ORBITEX INVESTMENT PORTFOLIO

ORBITEX INVESTMENT PORTFOLIO

INDEX ORBITEX Investment Process Selecting and Structuring of Asset Classes ORBITEX Investment Portfolio Performance Analysis Glossary

ORBITEX INVESTMENT PROCESS TOP-DOWN APPROACH Top World Economy Europe USA Japan Political Sphere Monetary/Fiscal Policy Interest, Inflation Currency Economic/ Earnings Growth Technological Sphere Social Sphere Environmental Sphere Down Result of Top-Down Approach (Macro-Analysis): Guidelines for asset allocation, selection and weighting of asset classes in portfolios Standards for structuring of the selected asset classes The portfolio should anticipate and reflect the future economic development 3

ORBITEX Investment Process BOTTOM-UP APPROACH Bottom Cash (0-5%) Fixed- Income Securities (30-45%) Equities* (30-50%) Alternative Investments (10-25%) Up Currencies USD, EUR, GBP, YEN, CHF Duration, Government vs. Corporate Bonds, Rating Liquidity, Earnings Growth and Consistency, PEG-Ratio Defensive Stocks Cyclical Stocks Growth Stocks Low Beta Stocks High Beta Stocks Private Equity Funds (0-5%) Hedge Investment Strategies (5-25% Market Neutral Incentive-Driven Opportunistic 4 Result of Bottom-Up Approach: Asset allocation: Portfolio structure by asset classes Structuring of each asset class * See Stock Selection Process, page 5-9

ORBITEX Investment Process STOCK SELECTION PROCESS QUANTITATIVE AND QUALITATIVE APPROACH Investment Universe Quantitative Screening: -Computer Screening -Technical Analyses Qualitative Screening: -GlobalScreening -FundamentalAnalyses YOUR PORTFOLIO SCREENING AND ANALYSES CRITERIA (>10,000) Computer Screening Growth rates Valuation Liquidity Historical returns (>1,000) Global Screening Global conference calls International forecasts Historical valuation (>500) (<100) Fundamental Analyses Technical Analyses Company meetings Industry conferences Wall Street analyses Proprietary research Bollinger bands Money flow Relative strength Rate of change 30-40 STOCKS (Number of Companies) 5

ORBITEX Investment Process STOCK SELECTION PROCESS: AN EXAMPLE Methodology for Selecting the Stocks of the Defensive Sector of the Equity Portfolio (See Page 13) Defensive stocks are characterized by sustainable growth which is determined by the pricing flexibility, the recurrence of the company s revenues and the global reach. The Keys to Successful Long-Term Growth Investing Pricing Flexibility + Recurring Revenues Sustainable Growth Pricing Flexibility (The ability to price products and services at consistently profitable levels) Reasons for pricing power Strong franchises Proprietary positions Low cost provider Brand name acceptance Examples Mc Donald s - Quick service restaurants Marriott International - Hotel and senior living services Starbucks - Specialty coffee retailing Abbott Laboratories - Diagnostics Gillette - Razor blades Johnson & Johnson - Healthcare products Pfizer - Cardiovascular drugs Automatic Data Processing - Payroll processing Home Depot - Home improvement State Street Corp. - Mutual fund shareholder accounting Wal-Mart - Mass merchandising Coca Cola - Soft drinks Colgate - Toothpastes Tiffany - Specialty retailing Wm. Wrigley - Chewing gum 6

ORBITEX Investment Process Recurring Revenues (Companies with revenues that recur are better able to sustain high growth rates because their products or services are consumed and need to be replaced.) Company A Recurring Revenues (in USD mn) Company B No Recurring Revenues (in USD mn) Time Period Repeat New Revenue Sources Growth Totals Beg. Year 1 100 Repeat New Revenue Sources Growth Totals 100 End Year 1 100 20 120 0 120 120 End Year 2 120 24 144 0 144 144 End Year 3 144 29 173 0 173 173 End Year 4 173 35 208 0 208 208 End Year 5 208 42 250 0 250 250 5 Years totals 745 150 895 0 895 895 % Total Revenues 83% 17% 100% 0% 100% 100% Over five years, both companies grew 20% and generated total sales of USD 895 million. Company A derives 83% of these revenues from doing the same things with the same customers. It needs only 17% from new customers each year. Company B got none of these revenues from doing the same things with the same customers. It needs to find new customers for all its growth. 7

