Vontobel Asset Management & Investment Funds Emerging Markets: Good Buy or Goodbye? Referent: Rajiv Jain, Portfolio Manager International Managing Director, Vontobel Asset Management, Inc., New York

Emerging Markets So far on passing lane Source: HANDELSBLATT, 11/11/2005, p. 39

Solid macro data as safeguard against volatility? Excerpted from: “The Continuing Case for Emerging Markets, Revisited” Everest Capital, February 2005

Leading productivity Emerging Markets offer some of the most productive corporations on the basis of RoE Source: Bernstein Research and Everest Capital, February 2005

Asia More and more independent of global economy

Low Correlation Good Diversification Source: Bloomberg, Monthly Data for MSCI and IFC Indices, Gross Total Returns in USD 12/31/98 - 12/31/2004

China Real GDP Growth vs. Total Return of the Market The real GDP growth compounded 9% in China relative to a stock market return of -2%!! Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.

India Real GDP Growth vs. Total Return of the Market The real GDP growth compounded 6% relative to a USD return of 8%. Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.

South Korea Real GDP Growth vs. Total Return of the Market The real GDP growth compounded 7% relative to a USD return of 3%. Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.

China Valuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.

India Valuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.

South Korea Valuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.

Market Valuations Dividend Yields Over Last 20 Years 5.00 World Asia/Pacific ex Japan Japan 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Nov-85 Nov-86 Nov-87 Nov-88 Nov-89 Nov-90 Nov-91 Nov-92 Nov-93 Nov-94 Nov-95 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Source: FactSet Aggregates

Selected stocks Examples

Unilever Indonesia EPS Growth Positively Correlates with Price Performance Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.

Lotte Confectionary EPS Growth Positively Correlates with Price Performance Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.

Hero Honda Motors EPS Growth Positively Correlates with Price Performance Source: FactSet; as of Nov. 30, 2005.

Grupo Modelo Mexico Founded in 1925, Grupo Modelo is the leader in the production, distribution, and sale of beer in Mexico (over 60% market share). Brands: Corona, Negra Modelo, Pacifico and more. Exclusive Mexican importer and distributor of Anheuser-Busch beers (Budweiser, Bud Light). Anheuser-Busch owns about 50% of Grupo Modelo. Sales growth of 8% annually over last 10 years. Operating margin >20%, ROE >10%; No long term debt. Dividend yield of 3%. Forward P/E of 16x. Market Cap: $US 10.5 bn. As of 9/26/05

Grupo Modelo

Growth vs. Value Our Definition Classical Growth = High Prices, High Earning Growth "Stars" High Earnings Growth, Low Prices "Looser" High Prices, Low Earnings Growth Classical Value = Low Prices, Low Earnings Growth

Attractive Growth and Undervaluation

Investment Process

Vontobel Fund - Emerging Markets Equity Performance as of 12/31/2005 Rating as of 12/31/2005

Emerging Markets Equity Up/Down Market Analysis, ending December 2005

Equity Funds Emerging Markets global Return-Risk-Spread sheet last 3 years

Vontobel Fund - Far East Equity Performance as of 12/30/2005 Rating as of 12/31/2005

Far East Equity Up/Down Market Analysis, ending December 2005

Equity Funds Far East ex Japan Return-Risk-Spread sheet last 3 years

Outlook Don’t expect to see a break in flows until bad things happen

Sector Winners: Energy, Materials and Technology Trend going on?

ROE of Energy and Materials stocks Peaking?

 EM are an essential element of a Global Equity Portfolio Conclusions Positive: Still attractive valuations absolutely, historically and relatively High productivity Solid macro data Asia: More and more independent of US economy Low Correlation - Good Diversification Negative: Negative growth surprise Exogenous shock (bird flu, terrorism) Optimism relative to Emerging Markets is probably peaking Earnings and productivity at record levels High oil price and rising interest rates  EM are an essential element of a Global Equity Portfolio  Outperformance by Buying Quality in Emerging Markets!

Thank you for your attention!