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Investment opportunities in the New Japan AXA Framlington Japan Smaller Companies Fund

Chisako Hardie

Fund Manager

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Positive outlook for Japan

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Japanese equities – a positive outlook

Corporate behaviour Balance sheet reform M&A activity Improving shareholder returns

Consumer confidence Labour market stabilisation Asset price recovery Death of deflation

Capital expenditure Healthy cashflow High capacity utilisation Ageing capital stock

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Changing corporate behaviour

Trends in Japanese M&A: number and value of deals (US$bn)

0

50

100

150

200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060

200

400

600

800

1000

1200

1400

1600

1800

2000Value (LHS) Number of deals (RHS)

Source: SDC and Citigroup. Based on conclusion days for done deals.

($bn)

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-4

-3

-2

-1

0

1

2

3

4

Jan-02 Dec-02 Nov-03 Oct-04 Sep-05 Aug-06

CPI Index (ex fresh food)Domestic Corporate Goods

Improving consumer confidence

Jobs market Consumer prices (% y/y)

Sources: Ministry of Public Management, Home Affairs, Posts & Telecom; Bank of Japan (all via Bloomberg), 31 January 02 to 30 November 2006Source: Bloomberg as at 30 November 2006

3.5

4

4.5

5

5.5

6

Jan-02 Dec-02 Nov-03 Oct-04 Sep-05 Aug-060.4

0.7

1

1.3Unemployment rate (LHS)Job offers to applicants ratio (RHS)

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70

75

80

85

90

95

100

105

Jan-78 Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

Capital expenditure – upward pressure

Source: METI as at 30 November 2006

Production capacity (2000=100)

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51.3

26.6

10.7

4 2.84.6

13.3

31.4 30.8

14

7.13.4

0

10

20

30

40

50

60

Currency & deposits Insurance & pensionreserves

Shares & equities Investment trusts Bonds Other

Japan US

% Distribution Japan and US household financial assets

Will domestic investors buy equities?

Source: Bank of Japan as at 30 September 2006

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Japanese smaller companies A most attractive asset class

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New business creation

Numerous new businesses are being created because of:

Changes in large companies’ attitudes

Changes in people’s sense of values

Emergence of entrepreneurial sprit

New technology

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Investment themes

Recovery in capital expenditure

Recovery in property prices

Outsourcing

Energy

The retirement of baby-boomers

Mobile internet

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Deane DonniganHEALTHCARE10 years

Gareth PowellBIOTECH7 years

Matthew LovattRISK MANAGER19 years

SPECIALIST SUPPORT

Nick EvansTECHNOLOGY8 years

Richard PeirsonFINANCIALS34 years

Investment team & experience

Amanda PrinceRISK MANAGER16 years

Chisako HardiePRIMARY15 years

Anja BalfourSECONDARY17 years

Ming KempASIA EX-JAPAN11 years

PRIMARY & SECONDARY MANAGERS

GENERAL SUPPORT

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Investment process

Bottom-up stock picking fund

Main focus on growth but only when it’s undervalued

Diversified portfolio

Strong buy and sell disciplines

Aware of the macro environment

Direct company contact – ‘The Edinburgh Advantage’

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Stock selection process

The universe3,000 listed companies

Screeningviability

profitability

Company meetings/site visits

Sell-side researchIndependent research

PressTrade publications

MacroeconomicsThemes

Global sectors

The monitor list500 companies

Portfolio70-85 stocks

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Portfolio construction

Low style/sector risk

Main risk is stock specific

Only the best ideas

Flexibility to switch from growth to value or vice-versa

Aim to have no more than 2% in any individual stock (not a restriction though)

Target prices set for stocks

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-60

-40

-20

0

20

40

60

80

100

120

140

Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05

% g

row

th

SWIP Japanese Smaller Companies A Acc (MF)MSCI Japan Small Cap TR (IN)IMA Japanese Smaller Companies (IN)

Proven track record

Source: Lipper Hindsight © from 29 December 2000 to 31 December 2005, % Growth, Total Return, Bid to Bid, UK Tax Net

Percentage Growth Total Return, Tax UK Net, in GBP

129%

85%

71%

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AXA Framlington Japan Smaller Companies Fund

Investment Objective The objective of the Fund is to achieve long term capital growth.

Investment Policy The Fund’s objective will be achieved through investment principally in small cap

companies having their head office or exercising part of their overriding economic activity in any economic sector in Japan, having a market capitalisation of between £1bn and £45m

Benchmark IMA Japanese Smaller Companies Sector Average

IMA Sector Japanese Smaller Companies

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AXA Framlington – corporate update

AXA Framlington Group is owned 100% by AXA Investment Managers S.A.

AXA Investment Managers took full ownership of Framlington Group on 1 November 2005

Previously, Framlington Group was owned by HSBC Holdings (51%) and Comerica Incorporated (49%)

A formal condition of the sale agreement was that Framlington’s investment philosophy and process would be protected, enabling managers to continue to manage money as they always have

AXA Framlington’s focus will therefore continue to be on delivering superior investment returns for clients, through competitive products, backed up with excellent service

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Important information

This advertisement is for professional advisers only and must not be relied upon by private investors. Circulation must be restricted accordingly.Issued by AXA Framlington Unit Management Limited. AXA Framlington Unit Management Limited is authorised and regulated by the Financial Services Authority. A Member of IMA.

The value of investments and the income from them can fluctuate and investors may not get back the amount originally invested. Investments should be made for the long term, ie. at least five years. Past performance is not a guide to future performance. Changes in exchange rates will affect the value of investments made overseas. Investments in newer markets, smaller companies or single sectors offer the possibility of higher returns but may also involve a higher degree of risk.

Information relating to investments is based on research and analysis undertaken or procured by AXA Framlington Investment Management Limited for its own purposes and may have been made available to other members of the AXA Framlington Group of Companies which, in turn, may have acted on it. Whilst every care is taken over these comments, no responsibility is accepted for errors and omissions that may be contained therein.

This document is not a prospectus and does not constitute an offer to sell or buy any units/shares in the Fund. All applications for units are made strictly subject to the Prospectus. Copies of the latest Full Prospectus, simplified Prospectus and Terms & Conditions are available directly from the Manager upon request.