Africa Emerging Capital

Asset Allocation, seizing African emerging opportunities

The MAAS
Monthly Asset Allocation and Strategy sset trategy
Cash

Alternatives

Equities

Fixed Income

Africa Emerging Capital (AEC) Asset Allocation January-February 2012 contacts@aec-aa.com 1260 Nyon Switzerland

The Monthly Asset Allocation Strategy

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2012: We enter the year of the Dragon

According to the Chinese zodiac, we enter 2012 by embracing the Year of the Dragon the Black Water Dragon to be exact. The Dragon is the only legendary animal among the animals in the Chinese zodiac. In Chinese mythology, Chinese dragons are a symbol of power, authority and auspiciousness. Contrary to the Western European dragons which are usually associated with the evil, Chinese dragons portray strength, nobility and good luck. Also, according to a Chinese saying, you can never see the dragons head and tail at the same time because it is moving fast and erratically. Incidentally this might be a fairly exact description of what to expect in 2012. In this paper, we share our prospects regarding the global economy and financial markets this year.

I.

Global Economy

World GDP is expected to grow by 3.0% at purchasing-power parity in 2012. This marks a considerable slowdown from 2010 and 2011. The global recovery is threatened by intensifying strains in the euro area and fragilities elsewhere. As captured by Global Business Confidence indicators, the global industrial sector is set to stagnate. While the PMI output and orders indices are rising, they still stand at levels consistent with growth at a roughly 3.0% pace. Global credit conditions also tighten. The evidence from both regions suggests this tightening is taking hold. In the EM, loan growth appears to have slowed below the 30% pace in early 2011. Survey shows EM banks suffering a substantial worsening in international funding conditions and tightening credit standards. Global inflation is in the midst of a sustained slide that is bringing purchasing power relief to consumers and creating policy flexibility for Central Banks. In all, global inflation is expected to fall to a 2.5% pace this year from 3.3% according to the last estimates. Though expected, Central Banks are globally surprising markets by announcing easier monetary policy that has to last a long moment. This is likely to have very important implications for global economic activity, particularly for financial markets. There are fundamental reasons that may merit easier policy as global inflationary pressures are receding. But to a certain extent, those policies are also a reflection of an increased preference for growth over inflation-fighting. The Europes the financial crisis will continue to weigh on the global economy in 2012, and still has the potential to cause disaster as pressure on the region's troubled sovereigns remains intense. For politics, austerity is the route out of this crisis, but in the drive to become fiscally virtuous there is a risk that policy will become damagingly pro-cyclical, The Monthly Asset Allocation Strategy

exacerbating the recession. The euro zone probably slipped into recession in Q411 is foreseen to contract 0.7% in 2012. Economy in the United States continued to gain momentum towards the end of 2011, shrugging off financial disruption from the euro crisis. Consumers proved surprisingly spendthrift during the holiday season, and the labor market is showing signs of moving past the soft patch it suffered during the summer, with non-farm payrolls rising by 200000 in December. So, as most economic indicators have improved, growth in Q411 is likely to have been above 3% in annualized terms. But the US economy is still weak by almost any standard. It is expected to grow 2.5% this year. The likely continued mixed data in the months ahead is one reason why the Fed has indicated that the near-zero interest rate environment will continue for a long time. In the United Kingdom, the official estimate of real GDP for Q311 revealed that stock building contributed significantly to quarterly growth of 0.6% (up by 0.5% on a YoY basis). Household consumption fell marginally relative to the previous quarter (a decline of 1% year on year). Household consumption was 4.7% lower in the third quarter of 2011 compared with the first quarter of 2008. As more data come in, it is looking increasingly likely that the first estimate of Q411 GDP will show a contraction. With little fundamental reason to anticipate an improvement in growth momentum in Q112, the chances of the UK meeting the classical definition of recession (two consecutive quarters of falling GDP) are high. The economy is expected to expand only at 0.2% this year. Japan has largely overcome the disruption to supply chains that crippled its economy in the wake of the natural disaster in March 2011. A surge in residential construction in the third quarter suggests that rebuilding following the disaster is well under way, and reconstruction should continue to boost the economy throughout 2012. Weak external Page 2