ORBITEX Investment Process Our Sustainable Growth Companies Have a Global Reach The United States + Canada, Western Europe and Japan (1950s - early 1980) + Latin America, Asia, Eastern Europe, Middle East and Africa (Late 1980s - 2000 and beyond) Five Billion Consumers Now Living Within Market-Oriented Economies Creating an Investment Universe Most do it quantitatively Computer screening creates initial universe Earnings and price changes monitored against benchmarks Little continuity to universe over time We do it qualitatively Direct research prequalifies each universe company Earnings and price changes monitored against established benchmarks Significant continuity to universe over time Valuation Discipline Valuation screens Reinvestment rates related to price/earnings ratios Sustainable growth rate estimates related to price/earnings ratios Our valuation screens help identify Which of the universe companies are most attractively valued and should be in the portfolio What percentage of total portfolio assets each holding should represent When a portfolio company should be sold 8

ORBITEX Investment Process How the Defensive Part of the Equity Portfolio Would Be Invested Today Pricing Recurring Global Sustainable + + = Flexibility Revenues Reach Growth Beverages 4.1% Coca Cola Business & Information Services 4.4% Automatic Data Processing Entertainment & Lodging 4.5% Marriott International Financial Services 8.3% Marsh & Mc Lennan 1.9% State Street Corp. 6.4% Foods 6.2% Wm. Wrigley 4.8% Nestle 1.4% Food Services 10.6% Mc Donald s 3.6% Starbucks 7.0% Health Products 10.9% Abbott Laboratories 3.9% Johnson & Johnson 7.0% Household Products 3.1% Colgate Insurance 5.0% American International Group Mass Merchandising 7.1% Wal-Mart Package Delivery Services 2.3% United Parcel Service Pharmaceuticals 12.8% Merck 4.7% Pfizer 6.6% Novartis 1.5% Specialty Retailing 16.9% Home Depot 5.7% Staples 6.4% Tiffany 4.8% Toiletries 3.8% Gillette 9

SELECTING AND STRUCTURING OF ASSET CLASSES The economic downtrend beginning in 2001 - the first recession in the globalized world economy - is fundamentally different from those in the past. Previous recessions were generally a result of monetary squeezes that were put in place to deal with excess demand and rising inflation. As a result, once monetary conditions were relaxed, recessions soon came to an end. The current cycle has been associated with supply excesses as well as demand excesses and it has been more of a deflationary than inflationary environment. Furthermore, in previous cycles at least one major region was not in recession and provided a certain support to the regions affected by the economic slump; this time all major economies are simultaneously in recession, so the external sector offers little relief. This helps to explain why sharp declines in interest rates have not been as effective as in the past in stimulating growth. Nevertheless, the power of easy money should not be underestimated. For the upcoming three years we expect continued sluggish growth with erratic capital markets with practical no clear-cut long-lasting price trends. The following selection and structuring of the asset classes in our portfolio reflects our assessment of the economic and capital market developments: 10

