Emerging Markets Outlook

Transcription

1 Mark Mobius, Ph.D. Executive Chairman Templeton Emerging Markets Group Emerging Markets Outlook Dealer Use Only / Not for Distribution to the Public

2 Agenda Performance Emerging Markets Equities: Demand and Supply Emerging Markets Fundamentals Frontier Markets Risks Investment Examples This presentation is provided by Franklin Templeton Institutional for informational purposes only. This information is considered proprietary and shall be treated as confidential. It shall not be distributed or otherwise communicated to third parties. While every effort has been made to ensure the accuracy of the information contained within these materials, we do not guarantee such accuracy. Information provided in this presentation is as of October 30, 2012, unless otherwise indicated. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 1

3 Performance

4 Emerging Markets vs. World Calendar 1-Year Performance % Percentage of Index Returns Emerging Markets outperformed 9xs out of the last 11 1-year periods Emerging Markets World Sources: 2012 Morgan Stanley Capital International (MSCI), 2012 FactSet Research Systems Inc. Indexes are unmanaged, and one cannot invest directly in an index. Emerging markets as represented by the MSCI Emerging Markets Index; world as represented by the MSCI World Index. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 3

5 Emerging Markets Outperformed the World 5-Year Period August 9, 2007 to July 31, 2012 US $ Source: 2012 MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Index returns include reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. Emerging markets as represented by the MSCI Emerging Markets Index; U.S. as represented by the MSCI USA Index and world as represented by the MSCI World Index FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 4

6 Emerging Markets Outperformed the World 10-Year Period October 04-OCT OCT , 2002 October 5, (INDEX) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (INDEX) MSCI The World Index - Price with Gross Dividends - Daily Official - USD (Index) 500 Emerging Markets US $ World /02 10/03 10/04 10/05 10/06 10/07 10/08 10/09 10/10 10/11 10/12 Source: 2012 Morgan Stanley Capital International (MSCI). All MSCI data is provided as is. In no event shall MSCI, its affiliates or any MSCI data provider have any liability of any kind in connection with the MSCI data described herein. Copying and redistributing the MSCI data is strictly prohibited. Index returns include reinvestment of dividends. Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Indexes are unmanaged, and one cannot invest directly in an index. Emerging markets as represented by the MSCI Emerging Markets Index; world as represented by the MSCI World Index. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 5

7 Emerging Markets Outperformed the World December 31-DEC OCT , 1987 October 5, 2012 (INDEX) MSCI EM (Emerging Markets) - Price with Gross Dividends - Daily Official - USD (Index) (INDEX) MSCI The World Index - Price with Gross Dividends - Daily Official - USD (Index) Would be worth US$850,000 in ,000 Emerging Markets 1,500 US $ 1, An investment of US$50,000 in 1987 World 0 12/87 06/90 12/92 06/95 11/97 05/00 11/02 04/05 10/07 04/10 10/12 Source: 2012 MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Index returns include reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. Emerging markets as represented by the MSCI Emerging Markets Index; U.S. as represented by the MSCI USA Index and world as represented by the MSCI World Index FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 6

8 Emerging Markets Equities: Demand and Supply

9 Demand

10 Emerging Markets Products: Cumulative Net Inward Flows Since January to 2011 $1,000 US$ Billion $800 $600 $400 $200 Cumulative Net Inward Portfolio Equity Flows Cumulative net inward portfolio equity investment flows is estimated to have increased by 2,823% (from January 1995 to 2011) $ Source: IIF, December 31, 1995 to December 31, Net Inward Portfolio Equity Product Flows portfolio equity investment by nonresidents into emerging market countries. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 9

11 Total Emerging Markets: Market Cap % of World¹ 1993 to 2011 Emerging Markets Percentage Market Cap of the World 40% 35% 30% 25% 20% 15% 10% 5% 0% At end December 2011: Estimate of counting all Emerging Market stocks (not just the index stocks) % of total world stocks is about 34% Average exposure for pension funds investing in emerging market equity is between 3% and 8%² '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 1. Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. December 31, 1993 to December 31, Pensions & Investments; data as of January 6, CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 10

12 Supply

13 Emerging Markets IPOs and Follow-On $500 $450 Deal Value $400 Deal Value (US$ Bn) $350 $300 $250 $200 $150 $100 $50 $0 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 Source: Dealogic; as of August CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 12

