Emerging Markets Debt: Seeking Alpha in a Developing Asset Class

Home , Frontier markets

FOR PROFESSIONAL INVESTORS

May 2013 FFTW Emerging Markets Fixed Income I May 2013 I 1

The World of Emerging Markets Investments Has Changed

● Today, we see emerging market Fixed Income as…

– a diverse, balanced and rich asset class, no longer a directional exotic alpha play

– an increasingly attractive opportunity when compared with developed markets

– mainstream, driven by idiosyncratic elements but with a continually changing relationship with global events

A Diversification Must-Have FFTW Emerging Markets Fixed Income I May 2013 I 2

Emerging Markets Fixed Income Evolution Period of growth and stability for the emerging world

Implementation of Inflation Development of local Fixed Income Emerging market countries have economic agendas targeting markets and local pension funds become part of the solution as post EMFI systemic opposed to part of the problem Fiscal Local Fixed Income replacing EMFI crises and discipline external financing Global Pension Funds, Central Milestones EXTERNAL Fixed Banks and Sovereign Wealth Income Sustained The end of FX mismatch for EM Funds allocating strategically to restructuring growth countries - EM becomes IG EM Fixed Income

Visibility Dev HIGH Dev HIGH Dev LOW 1992 EM LOW 2002 2003 EM HIGH 2008 2008 EM HIGH 2012

Retail investors / EMFI Hedge Funds and Mutual Funds Institutional Demand 1992 Proprietary desks 2002 2003 2008 2008 2012 proliferation Investors

Changing EMFI Crisis based Based on growth and 1992 2002 sensitivity to management 2003 inflation Inputs 2008 2008 2012 Process global factors

Source: FFTW, as of December 31, 2012. FFTW Emerging Markets Fixed Income I May 2013 I 3

Market Trends Why are global investors are adding exposure to EM Fixed Income

1. Geographic diversification of investments : A ‘fundamentals’ story that only gets better: EM countries currently have lower debt levels, healthier balance sheets than the developed world, and are mostly investment grade

2. Improving liquidity: EMFI is a very large asset class with a market cap close to USD12 trillion*, which is equal to 7% of global equities and bonds*

3. Strong Technicals: Large inflows from global institutional investors (Central banks and Pension Funds) which have just started their diversification process in EMFI vs. low issuance

4. Higher yields resulting from strong growth and inflation dynamics. Also, potential for strong currencies as a result of productivity and growth outperformance

5. Large shift in risk perception as emerging fixed income markets mature

*Source: FFTW, BIS, as of November 30, 2012. FFTW Emerging Markets Fixed Income I May 2013 I 4

A Fundamentals Story That Only Gets Better Strong sovereign balance sheets

Total Emerging Markets External Debt (% GDP) 40% Significant reductions in external debt: 35%

● Lower reliance on external funding 30%

● Select emerging market sovereigns can now 25% claim the status of net external creditor 20%

Strong external reserve positions: ● International reserves give countries greater ability to manage volatility ● Emerging sovereigns’ reserve positions reduces vulnerability to external shocks

Source: FFTW, Bloomberg as at end March 2013 FFTW Emerging Markets Fixed Income I May 2013 I 5

A Fundamentals Story That Only Gets Better Strong convergence underway

EM economies are converging with the Developed Higher growth in emerging markets World, but fiscal and debt dynamics are diverging GDP Growth (%) 2010 2011 2012F 2013F 2014F G7 2.8 1.4 1.4 1.5 2.2 US 2.4 1.8 2.2 2.1 2.9 Japan 4.5 -0.8 2.2 1.2 1.1 Euro area 2.0 1.4 -0.4 0.2 1.2 EM Asia 9.5 7.8 6.7 7.2 7.5 China 10.4 9.2 7.8 8.2 8.5 India 10.1 6.8 4.9 6.0 6.4 Russia 4.3 4.3 3.7 3.8 3.9 LATAM 6.2 4.5 3.2 3.9 4.1 Brazil 7.5 2.7 1.5 4.0 4.2 Advanced economies 3.0 1.6 1.3 1.5 2.3 EM Economies 7.4 6.2 5.3 5.6 5.9 Global 5.1 3.8 3.3 3.6 4.1

EM balance sheets are healthy, leverage is low and growth is decent

Source: IMF, as of October 2012. FFTW Emerging Markets Fixed Income I May 2013 I 6

Strong Technicals US$260bn inflows since 2008 credit crisis

● Large inflows from global institutional investors (Central banks and Pension Funds) which have started their diversification process

● Despite periods of market volatility inflows remain positive

● Inflows are expected to continue over the coming years

Source: JP Morgan, as of January 31, 2013. FFTW Emerging Markets Fixed Income I May 2013 I 7