Selecting and Structuring of Asset Classes Selected Asset Classes Cash / Money Market Instruments (0-5%) Fixed-Income Securities (30-50%) Equities (30-50%) Alternative Investments (10-25%) For each of these four asset classes, special portfolios are designed in accordance with two typical customer profiles: 1) Conservative Value Oriented Investor, whose prime target is capital protection and achieving a return of around the double of riskfree investments (US-Government Fund Rates) by assuming minimal risks. 2) Dynamic Growth Oriented Investor, whose prime target is longer-term capital protection and achieving a return which is three times the risk-free rate by assuming higher but controllable risks. CASH / MONEY MARKET INSTRUMENTS This asset category offers very low returns (risk free investments in USD and Euro: around 1%). A small portion in this asset class is held in the portfolio for tactical purposes; it allows to act quickly if and when special opportunities arise in the field of equities and/or alternative investments. Currency-wise, 25% are held in Euro and 75% in USD. FIXED-INCOME SECURITIES Bonds in general do not offer exiting value at present. They do, however, offer protection in a deflationary environment; therefore, positions above minimum levels should be kept. Nevertheless, with unexiting valuations and a slight economic recovery on the horizon, we expect that bonds will underperform stocks in the next twelve months and beyond. On the one side, we assume that investors will be quick to react as the economy picks up. On the other side, the inflation outlook in the USA and in Europe is very good and this argues against being too bearish on bonds. We assume that yields will be very slow to move up when the economy picks up because of lingering deflationary concerns. To maximize returns from the bond portfolio, we intend to focus on corporate bonds rather than government bonds. Credit spreads have narrowed from their very high levels, but they are still at the top end of their historical range. The high yield bond markets offer good potential in absolute and relative terms. A diversified basket of high yield issues may beat equity returns in the coming years, with some issues perhaps delivering more than 20%. We recommend to invest for growth oriented portfolios up to 10% of the bond portfolio in high yield issues. In order to reduce the price risk of the bond portfolio, we focus on fixed-income securities with shorter to middle-term maturities resulting in a relatively low duration of the overall bond portfolio. Currency-wise, we invest 50% in USD and 40% in Euro; Yen-Bonds are avoided. 11

Selecting and Structuring of Asset Classes Value Oriented Bond Portfolio Issuer Minimal Weight Expected Expected Return Risk Rating Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Government A+ 60.0% 4.5% 0.5% 2.7% 0.3% Bonds Corporate A+ 40.0% 5.5% 1.0% 2.2% 0.4% Bonds Expected return of value oriented bond portfolio 4.9% Expected risk of value oriented bond portfolio 0.7% Expected sharpe ratio 1 of value oriented bond portfolio 0.6 Growth Oriented Bond Portfolio Issuer Minimal Weight Expected Expected Return Risk Rating Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Government A 40.0% 4.5% 0.5% 1.8% 0.2% Bonds Corporate A 40.0% 5.5% 1.0% 2.2% 0.4% Bonds High Yield A 20.0% 13.0% 10.0% 2.6% 2.0% Bonds Expected return of growth oriented bond portfolio 6.6% Expected risk of growth oriented bond portfolio 2.6% Expected sharpe ratio 1 of growth oriented bond portfolio 0.8 1Risk free rate = 4.5% 12

Selecting and Structuring of Asset Classes EQUITIES We are neutral and cautious for the major equity markets in the USA and Europe. Since 2002, a number of bear and bull factors are overhanging the equity markets: Negative factors The bursting of the technology bubble beginning in spring 2000 has washed out most of the market excesses and left back a great number of investors with huge losses and suposedly with a lasting impact on investor psychology. One has to assume that the experience of the last couple of years would encourage investors to pay more attention to market fundamentals, and to make them more cautious. This reluctant behavior is shown by the large mountain of cash piled up in money market funds. Another negative element is the fact that the equity valuations are not cheap. At the beginning of 2003 the S&P 500 Index traded at close to 30 times trailing operating earnings. To justify a P/E-ratio of 30, an average earnings growth of 15% p.a. in the coming years would be required. In view of the prevailing recessionary and deflationary tendencies, only a few selected industries may reach these earnings growth rates. Positive factors Other than the valuation, many prices are in place for a classic cyclical recovery: Many measures of sentiment reached depressed levels; liquidity is explosive; there are some hints that the economy and earnings are set to slightly recover. As experience shows, stocks led economic upturns by an average of 4.5 months during the past eight cycles. Chartists, however, teach us that the broad market has yet to receive a technical green light by breaking through above its 200-day moving average. Summary of Equity Market Outlook Opportunities outweigh the risks Markets will remain liquidity-driven with little chance to become earnings-driven Since a transition from liquidity-driven to earnings-driven is rarely smooth: Volatility will remain high Sector rotation may be frequent Our Investment Policy We pursue a defensive policy in our equity portfolios. Consequently, we focus on defensive sectors such as utilities, food, pharmaceutical, retail; also prime quality cyclicals such as technology, paper, chemicals, selected natural resources - in particular, precious metals and gold - belong to our favorites. In the stock-picking process low beta stocks are preferred to high beta stocks; strong large cap companies, which have the power to expand their market share in the current low growth environment, get preference to middle and small sized companies. Particular attractive are stocks with secured high dividend yield. As soon as a slight economic recovery becomes reality, a more aggressive investment behavior will be adopted. Beside cyclical stocks growth sectors such as financials, IT, communication, biotech will be focused on. Preference will be given to higher beta stocks. 13

