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GLOBAL PERSPECTIVES
Table of Contents
Overview Strategic Overview News H dli N Headlines Global Capital Market Returns Equity U.S. U S Market Returns Valuation Fundamentals Volatility Fixed I Fi d Income Bond and Loan Returns Yield Curves Global Yields U.S. U S Yields Municipal, Credit and Mortgage Spreads Fixed Income Strategy International Global Returns 34-37 Major Currencies 38 International Economics 39 Global Stock Fundamentals 40 World d Emerging M k t W ld and E i Markets 41-42 41 42 Euro Zone, Frontier Mkts, China Hard Landing 43-45 18 19 20 21-22 21 22 23-25 26-33 4-8 9-10 11-16 17 1 2 3 Economy Consumer Trends, Confidence Leading Current B i L di & C t Business I di t Indicators Employment and Unemployment GDP Inflation Housing g Federal Budget, Debt, Deficits, Funding Corporate Tax Rates Commodities, Oil, U.S. Trade Asset Allocation Correlation Matrix Fund Flows Alternative Investment Returns Long-term Capital M k t R L t C it l Market Results lt Diversification & Allocation Strategy Retirement Investment-Related R ti I t t R l t d Retirement T d t Trends Index Definitions / Important Disclosures 75-84 75 84 85-87 66 67 68 69 70-74 46-47 48-51 48 51 52-53 54 55 56-57 58-60 61 62-65
All d t are th most recently available as of 4/30/12 unless data the t tl il bl f l indicated otherwise. Please refer to the Index Definitions.
GLOBAL PERSPECTIVES
Strategic Overview
Fundamentals
Global Capital Market Returns Advancing Corporate Profits Broadening Manufacturing Consumer Strength Developing Economies Global Risks U.S. Debt and Deficit Euro zone Debt China Hard Landing Commodities Bubble 59 43 45 62 Total federal debt exceeds 90% of GDP, and the deficit is about 9% of GDP (without Social Security or Medicare) Political posturing will likely continue Medicare). continue. The alarming debt levels of PIIGS countries may be containable by the fence being put in place, but obstacles and pitfalls remain. Chinas soaring state investments, property bubble and declining exports raise questions about th probability of a soft l di ti b t the b bilit f ft landing. Gold prices exemplify the risk of a potential collapse in commodities prices.
Slide
3 12 49 50 49-50 46 41
Comment Returns for a globally diversified strategy over the last 10 years refute the notion of a lost decade.
Consistent earnings growth is the cornerstone of an improving investment climate. U.S. manufacturing capacity utilization is nearing historically normal levels while the ISM index has expanded for 33 consecutive months. Personal consumption and income are at all-time highs; retail sales are rising fast.
World GDP grew steadily through the great recession supported by the largest emerging markets, which now out-produce the largest developed economies.
GLOBAL PERSPECTIVES
Overview
GLOBAL PERSPECTIVES
Wgt Apr-12 g p
YTD
2011
2010
2009
2008
2007
1 year y
The Global Asset All Th Gl b l A t Allocation strategy i comprised of 10 asset classes, equally weighted: S&P500 S&P400 Mid ti t t is i d f t l ll i ht d S&P500, Midcap, S&P600 S ll Smallcap, MSCI U S REIT Index, U.S. I d NA REIT Index, MSCI EAFE Index, MSCI BRIC Index, Barclays Capital U.S. Corporate Bonds, Barclays Capital U.S. Treasury Bonds, Barclays Capital Global Aggregate Bonds, Barclays Capital U.S. High Yield Bonds. Source: FactSet and FTSE NAREIT Index.
Overview
GLOBAL PERSPECTIVES
S&P 500
After two bull and two bear market cycles, the S&P 500 is about 11% below its 2007 peak.