Local Emerging Bonds Returns & Correlations

Correlation of Monthly Returns Matrix

EM Local EM US$ EM Cash EM Equity US High Yield US Inv Grade US Equity US 3M LIBOR Bonds Bonds

EM Local Bonds 1.00 EM Cash 0.94 1.00 EM US$ Bonds 0.78 0.67 1.00 EM Equity 0.80 0.81 0.66 1.00 US High Yield 0.65 0.59 0.75 0.71 1.00 US Inv Grade 0.63 0.54 0.89 0.53 0.70 1.00 US Equity 0.68 0.71 0.57 0.81 0.72 0.48 1.00 US 3M LIBOR -0.01 0.06 -0.13 -0.02 -0.22 -0.17 -0.15 1.00

Risk/Return Characteristics

EM Local EM US$ EM Cash EM Equity US High Yield US Inv Grade US Equity US 3M LIBOR Bonds Bonds Annualized Return 11.87% 7.28% 10.36% 13.02% 10.56% 5.50% 5.76% 2.16% Annualized Vol 11.79% 7.95% 8.81% 23.83% 10.46% 6.74% 14.70% 0.57% Sharpe Ratio 0.82 0.64 0.93 0.46 0.80 0.50 0.25 n/a

Source: Bloomberg Statistics calculated over the period 31 December 2002 to 31 March 2013, unhedged in USD Past performance is not indicative of future results which may vary. There can be no assurance that the investment objectives of any portfolio will be achieved. Correlation information for the representative portfolio is provided for illustrative purposes only and relates solely to the representative portfolio for the relevant period. Please see Additional Disclosures for further information. FFTW Emerging Markets Fixed Income I May 2013 I 8

Decomposition of Historical Returns

Capital Gains Short Term FX Return + Long Term Interaction Total Return Rates Rates Annualised Return 2.18% 6.60% 2.47% 0.40% 12.05% Annualised Volatility 6.93% 0.72% 4.06% 3.31% 11.92% % of Total 18.12% 54.72% 20.48% 3.28%

Source: FFTW, JP Morgan, and Bloomberg, as of December 31, 2012. Past performance is not indicative of future results which may vary. There can be no assurance that the investment objectives of any portfolio will be achieved. Please see Additional Disclosures for further information. FFTW Emerging Markets Fixed Income I May 2013 I 9

Large Shift in Risk Perception Crisis in developed world accelerated diversification

● Risks in EMFI have been already priced-in, not the case in developed fixed income ● Demand for “safe” credit and/or pure duration strategies benefiting EMFI allocations

EMFI inclusion to global Emerging markets moving form a credit asset benchmarks as risk EM class into a “duration” asset class perceptions changed Old fixed income paradigm New fixed income paradigm

Duration Duration High Grade Global Index EM Credit EMDM to EMDM

EM Credit High Grade Fixed Income Index Frontier to EM to DM

Source: FFTW, March 2013 FFTW Emerging Markets Fixed Income I May 2013 I 10

Large Shift in Risk Perception EM credit quality continues to improve

Emerging markets trade inside several DM EM debt/GDP is third of the size of DM

Total public sector debt (% of GDP)

Bps

Source: Bloomberg, as of December 31, 2012. Source: JP Morgan, as of October 31, 2012. FFTW Emerging Markets Fixed Income I May 2013 I 11

Compelling yield pick-up on a historic basis JP Morgan GBI-EM GD has averaged a 4% premium over US treasury yields

7.0%

6.0%

5.0%

Current premium of 4.81% 4.0%

3.0%

2.0%

1.0%

0.0%

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Source: FFTW, JP Morgan, Bloomberg 31 March 2013 Green line: JP Morgan GBI-EM GD yield minus GBI-US yield (%) Past performance is not indicative of future results which may vary. There can be no assurance that the investment objectives of any portfolio will be achieved. Please see Additional Disclosures for further information.

*Source: ING November 2010 FFTW Emerging Markets Fixed Income I May 2013 I 12

Despite Real Appreciation Valuations Are Still Attractive

Spot FX Relative to Purchasing Power Parity (PPP) 0.0%

-10.0%

-20.0%

-30.0%

-40.0%

Currency Currency discountPPP in -50.0%

-60.0%

-70.0%

Peru

India

Chile

Brazil

Egypt

China

Turkey Russia

Poland

Mexico

Hungary

Thailand

Malaysia

Colombia

Argentina

Indonesia

Philippines South Africa

Source: FFTW, IMF, Bloomberg. 31 March 2013

*Source: ING November 2010 FFTW Emerging Markets Fixed Income I May 2013 I 13

Regional Diversification

Middle East & Asia, 28% Africa, 11% Nigeria Indonesia South Africa Malaysia Philippines Thailand

Latin America, 26%

Brazil Chile Eastern Europe, Colombia 35% Mexico Hungary Peru Poland Russia Turkey

Additional Markets Argentina Kazakhstan Sri Lanka China Pakistan Taiwan Czech Republic Romania Uruguay Hong Kong Singapore Vietnam India South Korea Zambia

Source : JP Morgan as at March 31, 2013 FFTW Emerging Markets Fixed Income I May 2013 I 14

What is EMFI Today?

