Baring Asset Management (Asia) Limited

Baring Asset Management (Asia) Limited19th Floor, Edinburgh Tower

15 Queen’s Road Central, Hong KongTel: (852) 2841 1411Fax: (852) 2868 4110

www.barings.com

Khiem Do – Fund ManagerMarch 20, 2007

THE ASIA PACIFIC FUND, INC.

2007 : Outlook Update for Asian Markets

Investment Community Conference Callwww.asiapacificfund.com

2

(HK: S:\Investment Management\Accounts\Tango\Presentations\0703-ICCC.ppt)

Table of Contents

Page

Section 1: Asian Markets Review 2 - 5

Section 2: Economic and Investment Outlook Update 6 - 19

Section 1:

Asian Markets Review

4


Local Currency Exchange Rate (US$/Local Rate)Year to March 5, 2007

12/31/2006 03/05/2007 Change %*

North AsiaChinese Renminbi 7.81 7.75 +0.7Hong Kong Dollar 7.78 7.81 -0.5New Taiwan Dollar 32.59 32.88 -0.9South Korean Won 930 951 -2.2

ASEANThai Baht 36.15 33.15 +9.0Malaysian Ringgit 3.53 3.52 +0.3Singaporean Dollar 1.53 1.53 +0.2Philippine Peso 49.01 48.93 +0.2Indonesian Rupiah 8,994 9,255 -2.8

Indian Rupee 44.26 44.63 -0.8

*: + denotes an appreciation of the local currency vs the USD (and vice-versa)Source: Factset

Mixed performances vs USD, with small ASEAN currencies out-performing

their Northern counterparts

5


Stock Market PerformanceYear to March 5, 2007

Return in USDCountry - Index (%)

North AsiaMSCI China Free -13.4MSCI Hong Kong Free -6.1MSCI Taiwan Free -8.5MSCI Korea Free -4.0

ASEANMSCI Indonesia Free -11.2MSCI Philippines Free 0.3MSCI Singapore Free 0.3MSCI Malaysia Free 2.2MSCI Thailand Free 9.5

MSCI India Free -11.1

MSCI AC Far East Free Ex Japan Gross -6.3

Source: Factset

Small ASEAN markets out-performed their Northern peers and India

6


Sectoral Performance Year to March 5, 2007

Source: Factset

Return in USD(%)

MSCI Materials 1.7

MSCI Industrials -2.1

MSCI Real Estate -3.9

MSCI Utilities -5.1

MSCI Consumer Discretionary -5.4

MSCI Telecommunication Services -5.7

MSCI Financials -7.0

MSCI Consumer Staples -7.5

MSCI Information Technology -9.2

MSCI Energy -11.4

MSCI Health Care -15.5

No clear trend, with the two heavy-weights Energy and Technology under-performing Materials and Industrials

Section 2:

Economic and Investment Outlook Update

8


Barings’ Global Economic forecasts: Basically unchanged from our December 2006 stance

US economy expected to grow more slowly in H1 ‘07 (pulled down by housing), but to recover in H2 ’07

Europe expected to continue to grow reasonably strongly, and Japan to recover modestly

US Federal Reserve expected to continue to pause for remainder of 2007

Oil prices likely to trade between $US 50-70/bbl

Still a relatively benign global backdrop, but direction of US monetary policy is key

9


Barings’ Asia Pacific Economic forecasts:Basically unchanged from our December 2006 stance

China expected to continue to grow solidly (9–10%) and drive the region

Other Asian economies likely to grow at long-term trend rates

Asian central banks’ policy direction expected to be mixed (Indonesia and Thailand to cut, China and India to raise, while others to maintain status quo)

Asia Pacific currencies likely to continue to strengthen modestly vs the USD

Still a favourable regional economic backdropfor 2007 and beyond

10


Global equity risk appetite: Falling recently, thus causing selling in high beta asset classes

Source: UBS (3/2007)

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

01/03 07/03 01/04 07/04 01/05 07/05 01/06 07/06 01/07

High risk appetite

Low risk appetite

Short-term investors recently became more risk-averse, thus offering long-term investors

with another opportunity to buy Asian equities

11


Which Asian markets have fallen the most YTD ?Answer is ……

Price change Drop from YTD 2006 Peak-Markets from YTD peak change to-bottom (local currency) Local Index Feb-26 (%) (%) (%) % drop

