1. GLOBAL INDUSTRY ANALYSIS AND THE QUEST FOR COMPARABILITY Philadelphia, PA December 2, 2003 Andrew B. Williams, CFA President Philadelphia International Advisors, LP

2. 2 Total Return Analysis - MSCI EAFE Value Versus MSCI EAFE (December 31, 1974 through September 30, 2003) Since 1974, a valuation based approach has provided alpha in international markets Cumulative Total Return (December 1974=$100) $4,450 $2,599 $1,413 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 747678808284868890929496980002 MSCI EAFE ValueMSCI EAFEMSCI EAFE Growth Historical 12-Month Returns MSCI EAFE Value MSCI EAFE MSCI EAFE Growth Annualized Return14.1%12.0%9.6% Maximum Return109.1%103.7%100.2% Minimum Return-24.2%-28.3%-37.9% Standard Deviation22.4%22.5%23.3% Negative Return Frequency24.0%26.9%29.9% Average Negative Return-9.1%-10.6%-12.7% Avg Return/St Dev0.630.530.41

3. 3 Historically, international value stocks have outperformed growth stocks 73% of the time. Relative 12-Month Total Returns (December 31, 1975 through September 30, 2003) Sources: FactSet, MSCI EAFE (based on monthly US dollar equivalent returns), and PIA Investment Research 4.0% 4.3% -40% -30% -20% -10% 0% 10% 20% 30% 40% 19751977197919811983198519871989199119931995199719992001 Relative 12-Month Return 25/75 Percentiles10/90 Percentiles5/95 Percentiles Median Historical International Value versus Growth Analysis

4. 4 International Equity Research Standard Analysis Options  Restate all figures to some comparable basis - US GAPP or local GAAP  Focus on cash flow and create DCF based valuation comparisons  Analyze valuations locally, ignoring the differences between countries

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6. 6  Non-synchronized economies  Capital market disparities - inflation, interest rates, valuation, tax  Accounting standards - earnings and balance sheet distortions – Goodwill/acquisition accounting – Depreciation - term and rates vary – Inventory valuation - LIFO/FIFO – Forex gains/losses – R&D treatment – Asset revaluation – Pension liability disclosure – Special expenses & revenue  Non-uniform disclosure (annuals vs interim's)  It’s a big job - EAFE has 1000 companies and MSCI All World ex US has 1700! Alternative #1 Global Sector Equity Analysis

7. 7 Alternative #2 DCF-Based Approach Where: FCF Yr1:Free cash flow year 1, etc. R:WACC TY: Terminal year of forecasting period G:Free cash flow growth rate in perpetuity Advantages:  Conceptually accurate  Eliminates accounting issues: Free cash flow is free cash flow Firm Value = FCF Yr1 + FCF Yr2 + FCF Yr3…..(FCF TY+1)/(R - G) (1+R)^1 (1+R)^2 (1+R)^3 (1+R)^TY

8. 8 DCF: Practical drawbacks  Forecasting ability diminishes rapidly as we move beyond year 1 or 2  WACC Assumptions: – Should the E(R) in calculating the cost of equity be constant across countries? – Beta: It’s the future that matters (Telecom high or low?)  Terminal growth rate: What is appropriate?

9. 9 Alternative #3  Control variables utilizing country based analysis  Identify attractive stocks within markets  Allocate portfolio between countries

10. 10 Top Quintile Versus Average Stock Performance Monthly Returns From September 1991 through September 2003 MSCI EAFE Average Exc/DefReturn/ ReturnSt DevRisk Dividend Yield0.732.430.30 Price to Earnings0.632.700.23 Price to Book Value0.663.220.21 Price to Cash Flow0.652.430.27 Price to Sales0.402.250.18 EV/EBITDA0.462.070.22 EAFE Equal Weighted0.822.410.34 Sources: PIA Investment Research and FactSet (Alphatesting with MSCI EAFE constituents)  Within EAFE, all valuation metrics have identified investment opportunities

11. 11 Valuation Factor Performance Top Quintile* Versus Average Stock 1992 through September 2003 YTD Some value factors don’t work every year Multifactor valuation models smooth out performance over time