Selecting and Structuring of Asset Classes Value Oriented Equity Portfolio Sectors Weight Industries Expected Expected Return Risk (Company Example) Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Defensive 60.0% Food (Nestle), 10.0% 5.0% 6.0% 3.0% Stocks Drugs (Pfizer), Retail (Wal-Mart), Insurance (Aetna Life), Health Products (Johnson & Johnson), Utilities (RWE) Cyclical 30.0% Automobiles (Daimler-Chrysler), 12.0% 7.0% 3.6% 2.1% Stocks Banking (City Corp.), Machinery (GE), Paper (International Paper), Basic Materials (Alcoa, Holcin), Energy (Exxon) Growth 10.0% Computer Hardware (IBM), 14.0% 8.0% 1.4% 0.8% Stocks Biotech (Amgen), Media (AOL), Financial Services (Merrill Lynch), Software (Microsoft), Telecoms (Vodafone) Writing of 2.0% 2.0% Call andput Options 2 Expected return of value oriented equity portfolio 13.0% Expected risk of value oriented equity portfolio 5.9% Expected sharpe ratio 1 of value oriented equity portfolio 1.4 14

Selecting and Structuring of Asset Classes Growth Oriented Equity Portfolio Sectors Weight Industries Expected Expected Return Risk (Company Example) Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Defensive 50.0% Food (Nestle), 10.0% 5.0% 5.0% 2.5% Stocks Drugs (Pfizer), Retail (Wal-Mart), Insurance (Aetna Life), Health Products (Johnson & Johnson), Utilities (RWE) Cyclical 30.0% Automobiles (Daimler-Chrysler), 12.0% 7.0% 3.6% 2.1% Stocks Banking (City Corp.), Machinery (GE), Paper (International Paper), Basic Materials (Alcoa, Holcin), Energy (Exxon) Growth 20.0% Computer Hardware (IBM), 14.0% 8.0% 2.8% 1.6% Stocks Biotech (Amgen), Media (AOL), Financial Services (Merrill Lynch), Software (Microsoft), Telecoms (Vodafone) Writing of 2.0% 2.0% Call andput Options 2 Expected return of growth oriented equity portfolio 13.4% Expected risk of growth oriented equity portfolio 6.2% Expected sharpe ratio1 of growth oriented equity portfolio 1.4 1 Risk free rate = 4.5% 2 Where market conditions allow, we write put options instead of direct purchase of a stock at limited price and we write call options instead of direct sale of a stock in the portfolio at limited price. By collecting premiums the overall return of the portfolio can be increased. 15

Selecting and Structuring of Asset Classes ALTERNATIVE INVESTMENTS The market environment which became very difficult since the burst of the technology bubble at the beginning of 2000 offers great potential to the alternative investments. The capital markets of the last couple of months and years can be characterized by the following observations: Stocks are more risky as the volatility has remarkably increased. Stocks may have low or negative performance over a longer period of time. The correlation between the major stock markets became very high with the consequence that the diversification benefits in equity portfolios have substantially diminished. There is now the consensus opinion in the financial industry that specific alternative investments are an efficient solution to mitigate and overcome above capital market problems. Among the alternative investments, there is a great variety and heterogenity. In our portfolio management we focus on market neutral strategies which are designed to generate pure alpha (returns independent on direction of underlying markets zero-beta), to capitalize on mispricings and inefficiencies in global capital markets and to generate high and consistent returns with low correlation to traditional asset classes. Moving-up of the Efficient Frontier of Investor s Portfolio by Adding Alternative Investments Investor s return/risk profile Return Alternative Investments Stocks USA Stocks Japan Stocks Europe Money Market Bonds Europe Risk Bonds USA Numerous academic studies have shown that the inclusion of alternative investments in general and market neutral hedge funds in particular in a traditional portfolio greatly contributes to the optimization of the portfolio; it increases the overall return and reduces the overall risk of the portfolio by moving upwards the efficient frontier. 16

