asset management updates from adcb …...banks voiced concerns over the economic recovery. in asia,...

Asset Management Updates from ADCBSEPTEMBER 2010, Issue 9

GLOBAL MARKETPERFORMANCE

WELCOME MACRO ECONOMIC

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Dear well informed investor,

Shiny black shoes and slightly oversized crisp

white shirts on little bodies signals an important

annual event on the family calendar - back-to-

school in Abu Dhabi. The first day back at school

always brings with it a cocktail of excitement

and enthusiasm blended together with a dash of

nervous apprehension as children navigate the

new environment and the unfamiliar faces of

teachers and fellow learners. New friends, new

teachers, new opportunities…a bright new start. It

is all part of a grand super-cycle, and this time of

year marks the start of a fresh new cycle within

this super-cycle of life.

This past weekend also marked the start a new

cycle within a super-cycle of a different kind.

Financial markets cheered the arrival of what has

informally come to be known as Basel III, a new

global set of financial rules aimed at averting

or at least withstanding a repeat of the global

financial crisis of 2008 and 2009. Brought about

by the devastating events of 2008 the Basel

Committee on Banking Supervision set in motion

the process of realigning banking regulations late

in 2009 with the publication of two consultative

documents for review and comment. On 12th

September 2010 the new draft regulations were

announced and it is expected that the rules

will be formally approved at the G20 meeting in

Seoul with a target of 31st December 2011 for

the regulations to be adopted and implemented

by all G20 countries. The major feature of the

new rules is a requirement for banks to hold core

tier-one capital of 7% of risk-bearing assets;

this represents more than triple the current

requirement of 2% which is mitigated by an

extended timeframe for banks to implement of

the new regulation. Bank will have until 2015 to

reach a core tier-one capital ratio of 4.5% which is

to be augmented by an addition “counter-cyclical”

capital conservation buffer of 2.5% that needs

to be in reached by 2019. Markets breathed a

sigh of relief following the announcement of the

new regulation after expectations of far more

onerous requirements by bankers and analysts.

Commenting on the new regulations, Jean-Claude

Trichet, president of the European Central Bank

said: “In the present episode of global recovery,

after this shock we had in the previous years,

uncertainty is the enemy in a way. With this

decision ... we eliminate uncertainty in a large area

which is a major contribution in consolidating the

global economy. It’s a work in progress.”

In this month’s newsletter we look at how

increased Euro zone sovereign risk could slow

recovery in developed economies as well as

looking at improved sentiment in UAE job

market. We also introduce the FTIF TEMPLETON

FRONTIER MARKETS FUND and provide a

brief overview of the ADCB Emerging Market

Currencies Linked Account which is currently open

for subscription. To learn more about these and

other ADCB wealth management products and

services please contact your ADCB Relationship

Manager or SMS INVEST to 2626.

Kind Regards

Mark Friedenthal

Head of Capital Market Solutions

Welcome to September’s asset management update from ADCB

Asset Management Updates from ADCB

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ISSUE 9SEPTEMBER 2010

The bears were back in August with all global equity markets sharply lower after weak economic data worldwide rattled investor confidence. In the US, continued high jobless claims and an unexpected slump in Philadelphia-area manufacturing increased concerns that the rebound in corporate profit growth will not be sustained, while a 27% slump in existing home sales in July suggested the economy may slow significantly. As a result, the NASDAQ, S&P 500 and Dow Jones fell 6.24%, 4.74% and 4.31%, respectively. The FTSE dipped 0.62% after the US and UK central banks voiced concerns over the economic recovery. In Asia, the Nikkei 225 crashed 7.48% after Japan’s consumer prices fell for a 17th consecutive month and household spending rose less than forecast. In addition, export growth slowed for a fifth month in a row in July after the yen surged close to a 15-year high against the dollar, undermining investor confidence. The Hang Seng slipped 2.35% on reports that the government will tighten mortgage lending

rules and increase the supply of land to stabilize the property market. Moreover, property prices rose at their slowest rate in six months while decelerating import growth in China clouded investor sentiment. However, the Sensex 30 edged up 0.58% driven by a resumption in monsoon activity and in-line corporate results.

The DSM and KSE apart, all GCC markets closed lower in August. The TASI fell 2.82% on Insurance and Building & Construction sector weakness, while the DFM slid 1.90% due to weak performances by the Materials and Utilities sectors. The ADX lost 1.86% on heavy selling of Real Estate and Energy stocks.

