The Emerging Markets Update

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1

155 W 19th St. New York, NY 10011 +1 888 800 4347 emergingglobaladvisors.com

2015 Review and 2016 Perspectives

EGA Investment Strategy Commentary

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Disclosures

Investors should carefully consider the investment objectives, risks, charges and expenses of a Fund before investing. To obtain a prospectus for

any EGA or EGShares Funds and other important information, as well as to obtain most recent index performance, please call +1 888 800 4347

or visit emergingglobaladvisors.com to view or download a prospectus. Read the prospectus carefully before investing.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any

management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an

index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data

may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

Emerging market investments involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles,

from economic or political instability in other nations or increased volatility, and lower trading volume. The value of an investment denominated in a foreign currency

could change significantly as foreign currencies strengthen or weaken relative to the U.S. dollar.

Frontier markets countries generally have smaller economies or less developed capital markets than in more advanced developing markets and, as a result, the risks

of investing in developing markets countries are magnified in frontier markets countries.

Diversification does not ensure a profit or protect against a loss.

ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund.

The content of this report is presented for general information purposes only. The statements and opinions expressed are those of the author and are as of the date

of this report. All information is historical and not indicative of future results, and subject to change. Reader should not assume that an investment in the securities

mentioned above was or would be profitable in the future. This information is not a recommendation to buy or sell. While the information and statistical data

contained herein are based on sources believed to be reliable, we do not represent that it is accurate and it should not be relied on as such or be the basis for an

investment decision. This report may include estimates, projections and other "forward-looking statements". Emerging Global Advisors, LLC assumes no duty to

update any such statements. Due to numerous factors, actual events may differ substantially from those presented.

EGA

®

, EGShares

℠

and EGAI

℠

are service marks of Emerging Global Advisors, LLC. All other trademarks, service marks or registered trademarks are the property of

their respective owners.

Edward Kerschner is a registered representative of ALPS Distributors, Inc.

EGA and EGShares Funds are distributed by ALPS Distributors, Inc. Emerging Global Advisors and ALPS are unaffiliated.

EGS002654 | Expires: 1/15/2017

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3

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Summary

•

Equities in emerging markets (EM) have now underperformed developed markets (DM) for the last 3

years

•

In 2015, the S&P 500 Index (+1.4% total return) and the MSCI EAFE Index (-0.2%) led, whereas the

MSCI EM Index (-14.8%) and the MSCI FM Index (-14.7%) brought up the rear

•

Within EM regions, Asia 9.8%) was the top performer, beating EMEA 19.7%) and Latin America

(-30.9%)

•

Countries that embraced reform (India, China) continued to outperform those embroiled in political

crises (Greece, Brazil)

•

Within EM sectors, the defensives outperformed the cyclicals and the consumer sectors led the

broader EM Index

•

Emerging Markets Review

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5

Summary

1.

The International Monetary Fund (IMF) forecasts a renaissance in EM growth, which has

historically proven key to EM equity performance

2.

EM earnings are forecast to lead in 2016, with consumer earnings forecast to outperform

3.

EM investors should not fear the U.S. Federal Reserve: During the last three Fed tightening

cycles EM equities have performed well

4.

EM consumer sector has benefitted more when U.S. interest rates rise

5.

EM U.S. dollar debt concerns likely overblown with liabilities as a percent of GDP

range-bound for over 20 years and no sign of balance sheet stress within EM corporates

6.