Selecting and Structuring of Asset Classes Classification of the Hedge Investment Strategies (Criterion: Exposure to general market) Hedge Investment Strategies Relative-Value Non-Directional Event-Driven Opportunistic Directional Convertible Arbitrage Merger Arbitrage (Risk Arbitrage) Macro Warrant Arbitrage Distressed Securities Short Sellers (Short only Funds) Fixed-Income Arbitrage Emerging Markets Equity Market Neutral Long/Short Equity Statistical Arbitrage Commodity Trading Advisors Low Market Exposure High 17

Selecting and Structuring of Asset Classes Relative-Value Non-Directional Convertible Arbitrage Warrant Arbitrage Fixed-Income Arbitrage Equity Market Neutral Statistical Arbitrage Mean Reversion Momentum Relying and capitalizing on mispricings of two or more interrelated instruments. These strategies have low or no correlation to the underlying markets; they are therefore also called market neutral or non-dirctional. E.g. long underpriced convertible bonds and short the underlying stocks; long underpriced convertibles and short overpriced convertibles of the same underlying stocks. E.g. long underpriced warrants and short the underlying stocks; long underpriced warrants and short overpriced warrants of the same underlying stocks. Capitalizing on pricing anomalies within and across global fixed-income markets and their derivatives. Example: Buying underpriced fixed-income instruments and selling short expensive securities. Exploiting equity market inefficiencies by being involved simultaneously in long and short matched equity positions. One of the greatest advantages is the doubling of the alpha. Most of these strategies are proprietary quantitative styles that are developed using sophisticated mathematical and statistical tools to identify non-random price behavior. Statistical arbitrage can be broadly characterized into three sub-styles: 1) Mean Reversion, 2) Momentum and 3) Multi-Factor Models. In most cases these strategies trade large liquid equities, maintain equally balanced long/short market exposure and capitalize on the statistically proved price distortions. Mean Reversion Strategies exploit a tendency between two assets with a quantifiable sympathetic price relationship. For example, lets take a pair of automobile stocks such as GM and Ford. A mean reversion statistical arbitrage program will have defined a mean price and a probability distribution for the price difference between the two stocks over a specific time horizon. When the price differential between GM and Ford spreads a standard deviation measurement from the mean within this specific time horizon, the computer sells one stock and buys the other, expecting the price differential to revert back to the mean. Sophisticated mathematical formulas measure the momentum (speed) of market movement and seek to exploit differences in the structures of individual sector momentums. Multi-Factor Models Multiple fundamental factors drive this strategy that seeks to exploit relative values between equities based on these factors.the holding time in this strategy is substantially longer than the one of the short-term Mean Reversion and Momentum Strategy. 18

Selecting and Structuring of Asset Classes Event-Driven Merger Arbitrage (Risk Arbitrage) Distressed Securities This strategy class focuses on identifying and analyzing securities that can benefit from the occurence of extraordinary transactions and events. It has a variable, rather low degree of market exposure. Investing in securities of companies which are or may be the subject of publicly announced mergers or acquisitions, in anticipation of earning the spread between prevailing market prices and the prices of the value of the securities or cash to be received upon consumption of the particular corporate event or transaction. This strategy intends to buy the target company s shares and simultaneously sell short the proper ratio of the acquiring company s shares. An example is the acquisition proposal of GE for Honeywell announced in spring 2001. Taking long and, to some extent, short positions in equities and debts of companies which are in financial distress, in a bankruptcy procedure or in a major reorganization. Opportunistic Directional Macro Short Sellers (Short only Funds) Emerging Markets This strategy class has a variable, rather high degree of market exposure. It capitalizes on an identified expected price trend on a specific market. This strategy employs an opportunistic top-down approach to invest in a leveraged base across multiple sectors, markets and instruments. The investment process is based on macro-economic analyses and forecasts of shifts in global interest rates, currency markets, equity markets and policy changes. Example: Soros Quantum Fund Profitable in a bearish market environment. Short sellers borrow stocks and sell them on the market with the intention of buying them back at a lower price; the portfolio holds usually only short positions. Taking long and short positions of equity and/or debt and derivative products in emerging markets. Long/Short Equity Commodity Trading Advisors Long/Short strategies combine both long as well as short equity positions. A long/short equity manager can add value by buying winners and selling losers in one and the same industrial sector. The long and short positions are usually not balanced. Market specialists buying and selling index, interest, currency or commodity futures and the respective options in order to capitalize on the expected market trends. 19