The yen rose against the dollar which in turn appreciated against most other currencies as signs of a global economic slowdown boosted demand for dollar denominated assets. NYMEX crude and OPEC prices tumbled 8.90% and

1.54%, while natural gas plunged 22.49% as high inventories and concerns regarding an economic slowdown caused investors to switch into gold and bonds. Consequently, gold rose 5.64%, while the yield on US Treasury 10-year notes fell 47 bps.

Dubai’s 5-year government bond (USD denominated) spread increased by ~5 bps m-o-m in August as lingering worries over the global economic recovery dented investor confidence.

Global Market Performance


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Global Market Performance


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Commodities, Yields and Currencies

Commodity Latest 1M Change 1Yr Change YTD

Yields and Currencies Latest 1M Change 1Yr Change YTD

Index Snapshot (World Indices)

Index Latest 1M Change 1Yr Change YTD

S&P 500 1,049.33 (4.74%) 2.81% (5.90%)

Dow Jones 10,014.72 (4.31%) 5.46% (3.96%)

NASDAQ 2,114.03 (6.24%) 5.22% (6.84%)

Hang Seng 20,536.49 (2.35%) 4.12% (6.11%)

Nikkei 8,824.06 (7.48%) (15.90%) (16.33%)

FTSE-100 5,225.22 (0.62%) 6.44% (3.47%)

Sensex 30 17,971.12 0.58% 14.71% 2.90%

MSCI World 1,080.70 (3.92%) (0.45%) (7.51%)

MSCI EM 970.05 (2.15%) 15.56% (1.96%)

TASI 6,106.42 (2.82%) 7.87% (0.25%)

DFM 1,483.67 (1.90%) (22.49%) (17.74%)

ADX 2,498.52 (1.86%) (13.76%) (8.93%)

KSE 6,688.60 0.51% (15.49%) (4.52%)

BSE 1,418.61 1.77% (6.49%) (2.72%)

MSM 30 6,256.81 (0.60%) (1.39%) (1.76%)

DSM 7,226.15 2.80% 1.53% 3.84%

NYMEX Crude 71.92 (8.90%) 2.80% (9.38%)

OPEC 73.05 (1.54%) 1.85% (5.29%)

Natural Gas 3.82 (22.49%) 28.18% (31.51%)

Gold 1,248.30 5.64% 31.17% 13.98%

Platinum 1,523.50 (3.38%) 22.47% 4.35%

Copper 7,355.50 2.23% 13.33% 0.13%

Sugar 19.75 0.92% (19.02%) (26.72%)

Soybean 1,008.00 (4.22%) (8.36%) (3.04%)

Corn 424.40 8.10% 30.10% 2.41%

Wheat 652.40 (1.36%) 38.51% 20.50%

Rice 11.09 5.02% (19.99%) (23.89%)

2Y US Treasury 0.47 (0.08) (0.50) (0.67)

10Y US Treasury 2.47 (0.47) (0.93) (1.38)

EUR 1.2689 (2.89%) (11.57%) (11.49%)

G BP 1.5471 (1.52%) (5.09%) (4.32%)

J PY 84.70 (2.04%) (9.13%) (9.01%)

Commodities, Yields and Currencies

Commodity Latest 1M Change 1Yr Change YTD

Yields and Currencies Latest 1M Change 1Yr Change YTD

Index Snapshot (World Indices)

Index Latest 1M Change 1Yr Change YTD

S&P 500 1,049.33 (4.74%) 2.81% (5.90%)

Dow Jones 10,014.72 (4.31%) 5.46% (3.96%)

NASDAQ 2,114.03 (6.24%) 5.22% (6.84%)

Hang Seng 20,536.49 (2.35%) 4.12% (6.11%)

Nikkei 8,824.06 (7.48%) (15.90%) (16.33%)

FTSE-100 5,225.22 (0.62%) 6.44% (3.47%)

Sensex 30 17,971.12 0.58% 14.71% 2.90%

MSCI World 1,080.70 (3.92%) (0.45%) (7.51%)

MSCI EM 970.05 (2.15%) 15.56% (1.96%)

TASI 6,106.42 (2.82%) 7.87% (0.25%)

DFM 1,483.67 (1.90%) (22.49%) (17.74%)

ADX 2,498.52 (1.86%) (13.76%) (8.93%)