demand and a strong Yen will, however, limit the strength of Japan's recovery. Also, the government looks for only 0.2%-pt contribution from public spending to its expected 2.2% GDP growth in FY2012. The lagging disinflationary effect of the strong Swiss franc on import prices seems to be diminishing. The relative stability of the EUR/CHF exchange rate since September 2011, when the Swiss National Bank set a minimum exchange rate, probably contributed to this development. According to the State Secretariat for Economic Affairs (SECO), the Swiss economy continues to lose momentum due to the influence of an increasingly bleak economic outlook in the EU and the strong CHF. Under the assumption that the euro debt crisis does not further escalate, the economic slowdown in Switzerland should be limited in depth and time. The Expert Group forecasts a weak GDP growth for 2012 (+0.5%), followed by a recovery in 2013 (+1.9%). Elsewhere, the negative effects of the euro crisis and slowing global growth are rippling through into Emerging Markets. Nonetheless, most emerging economies will perform decently this year thanks to robust domestic demand, but few will remain immune to the slowdown in the West. Economic growth in Asia ex Japan is set to slow from 7.0% in 2011 to 6.3% this year, although the region will remain the world's fastest-growing. Latin American economies are losing impetus after a stellar recovery in 2010-11. As a result, policymakers are shifting their focus from dampening inflation and currency appreciation to supporting growth. Economic growth is the region is set to slow from 4.3% last year to 3.4% this year. Eastern Europe faces the twin spectres of weaker demand from its main export market and a credit squeeze as western European lenders deleverage. The impact of the political turmoil sweeping the Middle East and North Africa (MENA) region has varied significantly in 2011. While domestic unrest is set to dominate the outlook for an extended period of time, we believe regional geopolitical risks will be substantially higher this year. The combination of deteriorating macroeconomic performance and political uncertainty along with rising sectarian and regional tensions will intensify downside risks that could ultimately fuel oil price volatility. Those countries directly affected by unrest have suffered sharp economic slowdowns. Others, particularly oil producers, have been able to boost public spending. The MENA regions large oil producers The Monthly Asset Allocation Strategy

(excluding Libya) have also remained more stable than net oil importers, reflecting the role of generous wealth transfers in damping popular unrest. In the year ahead, political instability and a more hostile external environment will weigh on growth across the region. Economic growth in Emerging Europe, Middle East and Africa is set to slow from 4.5% in 2011 to 2.6% this year. Africa was one of the fastest-growing regions in the world last year, and is expected to stay at the head of the pack in 2012. While the continent is expected to continue on its path of recovery from 3.7% of real GDP growth in 2011 to 5.8% in 2012, the impact of global economic trends on the continents prospects is likely to dominate the regional headlines in 2012. Indeed, the ongoing debt crisis in Europe and the weakness in the US global economic pace would dent Africa's performance, hurting commodity prices and terms of trade (together the US and Europe account for around 50% of Africa's exports). Specific risk factors also include a drying-up of trade credit, declining commodity prices and contracting demand for the region's exports - as well as falling remittances, aid, foreign direct investment (FDI) and tourist receipts.

II.

Asset Allocation

Contagion in the euro zone and fiscal uncertainty in the US have weighed on stock prices and future growth prospects globally. Fiscal and regulatory uncertainty across the developed world has roiled markets and hampered growth prospects. Standard & Poors (S&P) downgraded US sovereign debt below AAA for the first time in history, while the euro zone sovereign debt crisis engulfed France, Italy and Spain. High risk, uncertainty, and low rates will remain high well into 2012. Yet, crisis does create opportunity. But the ongoing turmoil has driven many asset prices down to levels that appear to offer good value on all but the most extreme scenarios. Thus diversify among carefully selected equities, credits and alternatives is the key. World Portfolio: Our preferred asset allocation remains overweight stocks, marketweight bonds and alternatives, underweight cash. US, Nordic Europe, and Non-BRIC Emerging Markets remain our preferred regional plays. In the near short-term, we are DLV (Defensive-Large-Value) against CSG (Cyclical-Small-Growth) in the medium to the long term horizon of time. In fixed income, we are long Page 3

