Accessing Opportunities in Emerging and Frontier Markets

(Smart) Money Flows in a Changing World

Presentation for the ‘Emerging and Frontier Markets’ Roundtable, organized by Singularis, Barcelona (SPA, May 2013)

May 28, 2013Erik L. van Dijk

Principal

1. LMG Emerge Who we are

LMG Emerge

Solutions-driven implemented consultant active in the Benelux, MENA-Africa, and Australasia; currently staff of 8; additional ‘human resources’ via backbone partnerships

Areas of expertise:1. Asset Allocation / Portfolio Optimization2. Emerging and Frontier Markets3. Asset Manager Selection

‘Backbone partners’: Emirates NBD (GLOCAL EM & Islamic Finance); Invest AD (GLOCAL FM); Ed Rothschild AM (Dev Markets), Evestment Alliance and Camradata (Man Selection)

Asset Allocation approach incorporates approximately 100 countries• Innovative joint work with Nobel Prize Laureate dr Markowitz (FAJ Mar-Apr 2003), chosen by

dr Markowitz and a group of fellow Nobel Laureates as one of his best articles • Monte Carlo simulations by Prof M Kritzman (MIT) confirm added-value of the underlying

heuristic (MIT Working Paper 2007)

Advisory Assets under Management have amounted to more than Euro 40 billion over the period 2005-current

Since April 2013 advisor to a SIF Sicav in Luxemburg, based on our GLOCAL approach

We believe that:

• Real diversification is the most effective method to control portfolio volatility

• Asset allocation is responsible for the majority of investment portfolio returns and risk

• Real asset classes provide investors a risk premium vs. inflation and cash over time

• Markets are not efficient, and Emerging Markets are often very inefficient

• Emerging markets will be the growth engine of the global economy for next 50 years

• Local players will play a growing role in Emerging Markets asset management (GLOCAL)

1. LMG EmergeWhat we believe in

2. Asset Allocation and Diversification

Gary Brinson et al.:

"The bulk of investment success or failure can be explained by asset allocation decisions"

2. Asset Allocation (2)

? ? ?

ALM/SAA

EquitiesBonds Other

Current Practice

Alpha At Risk Risk Control Gap

Better structure for increasedrisk-adjusted returns:

ALM/SAA

EquitiesBonds Other

StructuredGTAA

2. Diversification –The Free Lunch

US Example. Interesting now that international correlations are creeping up to levels previously only seen nationally.

2. Diversification –Are Correlation Trends eating away our Free Lunch?

But what is going on? Even within countries there is a tendency for correlations to go up!

3. Emerging and Frontier Markets

Emerging and Frontier Markets will add more and more value to Asset Allocation / Portfolio Optimization:

• We believe that Emerging and Frontier Markets can add an increasing amount of value because of:– Performance– Diversification opportunities– Growing universe both within asset classes and outside the

‘prime asset class of the past’ (EM and FM equities): EM Debt (hard and soft currency), Private Equity, Hedge Funds, Real Estate, Infrastructure et cetera.

– New products (e.g. Islamic Finance)– Man-Machine: they are getting more important and skilled,

both at the financial professional and investor level (e.g. wealth funds)

3. Emerging and Frontier Markets (2)

The Increased Opportunity Set in Emerging and Frontier Markets will translate into a spectacular increase in the allocation of funds to these markets, not just in Asia or the BRIC countries but also in Africa:

– Excess growth vis-à-vis more mature economies will continue (see also next slide from our MENA-Africa partner Invest AD)

– Changes in the ‘balance-of-power’ between internationally-operating institutional and family office investors, will lead to changes in the existing ‘foreign bias’

– Relative improvements in legal and governance structures in EM and FM nations, in combination with a larger investment opportunity set and market liquidity will translate into a reduction in the risk gap vis-à-vis more developed markets

But rapid growth expected in coming years

GDP growth 2011-2015 (CAGR)

Iraq 10.8%

China 9.5%

India 8.2%

Ethiopia 8.1%

Mozambique 7.7%

Tanzania 7.3%

Vietnam 7.2%

D.R. Congo 7.0%

Ghana 7.0%

Zambia 6.9%

Afghanistan 6.9%

Nigeria 6.8%

Excluding countries with less than 10 million population. Eg. Qatar forecast GDP growth of 8.4% 2011-2015 CAGR

Source: IMF January 2011

10

4. But What About Valuation Levels?

Equity Market Analysis based on MSCI Global Monitor (End-of-April 2013)

“How to incorporate the EM and FM theme when markets are not really cheap anymore and the world suffers from a

set of major risks and uncertainties’’

4.1.1 Market Returns DEV Markets

MSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrAUSTRALIA DM DEV Asia/Oceania 69 4.67% 25.68% 11.32% 5.64% 16.32%HONG KONG DM DEV Asia/Oceania 41 2.59% 19.11% 12.14% 4.66% 14.96%