14 Emerging Markets Fundamentals

15 Growth

16 Emerging vs. Developed Markets: GDP Growth 2011 to 2012F 6.0% 6.0% 5.0% 4.8% Percentage of GDP Growth 4.0% 3.0% 2.0% 1.0% F 1.4% % 2012F 0.0% Emerging Markets Developed Markets Source: Economist Intelligence Unit (EIU), as of August There is no assurance that any projection, estimate or forecast will be realized. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 15

17 Foreign Reserves

18 Emerging vs. Developed Markets: Foreign Reserves 2002 to OCT SEP ,000 7,000 Total Reserves Minus Gold-Emerging Markets US$ Bn Total Reserves Minus Gold- Developed Markets US$ Bn 6,000 US$ Billion 5,000 4,000 3,000 2,000 1,000 0 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Source: Economist Intelligence Unit (EIU); IMF By International Monetary Fund. All Rights Reserved. Data as of 28 September CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 17

19 Debt

20 Emerging Markets vs. Developed Markets: Public Debt Percentage of GDP December 31, 2002 to December 30, 2011 Debt Percentage of GDP Source: 2012 FactSet Research Systems Inc., EIU, as of December 31, Developed Markets: G7. Emerging Markets: 87 non-oecd Countries. Total domestic, external and IMF government debt, as a % of nominal GDP. Usually but not exclusively central government. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 19

21 Inflation and Interest Rates

22 Emerging Markets: Inflation 30-OCT AUG Year Period Ended August 31, Cpi % Change Percent Per Annum - Emerging Markets CPI Percentage Change Per Annum Jan 94 Jan 95 Jan 96 Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan Source: 2012 FactSet Research Systems Inc., from October 30, 1992 to August 31, Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 21

23 Emerging Markets: Short-Term Interest Rates October 31-OCT SEP , 2007 September 28, Emerging Markets Short Term Rates 6.5 Interest Rate Percentage /07 03/08 09/08 03/09 09/09 03/10 09/10 03/11 09/11 03/12 09/12 Source: 2012 FactSet Research Systems Inc., from October 30, 2007 to September 28, Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 22

24 Valuations

25 P/E 12-Months Forward: Emerging Markets All Time High, Low vs. Current (Xs) 30 28xs 25 Price-to-Earnings (Xs) 'xs xs 7xs 0 May 1988 (High) July 2012 Nov 2008 (Low) Source: 2012 MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Index returns include reinvestment of dividends; Thomson Reuters Institutional Broker s Estimate System (I/B/E/S). Indexes are unmanaged, and one cannot invest directly in an index. High and Low since 1987, Forward (next 12 months) P/E. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 24

26 P/E 12-Months Forward: Emerging Markets vs. World September xs Price-to-Earnings (Xs) 'xs xs 0 Emerging Markets World Source: 2012 MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed or produced by MSCI. Index returns include reinvestment of dividends; Thomson Reuters Institutional Broker s Estimate System (I/B/E/S). Indexes are unmanaged, and one cannot invest directly in an index. Forward (next 12 months) P/E. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 25

27 Frontier Markets The New Opportunity

28 Some Frontier Markets Europe Middle East Bulgaria Croatia Estonia Kazakhstan Latvia Lithuania Romania Slovakia Slovenia Ukraine Bahrain Jordan Kuwait Lebanon Oman Qatar Saudi Arabia U.A.E. America & Caribbean Africa Asia Argentina Ecuador Jamaica Panama Trinidad & Tobago Botswana Cote d Ivoire Ghana Kenya Mauritius Namibia Nigeria Tunisia Bangladesh Cambodia Pakistan Sri Lanka Vietnam Source: Morgan Stanley Capital Index (MSCI); Standard & Poors; International Finance Corporation (IFC); Economist Intelligence Unit (EIU), as of December The above examples are just a selected number of markets and is not an exhaustive list of markets defined as Frontier Markets. The Frontier Markets countries are generally smaller, less developed and less accessible than Emerging Markets countries, but with investable equity markets. Frontier Markets include those generally defined as Frontier Markets by International Finance Corporation, as well as included in Frontier Markets related indices. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 27

29 Frontier Markets: Early Stage Development

30 Land, Population and GDP Percent of World: Frontier Markets 2010 Population 17% Land 16% GDP 6% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Source: 2011 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Based on MSCI classification for Emerging Markets and Developed Markets; Frontier Markets includes both MSCI and S&P Frontier index Nominal GDP. Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 29