Selecting and Structuring of Asset Classes Value Oriented Alternative Investments Portfolio Strategies Weight Expected Expected Sharpe Return Risk Return Volatility Ratio Contribution Contribution (Risk) to Portfolio to Portfolio Fixed-Income Arbitrage 30.0% 12.0% 4.0% 1.9 3.6% 1.2% Convertible Arbitrage 20.0% 14.0% 5.6% 1.7 2.8% 1.1% Merger Arbitrage 10.0% 10.0% 3.7% 1.5 1.0% 0.4% Warrant Arbitrage 10.0% 15.0% 6.0% 1.8 1.5% 0.6% Long/Short Global Equities 10.0% 15.0% 8.0% 1.3 1.5% 0.8% Statistical Arbitrage 20.0% 15.0% 10.0% 1.1 3.0% 2.0% Expected return of value oriented alternative investments portfolio 13.4% Expected risk of value oriented alternative investments portfolio 6.1% Expected sharpe ratio 1 of value oriented alternative investments portfolio 1.5 1 Risk free rate = 4.5% 20

Selecting and Structuring of Asset Classes Growth Oriented Alternative Investments Portfolio Strategies Weight Expected Expected Sharpe Return Risk Return Volatility Ratio Contribution Contribution (Risk) to Portfolio to Portfolio Fixed-Income Arbitrage 10.0% 12.0% 4.0% 1.9 1.2% 0.4% Convertible Arbitrage 30.0% 14.0% 5.6% 1.7 4.2% 1.7% Merger Arbitrage 10.0% 10.0% 3.7% 1.5 1.0% 0.4% Warrant Arbitrage 10.0% 15.0% 6.0% 1.8 1.5% 0.6% Long/Short Global Equities 10.0% 15.0% 8.0% 1.3 1.5% 0.8% Statistical Arbitrage 30.0% 15.0% 10.0% 1.1 4.5% 3.0% Expected return of growth oriented alternative investments portfolio 13.9% Expected risk of growth oriented alternative investments portfolio 6.9% Expected sharpe ratio 1 of growth oriented alternative investments portfolio 1.4 21

ORBITEX INVESTMENT PORTFOLIO (Investment Portfolios for 100 Million USD) Proposed Structure The portfolios of each asset class are - comparable to modules - combined to two different investment portfolios: Value Oriented Investment Portfolio, designed for more conservative investors and Growth Oriented Investment Portfolio, designed for investors willing to take a higher but controllable risk. The two investment portfolios - designed for two typical client profiles - are the consolidation of the respective model portfolios for each asset class. If the client requests - in accordance with his risk profile, personal wishes and needs - modifications of the different asset class portfolios respectively of the final portfolio, ORBITEX can easily comply with these requests by changing the contents and weights in the asset class portfolios and by changing the weights of the different asset classes in the final portfolio. Such modifications, of course, result in modified risk/return profiles and in different performance figures. To conclude, ORBITEX is in a position, if needed, to create for each client a tailor-made portfolio. Value Oriented Bond Portfolio Value Oriented Equity Portfolio Value Oriented Alternative Investments Portfolio Value Oriented Investment Portfolio Growth Oriented Bond Portfolio Growth Oriented Equity Portfolio Growth Oriented Alternative Investments Portfolio Growth Oriented Investment Portfolio 22

