Uk in Guide to Emerging Markets

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A guide to investingin Emerging marketsF&C: Pioneering experience in emerging markets

Expect excellence



The changes underway are seeing

countries such as China, India

and Brazil shiting rom agrarian or

resource based economies, tied to

the economic cycles o the developed

‘western’ economies, to genuine sel

sustaining industrial powerhouses.

Je Chowdhry,

Head o Emerging Equities,

F&C Investments.

“ “

You would not ignore an economy the size o the US when

constructing an investment portolio so it is a surprise that

so many investors, rom the largest to the smallest, seemto overlook the potential o the emerging economies.

Richard Wilson, Head o Equities, F&C Investments.““

“Emerging

markets still

oer us vast

potential”

“Emerging markets represent 30% o

the Group’s prots and generate

two-thirds o its growth”

“Our centre o gravity will shit to the

developing markets”

In a matter o a couple o decades emerging economies are achieving an

economic revolution that took Europe some 200 years to achieve.

Sam Mahtani, Fund Manager, Indian Investment Company, F&C Investments.

“ “



Te case forEmerging MarketsThe big picture

Emerging markets have come o age. The extensive

dismantling o political and technological barriers to entry has

promoted a levelling o the international economic playing

eld whereby developed and developing countries are

competing in an integrated world.

The integration o economies, in various stages o

development, is part and parcel o the globalisation process

that has transormed the world economy in the last couple

o decades. Developing economies such as Brazil, India and

China have opened up their economies and invited oreign

companies to share their knowledge and technological

expertise in return or a share o their resources and prots.

Investors have been actively encouraged to participate in the

growth potential and capital has fowed rom the developed

to the developing world.

Starting with a clean slate, emerging market communitiesare leaprogging xed telephone lines to enjoy the

immediate benets o mobile phone technology and

broadband. Similarly actories are opening up utilising the

latest technology, giving them an eciency edge over their

developed market counterparts. As economic expansion has

exploded and earnings grown, emerging market countries

have seen their contribution to global GDP rise, reaching an

estimated 35% at the end o 2009. Furthermore, nearly all o

the global growth in 2009, a period o deep global downturn,

was attributed to the emerging economies. A trend set to

continue.

Breaking rom the past

Emerging economies have experienced periods o growth

beore but in a break rom history this time the expansion is

undamental and set to be sustained. Why? Because it has

its oundations in structural rather than cyclical actors or

one thing. In addition, governments in many o the emerging

economies have instilled new tighter nancial management to

provide a ramework capable o aording long-tem economic

management. They have introduced much greater scal

discipline, which has secured domestic budgets and current

account surpluses, more responsive monetary policies,

greater fexibility in exchange rates and targets or infation. All

o these elements have helped in the ormulation o a more

constructive macro policy.

Improvements have been seen across a broad swathe

o emerging markets countries but have probably been

most dramatic in Asia. It is the Asian economies that havegenerally been the ones generating scal budget and

external surpluses, reducing the leverage in their nancial

systems, leaving them with one o the strongest sets o

undamentals at the start o this new economic growth cycle.

In terms o individual countries elsewhere, Brazil is worthy

o note having managed to upgrade its credit rating to

‘investment grade.’ Turkey and Mexico have also made good

progress.

Potential or urther growth

For those that have not yet invested in emerging economiesis it too late? Not according to John Lomax, GEM Equity

strategist at HSBC. “We think the potential growth rate or

the emerging world as a whole is about 5.5% in the medium-

term and within that we expect some countries will have

noticeably higher growth rates.”

He orecasts China could grow by around 8% and India

by between 6-7%, over the next 3 to 5 years. These rates

would be deemed attractive even in their own r ight but when

you compare them against what is orecast or developed

economies over the same period (around 2%) they look

especially strong.

F&C Investments 01

“China could grow by 8% and India

6-7% over the next 3-5 years…

compared to around 2% in the

developed economies.”