31 Frontier Markets: Growth Potential

32 World s 10 Fastest-Growing Economies: GDP Growth Annual Average GDP Growth , 2011 (Estimated) and 2012 (Forecast) (%) E 2012F Angola China Myanmar Nigeria Ethiopia Kazakhstan Chad Mozambique Cambodia Rwanda Source: The Economist /International Money Fund, January 6, 2011: Much has been written about the rise of the BRICs and Asia s economic performance. Analysis by The Economist finds that over the 10 years to 2010, six of the world s 10 fastest-growing economies were in sub-saharan Africa. Two economies were from Asia and one economy from Commonwealth of Independent States (our ranking excludes countries with a population of less than 10 million as well as Iraq and Afghanistan); 2011 is estimated and 2012 is forecast. There is no assurance that any projection, estimate or forecast will be realized. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 31

33 Risks

34 Risks: Sovereign Debt

35 Budget Expenditure: Percent of GDP 10-Year Period December 31, 2002 to December 31, 2012 Budget Expenditure (% of GDP) United Kingdom Budget Expenditure (% of GDP) Japan Budget Expenditure (% of GDP) United States Budget Expenditure (% of GDP) Euro Area Percentage of GDP Forecast Source: FactSet; Economist Intelligence Unit (EIU), from December 31, 2002 to December 31, There is no assurance that any projection, estimate or forecast will be realized. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 34

36 Government Debt per Capita 2011 (US$) $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Japan Canada Italy Greece France Germany United Kingdom United States Spain Brazil China Source: Economist Intelligence Unit (EIU), as of December 31, CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 35

37 Risks: Unemployment

38 Unemployed and Unemployment Rate: World (Yearly) (Million ) Unemployed (Millions) Unemployment Rate (%) Unemployed (LHS) Unemployment Rate (RHS) Source: International Labour Office; June 2012 CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 37

39 Unemployment Rate: Emerging vs. Developed Markets (%) % % 6.2% 8.8% % Developed Markets Emerging Markets Source: International Labour Office. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 38

40 Risks: Growth

41 OECD Composite Leading Indicator: Total OECD October 30-OCT SEP , 1992 September 28, Oto Cli - Amplitude Adjusted, Stock Or Quantum, Sa, Amp Adj - Oecd Total 101 Composite leading indicator /93 01/95 01/97 01/99 01/01 01/03 01/05 01/07 01/09 01/11 Source: Organisation for Economic Co-operation and Development (OECD), October 30, 1992 to September 28, Leading indicators provide early signals of turning points (peaks & troughs) between expansions and slow downs in economic activity. Long term trend is 100, Countries include Australia, Austria, Belgium, Canada, Switzerland, Chile, Czech Republic, Germany, Denmark, Spain, Estonia, Finland, France, United Kingdom, Greece, Hungary, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, Norway, New Zealand, Poland, Portugal, Slovak Republic, Slovenia, Sweden, Turkey, United States, South Africa. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 40

42 US: Manufacturing PMI October 30-OCT SEP , 1992 September 28, 2012 Performance of Manufacturing Percentage Business Surveys ISM (NAPM) Manufacturing PMI total, SA - United States Recession Periods - United States 10/92 09/94 09/96 09/98 09/00 09/02 09/04 09/06 09/08 09/10 09/12 Source: Institute for Supply Management (ISM), October 30, 1992 to September 28, 2012 CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 41

43 China: PMI January 31-JAN SEP , 2005 September 28, Sentiments And Surveys, Pmi: Purchasing Managers Index, Total Nsa - China Performance of Manufacturing Percentage '05 '06 '07 '08 '09 '10 '11 '12 Source: China Statistical Information Network, CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 42

44 Risks: US and EU Consumption

45 Emerging Markets: Exports to EU 2001 to % 17% 16% 15% % 14% 13% 12% % of Total EM Exports 11% 10% Source: International Trade Centre, EU 15. As of August 31, CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 44

46 Emerging Markets: Exports to U.S to 2011 $1,200 $1,100 $1,000 $900 % of Total EM Exports US$ Billion $800 $700 $600 $500 $400 $300 $ Source: International Trade Centre, EU 15. As of August 31, CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 45

47 Risks: Money Supply

48 US Money Supply: M2 04-JUL OCT-2012 June 30, to October 5, 2012 Money supply M2, USD, SA - United States (Left) 10,000 US Money Supply 9,500 9,000 $ Billions (USD) 8,500 8,000 7,500 7,000 6,500 6,000 06/03 06/04 05/05 04/06 03/07 02/08 01/09 12/09 11/10 11/11 10/12 Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 47