EM valuations appear attractive relative to other markets and relative to their own historical

average

2016 Perspectives

What EM Investors Need to Know

Source: Bloomberg, MSCI, EGA, as of 12/31/2015. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

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7

Global Index Total Return

12/31/2014 – 12/31/2015

Global Index Performance

1.4%

-0.2%

-0.3%

-14.7%

-14.8%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

S&P 500 Index

MSCI EAFE Index

MSCI World Index

MSCI Frontier Markets

Index

MSCI Emerging Markets

Index

Tot

al

Ret

(8)

Three years of underperformance from EM

•

The MSCI EM Index lost 14.8% in 2015 and has not had a positive return since 2012

–

The

prospect

of the first U.S. rate hike in over 9 years pressured EM, with

all

of EM weakness coming

before

the Fed's December 16 move; in fact, while the S&P 500 lost over 1.3% since December 16, MSCI

EM gained over 0.5%

–

Slowing Chinese growth and falling commodity prices also contributed

•

S&P 500 Index led global regional indices in 2015 and returned 1.4%

–

An improving economic outlook in the U.S. as well as a stronger U.S. dollar helped U.S. equities perform

better

•

The MSCI EAFE Index was the worst performer in 2014, but in 2015 it showed strength and

ended the year as the second best performing region with a flattish return of -0.2%

–

The continued support in the form of quantitative easing (QE) by the European Central Bank (ECB) and

Bank of Japan (BOJ), as well as initial signs of economic recovery helped EAFE perform better

•

The MSCI FM Index lost 14.7% in 2015, after producing a return of 6.7% in 2014

–

The concerns over slowing global growth and the slump in commodity prices, particularly oil, led to the

underperformance of the MSCI FM Index

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9

Emerging Markets Total Return by Country

12/31/2014 – 12/31/2015

Emerging Markets Country Performance

Source: Bloomberg, MSCI, EGA, as of 12/31/2015. LatAm is the MSCI Latin America Index, EMEA is the MSCI EM Europe, Middle East and Africa (EMEA) Index and Asia is the MSCI EM Asia Index.

Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

37.1% 5.0% -6.0% -6.1% -7.6% -8.5% -9.8% _-11.1% -14.4% -16.5% -16.8% -17.9% _{-19.4% -19.5% -19.7% -20.1%} -23.5% -23.6% -24.6% -25.2% -30.9% -31.5% -31.7% -41.2% -42.0% -61.3%

-80%

-60%

-40%

-20%

0%

20%

40%

H

un

ga

ry

Ru

ssia

Ph

ilip

pi

nes

In

dia

Ch

in

a

Sou

th

K

or

ea

A

sia

Ta

iwa

n

Me

xic

o

Cz

ech

Ch

ile

UA

E

In

don

es

ia

Q

at

ar

EME

A

Ma

la

ysia

Eg

yp

t

Th

ail

an

d

Pola

nd

Sou

th

A

fric

a

La

tA

m

Tu

rk

ey

Pe

ru

Bra

zi

l

Co

lom

bia

G

re

ece

Tot

al

Ret

urn

MSCI EM Index: -14.8%

(10)

Asia led, EMEA and Latin America lagged

•

Within EM, just like 2014, Asia (-9.8%) was the best performer in 2015, Europe, Middle East and

Asia (EMEA) (-19.7%) and Latin America (-30.9%) both posted heavy losses

•

Hungary (+37.1%) and Russia (+5.0%) were the only countries to record positive returns;

Philippines (-6.0%), India (-6.1%), China (-7.6%) and Korea (-8.5%) performed relatively better

–

Hungary led the pack after signs of economic improvement in the euro zone

–

Russia bounced back in 2015 after being the worst performing market in 2014

–

Reform-oriented countries like India and China did relatively better and reform-driven markets continued

to outperform the broader EM index in 2015, continuing the trend from 2014

•

Commodity driven markets and those embroiled in political crises were the worst performing

markets

–

Greece (-61.3%), Colombia (-42.0%), Brazil (-41.2%), Peru (-31.7%) were the worst performing EM

countries in 2015

–

Greece’s performance was weighed down by the negotiation over a new debt agreement with its

international creditors and the political drama that followed (market shutdown, referendum, re-election)

–

Brazil’s loss was caused by a slump in commodity prices, deterioration in economic growth, credit rating

