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US Equities Scenario and strategy Romina Graiver International Equity Investments Vienna - March 2006

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2 Recent developments in the USA (1) A few recent indicators could raise concerns about the economy > The first estimate of 4Q GDP growth (1.1%) is below our expectations It is difficult to assess the respective impact of the various factors Hurricanes, oil prices, rising interest rates, etc > Companies quarterly earnings involved a few disappointments Negative surprises apparently slightly more numerous than in prior quarters Competitive pressures and higher costs obviously take a toll However negative surprises remain below 20% despite stock option bias > but most indicators point to optimism for the foreseeable future Confidence gives no sign of erosion ISM, employment, consumer confidence all remain strong Production, inventories and capacity utilization are rather good

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3 Recent developments in the USA (2) Most indicators point to optimism for the foreseeable future

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4 The other factors > Energy prices Impact of past rises largely discounted Uncertainties about the future mainly due to speculation seasonal factors should play favorably investment likely to restore capacity > Foreign economies Signs of a broader-based recovery Japanese consumption improving gradually Euro zone also showing improvements > Political risk Continuing tensions worldwide recent results of Palestinian elections consequences of cartoons in the European press Irans resumption of nuclear program Globally OK

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5 Situation in the main sectors Consumer Discretionary Contrasted in softlines retail, technical rebound in auto sales Consumer Staples Still few opportunities Energy Earnings at record highs, but future trends less appealing Finance Attractive results in IB, too much risk in lending-related businesses Healthcare Focus back on new products in pharmaceuticals, but still prefering services Industrials Rail transportation benefiting from fuel-efficiency and strong economy Technology Aggressive competition in semi and hardware Materials Continuing our selective stance due to cyclical reasons A global interpretation of our model s bottom-up messages

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6 US Core Growth - Reminder: Investment philosophy In highly efficient markets, structuring intuition to eliminate emotion, and thus focus on what really makes the difference, is key to achieving superior performance results A consistent approach, involving a reasonable use of computer processing in those areas where it is more effective than human judgment, will help achieve this objective In highly efficient markets, structuring intuition to eliminate emotion, and thus focus on what really makes the difference, is key to achieving superior performance results A consistent approach, involving a reasonable use of computer processing in those areas where it is more effective than human judgment, will help achieve this objective We believe in research, pragmatism and discipline

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7 US Core Growth - Reminder: Process overview A structured, disciplined process based on extensive research Investment Universe Quantitative processing (Model) Actual Portfolios Buy and Sell lists + Portfolio construction guidelines Judgmental overlay (Analyst + Fund Manager) Implementation / Execution (Traders) Fund management (Short decision cycle) Model development / upgrade (Long-term research cycle) 3-5 year cycles Model Portfolio

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8 US Core Growth - Reminder: Model s contribution The computer identifies opportunities from a huge mass of fast-changing data Dynamic Growth family Static Growth family Valuation family Diffusion of earnings estimates revisions Expected LT growth rate of Book Value Growth-adjusted P/E with notoriety coefficient Industry-adjusted Price / Earnings ratio Earnings surprise analysis Weighted combination All stocks in the universe ranked in order of fundamental attractiveness Sell if rank falls in bottom 30% Buy from top 5% Max. sect. overweight : +10% Hold 50 stocks at all times Weight all stocks equally Recompose monthly Implementation rules Revised ranking (marginal adjustments for earnings surprise) SELL listBUY list Current Portfolio Investment Universe (500+ companies selected for their investibility)

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9 US Core Growth - Investment style Adjusting to market environments, but always with a growth bias Compared characteristics of a typical share

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10 US Core Growth - Portfolio characteristics Truly active strategy driven by bottom-up stock selection Industry breakdown (Portfolio vs S&P 500)

