the world-beyond-bri cs-may2013

Capturing Value Worldwide®

(312)-663-8300 | www.thomaswhite.com

STRATEGY FACTSDiscipline Bottom-up/ Active Management Process Fundamental Strategy Assets $410 Million Inception January 01, 2000

Portfolio Management Team Thomas S. White, Jr. Douglas M. Jackman, CFA Wei Li, Ph.D., CFA Jinwen Zhang, Ph.D., CFA John Wu, Ph.D., CFA

Asset Class Emerging Markets Equity

Capitalization Large-to-Mid Cap

Style Core/Value

Benchmark MSCI Emerging Markets (net)

Minimum Initial Investment $10 Million

CONTACTChris Neill, CFA Director of Institutional [email protected]

MAY 2013

The eM world beyond The BrICs

ThoMas whITe eMergIng markeTs sTraTegy

In recent years, few acronyms have caught the fancy of financial markets as much as the term BRIC. When it was first used in 2001 to present Brazil, Russia, India, and China as a group of countries that could dominate the global economy by mid-century, investors were only warming up to emerging markets. But from then on, helped in large part by the media deluge, the change in perception over the growth potential in emerging countries has been remarkable. Within a few years, other countries with bright economic stories peeked out from under the glow of the BRIC group and emerging markets became one of the favored asset classes for global investors seeking higher returns and diversification.

Despite other emerging markets gaining investor attention, the BRIC countries still have a dominant 44% weight in the MSCI Emerging Markets Index. For almost a decade after their launch, the BRIC countries pulled their weight in terms of performance too, as the MSCI BRIC Index (net) returned 16.6% annualized for the 10-year period through December 31, 2011. However, more recently, these large markets have lagged most other emerging markets, except those in Europe that have been hurt by the ongoing fiscal turmoil and recession. For the three year period ending March 31, 2013, India, Brazil, and Russia all lost value and China barely broke even, while the MSCI EM Index annualized 3.3%.

For the Thomas White Emerging Market portfolios, our Investment Committee has taken advantage of the geographical breadth of our research coverage to focus on some of the relatively smaller countries that we believe provide better growth opportunities. This strategy has allowed us to log strong relative performance, since we launched the dedicated Emerging Markets Strategy in mid-2010. Here are some highlights by region:

EM LATIN AMERICA (ex-Brazil, 9% of the MSCI EM Index as of March 31, 2013)

Among the Latin American EM countries outside Brazil, Mexico’s economic performance has been the most noteworthy in recent years. The long struggle to shield its economy from intense drug-related violence, though not yet completely successful, has started to yield positive results. The growing trend among global corporations of ‘nearshoring,’ or locating manufacturing units close to major markets such as the U.S., is benefitting Mexico significantly. The increasing labor costs in Asia, and higher shipping costs from countries such as China to the U.S., have also played a major role in making Mexico an attractive manufacturing location.

THOMAS WHITE INTERNATIONAL EM STRATEGY PERFORMANCE (JUNE 30, 2010 - MARCH 31, 2013)Portfolio Average

WeightPortfolio Total

ReturnBenchmark

Average WeightBenchmark Total

Return

Total Emerging Markets 92.60% 38.91% 99.99% 20.05%Latin America 21.83% 50.10% 22.71% 13.37% Mexico 6.74% 119.56% 4.67% 56.93% Colombia 0.22% 31.88% 1.01% 51.52% Peru 0.26% 63.84% 0.63% 34.71% Chile 1.18% 18.63% 1.75% 25.69%

The presentation above is shown as additional/supplemental information only and complements the Thomas White Emerging Markets Composite Disclosure which is included in this publication.

For the Thomas White Emerging Market portfolios, our Investment Committee has taken advantage of the geographical breadth of our research coverage to focus on some of the relatively smaller countries that we believe provide better growth opportunities. This strategy has allowed us to log strong relative performance, since we launched the dedicated Emerging Markets Strategy in mid-2010.