convertible bonds as they offer to participate in companies stock price appreciation while providing some amount of downside protection against declines in the underlying stocks share prices . Long Only ETF Portfolio: we favor equity (specially developed market ones and Africa vectors), convertible bonds, precious metals, and EM FX. Equities (Overweight): we stay long the asset class and jump in through US stocks. We put the emphasis on companies that have strong balance sheets and quality brand-driven revenues with flexible business models. Corporate cash levels are high, and with real interest rates still low, we expect that one avenue through which companies expand is through M&A activity. Similarly, high cash levels owing to investor uncertainty and low real interest rates create conditions where equity investors will be inclined to gravitate toward companies with high, sustainable dividend yields, strong balance sheets, emerging world focused revenues and stable earnings. While the period of Q411 earnings releases continues to intensify, most equity markets continue to advance, though at a slowing pace amid still weak earnings momentum. Also, equity valuations continue to be attractive in a multi-year comparison, especially compared to competing assets. Thus, the outcome of the Q411 earnings reporting season, both in the US and Europe, and subsequent earnings revisions, is essential to support valuations further, along with ongoing low interest rates. We also are overweight Africa vectors for exposition to one of the growing economic region in the world. Fixed Income (Marketweight): the 2 biggest Central Banks (The Fed and the ECB) are signaling that money will remain cheap and abundant for a very long time. It would take a big event risk to derail a global carry trade comparable to what Fed QE triggered in spring 2009. Thus, we like short duration in the US, Germany and UK, with yields towards the bottom of their recent range. We continue to buy Frontier local debt on valuation. We are neutral international corporate bonds and long convertible bonds. We slightly add inflation-protected bonds but still remain under invested.

Alternatives (Marketweight): the environment for alternative investments is challenging but there are still opportunities. The economic slowdown and a potential recession in Europe is expected to pinch commodities demand at least early in 2012. But how much it will dent demand is up for debate. While some market watchers have lowered their price forecasts for the year across the board, others said it might be better to be on the sidelines for the first half of 2012. In our view, China consumption and EM demand will be critical should the macro picture deteriorate worse than expected. And 2012 could be a year that rewards investors who are choosy in their commodity selections. Commodities analysts who see value in some markets are selecting livestock and gold as two areas that might outperform the sector as a whole. Global crude oil production growth slowed in 2011, largely reflecting the loss of Libyan supply, but also production problems in the North Sea, Angola, Yemen and Azerbaijan, mainly. These losses were offset by increased OPEC production, particularly from Saudi Arabia and Iraq. To reflect the uncertainties weighing on the global supply picture, we foresee the Bren Blend prices to remain high at around USD 110/b during the year. Prices for most hard commodities fell sharply in late September and early October last year, reflecting mounting concerns about slower global growth and signs of a deceleration in China's economy. Unless the economies of China and developing countries generally slow more than forecasted, demand growth will continue to support prices in 2012, aided by tight fundamentals in some markets, such as copper. Gold will climb to a record this year as emerging countries central banks add more of the metal to their reserves. bought 144.2 tons in the 11 months through November, according to the International Monetary Fund. Goldman Sachs Group Inc. sees nations worldwide to buy as much as 600 tons this year. Agricultural commodity prices fell as part of the general commodity sell-off. Supply improved in 2011 and a further improvement is likely in 2012 (assuming normal weather conditions), with market surpluses expected to return, allowing prices to fall back in both 2012 and 2013. However, they will remain high by historical standards, partly because of the still-low level of stocks but also because of population growth, urbanization in the developing Page 4

