1 global investment management Harmony update James Klempster, CFA May 2012

2 global investment management 1. Market update

3 global investment management Asset class returns 2011 – local currency terms Source: Bloomberg, May 2012

4 global investment management Global equities back to 2008 levels Source: Bloomberg, May 2012

5 global investment management Asset class returns YTD 2012 – local currency terms Source: Bloomberg, May 2012

6 global investment management Sector returns since 19 December 2011 Source: Bloomberg, May 2012

7 global investment management US 10 year yields versus equities Source: Bloomberg, May 2012 Index level

8 global investment management 10 year Treasury yields at 50 year lows US 10 year Treasury yields since 1962 Source: Bloomberg, May %

9 global investment management US data now broadly in line with consensus Source: Bloomberg, May 2012 Citigroup Economic Surprise Index (US) Negative surprises Positive surprises

10 global investment management GDP’s early glimmer of hope Source: Bloomberg, May 2012 Consensus US GDP growth (2012) ?

11 global investment management But US expected to embark on a strong dose of austerity next year… Source: IMF May 2012 Austerity plans (change in primary deficit)

12 global investment management Expectations for Europe may have bottomed Source: Bloomberg, May 2012 Consensus EU GDP growth (2012 )

13 global investment management 10 year government bond spreads over Bunds Source: Bloomberg, May 2012

14 global investment management Systematic risk has re-emerged Source: Bloomberg, May 2012 UPDATE German versus Italian bond yields

15 global investment management Loss of competitiveness in the periphery Source: Bloomberg, May 2012

16 global investment management Divergent trends in unemployment Source: Bloomberg, May 2012

17 global investment management Mario Draghi “ We see no stigma attached to the use of central banking credit provisions; our facilities are there to be used”

18 global investment management EU base rate Source: Bloomberg, May 2012 Mario Draghi’s term starts as President of the ECB

19 global investment management Ease of doing business... Source: 2011 World Bank data, May 2012 US UK Ireland Canada Germany Japan France Portugal Spain Italy China Greece Russia Brazil India Easiest Hardest

20 global investment management Time to start a business in days.... Source: 2011 World Bank data,May 2012

21 global investment management Total tax rate (% of commercial profits)... Source: 2011 World Bank data, May 2012

22 global investment management Ease of doing business... Source: 2011 World Bank data, IMF May 2012

23 global investment management Chinese inflation Source: Bloomberg, May 2012

24 global investment management This core resilience may explain why inflation hasn’t fallen as sharply as expected Source: Bloomberg, May 2012 Chinese CPI and world food price (CNY)

25 global investment management Export sector still fairly soft Source: MGIM, May 2012 Chinese global exports (Real $) (Deseasonalised)

26 global investment management Credit tighter than during Lehmans Source: Bloomberg, May 2012 Chinese Money Supply

27 global investment management Monetary policy Source: Bloomberg, May 2012 Interest rate (%)

28 global investment management Inexorable rises can fall flat Source: Bloomberg,April2012

29 global investment management Are shareholder and owner interests aligned? Source: Bloomberg,April2012

30 global investment management Poor correlation between stock markets and GDP Rolling 30 year correlation: US GDP and S&P returns Discrete annual US GDP and S&P returns Ratio Correlation Source: Bloomberg,April2012

31 global investment management Population: sheer weight of numbers is not enough January 2012

32 global investment management Interdependent January 2012

33 global investment management Interdependent January 2012

34 global investment management Equity market valuations Source: Bloomberg, May 2012

35 global investment management Key themes for 2012 ‘ New normal’ is now the consensus Global rebalancing set to continue for several years Subdued GDP growth now widely expected Eurozone sovereign debt remains a tail risk Recent data suggests economic thawing in DM Current deflationary environment will ultimately turn inflationary as governments resort to the printing presses – but not yet 2012 started strongly, remain positive but do not let expectations become outlandish Add to equity on bouts of weakness Diversification and dynamic asset allocation key to performance

36 global investment management 2. Fund focus

37 global investment management Harmony Balanced fund strategic allocation Holdings up to 30 th March 2012

38 global investment management Harmony Growth fund strategic allocation Holdings up to 30 th March 2012

39 global investment management Harmony US Dollar Balanced asset allocation Source: MGIM, Allocations 30 th March 2012

40 global investment management Harmony US Dollar Balanced currency allocation Allocations as of 30 th March 2012 Source: Asset allocations as of 30 th March 2012

41 global investment management Harmony US Dollar Balanced performance Source: Lipper, Performance as of end of April 2012

42 global investment management Harmony US Dollar Balanced managed performance Source: Lipper, Bloomberg. Holdings as off end of April

43 global investment management Harmony US Dollar Growth asset allocation Source; MGIM, Allocations as of 30 th March 2012

44 global investment management Harmony US Dollar Growth currency allocation Source: Asset allocations as of 30 th March 2012

45 global investment management Harmony US Dollar Growth performance Source: Lipper, Performance as of end of April 2012

46 global investment management Harmony US Dollar Growth manager performance Source: Lipper, Bloomberg. Holdings as off end of April

47 global investment management Harmony funds protecting capital in 2007/08 Performance rebased to 100 Source: Lipper Hindsight, May Past performance is not indicative of future returns.

48 global investment management …and again in 2011’s weak markets Performance rebased to 100 Source: Lipper Hindsight, May Past performance is not indicative of future returns.

49 global investment management Harmony performance vs. peers Source: Lipper, returns to end of April 2012

50 global investment management Questions

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52 global investment management Contact: Lucy Richardson Marketing Manager Momentum Global Investment Management T: