MULTI-ASSET THEMES. Risk Assets with Caution

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1 MULTI-ASSET THEMES Actionable Investment Ideas June 05 Improving Economic Outlook We expect global growth to pick up in 05 and 06, despite vulnerabilities. Developed markets are progressing towards a more homogeneous pace in domestic demand. Risk Assets with Caution We are still constructive on risk assets (especially equities). However, rich valuations and rising geopolitical risks dictate a cautious and selective approach. Hedging Tail Risk Events Due to multiple geopolitical concerns, we are keeping protections in place to help mitigate market volatility on risk assets. Riding Market Volatility in a Cyclical Uptrend We expect GDP growth to accelerate in 05 and 06, supported by healthier domestic demand in Europe and in the US. We think inflation will stay low but deflationary fears are rapidly receding. On the back of this scenario we see oil prices remaining low, even if they may continue to trend modestly higher (50$-70$). The Federal Reserve will likely hike interest rates in Q, but the pace will be moderate and data dependent. The US dollar is expected to continue its long-term strengthening towards parity vs euro, as the US economy reaccelerates. A cyclical uptrend in the developed world could favour a turnaround in Emerging Markets, easing downward pressure from China and allowing a possible breakthrough of reforms in some key countries. In this positive economic scenario, our concerns for geopolitical risks have increased: Grexit has become a material threat to European stability and the conclusion of the Greek saga if there will be any conclusion is still very uncertain. From a global perspective, the ISIS military advance, terrorist threats, and the ongoing conflict between Russia and Ukraine remain in the centre of our radar screens. The macro environment, we believe, is still positive for equities, in particular European (EU and UK) and some Asian markets (Japan and China). Interest rates are still at low levels and subject to spikes in volatility. With a well designed risk management discipline in place, we think alpha* creation may be enhanced even in this environment, with Central Banks divergences and market volatility generating relative value opportunities among different yield curves and currencies. Given the number of geopolitical concerns, we believe it would be wise to keep hedging strategies in place. Base Scenario: Multiple Transitions Improving Growth Outlook & Ongoing Structural Reforms Central Banks not Synchronized, Global Liquidity Abundance Low Inflation for a Prolonged Period Macro & Hedging Strategies Positive on Europe (EU and UK) and Asian (Japan, China) Equities Flattening of US Yield Curve, Cautiously Positive on US Dollar Hedging Multiple Geopolitical Risks Global growth is expected to accelerate, with Developed Market economies potentially supporting a positive turnaround in Emerging Markets. *Alpha Measures risk-adjusted performance, representing excess return relative to the return of the benchmark.

2 MACRO THEME CENTRAL XXXXX BANK ASYNCHRONY All XXXXXXXXX Eyes On Early Inflation Signs The weakness in US data for Q, even if temporary, has contributed to a delay in the start of the tightening cycle in the US. While we expect the Fed to stay on hold for the time being, we could see the first hike in Q depending on the strength of the recovery and inflation data. We expect the hiking cycle to remain data dependent and further hikes to be determined step by step. The labor market has recorded steady improvement; May payroll numbers showed solid gains, especially in the services sector. So far, core inflation has been very tame and the decline in unemployment has had only a limited impact on wage dynamics, but we expect the improvement in the job market to influence wage data soon. The strong labor report for May already shows an increase in earnings of 0.% month-on-month and.% year-on-year. In the EU, the ECB buying program is expected to continue as announced until Sept. 06, with frontloading before the summer. The BOJ is expected to continue its current level of purchases, for as long as it is necessary to achieve and maintain their price stability target. Reduced Slack in Labor Markets Should Put Upward Pressure on Wages In the US, core inflation has been very tame so far, but we expect the improved employment environment to pass through to wage increases soon. % US unemployment Rate LHS US Average Hourly Earnings All RHS Source: Bloomberg. Data available as of June 0, YoY change % INVESTMENT STRATEGY A sharp increase in German Bund yields has shaken fixed income markets. Long positions in the market and a repricing of inflation expectations triggered a strong sell off. The increased uncertainty related to the outcome of Greek negotiations has contained the rise in German yields as bund was perceived as a safe heaven, while peripheral rates have posted further losses. We believe that, even after the recent re-pricing, core government bonds offer little value, but the persistence of ECB purchases and the still fragile inflation dynamics in the Euro area should keep interest rates close to the current levels for the next few months. Increased volatility may offer opportunities for relative value trades. We think the US curve may flatten, as a duration extension by investors searching for yield could reverse the recent steepening. We are positive on the US dollar, as we think the long-term trend is still in place given the divergences between ECB and Fed policy. We also prefer US dollar to British pound, on the back of a stronger growth and inflation outlook for US versus UK, and potentially favorable rate hike dynamics. German Bunds Leading the Re-Pricing of Interest Rates 0 Apr-5 May-5 Jun-5 US-GE spread US 0Y yield Germany 0Y yield Source: Pioneer Investments, Bloomberg data available as of June 7, 05. A sharp increase in German Bund yields has shaken fixed income markets. We believe that, even after the recent re-pricing, core government bonds offer little value. %