KSE 6,688.60 0.51% (15.49%) (4.52%)

BSE 1,418.61 1.77% (6.49%) (2.72%)

MSM 30 6,256.81 (0.60%) (1.39%) (1.76%)

DSM 7,226.15 2.80% 1.53% 3.84%

NYMEX Crude 71.92 (8.90%) 2.80% (9.38%)

OPEC 73.05 (1.54%) 1.85% (5.29%)

Natural Gas 3.82 (22.49%) 28.18% (31.51%)

Gold 1,248.30 5.64% 31.17% 13.98%

Platinum 1,523.50 (3.38%) 22.47% 4.35%

Copper 7,355.50 2.23% 13.33% 0.13%

Sugar 19.75 0.92% (19.02%) (26.72%)

Soybean 1,008.00 (4.22%) (8.36%) (3.04%)

Corn 424.40 8.10% 30.10% 2.41%

Wheat 652.40 (1.36%) 38.51% 20.50%

Rice 11.09 5.02% (19.99%) (23.89%)

2Y US Treasury 0.47 (0.08) (0.50) (0.67)

10Y US Treasury 2.47 (0.47) (0.93) (1.38)

EUR 1.2689 (2.89%) (11.57%) (11.49%)

G BP 1.5471 (1.52%) (5.09%) (4.32%)

J PY 84.70 (2.04%) (9.13%) (9.01%)


Increased Euro zone sovereign risk could slow recovery in developed economiesWhile the global economic recovery remains intact, various sovereign credit events during the past few months threaten to slow the rate of recovery with market and liquidity risk rising, particularly within the Euro zone. This is largely due to the impact of increasing government deficits on the banking system, leaving banks more reluctant to lend to one another, except at short maturities. As a result, market volatility has increased worldwide as investors have become more risk averse. Consequently, we expect continued low credit availability to the corporate sector, which could slow economic recovery in developed countries.

Concerns regarding sovereign credit risk emerged earlier this year as credit rating agencies successively downgraded various Euro zone economies including Greece, Spain, Portugal and Ireland. Such measures resulted in higher sovereign spreads within the region,

restricting the ability of borrowers to raise capital as investors opted for safe haven assets including gold, US treasuries and German bunds. Further, the sovereign debt crisis has also impacted the banking system due to European banks’ sovereign debt exposure, resulting in increased uncertainty and consequent liquidity hoarding by Euro zone banks. In addition, we note an increasing risk of adverse feedback loops between sovereign debt and the financial sector due to the potential negative effect on government balance sheets should weak banks require financial support. Such a situation occurred in Ireland as the government was forced to inject funds into two troubled banks: Allied Irish Bank and Bank of Ireland. S&P estimates the total cost of bailing out both banks at EUR 90bn, equal to around 58% of GDP, comprising EUR 50bn for bank recapitalization and EUR 40bn for liability acquisition.

Moreover, the Euro zone’s most fragile economies face significant total bond rollovers of around EUR 300bn in Q3 and Q4 2010. As a result, such countries could face tough competition from significant rollover requirements amounting to around USD 4bn from other Euro zone countries, the US, UK and Japan. Potentially, troubled Euro zone states may need to refinance loans at a higher cost, exerting further pressure on government finances.

Being at the centre of the current sovereign crisis, the Euro zone requires its various governments to implement substantial austerity measures. As state spending is radically reduced to cut budget deficits, downside risks to regional economic recovery increase sharply. Further, the adverse effect of such measures may not be restricted to the Euro zone alone as the deleveraging process could spread given cross-border banking exposure. Should these tighter conditions persist, they could continue to undermine corporate

credit availability and potentially slow the rate of recovery in more developed countries.