Emerging market Fixed Income is:

● A fast growing, mainstream asset class

● Now subject to a dynamic asset allocation following different market cycles

– Not a directional exotic alpha play anymore

– A diverse, balanced and rich asset class

● Mainstream, driven by idiosyncratic elements but with a continually changing relationship with global events

*Source: ING November 2010 FFTW Emerging Markets Fixed Income I May 2013 I 15

Additional Disclosures

This material is issued by Fischer Francis Trees & Watts UK Ltd (FFTW)*, a member of BNP Paribas Investment Partners (BNPP IP)**.

This material is produced for information purposes only and does not constitute:

1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or

2. any investment advice.

This material makes reference to certain financial instruments (the “Financial Instrument(s)”) authorised and regulated in its/their jurisdiction(s) of incorporation.

No action has been taken which would permit the public offering of the Financial Instrument(s) in any other jurisdiction, except as indicated in the most recent prospectus, offering document or any other information material, as applicable, of the relevant Financial Instrument(s) where such action would be required, in particular, in the United States, to US persons (as such term is defined in Regulation S of the United States Securities Act of 1933). Prior to any subscription in a country in which such Financial Instrument(s) is/are registered, investors should verify any legal constraints or restrictions there may be in connection with the subscription, purchase, possession or sale of the Financial Instrument(s).

Investors considering subscribing for the Financial Instrument(s) should read carefully the most recent prospectus, offering document or other information material and consult the Financial Instrument(s)’ most recent financial reports. The prospectus, offering document or other information of the Financial Instrument(s) are available from your local BNPP IP correspondents, if any, or from the entities marketing the Financial Instrument(s).

Opinions included in this material constitute the judgment of BNPP IP or FFTW at the time specified and may be subject to change without notice. BNPP IP and FFTW are not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the Financial Instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for a client or prospective client’s investment portfolio.

Given the economic and market risks, there can be no assurance that the Financial Instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the Financial Instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the Financial Instruments may have a significant effect on the results portrayed in this material. Past performance is not a guide to future performance and the value of the investments in Financial Instrument(s) may go down as well as up. Changes in currency exchange rates may affect the value of your investment. Investors may not get back the amount they originally invested.

The performance data, as applicable, reflected in this material, do not take into account the commissions, costs incurred on the issue and redemption and taxes.

This document is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to and will be engaged in only with Professional Clients as defined in the rules of the Financial Services Authority. Any person who is not a relevant person should not act or rely on this document or any of its contents.

* Fischer Francis Trees & Watts UK Ltd is authorised and regulated by the Financial Conduct Authority. Registered in England No: 979759, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom. FFTW UK is also registered with the US Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940.

** “BNP Paribas Investment Partners” is the global brand name of the BNP Paribas group’s asset management services. The individual asset management entities within BNP Paribas Investment Partners if specified herein, are specified for information only and do not necessarily carry on business in your jurisdiction. For further information, please contact your locally licensed Investment Partner. Finding Predictable and Sustainable Growth

Old Mutual Global Index Trackers Tendai Musikavanhu, CEO Agenda

Emerging Markets I: The Box Office Hit, that many missed…

Frontier Markets: Emerging Markets II: The Sequel?

Africa: Emerging Markets III?

Low Liquidity: The Admission Price to Good Returns?

2 www.omgxtus.com We Believe the World has Changed... Emerging Markets (12.2%) are now mainstream, almost as large as Europe ex UK (15.4%) Index Market Capitalizations as a percentage of MSCI AC World Index Market Capitalization Dec 31, 1999 - Mar 31, 2013

60%

50% 47.24%

40% Emerging Markets have more than doubled their contribution to the MSCI AC World Index market capitalization (from 5.1% to 12.2%).

European Markets ex UK have declined from 22.3% to 15.4% over the last 13 years. 30%

Therefore, Emerging Markets should no longer be regarded as an insignificant component within a global portfolio.

