FEBRUARY2017

INVESTMENT

IMPLICATIONSOF

GLOBAL

DEMOGRAPHICSHIFTS

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HIGHLIGHTS

• Worldpopulationgrowthisslowingdown,fertilityratesacrossthe globe are dropping and people are living longer. This iscausing a major shift in the composition of the worldpopulationasoldercohortsareforminganincreasinglyhigherpercentageofthetotal.

• WithfertilityratesintheEUat1.5,theUnitedStatesat1.9andChinaat1.6,thelargestglobaleconomiesarealreadybelowthelongtermaveragemaintenancerateof2.1.

• An aging population combined with a low birthrate presentseriouspressuresongovernmentsandhouseholdfinancesastheystruggletosecureappropriatehealthcareandelderlycareservicesexpensesandkeeppensionsfunded.

• The implications of such shifts are wide reaching. There ismountingevidencethatanagingpopulationisimpactinglevelsofproductivity,spendingandsavingbehaviors,inflationlevelsandultimatelygeneraleconomicgrowth.

• Longtermtrendsofeconomicindicatorsseemtobepointingtoa structural paradigm shift. Inflation and Interest rates havebeenonadecliningtrendformorethan3decades.

• Theglobaleconomyhasbeenregisteringlowsingle-digitgrowthrates for the past 5 years and is currently expected to stayaroundtheselevelsforatleastanother5years.

• Going forward, economic growth would be driven more byincreasesinproductivityandlessbyleverage,hencereducingthevolatilityofGDPgrowthratesinadditiontosmootheningandextendingeconomiccycles.

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WORLDPOPULATIONGROWTHISSLOWINGDOWN

Thesizeoftheworldpopulationanditscompositionarekeyvariablesindeterminingpatternsofeconomicgrowthandlevelsofproductivityandconsumption.Thetremendousgrowthratewitnessedbytheworldpopulationsincethe industrial revolutionhelpedpropeleconomicgrowth across the globe. It took humanity all of its history to reach the one billionmarkaroundtheyear1800.Weachievedthesecondbillioninonly130years,thethirdbillionin30years,andthefourthandthefifthin15years(1974)and13years(1987),respectively.Theworld population today is close to 7.5 billion, with the largest two countries in terms ofpopulation,ChinaandIndia,accountingfor36%ofthetotal,witharound1.4billioneach.

Chart1.Global&USPopulationHistoricalGrowthRates

Source:WorldBank

Theexplosivegrowthinworldpopulation,however,seemstobetaperingdown.AsillustratedinChart1above,theglobalpopulationgrowthratealmosthalvedoverthepast50years.Itdeclinedfromaround2.1%inthemid-1960stoalittleover1%currently.

Along with the slowdown in global population growth rates, a fundamental shift in thestructure of the demographic composition appears to be underway; societies around theworldareagingandtheworldisgettingolder.

Peoplearelivinglongerandhavinglesschildrenthantheirparentsandgrandparents.Sincethebeginningof the secondhalfof the twentiethcentury, theworld started towitnessasignificantshift in itsdemographiccomposition.Acombinationofadvances inthemedicalfield, improvementinlivingstandards,betternutritionalhabits,andlifestylechangeshavemadeitpossibletolivelonger.Longevity,orlifeexpectancy,isimprovingacrosstheworld.Although this improvement is more obvious in advanced and high-income countries,increasinglongevityisaworldwidephenomenon,albeitinvaryingdegreesamongdevelopedanddevelopingnations.

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Chart2.LifeExpectancy

Source:WorldBank

Onaverage,peopleborninlow-incomecountriesasrecentlyasthe1980swereexpectedtoliveuptotheirlate40s.Theaveragelifeexpectancyforthesamecountrygroupisnowslightlyover60years.Overthesameperiod,lifeexpectancyforOECDmembercountriesincreasedfrom72to81years.

Alongwithincreasinglongevity,weareseeingfertilityratesdropping.Fertility,definedasthetotalnumberofchildrenborntoawomanoverherlifetime,isdroppingacrosstheworld.Theglobalaveragefertilityratecurrentlystandsataround2.45downfrom3.28asrecentlyas1990and4.80in1970.

