1. 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

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

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

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

5. Asia More and more independent of global economy

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

7. 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 Total Return Index (USD) from FactSet Aggregates.

8. 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 Total Return Index (USD) from FactSet Aggregates.

9. 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 Total Return Index (USD) from FactSet Aggregates.

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

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

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

13. 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

14. Selected stocks Examples

15. 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 Total Return Index (USD) and valuation from FactSet Aggregates.

16. 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 Total Return Index (USD) and valuation from FactSet Aggregates.

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

18. 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

19. Grupo Modelo

20. 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

21. Attractive Growth and Undervaluation

22. Investment Process

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

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

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

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

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

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

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

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

31. ROE of Energy and Materials stocks Peaking?

32.  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!

33. Thank you for your attention!