20% 15.37% 12.21% 10% 8.00%

Jun,00 Jun,01 Jun,02 Jun,03 Jun,04 Jun,05 Jun,06 Jun,07 Jun,08 Jun,09 Jun,10 Jun,11 Jun,12

Oct,10

Sep,00 Sep,01 Sep,02 Sep,03 Sep,04 Sep,05 Sep,06 Sep,07 Sep,08 Sep,09 Sep,10 Sep,11 Sep,12

Dec, 99 Dec, 00 Dec, 01 Dec, 02 Dec, 03 Dec, 04 Dec, 05 Dec, 06 Dec, 07 Dec, 08 Dec, 09 Dec, 11 Dec, 12

Mar,00 Mar,01 Mar,02 Mar,03 Mar,04 Mar,05 Mar,06 Mar,07 Mar,08 Mar,09 Mar,10 Mar,11 Mar,12 Mar,13

MSCI USA MSCI Europe ex UK MSCI Emerging MSCI UK

3 www.omgxtus.com

Past performance is not an indicator of future results. Index Source: MSCI performance is not representative of a specific fund or product. One cannot invest directly in an index. Emerging Market Correlations Further benefits on offer • The US has slightly lower correlations with Emerging Markets than the rest of the Developed World • However, for substantially lower correlations in the listed equity space, the new “Emerging Markets” i.e. Frontier Markets and Africa, present the next “frontier” of opportunity...

5-yr Monthly Correlation MSCI MSCI MSCI MSCI MSCI MSCI MSCI USA World ex Frontier ex Frontier MSCI China World Emerging Frontier as at March 31, 2013 USA GCC Africa

MSCI USA 100% 98% 93% 87% 77% 71% 51% 72% MSCI World 98% 100% 99% 92% 80% 76% 55% 78% MSCI World ex USA 93% 99% 100% 93% 80% 79% 57% 81% MSCI Emerging 87% 92% 93% 100% 77% 78% 54% 90% MSCI Frontier 77% 80% 80% 77% 100% 92% 77% 63% MSCI Frontier ex GCC 71% 76% 79% 78% 92% 100% 89% 66% MSCI Frontier Africa 51% 55% 57% 54% 77% 89% 100% 49%

MSCI China 72% 78% 81% 90% 63% 66% 49% 100%

4 www.omgxtus.com

Past performance is not an indicator of future results. Index performance is not representative of a specific fund or product. Source: MSCI One cannot invest directly in an index. Benefits of diversifying from US equities Adding global and emerging market exposure over the last 10-years

10-year Annualized Risk-Returns as at March 31, 2013 with Annualized Risk-Adjusted Return Ratios 20%

The value next to each point is the Annualized Risk-Adjusted Total Return Ratio and is calculated 18% by dividing the annualized total return by the annualized volatility (standard deviation). This gives an indication of how much return is generated per unit of risk (volatility). A higher ratio indicates 0.72 greater return per unit of risk. 16% Emerging & Developed Market diversification After adding Emerging Market exposure, even higher

14% returns were generated, albeit at marginally higher volatility. 12% 0.60 Developed Market diversification 0.57 10% 0.59 AnnualizedReturn The addition of the developed markets ex US does not 0.58 improve the risk-adjusted return ratio for US investors. 0.59 0.58 8% US-only benchmark performance MSCI US and S&P 500 risk adjusted returns are 6% significantly lower than those of Emerging Markets. .

4% 0% 5% 10% 15% 20% 25% 30% Annualized Volatility S&P 500 MSCI USA MSCI World ex USA MSCI World MSCI Emerging MSCI AC World ex USA MSCI AC World

5 www.omgxtus.com

Past performance is not an indicator of future results. Index Source: S&P, MSCI performance is not representative of a specific fund or product. One cannot invest directly in an index. Opportunity Cost of Excluding Emerging & Frontier Markets The long term historical cost of being underweight is large

Growth Comparison of $10,000 invested in US , Emerging and Frontier Markets as at March 31, 2013

$41,204 $45,000 $ 39,910

$40,000

$35,000 $26,957 $30,000

$25,000 $ 18,559

$ 14,352 $20,000 $13,981 $ 13,338 $ 11,116 $ 10,716 $15,000 $10,760 $6,258 $6,151 $10,000

$5,000

$- 3 Years 5 Years Common Inception Date

MSCI US MSCI Emerging Markets MSCI Frontier Markets MSCI Frontier Africa 6 www.omgxtus.com Past performance is not an indicator of future results. Index •Earliest common inception date: May 31, 2002 performance is not representative of a specific fund or product. Source: MSCI One cannot invest directly in an index. Emerging Market Fundamentals Emerging Markets are still attractive relative to the Developed World

MSCI indices Price Earnings(PE) Ratios Jan 31, 1996* - Mar 31, 2013 45

PE Ratio PE 20

Jun, 96 Jun, 97 Jun, 98 Jun, 99 Jun, 00 Jun, 01 Jun, 02 Jun, 03 Jun, 04 Jun, 05 Jun, 06 Jun, 07 Jun, 08 Jun, 09 Jun, 10 Jun, 11 Jun, 12 Jun,