Macro Economic Trends


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ADCB Wealth Management Group I Research I +97126973525 | [email protected] 2

Selected Euro Zone Sovereign Bond Rollover (In EUR bn)

0

50

100

150

200

Q3

'10

Q4

'10

Q1

'11

Q2

'11

Q3

'11

Q4

'11

Q1

'12

Q2

'12

Q3

'12

Q4

'12

Source: Global �nancial stability report, IMFNote: Selected economies include Greece, Spain, Italy, Portugal and Ireland

Financial Bond Issuance (In USD bn)

0

20

40

60

80

100

120

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10

US UK Euro Area

Source: Global �nancial stability report, IMF

Hiring Expectations in the UAE

0%

10%

20%

30%

40%

In 3 months In one year

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Source: Bayt.com

Salary Increases in 2009 (%)

0% 1% 2% 3% 4% 5% 6%

UK

Germany

Australia

US

UAE

Source: Mercer Survey Results




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Improved sentiment in UAE job marketAs the credit crisis developed during H2 2008, redundancies steadily increased in the UAE, initially within the construction and property sector and later nationwide. Subsequently, the working population declined as unemployed migrants were forced to return to their native countries. However, the UAE labour market appears to have stabilized over the past 3-6 months based on increasing optimism regarding the overall economic environment. As a result, job opportunities and salaries are likely to rise in 2010-11.

The UAE job market appears to be recovering according to a recent Jobs Index Study by Bayt.com, in association with YouGov Siraj. It shows almost 54% of UAE employers plan to recruit over the next three months, suggesting significantly improved employment prospects. The study reports that 29% of organizations are certain to hire in

the next three months with a further 25% likely to do so. Similarly, almost 64% of respondents propose to hire new staff within the next 12 months, confirming improving business optimism. With employers increasingly determined to hire, the UAE job market is ranked second overall in the regional job attractiveness index. At Industry level, the banking, construction and telecom sectors are likely to report an early improvement in employment prospects. Further, the Job Index Study shows more organizations expect initially to back-fill junior vacancies arising from lay-offs during the recession. Later, middle and senior level job opportunities may also arise once organizations determine their expansion plans and consequently increase their capex.

The UAE’s improving job market is also confirmed by a 33% q-o-q increase in job vacancies in Q2 2010 as shown by a study conducted by the FiveTen

Group, a recruitment firm. Its research also revealed a 113% q-o-q rise in the number of interviews as companies looked to fill vacant positions.

With the UAE employment outlook likely to continue to improve, salaries may rise faster this year than last. According to RAK Free Trade Zone, average salaries may increase by 7-7.5% in 2010, maintaining last year’s outperformance, despite stricter budgets in most industries.

With employment set to rise further over the next 2-3 quarters, the UAE may attract increasing numbers of economic migrants, ensuring the resumption of a rising population trend, which may drive cross-sector growth.

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SEPTEMBER 2010


ISSUE 9

ADCB Wealth Management Group I Research I +97126973525 | [email protected] 2

Selected Euro Zone Sovereign Bond Rollover (In EUR bn)

0

50

100

150

200

Q3

'10

Q4

'10

Q1

'11

Q2

'11

Q3

'11

Q4

'11

Q1

'12

Q2

'12

Q3

'12

Q4

'12

Source: Global �nancial stability report, IMFNote: Selected economies include Greece, Spain, Italy, Portugal and Ireland

Financial Bond Issuance (In USD bn)

0

20

40

60

80

100

120

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10

US UK Euro Area

Source: Global �nancial stability report, IMF

Hiring Expectations in the UAE

0%

10%

20%

30%

40%

In 3 months In one year

De�

nite

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g

Pro

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Pro

babl

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g

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g

Don

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Source: Bayt.com

Salary Increases in 2009 (%)

0% 1% 2% 3% 4% 5% 6%

UK

Germany

Australia

US

UAE

Source: Mercer Survey Results

Introducing The FTIF Templeton Frontier Markets Fund

What are Frontier Markets ?Frontier markets are smaller, less developed and less liquid countries that are considered to be in the nascent stages of development. In essence, they represent what emerging market countries like Brazil, Russia, India and China were 20 years ago. Some examples of frontier markets include:Africa: Kenya, Morocco, Nigeria, Ghana, ZimbabweAsia: Vietnam, Sri Lanka, Pakistan, CambodiaCentral and Eastern Europe: Bulgaria, Croatia, Kazakhstan, Slovakia, UkraineLatin America: Jamaica, Peru, Colombia, Ecuador, VenezuelaMiddle East: Kuwait, Qatar, Lebanon, United Arab Emirates, Egypt


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Argentina Chile Colombia Ecuador Jamaica Paraguay Peru Trinidad & Tobago Uruguay Venezuela

Botswana Cote d’Ivoire Ghana Kenya Malawi Mauritius Morocco Moz ambique

Bahrain Egypt Jordan Kuwait Lebanon Oman Pakistan Qatar Saudi Arabia United Arab Emirates

BangladeshIndonesia Philippines Sri Lanka Thailand Vietnam

Namibia Nigeria Senegal Swaziland Tanzania Tunisia Uganda Zambia Zimba bwe

Azerbaijan Belarus Bulga ria Croatia Czech Republic

EstoniaGeorgia Hungary Kazakhstan Latvia

Lithuania Macedonia Montenegro

Serbia

Slovakia Slovenia Turkey Ukraine Romania

Source: Frontier Markets as de�ned by MSCI, S&P and IFC.