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11

Emerging Markets Total Return by Sector

12/31/2014 – 12/31/2015

Emerging Markets Sector Performance

•

Defensive sectors did relatively better

compared to cyclicals

•

All sectors registered negative returns for

2015

•

Health Care (-5.2%), Technology (-6.9%),

Consumers Staples (-9.1%) and Consumers

Discretionary (-11.4%) outperformed the

MSCI EM Index

•

Materials (-21.6%), Utilities (-20.7%),

Telecoms (-19.2%) and Financials (-18.6%)

were the worst performers

-5.2% -6.9% -9.1% -11.4% -16.8% -16.8% -18.6% -19.2% -20.7% -21.6%

-25%

-20%

-15%

-10%

-5%

0%

H

eal

th

Ca

re

Tec

hn

olog

y

St

ap

les

D

isc

re

tion

ary

En

er

gy

In

du

st

ria

ls

Fin

an

cia

ls

Tel

ec

oms

Ut

ili

tie

s

Ma

ter

ia

ls

Tot

al

Ret

urn

MSCI EM Index: -14.8%

(12)

Frontier Markets Total Return by Country

12/31/2014 – 12/31/2015

Frontier Markets Country Performance

11.7% 4.0% 1.9% -0.4% -3.7% -4.2% -4.6% -5.4% _-6.8% -9.4% -12.9% -12.9% -15.0% -15.5% -16.2% _{-17.6% -18.1%} -20.2% -21.6% -22.1% -26.8% -35.0% -43.3% -46.2%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

Est

on

ia

Leb

an

on

Rom

an

ia

A

rg

en

tin

a

Jor

da

n

Slov

en

ia

Lith

ua

ni

a

Vi

et

na

m

Croa

tia

O

ma

n

Moroc

co

Pa

kist

an

Tu

nisi

a

Ma

uri

tiu

s

K

uw

ait

Ba

ng

la

des

h

K

en

ya

Nig

er

ia

Ba

hra

in

Sri

La

nka

Ser

bia

Bu

lg

aria

Uk

ra

in

e

K

az

akh

st

an

Tot

al

Ret

urn

MSCI FM Index: -14.7%

(13)

13

Frontier markets (FM) followed EM down

•

The MSCI FM Index lost (-14.7%) in 2015

–

The concerns over the U.S. Federal Reserve (Fed) rate hike weighed on FM throughout the year. Like EM,

FM losses were also

before

the Fed hike, with FM gaining over 1.3% since the December 16 Fed move, and

S&P 500 losing over 1.3%.

–

Slowing global growth and geo-political issues weighed on FM performance

–

The losses were also linked to the sharp declines in commodity prices, which put pressure on commodity

dependent economies

•

Only three out of the twenty-four frontier countries managed to end 2015 in positive territory:

Estonia (+11.7%), Lebanon(+4.0%) and Romania (+1.9%).

•

Kazakhstan (-46.2%), Ukraine (-43.3%), Bulgaria (-35.0%), Serbia (-26.8%) and Sri Lanka (-22.1%)

were the worst performers

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Emerging Market Equity ETF Fund Flows (cumulative)

1/1/2015 – 12/31/2015

Outflows continue for emerging market equity ETFs

•

A total of US$0.9 billion exited EM equity

(ex-China A shares) ETFs. This follows

US$3.7 billion of outflows in 2014.

•

In Q1, EM saw an outflow of US$3.1 billion

– Outflows increased in March when

strong U.S. economic data signalled

possibility of the Fed rate hike later in the

year

•

In Q2, EM experienced inflows of US$8.3

billion as the Fed pushed back the timing of

its first rate hike

•

Concerns over a global economic

slowdown drained investors’ risk appetite

in Q3 where EM saw outflows of US$10.5

billion; however in Q4 EM saw inflows of

-6

-4

-2

0

2

4

6

8

Jan-15

Apr-15

Jul-15

Oct-15

Flow

s in

US$ b

illi

on

s

Q1 2015 Q2 2015 Q3 2015 Q4 2015

(15)

15

Notable Events in 2015

Source: Bloomberg, EGA, as of 12/31/2015. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