China—H HSCEI -14% -22% -18% -21%

Malaysia KLCI -13% -14% 1% -9%

Philippines PCOMP -11% -12% 1% -22%

China—Red HSCCI -11% -13% -5% -20%

Singapore STI -11% -11% -1% -15%

India SENSEX -9% -16% -10% -31%

Hong Kong HSI -8% -10% -6% -12%

Japan TPX -8% -8% 0% -19%

Taiwan TWSE -7% -8% -6% -17%

Australia AS51 -6% -7% 0% -12%

Korea KOSPI -6% -6% -4% -19%

Indonesia JCI -4% -7% -5% -21%

Thailand SET -1% -14% 0% -25%

Source: Goldman (3/2007)

……… The winners of 2006 (i.e., mean reversion phenomenon occurring)!

12


Is the Yen “carry-trade” correction over ?

Yen/USD Exchange Rate MSCI Far East Free ex-Japan Index

Yen Carry-trade correction over? Impact of Yen carry-

trade correction over?

Source: Bloomberg

Yes, most probably !

13


Foreign flows of funds in (and out) of Asia:Has Asia seen the bulk of redemptions ?

Asia ex Japan Regional and Country Equity Funds

Source: Citigroup (3/2007)

-800

-600

-400

-200

0

200

400

600

800

1,000

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Feb-06 Feb-07

Eq

uit

y fu

nd

flo

ws,

8-w

k m

ovi

ng

avg

. U

S$m

n

150

200

250

300

350

400

450

MS

CI

AxJ regional & Country funds (LHS) MSCI AC Asia ex Japan (RHS)

Yes, most probably !

14


Top 50 China A-share tracker: A good gauge of investors’ sentiment for Chinese equities

Source: CICC (3/2007)

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jan

-05

Ma

r-0

5

Ma

y-0

5

Jul-0

5

Se

p-0

5

No

v-0

5

Jan

-06

Ma

r-0

6

Ma

y-0

6

Jul-0

6

Se

p-0

6

No

v-0

6

Jan

-07

Ma

r-0

7

A50 Tracker Premium (Discount) to NAV

The craze for Chinese A-shares (premium) has turned to fear (discount),

offering a potential long-term buying opportunity

15


Is China trading at ‘bubble’ valuations ? No, not at 13X forward P/E !

Source: CICC (3/2007)

10

15

20

25

30

35

40

45

50

55

60

Jan

-00

May-0

0

Sep

-00

Jan

-01

May-0

1

Sep

-01

Jan

-02

May-0

2

Sep

-02

Jan

-03

May-0

3

Sep

-03

Jan

-04

May-0

4

Sep

-04

Jan

-05

May-0

5

Sep

-05

Jan

-06

May-0

6

Sep

-06

Jan

-07

MSCI China 12 month forward P/E band

9x

8x

10x

11x

12x

13x

7x

14x

15x

16x

17x

China: solid growth, at a reasonable price!

16


China’s profitability trend:Positive

Note : Ex-energy means exlcuding PetroChina and SinopecSource: UBS (3/2007)

5%

7%

9%

11%

13%

15%

17%

19%

94 95 96 97 98 99 00 01 02 03 04 05 06 07E 08E

H-share Index ROE (%) H-share Index ROE (Ex-Energy) (%)

Strong sales growth, plus stable margins and efficient management of capital

have helped to raise ROE trend

17


Chinese and Asian market valuations: Undemanding

Growth at a reasonable price

Source: Goldman Sachs (03/2007)