What is the FTIF Templeton Frontier Markets Fund about?The Fund (a sub-fund of the Luxembourg-domiciled SICAV, Franklin Templeton Investment Funds) provides investors a unique opportunity to gain exposure to less accessible frontier markets, which continue to exhibit strong growth potential.The FTIF Templeton Frontier Markets Fund’s objective is to achieve long-term capital appreciation by investing primarily in transferable equity securities of companies in or significantly exposed to frontier markets. The objective reflects the investment manager’s opinion that attractive investment opportunities will result from the evolving process of economic reforms in frontier markets.

What are some of the reasons to invest in Frontier Markets?• PositiveeconomictrendsFrontier market economies are growing at a robust pace. For instance, countries such as Qatar, Nigeria and Vietnam, are forecast to grow 18.5%, 7.0% and 6.0%, respectively, in 2010, while developed markets such as the US, UK and Japan are expected to have negative growth of 3.1%, 1.3% and 1.9%, respectively (Source: IMF, WEO, as of April 2010).

• ExpansionofcapitalmarketsThe rising number of initial public offerings (IPOs) in these countries demonstrates that local capital markets have been steadily gaining strength. This is largely a result of governments selling some of their assets to the public while entrepreneurs have increasingly been using the capital markets as a source of funding for business expansion. The increase in IPOs has, in turn, boosted the

overall equity market capitalization of the frontier universe and is starting to bring those countries and companies to the attention of more investors. According to Standard & Poor’s Emerging Markets Database, the total stock market capitalization of frontier countries almost tripled between 2006 and 2009 from US$241 to approximately US$600 billion (Source: EIU; FactSet, Consensus Economics, February 2009).

• Lowcorrelationtoworldmarketsduetotheirdiversity

The relatively low correlation of frontier markets to global markets provides investors with an opportunity to diversify their investment portfolio, as shown by the 5-year correlation coefficient between the MSCI Frontier Markets Index relative to the three major MSCI Indices — MSCI World ex U.S., MSCI U.S. and MSCI Emerging Markets.

Furthermore, the economic drivers across frontier markets are diverse. For example, Botswana, one of the world’s largest diamond exporters, is introducing call and data processing centers. On the other hand, Kazakhstan, a country rich in oil and other natural resources, is seeing significant investments in infrastructure development. These varied economic themes across frontier markets ensure a diversified portfolio.


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Source: Factset, MSCI, as of March 31, 2010. Frontier Markets are defined by the MSCI Frontier Markets Index; Emerging Markets are defined by the MSCI Emerging Markets Index; Developed Markets are defined by the MSCI World ex-US Index; the United States is defined by the MSCI US Index. Index returns include reinvestment of dividends. Indexes are unmanaged, and one cannot invest directly in an index. Past performance does not guarantee future results.

March 2005 - 2010 Frontier Markets Emerging Markets Developed Markets United States

Frontier Markets 1.00

Emerging Markets 0.63 1.00

Developed Markets 0.68 0.94 1.00

United States 0.60 0.83 0.91 1.00

• APioneerinemergingmarketsinvestingTempleton is a pioneer in emerging markets investing, having been the first to set up a dedicated emerging markets equity team in 1987 under the leadership of Dr. Mark Mobius. This team is located throughout the world in order to cover the markets it invests in with greater depth and insight. Currently, the Templeton emerging markets team is comprised of 44 portfolio managers and

analysts and is spread across 15 emerging markets offices (Singapore, Hong Kong, Shanghai, Warsaw, Istanbul, Johannesburg, Mumbai, Rio de Janeiro, Buenos Aires, Moscow, Dubai, Seoul, Ho Chi Minh, Kuala Lumpur and Vienna), providing access to local resources and facilitating relationships with local contacts. This geographical diversification provides the team with a global perspective that offers a value-added approach to the portfolio management process.