02 F&C Investments

Long-term thematic opportunities

Dierentiating the emerging markets in the current

environment are long-term thematic drivers o growth. The

most important o these and rom which other things lead, is

demographics.

Emerging economies have aster growing and younger

populations than their developed peers. “I you look at where

the labour supply is increasingly coming rom over the next

20 to 30 years, it is really coming rom emerging markets,”

says Michael Wang, Global Emerging Markets Strategist,

Morgan Stanley. “This has implications not only or the world

but also the emerging countries themselves.”

What it implies is that there will be a higher share o the local

population in employment. This, in turn, means there will be

more people in receipt o an income. The wealth created will

drive an advance in living standards and consumption and

increase domestically ocused employment.

Urbanisation

Concurrent to the big rise in consumption is the trend o

urbanisation. The new jobs tend to be located in urban

areas and accompanying the development o industrial

transormation is the migration o a work orce rom the

countryside to the city.

Governments have begun preparing or this with huge

inrastructure projects and this has been to create new

housing, roads, schools, hospitals and other necessary

pre-requisites or a massive population shi t, have been

behind a large part o the increase in economic activity in the

last decade. Building, steel and cement companies have all

beneted rom increased investment as a result.

The next phase o the process o urbanisation, which will

drive economic growth in the next decade, will be the

growing consumer appetite o the rising urban population.

Wang estimates spending attributed to urbanisation could be

as high as $1trillion over the next 10 years.

Rising standards o living

In the next decade the popular perception o emerging

markets as a supplier o goods and services to developed

countries should be comprehensively knocked on the

head as the rapidly growing working and middle classes

increasingly become the end purchasers o the goods andservices they are producing.

Taking the automotive industry as an example, the per capita

car ownership in China is set to reach 59 per 1,000 people in

2010, while the equivalent gure in the US is estimated at 826

per 1,000. This huge disparity translates into an enormous

investment opportunity as the gap between developed and

developing market consumers closes.

“I you look at consumption, across a lot o di erent product

categories rom cars to PCs and mobile handsets, the key

marginal consumers o these products are currently rom the

BRICs,” says Lomax

It is not just cars, mobile telephones, rerigerators, television

sets and computers o course. Financial products and

services are also on the consumption horizon o the

emerging markets consumer. Mortgages, insurance and

other nancial services are only just becoming accessible

on a mass basis and the penetration rates o such products

is so low as to not register in any meaningul way.

As part o the development process it would be expected

that the penetration rate o these products and services will

rise over time.

“Te labour supply for the next

20-30 years is set to come from

emerging markets.”

Te number of cars on the road

in China would top a

billion if car ownership reached

US proportions.

(Source: IMF and World Bank)

0

5

10

15

20

25

30

35

� EM (incl Middle East) � US

1 9 8 6

1 9 8 7

1 9 8 8

1 9 8 9

1 9 9 0

1 9 9 1

1 9 9 2

1 9 9 3

1 9 9 4

1 9 9 5

1 9 9 6

1 9 9 7

1 9 9 8

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

%

Share o global nominal US$ GDP



F&C Investments 03

The role o leverage

Consumption nanced by the newly earned salaries o a

rapidly growing labour orce, would create a phenomenal

wave o demand but when you are also br inging into the

equation the possibility o leverage, in the orm o loans andmortgages, that potential is magnied.

Leverage is not an emerging markets concept. In these

countries consumption is normally saved or. As a result,

the international nancial crisis did not have quite the same

devastating impact on developing market consumption

patterns as was witnessed in the developed world. The

‘top- end’ analysts’ estimate about 10% leverage exposure

among consumers in developing markets compared with

100% leverage in the UK. While the very conservative

approach to debt o most emerging market consumers

means they are unlikely to ever approach the UK’s level o leverage, there is still potential or leverage to play a role in

driving demand. This will be both by individuals increasing

their levels o debt and through an increase in the number

o consumers accessing debt nance.

Corporate leverage is not quite so restrained, but is still very

low compared to the developed markets.