The Monthly Asset Allocation Strategy

world (and less arable land), and the extra demand created by biofuels production. The risks are probably on the upside given that markets are still relatively tight and any disruption related to the weather or natural disasters could lead to sharp price rises for affected commodities. Thus, we trimmed commodities to neutral for the full H211 and are keeping our recommendation for the moment. We prefer agriculture to base metal, Gold to Copper, and stay neutral Oil. Turning to currencies, we see the euro continuing to weaken against the US dollar in 2012. The greenback was held down for much of 2011 by the possibility of another round of quantitative easing by the Fed. The divergence between US and EMU growth and monetary policy shifts the balance of risks for EUR/USD to the downside. We are moderately bearish EUR/USD due to our expectation that the ECB will cut rates below 1%. We also remain tactically bullish EUR/CHF, but this view is now mainly driven by overvaluation and the positive technical trend. The aversion to risk that took hold in September has weighed heavily on many emerging-market currencies. Several currencies, including those of India, South Africa, Brazil, Mexico and South Korea, lost more than 10% of their value in a few weeks. (These currencies have gained ground against the dollar in recent weeks, but are still well below their September levels). Most emerging markets have also begun monetary loosening cycles, which will weigh on their currencies, although interest rates in developing economies generally remain far above those in the US, Japan and the euro zone. Some emerging-market central banks, including those of Brazil and South Korea, have intervened in currency markets to smooth exchange-rate volatility. However, they will generally have welcomed a weakening of their currencies, given concerns about overvaluation and a loss of competitiveness. Emerging countries and commodity producers continue to signal further currency appreciation. We prefer most Asian currencies due to healthy external balances. But until risk aversion subsides, we expect emerging-market currencies to remain under pressure. The CNY has been the second best performing currency so far in 2011. This shows that the appreciation trend of the CNY continued despite the strength of the USD.

Against the backdrop of rebounding equity and commodity markets, hedge funds returned positive gains on average in October. Unfortunately, due to their defensive positioning, only a marginal part of the upside was captured. Initial indications of performance in November point toward a continuation of the downtrend. Liquidity conditions remain stressed, while volatility and systemic risks persist at high levels. Within hedge funds, liquid and flexible strategies, such as global macro, convertible arbitrage, should perform best. The global rental market recovery is slowing due to weaker economic growth prospects, and potential for further capital gains appear limited. However, in the current low interest rate environment, commercial real estate remains attractive due to the significant yield they offer. We remain neutral global real estate as support from global economic continue to fade though offset by positive effect of monetary loosening. We recommend then a defensive stance regarding sectors and markets. Cash: still remains unattractive. We do not add cash and remain underweight the asset class.

III.

Regional Allocation

As we enter 2012, the Age of Austerity is ahead us, restricting economic growth and increasing political and market risks. Governments are cutting back across the Eurozone, and in the US, debate over how to reduce the federal deficit looks to be a core issue in the presidential election. The Eurozone crisis seems to be entering an important new stage with intensifying pressure not only on sovereign bonds but also on bank funding, the latter threatening to spill over into a credit squeeze on the real economy. The persistently low interest rate environment in developed markets will continue, in our view. Weak growth harassed the developed world during the second half of 2011 and is forecast to weaken into 2012. The IMF slashed its 2012 growth forecasts for all G7 countries and is predicting GDP growth of less than 2% for the US and euro zone economies. Emerging markets, however, remain a bright spot in the global growth story. Inflationary pressures have abated across emerging market countries on the back of a slowdown in global growth. Food and commodity prices have fallen from their early 2011 peaks, which has resulted in a drop in consumer and producer prices.