Oct, 96 Oct, 97 Oct, 98 Oct, 99 Oct, 00 Oct, 01 Oct, 02 Oct, 03 Oct, 04 Oct, 05 Oct, 06 Oct, 07 Oct, 08 Oct, 09 Oct, 10 Oct, 11 Oct, 12 Oct,

Feb, 96 Feb, 97 Feb, 98 Feb, 99 Feb, 00 Feb, 01 Feb, 02 Feb, 03 Feb, 04 Feb, 05 Feb, 06 Feb, 07 Feb, 08 Feb, 09 Feb, 10 Feb, 11 Feb, 12 Feb, 13 Feb,

MSCI USA 16.26 MSCI World 16.09 MSCI Emerging 12.51

7 www.omgxtus.com

Emerging Markets I: The Box Office Hit, that many missed…

Frontier Markets: Emerging Markets II: The Sequel?

Africa: Emerging Markets III?

Low Liquidity: The Admission Price to Good Returns?

8 www.omgxtus.com Benefits of Diversifying from US Equities Adding Frontier Market exposure over the last 10 years 10-year Annualized Risk-Returns as at March 31, 2013 with Annualized Risk-Adjusted Return Ratios 20% The value next to each point is the Annualized Risk-Adjusted Total Return Ratio and is calculated by dividing 18% the annualized total return by the annualized volatility (standard deviation). This gives an indication of how 0.72 much return is generated per unit of risk (volatility). A higher ratio indicates greater return per unit of risk. 16% Emerging Market performance Exceptional returns, but at higher volatility. However, increased returns have 14% more than adequately compensated for the increased risk resulting in a

substantially higher risk-adjusted return ratio. 12% 0.66 0.53 Developed Market diversification 10% No significant improvement in efficiency of returns 0.58 despite adding non-US Developed Markets. 0.59 0.42

8% AnnualizedReturn

6% US-only benchmark performance Lower risk-adjusted returns compared to 4% Frontier Market performance Emerging and Frontier Markets. Similarly, improved returns relative to Developed Markets but at lower volatility relative to Emerging Markets. 2%

0% 0% 5% 10% 15% 20% 25% 30% Annualized Volatility MSCI USA MSCI World MSCI Emerging MSCI Frontier MSCI Frontier ex GCC S&P Frontier BMI ex GCC

9 www.omgxtus.com •Earliest common inception date May 31, 2002 Past performance is not an indicator of future results. Index Source: MSCI, S&P performance is not representative of a specific fund or product. One cannot invest directly in an index. Frontier Market Fundamentals Under-researched, Underappreciated, Undervalued

MSCI indices Price Earnings(PE) Ratios Jan 31, 1996* - Mar 31, 2013 45

PE Ratio PE 20

Jun, 96 Jun, 97 Jun, 98 Jun, 99 Jun, 00 Jun, 01 Jun, 02 Jun, 03 Jun, 04 Jun, 05 Jun, 06 Jun, 07 Jun, 08 Jun, 09 Jun, 10 Jun, 11 Jun, 12 Jun,

Oct, 96 Oct, 97 Oct, 98 Oct, 99 Oct, 00 Oct, 01 Oct, 02 Oct, 03 Oct, 04 Oct, 05 Oct, 06 Oct, 07 Oct, 08 Oct, 09 Oct, 10 Oct, 11 Oct, 12 Oct,

Feb, 96 Feb, 97 Feb, 98 Feb, 99 Feb, 00 Feb, 01 Feb, 02 Feb, 03 Feb, 04 Feb, 05 Feb, 06 Feb, 07 Feb, 08 Feb, 09 Feb, 10 Feb, 11 Feb, 12 Feb, 13 Feb,

MSCI USA 16.26 MSCI World 16.09 MSCI Emerging 12.51 MSCI Frontier 11.81 MSCI Frontier ex GCC 9.93 MSCI Frontier Africa 14.49

10 www.omgxtus.com

Past performance is not an indicator of future results. Index Source: MSCI performance is not representative of a specific fund or product. *Earliest available data One cannot invest directly in an index. Frontier Market Correlations Further benefits on offer • Frontier ex GCC offers better diversification benefits than Frontier • Frontier Africa is in a league of its own from a diversification perspective

5-yr Monthly Correlation MSCI MSCI MSCI MSCI MSCI MSCI MSCI USA World ex Frontier ex Frontier MSCI China World Emerging Frontier as at March 31, 2013 USA GCC Africa

MSCI China 72% 78% 81% 90% 63% 66% 49% 100%

11 www.omgxtus.com

Past performance is not an indicator of future results. Index performance is not representative of a specific fund or product. Source: MSCI One cannot invest directly in an index. Frontier ex GCC Market Liquidity • Approximately 40 trading days (2 months) are required to optimally invest $100m in Frontier ex GCC markets*