Outlook by Dr. Mark MobiusWe continue to be excited about the prospects for frontier markets. In the future, we expect these markets—at least some of them—to become quite important and to eventually become full-fledged emerging markets. An important contributor to growth in frontier markets has been rising consumption, which provides these economies with strong purchasing power and the ability to spend their way into growth.

Economic growth in many frontier market countries is currently faster than in most emerging markets in general and in developed markets by a wide margin. For example, in 2010, Vietnam is expected to grow by 6.0%, Nigeria by 7.0% and Qatar by 18.5%, compared to 6.3% for emerging economies and 2.3% for developed economies. Another area that is poised to support economic growth in these markets is investment, particularly in infrastructure.


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Frontier market countries have been, and continue to be, positively impacted by the substantial investments made by large emerging market countries such as China, India, Russia and Brazil.

Furthermore, the economic drivers across frontier markets are diverse. For example, Botswana, one of the world’s largest diamond exporters, is introducing call and data processing centers. On the other hand, Kazakhstan, a country rich in oil and other natural resources, is seeing significant investments in infrastructure development. We believe these varied economic themes across frontier markets ensure a diversified portfolio.

We are currently finding opportunities in several frontier markets, including Vietnam, Kazakhstan, Qatar, Ukraine, Nigeria, Sri Lanka, Egypt and Kenya. In Eastern Europe and central Asia, the frontier markets of Slovenia, Romania, Croatia and Mongolia

are beginning to warrant interest. We have also been finding interesting opportunities in the Middle East. With about 60% of the world’s oil reserves, countries in the Middle East have benefited and, in our opinion, may continue to benefit directly or indirectly from the long-term uptrend in oil prices. The region continues to record positive macroeconomic data, including robust economic growth. Higher domestic consumption as a result of recovering consumer confidence and domestic demand is also expected to continue. Moreover, regional governments have been implementing strategies that aim to boost economic growth, allow foreign capital into local markets, promote higher levels of corporate governance and transparency, and enable more sophisticated capital market structures.

Dr. Mark Mobius is the Executive Chairman, Templeton Emerging Markets Group. He currently directs the analysts based in Templeton’s Emerging Markets

offices and manages the emerging and frontier markets portfolios. Dr. Mobius has spent more than 30 years working in emerging and frontier markets all over the world.

Franklin Resources, Inc. [NYSE:BEN], is a global investment management organization operating as Franklin Templeton Investments. Franklin Templeton Investments provides global and domestic investment management solutions managed by its Franklin, Templeton, Mutual Series, Fiduciary Trust, Darby and Bissett investment teams. The San Mateo, CA-based company has more than 60 years of investment experience and over US$602 billion in assets under management as of 31 July 2010.

Disclaimer

Opinions expressed in this material are the author’s at the publication date and do not constitute investment advice. They are likely to be modified without prior notice and do not necessarily represent Franklin Templeton Investments’ point of view. Such opinions are

provided to you incidentally. They do not constitute or form part of legal or tax advice or an offer for shares or an invitation to apply for shares of the Luxembourg-domiciled SICAV Franklin Templeton Investments Funds (“the Fund”). Subscriptions of shares of the fund can only be made on the basis of the current prospectus of the Fund, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. The prices of shares and income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily a reliable indicator of future results. Currency fluctuations may affect the value of overseas investments. An investment in the fund entails risks, which are described in the Fund’s prospectus. No shares of the Fund may be directly or indirectly offered or sold to nationals or residents of the United States of America. Shares of the fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making plans to invest. Please consult your professional advisor before deciding to invest. Issued by the branch of Franklin Templeton Investment Management Limited in Dubai (“FTIML”), authorized and regulated in the UK by the Financial Services Authority and regulated in Dubai by the DFSA. This marketing material is directed at professional clients. Dubai office: Franklin Templeton Investment Management Limited, Office No. 505, Building No. 3, Dubai International Financial Centre, P.O. Box 506613, Dubai, U.A.E., Tel.: +9714-4284100 Fax:+9714-4284140 www.franklintempletongem.com

Source: © Franklin Templeton Investments, August 2010

Currency AED

Underlying An equally weighted basket of 6 emerging markets currencies against U.S. Dollar.