Chart3.HistoricalGlobalFertilityRate

Source:WorldBank

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SHIFTINGCOMPOSITION

Withanincreasinglongevityandadecliningfertility,societiesacrosstheglobeareaging.Thecohortofolderpeoplethathaveretiredorareabouttoretire(aged64+)isincreasingmuchfaster than the young cohort (aged 0-15) which are supposed to replace the retirees topreserveabalanceintheworkforce.Moreimportantly,andgiventhatthecurrentdecliningtrendinfertilityisunlikelytoreverseinthenearfuture,itseemsthattheworldpopulationisundergoingastructuraltransformationthatisbothirreversibleandfarreachingintermsofits impactonmacroeconomicoutcomes.Suchchangeswillaltermacroeconomicvariablesthroughchannels suchas savingsand investmentbehavior, spendingpatterns, abilityandwillingnesstotakeinvestmentrisksandlaborforceproductivity.

Chart4.HistoricalAgeGroupDistribution-World Chart5.HistoricalAgeGroupDistribution-EU

Source:WorldBank

Thefirstdirectimpactofincreasinglongevitythatiscombinedwithadecliningfertilityrateisashiftinthecompositionofpopulation.Typically,thisleadstoanincreaseintheshareoftheoldercohort(65+)attheexpenseoftheyoungercohort(0-14).Oldergroupsinthepopulationarebecominganincreasinglymoresignificantportionofthetotal.

IntheEuropeanUnionforexample,thepercentageofthepopulationthatisabove65yearsofagehaspracticallydoubledinthepast50yearsorso.Ithasincreasedfrom10%ofthetotalpopulationin1970to19%currentlyanditisontracktoreach30%by2050.Overthesameperiod,thesegmentofthepopulationaged0-14hasdeclinedfrom26%to16%.Lookingattheglobal figures, thepictureand the trend remains identical: older cohortshavealmostdoubledfrom5%to9%between1960and2020,whiletheyoungerconstituents’shareofthetotalhasdeclinedfrom37%toaround26%.Althoughthistrendismuchmoresevereinricherandmoredevelopednations,itisobviousthatitisquicklycatchingupintherestoftheworld.(Seetheappendixformoredetailedchartsondifferenteconomicblocksandincomegroups).

Inbothgroups,andinmuchofthedevelopedworldcountries,theshareoftheworkingagepopulation ison thedecline.OECD figures show that the shareof theworkingagegroup

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reachedamaximumof67%andstartedtodeclinesincethen.Thistrendwillaccelerateinthecomingdecadestoreach58%by2050.

The most direct consequence of this shift in composition is the increase in old-agedependencyratio,definedasthetotalnumberofpeopleaged65andabovedividedbythetotalnumberofpeopleofworkingageor15-64. InJapan,whichhasbeenregardedasanexception in terms of aging population and sluggish economic growth, the old agedependencyratiohasdoubledfrom13%in1980toaround25%in2000andisontracktodoubleagain to48%by2020.According tocurrentdata, Japan isno longeranexception.GermanyandFrancearecatchingup,withdependencyratiosprojectedtoreach35%and34%respectivelyby2020.

As one would expect, this phenomenon is not restricted to the developed world. Lowerincomeanddevelopingcountriesarefollowingthesameupwardtrendbutitisstillinearlystages.Onagloballevel,theoldagedependencyratioincreasedfrom11%in1980to14%in2000anditisheadingtowards22%by2020.

Chart6.OldAgeDependency–LargeEconomies Chart7.OldAgeDependency–MajorEconomicBlocks

Source:WorldBank

WHATDOESTHATMEANFORTHEWORLDECONOMY?

Demographicchangesareusuallyconsideredlonger-termphenomenathatmayormaynotmaterializeatsomepointinthefuture,whileeconomicpolicydiscussionsandmainstreammedia seem to have largely dismissed such trends. Whenever subjects such as agingpopulation,lowfertility,andlongevityarediscussed,theattentionshiftstoJapanandSouthKorea,wherethisphenomenonhasbeengoingonforquitesometime.Thereareindications,however, that this phenomenon has already started to shape the globe, and not only indeveloped countries, but in less developed and low-income countries, albeit to a lesserextent.

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Some research seem to indicate that not onlywill these demographic shifts have seriouseconomicconsequences,but thatsuchconsequenceshavealreadystarted to reshapetheglobaleconomyandhavethepotentialtoexplainmuchofwhatisbeingobservedtodaysuchasgenerally low inflation, low interest rates, lesseffectivemonetarypolicy,and relativelylowereconomicgrowthacrosstheworld.

AmultitudeofIMFworkingpapers,articlesintheFinancialAnalystsJournal(FAJ)andtheCFAInstitute Magazine, have discussed and studied the effects of demographic changes onfinancialmarketsandtheeconomy,onmonetarypolicyeffectiveness,andontheoutlookforinflationandlongtermeconomicgrowth.Forthepurposesofthisdiscussion,wewillnotgointothedetailsofsuchacademicandtechnicalanalysis.Instead,wewilltrytoemployalogicalapproach indiscussingthe implicationsofsuchdemographicshiftsontheglobaleconomyand the investment environment while keeping the supporting conclusions of theaforementionedstudiesinthebackground.

INFLATION

Populationgrowthwasfoundtoaffectinflationpositively.Thefastpopulationgrowthofthe1960s had the effect ofmoving aggregate demand higher and faster than the aggregatesupply could catch up. Themarkets needed to clear, or to balance, which was achievedthroughanincreaseinprices,leadingtoinflationduringthefollowingdecadesfueledbythebaby boomers.When the opposite happens, it is only logical to conclude that it will bedeflationary. Today’spicture is radically different from thatof themid-20th century.Babyboomersarenowretiringandpopulationgrowthisslowingdown,andmoreimportantly,thecompositionofthepopulationisdrasticallychanging.

Chart8.USLongTermConsumerPriceIndex-AllUrbanConsumers(Y/Y)

Source:U.S.BureauofLaborStatistics,retrievedfromFRED,FederalReserveBankofSt.Louis

Onagloballevel,wehavemovedfromapopulationwhere37%ofpeoplearebelowtheageof15and5%areabove65in1960toapopulationwhere10%areretireesandonly26%arebelowtheageof15.ThispictureismorepronouncedinlargeindustrializedcountriessuchasGermany,France,theUK,andtheUSwheretheshareoftheelderlyhasdoubledbetween1960to2015whiletheshareofthosebelow15declinedbyaround40%onaverage.

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Thishassignificantimplicationsonthespendingpatternsofthegeneralpopulation.Youngercohorts are generally net borrowers and their consumption patterns tend to be moreinflationary.Theyborrowtofinancetheireducation,residence,cars,furniture…etc.Astheygrowolder,theirincomestartstoimproveandtheystartpayingdowndebt,accumulatingassetsandsaving for retirement.Theybecomenet savers, they invest,and theyhave theabilityandwillingnesstotakeinvestmentriskhopingthatitwillpayoffinhigherreturnwhentheyretire.Bythetimetheyreachretirementtheywouldhavepaiddowntheirmortgage,orevensoldtheirhouseandmovedtoasmallerone.Theystartspendingfromtheirsavingsandpension and spend more on healthcare and recreational activities such as travel andexperiences rather than material things. Their consumption trends become, therefore,deflationary.

ECONOMICGROWTH&LABORPRODUCTIVITY

Productivityandthesizeofthelaborforcearetwoofthemajordriversofeconomicgrowth.Intoday’sdigitaleconomyandwithanagingpopulation,twoforcesseemstobepullinginopposite directions on economic growth. On one hand, labor force is shrinking,with thedecliningfertilityandincreasinglongevitywhich,whentakeninisolation,wouldtranslateintolowereconomicgrowth.Ontheotherhand,technologyandautomation isdisplacing low-skilledworkersand reducing theneed forhuman labor ingeneralandmakingproductionmuchmoreefficientandlesslaborintensive,whichisconducivetopositivegrowth.

Reality,however,isnotthatstraightforward.Thesocialandeconomiccostsoftechnologicaladvancement are significant. Technological advancement is completely transforming thelabormarketthroughchangesinthelearningcurve.Intraditionalmanufacturingandserviceindustries, amaturing labor forcewould ideally translate intomore experienced laborerswhichwouldleadtomoreefficienciesandultimatelyincreasedproductivity.Addtechnologytothemixandthislogicisturnedupsidedown.Asignificantchallengeintoday’sjobmarketistokeepupwithtechnologicaladvancement.Traditionally,formaleducationandtrainingarefrontloadedintoone’scareer.Formalschooleducationfollowedbyjob-specifictrainingearlyoninthecareerconstitutedthebulkofthetraininganemployeereceivesoverhisorherprofessional life. Intoday’s jobmarket,amaturing laborforce isfindingit increasinglydifficulttokeepupwithtechnologicaladvancement.

Costlylifelongtrainingisbeingadvocatedasaprerequisitetomaintainingproductivitylevelsthroughoutone’scareer.Thisphenomenonhas,accordingtosomestudies,reducedthepeakperformance in some industries to the mid-40s which is roughly half way through theconventional working age of 15-64 years. This goes against the advocates of policies ofextendingtheretirementagebeyondtheageof65aimedatreducingtheburdenofpensionproviders,whichwillbediscussedinthenextsections.