49 Euro Zone Money Supply: M2 June 30-JUN SEP , to September 28, 2012 M2 - US$bn - Euro Zone (Left) 12,000 11,000 Euro Zone Money Supply $ Billions (USD) 10,000 9,000 8,000 7,000 6,000 06/03 05/04 04/05 03/06 02/07 01/08 01/09 12/09 11/10 10/11 09/12 Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 48

50 Japan Money Supply: M2 June 30-JUN SEP , to September 28, 2012 M2 (US$bn) - Japan (Left) 10,000 Japan Money Supply 9,000 $ Billions (USD) 8,000 7,000 6,000 06/03 05/04 04/05 03/06 02/07 01/08 01/09 12/09 11/10 10/11 09/12 Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 49

51 China Money Supply: M2 October 31-OCT SEP , to September 28, ,000 14,000 China : MOney Supply M2, US$ Bn China Money Supply $ Billions (USD) 12,000 10,000 8,000 6,000 4,000 10/07 03/08 09/08 03/09 09/09 03/10 09/10 03/11 09/11 03/12 09/12 Source: 2012 FactSet Research Systems Inc. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 50

52 Risks: Derivatives

53 Derivatives: Amount Outstanding December 31, 1998 to December 31, $ Trillions (USD) /98 12/99 12/00 12/01 12/02 12/03 12/04 12/05 12/06 12/07 12/08 12/09 12/10 12/11 Source: BIS, January 2012 report, Notional Amount. Derivatives refer to foreign exchange. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 52

54 Global Assets and Securities As of December 30, $ Trillions (USD) World Economic Output Derivative Contracts Source: Economist Intelligence Unit (EIU); BIS, as of January 2012; World Economic Output is forecasted for Derivative contracts refer to notional amounts outstanding. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 53

55 Risks: Volatility

56 Emerging Markets Index: Annual Market Volatility December 1987 September % 40% % of Volatility 30% 20% 10% 0% 12/87 12/89 12/91 12/93 12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11 MSCI Emerging Markets Index Trend Source: MSCI, December 31, 1987 to December 31, Annual volatility is based on monthly change over the last 12 months (annualized). Emerging Markets as represented by the MSCI Emerging Markets Index. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 55

57 World Index: Annual Market Volatility December 1987 September % 30% % of Volatility 20% 10% 0% 12/87 12/89 12/91 12/93 12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11 MSCI AC World Index Trend Source: MSCI., data as of December 31, 1987 to September 30, Annual volatility is based on monthly change over the last 12 months (annualized). World markets as represented by the MSCI AC World Index. Past performance does not guarantee future results. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 56

58 US Index: Annual Market Volatility December 1987 September % 30% % of Volatility 20% 10% 0% 12/87 12/89 12/91 12/93 12/95 12/97 12/99 12/01 12/03 12/05 12/07 12/09 12/11 MSCI USA Trend Source: MSCI, data as of December 31, 1987 to September 30, Annual volatility is based on monthly change over the last 12 months (annualized). US markets as represented by the MSCI US Index. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 57

59 The market is like a roller coaster. It has its ups and downs. It's up to you whether to scream...or enjoy the ride." For Broker/Dealer and Professional Use Only. Not for Distribution to the Public

60 Summary Performance Emerging Markets Equities: Demand and Supply Emerging Markets Fundamentals Frontier Markets Risks Investment Examples CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 59

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62 Important Information This document has been prepared for circulation to persons reasonably believed to be within one of the professional or qualified investor exemptions contained in the applicable regulations of their jurisdiction or to whom this document may otherwise lawfully be communicated to give preliminary information about the investment propositions described herein. It is a confidential communication to, and solely for the use of, such persons and is not intended for general public distribution. The description in this document of our investment management service and other matters are general in nature. The information contained in this document is subject to updating, completion, modification and amendment. It should not be assumed that the approach described will necessarily be followed in a particular case. Such matters will also be subject to any specific arrangements with a particular client. It is the responsibility of every person receiving a copy of this document to satisfy him or herself as to the full observance of laws of any relevant country, including obtaining any government or other consent which may be required or observing any other formality which needs to be observed in that country. None of the services or other matters described here should be taken as an offer or solicitation of those services or other matters in any jurisdiction where such an offer or solicitation is not permitted under applicable legislation. CLIENT EDUCATION PROGRAM MATERIALS. NOT FOR PUBLIC DISTRIBUTION. 61