Investment Portfolio VALUE ORIENTED INVESTMENT PORTFOLIO Asset Classes Investment Weight Expected Expected Return Risk Group Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Cash / Money Treasury Bills 5.0% 1.0% 0.0% 0.1% 0.0% Market Instruments Time Deposits Fixed-Income (See Page 12) 50.0% Securities Government 30.0% 4.5% 0.5% 1.4% 0.2% Bonds Corporate 20.0% 5.5% 1.0% 1.1% 0.2% Bonds Equities Value Oriented 30.0% 13.0% 5.9% 3.9% 1.8% (See Page 14) Alternative Value Oriented 15.0% 13.4% 6.1% 2.0% 0.9% Investments (See Page 20) Expected return of value oriented investment portfolio 8.5% Expected risk of value oriented investment portfolio 3.1% Expected sharpe ratio 1 of value oriented investment portfolio 1.3 1 Risk free rate = 4.5% 23

Investment Portfolio GROWTH ORIENTED INVESTMENT PORTFOLIO Asset Classes Investment Weight Expected Expected Return Risk Group Return Volatility Contribution Contribution (Risk) to Portfolio to Portfolio Cash / Money Treasury Bills 1.0% 1.0% 0.0% 0.0% 0.0% Market Instruments Time Deposits Fixed-Income (See Page 12) 39.0% Securities Government 19.0% 4.5% 0.5% 0.9% 0.1% Bonds Corporate 15.0% 5.5% 1.0% 0.8% 0.2% Bonds High -Yield 5.0% 13.0% 10.0% 0.7% 0.5% Bonds Equities Growth Oriented 40.0% 13.4% 6.2% 5.4% 2.5% (See Page 15) Alternative Growth Oriented 20.0% 13.9% 6.9% 2.8% 1.4% Investments (See Page 21) Expected return of growth oriented investment portfolio 10.6% Expected risk of growth oriented investment portfolio 4.7% Expected sharpe ratio 1 of growth oriented investment portfolio 1.3 1 Risk free rate = 4.5% 24

PERFORMANCE ANALYSIS VALUE ORIENTED INVESTMENT PORTFOLIO Asset Classes Alternative Investments 15% Cash / Money Market Instruments 5% Performance Figures Expected Return of Value Oriented Investment Portfolio 8.5% Expected Risk 1 of Value Oriented Investment Portfolio 3.1% Equities 30% Fixed-Income Securities 50% Expected Sharpe Ratio 2 of Value Oriented Investment Portfolio 1.3 GROWTH ORIENTED INVESTMENT PORTFOLIO Asset Classes Alternative Investments 20% Cash / Money Market Instruments 1% Performance Figures Expected Return of Growth Oriented Investment Portfolio 10.6% Expected Risk 1 of Growth Oriented Investment Portfolio 4.7% Equities 40% Fixed-Income Securities 39% Expected Sharpe Ratio 2 of Growth Oriented Investment Portfolio 1.3 1 The formula for Risk (Standard Deviation) is 2 The formula for Sharpe Ratio is [ ] n n 2 n Σ x 2 i- Σ xi i=1 i=1 δ = n(n-1) µ annual - R f Sharpe Ratio = δ annual xi = Monthly Returns µ annual = Annualized Average Return i = Monthly Interval δ annual = Logged Annual Risk (Standard Deviation) n = Number of Fund Returns R f = Risk Free Rate 25

