1. INNOCENTS ABROADInternational Diversification Andrea Gherzi Lucrezia Grasso Mustafa Khan Heathcliff Lewis

2. Agenda 2 Firm’s Strategy Global Equity Markets Performance Correlation Analysis Impact of currency movements Portfolio Allocation

3. Agenda 3 Firm’s Strategy Global Equity Markets Performance Correlation Analysis Impact of currency movements Portfolio Allocation

5. Focus on International Diversification

6. Better risk-return tradeoff

7. Diversifying across nations with different economic cycles

12. Global Equity Markets Performance 9 Risk-Return Characteristics (Dollars)

13. Agenda 10 Firm’s Strategy Global Equity Markets Performance Correlation Analysis Impact of currency movements Portfolio Allocation

15. Determine diversification benefits

16. Correlation between U.S and other Markets

18. Correlation Analysis 13 Correlation 1981-2003 Dollars

20. Higher Returns Volatility

22. Correlation Analysis 16 Correlation with U.S market in Local Currency

23. Correlation Analysis Correlation with U.S market in Dollars 17

24. Correlation Analysis 18

25. Agenda 19 Firm’s Strategy Global Equity Markets Performance Correlation Analysis Impact of currency movements Portfolio Allocation

26. Impact of Currency Movements 20

28. Hedge portfolio using forward exchange contracts, swaps etc

29. Political risks

31. International Portfolio Allocation 23

32. International Portfolio Allocation 24

33. International Portfolio Allocation 25