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Advanced economies growth is expected to slow down from an already meager 1.4% in 2011 to 1.1% in 2012. Emerging economies will slow in growth, going from 5.8% growth in 2011 to 4.7% in 2012, partly as a result of slower export growth and partly because several of them have been growing above trend. Thus, IP growth differential favor Emerging Markets vs. Developed Markets. US (Overweight): Mega-Caps stocks should outperform this year. We like Consumer Staples as they offer both dividend growth potential and a high current dividend yield of 3.2%. Staples is the second most under-owned sector by US fund managers. Staples offer defensive growth. It is also the only US sector expected to have higher projected EPS growth in 2012 in part because of its exposure to faster-growing EM. Also buy US stocks with cyclically attractive risk/reward. Be selective and focus on those in depressed cyclical areas. Europe (Underweight): European equities are the most oversold they have been relative to US equities in the past 20 years. We believe the best European equity opportunities over the medium term will be in best of stocks with strong earnings, good corporate management, healthy balance sheets, and solid margins. Note the level of corporate cash in Europe is just as high as the US (more than USD 1tillion for non-financial largecaps), and the big surprise in Europe next year could be a major revival in M&A and corporate restructuring activity. European banks are the worlds biggest contrarian trade. Japan (Marketweight): Japan is a haven. The Yen is rising and the yield falling. We like domestic, defensive stocks with high dividend yields and strong cash flow. But, valuations for Japanese Consumer Discretionary stocks are cheap (P/B of 0.93x, a 42% discount to their long-term average) and the sector has the fastest projected 2012 EPS growth (68%) in the world. Emerging Markets (Overweight): though their fundamentals are vastly superior, we do not believe in decoupling today any more than we did in 2008/2009, as these markets (mainly mature ones) are much more integrated in world trade and financial markets than they have ever been. Also, despite the increasing role of domestic demand, many emerging economies, especially in Latin America and Africa, would be hurt if the demand for commodities falls. This will bring prices down, reduce capital inflows, weaken currencies and slow The Monthly Asset Allocation Strategy

economic growth. Thus, the effects of the slowdown in the West will be greatest on those emerging markets that are significantly exposed to global trade, and on countries that are large commodity producers. Nevertheless, we do expect them to weather the cycle much better than G7 economies. Not only are their starting point growth rates much higher, but their sovereign balance sheets are in a much stronger position to smooth the shocks. Also, in anticipation of weaker demand and slower growth from developed markets, Central Banks in emerging market economies have begun to loosen monetary policy. We expect this trend to continue into the first half of 2012, as the macro environment remains unclear. So, dont fight Central Banks. Investors are returning to EM equities as shown by inflows into EM equity fund flows. Valuation remains attractive across emerging market equities, relative to their developed market counterparts. PE and PBV multiples remain below long-term historical averages. As volatility abates, we expect the market to refocus and return to trading on fundamentals. The MSCI Emerging Markets Index now trades at a 12-month forward P/E ratio of 11x, or 27% lower than its long-term historical average. The MSCI World Index trades at 13.3x and the S&P 500 at 13.2x. Thus, emerging market equity fund flows, while negative last year, may reverse course modestly in 2012 given attractive valuation and resilient economic growth in the region, although risk appetites will remain suppressed until a clearer resolution of the euro zone debt crisis materializes. Our preferred EM exposures are Indonesia, Korea, Malaysia and Russia. We believe China can avoid an economic hard landing. We are buyers of Chinese consumer, insurance, and telecom stocks. Also, the rise of the emerging market consumer is still one of our key long-term investment. The consumer share of GDP in the BRICs is just 46% of GDP (in China 35%), compared to 71% in the US. We reiterate our positive view, in particular as falling food inflation should free up the budget of emerging consumers for more discretionary spending. We see the trend discretionary consumption growth in BRICs will be double digit. We also strategically look beyond the BRICS and extend frontiers in our benchmark portfolio. We thus like Frontier Markets. Again, Frontier Markets Page 6