Valuations

The bull market seen since 2000 has witnessed a superior

return on equity (ROE) rom companies within emerging

markets, driven by the more ecient use o capital at themicro level. In the years ahead rising consumption will be

another positive element in the mix. The ROE can then be

expected to increase urther.

Valuations in aggregate have potential or improvement.

Using parameters like price/earnings (p/e) or price-to-book,

they are in line with historical levels. On a trailing earnings

basis they are actually at about a 20% discount to developed

countries, trading at around 17.5 times p/e, (16x is the long-

term average). “With the 40% growth in earnings that we are

expecting or 2010,” says Wang “that multiple will drop down

to 14x.”

An important aspect to remember is that we are just coming

out o a global recession and in the rst year o a recession

the p/e multiple always gets re-rated because earnings are

depressed and so investors buy the market in expectation

o an earnings recovery, making the p/e look ar ticially high.Once genuine earnings growth starts to become eective,

however, valuations should move back to more normal levels.

Wang believes that within markets there are some quite big

dierences, however. “Amongst the BRIC countries, Brazil,

India and China seem to have attracted disproportionate

liquidity fows and those three markets seem rather more

highly valued than Russia, which we think looks cheap by

comparison”. Outside o the BRIC group there may be even

greater value potential, in countries such as Indonesia, Egypt

and Turkey.

He orecasts a strong earnings recovery or emerging Europe

next year because o a steep contraction in earnings in 2009.

In Asia, the rebound is likely to be more modest as these

economies saw less o a correction in 2009.

Outside o BRIC

Mexico is closely locked into the US economic cycle and

was let behind in 2009 as a result. A more robust upswing

in the US than is presently expected could catch investors by

surprise and lead Mexico higher in its wake.

In EMEA, while Russia is an obvious beneciary o a rising

oil price, the region as a whole has lagged. I the oil price

continues to accelerate and the Russian economy gathers

urther momentum this will have spill over benets or

neighbouring economies.

As an example, Hungary is another country that has perhaps

been overlooked. It has been a casualty o macro economic

policy, operating a big current account decit, which let it

exposed to the global nancial crisis, causing the exchange

rate to come under downward pressure, orcing interest rates

to be raised. But looking ahead, Hungary is well positioned

to take advantage o the cyclical recovery expected in

developed Europe, especially Germany, which is the recipiento a high proportion o Hungary’s (mostly manuacturing)

exports. Hungarian interest rates are still quite high (a base

rate o a 6.5%) but infation is quite well contained, so there

is a good possibility o rates coming down and boosting

domestic consumption also.

Technology sector earnings have been depressed in 2009

and i the global economy recovers as expected Taiwan

could be one o the astest growing markets in Asia in 2010

given its big exposure to technology as companies start to

increase their IT investment.

5

10

15

20

25

30

35

40

Oct1995

Oct1995

Oct1995

Oct1995

Oct1995

Oct2000

Oct2001

Oct2002

Oct2003

Oct2004

Oct2005

Oct2006

Oct2007

Oct2008

Oct2009

MSCI WORLD trailing PE

MSCI EM trailing PE

Jan

2010

P / E M u l t i p l e

MSCI EM vs. MSCI World



Technical drivers

In 2002 emerging market economies accounted or just 4%

o the MSCI World equity index, today they make up around

13%. This contrasts sharply with their contribution to world

GDP, which is over 30%. In time, their weighting in the indexwill increase to catch up and refect their importance to the

global economy. The fow o privatisations is also a trend set

to continue as governments increasingly look to the capital

markets to raise unds, which urther increases the pool o

companies available to investors and the weighting o the

emerging market companies to the total market cap o the

global economy.

As this happens, investors with global mandates will be

required to increase their exposure to emerging markets,

thereby providing a urther underpinning o valuations.

Emerging Market Debt

Many o the positive arguments above, particularly those

around scal and monetary discipline apply equally to

emerging market debt. Indeed, this is probably an asset

class with an even lighter representation within most

portolios than emerging market equities.

