The Changing Nature of Emerging Markets

Kim CatechisGlobal Emerging Markets

April 2019

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Important information

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Risks

All investments are subject to risk including the loss of principal. The views expressed in this presentation reflect those of the portfolio manager as of the dateof this presentation. Any such views are subject to change at any time based on market or other conditions. These views may not be relied upon as investmentadvice and, because investment decisions for the fund is based on numerous factors, may not be relied upon as an indication of trading intent on behalf of thefund. Neither the information, nor any opinion expressed, constitutes a solicitation or recommendation by us of the purchase or sale of any securities orinvestment.

It is not possible to invest directly in an index.

Distributed by Legg Mason Investor Services, LLC. Legg Mason Investor Services, LLC is a subsidiary of Legg Mason, Inc.

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Attractive market valuations

Past performance is not a guide to future returns. Source: Bloomberg as at 31 December 2018.

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Price to Book Return on Equity

2,1

1,5

1,0

1,5

2,0

2,5

3,0

PB R

atio

MSCI World Index

MSCI Emerging Markets Index

13,2

13,2

2

4

6

8

10

12

14

16

RO

E

MSCI World Index

MSCI Emerging Markets Index

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The changing nature of emerging markets

Source: Factset and Martin Currie. 2008 sector exposure is as at 1 January 2008. 2018 data is accurate as at 31 December 2018. Other includes Industrials, Utilities, Healthcare and Real Estate.

MSCI Emerging Markets Index Sector Exposure

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18%

15%

12%10%

22%

9%

15%

8% 8%

14% 14%

25%

17%

14%

Energy Materials CommunicationServices

InformationTechnology

Financials Consumer Other

2008 2018

2008 2018

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3.492

733

497

354

335

1.380

724

306

335

285

Asia Pacific

Europe

Middle East and Africa

North America

Central and South America

Long-term driver: the rise of the middle class

Source: Statista and Brookings Institute. *Middle class = households with incomes between $11 and $110 per person per day in 2011 Purchasing Power Parity terms.

Number of global middle class* by region (millions)

5

46%

24%

10%

11%9%

64%14%

9%7%6%

Share of global middle class by region

2015

2030

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Long-term driver: consumer spending accelerated by technology

Source: Statista and EY, ‘FinTech Adoption Rates’, June 2017. *Hong Kong is a special administrative region of the people’s republic of China.

Share of digitally active population using the following Fintech services by country (2017)

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57%

59%

60%

72%

83%

UK

Australia

Brazil

India

China

13%

15%

20%

21%

22%

HongKong

US

India

Brazil

China

25%

27%

29%

39%

58%

HongKong

US

Brazil

India

China

12%

13%

15%

20%

46%

Germany

US

Brazil

India

China

31%

32%

38%

43%

47%

Germany

South Africa

China

UK

India

Money transfer & payments

Financial planning

Savings & investments

Borrowing Insurance

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The confluence of technology and geopolitics

Source: Statista - ‘Global 5G Adoption to Take Off in 2021’. Ericsson Mobility report, forecast as of November 2018. All forecasts are expressions of opinion and are subject to change without notice and are not intended to be a guarantee of future events.

Forecast of 5G smartphone subscriptions by region

7

0

300

600

900

1.200

1.500

2019 2020 2021 2022 2023 2024Fore

cast

of 5

G s

mar

tpho

ne s

ubsc

riptio

ns b

y re

gion

Asia-Pacific

North America

Western Europe

Central & Eastern Europe

Latin America

Middle East & Africa

4m54m

191m

551m

1,031m

1,479m

2.2m Asia-Pacific

1.5m North America

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Digitisation – a long way to grow

Source: Statista Digital Market Outlook, ‘China’s Vast Digital Potential’, May 2017. Online vs offline population in china compared to the United States in 2016.

Online vs offline population in China compared to the United States

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Trade alliancesThe new battleground

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U.S. – MEXICO – CANADA AGREEMENT

(THE NEW NAFTA)

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One belt, one roadChina’s soft power strategy

Source: Martin Currie. This is an approximation of the locations of Chinese global ports. The information presented has been compiled with considerable care to ensure its accuracy. But no representation or warranty, express or implied, is made to its accuracy or completeness.

68 nations, USD2 – 3 trillion of investment

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Chinese-owned global ports

Panama canal

Strait of Gibraltar

Suez canal

Bab-al-Mandab Strait

Strait of Hormuz

Strait of Malacca

Strait of Sunda

Maritime chokepoint

Chinese global port

Source: Martin Currie. This is an approximation of the locations of Chinese global ports. The information presented has been compiled with considerable care to ensure its accuracy. But no representation or warranty, express or implied, is made to its accuracy or completeness.

Djibouti

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