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    Lazard Lazard Presentation Transcript

    • The Role of Emerging Markets in Your PortfolioCitywire Wealth Manager RetreatOctober 2011James DonaldPortfolio Manager/AnalystFor Professional Investors Only
    • Agenda• The Current Environment• Emerging Markets Evolution• The Case for a Multi-Strategy Approach• Indices• The Lazard Multi-Strategy Approach• Appendices 1 Lazard Asset Management
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    • Valuations and Financial Productivity Emerging markets equities are currently at a discount to developed markets MSCI World Index vs. MSCI Emerging Markets Index P/E ROE (%) 30 30 25 25 20 20 15 15 10 10 5 5 0 0 Dec 03 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Jun 11 EPS Growth (%) MSCI World 50.9 35.4 8.7 25.1 14.9 -9.1 -52.0 83.7 41.2 MSCI EM 57.0 45.1 5.3 22.6 24.4 -5.2 -35.7 64.2 42.4 MSCI World P/E MSCI EM P/E MSCI World ROE MSCI EM ROEAs of 30 June 2011Characteristics shown are calculated on a trailing 1-year basis.Past performance is not a reliable indicator of future resultsSource: Lazard, MSCI 3 Lazard Asset Management
    • EM Fiscal Position and Debt/GDP Ratios are Much Better thanDeveloped World• Emerging Market fiscal deficits are much lower than the levels of developed markets• Emerging Market Debt/GDP ratios exhibit long-term stabilityStrong Fiscal Indicators in EM Lower Debt / GDP Ratios in EM(Fiscal Deficit as % GDP) (Debt as % GDP) 4 100 2 90 80 0 70 -2 60 -4 50 -6 40 -8 30-10 20-12 10-14 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F Emerging Markets Emerging Markets United States United States United Kingdom United Kingdom Eurozone EurozoneIncludes 20 EM countriesSource: Moody’s and Lazard, as of December 2010Forecasted or estimated results do not represent a promise or guarantee of future results and are subject to change. 4 Lazard Asset Management
    • Emerging Markets Inflation Appears to be Stabilizing but Vigilance is Required • Headline inflation has stabilized, at levels comfortably below the “inflation scare” of mid-2008 • Stable commodity prices and decelerating Emerging Markets GDP growth back to potential should reduce underlying pressures going forward • Policy vigilance is still required in selected countries against the backdrop of persistently abundant global liquidity, robust credit growth and structural factors creating inflation inertia Emerging Markets Inflation1 (%) Headline CPI 9.0 Core CPI 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Apr-08 Feb-09 Oct-10 Mar-11 Jan-07 Jun-07 Nov-07 Sep-08 Dec-09 Aug-11 Jul-09 May-10As of 31 August 20111 Calculated as the sum of individual country YoY inflation rates, each weighted by each country’s share in total EM GDP measured in US dollars.Source: IMF World Economic Outlook, Haver Analytics, Lazard 5 Lazard Asset Management
    • Local Government Debt Could Be a Lurking Danger in China • Not everything is perfect in EM economies • Legitimate concerns exist regarding the capital investments in China and the debt used to finance these projects • Many investors have homed in on the Local Government Financing Vehicles (LGFVs) as a source of concern (%) 80 70 60 Additional LGFV debt AMC/MoF 50 Ministry of Railways 40 LGFVs 30 Local government debt Policy bank bonds less LGFV 20 MoF bonds 10 0 Chinese public debtAs of July 2011Source: Standard Chartered Research, China National Audit Office, China Banking Regulatory Commission, Caixin, China Ministry of Finance, People’s Bank of China 6 Lazard Asset Management
    • Emerging Markets Growth Makes Debt Less Worrying• Public debt is less worrying where growth creates tax revenues to support the debt• Interestingly, from a fully-loaded perspective, Chinese debt/GDP is comparable to that of the U.S. and U.K., but China’s nominal GDP growth is 5-6x as highPublic debt, % of GDP, 2009 against average nominal GDP growth 2009–2015As of July 2011Note: Database does not include local-government debt, whereas China includes all known public debtSingapore excludes Central Provident FundProjections and estimated data are not a promise or guarantee of future results and are subject to change.Sources: IMF, World Bank, Standard Chartered Research 7 Lazard Asset Management
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    • EM SC Index vs. EM Standard Index by CountryGeographic Distribution of MSCI EM Small Cap IndexRelative Mkt Cap & No of Companies by Country (%) • MSCI EM Small Cap is the most utilized Standard Small Cap benchmark of the 3 available indexes Weight No of Weight No ofCountries (%) Comp (%) Comp • Index includes 1,987 companies in 21Brazil 15.5 128 6.1 121Chile 1.7 14 1.5 29 countries, substantially higher number asChina 17.3 143 17.0 338 compared to the Standard EM index (824)Colombia 0.8 7 0.1 2Czech Republic 0.4 3 0.4 8Egypt 0.3 3 0.6 12 • EMSC is substantially Asia focused (75%),Hungary 0.4 3 0.2 3 with largest concentrations in TaiwanIndia 7.4 61 9.7 192Indonesia 2.6 21 3.5 69 (20.5%), China (17%), South Korea (16.1%)Korea 14.8 122 16.1 320 and India (9.7%)Malaysia 3.2 26 4.2 84Mexico 4.4 36 2.3 45Morocco 0.2 1 0.2 4 • Major Differences between Standard and SCPeru 0.5 4 0.1 2 indices are weights in Taiwan (+9.4%),Philippines 0.6 5 1.1 22Poland 1.7 14 1.8 35 Brazil (-9.4%), Russia (-5.8%), IndiaRussia 6.8 56 1.1 21 (+2.3%)South Africa 7.3 60 8.2 163Taiwan 11.1 92 20.5 407Thailand 1.7 14 2.9 58Turkey 1.4 11 2.6 52Total 100.0 824 100.0 1,987As of June 30th 2011Source: MSCI from Factset 9 Lazard Asset Management
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    • The Case for Emerging Markets Multi-Strategy InvestmentDrawdown Comparison 0% -10% -26% -39% -20% 39 months -41% -30% -40% 28 months -62% 22 months -56% -50% 77 months Return3 Volatility3 -60% Emerging Markets Equity¹ 8.6% 24.7% Ongoing for 41 months Emerging Markets Equity and Debt² 10.3% 14.3% -70% 1995 1996 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 A balanced approach can reduce entry point risk by curtailing drawdowns1. MSCI Emerging Markets Index As of 23 March 20112. 50% MSCI Emerging Markets Index, 25% J.P. Morgan ELMI+ Index, 25% J.P. Morgan EMBI Global Diversified Source: Lazard, J.P. Morgan, MSCI Index The information in the charts above is for illustrative purposes only and does not represent any product offered by3. Annualized over the period from 2/8/1995 to 3/23/2011. Lazard. 11 Lazard Asset Management
    • Emerging Markets Multi Strategy Risk StrategiesTotal Return and Risk Annualized Return (%) 40 Lazard Developing Markets Equity 35 30 Lazard Emerging Markets Equity 25 MSCI EM Index Lazard EM Multi Strategy Equity + Debt 20 0 5 10 15 20 25 30 35 40 15 50% MSCI EM Annualized Standard Deviation of Return (%) JP Morgan EMBI 25% JP Morgan ELMI Global Diversified Index 25% JP Morgan EMBI 10 Lazard Emerging Income JP Morgan 5 ELMI + Index 0Source: Lazard, MSCI, Reporting currency: USD 12 Lazard Asset Management
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    • Summary• Given the sharp fall in markets and valuations, we are bullish on emerging markets across all time periods• Inflationary pressures and the possibility of substantial capital raising remain, but fundamentals and valuations look attractive• However, regular crises in emerging market equities can destroy years of compounding in weeks• Blending asset classes may significantly reduce volatility• Lazard offers a best in breed emerging market platform with proven expertise in equity, debt and currencies As of 30 September 2011. Opinions expressed are subject to change. 14 Lazard Asset Management
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    • Underlying Investment Strategies Flexible, timely alignment of investment management strengths to market conditions. A diversified portfolio of equity and debt securities. Implementation Role EME Value In times of uncertainty or potential crisis, our Value strategy should outperform, as it focuses on sustainable Concentrated profitability, free cash flow, and attractive valuations. EME Growth When companies in emerging economies are expanding capacity, we use our Growth strategy, which focuses Concentrated on CAPEX, to capture a significant portion of upside. These strategies look to monetize shifts in government policy and changes in currency regimes across the emerging world.Emerging Market Liquid Currency and Debt In situations where government policy exhibits significant influence, we use Emerging Income to leverage specialized knowledge base in central bank behaviour. Our EMD Total Return strategy provides broad emerging markets debt exposure, local currency, hard EMD Total Return currency, corporates, sovereigns and quasi-sovereigns. This strategy also provides the opportunity to take advantage of idiosyncratic inefficiencies in credit spreads, local and external yield curves, and FX rates.For illustrative purposes only. There can be no guarantee that the Strategy’s aims and objectives will be achieved. 16 Lazard Asset Management