The emerging debt universe, small and largely ragmented

in its inancy, received a boost by the implementation o the

Brady Bond program implemented by the US Treasury in the

1980s. The program was designed to help emerging marketeconomies (mostly Latin American at the time) restructure

their debt, and eventually helped boost overall debt issuance

that was primarily US dollar denominated. However, despite

a spate o crises and the odd deault episode, the advent

o globalisation, accelerating growth in emerging markets

and implementation o structural reorm programs eventually

played a key role in rmly establishing the asset class. The

exponential growth in currency reserves also helped mitigate

currency devaluation risk and helped boost issuance in

local currencies as well. Local currency debt is in increasing

demand today as developing countries nd themselves

avourably placed relative to developed countries in terms o growth outlook and scal positions.

The robustness o the public nances o many emerging

economies means that the risk o deault is probably lower than

it has ever been. This is refected in narrowing spreads and

improving sovereign debt ratings based on avourable views

taken by various ratings agencies (S&P, Moody’s and Fitch).

Ater the recent upgrades to Brazil, more than 50% o the

standard Emerging Bond Index is now rated investment grade.

The range o opportunities within emerging market debt also

continues to expand. In the past exposure has primar ily been

through government issues, but there are now a growing

number o corporate issuers as well, illustrating an improving

maturity and depth to the market as a whole.

Risks and pitalls

Investing in emerging markets is a long-term commitment

and investors should be prepared or more volatility

compared to the more developed markets. Political risks

tend to be greater during the process o development and

short-term issues may arise rom time to time.

At the present time the most obvious r isks are more short-

term and generally more cyclical than structural. One risk

is that growth in the US is actually quite a bit stronger than

the markets are assuming. This could result in a rise in the

dollar and US interest rates rising sooner than expected,

dampening liquidity fows into the emerging economies.

Conversely, i US growth retraced and a double-dip

recession ensued, this would result in a weaker export prole

or emerging markets.

More specically, the emerging markets have enjoyed a good

run over the last 10 years, even rebounding more strongly

than many expected rom the international credit crisis o

2008. It would not be out o character or there to be some

increased volatility in 2010. But it is the medium to longer-

term structural drivers that should underpin investment

decisions. So a strong uptrend looks set to continue.

04 F&C Investments

“Te short-term risks are

cyclical not structural”Sam Mahtani, F&C Investments

3

6

9

12

15

2002 2003 2004 2005 2006 2007 2008 2009

EM as % of total

%

Emerging markets as a % o MSCI All World Index

0.0

2.0

4.0

6.0

8.% 0

10.0

12.0

14.0

16.0

Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09

EMBI+ Yield UST 10-year Yield UST 2-year Yield

Emerging Debt Yield vs. US Treasury Yields



F&C Investments 05

Commodity prices

For Russia and Brazil, a change in the value o the dollar

would impact the price o commodities and hence economic

prospects rom export earnings.

India too would eel the eect o a change in the oil price.

High oil prices would hit it disproportionately hard as it is

a net importer o oil and while a country like China with its

high scal surpluses can aord to subsidise its users, India’s

scal position would not aord it such an option. On the fip

side, however, we also need to remember that most o the

increase in demand or oil, which leads to a rise in the oil

price, stems rom growth in emerging economies.

Rising interest rates

I interest rates in the US were raised sooner than expected,

that could hurt emerging economies as the US acts as

the benchmark or global rates, and especially or

emerging markets where currencies are requently pegged

to the dollar.

There is also the possibility that Europe could tighten interest

rates beore the Federal Reserve, impacting consumption

and imports rom developing countries, although with an

already strong Euro they may be more cautious about

doing this.

Viewed in context, however, there are no signs yet that US

growth is accompanied by a build up in infationary pressure.Furthermore with US rates at virtually zero when they do

start to rise they would only be starting a journey back to

‘normal’ levels.