THE EM WORLD BEYOND THE BRICs | MAY 2013


The reform initiatives launched by President Enrique Pena Nieto have also attracted investor attention to Mexico this year. If the government’s proposals are successfully implemented, key sectors of the economy such as energy and telecommunications would see increased competition. At the same time, Mexico has managed to avoid episodes of excessive inflation and currency fluctuations in recent years. Along with growing average income levels, relatively lower inflation and stable interest rates have supported domestic consumption growth and sectors such as financials and consumer staples. Grupo Financiero Banorte S.A.B. de C.V., one of the leading banks in the country, is among the businesses that have taken advantage of the increased opportunities. Unlike many of its peers, which are subsidiaries of global banks struggling to raise capital, Banorte has a capitalization ratio in excess of 15% that it has successfully leveraged to expand its loan portfolio and make acquisitions. Last year, Banorte joined hands with a government -owned pension fund to acquire the Mexican pension fund assets of Spanish bank Banco Bilbao for $1.6 billion.

In Chile and Peru, among the world’s biggest producers and exporters of copper and other metals, our portfolio selections have tried to reduce the exposure to the volatile commodity cycle. We have emphasized sectors such as banking and consumer staples, which continue to see above average demand growth, aided by the sustained fiscal and monetary stimulus measures.

EM EUROPE/AFRICA (ex-Russia, 12% of the MSCI EM Index as of March 31, 2013)

The emerging economies of Europe continue to bear the brunt of the region’s persistent fiscal crisis that has led to appreciable demand destruction and economic recession. Producers of industrial components and chemicals feeding the large manufacturers in the developed European countries have been the worst hit, even as lower government spending has restrained domestic consumption.

However, our research continues to seek value in countries such as Turkey, which have relatively large domestic markets that are shielded from external shocks. In addition, being at the border of Europe, Turkey is also in a position to take advantage of opportunities in Asia, especially in the Middle East. Turkish industrial conglomerates Haci Omer Sabanci Holding A.S. and KOC Holding A.S. have been strengthening their dominant local market positions while expanding in countries such as Iraq where global competitors are yet to become active. For instance, KOC has increased its capital investment plans to nearly $4 billion this year, investing in sectors such as energy, hospitality, and processed foods in Turkey as well as in neighboring countries.

In South Africa, traditionally a major exporter of resources, government efforts at affirmative action and promotion of equitable growth have led to relatively robust growth in income levels and expansion of the middle class. This has benefited the consumer staples and consumer discretionary sectors which have seen accelerated demand growth in recent years. In addition, the South African consumer goods and pharmaceutical manufacturers as well as retailers are well placed to expand in other countries on the continent. Several countries in Africa have seen fast paced growth in recent



ReturnBenchmark


Return

Total Emerging Markets 92.60% 38.91% 99.99% 20.05%Europe 12.31% 60.48% 10.21% 20.24% Turkey 2.28% 57.88% 1.58% 38.70% Poland 1.66% 107.50% 1.52% 22.05% Czech Republic 1.18% 66.71% 0.34% -6.51% Hungary 0.23% 11.03% 0.34% -12.44%Africa/Middle East 10.30% 66.33% 8.05 26.98 South Africa 9.86% 70.20% 7.55% 31.26% Morocco 0.30% -4.49% 0.14% -18.58% Eqypt 0.14% -40.05% 0.37% -18.13%


years, but global corporations are hesitant to enter these countries due to the small size of these economies and lack of local operating experience. South African corporations, on the contrary, are well versed with the local environment and have the ability to make the necessary changes to their products and services to suit local consumer preferences. Our EM portfolios have maintained overweight positions in South Africa in recent years, with majority of the holdings outside the mining sector.

EM ASIA (ex-China/India, 35% of the MSCI EM Index as of March 31, 2013)

In Asia, investor attention is shifting away from the well-known growth stories of China and India to countries such as Malaysia, Thailand, and Taiwan that came to prominence earlier before fading, as well as Indonesia, which joined the growth club much after the others. Among these countries, Indonesia has seen the most consistent economic performance in recent years, expanding at an annual average of above 6%. Most forecasts, including from the International Monetary Fund, expect the country to sustain this pace over the next several years. The recent trends from Malaysia, Thailand, and Taiwan have also been positive and they are among the few countries where the International Monetary Fund expects economic growth to gain pace when compared to earlier forecasts.

In addition to the export potential, most of these countries are also seeing significant expansion in domestic discretionary spending and our portfolio strategies have attempted to closely track this trend. Accordingly, our EM portfolios are currently overweight on banks in Indonesia, Malaysia, and Thailand which are seeing significant credit demand growth, as well as consumer oriented corporations. Most of these banks have conservative balance sheets as these countries successfully rebuilt their banking industry after the Asian financial crisis in the nineties by enforcing prudent regulations. In Indonesia, Astra International has a dominant market share in the distribution and financing of automobiles and appears uniquely placed to ride the consumer demand growth in one of the most populous countries in the region.