12. 12 Valuation Based Approach Effective in Individual Markets 1975 to 2002

13. 13 Sources: PIA Investment Research and FactSet (Alphatesting with MSCI EAFE constituents) Top Quintile Versus Average Stock Performance Monthly Returns From September 1991 through September 2003 JapanUnited Kingdom Average Exc/Def Return/ ReturnSt DevRisk Average Exc/Def ReturnSt Dev Return/ Risk Dividend Yield0.712.980.24Dividend Yield0.522.500.21 Price to Earnings1.082.660.41Price to Earnings0.512.180.23 Price to Book Value0.422.790.15Price to Book Value0.733.230.23 Price to Cash Flow0.882.840.31Price to Cash Flow0.652.250.29 Price to Sales0.493.360.15Price to Sales0.323.390.10 EV/EBITDA0.652.510.26EV/EBITDA0.412.310.18 UK Equal Weighted0.952.670.36 Japan Equal Weighted 0.742.250.33 GermanyFrance Average Exc/DefReturn/Exc/DefReturn/ ReturnSt DevRiskReturnSt DevRisk Dividend Yield0.943.040.31Dividend Yield0.32 3.00 0.11 Price to Earnings0.573.470.17Price to Earnings0.362.620.14 Price to Book Value0.634.090.15Price to Book Value0.664.170.16 Price to Cash Flow0.343.760.09Price to Cash Flow0.483.230.15 Price to Sales0.403.990.10Price to Sales0.753.790.20 EV/EBITDA-0.043.66-0.01EV/EBITDA0.152.830.05 Germany Equal Weighted0.553.590.15 France Equal Weighted0.613.210.19 Valuation factor efficacy varies across markets

14. 14 Cash Flow/Price Ratio Historical Factor Analysis Alternative Holding Period Returns September 1991 to September 2003 Like good wines, value factor returns improve with age

15. 15 January 1979 - December 2002 Data Source: FactSet and MSCI Average 12-Month Return and Standard Deviation 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 10%15%20%25%30% Standard Deviation Average 12-Month Return Average Excess Return and Information Ratio -1% 0% 1% 2% 3% 4% 5% 6% 7% (0.2)(0.1)0.00.10.20.30.40.5 Information Ratio Average Excess Return Maximize IR Equal-Weight MSCI EAFE P/E P/CE P/B Yield Rel P/E Rel P/CE Rel P/B Rel Yield Inexpensively Valued Markets Outperform

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17. 17 Alternative #3A “Belt and Suspenders”  Utilize country rankings  Evaluate equities within a regional sector basis  Blend inputs from country/sector analysis  Check behind the numbers

18. 18 *Based on International Stocks of over $1 Billion Market Capitalization (US$ as of October 2003) in the MSCI EAFE Index MSCI EAFE Large Cap Stocks* Average R-Squared for Country, Sectors and Macro International Stock Prices continue to reflect Higher Correlations to Country Factors! (Rolling 30-Month Stock Price Changes) Sources: Philadelphia International Advisors with monthly stock prices from FactSet. 16.0% 6.7% 22.6% 0% 10% 20% 30% 40% 50% 10/034/0310/024/0210/014/0110/004/0010/994/9910/984/9810/974/9710/96 R-Squared (Rolling 30-Month) CountrySectorMacro Country Versus Sector Correlation Analysis

19. 19 MSCI EAFE Large Cap Stocks* Average R-Squared for Country and Economic Sectors (Rolling 30-Month Stock Price Changes) Country Versus Sector Correlation Analysis

20. 20 Country Versus Sector Correlation Analysis MSCI EAFE Large Cap Stocks* Average R-Squared for Country and Economic Sectors (Rolling 30-Month Stock Price Changes)