Other pitalls

Recent events in Dubai were a reminder that investing in

emerging markets is not without risk. However, Dubai is not

a typical emerging market, and its lack o transparency is in

contrast to many emerging economies that have more long

standing disclosure investor relations. Contagion rom Dubai

should be viewed as overreaction, given that most emerging

markets investors have little exposure to the market.

The Investment case

Traditionally many investors have avoided investing in

emerging markets due to the greater risk and higher volatility

they have demonstrated historically when compared

against the mature developed markets. Consequently, most

portolios are underweight to emerging market equities and

probably even more so to emerging market debt.

As we can see rom the discussions above, the investment

landscape has changed signicantly in recent years and

there are now sound and undamental reasons why investors

need to consider increasing their exposure to the undoubted

potential o emerging market assets.

n They are underpinned by long-term structural drivers

n They will lead global growth or years to come

n This is not an export driven cyclical upswing, though

exports should recover at some stage

n The domestic economies have increasingly taken over

rom export markets as the drivers o growth

n Falling risk o deault amongst bond issuers

n Mature markets are likely to deliver more muted returns

as the all out rom the credit crunch and nancial crisis

continues to take its toll

Diversication is the key to any successul investment

strategy and adding or increasing emerging market exposure

will improve the diversication o most portolios. This

will provide a portolio with increased growth potential to

compensate or the more muted returns expected rom themature markets, while they deal with the issues acing their

economies and seek a return to a more normal

growth ooting.

Conclusions

Emerging markets have rebounded strongly as investor

sentiment recovered rom the lows o 2008. This is also a

clear refection o the undamental changes that have taken

place within emerging market economies in recent years

and indicates the strength and robustness o the investment

case, be it in emerging market equities or debt.

Positive structural actors now underpin emerging market

economies and they should no longer simply be regarded

as a geared play on the cyclical swings o the US, Europe

and Japan.

In the coming years global growth is set to be driven by the

emerging economies and those o China, India, Indonesia,

Egypt and Latin America. Importantly, even when the mature

developed economies re-establish their normal patterns o

growth, emerging markets will continue to play an important

role in the development o the world economy. As such, they

also have an important role to play in driving the returns rom

any investment portolio.

“It is the positive, long-term,

structural factors that

should underpin investment

decision making.”Je Chowdhry, F&C Investments



“By 2050 it is estimated that the

working population in emerging

economies will be over 4bn

compared to less than 750m indeveloped economies”

“In 2010 its estimated that sales

o mobile handsets in emerging

markets will be over 1.1bn

“In 2009 China overtook Germany

as the world’s largest exporting

economy ”

“In 2010 Chile is set to become

the 31st member o the OECD

and the rst rom South America”

“China, India and Brazil are

already amongst the world’s ten largest economies.” July 2009

Eight o the world’s

ten largest cities arein emerging economies. F&C Investments.“

“

Over 90% o the world’s

population live in emerging

economies.

F&C Investments.

“ “

World Bank



Investment pioneersfor over 140 years

F&C has over 2000 relationships

in over 20 countries and manages

money for over 3 million people.

1868

First ever pooled

investment fund

1932

Taiwanese investments

1961

Japanese investments

1984

Ethical Fund

1988

Multi-manager Fund

1994

iddle East investments

2006

LDI pioneers

2007

Lifestyle range

Climate Opportunities 2009

Independence

At F&C, investment management is all we do, so we are not

distracted by other interests. We are active managers with a

multi specialist approach. This means small entrepreneurial

and perormance driven teams supported by extensive

resources in terms o analytical research, investment

strategy, risk controls and dealing.

F&C has over 2000 relationships in over 20 countries and

manages money or over 3 million people, and with over

£97.8 billion under management*, is a broadly diversied

global investment manager.

Unparalleled experience in emerging

markets

We can point to an unparalleled heritage in investing in

emerging markets along with a record o innovation in

meeting the investment needs o our clients. Through

managing the Foreign & Colonial Investment Trust, the

world’s rst collective investment scheme, we have been

investing in emerging markets or over 140 years, which

means they are part o F&C’s DNA.