Capital Protection 100%, only at maturity

Trade Objective Provide investors with possible returns above those offered by bank deposits by givingupsideexposuretotheUnderlying

Launch Date 25th August, 2010

Last date for Subscription 27th September, 2010

Strike Date 30th September, 2010

Tenor 1 Year

Fee Nil

Min Investment AED 30,000 and multiples of AED 1,000 thereafter

Profits: Investor will receive the upside of the Underlying, UNCAPPED

Open for Subscription: ADCB Emerging Market Currencies (“EMC”) Linked Account

ADCB has recently launched a Market Linked Account with the following features:


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Investing Today


How it Works: 1. On day 1, USD100 will be used to buy an

equallyweightedbasketofthesixemergingmarkets currencies.

2. After one year, this basket will be converted back to USD.

Payout:If we ended up with more than USD100, this means the basket has performed positively, and client will receive 100% of his capital plus the positive performance in %. Otherwise, if we ended up with less than USD100, this means the basket has performed negatively, and client will receive only 100% of his capital as this product is capital guaranteed at Maturity.

For example: if we end up with USD106, client will receive 106% of his initially invested capital; otherwise, if we end up with USD92, client will only receive 100% of his initially invested capital.

ADCB Emerging Markets Currencies Underlying Currency Pairs Performance

70%

80%

90%

100%

110%

120%

130%

USDRUB Curncy USDINR Curncy USDCNY Curncy USDMXN Curncy USDTRY Curncy USDBRL Curncy

Jul-0

7

Sep-

07

Nov

-07

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-

08

Nov

-08

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Nov

-09

Jan-

10

Mar

-10

May

-10

Jul-1

0

CONTINUE


PAGE 14



TRENDS

PERFORMANCE REVIEW

INVESTINGTODAY

PRODUCTSPOTLIGHT

Investing Today


Product Rationale:• Emergingmarketscountrieshavethehighest

expectationsofgrowth• Fullprincipalprotection• Diversification For additional information, please contact your relationship manager

USDRUB Curncy USDINR Curncy USDCNY Curncy USDMXN Curncy USDTRY Curncy USDBRL Curncy