today remind us of the early days of (mature) emerging markets some 20 years ago. However, frontier markets are starting from a stronger base than emerging markets and are still very underresearched, under-owned and represent the most inefficiently priced equity markets globally. According to UBS, global equity funds are only 7% weighted in emerging market equities, compared with a benchmark weight of 14% in the MSCI All Country World index, despite all the hype and perception of a bubble having already been formed. Africa is one of our key trade. While the continent is expected to continue on its path of recovery from 3.7% of real GDP growth in 2011 to 5.8% in 2012, the impact of global economic trends on the continents prospects is likely to dominate the regional headlines in 2012. Sub-Saharan African economies belong to the fastest growing markets with projected GDP growth rates of above 5% per annum and highly favorable components for a sustainable long-term growth. Growth in 2011 is expected to average 5.5%, and 6% in 2012. Though most of the current downward revision to growth is concentrated among high-income OECD countries and that some of them are now expected to go in recession, this would dent Africa's performance, hurting commodity prices and terms of trade, as together the US and Europe account for around 50% of Africa's exports. Specific risk factors include a drying-up of trade credit, declining commodity prices and contracting demand for the region's exports - as well as falling remittances, aid, foreign direct investment (FDI) and tourist receipts. That said, African countries are increasingly diversifying their export markets, in particular to Asian countries. Around two-thirds of the region's export growth in 2005-10 is explained by an expansion in exports to emerging markets. Consequently, around half of Sub-Saharan Africa's trade is now conducted with emerging economies, compared with negligible amounts in the 1990s. China, India and Brazil, which together account for more than one-quarter of the region's trade flows, are of particular importance. By the same token, this means that any significant slowdown in the pace of expansion in those three - and China in particular would be of great concern. The median inflation rate was 4.4% in 2010 and is projected to accelerate to 5.3% in 2011 due mainly to expected increase in energy and food prices. Food items have relatively higher weights in the The Monthly Asset Allocation Strategy

basket of goods and services of some African countries, and sustained increases in food prices have driven inflation in these countries to historic highs. The forecasts of global food indices indicate that the upward pressure on food prices will remain throughout 2012. Due to the economic recovery and prudent fiscal policies, African countries recorded a moderate fiscal deficit of 1.8% of GDP in 2010 which is expected to increase to below 4% in 2011 but decline again to slightly above 3% in 2012. The 2011 increase is mainly due to the deterioration of fiscal balances in North Africa in the wake of political upheavals. However, fiscal consolidation may be uneven across the continent if governments respond to higher food and oil prices by increasing subsidies or if disbursements of Official Development Assistance (ODA) fall short. Trade and current accounts have improved in resource-rich countries due to high commodity prices and rising export volumes. At the same time, high oil and food import bills are contributing to a worsening of external balances in resource-poor countries and threatening food security. The rising dynamic African consumer is our key investment theme to trade. Since 2000, consumer spending in Sub-Saharan Africa has grown at a steady four percent per year, reaching nearly USD 600 billion in 2010. The market is expected to be worth USD 1 trillion by 2020. While mineral resources undoubtedly continues to be sizeable, the most significant contributors to growth are changing, with less reliance on exports and more reliance on domestic demand (consumer spending and imports). We suggest investing in an actively managed diversified portfolio of frontier market equities to best benefit from the early mover advantage. Frontier markets were not able to deliver in 2011 but their negative equity returns of around -25% were in line with the Euro and BRIC markets. Investors in emerging and frontier markets equities generally, and African public equities in particular, are seeking exposure to a package of real GDP growth, potential currency appreciation over the long term and reflationary, rather than deflationary pressures on prices. Olivier M. Lumenganeso Investment Strategist and Client Advisor olumenganeso@aec-aa,com Page 7

IV.

Our Global (Tactical) Asset Allocation Portfolio

A. The Investment Grid

Asset Class Benchmark Indices Benchmark weights Portfolio weights GTAA Recommendations

Equities

iShares MSCI ACWI Index (ACWI)

50.0
30.0 20.0
2.0 6.0 12.0

54.0
32.0 22.0
4.0 6.0 12.0

4.0
2.0 2.0
2.0 0.0 0.0

OW
OW OW
OW MW MW

Developed Markets iShares S&P Global 100 Index Fund (IOO) Global Emerging Markets MSCI GEM (EM+FM) Index
All Africa Markets Other Frontier Markets Mature Emerging Markets Market Vectors Africa Index ETF (AFK) Guggenheim Frontier Markets (FRN) iShares MSCI EM Index (EEM)

Fixed Income
Sovereign Bonds Corporate Bonds Emerging Market Bonds Convertible Bonds

Vanguard Total Bond Market ETF (BND)

SPDR DB Intl Gov Inflation-Protected Bond (WIP) PowerShares International Corporate Bond (PICB) iShares JPMorgan USD Emerging Markets Bond (EMB) SPDR Barclays Capital Convertible Secs (CWB)