    • Economic Context Assessment Each economic cycle has its own specific traits• The Economic Context Assessment (ECA) helps us understand the current economic conditions• Our propriety system gives a dashboard of over 200 economic, market, credit, and volatility indicators• Used to determine which financial context exists, and with what degree of certainty VIX range-bound (25-40) VIX above 50 Gold stable Gold jumps up EM Sovereign spreads fluctuate EM Sovereign spreads over 1000 U.S. T-Bills low but positive U.S. T-Bill Yields at zero or negative Dispersions high Dispersions high Correlations low Correlations high Option volatility skew stabilizes Option volatility skew high Yield curve steepens Yield curve steepens Governments’ Governments agree implementations differ Economic releases worse Economic releases than pessimistic forecasts Panic Differentiation close to realistic forecasts Mania Growth/ VIX under 25 VIX under 15 Expansion Gold stable Gold drops sharply EM Sovereign spreads drop EM Sovereign spreads very low U.S. Dollar weakens U.S. T-Bills high, TIPS widen U.S. T-Bills rise Dispersions low Dispersions low Correlations high Correlations low Option volatility term structure steepens Option volatility skew and term structure flat Yield curve flattens Yield curve flattens Governments agree Governments disagree Economic releases better than Economic releases beat optimistic forecasts realistic forecastsFor illustrative purposes only 17 Lazard Asset Management
    • Emerging Markets Strategy Teams• The Lazard Multi Strategy Team manages a total of £1.6 billion in regional and global mandates• Lazard manages £28.8 billion in six separate emerging markets mandates with a substantial history in a variety of emerging market products and securities Multi Strategy – Emerging Markets Jai Jacob Steven Marra Michael Per Giuseppe Ricotta EME Value Concentrated EME Growth Concentrated James Donald Erik McKee Kevin O’Hare Peter Gillespie Rohit Chopra Ben Wulfsohn Mark Lien Georg Benes Monika Shrestha Emerging Market Liquid EMD Core & Local Currency Currency & Debt Ardra Belitz Ganesh Ramachandran Denise S. Simon Arif T. Joshi Aristotel Kondili Steven Nelson George Varino Chris Milonopoulos Andrew RaabTeam membership is current as of the date of this document..AUM as of 30 June 2011 18 Lazard Asset ManagementSource: Lazard
    • Recent Performance Annualised Returns - Since Inception (Jul/09 1 Month QTD YTD 1 Year – Aug/11) Lazard Multi Strategy - Emerging Markets (Equity + Debt) -4.94 -6.90 -5.79 6.08 16.30 MSCI Emerging Markets Index -8.94 -9.34 -8.55 9.07 17.83 Excess Return (bps) +400 +244 +276 -299 -153 Blended Benchmark* -5.95 -6.19 -3.74 9.37 13.59 Excess Return (bps) +101 -71 -205 -329 +271As of 31 August 2011All data in USD*Blended Benchmark consists of 60% MSCI Emerging Markets Index and 40% J.P. Morgan EMLI+ IndexThe Blended Benchmark is comprised of a 60% weight of the MSCI Emerging Markets Equity (Net) index and a 40% weight of the ELMI + and is rebalanced monthly.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index calculated total return and net of foreign withholding taxes that is designed to measure equity market performance in the global emerging markets.The JP Morgan Emerging LocalMarkets Index Plus™ (ELMI+) is a performance benchmark for emerging market money market instruments. Performance is preliminary and presented gross of fees. Please refer to the attached disclosures for performancepresented on a net of fee basis and for a description of this composite. The performance quoted represents past performance. Past performance is not a reliable indicator of future results.Source: Lazard 19 Lazard Asset Management
    • Historical Performance ReviewLazard Multi Strategy – Emerging Markets (Equity+Debt) MSCI EM Relative Benchmark Tracking Error Benchmark Upside DownsidePeriod Return (%) Return (%) Return (%) Vol (%) Vol (%) (%) Sharpe Sharpe IR Alpha (%) Beta Capture (%) Capture (%) 2009Q3 +17.59% +21.04% -3.45% 14.47% 21.32% 9.00% 6.14 5.24 1.88 +16.88% 0.64 66.5% 52.8% 2009Q4 +7.70% +8.58% -0.88% 14.97% 18.18% 6.27% 2.25 2.09 0.64 +4.03% 0.78 80.1% 76.8% 2010Q1 +5.18% +2.45% +2.73% 11.98% 17.05% 6.76% 1.88 0.59 2.21 +14.97% 0.67 73.9% 61.2% 2010Q2 -6.05% -8.29% +2.24% 19.81% 25.79% 8.08% -1.14 -1.15 0.11 +0.86% 0.75 71.8% 71.9%July 2009 - June 2010 +25.15% +23.48% +1.67% 15.61% 20.89% 7.58% 1.58 1.10 1.01 +7.64% 0.71 72.5% 66.6%Jul-10 +7.21% +8.40% -1.19% 8.22% 11.48% 5.07% 15.48 13.84 4.24 +21.51% 0.66 76.0% 47.3%Aug-10 -1.20% -1.91% +0.71% 9.38% 13.99% 5.34% -1.46 -1.48 0.11 +0.57% 0.65 65.7% 64.9%Sep-10 +7.36% +11.13% -3.77% 7.02% 10.66% 5.12% 18.69 23.24 1.83 +9.36% 0.60 64.8% 46.4% 2010Q3 +13.71% +18.16% -4.45% 8.62% 12.58% 5.25% 7.60 7.36 1.60 +8.38% 0.65 69.2% 58.4%Oct-10 +2.90% +2.91% -0.02% 8.71% 13.09% 5.46% 4.83 3.24 2.50 +13.64% 0.63 71.8% 57.6%Nov-10 -1.49% -2.64% +1.14% 11.35% 16.21% 6.17% -1.46 -1.69 0.57 +3.53% 0.67 67.4% 64.4%Dec-10 +3.94% +7.15% -3.20% 7.86% 12.11% 4.86% 6.94 9.74 -1.09 -5.28% 0.63 58.4% 62.9% 2010Q4 +5.36% +7.36% -2.00% 9.42% 13.98% 5.58% 2.39 2.29 0.44 +2.47% 0.65 65.2% 62.1%Jan-11 -2.79% -2.69% -0.09% 8.66% 12.35% 5.17% -3.45 -2.35 -2.32 -11.98% 0.66 48.0% 68.4%Feb-11 +0.29% -0.92% +1.21% 9.48% 14.68% 6.57% 0.38 -0.79 1.79 +11.75% 0.61 69.1% 56.5%Mar-11 +3.25% +5.90% -2.64% 9.25% 14.80% 6.65% 4.69 6.13 -0.34 -2.24% 0.59 57.2% 58.4% 2011Q1 +0.67% +2.10% -1.43% 9.18% 14.04% 6.19% 0.27 0.60 -0.40 -2.45% 0.62 58.7% 61.3%Apr-11 +3.36% +3.12% +0.24% 8.79% 14.60% 6.39% 5.72 3.15 3.20 +20.47% 0.59 69.8% 45.6%May-11 -1.39% -2.58% +1.19% 10.19% 16.56% 6.89% -1.53 -1.62 0.30 +2.09% 0.60 62.6% 60.2%Jun-11 -0.86% -1.50% +0.64% 8.75% 13.34% 5.58% -1.14 -1.24 0.18 +0.99% 0.63 60.5% 59.9% 2011Q2 +1.04% -1.04% +2.09% 9.27% 14.78% 6.22% 0.43 -0.30 1.12 +6.93% 0.61 64.5% 57.1% July 2010 - June 2011 +21.87% +28.17% -6.30% 9.15% 13.88% 5.81% 2.34 2.00 0.73 +4.22% 0.63 64.7% 59.7%Jul-11 +0.10% -0.38% +0.47% 10.00% 14.82% 5.80% 0.10 -0.32 0.75 +4.35% 0.65 69.0% 64.6%Aug-11 -4.82% -8.90% +4.08% 19.42% 33.19% 15.58% -2.22 -1.97 0.22 +3.36% 0.56 54.6% 54.0%Total +45.32% +43.63% +1.69% 13.03% 18.51% 7.28% 1.41 0.96 0.85 +6.20% 0.67 68.5% 63.0%The strategy inception date is 1 July 2009.As of 31 August 2011.Performance is preliminary and presented gross of fees and was derived from a portfolio that represents the proposed investment for a fully discretionary account for the Lazard Multi Strategy - Emerging Markets (Equity+Debt) strategy, including the allocation to the discounted assets strategy. This information is being provided for illustrative and comparative purposes only and is supplemental to the complete composite performance. Pleaserefer to the disclosure sections for additional performance information, including net-of-fees results and a description of the composite. The performance quoted represents past performance. Past performance is not a reliableindicator of future results.Source: Lazard 20 Lazard Asset Management
    • Lazard Emerging Markets Multi-Strategy - USPUnique Selling Proposition• Best-in-breed EM platform with proven expertise in Equity, Debt, and Currencies• Emerging Markets opportunities across capital structure and asset class• 44 investment professionals with direct involvement in alpha generation (with clearly delineated roles)• “Economic Context” model focuses on matching the right team skills to the investment environment, avoiding asset allocation hubris• We Are Blending Skills, They Use a Group of Generalists Assuming They Have All SkillsAs of 30 September 2011. Subject to change. 21 Lazard Asset Management
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    • GIPS Composite InformationLazard Emerging Markets Multi-StrategyBenchmark: MSCI Emerging Markets IndexReporting Date: 30 June 2011Composite Inception Date: 01 July 2009Reporting Currency: U.S. DollarComposite De scriptionT he composite returns represent the total returns of all fully discretionary, fee-paying portfolios with a Lazard Multi Strategy - Emerging Markets (Equity + Debt) investment mandate. T hrough dynamicallocations to Lazards Emerging Markets equity and debt platforms, the strategy seeks to overweight allocations that it feels are best positioned for the prevailing market conditions. Lazards Emerging MarketsMulti Strategy (Equity + Debt) blend seeks to generate annualized returns that will consistently outperform the MSCI Emerging Markets Index while providing lower volatility. T his strategy continually makes useof short duration Emerging Markets derivative instruments by material use of currency forwards to gain exposure to local money market performance. Additionally, this strategy makes use of leverage for EmergingMarkets currency long and short positions.Calculation of Pe rformance Re turnsLazards account inclusion policy is the first full month or the end of the month in which the account is fully invested. T he returns of the individual portfolios within the composite are time-weighted, use trade dateaccounting, are based upon monthly portfolio valuations, and include the reinvestment of all earnings as of the payment date. T he composite returns are asset-weighted based upon beginning period market values.Additional information regarding policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. For the calendar year ends, between 2009 and 2010, thefollowing are the respective non-fee-paying account percentages of the composite, 100.0% and 100.0%. For these accounts, net of fee performance has been calculated using the standard fee schedule for theLazards Multi Strategy - Emerging Markets (Equity + Debt). Composite returns are shown before taxes and the deduction of custody fees (except for mutual funds which includes all fees). T he composite andbenchmark returns are reported net of foreign withholding taxes on dividends, interest and capital gains. T he composite returns presented represent past performance and is not a reliable indicator of future results,which may vary.Fe e Sche duleLazards standard fee schedule for Multi Strategy - Emerging Markets (Equity + Debt) accounts is 125bps on the first $100 million and 100 bps on the balance of the account. (T his fee schedule may be presented innon-U.S. local currency equivalents based on prevailing exchange rates.) Actual account fees, inclusive of performance-based fees (if applicable) are used in the construction of composite net of fee performanceunless otherwise noted. A complete list and description of all Lazard composites is available upon request.Be nchmark InformationT he MSCI Emerging Markets Index is a free float-adjusted market capitalization index calculated total return and net of foreign withholding taxes that is designed to measure equity market performance in theglobal emerging markets.GIPS Compliance and Ve rification StatusLazard Asset Management claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Lazard AssetManagement has been independently verified for the period of January 1, 1993 through December 31, 2009. T he verification reports are available upon request. Verification assesses whether (1) the firm hascomplied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firms policies and procedures are designed to calculate and present performance in compliance withthe GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. Lazard Asset Management is the "Firm" to which the GIPS Standards apply (Frankfurt office included in Firmdefinition as of January 1, 2003). GIPS is a registered trademark of CFA Institute. CFA Institute has not been involved in the preparation or review of this presentation. T he composite creation date is January2010. Calendar Annualized Jul 09 - Since QTD YTD 2010 1 YR Dec 09 InceptionLazard Rate of Return (%; Gross of Fees) 0.33 1.20 17.23 25.59 20.79 22.06Lazard Rate of Return (%; Net of Fees) 0.01 0.56 15.76 24.80 19.28 20.53Benchmark (%; Rate of Return) -1.15 0.88 18.88 31.24 27.80 25.45Composite Standard Deviation (3 Yr.) N/A N/A N/A N/ABenchmark Standard Deviation (3 Yr.) N/A N/A N/A N/A# of Portfolios 1 1 1 1Composite Dispersion (Asset Wtd. Std. Dev.) N/A N/A N/A N/AComposite Assets (USD Millions) 9.3 9.3 9.1 8.2Total Firm Assets (USD Billions) 145.3 145.3 140.6 116.5 23 Lazard Asset Management