Korean manufacturers have gained significant global market share in sectors such as automobiles and electronic durables in recent years. Samsung Electronics has seen spectacular growth in its smartphone business, outpacing rivals to become the global market leader. Automaker Hyundai Motor and its associate Kia have proved to be more than capable of matching Japanese, European, as well as American competitors in product quality, design attractiveness, and other features. Though Hyundai has faced some recent setbacks including large product recalls, the company continues to strengthen its position across major markets. In addition, domestic demand growth could get a fillip if the declared intention of the new government to introduce policies that favor domestic consumers is successfully implemented.

Korean manufacturers have gained significant global market share in sectors such as automobiles and electronic durables in recent years. Samsung Electronics has seen spectacular growth in its smartphone business, outpacing rivals to become the global market leader. Automaker Hyundai Motor and its associate Kia have proved to be more than capable of matching Japanese, European, as well as American competitors in product quality, design attractiveness, and other features.





ReturnBenchmark


Return

Total Emerging Markets 92.60% 38.91% 99.99% 20.05%Asia 48.15% 26.18% 59.02% 21.65%

Thailand 3.37% 132.07% 1.96% 99.61% Malaysia 2.24% 67.30% 3.26% 42.73% The Philippines 0.99% 114.50% 0.71% 114.08% Indonesia 6.11% 32.23% 2.64% 47.38% Taiwan 3.81% 4.86% 10.95% 27.95% South Korea 12.37% 28.24% 14.61% 35.26%


After several years of intense competition that destroyed margins and drove several corporations to bankruptcy, Taiwanese semiconductor companies are now seeing a revival in fortunes. The exploding global demand for smartphones, tablet computers and other handheld devices has fueled the hunger for processors. At the same time, the industry has now consolidated around a select group of manufacturers that has the capacity, technological capability, and now, improving pricing power.

Concluding Thoughts and Performance Profile

The broad stock selectivity across all three EM Regions in the non-BRIC’s is a reflection of the firm’s expertise and knowledge built up since 1998 when we first began investing in emerging markets through our global and international portfolios. While most overseas investors were just getting their initial exposure to emerging markets back in 2001-2004 with perhaps one or two holdings in each of the BRIC’s, for example, our international portfolio held as many as 25-30 issues across 8-9 countries within the emerging markets. We are happy to provide the supporting evidence through our EM Carveout Analysis (available upon request).

What excites us the most since the launch of the dedicated EM strategy is the relative performance during negative market environments. Since inception on 6-30-10, the portfolio has beaten the index in 13 out of 18 negative months by an average of 132 bps (net of fees) and the 3-year down market capture ratio for the EM composite is 93.60%.

Past performance should not be construed as a guarantee of future performance. Performance includes the reinvestment of all income. The TWI Emerging Markets Strategy performance is from the largest, most representative emerging markets equity portfolio managed by the firm. The presentation above is shown as additional/supplemental information only and complements the Thomas White Emerging Markets Composite Disclosure which is included in this publication. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The index is calculated with net dividends reinvested in U.S. dollars.

The broad stock selectivity across all three EM Regions in the non-BRIC’s is a reflection of the firm’s expertise and knowledge built up since 1998 when we first began investing in emerging markets through our global and international portfolios. While most overseas investors were just getting their initial exposure to emerging markets back in 2001-2004 with perhaps one or two holdings in each of the BRIC’s, for example, our international portfolio held as many as 25-30 issues across 8-9 countries within the emerging markets.