3 MACRO THEME EUROPEAN XXXXX RESURRECTION The XXXXXXXXX Desirable Consequences Of QE Euroland: the Return of Consumers European economic growth has seen some acceleration in Q, particularly among previously lagging countries Italy and 5 France, and also thanks to improving consumer demand 50 (boosted by oil prices and confidence) and exports. For growth to be solid and sustainable, a pick-up in investment 8 growth is now needed. But capital expenditure has sputtered as the European corporate sector remains in deleveraging 6 mode, trailing developments in the US and UK. By boosting growth and asset price dynamics, the ECB s unconventional policies should speed up the process and support renewed investment. Inflation is still at very low levels, but deflationary fears are receding rapidly. Wage dynamics are 0 tame overall, with spots of differentiation (for example, the increase in Germany for IG Metall contracts) helping 8 internal equilibrium within the Eurozone. On the political front, we observe 'noise' coming from different countries: discontent on the right (Poland) and left (Spain), upcoming negotiations with the UK, and the inability to deal rapidly Markit Eurozone Retail PMI SA LHS and decisively on Greece. These are dynamics that could Eurostat Retail Sales Eurozone RHS potentially hamper the smooth progress towards structural change and increase fragmentation within the complex Source: Bloomberg. Data available as of May, 05. European architecture. For growth to be solid and sustainable a pick-up in investment growth is now needed. However, we see some progress in the economic outlook for the Eurozone. The worst should be over. Index YoY change % INVESTMENT STRATEGY We maintain a constructive view on the European equity market (EU and UK), on the back of an improved macroeconomic outlook. Valuations are still attractive on most metrics, and more attractive than in the US. A weaker Euro is providing a nice tailwind for earnings, and the macro momentum is currently positive and price supportive. US equities are quite expensive, with margins vulnerable to an increase in labor costs. Bond valuations are tight despite the recent sell off, but we expect government bond yields to remain low due to supply/demand dynamics in the quantitative easing framework. Credit cycles differ across regions and the combination of improving growth/inflation, weak currency and QE is positive for spreads. It is likely that the search for yield will provide support in particular for the European Investment Grade space. But because valuations are stretched and credit markets are vulnerable to a further correction of rates, we are maintaining a neutral stance on credit. US Europe (ex UK) Margin Gap At The Highest Since 000 Source: Pioneer Investments, MSCI. Data available as of June 0, 05. Margin gap calculated as difference between MSCI US EBITDA margin and MSCI Europe Ex UK EBITDA margin. An increase in wages in the US could limit the upside in margin growth. In relative terms, valuations are still attractive in the Eurozone. % % % % 0% -% -%

4 MACRO THEME JAPAN XXXXX KURODANOMICS Something XXXXXXXXX is Moving Japanese growth for the first quarter of the year surprised to the upside (.9% QoQ ann.), on a strong pick-up in business investment and inventories. Consumption growth remains moderate, 0.% in Q, but some acceleration should happen in 05 due to improvements in the labor market and a wage increase, combined with some wealth effect from lower energy prices. According to our expectations, the inflation path will moderately increase starting from Q 05, but remain well below the BoJ target on the horizon considered. In 07, the inflation rate will be supported (again) by the Consumption Tax increase. The recent BoJ outlook and the strong GDP numbers reinforce our view of no further intervention by the BoJ this year. Regarding stability conditions, the third arrow of Kuradonomics, the structural reform agenda, is slowly proceeding. It includes reforms which aim to revitalize investments and increase productivity and the potential rate of growth. % Inflation Dynamics: Japan Core Inflation Rate BoJ Target % Consumption Tax Impact Source: Pioneer Investments, Bloomberg. Data available as of June 0, 05. The recent BoJ outlook and the strong GDP numbers reinforce our view of no further intervention by the BoJ this year. INVESTMENT STRATEGY Among the main developed markets, we remain positive on Japanese equities, which may be supported by the following factors: Further weakening of the yen after a period of stability, and strong earnings growth The adoption of the New Corporate Governance Code by quoted companies, which promotes progress in the efficient use of capital. Multiple expansion still to materialize. Unlike the US and Europe, the Japan equity market rise since Abenomics is entirely attributable to earnings per share (EPS) growth. Technical flows from US to Japanese equities to continue. General robustness of the economic recovery in Japan. On the currency side, we believe that fundamentals still point to a weaker yen vs US dollar. Widening rate differentials and a low level of implied rate volatility should confirm yen as a funding currency. A Weak Yen Has Contributed to Equity Strong Performance We believe catalysts for a bull market in Japanese equities are still in place strong profits, improvements in corporate governance, appealing valuations. TOPIX index,800,700,600,500,00,00,00,00,000 TOPIX USDJPY Source: Pioneer Investments, Bloomberg. Data available as of June 0, JPY vs USD rate