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Chart9.CivilianUnemploymentRate

Source:U.S.BureauofLaborStatistics,retrievedfromFRED,FederalReserveBankofSt.Louis

ThereisabigdebatetodayintheUnitedStatesaboutthe“real”unemploymentrate.Isthecurrentunemploymentof4.7%reallyrepresentativeofthejobmarketpicture?Whatabouttheparticipationrate?AccordingtoarecentanalysisbyBloombergdiscussingthenewUSadministration’sviewsonunemployment,addingbackpeoplewhodroppedoutofthelaborforcesince2007andthosewhoareworkingpart-timebutwouldliketoworkfulltime,theunemployment rate would be around 16.7%! However, when taking into account thatsignificantfactorscontributingtothedropinlaborforceparticipationareanagingpopulationandpeopledroppingoutoftheworkforcesimplybecausetheirskillsarenolongercompatiblewiththerequirementsofthejobmarket,thesenumbersseemdebatable.

Chart10.LaborForceParticipation(age25-54) Chart11.LaborForceParticipation(All)

ource:U.S.BureauofLaborStatistics,retrievedfromFRED,FederalReserveBankofSt.Louis

Theeffectofpopulationagingisillustratedincharts10and11.Totalparticipationreachedapeakofalittleover67%intheyear2000andhasbeendroppingeversince.Itcurrentlystandsat62.7%registeringadeclineofover7%.However,lookingattheparticipationratefortheagegroupbetween25and54years,thedeclinewasn’tthatsteep.Participationwentdown

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fromapeakof84.4%inJanuary2000toalowof80.7%inmid-2015andhasbeenrecoveringsteadilytoaround81.5%currently.

INTERESTRATES&RETURNS

After the financial crisis of 2008 central banks around the globe embarked on massivemonetaryeasingmeasurestoshoreuptheglobaleconomy.Now,morethaneightyearsaftertheonsetof thecrisis,mostmajoreconomiesarestillemployingsome formofmonetaryeasingandinterestratelevelsarestillatrecordlows.TheUSFederalreserveistheonlymajorcentral bank that started to reverse its easing policy. It has been increasing rates verygraduallywhilerelyingontheunravelingconditionoftheeconomytotakeappropriateactiontowardsfulfillingitsdualmandateofmaximizingemploymentandstabilizingprices.

ThefirstrateincreaseinthecurrentcyclewasinDecember2015.Expectationswereforuptofourrateincreasesin2016onlyoneofwhichmaterializedinDecember.

Chart12.EffectiveFederalFundsRate(%)

Source:BoardofGovernorsoftheFederalReserveSystem(US),retrievedfromFRED,FederalReserveBankofSt.Louis

LookingattheFed’sdotplots,expectationsareforthreerateincreasesthisyeartobringthetargetto1.375%thenanotherthreein2018to2.125%.Thetargetistoreachalongtermlevelof3.0%by2020.Evenifthedotplotsexpectationsmaterialize,orevenifthelongtermtargetlevelwasbroughtforwardasaresultofmoreaggressivetightening,interestratelevelswillstillbeonthelowsidewhencomparedtohistoricallevels.

Infact,interestrateshavebeenonadecliningseculartrendformorethanthreedecadesasshownonchart13below,whichdepictsthe10-Yeartreasuryconstantmaturityratesince1980.Therehasbeensomeeconomiccyclerelatedupsanddownsthatsometimeslastedforyears,buttheoveralllongtermtrendisclearlydownwards.

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Chart13.10-YearTreasuryConstantMaturityRate(%)

Source:BoardofGovernorsoftheFederalReserveSystem(US),retrievedfromFRED,FederalReserveBankofSt.Louis

UndertheFed’sdualmandateofmaximizingemploymentandstabilizingprices,theformerseemstohavebeenlargelyachievedwithunemploymentdroppingdownto4.7%fromover10%attheonsetofthefinancialcrisis.Thelatter,however,isprovingtobealittletrickier.Withinterestratelevelsathistoriclowsandtheeconomydoingrelativelyfine,inflationhasbeendecliningsincemid-2011afterwitnessingsomevolatilityaroundthefinancialcrisis.