ISRAEL DM DEV Asia/Oceania 10 -1.56% -8.05% -8.98% -4.02% 8.27%JAPAN DM DEV Asia/Oceania 316 8.77% 22.15% 6.51% -0.09% 8.08%

NEW ZEALAND DM DEV Asia/Oceania 5 6.40% 30.89% 21.38% 7.58% 12.58%SINGAPORE DM DEV Asia/Oceania 30 3.43% 15.96% 10.25% 5.41% 17.32%

AUSTRIA DM DEV Europe 9 6.41% 15.34% -2.65% -16.01% 5.93%BELGIUM DM DEV Europe 11 1.78% 33.05% 13.76% -5.85% 8.60%DENMARK DM DEV Europe 11 4.08% 17.39% 10.81% 2.75% 16.02%FINLAND DM DEV Europe 14 6.35% 17.67% -1.39% -10.78% 3.41%FRANCE DM DEV Europe 72 6.06% 24.03% 5.29% -3.23% 8.59%

GERMANY DM DEV Europe 51 4.25% 17.36% 9.18% -1.44% 12.12%GREECE DM DEV Europe 2 0.09% 13.60% -31.33% -34.50% -6.12%IRELAND DM DEV Europe 4 -1.23% 10.03% 1.10% -18.74% -3.13%

ITALY DM DEV Europe 25 11.96% 14.94% -3.93% -11.90% 2.60%NETHERLANDS DM DEV Europe 22 3.72% 23.33% 5.60% -2.37% 9.38%

NORWAY DM DEV Europe 10 3.76% 10.85% 10.00% -3.14% 17.20%PORTUGAL DM DEV Europe 5 10.89% 19.18% -0.35% -9.39% 6.18%

SPAIN DM DEV Europe 23 10.54% 28.79% -1.66% -7.29% 8.81%SWEDEN DM DEV Europe 32 2.46% 22.75% 11.87% 5.72% 15.68%

SWITZERLAND DM DEV Europe 39 4.62% 29.50% 14.79% 6.25% 12.54%UNITED KINGDOM DM DEV Europe 106 3.08% 11.74% 9.54% 0.09% 8.59%

CANADA DM North America 95 -1.40% 2.20% 2.68% -0.01% 13.05%USA DM North America 604 1.98% 16.86% 12.94% 5.32% 8.05%

Global 1606 3.22% 17.40% 10.21% 2.41% 8.87%AVERAGE 1606 4.32% 18.10% 4.95% -3.56% 9.38%

Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)

MSCI World Index

4.1.2 Market Returns EM Markets

MSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrINDIA EM Asia ex China 72 4.18% 11.82% -3.10% -2.98% 19.99%

INDONESIA EM Asia ex China 26 2.04% 17.69% 14.37% 14.60% 29.66%KOREA EM Asia ex China 103 -2.40% -0.75% 5.42% 1.25% 15.34%

MALAYSIA EM Asia ex China 42 4.70% 10.09% 12.65% 9.33% 15.99%PHILIPPINES EM Asia ex China 18 2.57% 44.05% 30.22% 21.35% 25.03%

TAIWAN EM Asia ex China 114 4.04% 11.35% 6.67% 1.26% 10.60%THAILAND EM Asia ex China 25 3.27% 22.26% 28.46% 15.30% 23.63%

CHINA EM China 138 1.14% 4.42% 1.26% -1.58% 19.14%CZECH REPUBLIC EM EM Europe/Central Asia 3 0.53% -14.29% -6.20% -9.15% 17.32%

HUNGARY EM EM Europe/Central Asia 3 8.73% 0.99% -12.86% -10.94% 8.16%POLAND EM EM Europe/Central Asia 22 0.98% 10.43% -0.24% -6.75% 12.86%RUSSIA EM EM Europe/Central Asia 27 -2.10% -5.99% -0.49% -9.22% 11.47%TURKEY EM EM Europe/Central Asia 25 2.14% 47.14% 8.60% 8.42% 22.32%BRAZIL EM Latin America 80 1.88% -5.03% -4.98% -4.88% 23.20%CHILE EM Latin America 21 -3.14% -5.64% 6.92% 7.14% 19.37%

COLOMBIA EM Latin America 14 -3.74% -4.39% 14.46% 15.19% 36.78%MEXICO EM Latin America 26 -2.03% 16.65% 11.68% 5.43% 19.22%

PERU EM Latin America 3 -11.87% -9.92% 6.97% 2.99% 26.00%EGYPT EM MENA 7 -0.30% -7.34% -13.79% -14.50% 25.66%

MOROCCO EM MENA 3 3.85% -6.56% -7.76% -10.57% 12.92%SOUTH AFRICA EM MENA 50 -0.22% -3.42% 5.54% 4.94% 16.99%

Global 822 0.79% 4.34% 3.44% -0.02% 16.50%AVERAGE 822 0.68% 6.36% 4.94% 1.74% 19.60%

Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)

MSCI EM Index

4.1.3 Market Returns FM Markets

MSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrBOTSWANA FM Africa 2 5.64% 43.65% 2.70%

GHANA FM Africa 2 3.55% 103.02% 24.99%KENYA FM Africa 6 3.03% 70.79% 19.57% 4.95% 20.49%

MAURITIUS FM Africa 2 -0.25% 13.96% 8.07% -1.95% 20.90%NIGERIA FM Africa 12 0.39% 63.65% 16.42% -7.62% 15.63%TUNISIA FM Africa 3 -0.34% -7.15% -2.10% 0.22%

ZIMBABWE FM Africa 2 2.69% 79.10%BANGLADESH FM Asia ex China 9 -5.26% -18.68% -17.66%

PAKISTAN FM Asia ex China 12 4.63% 18.70% 14.04% -5.21% 12.28%SRI LANKA FM Asia ex China 5 2.21% 24.05% 12.72% 12.95% 16.96%VIETNAM FM Asia ex China 9 -6.23% -2.64% -6.05% -3.00%

BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 2 1.54% 11.50%BULGARIA FM EM Europe/Central Asia 2 12.32% 6.20% -14.92% -29.36%CROATIA FM EM Europe/Central Asia 4 2.52% 9.09% 1.40% -3.18% 8.49%ESTONIA FM EM Europe/Central Asia 2 2.06% 44.70% 10.58% 3.93% 13.22%

KAZAKHSTAN FM EM Europe/Central Asia 4 -3.17% 2.79% -5.28% -8.51%LITHUANIA FM EM Europe/Central Asia 2 3.28% 22.20% 12.05%ROMANIA FM EM Europe/Central Asia 3 -3.43% 4.29% -0.61% -13.09%SERBIA FM EM Europe/Central Asia 2 4.52% 30.06% -3.82%

SLOVENIA FM EM Europe/Central Asia 3 9.76% 7.42% -9.44% -17.17% 5.08%UKRAINE FM EM Europe/Central Asia 2 -9.27% -48.32% -38.12% -36.57%

ARGENTINA FM Latin America 5 4.91% 3.01% -11.47% -12.88% 10.59%JAMAICA FM Latin America 2 5.97% -25.65% -0.51%

TRINIDAD AND TOBAGO FM Latin America 2 -0.09% 26.13% 15.05%BAHRAIN FM MENA 2 -1.87% -8.48% -11.28% -28.28%JORDAN FM MENA 4 -1.58% -6.19% -7.58% -13.76% 5.06%KUWAIT FM MENA 12 6.59% 7.62% 3.44% -9.80%

LEBANON FM MENA 5 6.69% 5.35% -8.20% -4.16% 13.74%OMAN FM MENA 8 2.71% 1.46% -2.68% -9.97%QATAR FM MENA 13 2.39% 4.18% 10.20% -0.04%

UNITED ARAB EMIRATES FM MENA 9 11.29% 49.04% 11.43% -10.83%Global 140 3.73% 17.11% 3.71% -8.89% 8.31%

AVERAGE 152 2.17% 17.25% 0.79% -8.79% 12.95%

Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)

MSCI FM Index

4.2.1 Valuation Levels DEV Markets

RET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCOREAUSTRALIA DM DEV Asia/Oceania 0.1 2.10 18.39 11.93 4.12 11.42 0.0 0.1HONG KONG DM DEV Asia/Oceania 0.1 1.36 15.65 12.60 2.51 8.71 -0.5 -0.4

ISRAEL DM DEV Asia/Oceania 0.3 1.45 12.08 7.50 3.37 11.99 0.0 0.3JAPAN DM DEV Asia/Oceania 0.6 1.42 23.61 9.01 1.67 6.01 -0.6 -0.1

NEW ZEALAND DM DEV Asia/Oceania 0.1 1.95 20.92 9.68 4.59 9.30 -0.1 0.0SINGAPORE DM DEV Asia/Oceania 0.1 1.57 13.34 11.16 3.06 11.74 -0.1 0.0

AUSTRIA DM DEV Europe 0.7 0.93 11.84 4.60 2.92 7.89 0.1 0.8BELGIUM DM DEV Europe 0.4 1.86 20.30 11.70 3.10 9.18 -0.5 -0.1DENMARK DM DEV Europe 0.1 2.56 18.57 11.22 1.97 13.79 -0.8 -0.6FINLAND DM DEV Europe 0.7 1.66 26.37 10.53 5.20 6.28 -0.3 0.4FRANCE DM DEV Europe 0.6 1.28 15.70 7.82 3.67 8.15 -0.1 0.4

GERMANY DM DEV Europe 0.3 1.50 11.43 6.21 3.27 13.15 0.0 0.3GREECE DM DEV Europe 0.7 2.20 11.86 7.78 4.21 18.57 0.0 0.7IRELAND DM DEV Europe 0.6 1.83 31.53 13.95 2.12 5.79 -0.8 -0.2

