Exhibit 91: EM Local Debt Currencies and Exhibit 92: S&P Goldman Sachs Commodity Total Developed Market Interest Rates Return Index Rising global interest rates would be a headwind to EM Commodities generated their first double-digit return local debt. since 2009. % 1/1/2016 = 100 Annual Returns {%) 1.2 Average G3 10-Year Rate 34 60 ——— EM Local Debt FX (Right, Inverted) 1.0 %° 40 + 98 ~~ vata a aie ; » AEE att i 106 0.2 -40 108 0.0 110 -60 Jan-16 Apr-16 Jul-16 Oct-16 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 Data through December 31, 2016. Data through December 31, 2016. Source: Investment Strategy Group, Bloomberg, Datastream. Source: Investment Strategy Group, Bloomberg. represent a headwind this year (see Exhibit First, EMD’s almost seven-year duration is 91). Meanwhile, any boost to emerging market a liability in a rising-rate environment. This is exports from the modest pickup in global growth particularly true now that the Federal Reserve we expect is likely to be dwarfed by ongoing US has resumed tightening policy, a fact evident in trade policy uncertainty, European political risk EMD’s 4.3% drop in response to increasing rate and China fears. Lastly, an acceleration of recent hike expectations late last year. Second, with outflows from EMLD markets could magnify these spreads standing near two-year lows, there is scope risks, particularly since 60% of the cumulative for spread widening based on US and European inflows into the asset class since 2004 are policy uncertainty and renewed China growth experiencing losses at current market levels. fears. Third, countries accounting for 37% of Although the number of concerns is large, so is © EMD—including Mexico, China, South Africa the risk premium of the asset class. As previously and Brazil—have negative outlooks from at least seen in Exhibit 76, the currencies in the EMLD two rating agencies, raising the potential for index are 15% undervalued. From this starting downgrades.!” A potential default by