750

790

830

870

910

950

990

1030

1070

1110

Jan-15

Feb-15 Mar-15 Apr-15 May-15

Jun-15

Jul-15

Aug-15

Sep-15 Oct-15 Nov-15 Dec-15

M

S

CI

E

mergin

g

M

ark

et

P

rice

In

d

ex

ECB announced quantitative easing Alexis Tsipras elected as Greek PM

The Fed removed its reference to being

"patient" on rates

Former military ruler Muhammadu Buhari wins

Nigerian election

Saudi Arabia announces stock market access for

foreigners

AK Party wins Turkey election; lost its single-party

government

Governing PRI party did well in Mexico mid-term

election

The Fed indicated interest rates hike will be slow and

gradual

Greece defaults on IMF payment

Greece voted against further austerity

IMF cuts World growth outlook

China devalued its currency (RMB)

Brazil ratings cut to junk status by S&P

Alexis Tsipras re-elected as Greek PM

IMF cuts World growth forecasts again

AK Party wins Turkey re-election; gains single-party

government

ECB lowered interest rate and extended

asset purchase program

The Fed raises interest rate by 25

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2016 PERSPECTIVE:

(17)

17

A renaissance in EM growth

•

IMF forecasts that emerging markets

(EM) will grow 4.5% next year, up

from an estimated 4.0% in 2015

•

This would be the first

acceleration since 2010

, in part

reflecting a less deep recession in

countries that endured economic

distress in 2015 (including Brazil and

Russia)

•

Developed markets (DM) expected

to grow by 2.2% in 2016, up from an

estimated 2.0% in 2015, supported by

accommodative monetary policy and

growth recovery in Europe and Japan

EM GDP growth expected to accelerate in 2016

2000 – 2017e

Source: IMF – World Economic Outlook, EGA, as of 12/31/2015. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

e

20

17

e

G

D

P

G

ro

w

th

(%)

Change in EM GDP growth

Developed Markets

Emerging Markets

(18)

Growth is key to EM equity performance

•

Growth is the key driver of EM

equity performance

•

Historically, when EM GDP growth

accelerates quicker than DM GDP

growth (i.e., the EM to DM growth

differential increases),

EM equities

have usually outperformed

•

The GDP growth differential between

EM and DM is expected to increase

in 2016 for the first time since 2011

•

This may signal better performance

for EM equities

Rising GDP differential signals better EM performance

2000 – 2017e

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

e

20

17

e

EM p

er

for

ma

nc

e r

ela

tiv

e

to DM

EM t

o DM

G

D

P

gro

w

th

d

iff

er

en

tia

l

(19)

19

Strong EM earnings growth with consumer earnings forecast to outperform

For the first time in 9 years,

consensus forecasts EM Earnings per

Share (EPS) growth will lead in 2016

•

During the last time EM earnings led

(2007), the MSCI EM Index gained

39.7%, outperforming the MSCI ACWI

Index (+12.4%), the MSCI EAFE Index

(+11.9%) and the MSCI U.S. Index

(+6.1%)

•

The companies in the Dow Jones

Emerging Markets Consumer Titans 30

Index, the index that the EGShares

Emerging Markets Consumer ETF

(ECON) tracks, are projected to see

their earnings grow by 22% next year

Corporate earnings growth

2016 consensus estimates

7%

10%

12%

22%

0%

5%

10%

15%

20%

25%

MSCI EAFE

Index

MSCI World

ex US Index

MSCI Japan

Index

MSCI US

Index

MSCI EM

Index

Dow Jones

EM

Consumer

Titans 30

Index

EP

S g

ro

w

th

(2

01

6e)

2

(20)

EM investors should not fear the Fed

•

During the last three tightening cycles (’94, ‘99 and ‘04), EM equities have

performed well

•

Historically, EM equities on average have been 17% higher six months after the first hike in Fed

Funds rates (vs. 13% for EAFE and 5% for S&P 500 Index); and on average EM returned 25% six

months after the second rate hike (vs. 13% for EAFE and 5% for S&P 500 Index)

Behavior of EM equities after 2nd Fed rate hike

Last three instances

Behavior of EM equities after 1st Fed rate hike

60

70

80

90

100

110

120

130

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

MSC

I E

M I

nd

ex

p

er

for

ma

nc

e

2nd Fed Rate Hike

60

70

80

90

100

110

120

130

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

M

SCI

E

M

In

dex

p

er

for

man

ce

1st Fed Rate Hike

(21)

21

EM consumer sectors have benefited when U.S. interest rates rise

•

Past data has already shown that

rising U.S. interest rates is not

necessarily a harbinger of doom and

gloom for EM equities. On the

contrary, EM stocks have risen after

the Fed hikes interest rates.