ITALY DM DEV Europe 0.7 0.80 16.66 3.79 3.47 4.79 0.0 0.7NETHERLANDS DM DEV Europe 0.6 1.44 15.99 8.76 2.72 9.02 -0.4 0.2

NORWAY DM DEV Europe 0.3 1.58 10.38 5.70 4.43 15.19 0.4 0.7PORTUGAL DM DEV Europe 0.7 1.43 16.81 5.09 5.54 8.49 0.0 0.7

SPAIN DM DEV Europe 0.8 1.17 34.87 5.26 6.06 3.36 0.3 1.0SWEDEN DM DEV Europe 0.1 2.13 15.71 11.20 3.75 13.56 0.0 0.1

SWITZERLAND DM DEV Europe 0.1 2.56 19.78 14.61 2.82 12.94 -0.5 -0.4UNITED KINGDOM DM DEV Europe 0.1 1.82 13.21 8.09 3.62 13.81 0.0 0.1

CANADA DM North America 0.4 1.79 15.29 8.77 3.13 11.69 -0.1 0.3USA DM North America 0.2 2.44 16.49 10.47 2.10 14.77 -0.8 -0.5

Global 0.1 1.97 16.46 9.56 2.59 11.95 -0.1 0.0AVERAGE 0.4 1.70 17.78 9.06 3.48 10.40 -0.2 0.2Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0

Valuation IndicatorsGross Total Performance; MSCI World Countries - Apr 2013

MSCI World Index

4.2.2 Valuation LevelsEM Markets

RET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCORE

INDIA EM Asia ex China 0.8 2.67 15.70 11.36 1.35 17.02 -0.5 0.3INDONESIA EM Asia ex China -0.1 4.09 18.94 12.91 2.25 21.57 -0.5 -0.6

KOREA EM Asia ex China -0.1 1.13 10.08 5.62 1.08 11.22 -0.1 -0.2MALAYSIA EM Asia ex China -0.1 2.16 15.45 10.30 2.99 13.98 -0.3 -0.4

PHILIPPINES EM Asia ex China -0.1 3.53 22.88 15.72 1.55 15.44 -0.8 -0.9TAIWAN EM Asia ex China 0.3 1.86 20.27 9.34 3.27 9.20 -0.4 0.0

THAILAND EM Asia ex China -0.1 2.58 15.43 10.45 2.81 16.71 -0.5 -0.6CHINA EM China 0.3 1.55 10.50 7.54 3.11 14.78 0.0 0.3

CZECH REPUBLIC EM EM Europe/Central Asia 0.2 1.32 8.79 4.53 8.47 15.06 0.5 0.7HUNGARY EM EM Europe/Central Asia 0.4 0.91 10.90 3.44 3.38 8.37 0.1 0.6POLAND EM EM Europe/Central Asia 0.9 1.25 9.60 4.46 6.00 13.05 0.6 1.5RUSSIA EM EM Europe/Central Asia 0.3 0.76 5.02 3.33 3.66 15.13 0.5 0.8TURKEY EM EM Europe/Central Asia -0.1 1.95 12.49 9.77 2.06 15.62 -0.3 -0.4BRAZIL EM Latin America 0.2 1.46 14.85 9.12 4.18 9.80 0.0 0.2CHILE EM Latin America -0.1 2.08 24.19 14.57 2.12 8.58 -0.8 -0.9

COLOMBIA EM Latin America -0.6 1.76 18.07 12.26 3.00 9.76 -0.5 -1.1MEXICO EM Latin America 0.3 3.01 20.15 10.31 1.52 14.92 -0.8 -0.4

PERU EM Latin America -0.1 2.74 12.82 10.40 4.33 21.40 0.1 0.0EGYPT EM MENA 0.3 1.31 14.15 8.33 2.90 9.24 0.0 0.3

MOROCCO EM MENA 0.1 2.49 12.81 8.37 4.69 19.40 0.3 0.4SOUTH AFRICA EM MENA -0.1 2.36 15.91 10.44 3.28 14.81 -0.5 -0.6

Global 0.3 1.60 12.41 7.66 2.77 12.88 0.0 0.3AVERAGE 0.1 2.05 14.71 9.17 3.24 14.05 -0.2 0.0Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0

Gross Total Performance; MSCI World Countries - Apr 2013 Valuation Indicators

MSCI EM Index

4.2.3 Valuation Levels FM Markets

RET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCOREBOTSWANA FM Africa 0.2 2.62 10.25 8.11 3.35 25.56 0.0 0.2

GHANA FM Africa 0.0 5.22 15.69 19.03 5.22 33.28 0.0 0.0KENYA FM Africa 0.1 3.94 13.42 13.62 3.49 29.33 -0.1 0.0