Our experience started with xed income securities and

evolved rapidly to include equity investments in 1905.

F&C Emerging Market Milestones

n 1868 Foreign & Colonial Investment Trust launched

n 1868 rst investments in Europe, South America, the

Middle East and the US

n 1881 rst investments in Asia and Australia

n 1883 rst investments in Arica

n 1932 rst investment in Taiwan

n 1934 rst investment in Hong Kong

n 1952 rst investment in Israel

n 1961 rst investment in Japan

n 1984 rst Ethical Fund launched

n 1987 launches rst Latin American Fund

n 1991 launches Emerging Markets Fund

n 1993 launches specialist Indian Fund

n 1996 launches rst Russian Fund

n 2006 launches high alpha emerging markets und

n 2010 launches rst emerging markets ESG und

Indeed, the launch o the Indian Investment Company saw

F&C become only the third company to be awarded Foreign

Investor status in India.

F&C Investments 07

*As at 30 December 2009



08 F&C Investments

F&C’s current Emerging Market Equities team was

established in 1993. Je Chowdhry and Sam Mahtani have

been instrumental in devising its strategy and have worked

together at F&C since 1994. Je took over as Head o

Emerging Markets Equities in December 2005 and the team

was strengthened adding Urban Larson and Gareth Morgan,

two key senior individuals, to the team.

The current team o 12 proessionals, with an average

experience o 14 years in the industry, has a great depth

and breadth o experience o investing in global emerging

markets through all market cycles.

The team is London based and combines a detached

assessment o emerging markets with regular research

trips to obtain a closer hands-on eel o the dr ivers in these

dynamic economies. Sitting alongside our other equity and

xed income investment teams provides a resource and

alternative viewpoint to aid decision making.

As the table to the right shows, we combine the roles o

research and und management our emerging markets team.

Perormance

Delivering investment perormance that meets or exceeds

the expectations o clients is the key to our approach. A

signicant restructuring o the emerging markets process in

2006 and the recruitment o additional resources has seen a

strong and consistent recovery in investment returns.

Name Years in

industry

Years at

F&C

Research & Portfolio Construction

Je Chowdhry 27 15

Sam Mahtani 16 17

Urban Larson 15 4

Gareth Morgan 15 4

Martha Reyes-Hulme 11 2

Claire Franklin 6 3

Research

Mike Hanbury-Williams 25 19

Ben Akrigg 14 4

Peter Dalgliesh 15 3

Anthony Linehan 5 5

Jorry Noeddekaer 9 2

June Lui 11 3

Average years o

experience14 7

Managing emergingmarket equities

China

Taiwan

TIMP*

Korea

India

Africa

Latin

America

Emerging

Europe

Je Chowdhry n n n

Sam Mahtani n n n

Urban Larson n n

Gareth Morgan n n

Martha Reyes-Hulme n

Claire Franklin n

Mike Hanbury-Williams n

Ben Akrigg n n n

Peter Dalgliesh n n n n

Jorry Noeddekaer n n n

June Lui n

Country responsibility

*Thailand, Indonesia, Malaysia, Philippines



Investment process

Our investment process has been designed to deliver

outperormance throughout the cycle by being active and

pragmatic and not bound to a single investment sty le

such as ‘value’ or ‘growth’. All companies are thereore

potential investments. Our style is not a driver o our process,

but a result.

Ranking

(1-4)

and

price

target

F&C Investments 09

Investmentuniverse

Countryresearch

Investmentthemes

Companyresearch

Portolioconstruction Portolio

C o u n t r y r a n k i n g

B o

t t o m u p

T o p d o

w n

S t o c k r

a n k i n

g

Our process can be broken down into three key

components.

1. Country research – The cornerstone o our approach

is that the superior economic growth taking place in

the emerging markets is most clearly discernible within

individual countries as they embrace ree market principles

and begin investing in both human and physical capital.