1,800
1,600
(49%)
(11%)
1,400
1,200 1,000
(10.7) (10 7)
800
600 400 1998 2000 2002 2004 2006 2008 2010 2012
10/09/07 11/20/08 11/20/08 01/06/09 1/06/09 3/09/09 3/09/09 4/30/12 10/09/07 4/30/12
Equity
GLOBAL PERSPECTIVES
Note: All returns are total returns including dividends expressed as percentages. Returns for 3-, 5-, and 10-year periods are annualized. Source: Dow Jones, Standard & Poors, NASDAQ, Russell Investments, FactSet
Equity
GLOBAL PERSPECTIVES
(17.1) 12.1 12.7 (0.6) (9.8) 2.4 6.3 20.0 2.1 2.9 26.7 22.2 10.2 19.0 5.5 15.1
(55.3) (18.6) 19.2 (22.8) 7.1 7.5 13.3 18.6 8.4 36.8 21.0 15.8
(39.9) 12.0 (45.7) 22.5 (43.1) 16.3 (30.5) 11.9 (29.0) 19.4 (37.0) 5.5
Note: N t All returns are t t l returns including dividends expressed as percentages. Returns f 3- and 5 t total t i l di di id d d t R t for 3 d 5-year periods are annualized. All other returns are i d li d th t cumulative. Total returns are based on S&P GICS sectors. Source: Standard & Poors, FactSet
Equity
GLOBAL PERSPECTIVES
Indexes: Lg Val = Russell 1000 Value Mid Gr = Russell Mid Cap Growth
Note: Data based on Russell U.S. equity indices as indicated above and are total returns including dividends for each calendar year or partial year. Source: Russell Investments, FactSet
Equity
GLOBAL PERSPECTIVES
Log
10,000 6,000 5,000 , 4,000 3,000 2,000 1,000 600 500 400 300 200 100 60 50 40 1910 1916 1922 1928 1934 1940 1946 1952 1958 1964 1970 1976 1982 1988 1994 2000 2006 2012
Equity
GLOBAL PERSPECTIVES
Mid-Cap
Small-Cap
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Equity
GLOBAL PERSPECTIVES
Equivalent to P/E of 13
7.86
Equivalent to P/E of 52
1984 1988 1992 1996 2000 2004 2008
1.91
2012
Note: Earnings Yi ld i th i N t E i Yield is the inverse of th P/E ratio and i calculated as th sum of th reported next t l months earnings estimates divided b market f the ti d is l l t d the f the t d t twelve th i ti t di id d by k t capitalization. The 10-year U.S. Treasury yield is used for bonds. Source: Standard & Poors, First Call, Reuters, Bloomberg, FactSet
10
Equity
GLOBAL PERSPECTIVES
Dividend Yields
Disregarding the 2008 spike, stock dividend yields remain above levels seen since 1996 and remain historically attractive relative to bond yields.
4
%
Dividend Yields
0 3 (2)
average
(4) 2 (6)
Bonds Attractive
Note: Bond yield is represented by the 10-year U.S. Treasury note. Source: Standard & Poors, Reuters, FactSet
11
Equity
GLOBAL PERSPECTIVES
150%
2012 S&P 500 Earnings Forecast: $105 2012 S&P 500 Price Forecast: 1425
2,200
100%
1,900 1 900
-50%
700
100% -100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
400
Source: Standard & Poors, First Call, FactSet, ING Investment Management
Equity
GLOBAL PERSPECTIVES
1,600
400 200 0 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
13
Equity
GLOBAL PERSPECTIVES
Earnings Growth g Percent Positive Negative -1% -10% 14% -7% 7% 2% 1% 25% 20% -1% -13% 9% 13 10 35 27 10 23 40 22 3 1 184 11 11 9 16 12 12 14 21 1 7 114
Earnings Surprise g p Percent Positive Negative -1% 7% 8% 7% 2% 4% 19% 11% 15% 0% 8% 15 20 35 36 14 24 39 31 3 3 220 9 3 8 6 3 6 12 6 2 5 60
Historical
Projected
Note: E i N t Earnings G Growth is th percentage change in the cumulative share weighted EPS earnings f th i the t h i th l ti h i ht d i from th t of a year ago. S that f Surprise P i Percent is th share t i the h weighted average of the ratio of actual company earnings vs. the consensus estimate. Source: Bloomberg, Standard & Poors, Factset
14
Equity
GLOBAL PERSPECTIVES
Growth Historical 3 Year Sales Growth % Long-term Estimated Growth % Estimated 2011 EPS Growth %
S&P 500
Russell Midcap
Russell 2000
High growth th
S&P 500
Russell Midcap
Russell 2000
Rich valuation v l ti
15
Equity
GLOBAL PERSPECTIVES
15
11
