Fund Performance Review (1Q2007)

Emerging Markets Index gained 1.795 percent. Latin American markets outperformed both emerging Europe and emerging Asia, by advancing 5.59 percent. The MSCI BRIC Index edged down 0.65 percent as Indian markets slumped 3.65 percent over the quarter.

Southeast Asian markets outperformed other markets during this turbulent period. Seven of the top 10 performing funds for the first quarter of 2007 are Southeast Asian single country funds. For the first quarter, the top three Morningstar fund categories are Singapore equity fund, up 18.01 percent; ASEAN equity fund, up 12.1 percent; and Emerging Asia Single Country stock fund, up 10.16 percent.

Over the quarter global small cap and mid cap stocks, especially in European markets, outperformed large cap stocks as takeover activity and positive profits news continued to drive up the performance. M&A rumors, in particular the ABN AMRO-Barclays deal in the banking sector, also boosted European equities.

Overall, the first quarter fund performance was slightly tarnished compared to last year as investors turned cautious on increasing global market volatility. 43 of the 50 Morningstar Categories posted positive returns for the first quarter of 2007 while fund performance ranged from the 35.3 percent gains of the Allianz GIS RCM Malaysia Fund to the 12.5 percent loss of Hang Seng IS – China H-Share Index Leveraged 150 Fund.

Overall, the first quarter fund performance was slightly tarnished compared to last year as investors turned cautious on increasing global market volatility. 43 of the 50 Morningstar Categories posted positive returns for the first quarter of 2007 while fund performance ranged from the 35.3 percent gains of the Allianz GIS RCM Malaysia Fund to the 12.5 percent loss of Hang Seng IS - China H-Share Index Leveraged 150 Fund.

Top 10 Performing Fund Categories
Singapore'economy grew faster than expected in the first quarter of 2007, expanding by an annualized 7.2 percent in this quarter. The benchmark Singapore Straits Times Index was set record high repeatedly, buoyed by strong performances of property, telecom and banking stocks. Singapore equity fund on average outperformed MSCI Singapore Index by around 7.8 percent for the quarter. The HSBC GIF Singapore Equity fund led the Morningstar Singapore equity category by returning 25.6 percent, followed by a return of 21.5 percent of Allianz GIS RCM Singapore fund.

Other ASEAN countries grew strongly over the first quarter, boosting funds'performance investing in such markets. In Philippine, the inflation continued to slow down on tempered oil prices. The MSCI Philippines Index gained around 10 percent with the bulk of the money going into the Philippine stock markets. BangKo Sentral ng Philipinas, the central bank of the Republic of the Philippines said net portfolio investment inflows grew 71 percent on year to US$838 million in January to March this year from US$490 million in the same period last year. Gross investment inflows rose by 139 percent from year-ago level, with US$2.803 billion, or 80 percent of the total going into listed shares at the Philippine Stock Exchange and US$1.734 billion into property, telecom and banking sectors.

Malaysian government announced to scrap capital gains tax on property deals from April and the prime minister and governor of the central bank also spoke publicly to support a stronger Malaysian Ringgit. Healthy economy as well as supportive policies has boosted Malaysian stock market to be one of the best performing markets in Asia this year. The MSCI Malaysia Index gained 17.75 percent for the first quarter of 2007.

On average Morningstar Emerging Asia Single country equity fund advanced 10.2 percent and the best performing fund was JF Vietnam Opportunities Fund, gaining 25.5 percent. Other outperforming funds in this category include JF Malaysia fund, returning 25.2 percent and Allianz GIS RCM Philippines fund, increasing 18.3 for the first quarter.

Iran dispute puts oil in focus. Fears about supply keep traders on edge. However, oil prices steadied above 60 dollars per barrel. Natural resources funds partly recovered their leading positioning this quarter by returning 6.2 percent on average. The BlackRock MLIIF New Energy fund led the category by returning 13.7 percent.

Bottom 10 Performing Fund Categories
India market tumbled the most among the so-called BRIC (Brazil, Russia, India, and China) countries. The Bombay Stock Exchange index, Sensex, slid 5.8 percent for the first quarter. Indian government took some unexpected monetary tightening on March 30th by increasing its overnight lending rate by a quarter percentage point to a four-and-half year high of 7.75 percent and raising banks'reserve requirements for the third time since last December to curb loans growth and curb heightened inflation. Over the quarter Indian equity funds on average lost 3.87 percent with AllianceBernstein-India Liberalisation leading the category by slumping 1.49 percent. ABN AMRO India Equity fund was the worst performing fund within the category, down 8.33 percent.

Effectively from April 16th, Chinese government further tightened monetary policy by increasing required deposit reserve ratio to 10.5 percent for big banks and 11 percent for smaller lenders. This is the third time this year the PBOC raised reserve ratio and the PBOC also raised the interest rate by 27 bps in March to suck up excess liquidity. Market expects more austerity policies coming as Chinese government clearly demonstrated its determination to curb rapid expansion and investment growth and to cool down overheating in the stock market.

Despite of that, the stock market in China kept moving up from January to March, except for previous unexpected sharp falls at January and February end. For the quarter both A-shares in Shanghai and Shenzhen shrugged off early loss and closed higher on strong money inflows, surging 18.9 percent and over 51 percent respectively. If Chinese government austerity policy had some effect, it would have been on H-shares. The Hang Seng China Enterprises Index, a gauge of Hong Kong-listed China companies, lost 7 percent over the quarter. Hang Seng IS – China H-Share Index Leveraged 150 became the worst performing fund within this category, slumping 12.5 percent due to amplifying effect of its leveraged strategy. In contrast, iShares FTSE/Xinhua A50 China Tracker Fund and JF China Pioneer A-Share Fund gained 22.4 and 21.5 percent respectively since these two funds invest directly in A-share market.

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