Chart14.Inflationvs.InflationExpectations Chart15.USRealGDPGrowth

Source: U.S. Bureau of Labor Statistics, retrieved fromFRED,FederalReserveBankofSt.Louis

Source:U.S. Bureauof EconomicAnalysis, retrieved fromFRED,FederalReserveBankofSt.Louis

Tomeasureexpectedinflationasdepictedinchart14above,weusedthe5-yearbreakeveninflationrate,whichisderivedfrom5-yeartreasuryconstantmaturitysecuritiesand5-yeartreasuryinflation-indexedconstantmaturitysecurities.Actualinflationdidn’tcatchupwiththe expectations until December 2016when it reached 2.1% up from 1.7% the previousmonth.Eventhoughinflationhasbeenontherisesincethebeginningof2015,theconcern

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hasrecentlybeenaboutdeflationratherthananovershootininflation.Itwasonlyinthepastfewmonthsthatthisriskseemstohavesubsidedassignsofinflationstartedtoshowacrosstheworld.

Inflation could either be imported or homegrown. A strong home currency would meancheaperimportsandisthereforedeflationary.ThisisthecasefortheUnitedStatescurrently.TheUSdollarindexhasincreasedbymorethan25%sincethemiddleof2014onthebackofa divergingmonetary policywith the rest of theworld and amore stable economy. TheoppositeishappeningnowinEuropeandtheUKasinflationinbothseemstobepickingupatleastpartlyduetoweaknessintheEuroandBritishPound.

Homegrowninflation,ontheotherhand,resultsfrompressuresonresources.Itisthe“toomanydollarschasingtoofewgoods”principle.Bythesametoken,therelationshipbetweeninflationandmoneysupplyisdemanddriven.Ifinflationwasdrivenbythesupplyofmoneyitwouldhavebeenstraightforwardtoreflate.However,inflationisdrivenbythedemandformoney,whichmakesitademographicissue.

Acombinationoffactorsworkedagainstinflationpostfinancialcrisis.Therewasatransferofdebtfromtheprivatesectortothepublicsectorwhilecentralbanks’balancesheetballoonedandhouseholdsdeleveraged.Addhighunemploymentandanagingpopulation,whichbynature isreluctanttoborrowmoney,anddemandformoneywillplummet.Thepriceonepaystoborrowmoneybecomesirrelevant.Takingthesefactorsintoconsiderationalongwiththefactthatthemoneymultiplier,orvelocityofmoney,hasbeenonadowntrendsincetheearly1980s,monetarypolicyalonebecomesincreasinglyineffectiveinreflatingtheeconomy.

Chart16.VelocityofMoneySupply(MZM)

Source:FederalReserveBankofSt.Louis,retrievedfromFRED,FederalReserveBankofSt.Louis

Note:MZM(moneywithzeromaturity)isthebroadestcomponentandconsistsofthesupplyoffinancialassetsredeemableatparondemand:notesandcoins incirculation, traveler’schecks (non-bank issuers),demanddeposits,othercheckabledeposits,savingsdeposits,andallmoneymarketfunds

Duringpreviouseconomicdownturns,wheninterestratepolicywasmoreeffective,reducingthe interest level in an economy would induce investment and consumption throughleverage. The massive deleveraging which happened post 2008 rendered such causalrelationship lesseffective.Changingeconomicdynamicsandanagingpopulation seemto

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havetheeffectofsmoothingandelongatingeconomiccycles.Economicgrowthwillhavetobedrivenmorebyproductivityandlessbyleverage.

Chart17.IMFWorldRealGDPGrowthForecast,2010-2020

Source:InternationalMonetaryFund

Highsingledigitgrowthfortheglobaleconomyseemstohavebeenlonggone.TheIMFinitsannualforecasthasconsistentlyadjusteditsestimatesforglobalGDPgrowthdownwardsforthepast six years.Chart17depicts thepathofestimatedGDPgrowthat the timeof theforecast since2011versus theactual realizedgrowth inworldGDP.We’vebeen trendingdownbetweenfrom3.5%toaround3.0%forthepastfewyears,and,evenaccordingtoIMFestimates,worldeconomicgrowthwillnotreach3.75%until2020.

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FINALTHOUGHTS

An aging global population and dropping fertility rates are reshaping theworld economythroughashrinkinglaborforce,changingproductivity,andarealteringconsumerbehaviorandsavingsandinvestmenttrends.

The global financial crisis of 2008 was unique in many ways; it acted as a catalyst thatacceleratedandmagnifiedtheeffectsofdemographicshifts.Itcoincidedwiththeretirementofbabyboomersputtingadditionaldownwardpressureonconsumptionandproductivity.The crisis caused a significant amountofwealthdestruction.According to a studyby theFederal Reservemedian householdwealth in the US declined by 40% in just three yearsbetween 2007 and 2010. This destruction of wealth caused people to become moreconcernedaboutfinancialstabilityandledtoanaccelerationindeleveragingatthehouseholdlevel.