5 MACRO THEME EMERGING XXXXX MARKETS: CHAMPIONS AND LEFTOVERS China XXXXXXXXX Juggling Stimulus And Reforms In Emerging Markets the picture remains extremely diversified, as the effects of macro factors on each country are different. The EM space can be screened using a few domestic and external parameters, which include: the manufacturing cycle (countries with strong industrial production may benefit from a pick up in global demand), oil and metals (importers versus exporters), and fiscal and monetary policies and resiliency to external shocks (i.e. reserves, external debt). China stands among the winners. In China, weakness in the economy is concentrated in real estate, construction and exports, while consumption is holding up decently. Monetary and fiscal stimulus have increased in order to smooth the slowdown, while infrastructure projects are being promoted. The stimulus is helping to stabilize economic conditions, particularly in property sales and prices. At the same time, the economic structure of China is improving, with household income, consumption, private sector and services holding up better than state sectors and investments. Reform momentum is strong and external conditions have remained relatively resilient, with less pressure on capital outflows and renminbi devaluation. Emerging Markets: Champion and Leftovers External Demand Oil/ Metals Fiscal Policy Mon. Policy Vulnerability Source: Pioneer Investments, data as June 0, 05. External demand includes manufacturing cycle, vulnerability index includes reserves on short term external debt. The overall score is calculated as sum of single items.. The economic structure of China is improving, with household income, consumption, private sector and services holding up better than state sectors and investments. Overall Score Malaysia Thailand Taiwan Chile 0 Korea Russia 0 Poland Indonesia Philippines Mexico China India Brazil INVESTMENT STRATEGY We maintain a positive view on Chinese equities, as China economic conditions, in particular the correction of the real estate sector, seem to be stabilizing and reform momentum has been stronger than expected. Plans by Chinese authorities for opening the capital account, although still under managed schemes, along with the recent opening of Certificate of Deposits to non-financial investors mark significant steps towards financial market liberalization. The implementation of infrastructure projects (one road one belt) may open opportunities for Chinese Corporates, further enhancing the role of China in global trade. Given the material divergences among countries, we believe investors should continue to look for relative value opportunities on bonds and on currencies in the EM space. China Equities Outperforming Asia Since April Index Jan-5 Feb-5 Mar-5 Apr-5 May-5 MSCI AC ASIA INDEX MSCI China Source: Pioneer Investments, Bloomberg. Data as of June 9, 05. Indexes considered are MSCI Asia and MSCI China, indexed at 00 at //05. Chinese equities are still preferred choice among EM equities. 5

6 HEDGING THE RISKS Multiple Geopolitical Concerns THE RISK MAP Time Horizon Risks Impact Probability -6 Months Geopolitical Tensions HIGH -6 Months Grexit MEDIUM 6- Months Stagflation and Euro Break up LOW 6- Months Market Liquidity Fading MEDIUM - Years China Credit Crunch MEDIUM Low Impact Medium Impact High Impact HEDGING STRATEGY Geopolitical uncertainties remain very high, amplified by the strenuous ongoing negotiations between Greece and its creditors. The concerns about a potential Greek debt default and exit from the Eurozone Monetary Union may have substantial implications for financial assets. Discontent emerging in the electoral outcomes in different parts of Europe add pressure to the delicate institutional architecture of Euroland. The situation in the Middle East and in Syria remains very critical, and the unresolved Russia/Ukraine conflict is another dangerous source of geopolitical risk. The outcome of the last Turkish elections, which left Erdogan s party without a majority, adds further uncertainty to the overall picture. The impact of such concerns on financial markets may be significant, especially in the current environment where Central Bank policies and the liquidity flood have altered in some way the natural market price equilibrium, leaving room for volatility to step in. In such a framework we believe it is important to keep protection on risk assets in place. Geopolitical uncertainties are amplified by the strenuous ongoing negotiations between Greece and its creditors. We think it is worth to consider keeping some form of protection on risk assets in place. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation regarding any fund or any security in particular. This information is strictly for illustrative and educational purposes and is subject to change. This information does not represent the actual current, past or future holdings or portfolio of any Pioneer Investments product. 6