GLOSSARY Active Premium Alpha Beta Capture Ratio (Down) Capture Ratio (Up) Correlation A measure of the investment s annualized return minus the benchmark s annualized return. A measure of value added generated independent on the direction and move of the underlying benchmark. It is calculated by taking the total return of a fund minus beta times the return of the benchmark. It is based on monthly values. A relative measure of the sensitivity of an investment s return to changes in the benchmark s return. The beta (or slope) between two funds is the amount the first fund moves when the other moves by one. For example, if one fund always goes up and down by exactly half of the performance of the index, it s beta will be 0.50. The index goes up 1.00 it goes up 0.50 etc. In other words the beta represents the volatility of the first investment versus the second. The down capture ratio is a measure of the investment s compounded return when the benchmark was down divided by the benchmark s compounded return when the benchmark was down. The up capture ratio is a measure of the investment s compounded return when the benchmark was up divided by the benchmark s compounded return when the benchmark was up. Correlation expresses the strength of the relationship between the distribution of returns of the fund and its benchmark. The coefficient of correlation is always between +1.00 and 1.00. A perfect correlation is when the investment behaves in exactly the same manner. A perfect positive correlation is represented by +1.00, a perfect negative correlation is represented by 1.00. A correlation of more than 0.70 indicates a strong relationship, between 0.40 and 0.69 a modest relationship. If the correlation is below 0.30 there is effectively no correlation. Deviation (Downside) Deviation (Standard) Deviation (Standard, Gain) Deviation (Standard, Loss) Information Ratio Downside deviation is similar to the loss standard deviation except the downside deviation considers only returns that fall below a defined minimum acceptable return (MAR) rather then the arithmetic mean. For example, if the MAR is assumed to be 10%, the downside deviation would measure the variation of each period that falls below 10%. The standard deviation is the measure of the square root of the variance of data (lognormal or arithmetic) points from the mean. We recommend the use of the lognormal measure as this takes into account that 10% up is not the same as 10% down.the larger the figure the higher the volatility of a fund and thus its risk. To annualize the result we multiply by the square root of 12. Similar to standard deviation, except this statistic calculates an average (mean) return only for the periods with a gain and then measures the variation of only the gain periods around this gain mean. This statistic measures the volatility of upside performance. Similar to standard deviation, except this statistic calculates an average (mean) return only for the periods with a loss and then measures the variation of only the losing periods around this loss mean. This statistic measures the volatility of downside performance. The informatio ratio is the active premium divided by the tracking error. This measure explicitly relates the degree by which an investment has beaten the benchmark to the consistency by which the in investment has beaten the benchmark. 26

Jensen Alpha Maximum Drawdown Number Ratio (Down) Number Ratio (Up) Percent Gain Ratio Percentage Ratio (Down) Percentage Ratio (Up) Sharpe Ratio Sortino Ratio Tracking Error (Annualized) Treynor Ratio Value Added Index Volatility (Annualized) Quantifies the extent to which an investment has added value relative to a benchmark. Equal to the investment s average return in excess of the risk free rate minus beta times the benchmark s average return in excess of the risk free rate. This is the largest percentage drawdown that has occured in any investment data record. The down number ratio is a measure of the number of periods that the investment was down when the benchmark was down, divided by the number of periods that the benchmark was down. The up number ratio is a measure of the number of periods that the investment was up when the benchmark was up, divided by the number of periods that the benchmark was up. A measure of the number of periods that the investment was up divided by the number of periods that the benchmark was up. The down percentage ratio is a measure of the number of periods that the investment outperformed the benchmark when the benchmark was down, divided by the number of periods that the benchmark was down. The up percentage ratio is a measure of the number of periods that the investment outperformed the benchmark when the benchmark was up, divided bythe number of periods that the benchmark was up. A return/risk measure. Return (numerator) is defined as the incremental average return of an investment over the risk free rate. Risk (denominator) is defined as the standard deviation of the investment returns. This is a return/risk ratio. Return (numerator) is defined as the incremental compounded average period return over a minimum acceptable return (MAR). Risk (denominator) is defined as the downside deviation below a MAR. A measure of the unexplained portion of an investment s performance relative to a benchmark. Annualized tracking error is measured by taking the square root of the average of the squared deviations between the investment s returns and the benchmark s returns and then multiplying the result by the square root of 12. The treynor ratio is similar to the sharpe ratio, except that it uses beta as the volatility measurement. Return (numerator) is defined as the incremental average return of an investment over the risk free rate. Risk (denominator) is defined as the beta of the investment s returns relative to a benchmark. The value added monthly index (VAMI) reflects the growth of a hypothetical USD 1 000 in a given investment over time. The index is equal to USD 1 000 at inception. Subsequent month-end values are calculated by multiplying the previous month s VAMI index by 1 plus the current month s rate of return. Volatility is an estimate of the risk of an investment and is measured by the lognormal annualized standard deviation of a fund. Standard deviation is the measure of the square root of the variance of returns from the average return. We use the lognormal measure as this takes into account that 10% up is not the same as 10% down. Thus the standard deviation uses logarithmic data rather than monthly percentage returns. The larger the figure the higher the volatility of a fund and thus its risk.to annualize the monthly volatility, we multiply the square root of 12. 27