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CAAM Funds Emerging Internal Demand A domestic growth thematic fund Page 1 CAAM Funds Emerging Internal Demand Contents 1. 2. Summary p. 3 Why focus on " Internal Demand " in Emerging Countries now? 1.1 Historical overview of economic development p. 4 1.2 An important contributor to world growth 1.3 Strong macro-economic fundamentals 1.4 Decreasing sensitivity of emerging markets to the US economy The strong drivers of Internal Demand in Emerging Countries 2.1 Household consumption: the emergence of a gigantic middle class 2.2 Corporate investments: strong support from private investments, p. 12 infrastructure spending and urbanisation 3. Page 2 CAAM Funds Emerging Internal Demand 3.1 CAAM Funds Emerging Internal demand: concept & attractiveness 3.2 Fund key features 3.3 Investment philosophy, robust process & risk monitoring 3.4 Track- record of Global Emerging funds managed by the team 3.5 Strengths of CAAM expertise CAAM Funds Emerging Internal Demand p. 20 Summary Emerging internal demand: why now? A winning theme in the current market environment: Growth engine of the world economy in the years to come Better economic health of emerging countries should translate into more resilient internal demand than in the past A way to invest in Emerging Markets with a targeted lower volatility Some protection from the slowdown of developed economies Page 3 CAAM Funds Emerging Internal Demand 1. Why focus on Internal Demand in Emerging Countries now? 1.1 Historical overview of economic development Large Emerging countries are entering mass consumption phase Take-off March towards technology maturity Mass consumption 1780 1800 1820 1840 1860 1880 1900 1920 1940 Analysis of Rostow in 1960 (updated in 1990), « The Stages of Economic Growth », economica,3e edition Page 5 United Kingdom United States France Germany Sweden Japan Russia Italy Canada Australia Taiwan South Korea Mexico Argentina Brazil Turkey China Thailand India Indonesia Philippines Vietnam United Kingdom United States France Germany Sweden Japan Russia Italy Canada Australia Taiwan South Korea Mexico Argentina Brazil Turkey China Thailand India CAAM Funds Emerging Internal Demand 1960 1980 2000 2020 Our vision 2040 1.2 Internal Demand in Emerging countries: an important contributor to world growth (1/2) Growth in retail sales are already higher in current dollars in China than in the United States Retail Sales growth over last 12 months (6 months average, mio $) 24000 20000 16000 12000 8000 United States Page 6 CAAM Funds Emerging Internal Demand China févr-07 août-06 févr-06 août-05 févr-05 août-04 févr-04 août-03 févr-03 août-02 févr-02 août-01 févr-01 août-00 févr-00 août-99 août-98 0 févr-99 4000 Source : CAAM 1.2 Internal Demand in Emerging countries: an important contributor to world growth (2/2) GDP (real, %yoy) Average so urce : EIU, M SCI, CA A M GDP growth in emerging countries consistently above the one of developed countries (except for 1998) Growth looks set to remain strong due to improvement in fundamentals Page 7 CAAM Funds Emerging Internal Demand 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1992 1993 Differential betw een Em erging and Developed Countries 4,0 3,0 2,0 1,0 0,0 -1,0 -2,0 -3,0 -4,0 -5,0 1.3 Strong macroeconomics fundamentals (1/2) 4,0 Current account - % GDP 3,0 2,0 1,0 0,0 -1,0 -2,0 -3,0 Highly positive current accounts... Emerging Countries Developed Countries Source : MSCI, EIU, CAAM Emerging Countries included in MSCI EMF index 30,0 25,0 20,0 15,0 10,0 5,0 0,0 -5,0 -10,0 Page 8 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 …net creditors vis-à-vis developed countries Net foreign debt (%GDP) So urce : Datastream, M SCI, EIU, CA A M CAAM Funds Emerging Internal Demand 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 -4,0 1.3 Strong macroeconomics fundamentals (2/2) S&P Ratings of countries included in the MSCI Emerging Markets (w eighted according to equity country w eight) 9 100% S&P upgraded Russia to "investment grade" Outperformance of non investment grade country leading to a low er rating 8 S&P upgraded India to "investment grade" 90% 7 80% Exit of Greece 6 70% Dow ngrade of South Korea & exit of Portugal % Investment Grade (right) Jan-07 Nov-06 Jul-06 Sep-06 May-06 Jan-06 Av. grade for MSCI EMF (left) Mar-06 Nov-05 Jul-05 Sep-05 May-05 Jan-05 Mar-05 Nov-04 Jul-04 Sep-04 May-04 Jan-04 Mar-04 Nov-03 Mar-03 0% Sep-03 -1 Mar-02 10% Sep-02 0 Mar-01 20% Sep-01 1 Mar-00 30% Sep-00 2 Mar-99 40% Sep-99 3 Mar-98 50% Sep-98 4 Mar-97 60% Sep-97 5 Sep-96 Difference in rating between emerging and developed countries set to tighten further Source : CAAM Comparison of different bond spreads 1800 1600 1400 10 years of macroeconomic adjustment and budget discipline: 1200 1000 800 600 historically low and less volatile spreads 400 200 Emerging Markets Bond Index Lehman Brothers High Yield mai-07 janv.