1 Month 3.33% 0.09% 0.11% 2.34% 5.09% 2.84%

3 Month -3.15% -4.40% 0.75% -2.64% -1.30% -0.88%

6 Month 0.47% -0.49% 0.77% 3.56% -0.70% 7.98%

1 Year 4.17% 3.29% 0.85% 4.32% -2.46% 6.28%

3 Years -15.40% -13.02% 11.78% -13.12% -15.40% 7.27%


PAGE 15

Performance Review



TRENDS

PERFORMANCE REVIEW

INVESTINGTODAY

PRODUCTSPOTLIGHT

Shari’ah Compliant

Fund House Performances

Funds Currency NAV 1M 3M 6M 12M 36M 12M VolatilityEquity Funds M&G GLOBAL LEADERS-$-A-ACC USD 7.17 (3.31%) (1.06%) (4.08%) (0.86%) (33.87%) 16.81%BNP PARIBAS ISLAMIC-EQY OPTIMISER-$-C-ACC USD 1,116.91 (1.14%) 3.54% (3.09%) 2.81% (16.65%) 14.12% SCHRODER INTL EMERG MKTS-$-A-ACC USD 11.53 (3.27%) 4.25% 2.49% 11.83% (8.13%) 21.15% M&G AMERICAN FUND-$-A-ACC USD 7.84 (3.90%) (4.54%) (5.42%) 2.13% (24.24%) 17.22%SCHRODER INTL EURO EQT-A ACC EUR 17.97 (4.31%) (0.99%) (3.13%) (4.11%) (35.15%) 15.33% JPMORGAN F-JF PAC EQ-A-A$ USD 11.84 (2.71%) 2.16% (0.75%) 3.86% (20.64%) 14.97% SCHRODER INTL BRIC-$-A-ACC USD 183.95 (3.27%) 3.02% 0.18% 11.95% (9.23%) 20.03% CAAM ISLAMIC BRIC QUANT FUND-$-C-ACC USD 184.10 (3.22%) 1.52% (0.21%) 16.36% N/A 20.96% AL-NOKHITHA FUND-ACC AED 3.72 (2.97%) (8.05%) (4.65%) (15.16%) (62.77%) 31.36% ADCB-MSCI UAE INDEX FUND-ACC AED 3.89 (1.98%) (5.29%) (0.05%) (18.02%) (60.46%) 38.56% ADCB-MSCI ARABIAN MKT $-ID-ACC USD 5.21 0.36% 1.40% (2.96%) (1.17%) N/A 17.66% FRANKLIN INDIA FUND-$-A-ACC USD 24.27 0.75% 7.91% 11.02% 30.06% 17.99% 16.94% FIDELITY LATIN AMERICA FUND-$-A USD 41.60 (2.28%) 8.96% 6.23% 27.57% N/A 24.63%TEMPLETON EM MARKETS SMALLER CO-$-A-ACC USD 7.71 0.52% 6.93% 7.53% 24.56% N/A 16.00% TEMPLETON FRONTIER MARKETS FUND-$-A-ACC USD 15.19 (2.63%) 0.86% 1.13% 10.55% N/A 15.69% GLOBAL THEMATIC RESEARCH PORTFOLIO-$-A-ACC USD 13.84 (4.16%) 0.65% (2.19%) 3.98% (19.11%) 21.08% FixedIncome BNY MELLON GL-GLOBAL BOND-$A USD 2.11 2.48% 8.05% 6.44% 8.87% 22.25% 8.14% ING (L) RENTA-EM MK DB LC-XC USD 54.96 (0.33%) 3.68% 1.53% 4.43% 11.93% 7.63% SCHRODER INTL GL CORP BD-AAC USD 8.67 1.88% 4.08% 5.47% 11.15% 23.50% 2.17% Commodities BLACKROCK WORLD GOLD FUND-$-A USD 55.36 8.17% 8.59% 19.57% 33.37% 44.13% 26.57% DB PLATINUM-COMMODITY $-I1C USD 18,388.66 (4.77%) (0.59%) (8.38%) (4.39%) 8.31% 17.11% JPMORGAN F-GLB NAT RE-$-A-ACC$ USD 15.48 2.25% 4.38% 5.09% 23.74% (14.99%) 22.04% Real Estate HENDERSON HOR-G PROP EQTY $-A2 USD 12.02 (1.31%) 5.53% 7.32% 14.48% (26.66%) 18.71% Hedge JPM INV-HIGH STAT MAR N-A$H USD 151.18 (0.87%) (1.98%) (4.60%) (5.11%) N/A 2.22% GATEWAY U.S. EQUITY FUND $-IA USD 105.53 (1.45%) (0.41%) (2.11%) 0.66% (11.58%) 7.14% Balanced FIDELITY MULTI-ASSET NAVIGATOR FUND $-A-ACC USD 10.00 0.15% 4.44% 1.33% 6.41% (11.58%) 12.00% Index MSCI WORLD USD 1,080.70 (3.92%) 0.08% (4.65%) (0.45%) (30.79%) 17.49% MSCI EM USD 970.05 (2.15%) 4.71% 3.65% 15.56% (10.76%) 19.24% S&P GLOBAL REIT INDEX USD 118.82 (0.95%) 5.25% 7.37% 15.44% (38.04%) 18.62% S&P GSCI OFFICIAL CLOSE INDEX USD 4,017.69 (5.52%) 0.21% (8.86%) (3.77%) (33.78%) 20.32% US CASH INDICES LIBOR TOTAL RETURN USD 175.50 0.05% 0.14% 0.20% 0.34% 6.53% 0.04% MSCI UAE USD 284.75 (2.12%) (5.85%) (3.30%) (18.87%) (50.99%) 33.86%


Disclosures:

This document is for information and illustrative purposes only; it is in no way an offer or solicitation to buy or sell any investment products, but only information being provided. ADCB will not be held liable for any information provided in this document which is stated to have been obtained from third party sources. This information may be based on assumptions or market conditions and may change without notice.

The information in this report was prepared by employees of ADCB and is current as of the date of the report. The information contained herein has been obtained from sources that they believe to be reliable, but ADCB does not guarantee its accuracy, adequacy, completeness, reliability, or timeliness, and will not be held liable for any investment decisions made based on this information. Moreover, ADCB is not responsible for any errors or omissions or for the results obtained from the use of such information. All information and estimates included

in this report are subject to change without notice. ADCB will furnish, upon request, available investment information supporting this recommendation. This report is intended for qualified customers of ADCB.

Past performance does not guarantee future results. Investment products are not bank deposits and are not guaranteed by ADCB. They are subject to investment risks, including possible loss of principal amount invested. Please refer to ADCB Terms and Conditions for Investment Services.

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