20.0
5.0 5.0 5.0 5.0

20.0
3.0 5.0 5.0 7.0

0.0
-2.0 0.0 0.0 2.0

UW
UW MW MW OW

Alternatives
Commodities
Agriculture Energy Base Metals Precious Metals

IQ Hedge Multi Strategy Tracker ETF (QAI)

PowerShares DB Commodity Index (DBC)
PowerShares DB Agriculture Fund (DBA) PowerShares DB Energy Fund (DBE) PowerShares DB Base Metals Fund (DBB) PowerShares DB Precious Metals Fund (DBP)

25.0
10.0
2.5 2.5 2.5 2.5

24.0
10.0
3.0 2.0 1.0 4.0

-1.0
0.0
0.5 -0.5 -1.5 1.5

MW
MW
OW UW UW OW

Foreign Exchanges
Developed Markets FX Emerging Markets FX

Franklein Templeton Hard Currency A (ICPHX)

Powershares DBG10 Currency Harvest (DBV) WisdomTree Dreyfus Emerging Currency Fund (CEW)

5.0
3.0 2.0

7.0
3.0 4.0

2.0
0.0 2.0

OW MW
OW

Hedge Funds Real Estate

IQ Hedge Macro Tracker ETF (MCRO) Vanguard REIT Index ETF (VNQ)

5.0 5.0

4.0 3.0

-1.0 -2.0

UW UW

Cash

iShares Barclays Short Treasury Bond Fund (SHV)

5.0 100.0

2.0 100.0

-3.0 0.0

UW

Our Global Tactical Asset Allocation (GTAA) portfolio provides concise investments that we expect to create returns over a tactical (1-3 months) time horizon. It is a deviation from our longterm (12 months and over) views or Global Asset Allocation Portfolio (the Benchmark one). Arrows indicate directional changes since last allocation. For more: contacts@aec-aa.com.

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B. Regional Allocation

Region Developed Markets Europe Monetary Union Japan United Kingdom USA Global Emerging Markets Frontier Markets All Africa Markets Mature Emerging Markets Brazil Russia India China South Africa

Benchmark Index iShares PLC iShares MSCI World (IWRD.L) iShares MSCI EMU Index Fund (EZU) iShares MSCI Japan Index Fund (EWJ) iShares MSCI UK Index Fund (EWU) iShares MSCI USA Index Fund (EUSA) MSCI GEM (EM+FM) Index MSCI Frontier Market Index Market Vectors Africa Index (AFK) iShares MSCI EM Index Fund (EEM) iShares MSCI Brazil Index Fund (EWZ) iShares MSCI Russia Capped Index Fund (ERUS) iShares MSCI China Index Fund (MCHI) iShares MSCI EM Index Fund (EEM) iShares MSCI South Africa Index Fund (EZA)

Overweight Neutral Underweight

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Africa Emerging Capital

Asset Allocation, seizing African emerging opportunities

Specialists in African emerging markets

Africa Emerging Capital Asset Allocation has as objective to be considered a high quality and leading independent investment research and consultancy firm, specialized in providing top top-down and bottom-up asset allocation strategies, and ideas to investment managers (private and/or institutional) around the World on emerging markets, with a particular focus on African markets. We develop investment strategies and recommendations by identifying key structural and cyclical themes driving the global economy in general, and African economies in particular, utilizing rigorous and particular, comprehensive forecasting approaches and indicators, analytical foundations, and market experience to help our clients make timely sound and confident investment decisions. Our vision is to become an accepted and sought sought-after investment advisory company regarding high quality opportunities in growing, emerging and frontier markets in Africa. We commit to offer our clients with soundly based, focused investment research and advisory services, by establishing strong and interactive relationships with each client to address their specific needs and by tive offering investment decision-making processes that match each risk profile and investment horizon. making We combine the spirit and vision of an entrepreneurial firm with the analytical r rigor of a research institute without compromising the highest levels of client service.

Africa Emerging Capital (AEC) Asset Allocation contacts@aec-aa.com 1260 Nyon - Switzerland Reference N: 2011/05872 Federal registration N: CH-550-1087921 1087921-6

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