* H share index

Index

PE (X) PBV (X) ROE (%) EPS growth (%) Year-to-date

Country 2006E 2007E 2006E 2007E 2006E 2007E 2006E 2007E performance

China * 16.2 14.2 2.7 2.3 18.6 17.3 18.8 13.8 -6.6%

India 19.4 16.4 3.9 3.4 24.1 22.2 24.0 17.8 -9.2%

Indonesia 16.0 13.3 3.7 3.2 26.6 25.9 19.7 19.6 -5.9%

Malaysia 17.0 16.2 2.3 2.1 14.1 13.5 14.7 5.2 +6.2%

Philippines 17.1 15.7 2.6 2.4 16.3 15.8 12.6 8.5 +2.6%

South Korea 12.0 11.5 1.6 1.6 13.5 13.6 (4.4) 4.6 -0.3%

Taiwan 15.7 13.1 2.0 1.9 13.7 15.1 18.3 20.4 -6.0%

Thailand 10.4 10.5 1.8 1.7 18.2 17.2 (17.6) (0.7) -1.3%

EM Asia 14.8 13.2 2.1 2.0 15.3 15.4 16.9 12.3 -4.8%

18


Long-term Asian valuations:Still attractive

Source: Morgan Stanley (3/2007)

Asian markets have been re-rated since ‘98: a long-term trend which is likely to continue

Asia Pac ex Jap fwd P/E Discount to US at 7.0%

Asia Pac ex Jap Bond Yield-Earnings Yield Gap is still a high -2.4% >> Equities are cheap versus

Bonds

12M Fwd PE

7

9

11

13

15

17

19

21

23

25

27

Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06

Fed Tightening S&P 500 AP ex JP 10Y Bond Yield - Fwd Earnings Yield (%)Avg. -1 Std dev

Avg. +1 Std devUS$ Price (Right)

APXJ

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Apr-95 Oct-96 Apr-98 Oct-99 Apr-01 Oct-02 Apr-04 Oct-05

-

50

100

150

200

250

300

350

400

450

19


General Conclusions :Still Bullish on Asian equities

China’s and Asia’s strong and sustainable domestic demand growth theme remains intact

This should lead to further re-rating of Asian equity markets

Any weakness caused by a reduction of global risk appetite in 2007 should be used as a buying opportunity for long-term investors

20


Investment Themes for 2007:Still focused on domestic demand

Pro-growth strategy maintained, with a focus on growth in Asian domestic demand

China’s sustainable growth plays – real estate and retail, financials, and selective manufacturing and infrastructure plays

ASEAN and Taiwan domestic reflation plays - property, banks, telecoms, consumer

Technology: looking to rebuild positions selectively in H2 ‘07

21


Important Information

This document is provided as a service to professional investors/advisers. It is issued in the United Kingdom by Baring Asset Management Limited and/or by its investment adviser affiliates in other jurisdictions. The affiliate serving as the Asia Pacific Fund’s investment adviser is Baring Asset Management (Asia) Limited. In the United Kingdom this document is issued only to persons falling within a permitted category under (i) the FSA’s rules made under section 238(5) of the Financial Services and Markets Act 2000 and (ii) the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.

This is not an offer nor a solicitation to buy or sell any investment referred to in this document. Baring Asset Management group companies, their affiliates and/or their directors, officers and employees may own or have positions in any investment mentioned herein or any investment related thereto and from time to time add to or dispose of any such investment. The contents of this document are based upon sources of information believed to be reliable but no guarantee, warranty or representation, express or implied, is given as to their accuracy or completeness. This document may include forward-looking statements, which are based upon our current opinions, expectations and projections as of the date on the cover hereof. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements. The value of any investments and any income generated may go down as well as up and is not guaranteed. Past performance will not necessarily be repeated. Changes in rates of exchange may have an adverse effect on the value, price or income of an investment. There are additional risks associated with investments (made directly or through investment vehicles which invest) in emerging or developing markets. Compensation arrangements under the Financial Services and Markets Act 2000 of the United Kingdom will not be available.

Private investors in the Company referred to herein should obtain their own independent financial advise before making investments. This document must not be relied on for purposes of any investment decisions. Before investing in the Company, we recommend that all relevant documents, such as reports and accounts and prospectus should be read, which specify the particular risks associated with investment in the Company, together with any specific restrictions applying and the basis of dealing. The Company may not be available for investment in all jurisdictions. There may also be prohibitions or restrictions on distribution of this document and other material relating to the Company and accordingly recipients of any such documents are advised to inform themselves about and to observe any such restrictions.

Complied (Boston): March 14, 2007

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