EFTA01458587

Macro outlook 10* 1401 10021 1905 OW W2,2 20W X421 2.,x6 200! xee 2.°11 But this will need time. Further market volatility is possible because many EM corporations used the low interest-rate environment of the past few years to borrow money, thereby sharply raising their debt. An appreciating U.S. dollar and rising interest rates should increase the interest and principal payments due on foreign loans. Rising defaults cannot be ruled out, additionally impeding the economic development of emerging markets Emerging-market debt Rising private debt I4) a POtitiC-3ECIOrdebi Pronto-MX:10r deb! 120 100 90 80 40 20 1044 1999 MX) 2002 2.004 2009 2009 2010 2012 2014 SeadiL kd hitrtahOtull SeithYdena as of June 2015 a Nit',mations' Ilona t • CrOct.bandce b it tot n:; and 3:1/4.:nk dopy:it tr4•00: alt, i14( ;441,435onal Soldornnn a, c4 J9.-4 2015 The combination of lower growth dynamics and higher debt risk in the corporate sector caused the MSCI Emerging Markets Index to trade sideways for several years. One of the triggers for the emerging markets' recent slide was China's decision to moderately devalue the renminbi versus the U.S. dollar. Many investors regarded this step as en implicit admission of slower economic growth by the Chinese government. Increasing capital expenditure has helped to keep emerging markets on track during and after the financial crisis. The flip-side of this has been rising private-sector debt. Decelerating growth in the emerging markets moreover indicates that some investment has been misallocated. Lower foreign dependence The Asia crisis of 1997 showed how dangerous debt denominated in foreign currencies can be. The devaluation of local currencies increased the value of this foreign denominated debt. From 2000 onwards, emerging markets have reduced their foreign debt as a ratio of gross domestic product, helped by the establishment and expansion of a local financial sector, flexible exchange-rate systems and more balanced current accounts. Past performance is not indicative of future returns. No assurance can be given that any forecast, investment objectives and/or expected returns will be achieved. Allocations are subject to change without notice. Forecasts are based on assumptions, estimates, opinions and hypothetical models that may prove to be incorrect. Mac", Anwrg.za Edrmn I ocbabar /015 rner t 0 ,] CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0118566 CONFIDENTIAL SDNY_GM_00264750 EFTA01458587