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11 US Core Growth Strategy April to June 2005: list of portfolio changes Sells Buys Harley Davidson (inventories, disappointing guidance for 2005) Affiliated Computer Services (deteriorating sales, profit warning for FY 06) Tyco (profit taking as sales and cash flow slow down) Cognos (impact of slowing number of large deals on EPS) Morgan Stanley (tough environment + destabilized management) US Steel (trends in US demand, high costs in Europe) Lehman (strength in M&A, mkt share gains, diversification ) Hilton (pick-up in margins on strong business bookings) Motorola (refocused business and new handset product line) Cisco Systems (strong existing business + new growth areas) Federated Department Stores (May acquisition combined w/ strong consumption) Invitrogen (integrating acquisitions into strong product platform)

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12 US Core Growth Strategy July to September 2005: list of portfolio changes Sells Buys Avaya (profit taking on rebound + high risk of bad news) Fedex (impact of fuel prices on margins) Harman International (exposure to EUR/USD exchange rate) Mercury Interactive (poor guidance + poor visibility on restruct. costs) Citigroup (mgt issues, weak in trading and credit card) Dell (slower top line growth + limits to bus. model) Allegheny (improved cost structure, specialization, demand) Oracle (installed base in database segment, sales force) Paychex (3-pillar growth strategy, enhanced staff management) Target (strong image, client focus, strategy to drive traffic) W.W.Grainger (growth strategy despite conservative bal. sheet mgt) Hewlett Packard (turnaround strategy proving fruitful under new mgt)

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13 US Core Growth Strategy October 2005 to January 2006: list of portfolio changes Sells Buys Ivax (take-over by non-US company) Apollo Group (slowing enrolment trends) Invitrogen (disappointing sales in bio-production area) Wellpoint (profit taking as slower membership growth) Bed Bath and Beyond (competitive pressures and market share issues) Exxon Mobil (diversified exposure to oil businesses, refining capa.) Medtronic (innovation, new products, competitive landscape) Merrill Lynch (exposure to Private Banking, product line expansion) Abercrombie & Fitch (brand momentum, pricing power, geog. expansion) Canadian National Railway (investments and cost control in favorable economy)

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14 US Core Growth - Portfolio list Well-known blue chips and more original ideas identified by the model Consumer Discretionary Abercrombie & Fitch Coach Federated Dept Stores Hilton Hotels Lowe s Nordstrom Staples Target Yum! Brands Consumer Staples - Financials Allstate Bank of America Capital One Financial Everest Re Goldman Sachs Lehman Merrill Lynch Moodys Healthcare Aetna Amgen Caremark Express Scripts Genzyme Gilead Sciences Medtronic United Health Group Industrials Canadian National Railway Cendant Grainger (W.W.) JetBlue Airways L-3 Communication Norfolk Southern United Technologies Information Technology Accenture Apple Computers Autodesk Cisco Systems Hewlett Packard Intel Jabil Circuit Motorola Nvidia Oracle Paychex Western Digital Telecom Services Sprint Nextel Utilities - Materials Allegheny Technologies Dow Chemical Energy BJ Services Exxon Mobil XTO Energy

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15 US Core Growth - Institutional track-record (gross of fees) Consistent outperformance was achieved in both bull and bear markets (*) (*) Please read important information at the end of the present document. Past performance is no guarantee of future performance. The value of any investment may go up as well as down Sources BNP PAM, Standard & Poors

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16 US Core Growth - Performance history (gross of fees) Consistent outperformance was achieved in both bull and bear markets (*) Annual returns - US Core Growth vs S&P 500 (*) Please read important information at the end of the present document. Past performance is no guarantee of future performance. The value of any investment may go up as well as down Sources BNP PAM, Standard & Poors

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17 US Core Growth - Open-ended fund track-record (net of fees) Parvest USA: the same strategy packaged as a Luxembourg Sicav (*) (*) Please read important information at the end of the present document. Past performance is no guarantee of future performance. The value of any investment may go up as well as down Sources BNP PAM, Standard & Poors