21. 21 Japanese Sector - Selected Valuation Factors Top Quintile Versus Average Stock Performance Monthly Returns From August 1996 through September 2003 Average Exc/DefReturn/Exc/DefReturn/ ReturnSt DevRiskReturnSt DevRisk Price to Earnings0.673.670.18Price to Earnings0.833.450.24 Price to Book0.553.360.16Price to Book0.875.030.17 Price to Cash Flow0.803.620.22Price to Cash Flow0.924.230.22 Dividend Yield0.303.540.09 Dividend Yield1.024.280.24 EV to EBITDA0.693.190.22 EV to EBITDA0.233.570.06 Price to Sales0.264.510.06 Price to Sales0.704.730.15 Equal Weighted Mix1.102.890.38 Equal Weighted Mix1.143.430.33 Average Exc/DefReturn/Exc/DefReturn/ ReturnSt DevRiskReturnSt DevRisk Price to Earnings0.483.580.13Price to Earnings0.904.380.21 Price to Book0.714.590.15Price to Book0.593.910.15 Price to Cash Flow1.102.650.42Price to Cash Flow0.285.990.05 Dividend Yield0.684.020.17Dividend Yield1.284.130.31 EV to EBITDA0.172.950.06EV to EBITDA0.473.620.13 Price to Sales0.285.770.05Price to Sales0.126.060.02 Equal Weighted Mix0.983.020.32Equal Weighted Mix0.843.760.22 Sources: PIA Investment Research and FactSet (Alphatesting with MSCI EAFE constituents) Discretionary SectorMaterials Sector Industrials Sector Staples Sector

22. 22 Average Exc/DefReturn/Exc/DefReturn/ ReturnSt DevRiskReturnSt DevRisk Price to Earnings1.103.620.30Price to Earnings0.892.440.36 Price to Book0.723.200.23Price to Book1.033.380.30 Price to Cash Flow0.853.250.26Price to Cash Flow0.642.760.23 Dividend Yield0.883.160.28Dividend Yield0.912.990.30 EV to EBITDA0.763.440.22EV to EBITDA0.442.430.18 Price to Sales0.723.620.20Price to Sales1.003.260.31 Equal Weighted Mix1.003.170.32Equal Weighted Mix1.082.630.41 Average Exc/DefReturn/Exc/DefReturn/ ReturnSt DevRiskReturnSt DevRisk Price to Earnings1.042.570.41Price to Earnings0.773.410.23 Price to Book0.542.890.19Price to Book0.413.490.12 Price to Cash Flow0.293.360.09Price to Cash Flow0.864.520.19 Dividend Yield0.902.780.32Dividend Yield1.322.510.52 EV to EBITDA0.542.350.23EV to EBITDA0.303.390.09 Price to Sales0.123.360.04Price to Sales0.233.750.06 Equal Weighted Mix0.992.890.34 Equal Weighted Mix0.783.640.21 Sources: PIA Investment Research and FactSet (Alphatesting with MSCI EAFE constituents) Industrials SectorStaples Sector Monthly Returns From August 1996 through September 2003 Discretionary SectorMaterials Sector European Sector - Selected Valuation Factors Top Quintile Versus Average Stock Performance

23. 23 Country Versus Sector Correlation Analysis October 2003 Sector Materials Consumer Discretionary Consumer Staples Industrials Technology Energy Financials Health Care Communications Utilities *Based on International Stocks of over $1 Billion Market Capitalization (US$ as of October 2003) in the MSCI EAFE Index Source: PIA Investment Research (Based on rolling 30-month sector and country r-squareds from monthly stock prices from FactSet) CountrySectorCountrySectorCountrySectorCountrySector 51%49%72%28%69%31%77%23% 70%30%85%15%84%16%88%12% 20%80%38%62%35%65%44%56% 74%26%88%12%86%14%90%10% 31%69%52%48%49%51%59%41% 20%80%39%61%36%64%45%55% 67%33%83%17%81%19%86%14% 38%62%61%39%58%42%67%33% 19%81%37%63%34%66%43%57% 16%84%32%68%29%71%37%63% United KingdomGermanySpainJapan

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25. 25 P/E Calculated on Stated Earnings #1 #2 #3 Interbrew looks relatively expensive - but what about depreciation?

26. 26 P/E Calculated on Adjusted Earnings #3 #2 #1 Interbrew is cheapest after adjustments

27. 27 Coming soon…….IAS International Accounting Standards Board  Mandates convergence of various standards closer to U.S. GAAP, but differences will remain.  Investor friendly reforms will facilitate global sector analysis and company comparisons.  European Union adoption 1/1/05.  Accounting Standards Board of Japan (ASBJ) has not agreed to converge.  To state compliance with IAS standards, a company must comply with all provisions.

28. 28 Summary  Fundamental valuation analysis can exploit pricing inefficiencies in international stocks  Multi factor approach raises return, lowers risk  Country and sector based approaches are both effective  Effectiveness of country and sector models varies across regions and sectors  Further “hands-on” analysis can add insight beyond database  IAS will facilitate cross border analysis, but issues remain

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