MAURITIUS FM Africa 0.6 1.65 10.42 9.89 3.22 15.85 0.0 0.6NIGERIA FM Africa 0.4 2.83 12.91 22.76 3.71 21.91 -0.1 0.3TUNISIA FM Africa 0.0 2.48 20.58 8.26 2.36 12.03 -0.4 -0.4

ZIMBABWE FM Africa 0.2 3.85 11.57 9.27 1.91 33.28 -0.3 0.0BANGLADESH FM Asia ex China 0.0 1.36 10.22 8.41 3.09 13.30 0.0 0.0

PAKISTAN FM Asia ex China 0.3 1.96 8.21 6.53 7.16 23.88 0.6 1.0SRI LANKA FM Asia ex China -0.1 2.52 15.44 13.64 2.12 16.30 -0.8 -0.9VIETNAM FM Asia ex China 0.2 2.50 17.87 15.32 3.98 14.01 -0.3 0.0

BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 0.3 0.51 13.38 4.88 5.51 3.79 0.4 0.7BULGARIA FM EM Europe/Central Asia 0.3 0.40 4.48 3.36 1.86 8.85 0.0 0.3CROATIA FM EM Europe/Central Asia 0.6 1.41 12.54 7.03 6.49 11.24 0.0 0.6ESTONIA FM EM Europe/Central Asia 0.1 0.99 12.14 5.71 1.07 8.15 -0.1 0.0

KAZAKHSTAN FM EM Europe/Central Asia 0.6 0.98 6.55 5.34 6.78 14.94 0.8 1.3LITHUANIA FM EM Europe/Central Asia 0.0 2.55 13.70 8.21 5.80 18.65 0.0 0.0ROMANIA FM EM Europe/Central Asia 0.6 0.97 10.79 3.85 2.67 9.02 0.1 0.7SERBIA FM EM Europe/Central Asia 0.4 0.68 3.58 2.80 0.00 19.03 0.5 0.9

SLOVENIA FM EM Europe/Central Asia 0.3 1.16 14.37 6.35 3.65 8.10 0.0 0.3UKRAINE FM EM Europe/Central Asia 0.2 0.58 2.26 1.89 0.50 25.76 0.5 0.7

ARGENTINA FM Latin America 0.4 0.78 3.99 2.00 5.17 19.65 1.0 1.4JAMAICA FM Latin America -0.4 0.82 5.34 6.05 7.04 15.29 0.6 0.2

TRINIDAD AND TOBAGO FM Latin America 0.2 1.85 13.14 8.19 3.12 14.11 0.0 0.2BAHRAIN FM MENA 0.2 1.00 8.58 5.10 6.54 11.69 0.8 1.0JORDAN FM MENA 0.2 1.23 12.82 8.39 4.42 9.61 0.3 0.5KUWAIT FM MENA 0.1 1.72 17.64 9.17 3.37 9.78 -0.4 -0.3

LEBANON FM MENA 0.4 1.03 9.73 12.77 3.14 10.63 -0.1 0.3OMAN FM MENA 0.3 1.46 10.31 6.29 4.81 14.12 0.3 0.6QATAR FM MENA -0.1 1.69 12.46 6.65 4.86 13.57 0.3 0.1

UNITED ARAB EMIRATES FM MENA 0.2 1.17 14.10 11.15 2.61 8.26 -0.1 0.1Global 0.6 1.57 11.82 7.27 3.98 13.28 0.3 0.8

AVERAGE 0.2 1.74 11.24 8.39 3.84 15.90 0.1 0.3Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0

Gross Total Performance; MSCI World Countries - Apr 2013 Valuation Indicators

MSCI FM Index

4.3 Conclusions What can we say of Valuation Levels today?

DEV Markets had a great year in terms of returns, but skepticism concerning their valuation levels remains

EM Markets did well over the last 10 years, but the main MSCI indices did poorly during the last 5 years

Real momentum to be found in FM Markets, but they are of course also the most risky ones

LMG themes today:- Russia/Central Asia/Eastern Europe

- DEV Europe Periphery- Small & Mid-Cap Stocks in EM

- Frontier Markets (finally!)

Also: Do not expect miracles. It will be more a period of ‘Risk’-than ‘Return-dominance’

AND BE VERY CAREFULL OF STANDARD MV-BASED BENCHMARKS

5. What About Benchmarks?

Main indices are still based on Market Values…..

“But dozens of studies did already indicate that some kind of ‘fundamental’ indexing or even a (more) equal

weighting could already add value!’’