-07 sept.-06 mai-06 janv.-06 sept.-05 mai-05 janv.-05 sept.-04 mai-04 janv.-04 mai-03 sept.-03 janv.-03 sept.-02 mai-02 janv.-02 mai-01 sept.-01 janv.-01 sept.-00 mai-00 janv.-00 sept.-99 mai-99 janv.-99 mai-98 sept.-98 janv.-98 0 Merrill Lynch BBB Index Source : CAAM London Page 9 CAAM Funds Emerging Internal Demand 1.4 Decreasing sensitivity of emerging markets to the US economy (1/2) With GDP weighted at current exchange rates, Emerging market account for more than half of world GDP growth World GDP breakdown Latam Asia CEEM EA Developped 100% World GDP growth at current exchange rates (real, YoY) Latam EM EA Emerging Asia Developped 4,5% 4,0% 90% 3,5% 80% 3,0% 70% 60% 2,5% 50% 2,0% 40% 1,5% 30% 1,0% 20% 0,5% 10% 0,0% 0% 2003 2004 2005 2006 2007 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source : CAAM, EIU Page 10 CAAM Funds Emerging Internal Demand 1.4 Decreasing sensitivity of emerging markets to the US economy (2/2) With GDP weighted at purchasing power parity, Emerging market account for 80% of world GDP growth World GDP growth at current exchange rates (real, YoY) World GDP breakdown Latam Emerging Asia EM EA Developped 100% 90% 6,0% Latam EM EA Emerging Asia Developped 5,0% 80% 70% 4,0% 60% 3,0% 50% 40% 2,0% 30% 20% 1,0% 10% 0% 0,0% 2002 2003 2004 2005 2006 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source : CAAM, EIU Page 11 CAAM Funds Emerging Internal Demand 2. The strong drivers of Internal Demand in Emerging Countries 2.1 Household consumption: the emergence of a gigantic middle class (1/3) An accelerator effect beyond a certain level of development… < 3000$ : low incomes, subsistence consumption (strong share of food and clothing) > 3000$: decent incomes allowing savings and consumption (cars, white goods, education, etc.) 60 Distribution of urban Chinese income Percentage of households with income higher than 3000$ pa Income percentile percentile Income 50 2000 731 2005 1235 69% 47 40 Urban revenu /capita Growth Nbr of people over Growth 30 Average GDP growth : Average increase in number of people over 3000$ : 2010 1911 55% 179 281% 2015 3000 57% 419 134% 9% 24% 20 10 0 0 1000 2000 3000 4000 5000 6000 2000 7000 8000 2000 2005 2005 2005 2010 2000 2000 2010 Source : Nomura, July 2007« China consumer – The great Leap Upwards » Page 13 9000 10000 11000 12000 13000 14000 15000 16000 CAAM Funds Emerging Internal Demand 2015 2.1 Household consumption: the emergence of a gigantic middle class (2/3) Acceleration effect : for example, the car industry Nb of cars per 1000 habitants Private car penetration Nb of habitants per car 700 United States Canada 600 Germany UK France Germany US 500 Italy 400 Brazil Japan Nb of cars per 1000 habitants Russia Korea Japan 300 200 China India 100 0 Log scale 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Source : Rostow, Goldman Sachs Page 14 CAAM Funds Emerging Internal Demand 2.1 Household consumption: the emergence of a gigantic middle class (3/3) Massive middle-class population expansion in highly-populated countries Expansion of a middle-class population : population size will considerably impact emerging countries In 10 years time, 800 million people will cross the 3000$ threshold, i.e. a greater population compared to the US, Europe and Japan put together 3,5 3 Middle class in Brazil, Russia, India & China Dramatic rise in China's and India's middle class 1600 Nb of people with income above 3000$ pa (bn) China 1400 India 1200 2,5 1000 2 800 1,5 600 1 400 0,5 200 0 0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Sources : Goldman Sachs Page 15 CAAM Funds Emerging Internal Demand 2005 2015 2025 2035 2045 2.2 Corporate investments: strong support from private investments 86 Capacity utilization ratio 84 82 80 High levels of capacity utilization 78 76 74 72 Computation : average of