Values Row Labels 1-Day 5-Day 10-Day 20-Day 40-Day 60-Day 120-Day Total Weight (%) Argentina 3.3% 5.9% 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% Bangladesh 0.6% 2.1% 3.2% 3.8% 3.9% 3.9% 3.9% 3.9% Bosnia and Herzegovina 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.2% Botswana 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.3% 1.3% Bulgaria 0.0% 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.2% Croatia 0.1% 0.4% 0.9% 1.7% 3.2% 3.4% 3.6% 4.1% Estonia 0.1% 0.3% 0.7% 1.0% 1.1% 1.1% 1.1% 1.1% Ghana 0.0% 0.1% 0.2% 0.3% 0.3% 0.4% 0.4% 0.4% Jamaica 0.0% 0.0% 0.0% 0.1% 0.1% 0.2% 0.4% 0.6% Jordan 0.2% 0.7% 1.2% 1.4% 1.5% 1.5% 1.6% 1.6% Kazakhstan 1.2% 6.1% 7.9% 8.0% 8.0% 8.1% 8.1% 8.1% Kenya 0.9% 4.3% 7.0% 7.6% 7.6% 7.6% 7.6% 7.6% Lebanon 0.0% 0.2% 0.5% 0.9% 1.8% 2.4% 3.4% 4.5% Lithuania 0.0% 0.1% 0.1% 0.3% 0.3% 0.3% 0.3% 0.3% Mauritius 0.1% 0.6% 1.3% 1.8% 1.8% 1.8% 1.8% 1.8% Nigeria 2.9% 14.5% 23.4% 29.9% 30.3% 30.3% 30.3% 30.3% Pakistan 2.5% 5.6% 6.9% 8.1% 8.1% 8.1% 8.1% 8.1% Romania 0.2% 0.9% 1.8% 2.5% 2.5% 2.5% 2.5% 2.5% Serbia 0.0% 0.2% 0.4% 0.6% 0.6% 0.6% 0.6% 0.6% Slovenia 0.1% 0.6% 1.1% 2.1% 3.3% 3.3% 3.3% 3.3% Sri Lanka 0.4% 1.9% 3.2% 3.3% 3.4% 3.4% 3.4% 3.4% Trinidad And Tobago 0.0% 0.1% 0.3% 0.6% 1.1% 1.7% 2.2% 2.3% Tunisia 0.0% 0.2% 0.4% 0.7% 1.1% 1.3% 1.3% 1.3% Ukraine 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.4% Vietnam 0.9% 2.8% 3.4% 4.2% 4.4% 4.4% 4.4% 4.4% Zimbabwe 0.1% 0.7% 0.9% 1.3% 1.4% 1.4% 1.4% 1.4% Grand Total 13.7% 48.6% 71.2% 86.7% 92.7% 94.5% 96.8% 100.0%

12 www.omgxtus.com Source: MSCI Past performance is not an indicator of future results. Index *Assuming a constant market participation rate of performance is not representative of a specific fund or product. 20% and all markets being open from day 1. One cannot invest directly in an index. Agenda

Emerging Markets I: The Box Office Hit, that many missed…

Frontier Markets: Emerging Markets II: The Sequel?

Africa: Emerging Markets III?

Low Liquidity: The Admission Price to Good Returns?

13 www.omgxtus.com Introducing African Markets... • Africa underrated: – Africa collective GDP in 2008 of $1.6 trillion is roughly equal to that of Brazil or Russia – By 2040 Africa will have the world’s largest workforce ever in human history with 1.1 billion people of working age – 316 million new mobile phone subscribers who signed up in Africa since 2000

• Africa markets offer the potential for high growth relative to advanced economies* – Largest growth outside of Asia – Growing middle class (Now larger than Indian middle class) – Growing population (45% of population is under the age of 15) – By 2030, the continent's top 18 cities could have combined spending power of $1.3 trillion. – Africa represents 60% of the world’s total uncultivated, arable land

• The “smart money” is already moving: China’s infrastructure commitments in sub-Saharan Africa have surpasses the World Bank’s on a yearly basis since 2005

• Limited liquidity lends itself to buy and hold, which fits well with indexation

• African stock markets typically do not allow shorting of instruments

• Africa Markets have lower correlations relative to other equity markets

14 www.omgxtus.com

* IMF World Economic Outlook (2010) ** Novare Investments (Africa Funds and Managers Survey 2010) , McKinsey Global Institute: “Lions on the Move” Report Introducing African Markets...