TW EM Strategy (net of fees)

MSCI EM Index (net)

TW EM Strategy (net of fees)

MSCI EM Index (net)

Aug 2010 -1.32% -1.94% Nov 2011 -1.32% -6.66%

Nov 2010 -2.24% -2.64% Dec 2011 -2.96% -1.21%

Jan 2011 -3.49% -2.71% Mar 2012 -0.95% -3.33%Feb 2011 -0.16% -0.93% April 2012 -0.96% -1.20%May 2011 -2.81% -2.62% May 2012 -11.41% -11.21%June 2011 -0.23% -1.54% Aug 2012 1.22% -0.33%July 2011 -0.31% -0.44% Oct 2012 0.84% -0.61%Aug 2011 -8.25% -8.94% Feb 2013 0.16% -1.26%Sep 2011 -17.81% -14.58% Mar 2013 -0.90% -1.72%


AVERAGE ANNUAL RETURNS AS OF THE MOST RECENT QUARTER END MARCH 31, 2013

1ST QTR YTD 1Yr 3Yrs 5Yrs 10Yrs

EM Equity Composite (gross) 1.05% 1.05% 8.57% 8.72% 3.91% 21.49%EM Equity Composite (net) 0.87% 0.87% 7.73% 7.82% 2.97% 20.34%MSCI Emerging Markets Index (net) -1.62% -1.62% 1.96% 3.27% 1.09% 17.05%


This publication is for informational purposes only. This publication is not intended to provide tax, legal, insurance or other investment advice. Unless otherwise specified, you are solely responsible for determining whether any investment, security or other product or service is appropriate for you based on your personal investment objectives and financial situation. You should consult an attorney or tax professional regarding your specific legal or tax situation. The information contained in this publication does not, in any way, constitute investment advice and should not be considered a recommendation to buy or sell any security discussed herein. It should not be assumed that any investment will be profitable or will equal the performance of any security mentioned herein. Thomas White International, Ltd, may, from time to time, have a position or interest in, or may buy, sell or otherwise transact in, or with respect to, a particular security, issuer or market on our own behalf or on behalf of a client account.

FORWARD LOOKING STATEMENTS

Certain statements made in this publication may be forward looking. Actual future results or occurrences may differ significantly from those anticipated in any forward looking statements due to numerous factors. Thomas White International, Ltd. undertakes no responsibility to update publicly or revise any forward looking statements.

Data sources include Factset Research Systems.

TWI Emerging Markets Equity Performance Disclosure

The TWI Emerging Markets Equity Composite contains fully discretionary Emerging Markets accounts and for comparison purposes is measured against the MSCI Emerging Markets (net) Index From Jan 1997 through Dec 2000, MSCI EM net of dividends returns are unavailable, and therefore gross returns were used for this period. The MSCI Emerging Markets (net) index uses withholding tax ranges applicable to Luxembourg based holding companies.Thomas White International, Ltd. claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Thomas White International, Ltd. has been independently verified for the periods July 1, 1992 through December 31, 2011.Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Emerging Markets Equity Composite has been examined for the periods January 1, 2000 through December 31, 2011. The verification and performance examination reports are available upon request.Thomas White International, Ltd. is an independent registered investment adviser. The firm maintains a complete list and description of composites, which is available upon request.The Emerging Markets Composite was created January 1, 2010. Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Non-fee-paying accounts are not included in this composite. Composite performance is presented net of foreign withholding taxes. Capital gains, dividend and interest received may be subject to withholding tax imposed by the country of origin and such taxes may not be recoverable. The MSCI Index range uses withholding tax rates applicable to Luxembourg holding companies. Withholding taxes may vary according to the investor’s domicile. Composite returns represent investors domiciled primarily in the United States, Bermuda and United Kingdom. Leverage is not used in this composite. Past performance is not indicative of future results. The U.S. dollar is the currency used to express performance. Returns are presented gross and net of management fees which includes a performance based fee, and include the reinvestment of all income. All dividends are included in performance calculations as net dividends. Net of fee performance was calculated applying the maximum management fee charged for all accounts in the composite. The annual composite dispersion is an asset-weighted standard deviation calculated for the accounts in the composite the entire year. The three-year annualized standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period. The standard deviation is not presented for 2000 through 2010 because it is not required for periods prior to 2011. Additional information regarding policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.From 1/1/00 through 12/31/09, cash has been allocated on a weighted basis using the cash balances each month for the overall accounts that comprise the EM composite. Cash return has been determined using the weighted average of the cash return for the overall portfolios and applied to the equity-only gross performance. Beginning in 2010, all EM carve out accounts have dedicated cash balances and corresponding returns. Net Fee is calculated using flat fee amount indicated from inception through 12/31/10. Beginning in 2011, Net Fee performance is based on account performance net of actual fees.The investment management fee schedule for the composite is as follows: for the first $10 million, 0.95%; for the next $15 million, 0.75%; for the next $25 million, 0.70%; for


Year End USD MillionsTotal Firm

Assets (millions)

% of Carve-Out Portfolios in Composite

% of Firm Assets

Accounts at Year End Gross Net Annual Std.