•

Within EM, it is the

consumer that

has benefitted more when the

Fed tightened monetary policy.

Over the last two cycles of rising U.S.

interest rates, EM consumers have

performed better than broader EM.

EM consumer stocks have performed better

Source: Bloomberg, MSCI, EGA, as of 12/31/2015. EM Consumers is a market capitalization weighted average of the MSCI EM Consumer Staples and MSCI EM Consumer Discretionary indices. Data for MSCI EM sectors are available from 1995, hence n.a. for EM Consumers in 1994. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

n.a.

22%

30%

6%

18%

25%

0%

5%

10%

15%

20%

25%

30%

35%

'94 rate hike

'99 rate hike

'04 rate hike

MSC

I E

M I

nd

ex

p

er

for

ma

nc

e (

6-mon

th

s)

MSCI EM Consumers

MSCI EM Index

(22)

The rise of the Indian consumer

•

India’s per capita household final

consumption expenditures levels

(constant 2005 US$) has reached an

all-time high $US730

•

This reflects a 10-year average

growth rate up 84% over the past

decade and at an all-time high

•

Looking at contributing macro

factors such as an aging, yet still

young population, birth rates, and per

capita GDP, our analysis suggests that

by 2020 per capita levels could reach

$1,025

India: consumption at an all-time high

1970 – 2014

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12

14

H

ou

se

hold

fin

al

con

su

mp

tion

ex

pen

ditu

re

, p

er

c

ap

ita

gro

w

th

(con

st

an

t 2

00

5

US$)

, 1

0-yr a

vg

(23)

23

EM U.S. dollar debt should not be a concern

•

U.S. dollar liabilities of EM economies

(sovereign, corporate and individual)

have been steadily rising over the last

ten years

•

However, this concern appears

overblown in context

•

When these liabilities are measured

as a percentage of economic output,

a different picture emerges

•

Liabilities appear to be

range-bound since 1990 and these

concerns appear overblown

EM U.S. dollar debt

1980 – 2014

Source: BIS, IMF – World Economic Outlook, EGA, as of 12/31/2015. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

5

12%

14%

16%

18%

20%

22%

24%

0

1,000

2,000

3,000

4,000

5,000

6,000

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

U.S.

dolla

r

lia

bil

itie

s

of

E

M %

of

G

D

P

U.S.

dolla

r

lia

bil

itie

s

of

E

M (

bil

lion

s)

(24)

No sign of balance sheet stress within EM corporates

•

Investors and the media alike have

expressed concerns over the debt

burden assumed by EM corporates

•

However, debt should be considered

on a net basis, that is gross liabilities

net of gross assets

•

Using the net debt/total equity ratio,

corporate EM does not appear

to be too leveraged

; the leverage

ratio has been in a narrow range

since 2000, after substantial

deleveraging following the 1997 Asian

crisis

EM: Net Debt/Total Equity

1995 – 2014

0%

20%

40%

60%

80%

100%

120%

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

EM C

or

por

at

e N

et

D

eb

t/

Tot

al

Eq

uity

(25)

25

The valuation case for EM

•

EM valuations appear attractive

relative to other markets and

relative to their own historical

average

•

The MSCI EM Index has declined

around 35% since its 2011 high and now

trades at 10.7x estimated earnings, or

almost one-third less than the valuation

of the S&P 500 Index

•

EM currently trades close to its 10-year

average forward P/E ratio, while

valuations in other regions are much

higher and close to their 10-year highs

EM valuations are relatively cheap

12/30/2005 – 12/31/2015

Source: FactSet, MSCI, EGA, as of 12/31/2015. Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

