2006 First Quarter General Emerging Market Funds Performance Review

and Emerging Europe Equity Category with 61.81 percent and 55.50 percent annualized returns on average, respectively.

In contrast, more developed markets, such as the US Equity and Europe Equity Categories, trailed most of their developing counterparts but still provided decent annualized growth of 17.03 percent and 29.32 percent, respectively, over the same period.

During the last quarter, the strongest performance was achieved by China Equity Category, up 24.70 percent, after moderate results in 2004 and 2005 due to cooling macro policies and reforms in state-owned ownership of shares. The recent rally was mainly spurred by the introduction of QDII, new listings by several large-scale stated-owned companies and speculative activities on RMB revaluation.

The Hang Seng China H-Share Index Leveraged 150 Fund led with its financial- and natural resources-centric compositions and leveraged indexing strategies, outpacing the average by more than 15 percent to end the quarter with a 40.10 percent gain.

The impressive emerging-market performance has given rise to a number of new products, with the fastest-growing four "golden brick" countries - Brazil, Russia, India and China - inspiring the BRIC investment theme. HSBC, Franklin Templeton and Schroder launched BRIC funds in succession over the past year, believing investors can benefit most from strategic positioning concentrated in these four future pillars. All three new BRIC funds reached the top-three positions in the last quarter in the more diversified Emerging Market Equity Category.

It is the same encouraging story on the fixed-income side of emerging bond funds. While most of the fixed-income categories across the globe suffered from considerable losses caused by inflation fear and rate-hike concerns, the Emerging Market Fixed Income Category escaped and, in fact, added 7.67 percent returns in calendar 2005.

This year, the re-rating theme of emerging market bonds has continued to weigh over the continuing rate-escalation cycle, and have resulted in improved fiscal management and lower inflation in certain Latin and Eastern Europe countries. Morningstar Fund Award winner ABN AMRO Global Emerging Markets Bond (USD) led the group with a 10.73 percent return in the quarter through March 31. Its 30.58 percent and 24.75 percent annualized gains for the trailing one year and three years also make it the star performer in the emerging market bond segment.