Country analysis is thereore our starting point because the

political and economic reorm processes are the drivers o

change. We also believe that individual stock markets have a

tendency to become mispriced as a result o sentiment and

liquidity fows on their undamental valuation.

2. Investment themes - We assess investment themes

that could have a country, regional or global impact and

how they may oer investment opportunities. Themes

are regularly discussed across the team to ensure that

they remain valid and new ones are also considered.

These investment themes direct the ocus o company

analysis within each country. Examples o themes includeinrastructure spending, the rising power o domestic

consumers and low penetration o nancial products

3. Stock selection - All members o the team are involved

in company analysis, with specic countries assigned to each

individual. Considerable emphasis is placed on one-to-one

company meetings and we have around 800 each year, both

in our London oces and during research trips to the various

regions. We also use broking and industry research to get a

comprehensive view o each company we are analysing. We

address the ollowing issues in the diagram below.

The und managers draw upon this pool o research to

construct a portolio designed to meet the investment needs

o our clients. Flexibility is key to our approach but with

fexibility comes accountability, and our managers are ully

accountable or all investment decisions made in respect o

their portolios.

We also use an advanced risk modelling tool Sunguard APT,

to monitor risk within our portolios. This ensures that the

areas o greatest risk match up with those o our highest

investment conviction.

Themes

Key investmentthemes on a secularbasis; signicanceo sectors withincountries

Management

Track record,shareholderorientation andstrategy

Growth

Strong marketposition, nicheplayers, visibleand sustainableearnings stream

Financials

Balance sheet andcash fow analysisis particularlyimportant wherereporting standardsare low

Catalysts

Company restruc-turing; governancechanges; newmanagement; newplant; new product;acquisitions/dispos-als; new legislation;cyclicality; interestrate sensitiv-ity; exchange rate

sensitivity

Value

Measured inboth absolute andrelative terms.Measures include:P/E Yield; P/B;EV/EBITDA;P/Operatingcash fow;P/Freecash fow



10 F&C Investments

F&C’s Emerging Market Debt team has been in place since

1991 and they developed the F&C Emerging Markets Fixed

Income philosophy and process in its current orm in 1995,

a development in which Helene Williamson, now Head o

Emerging Market Debt, was instrumental. The six-strong

team has an average o 14 years investment experience,

which also means experience in managing assets across theeconomic cycle.

Within the emerging market debt team, the und managers

also undertake research as we believe this delivers a

fatter structure and improves communication across the

team. There are also three dedicated research analysts

who support the und managers due to the breadth o the

countries to be covered.

We operate a top-down undamental process designed

to identiy relative value primarily between countries,

and highlight market distortions o country spreads and

currencies. The process makes the optimum use o the in-

depth knowledge and expertise o the Emerging Market Debt

team and builds research into the investment process as a

whole. Our investment approach is unique in its emphasis onidentiying ‘country value’, through the systematic, research-

based process we have developed.

We believe that emerging bond markets are oten priced

ineciently and undergo spread and currency fuctuations

that have a weak relationship with the actual political,

economic and repayment risk o a country. Our three stage

investment process thereore starts by researching these

aspects.

Name Country expertise Country Responsibility Years in industry Years at F&CHelene Wil liamson Head o Emerging Debt Russia, Argentina, Venezuela,

Middle East

32 14

Jonathan Mann Senior Fund Manager Asia, Mexico, Brazil 17 4

Will Ne Fund Manager Arica, Georgia, Malaysia,

Kazakhstan, Ukraine, Sri

Lanka, Lebanon, Pakistan,

Qatar

6 3

Sonya Dilova Analyst Corporate, CIS 10 4

Miguel Gandolo Analyst Ecuador, Peru, Columbia,

Risk Analysis

9 3

Philip Ladstaetter Analyst Turkey, EMEA,

Local currency bonds

3 3

Average Years o experience 14 5

Managing emergingmarket debt





12 F&C Investments

Accessingemerging markets At F&C we are committed to providing the vehicles to enable our clients to

access the potential o the emerging economies rom pooled vehicles to

bespoke segregated mandates. We also provide a range o und solutions

rom global and regional mandates to single country unds. Listed below are

the und capabilities currently available. Alternatively, through constructing a

segregated portolio, we can provide you with a bespoke investment vehicle

to meet your own specic needs.