6

0

2

4

6

8

10

12

14

16

18

MSCI EM Index

MSCI EAFE Index MSCI ACWI Index

S&P 500 Index

12

-mon

th

Fo

rw

ard

P/

E

ra

tio

(26)

Keep in Mind: EM currencies are at an all-time low

•

EM currencies have reached all-time

lows and have fallen below the levels

reached during the 2008 Financial

Crisis

•

Record low currencies and low

relative equity valuations should

be supportive of the EM equities

EM currency

1/31/2000 – 12/31/2015

60

65

70

75

80

85

90

95

100

105

110

115

JP

M

or

ga

n

EM

Cu

rr

en

cy

In

dex

(27)

27

Keep in Mind: Hedging EM currency exposure is expensive with no benefit

•

Over the past 16 years, there has

been no return benefit from hedging

EM equity investments: it would have

helped in 8 years and hurt in 8 years

•

The estimated EM FX short term

interest rate differential currently is

3.9% per year –

before

transaction

costs

•

The currency markets for other

international investments – Europe

(euro) and Japan (yen), are deep and

liquid. However, EM is not. EM FX is

heterogeneous and its currencies are

much more difficult to hedge.

Hedging EM: No benefit at a high cost

12/31/1999 – 12/31/2015

Source: Bloomberg, MSCI, EGA, as of 12/31/2015. Hedged Returns are represented by MSCI Emerging Markets Index (Local), Unhedged are represented by MSCI Emerging Markets (USD). Index returns are for illustrative purposes only and do not represent actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses, which could reduce returns. Indexes are unmanaged and one cannot invest directly in an index. Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance data may be higher or lower than actual data quoted. For the most current index performance data please call + 1 888 800 4347.

5%

10%

-1%

-9% -9%

1%

-4%

-6%

7%

-16%

-5%

6%

-1%

6%

7%

10%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Ex

ces

s re

tu

rn

fro

m h

edg

in

g

cu

rr

en

cy

ex

posu

re

s

Average = 0.1%

(28)

Keep in Mind: EM currencies do not create relatively higher volatility

•

EM currencies contribute to higher

volatility of U.S. dollar denominated

equity returns

•

However, EM and FM are not alone with

this challenge. Variations of currencies

in UK, EAFE and Japan have led to even

higher volatility in U.S. dollar returns in

their respective equity indices.

•

Over the long run, EM and FM

currencies have each resulted in a 1.1%

increase in equity volatility, which

compares favorably to the 2.4% increase

contributed by currencies in the UK,

2.2% increase in EAFE, and the 1.3%

increase in Japan

EM currencies do not create relatively higher volatility

12/31/1987 – 12/31/2015

16.8%

17.2%

20.7%

23.2%

19.0%

14.4%

15.0%

19.5%

22.1%

18.0%

14.4%

10%

12%

14%

16%

18%

20%

22%

24%

MSCI UK

Index

MSCI EAFE

Index

MSCI Japan

Index

MSCI EM

Index

MSCI FM

Index

S&P 500

Index

A

nn

ua

lised

V

ola

til

ity

(29)

29

Keep in Mind: Time in the markets is more important than timing the markets

•

Missing just a very few of the best

performing trading days can be

significantly detrimental to returns

•

Total returns for the MSCI EM Index

since the start of 2000 is 136%, yet

falls off sharply to below zero once

only the best 15 of the 4175 trading

days have been missed

EM: Market Timing vs. Time In The Market

Since 2000

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Tot

al

re

tu

rn

s

of

t

he M

SCI

E

M I

nd

ex

(30)

Summary

1.

The International Monetary Fund (IMF) forecasts a renaissance in EM growth, which has

historically proven key to EM equity performance

2.

EM earnings are forecast to lead in 2016, with consumer earnings forecast to outperform

3.