Brazil, Thailand, Korea, Mexico, India, China US$bn % 100 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 Page 16 2003 2004 2005 2006E Asia Pacific Net Debt-to-Equity Ratio* (RHS) Source: Merrill Lynch CAAM Funds Emerging Internal Demand Q2 2007 Q4 2006 Q2 2006 Q4 2005 Q2 2005 Q4 2004 Q2 2004 Q4 2003 Q2 2003 Q4 2002 Q2 2002 Healthy balance sheets should translate into higher capex 0 2000 2001 2002 Asia Pacific Free Cash Flow * (LHS) Source : OECD, CAAM 100 90 0 Q4 2001 Q2 2001 Q4 2000 Q2 2000 Q4 1999 Q2 1999 Q4 1998 Q2 1998 Q4 1997 Q2 1997 Q4 1996 Q2 1996 Q4 1995 Q2 1995 70 2.2 Government spending: strong support from infrastructure Governments infrastructure spending plans for 2007 to 2009 Country Investment estimated Sectors targeted China 400bn$ (12% GDP) Energy, transportation (rail, highways), environment protection. 2008 Olympics is a reason for sustained spending India 110bn$ (9,7% GDP) Roads, ports, oil and gas, power generation. Indonesia 45bn$ (10,5% GDP) Roads, power generation, ports & water treatment Has been reduced given slow regulatory reform and efforts to combat corruption Russia 185bn$ (15,6% GDP) Projects to facilitate exports of commodities (pipeline, ports) 25bn$ Central & Eastern Europe (3,5% GDP) South Africa 60bn$ (23%) Brazil 100bn$ (7,7% GDP) Mexico Total 60bn$ (6,8%) 985bn$ (10,8% GDP) Spending target trans-European transport network (high speed motorways, rail lines) Will focus on electricity generation and transportation (rail freight) 2010 world cup is the objective Will apply to a wide range of sectors: oil, power generation, telecommunications, transportation, engineering and construction Natural gas, electricity, oil, roads, highways, home building Source : Merrill Lynch, World Bank Page 17 CAAM Funds Emerging Internal Demand Example: India Infrastructure needs are a major boost to investment Golden Quadrilateral was a huge success: more roads built in India over the past 5 years than there were over the previous 50 years combined Road / Highways- Development is two-fold: Expanding the 4 lane GQ network to 6 lanes North/South & East/West corridors linking the entire country Source : CAAM Hong Kong Page 18 CAAM Funds Emerging Internal Demand 2.2 Strong support from urbanisation Urbanisation in major emerging economies High demand for goods & services : 100 Accommodation 90 Public facilities : water treatment, 80 transport, schools etc 70 Electricity, energy 60 Consumer goods Leisure 50 40 30 Driving force for many of the economic domestic sectors 20 10 0 1950 1960 1970 Brazil 1980 1990 China 2000 India 2010 2020 2030 Russia Source :IMF Page 19 CAAM Funds Emerging Internal Demand 3. CAAM Funds Emerging Internal Demand 3.1 CAAM Funds Emerging Internal demand: concept & attractiveness Internal Demand: an economic concept… DOMESTIC DEMAND = Household consumption + Corporate investments + Government spending Internal Demand in emerging countries: an opportunity for investors… An important contributor to world growth Strong fundamentals supportive of a high and stable growth : Increasing purchasing power and demographics supportive of an increase in consumption Huge investments requirements compared to developed countries Should provide investors with some protection from slowing developed economies CAAM Funds Emerging Internal Demand Page 21 Focus on companies exposed to emerging domestic demand Using tested investment philosophy and process CAAM Funds Emerging Internal Demand 3.2 CAAM Funds Emerging Internal Demand key features (1/2) Fund objective: Outperform the MSCI Emerging Markets by benefiting from the growth potential of emerging countries' growing domestic demand Focus on companies that sell most of their goods and services to Emerging Countries Favor sectors catering to Internal Demand Consumer Discretionary, Consumer Staples, Finance, Industry, Telecom and Public Utilities Sectors most likely to be underweight are those most linked to developed economies : Technology, Healthcare, Energy, Materials Page 22 CAAM Funds Emerging Internal Demand 3.2 CAAM Funds Emerging Internal Demand key features (2/2) CAAM Funds Emerging Internal Demand should be less volatile than other GEM funds Volatility 3 years (monthly performance) 40% 35% 30% 25% 20% 15% MSCI EMF Domestic sectors MSCI EMF août-07 févr.-07 août-06 févr.-06 août-05 févr.-05 août-04 févr.-04 août-03 févr.-03 août-02 févr.