This provides our clients with fexibility in accessing the emerging

economies. They can either outsource all asset allocation and stock

selection decisions to our und managers, or they can select specic regions

or countries as part o constructing their own diversied portolio.

Global Emerging Markets

- core

GEM High Alpha

Emerging Asia

India

Emerging Markets Debt

Latin America

Russia

Pooled Segregated

4 4

4 4

4 4

4

4

4 4

4 4





Important information. All data is as at 31 December 2009 unless otherwise stated.

This document has been produced or inormation only and should not be construed as investment advice. Past perormance should not be seen as an indication o uture perormance. Stockmarkets and currency movements may cause the value o investments and the income rom them to all as well as rise and investors may not

get back the amount they originally invested. Where investments are made in emerging markets, unquoted securities or smaller companies, their potential volatility mayincrease the risk to the value o, and the income rom, the investment. All sources F&C Management Limited unless otherwise stated. F&C Management Limited is Authorised and regulated by the Financial Services Authority (FSA) FRN:119230. Limited by shares. Registered in England and Wales, No. 517895.Registered address and Head Oce: Exchange House, Primrose Street, London EC2A 2NY F&C Asset Management plc is the listed holding company o the F&C group. F&C Management Limited is a member o the F&C Group o companies and a subsidiary o F&C Asset Management plc. F&C, the F&C

logo, reo and the “reo” logo are registered trade marks o F&C Asset Management plc. F&C INVESTMENTS and the F&C INVESTMENTS logo are trademarks o F&C Management Limited. © F&C Management Limited 2009. F&C6887 02/10

Products

F&C oers a wide range o investment opportunities or pension unds,

charities, nancial institutions, corporations and other organisations.

We oer segregated and pooled portolio management through a range

o onshore and oshore vehicles. These cover developed and emerging

markets in equity, bond, cash, property and alternative investment unds.

Please contact us or urther details or visit our website at

or visit our website at www.andc.com

United Kingdom Tel: +44 (0) 20 7628 8000

Netherlands Tel: +31 (0) 20 582 3000

France Tel: +33 (0) 1 78 42 40 92

United States Tel: +1 (0) 617 426 9050

Spain Tel: +44 (0) 20 7011 5398

Sweden Tel: +46 (0) 850 901276

Ireland Tel: +353 (0) 1 436 4000

Portugal Tel: +351 (0) 21 003 3200

Germany Tel: +49 (0) 69 308 55 098

Switzerland Tel: +41 (0) 22 747 7714

Hong Kong Tel: +(852) 3965 3160

Ofces

Head Ofce Institutional Business Tel: +44 (0) 20 7011 4444Email: [email protected]

Global Wholesale Tel: +44 20 7011 5111Email: [email protected]

Broker Support Tel: 0845 799 2299Email: [email protected]

Contact us

Winning gold withF&C

Delivering highly eective investment

strategies is just one part o the

service we provide. As principled asset

managers, we are determined to lead our

industry in all aspects o our business.

In 2006 – 2008, F&C were voted

winners o the ‘Gold Standard’ in the

Fund Management category. Only a ew

companies have been privileged enough

to win a Gold Standard award, and as

such, this is an exceptional achievement.

The Gold Standard Awards aim to

identiy nancial services companies that

excel not just in service but in ve key

areas important to consumers o nancial

products and services:

Financial strength

Ability to meet and exceed customer

expectations

Capability

Outstanding expertise and aptitude as a

und manager

Service

Ability to maintain and grow an eective

post-sales relationship

Fair value

Assessing whether customers receive

great value or money

Trust

Ability to instil condence in consumers

As a result, the Gold Standards are

one o the hardest, most sought ater

awards in the nancial market place.

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