1983. Perkasa Normandy Advisers provides investment advice, portfolio monitoring and administration services to a wide range of investors. We believe that the creation of wealth depends on sensible, long term and consistent investment activity. For the individual this means the recognition of his or her personal interests, plans and targets, responsibilities and capacity. Many people enjoy the challenge of investment. Many enjoy winning but do not have the time or desire to persistently review and evaluate, amend or stick to an investment strategy through good times and bad times. Many like to have control over their investments, but welcome the guidance of a professional backup as a second opinion, to keep watch while they are otherwise busy, and to handle the paperwork of dividends, security and cash movements and give clear reports. Perkasa Normandy Advisers provides this support. We are not a fund manager, or a stock broker, we do not specialise in selling or advising any particular product and we do not get commissions or rebates on what our clients buy or sell.

Disclosure : In accordance with the Securities Industry Act (1983) we declare that we do not hold any securities or at the present time have any direct or indirect interest in the securities referred to in this Investment Update. From time to time we may have direct and indirect interest in some or all of the securities mentioned herein. Neither the information nor the opinions expressed herein constitutes or is to be construed as an offer or the solicitation of an offer to sell or buy the securities referred to herein. The information contained herein is based on sources which we believe to be reliable.

We are providing long term services to a growing client base, to help them choose and manage investments which are specially tailored to suit the individual's circumstances and philosophy, in the light of expert market views and information. With the proliferation of investment alternatives in Malaysia and overseas, a key focus of our philosophy is to continually monitor and select the best performing investments. As a cornerstone for most investment portfolios, we generally advise clients to place funds in different trusts, cash, shares and other investments as appropriate from time to time for the best long-term performance.

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Perkasa Normandy Advisers Sdn Bhd Licensed Investment Adviser

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Perkasa Normandy Advisers Sdn Bhd 15th Floor Menara Multi-Purpose at Capital Square, 8 Jalan Munshi Abdullah 50100 Kuala Lumpur Enquiries: - Mr Dinesh Virik - Ms Pretta Mehrotra Tel: Fax: 603-2711 5560 603-2694 5561

Toll Free: 1-800-38-5560

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