-02 août-01 févr.-01 août-00 févr.-00 août-99 févr.-99 août-98 févr.-98 août-97 févr.-97 10% MSCI EMF External sectors MSCI Bric Source: CAAM Page 23 CAAM Funds Emerging Internal Demand 3.3 Tested investment philosophy Our convictions Fundamental analysis and judgemental decisions Anticipating changes Arbitraging prospects vs. valuations vs. risks 3 sources of alpha generation: country selection, sector allocation & stock picking Exposure to small/mid cap stocks Risk diversification Medium term investments Average 18 months holding Page 24 CAAM Funds Emerging Internal Demand 3.4 Track- record of Global Emerging funds managed by the team Information ratio Composite World Emerging Markets gross annualized performance MSCI Emerging Markets annualized performance Excess return Trackingerror Information ratio 1 year 35% 26% 9.2% 2.3% 4.0 3 years 41% 33% 8.6% 3.4% 2.5 5 years 35% 28% 6.9% 4.1% 1.7 Source: CAAM – December 2007 Currency : EUR Ranking 1 year 3 years 5 years Performance 33% 165% 311% Rank 33/328 8/234 3/190 Quartile 1/4 1/4 1/4 Source : Lipper (Funds sold in Europe – December 2007) Category : Equities Emerging markets Past performance doesn’t guarantee futur returns. Page 25 CAAM Funds Emerging Internal Demand 3.5 Strengths of CAAM expertise A team of 7 investment professionnals dedicated to emerging equity management with complementary skills Latin America managers: Patrice Lemonnier (CFA) and Lionel Bernard Emerging Asia: Philippe Guigny and Mickaël Tricot (CFA) Emerging Europe, Middle East and Africa: Nina de Martinis (CFA) Analysts: Hélène Ecalle and Qian Jang Recognised for its expertise and good track-record* Lipper Funds Awards (2008) Award Trophy for CAAM Funds Latin America Equities C Cap (USD)-Equity Emerging Markets Latin America, over 3, 5 and 10 years in Switzerland / Best fund in Spain over 3 years for « Equity Emerging Markets Latin America » : CAAM Funds Latin America Equities C Cap (USD). Lipper Funds Awards (2007) Best fund over 10 years in the category « Equity Emerging Latin America » in Italy, Spain, France, Austria, North Countries, Germany and Switzerland for CAAM Latin America Equities C Cap La Tribune-Standard&Poor’s (march 2007) 1st place over 1 year and the 2nd place over 3 and 5 years in the category « emerging countries equities » for a french domiciled fund. Mieux VivreVotre Argent (march 2007) Excellence Label for a french domiciled fund and Regularity Label for a french domiciled Global Emerging Equity fund. With a large product range Global emerging equity funds Latin America equity fund Europe emerging equity fund More than €2 billion under management (as at 31/12/2007) * Past performance doesn’t guarantee future returns. Page 26 CAAM Funds Emerging Internal Demand CAAM Funds Emerging Internal Demand – Fund information Classic (C) Management company Institutional (I) Crédit Agricole Asset Management Luxembourg S.A. Investment manager Crédit Agricole Asset Management Custodian CACEIS Bank Luxembourg Reference currency USD Minimum recommended period Countries registered for sales as at 14/04/2008 Isin Code Minimum initial subscription Share categories 5 years Austria, Belgium, Finland, France, Germany, Hong Kong, Irland, Italy, Luxembourg, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom Accumulation : LU0319685854 Distribution : LU0319686076 Accumulation : LU0319685342 Distribution : LU00319685425 LU0319686159 None USD 500 000** None Accumulation / Distribution Frequency of NAV calculation Accumulation Daily Cut off for dealing times Luxembourg dealing days before 2pm*** Maximum initial charge 4.50% 2.50% 3.00% Maximum annual management fee 1.60% 1.00% 2.00% Annual administration fee 0.50% 0.40% 0.50% Performance fee None Maximum conversion fee 1.00% Maximum redemption fee None Not all share classes and, as the case may be, share categories are registered for sales in all countries * Only for distributors authorised by Board of Directors. ** Or equivalent in another currency. *** Or, as the case may be, an earlier cut off time applicable by the relevant distributor. Page 27 Classic S* (S) CAAM Funds Emerging Internal Demand Disclaimer This document which is not contractual and not part of documents usually certified by statutory auditors, is provided solely for information purposes by Crédit Agricole Asset Management, based on sources that we consider to be