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Investing in Central and Eastern Europe

Via US-Listed ETFS

NBP/INE PAN/GIC Roundtable

Cracow, Poland, May 26, 2012

Bill Witherell

Cumberland Advisors

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Economic Outlook – Real GNP (% PA)

2011 2012 2013

Poland 4.3 2.6 3.0

Hungary 1.7 -0.4 1.8

Czech Republic 1.7 0.4 2.3

Russia 4.3 4.0 4.5

In comparison with

EU 1.5 -0.3 0.8

Source: Cumberland Advisors

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Some Recent Developments

• Polish MPC, despite signs of a weaker economy, surprises with a 25bp increase in policy rates, noting impatience with high inflation. Deposit rate: 3.25%, Base rate: 4.75,Lending rate: 6.25%

• Russian CBR remained on hold.

Refinancing rate:8.0, Overnight deposit rate: 4.0%

• Manufacturing PMI’s weaken n April for Poland, Czech Republic and Hungary. Poland’s manufacturing responded to the shock of Eurozone’s weakening with a greater delay than did Hungary and the Czech Republic, and could contract in Q2.

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Stock Market Capitalization

US$ millions, end 2011 (Jan. 2012 for Russia)

Warsaw Stock Exchange 138,244

Prague Stock Exchange 53,198

Budapest Stock Exchange 18,773

Russia (MICEX-RTS) 877,190

Source: World Federation of Exchanges and PSE

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US-Listed ETFs for Central and Eastern Europe

Ticker Net Assets –US$M

SPDR S&P Emerging Europe GUR 102

iShares MSCI Emerging Markets Eastern Europe ESR 28

iShares MSCI Poland Investible Market EPOL 128

Market Vectors Poland PLND 33

Market Vectors Russia RSX 2,100

iShares MSCI Russia Capped ERUS 113

SPDR S&P Russia RBL 59

Market Vectors Russia Small Cap RSXJ 5

Source: Yahoo Finance

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Eastern Europe ETF – GUR – Compared with All

World EX US ETF – ACWX (YTD May 14)

Sources: Yahoo Finance and Ned Davis

ACWX= 3.48% GUR= 5.89%

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GUR Country Weights (%)

• Russia: 60.68

• Turkey: 16.25

• Poland: 13.56

• Czech Republic: 4.03

• Hungary: 3.70

• Jersey: 0.73

• United Kingdom: 0.72

• Kazakhstan:0.32

Source: State Street Global Advisors

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GUR Sector Weights (%)

• Energy: 38.91

• Financials: 22.60

• Telecommunication Services: 11.59

• Materials: 11.26

• Utilities: 3.57

• Consumer Staples:3.37

• Consumer Discretionary: 3.07

• Industrials: 2.62

• Health Care: 1.11

• Information Technology: 0.34

Source: State Street Global Advisors

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Polish ETF – EPOL - Compared with Eastern Europe –

GUR (YTD May14)

Sources: Yahoo Finance and Ned Davis

EPOL= 6.98% GUR= 5.89%

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EPOL Sector Weights (%)

• Financials: 39.23

• Materials: 17.75

• Energy: 13.06

• Utilities: 11.79

• Telecommunication Services: 6.10

• Consumer Discretionary: 3.42

• Consumer Staples: 3.35

• Industrials: 2.95

• Information Technology:1.89

• Health Care: 0.42

Source: iShares

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Russian ETFs – RSX and ERUS – Compared Eastern

Europe – GUR (YTD May 14)

Sources: Yahoo Finance and Ned Davis

RSX= 1.3% ERUS=5.07% GUR= 5.89%

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ERUS RSX

• Energy 53.87 42.1

• Financials 14.92 11.7

• Materials 12.18 20.0

• Telecommunications 7.74 10.5

• Utilities 5.78 7.2

• Consumer Staples 3.70 5.3

• Information Technology ,, 1.3

• Industrials ,, 0.8

• Health Care ,, 0.7

• Consumer Discretionary ,, 0.4

Sources: iShares and Market Vectors