15 www.omgxtus.com Exciting GDP Growth Forecast for African Countries 28 African Countries are ranked in the Top 50 Emerging and GDP Growth African Country Developing Economies according to real GDP Growth projected for 2017(F) 2017. Angola 5.5% Nigeria 6.6% Egypt 6.5% Mali 5.3% Zambia 7.7% Morocco 5.9% Kenya 6.5% Burkina Faso 7.0% Mauritius 4.2% Ghana 5.7% Sierra Leone 4.3% Tunisia 6.7% Botswana 4.3% Cameroon 5.0% Cote d’Ivoire 6.7% Congo 5.7%

Map Source: IIMF World Economic Outlook “Gradual Upturn in Global Growth Namibia 4.4% During 2013”, dated January 23, 2013

16 www.omgxtus.com Source: Used with permission of IMF, from IMF World Economic Outlook (April 2012); permission conveyed through Copyright Clearance Center, Inc. S&P Africa ex SA Custom Liquidity A dose of reality... • Approximately 40 trading days (1month) are required to optimally invest $100m in Africa ex SA markets

Listed Country 1-Day Traded 5-Day Traded 10-Day Traded 20-Day Traded 40-Day Traded 60-Day Traded Sum of Weights as at March 31, 2012 Weight Weight Weight Weight Weight Weight Botswana 0.0% 0.2% 0.4% 0.7% 1.0% 1.2% 1.2% Canada 16.2% 16.3% 16.3% 16.3% 16.3% 16.3% 16.3% Cote D'Ivoire 0.1% 0.3% 0.6% 0.6% 0.6% 0.6% 0.6% Egypt 6.7% 14.4% 15.3% 15.3% 15.3% 15.3% 15.3% France 1.7% 2.1% 2.1% 2.1% 2.1% 2.1% 2.1% Ghana 0.0% 0.0% 0.0% 0.1% 0.2% 0.3% 0.3% Kenya 0.4% 1.8% 2.5% 2.9% 3.0% 3.0% 3.0% Mauritius 0.1% 0.7% 1.4% 2.8% 3.5% 3.5% 3.5% Morocco 1.3% 5.5% 8.0% 9.7% 9.7% 9.7% 9.7% Namibia 0.0% 0.1% 0.1% 0.2% 0.4% 0.4% 0.4% Nigeria 2.8% 13.3% 19.4% 20.8% 21.0% 21.0% 21.0% Tunisia 0.2% 0.9% 1.3% 1.5% 1.6% 1.6% 1.6% United Kingdom 18.7% 18.7% 18.7% 18.7% 18.7% 18.7% 18.7% USA 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% 6.2% Grand Total 54.6% 80.5% 92.3% 98.0% 99.6% 100.0% 100.0%

17 www.omgxtus.com Source: MSCI Past performance is not an indicator of future results. Index *Assuming a constant market participation performance is not representative of a specific fund or product. rate of 20% and all markets being open One cannot invest directly in an index. from day 1. Agenda

Emerging Markets I: The Box Office Hit, that many missed…

Frontier Markets: Emerging Markets II: The Sequel?

Africa: Emerging Markets III?

Low Liquidity: The Admission Price to Good Returns?

18 www.omgxtus.com But Why Does the Efficient Market Hypothesis Not Work, in Reality, in the World’s Least Liquid Markets The following are prohibitive hurdles to producing significant and consistent alpha

Information lags theoretically should produce opportunities for producing alpha, however; • Implementation costs in some of the world’s most liquid markets are prohibitive in order to survive, trading frequency must be minimal and well orchestrated; • For Global Emerging and Frontier Market Active Managers: The EM and Frontier Markets are not homogenous and therefore are driven by different regional influences. The learning curve is steep and inconsistent; • Practical Consideration: Frontier Market managers typically have short track records, given the relative novelty of the asset class

19 www.omgxtus.com

* Kang, X., Nielsen, F. & Fachinotti, G. (2011): “Some Like It Hot”, MSCI Research, January 2011. Implementation Costs in Some of the World’s Most Illiquid Markets are Prohibitive Frontier Market Trade Impact Cost ($100mn Fund)

• Optimal participation rate is at 10% of daily traded volume with an expected trade impact cost of 131bps.

• Trading 100% of the market volume every day until the total order is filled will result in a trade impact of Spread Ranges [bps] Weight [%] 1 - 2 0.00 713bps. 2 - 5 0.00 5 - 10 0.60 • Implementing the entire 10 - 15 10.60 15 - 20 2.51 48.54% of portfolio will have spreads less than portfolio in one day using 20 - 25 7.26 50bps 25 - 30 11.24 the optimal trading strategy

hiddenhere? 30 - 40 10.18

What if Whatif is Alpha would require 700% of a 40 - 50 6.17 50 - 75 6.15 11.14% of portfolio will have spreads between day’s volume (i.e. doing the 75 - 100 4.99 50bps and 100bps impossible and trading 7 100 - 150 11.22 times the available volume 150 - 200 5.56 40.32 % of portfolio will have spreads larger than 200 - 250 17.22 traded of one day). >250 6.32 100bps

20 www.omgxtus.com Source: Citigroup BECS Pre Trade Analytics (March 31, 2013) Trading data is based on a basket of securities that comprise a full replication of MSCI Frontier Markets ex GCC Index. Please see Important Disclosures and Attributions for additional disclosures.