5.1.1 Benchmark Levels DEV Markets

MSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtAUSTRALIA DM DEV Asia/Oceania 69 4.30% 1,101.81$ 3.90% 960.70$ 2.51% 26.9% 5 6.30%HONG KONG DM DEV Asia/Oceania 41 2.55% 367.84$ 1.30% 363.70$ 0.95% 30.0% 5 6.30%

ISRAEL DM DEV Asia/Oceania 10 0.62% 60.38$ 0.21% 247.90$ 0.65% 74.4% 4 5.04%JAPAN DM DEV Asia/Oceania 316 19.68% 2,642.82$ 9.36% 4,525.00$ 11.83% 214.3% 0 0.45%

NEW ZEALAND DM DEV Asia/Oceania 5 0.31% 15.65$ 0.06% 128.50$ 0.34% 41.8% 5 6.30%SINGAPORE DM DEV Asia/Oceania 30 1.87% 209.44$ 0.74% 325.10$ 0.85% 111.4% 2 2.52%

AUSTRIA DM DEV Europe 9 0.56% 32.57$ 0.12% 357.80$ 0.94% 74.6% 4 5.04%BELGIUM DM DEV Europe 11 0.68% 137.25$ 0.49% 419.60$ 1.10% 99.6% 3 3.78%DENMARK DM DEV Europe 11 0.68% 135.98$ 0.48% 208.50$ 0.55% 45.3% 5 6.30%FINLAND DM DEV Europe 14 0.87% 90.78$ 0.32% 198.10$ 0.52% 53.5% 4 5.04%FRANCE DM DEV Europe 72 4.48% 1,116.25$ 3.95% 2,253.00$ 5.89% 89.9% 3 3.78%

GERMANY DM DEV Europe 51 3.18% 988.36$ 3.50% 3,123.00$ 8.17% 81.7% 3 3.78%GREECE DM DEV Europe 2 0.12% 7.18$ 0.03% 280.80$ 0.73% 161.3% 0 0.00%IRELAND DM DEV Europe 4 0.25% 31.51$ 0.11% 191.50$ 0.50% 118.0% 2 2.52%

ITALY DM DEV Europe 25 1.56% 248.34$ 0.88% 1,834.00$ 4.80% 126.1% 1 1.26%NETHERLANDS DM DEV Europe 22 1.37% 286.72$ 1.02% 709.50$ 1.86% 68.7% 4 5.04%

NORWAY DM DEV Europe 10 0.62% 104.09$ 0.37% 278.10$ 0.73% 30.3% 5 6.30%PORTUGAL DM DEV Europe 5 0.31% 21.73$ 0.08% 245.00$ 0.64% 119.7% 2 2.52%

SPAIN DM DEV Europe 23 1.43% 344.00$ 1.22% 1,409.00$ 3.68% 85.3% 3 3.78%SWEDEN DM DEV Europe 32 1.99% 376.40$ 1.33% 395.80$ 1.03% 38.6% 5 6.30%

SWITZERLAND DM DEV Europe 39 2.43% 1,078.34$ 3.82% 362.40$ 0.95% 52.4% 4 5.04%UNITED KINGDOM DM DEV Europe 106 6.60% 2,571.13$ 9.11% 2,323.00$ 6.07% 88.7% 3 3.78%

CANADA DM North America 95 5.92% 1,220.70$ 4.32% 1,446.00$ 3.78% 84.1% 3 3.78%USA DM North America 604 37.61% 15,041.70$ 53.28% 15,660.00$ 40.95% 73.6% 4 5.04%

Global 1606 100.00% 28,230.97$ 100.00% 38,246.00$ 100.00% 1990.2% 79 100.00%

Calculation LMG Weights; MSCI Indices Developed Markets April 2013

MSCI World Index

5.1.2 Benchmark LevelsEM Markets

MSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtINDIA EM Asia ex China 72 8.76% 260.87$ 6.81% 4,784.00$ 14.11% 51.9% 4 4.04%

INDONESIA EM Asia ex China 26 3.16% 117.55$ 3.07% 1,212.00$ 3.57% 24.8% 6 6.06%KOREA EM Asia ex China 103 12.53% 553.30$ 14.44% 1,611.00$ 4.75% 33.7% 5 5.05%

MALAYSIA EM Asia ex China 42 5.11% 139.01$ 3.63% 492.40$ 1.45% 53.5% 4 4.04%PHILIPPINES EM Asia ex China 18 2.19% 41.28$ 1.08% 423.70$ 1.25% 51.0% 4 4.04%

TAIWAN EM Asia ex China 114 13.87% 428.54$ 11.18% 901.90$ 2.66% 36.0% 5 5.05%THAILAND EM Asia ex China 25 3.04% 108.11$ 2.82% 645.70$ 1.90% 43.3% 5 5.05%

CHINA EM China 138 16.79% 698.01$ 18.21% 12,380.00$ 36.50% 31.7% 5 5.05%CZECH REPUBLIC EM EM Europe/Central Asia 3 0.36% 9.22$ 0.24% 286.70$ 0.85% 43.9% 5 5.05%