Thecombinationofthesefactorscontributedtocausinganexpansionarymonetarypolicytobecomelesseffectiveinrestartingtheenginesoftheeconomy.Thesteadyimprovementintheunemploymentratewaspartlyduetocontinueddeclinesintheparticipationrates,whileinflationcontinuedtodeclineforthebetterpartofthepasttenyears.

One of the most direct consequences of the global financial crisis and the ongoingdemographicshiftsisthechangeinthestructureofthelabormarket.Anagingpopulationischanging the age profile of the labor pool at a timewhen technological advancement ismakingitmorechallengingforworkerstokeepupwiththeskillsrequiredbythejobmarket.Thereforeitbecameverydifficultforskilledemployeeswholeftthejobmarketduringthefinancial crisis to come back years later, because their skillset was already outdated andbecausetheywerereplacedbyayoungergroup.

Insuchanenvironmentofmoderatingeconomicgrowth, lowleverageandhistorically lowinterestratelevelsandinflation,itbecomesincreasinglydifficulttoconceiveofhighreturnsfortraditionalassetclasses.Fixedincomereturnsareatall-timelows,dividendyieldfortheS&P500currentlystandsataround2.1%comparedto5.5%in1980,andequitymarketsareatall-timehighs.AddtothisamultitudeofpoliticalfactorsandeventsunfoldingintheUSandEuropeanditbecomesextremelychallengingtoconceiveofanassetallocationfromatraditionalmenuofassetclasses thatwould result ina reasonable riskadjusted return. Itfollows that non-traditional asset classes such as alternatives, private debt and illiquidstrategiesingeneralareincreasinglygaininginvestors’interestintheirquesttocapturetheextrareturnofferedbytheseinstruments.

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APPENDIX–FERTILITYRATES:

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2002

2005

2008

2011

2014

France

1.51.71.92.12.32.52.72.93.13.33.5

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

OECDMembers

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

EuropeanUnion

4.74.95.15.35.55.75.96.16.36.56.7

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

LowIncomeCountries

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

MiddleEast&NorthAfrica

16

APPENDIX–FERTILITYRATES:

Source:WorldBank

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

India

1.0

2.0

3.0

4.0

5.0

6.0

7.0

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

China

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

SaudiArabia

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

Kuwait

17

APPENDIX–POPULATIONDISTRIBUTION:

Germany Japan

UnitedStates France

MENA OECDMembers

EuropeanUnion LowIncomeCountries

Populationages0-14(%oftotal) Populationages15-64(%oftotal) Populationages65andabove(%oftotal)Source:WorldBank

21 23 19 16 15 14 13 13 13 13 12

67 63 66 69 68 66 66 64 59 56 55

12 14 16 15 16 21 21 23 28 31 32

- 102030405060708090

100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

30 24 24 18 15 13 13 13 12 12 12

64 69 6770

68 64 61 59 57 54 51

6 7 9 12 17 23 26 28 30 34 36

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

31 28 23 22 21 20 19 19 18 18 17

60 62 66 66 66 67 66 65 61 60 60

9 10 11 13 12 13 15 17 21 22 22

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

26 25 22 20 19 18 18 18 17 17 17

62 62 64 66 65 65 62 61 59 57 57

12 13 14 14 16 17 19 21 24 26 26

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

43 44 43 43 37 30 30 30 26 23 22

53 52 53 53 59 65 65 65 66 67 64

4 4 4 4 4 5 5 5 7 10 13

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

30 28 25 23 21 19 18 18 17 16 16

62 62 64 66 66 67 66 64 62 60 58

8 9 11 12 13 15 16 18 21 24 26

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

26 25 22 19 17 16 16 15 15 14 14

64 64 65 67 67 67 65 64 61 58 56

10 12 13 14 16 18 19 21 25 28 30

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

43 44 45 45 45 44 43 41 38 35 33

55 53 52 52 52 53 54 55 58 60 62

3 3 3 3 3 3 3 3 4 4 5

- 102030405060708090100

1960 1970 1980 1990 2000 2010 2015 2020 2030 2040 2050

18

Contacts:

InvestmentStrategy&AdvisoryAssetManagement ArrayaTowerII,Floor35 P.O.Box4950,Safat13050,Kuwait T.(965)22245111 F.(965)22246904 E.NBKCAPITAL.IA@nbkcapital.com

19

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