Emerging Markets – Not That Easy to Outperform Emerging Market s: The trade impact cost of a $100mn Fund make the “round trip” cost of active fund management decisions expensive

Optimal participation rate is at 5% with an expected trade impact cost of 35bps.

Spread Ranges [bps] Weight [%] 1 - 2 1.60 2 - 5 8.10 5 - 10 13.63 10 - 15 13.16 15 - 20 13.96 74.41% of portfolio will have spreads less than 20 - 25 8.94 50bps 25 - 30 6.18 30 - 40 3.28 40 - 50 5.55 50 - 75 3.27 3.82% of portfolio will have spreads between 75 - 100 0.55 50bps and 100bps 100 - 150 0.15 150 - 200 0.00 21.77% of portfolio will have spreads larger than 200 - 250 18.82 >250 2.80 100bps

21 www.omgxtus.com

Source: Citigroup BECS Pre Trade Analytics (March 31, 2013) Trading Data is based on a basket of securities that comprise a full replication of MSCI Emerging Markets Index. Please see Important Disclosures and Attributions for additional disclosures. Conclusion Liquidity seekers* pay liquidity providers * especially when under pressure

• Become a liquidity provider

• Patiently wait for the fundamentals that are being overlooked to become commonly accepted

22 www.omgxtus.com Important Disclosures & Attributions

Risks are inherent in all investing. The value of an investment may fluctuate. Past performance is not indicative of future results. This presentation does not constitute an offer to sell or a solicitation of an offer to buy securities. Investments in the securities of non-US issuers involve risks beyond those associated with investments in US securities. These risks include greater market volatility, the availability of less reliable financial information, higher transactional costs, taxation by foreign governments, decreased market liquidity and political instability. Foreign issues are often subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping that US securities and therefore, not all material information regarding these issuers will be available.

This document has been prepared and issued by Old Mutual Global Index Trackers (Pty) Ltd. (Old Mutual Global Index Trackers) for informational purposes only and is intended for use by professional investors or their advisers and not for use by any other category or recipient. The document and the information and opinions contained herein may not be publicly disclosed or distributed without prior written consent from Old Mutual Global Index Trackers. Except where otherwise noted, all information is sourced from Old Mutual Global Index Trackers. In certain instances, Old Mutual Global Index Trackers has prepared the information and opinions contained herein using data from external sources believed to be reliable, but which are not guaranteed by Old Mutual Global Index Trackers as to their timeliness or accuracy and which are subject to change without notice.

The indexing investment approach bears the risk of not fully correlating with the chosen index. Only a sample of stocks in an index may be purchased, and substitutes not in an index may be used. Derivatives may be used to enhance correlation which can have the opposite effect. Operating expenses of indexing products and cash flows also reduce correlation.

The information about the indices is from publicly available sources. The opinions expressed in this piece have not been submitted to index providers for endorsement. Index data is not an offer or recommendation to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy. Further, none of the index data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance, analysis, forecast or prediction.

Any index providers listed in this document are the source and owner of the index data contained or reflected in this material and all trademarks and copyrights related thereto. The material may contain confidential information and unauthorized use, disclosure, copying, dissemination or redistribution is strictly prohibited. This is Old Mutual Global Index Trackers presentation of the data.

23 www.omgxtus.com Important Disclosures & Attributions (continued)

In Slide 20 “Implementation Costs in Some of the World’s Most Illiquid Markets are Prohibitive” and Slide 21 “Emerging Markets – Not that Easy to Outperform”:

• the actual historical volume and volatility are applied to the securities in the basket. Expected Impact cost is based on the mean of the historical volume and volatility values. Favorable and unfavorable markets are one standard deviation away from the mean. A favorable/unfavorable market will depend on the direction of the market in relation to the direction of the trade.

• Optimal participation is defined as the value of daily market liquidity that would have the least impact on the price, ignoring the time it would take to actually get into the position.

• Constant participation is defined as the assumption of evenly distributed trading during a day.

• Optimal time is defined as taking the time it takes to get into the position into consideration (TE risk) along with market impact cost. Two different graphs that slope towards each other. Their intersection gives you the optimal time to trade.

• Constant time is defined as taking 100% of market liquidity, until your position is filled.

24 www.omgxtus.com