reliable. Crédit Agricole Asset Management can in no way be held responsible for any decision made on the basis of information contained in this document. The information contained in this document doesn’t constitute a recommendation, a request for proposal or an invitation to purchase, sell or switch shares in the funds (Organismes de Placement Collectif en Valeurs Mobilières or OPCVM, UCITS) described herein, and should in no case be interpreted as such. The information contained in this document may be modified without prior notice. Additional information is available upon request. The information contained in this document is disclosed to you on a confidential basis and you agree it shall not be copied, reproduced, or distributed to a third party without our prior written approval. The information contained in this document is not intended for all categories of customers. Your attention is drawn to the fact that units or shares in these UCITS may not be purchased if the regulations of your country of origin or any other applicable regulation forbid such purchase. As a consequence, it is your responsibility, prior to subscribing to any shares, to ensure that such purchase is permitted by applicable laws and regulations, as well as to inform yourself as to the fiscal consequences of such investment. It is also your responsibility to read the legal documents in force for each UCITS, in particular the prospectus as approved by the AMF (French Regulatory Authority) and the CSSF (Luxembourg Regulatory Authority) which are available upon request. Past performance does not prejudge future results, nor is it a guarantee of future returns. The value of units or shares in UCITS may fluctuate according to market conditions and as a result the value of initial investments may rise as well as fall. Document issued by Crédit Agricole Asset Management , a limited company ( “ French société anonyme”) with a registered capital of € 546 162 915, head office : 90 Boulevard Pasteur, 75 015 PARIS, 437 574 452 RCS Paris. Crédit Agricole Asset Management is a portfolio management company approved by the AMF (Autorité des Marchés Financiers), the French Securities Regulator under n° GP 04000036 www.caam.com This document contains information about CAAM Funds Emerging Internal Demand (the “Sub-Funds”), a sub-fund of CAAM Funds (the “Sicav”), an undertaking for collective investment in transferable securities existing under Part I of the Luxembourg law of 20 December 2002, organised as a société d’investissement à capital variable and registered with the Luxembourg Trade and Companies Register under number B68.806. The Sicav has its registered office at 5, Allée Scheffer, l-2520 Luxembourg. The Sub-Fund has been authorised for public sale by the Commision de Surveillance du Secteur Financier in Luxembourg. The Sicav comprises other sub-funds which are described in the Sicav’s full and simplified prospectus. Not all sub-funds will be necessarily be registered or authorised for sales in all jurisdictions or be available to all investors. Subscriptions in the Sub-Funds will only be accepted on the basis of the Sicav’s latest complete and simplified prospectuses and its latest annual and semi-annual reports that may be obtained, at the registered office of the Sicav or at its local representative. The name of the local representative may be obtained at the Sicav's registered office. Consideration should be given to whether the risks attached to an investment in the Sub-Funds are suitable for prospective investors who should ensure that they fully understand the contents of this document. In case of doubt, it is advised to consult a professional advisor to determine whether an investment in the Sub-Funds is suitable. The value of, and any income from, an investment in the Sub-Funds can decrease as well as increase. The Sub-Funds have no guaranteed performance. Further, past performance is not a guarantee or a reliable indicator for future returns. This document does not constitute an offer to buy nor a solicitation to sell in any country where it might be considered as unlawful, nor does it constitute public advertising or investment advice. This document is solely for the attention of institutional, professional or sophisticated investors and is not to be distributed to the general public. Page 28 CAAM Funds Emerging Internal Demand