    • Regulatory DisclosuresCertain information included herein is derived by Lazard in part from an MSCI index or indices (the “Index Data”). However, MSCI has not reviewed this product or report, anddoes not endorse or express any opinion regarding this product or report or any analysis or other information contained herein or the author or source of any such information oranalysis. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any Index Data or data derived therefrom. TheMSCI Index Data may not be further redistributed or used as a basis for other indices or any securities or financial products.This is a financial promotion and is not intended to be investment advice. In the UK this document, which is supplied for information only, is for distribution only to professionalinvestors and advisers authorised to carry out business under the Financial Services and Markets Act 2000.References to Director and other titles of employees of Lazard Asset Management Limited are internal titles and do not necessarily imply any legal status or responsibility.Securities identified in this document are not necessarily held by Lazard Asset Management for all client portfolios, and should not be considered as a recommendation orsolicitation to purchase, sell or hold these securities. It should also not be assumed that any investment in these securities was or will be, profitable.Past performance is not a reliable indicator of future results. Fluctuations in the rate of exchange between the currency in which shares are denominated and the currency ofinvestment may have the effect of causing the value of your investment to diminish or increase.Investors are reminded that the value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When yousell your investment you may get back less than you originally invested.Investments in emerging markets carry an above-average degree of risk due to the undeveloped nature of the securities markets in those countries. Investors should considercarefully whether or not investment in emerging markets stocks is suitable for them and, if so, how substantial a part of their portfolio such investments should be.The Emerging Markets Multi Strategy (Equity + Debt) strategy may invest in a range of assets including collective investment schemes which may themselves invest in a range ofother assets. The strategies assets are likely to vary from time to time but each category of assets has individual risks associated with them. The value of the strategy will dependon the combined performance of all the assets held by it and a rise in the value of one asset does not necessarily result in an increase in the value of the strategy.The Emerging Markets Multi Strategy (Equity + Debt) strategy, The Emerging markets Liquid Currency and Debt strategy and the EMD Core and Local Currency strategies mayinvest in financial derivative instruments (“FDI’s”). While the use of FDI’s can be beneficial, they also involve risks different from, and in certain cases, greater than, the riskspresented by more traditional investments. FDI’s may be subject to sudden, unexpected and substantial price movements that are not always predictable. FDI’s do not alwaysperfectly or even highly track the value of the securities, rates or indices they are designed to track. The use of FDI’s to gain greater exposure to securities, rates or indices than bya direct investment, increases the possibility for profit but also increases the risk of loss.The strategies are also subject to the risk of the insolvency or default of its counterparties to FDI investments. In such events the funds may have limited recourse against thecounterparty and may experiences losses.The strategies may also invest a significant amount of NAV in deposits or money market instruments.This financial promotion is issued and approved by Lazard Asset Management Limited, 50 Stratton Street, London W1J 8LLLazard Asset Management Limited is incorporated in England and Wales with registered number 525667. It is authorised and regulated by the Financial Services AuthorityThe contents of this document are confidential and should not be disclosed other than to the person or persons for whom it is intended. 24 Lazard Asset Management