7 GLOBAL ASSET ALLOCATION -Month Return Outlook Global Equities USA Relative Value Opportunities Underweight Neutral Overweight Europe Japan = Pacific ex Japan Our assessment on risk assets is still positive. Global growth is picking up though amid vulnerabilities, and Central Banks provide ample liquidity. Equity returns are expected to be supported by earnings per share growth especially in the Eurozone and Japan. Valuations are still interesting in Asia and in Europe, and more expensive in US. US equities are overvalued according to most of the metrics. Therefore we prefer other markets (Europe, Japan), where valuations are more attractive. An expected rise in wages could impact US corporate profitability. We still see upside potential for European Equities (EU and UK) on the back of an improved outlook. Valuations are still positive by most metrics and more attractive than in the US. QE and the euro weakening are a strong tailwind for earnings. Kurodanomics is likely to keep the yen weak, which may help Japanese competitiveness. There is some macroeconomic stabilization in the country, valuations are attractive and technical flows from US to Japan equities continue to support the market. We are neutral on the area, which is strongly linked to China s growth and also dependent on the commodity cycle. - - Emerging Markets Global Bonds US Govies US Corporate Euro Govies Chinese equities may offer interesting opportunities. Economic and financial reforms are progressing; steps have been made toward further opening of the capital account, though still under managed schemes. The implementation of infrastructure projects (one road one belt) may open opportunities for Chinese corporates, further enhancing the role of China in global trade. Despite the recent sell off we do not see value in global bonds - sovereign and credit. Supply/demand equilibria have been altered by Central Banks purchases. We prefer considering relative value and yield curve opportunities, rather than duration. US Government bonds seem overvalued. We see potential for the curve to flatten as duration extension and search for yield could reverse the recent steepening movement. Valuations are stretched and there is a risk of rising default rates in the low-quality segment, which could be driven by the drop in oil price combined with less favourable funding conditions. Opportunities may be found at individual security or sector level. Valuations for Euro Govies are still expensive but they are quickly approaching their fair value. We expect short term yields to remain at low levels and market volatility to stay high. Euro Corporate Emerging Markets COMMODITIES STRATEGIES For hedging purposes, we believe that exposure to Gold may be beneficial. We remain neutral on credit. The combination of improving growth/inflation, weak currency and QE is positive for spreads, but valuations are stretched and credit markets are vulnerable to a further correction of rates. EM bonds may offer interesting opportunities on a selective basis. CURRENCY STRATEGIES We remain positive on US Dollar vs. Euro, GBP, Yen. Opportunities from further easing by EM Central Banks. This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research, investment advice or a recommendation regarding any fund or any security in particular. This information is strictly for illustrative and educational purposes and is subject to change. This information does not represent the actual current, past or future holdings or portfolio of any Pioneer Investments product. 7

8 INSIGHT DISCOVER OUR INVESTMENT VIEW MACRO STRATEGY GROUP Giordano Lombardo Group Chief Investment Officer Macro Advisory Forum CIO Letter Matteo Germano Global Head of Multi-Asset Investments Find out more at Follow us on: Important Information Unless otherwise stated, all information contained in this document is from Pioneer Investments and is as of June 7, 05. Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. This material does not constitute an offer to buy or a solicitation to sell any units of any investment fund or any services. Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies. Data of First Use: June 8, 05. Davide Cataldo Head of Multi-Strategy Portfolios Monica Defend Head of Global Asset Allocation Research Francesco Sandrini Head of Multi-Asset Stock Solutions John O Toole Head of Multi-Asset Fund Solutions EDITORIAL TEAM Claudia Bertino and Giuseppina Marinotti Financial Communication Global Strategy and Marketing Team 8