HUNGARY EM EM Europe/Central Asia 3 0.36% 8.49$ 0.22% 195.40$ 0.58% 78.6% 3 3.03%POLAND EM EM Europe/Central Asia 22 2.68% 58.21$ 1.52% 799.20$ 2.36% 53.8% 4 4.04%RUSSIA EM EM Europe/Central Asia 27 3.28% 218.57$ 5.70% 2,504.00$ 7.38% 12.2% 6 6.06%TURKEY EM EM Europe/Central Asia 25 3.04% 83.14$ 2.17% 1,125.00$ 3.32% 40.4% 5 5.05%BRAZIL EM Latin America 80 9.73% 485.00$ 12.65% 2,362.00$ 6.96% 54.9% 4 4.04%CHILE EM Latin America 21 2.55% 72.81$ 1.90% 319.40$ 0.94% 10.1% 6 6.06%

COLOMBIA EM Latin America 14 1.70% 43.40$ 1.13% 500.00$ 1.47% 40.2% 5 5.05%MEXICO EM Latin America 26 3.16% 206.80$ 5.40% 1,761.00$ 5.19% 35.4% 5 5.05%

PERU EM Latin America 3 0.36% 19.67$ 0.51% 325.40$ 0.96% 18.3% 6 6.06%EGYPT EM MENA 7 0.85% 9.89$ 0.26% 537.80$ 1.59% 85.0% 3 3.03%

MOROCCO EM MENA 3 0.36% 3.18$ 0.08% 171.00$ 0.50% 71.7% 4 4.04%SOUTH AFRICA EM MENA 50 6.08% 267.81$ 6.99% 578.60$ 1.71% 43.3% 5 5.05%

Global 822 100.00% 3,832.86$ 100.00% 33,916.20$ 16.50% 913.7% 99 100.00%

Calculation LMG Weights; MSCI Indices Emerging Markets April 2013

MSCI EM Index

5.1.3 Benchmark Levels FM Markets

MSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtBOTSWANA FM Africa 2 1.32% -$ 0.00% 32.67$ 0.66% 23.0% 6 4.32%

GHANA FM Africa 2 1.32% -$ 0.00% 83.18$ 1.67% 47.4% 5 3.60%KENYA FM Africa 6 3.95% 4.44$ 3.79% 76.07$ 1.53% 50.0% 5 3.60%

MAURITIUS FM Africa 2 1.32% 1.03$ 0.88% 20.26$ 0.41% 61.8% 4 2.88%NIGERIA FM Africa 12 7.89% 16.88$ 14.40% 450.50$ 9.05% 18.8% 6 4.32%TUNISIA FM Africa 3 1.97% 0.74$ 0.63% 104.40$ 2.10% 52.3% 4 2.88%

ZIMBABWE FM Africa 2 1.32% -$ 0.00% 6.91$ 0.14% 202.7% 0 0.00%BANGLADESH FM Asia ex China 9 5.92% 2.10$ 1.79% 305.50$ 6.14% 32.0% 5 3.60%

PAKISTAN FM Asia ex China 12 7.89% 4.83$ 4.12% 514.60$ 10.34% 50.4% 4 2.88%SRI LANKA FM Asia ex China 5 3.29% 1.97$ 1.68% 125.30$ 2.52% 81.0% 3 2.16%VIETNAM FM Asia ex China 9 5.92% 2.36$ 2.01% 320.10$ 6.43% 48.2% 5 3.60%

BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 2 1.32% -$ 0.00% 32.08$ 0.64% 43.8% 5 3.60%BULGARIA FM EM Europe/Central Asia 2 1.32% 0.12$ 0.10% 103.70$ 2.08% 17.9% 6 4.32%CROATIA FM EM Europe/Central Asia 4 2.63% 2.37$ 2.02% 79.14$ 1.59% 52.1% 4 2.88%ESTONIA FM EM Europe/Central Asia 2 1.32% 0.62$ 0.53% 28.44$ 0.57% 8.0% 6 4.32%

KAZAKHSTAN FM EM Europe/Central Asia 4 2.63% 4.43$ 3.78% 231.30$ 4.65% 12.0% 6 4.32%LITHUANIA FM EM Europe/Central Asia 2 1.32% 0.18$ 0.15% 64.80$ 1.30% 38.5% 5 3.60%ROMANIA FM EM Europe/Central Asia 3 1.97% 1.35$ 1.15% 274.10$ 5.51% 37.2% 5 3.60%SERBIA FM EM Europe/Central Asia 2 1.32% 0.35$ 0.30% 78.43$ 1.58% 61.5% 4 2.88%

SLOVENIA FM EM Europe/Central Asia 3 1.97% 2.04$ 1.74% 58.06$ 1.17% 53.2% 4 2.88%UKRAINE FM EM Europe/Central Asia 2 1.32% 0.19$ 0.16% 335.40$ 6.74% 38.8% 5 3.60%

ARGENTINA FM Latin America 5 3.29% 3.69$ 3.15% 746.90$ 15.01% 41.6% 5 3.60%JAMAICA FM Latin America 2 1.32% -$ 0.00% 25.18$ 0.51% 127.3% 1 0.72%