Deviation*3-Year Std. Deviation1

MSCI Emerging Markets

(net)

3-Year Std. Deviation (index)1

2012 427 1,962 90% 22% 19 22.87% 21.93% 1.6 21.70% 18.22% 21.50%

2011 297 1,426 88% 21% 14 -13.04% -13.73% 2.2 25.90% -18.42% 25.76%

2010 304 1,435 92% 21% 12 25.78% 24.53% 2.3 - 18.88% -

2009 173 1,083 100% 16% 10 75.84% 74.09% 4.0 - 78.51% -

2008 55 782 100% 7% 7 -53.28% -53.74% 2.6 - -53.33% -

2007 100 1,010 100% 10% Five or fewer 38.46% 37.08% - - 39.39% -

2006 39 426 100% 9% Five or fewer 41.69% 40.28% - - 32.17% -

2005 21 232 100% 9% Five or fewer 56.37% 54.81% - - 34.00% -

2004 7 192 100% 4% Five or fewer 23.67% 22.44% - - 25.55% -

2003 7 238 100% 3% Five or fewer 54.42% 52.88% - - 55.82% -

2002 4 261 100% 2% Five or fewer -13.06% -13.92% - - -6.17% -

2001 3 333 100% 1% Five or fewer 3.94% 2.90% - - -2.61% -

2000 3 376 100% 1% Five or fewer -29.01% -29.71% - - -30.83% -

*Composite dispersion is not shown for periods where there are an insufficient number of portfolios in the composite for the entire year.1The three-year annualized ex-post standard deviation is not required to be presented for periods prior to January 1, 2011.

Capturing Value Worldwide®

THOMAS WHITE INTERNATIONAL

are you PosITIoned for a World of oPPorTunITIes?THE THOMAS WHITE DIFFERENCE

Thomas White International manages in excess of $2.1 billion in assets across multiple global, international and domestic equity mandates. The diverse client base spans public, corporate, endowment, Taft-Hartley, and separately managed account platforms.

Research is the heart of our company. At Thomas White, we believe that original research is the surest path to superior portfolio performance. That is why our disciplined investment process is supported solely by our in-house research.

Our investment process differs from the crowd. Our labor-intensive approach to valuing common stocks combines the patient collection of data, and the execution of thorough historical studies, with the application of fundamental securities analysis. These guidelines provide an investment framework, which is used in the process of determining a company’s current business worth. Valuing global stocks in nearly 50 countries, this industry-based stock selection process employs tailor-made valuation frameworks refined and tested over the 40-year history of the Thomas White organization and its predecessors.

Our veteran analysts, most with PhDs, on average have more than sixteen years of experience working together as a team. Our proprietary research is generated by our professionals, both in Chicago and in our Asia office in Bangalore, India, who have spent their entire careers at Thomas White.

Our investment approach seeks to benefit from buying undervalued stocks and selling them when they return to fair value. Our analysts find that investors tend to overvalue a company against its industry peers when the intermediate business environment is favorable, producing strong earnings growth and then undervalue a company when the environment depresses its business outlook. This pattern is a reflection of human behavior - it occurs in every industry and country around the world. It is this phenomenon that explains a stock’s wide price swings above and below its intrinsic value as a business.

“ Our strategy is to seek smoother, more consistent returns by stressing excellent local stock selection as opposed to betting on major country and sector moves. To succeed in this approach, we have built an exceptional global research team that uses our proprietary techniques to identify the most attractive stocks in each of the major regions of the world. This in effect is our trump card.”

— Thomas S. White, Jr., Chief Investment Officer

Thomas White International, Ltd. 440 South LaSalle Street Suite 3900 Chicago, IL 60605 ( 312 ) 663-8300 ( Main ) ( 312 ) 663-8323 ( Fax ) www.thomaswhite.com

(312)-663-8300 | www.thomaswhite.com | © Thomas White International Ltd, 2013

the world-beyond-bri cs-may2013

Business

emerging countries

emerging markets becameone

msci emerging markets

large markets

bric countries

major markets suchas

fancy of financial markets

msci em index