EM investors should not fear the U.S. Federal Reserve: During the last three Fed tightening

cycles EM equities have performed well

4.

EM consumer sector has benefitted more when U.S. interest rates rise

5.

EM U.S. dollar debt concerns likely overblown with liabilities as a percent of GDP

range-bound for over 20 years and no sign of balance sheet stress within EM corporates

6.

EM valuations appear attractive relative to other markets and relative to their own historical

2016 Perspectives

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31

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Glossary of Terms

Developed Markets (DM) are countries that are most developed in terms of economy and capital markets. They generally have high per capita income or GDP, as

well as openness to foreign ownership, ease of capital movement and efficiency of market institutions.

Earnings Growth is the rate at which a company has grown its profitability per unit of equity over a given time period.

Earnings per Share (EPS) is the amount of income earned during a period per share of common stock.

Emerging Markets (EM) are countries with less advanced capital markets and less established stock markets than those in developed markets; these countries

have embarked on economic development and reform programs as well as begun to open up their markets and emerge.

Frontier Markets (FM) are countries with less advanced capital markets and less established stock markets than those in the emerging markets.

Gross Domestic Product (GDP) a money measure of the goods and services produced within a country's borders over a stated time period.

Quantitative Easing (QE) is a type of monetary policy where central banks target the supply of money by buying government bonds.

Price to Earnings Ratio (P/E Ratio) (Forward) is the sum of Bloomberg consensus estimates for the future 12-month earnings of the equity holdings, divided by

the total market value of the equity holdings. Both positive and negative earnings are included in the calculation.

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Index Definitions

Dow Jones Emerging Markets Consumer Titans 30 Index is a free-float market capitalization-weighted index that measures the performance of 30

leading emerging market companies in the Consumer Goods and Consumer Services Industries as defined by S&P Dow Jones Indexes.

JP Morgan Emerging Market Currency Index is a benchmark for Emerging Markets currencies versus the US dollar.

MSCI All Country World (ACWI) Index is an index that captures large and mid-cap representation across 23 developed markets and 23 emerging markets

countries.

MSCI Europe, Australasia, Far East (EAFE) Index captures large and mid-cap representation across developed markets countries around the world, excluding

the U.S. and Canada.

MSCI Emerging Markets (EM) Index is an index that is designed to measure the equity market performance in global emerging markets.

MSCI EM Asia Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging

market countries of Asia.

MSCI EM Europe, Middle East and Africa (EMEA) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity

market performance of the emerging market countries of Europe, the Middle East & Africa.

MSCI EM Latin America Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of

emerging markets in Latin America.

MSCI Frontier Markets (FM) Index is an index that captures large and mid cap representation across 24 Frontier Markets countries.

MSCI Japan Index is designed to measure the performance of the large and mid cap segments of the Japanese markets.

MSCI United Kingdom (UK) Index is designed to measure the performance of the large and mid cap segments of the UK market.

MSCI World Index is an index that captures large and mid cap representation across 23 Developed Markets countries.

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Additional Disclosures

The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a

component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to

make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or

guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes

the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any

MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy,

completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the

foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost

profits) or any other damages.

The Global Industry Classification Standard ("GICS") was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s,

a division of The McGraw-Hill Companies, Inc. (“S&P”) and is licensed for use by Emerging Global Advisors, LLC. Neither MSCI, S&P nor any third party involved in

making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification

(or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability

and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of

their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive,

consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The Dow Jones Emerging Markets Consumer Titans 30 Index is a product of S&P Dow Jones Indices LLC ("SPDJI"), and has been licensed for use by Emerging Global Advisors. Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Emerging Global Advisors. EGShares ECON ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the above mentioned indices.

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35

Edward Kerschner, CFA

Vice Chairman

Investment Strategist

Steve Mo

Investment Strategist

Neeraj Agarwal

C O N T A C T I N F O R M A T I O N

VISIT: emergingglobaladvisors.com

READ:

Emerging Perspectives

CALL: +1 888 800 4347