TRINIDAD AND TOBAGO FM Latin America 2 1.32% -$ 0.00% 27.12$ 0.55% 46.6% 5 3.60%BAHRAIN FM MENA 2 1.32% 0.56$ 0.48% 32.44$ 0.65% 56.2% 4 2.88%JORDAN FM MENA 4 2.63% 0.89$ 0.76% 38.67$ 0.78% 75.0% 4 2.88%KUWAIT FM MENA 12 7.89% 28.54$ 24.35% 165.90$ 3.33% 7.1% 6 4.32%

LEBANON FM MENA 5 3.29% 2.68$ 2.29% 63.69$ 1.28% 127.9% 1 0.72%OMAN FM MENA 8 5.26% 3.75$ 3.20% 90.66$ 1.82% 3.6% 6 4.32%QATAR FM MENA 13 8.55% 17.53$ 14.96% 189.00$ 3.80% 32.5% 5 3.60%

UNITED ARAB EMIRATES FM MENA 9 5.92% 13.57$ 11.58% 271.20$ 5.45% 40.4% 5 3.60%Global 152 100.00% 117.21$ 100.00% 4,975.70$ 100.00% 1588.8% 139 100.00%

Calculation LMG Weights; MSCI Indices Frontier Markets April 2013

MSCI FM Index

5.2 Benchmark ComparisonTop 25 %MV Top 25 LMGUSA DM 46.74% USA DM 22.65%

JAPAN DM 8.21% JAPAN DM 6.54%UNITED KINGDOM DM 7.99% CHINA EM 6.04%

CANADA DM 3.79% UNITED KINGDOM DM 3.94%FRANCE DM 3.47% INDIA EM 2.64%

AUSTRALIA DM 3.42% CANADA DM 2.51%SWITZERLAND DM 3.35% FRANCE DM 2.46%

GERMANY DM 3.07% GERMANY DM 2.42%CHINA EM 2.17% KOREA EM 2.25%KOREA EM 1.72% AUSTRALIA DM 2.14%BRAZIL EM 1.51% BRAZIL EM 2.14%TAIWAN EM 1.33% TAIWAN EM 2.04%SWEDEN DM 1.17% RUSSIA EM 1.59%

HONG KONG DM 1.14% SWITZERLAND DM 1.58%SPAIN DM 1.07% MEXICO EM 1.28%

NETHERLANDS DM 0.89% SOUTH AFRICA EM 1.19%SOUTH AFRICA EM 0.83% SPAIN DM 1.12%

INDIA EM 0.81% HONG KONG DM 1.12%ITALY DM 0.77% INDONESIA EM 1.10%

RUSSIA EM 0.68% ITALY DM 1.07%SINGAPORE DM 0.65% SWEDEN DM 1.05%

MEXICO EM 0.64% TURKEY EM 0.98%MALAYSIA EM 0.43% MALAYSIA EM 0.92%BELGIUM DM 0.43% NETHERLANDS DM 0.91%DENMARK DM 0.42% THAILAND EM 0.85%

96.72% 72.52%

6. Other Asset Classes

Other asset classes are going to be more important as well, because:

In a ‘Globalizing’ world that will be dominated by ‘risk-related’ factors for some time to come, the quest for lower correlations and diversification makes new asset classes or

new countries participating within a certain asset class very important.

Example 1 – Emerging Markets Debt (especially local currency)

Example 2 – Frontier Markets Debt

Example 3 – Private Equity EM

Example 4 – Islamic Finance

7. Complicating FactorsComplicating factors in a Changing World are:

The Shale Oil and Gas RevolutionImpact on Prices?

Impact on Relative Strength of countries in Energy Sector?Chinese Energy Demand?

This all in an environment of increasing Energy Volatility

Changing Relative Strengths:Western Governments have no money or the countries

less growthFinancial institutions in West in trouble

Growing importance of institutional investors, but they suffer from liability issues and mortality risks

Increased role SWFs

Beware of the money flow back into Dev CountriesRearview Mirror Policies of Western Governments

Islamophobia and other Foreign Biases

7. Complicating Factors 2

8. ConclusionsShould we do more in Emerging and Frontier

Markets?

For the average attendee:YES

But don’t rushUse your brain

BRIC?Not really that exciting anymore, maybe with the

exception of India (lt)And/or

Small/MicroCap

Other EM/FMYes, especially some of the more populous countries

including some FMs

Don’t forget distressed, undervalued opportunities in Dev Markets plus those that fit the agenda of the

cash-rich EM/FMOpportunities in the Financial Sector and in Europe

Last but not least:Don’t underestimate the US, at least not yet!

Questions and Contact

LMG EmergeErik L van Dijk (CEO/CIO)

Newtonlaan 1153584BH UtrechtThe Netherlands

erik.vandijk@lmg-emerge.comTel. Office: +31 30 210 6166Tel. Direct: +31 6 155 86 109