Note: Values are calculated based on a market value-weighted sum of th quarterly hi t i l results of th S&P 500 constituents excluding Fi N t V l l l t db d k t l i ht d f the t l historical lt f the tit t l di Financials. i l Values reflect results for trailing four quarters at each quarter end. Data as of 12/31/11. Source: Standard & Poors, Compustat, FactSet
16
Equity
GLOBAL PERSPECTIVES
80 70 60 50
Euro Crisis
40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
17
Equity
GLOBAL PERSPECTIVES
U.S. Investment Grade Treasury Treasury (1-3YR) y( ) Treasury (20+YR) Government Related Corporate Fixed rate MBS ABS CMBS Hybrid ARM Barclays Aggregate High Yield and Global High Yield gg g Global Aggregate Emerging Markets Senior Loans
0 0 0 68 185 69 64 203 3 71
1.5 0.2 4.7 0.9 1.4 0.7 0.7 0.5 0.3 1.1 11
0.1 0.1 (2.4) 1.8 3.5 1.2 1.5 3.6 1.1 1.4 14
9.8 1.6 33.8 6.7 8.1 6.3 5.1 6.2 3.6 7.8 78
5.9 2.4 9.4 5.0 9.0 5.5 5.9 18.5 2.5 6.5 65
9.0 7.3 10.2 8.0 4.6 7.0 2.2 5.6 6.3 7.0 70
3.1 3.9 0.9 4.3 4.3 5.2 4.7 4.7 4.8 4.3 43
8.9 1.2 30.2 6.8 9.1 5.8 5.1 5.9 3.6 7.5 75
5.0 1.6 10.6 5.5 12.6 5.4 9.0 16.5 4.1 7.1 71
6.4 3.4 10.3 6.1 7.1 6.4 4.3 6.6 5.1 6.4 64
5.6 3.2 8.7 5.5 6.6 5.5 4.3 N/A N/A 5.7 57
(21.4) 33.7
Note: All spreads are option-adjusted spreads except for Emerging Markets and Senior Loans. Emerging Markets spread is the spread over the U.S. Treasury curve. S i L Senior Loans spread i th average th d is the three-year call secondary spread. All returns are t t l returns including di id d expressed as percentages. ll d d t total t i l di dividends d t Returns for 3- and 5-year periods are annualized. All other returns are cumulative. Source: Barclays Capital, JPMorgan, Standard & Poors
18
Fixed Income
GLOBAL PERSPECTIVES
Yield Curves
The steep U.S. yield curve is indicative of economic growth. Higher yield opportunities can be found outside the U.S.
6 5 4
14 12 10 8 6 4 2
3 2 1 0
3 mo 2 yrs
5 yrs
10 yrs
2 yrs 5 yrs
30 yrs
10 yrs 30 yrs
3 mo 2 yrs
5 yrs
3 mo 0.09 0.47 0.01 0.11 0 11 4.35 5.60 8.39 7.76
10 yrs
2 yrs 0.25 0.44 0.07 0.11 0 11 4.63 5.71 8.11 9.03 5 yrs 0.81 1.07 0.60 0.27 0 27 5.16 7.75 8.42 10.29
30 yrs
10 yrs 1.91 2.11 1.66 0.90 0 90 6.21 7.65 8.67 10.71 30 yrs 3.11 3.34 2.37 1.89 1 89 7.38 8.77 8.87 10.82
19
Date
3 mo
Fixed Income
GLOBAL PERSPECTIVES
Global Yields
Investors seeking income may benefit from the rich opportunities for higher yield available from global bonds.
Source: Bloomberg
20
Fixed Income
GLOBAL PERSPECTIVES
9 % 8 7 6 5 4
2 1 0
1 basis point
(1) 1988
1992
1996
2000
2004
2008
2012
Note: 3-Month T-Bill Yield is annualized based on purchase at a discount and holding to maturity. Source: Reuters, Bloomberg, FactSet
21
Fixed Income
GLOBAL PERSPECTIVES
7 6 5 4
1 3
3
2.03%
0%
(1) 1988 1991 1994 1997 2000 2003 2006 2009 2012
Note: Real 10-Year Treasury Yield is equal to the 10-Year Treasury yield minus core CPI (ex food and energy) Source: Federal Reserve, Bloomberg, FactSet
22
Fixed Income
GLOBAL PERSPECTIVES
Muni yields should be (1- tax rate) x T reasury yields. Any difference sh ld b explainable by yi lds A y diff c should be pl i bl differences in credit or liquidity.
117
Note: Municipal yields represent the yield-to-worst for the Merrill Lynch AA municipal index. 10-year U.S. Treasury yields are used. Source: Merrill Lynch, Reuters, Bloomberg, FactSet
23
Fixed Income
GLOBAL PERSPECTIVES
6
3
Lehman crisis
5
2
3.0
1
2
0
0.38
Euro crisis II
(1) 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011
Note: C N t Corporate Baa Spreads are b t B S d benchmark average rates i excess of 10 h k t in f 10-year U S T U.S. Treasury yields. Lib i th L d I t b k Off Rate, the i ld Libor is the London Inter-bank Offer R t th interest rate banks charge each other for loans. Source: Moodys, Reuters, Federal Reserve, Bloomberg, FactSet
24
Fixed Income
GLOBAL PERSPECTIVES
Mortgage Spreads
12
Loan Delinquency
3.0
10
Residential R id ti l
9.9 99
2.5
8
Commercial and Industrial
2.0
1.7
1.5
1.0
1.6
0.5 05 1988
1992
1996
2000
2004
2008
2012
0 1988
1992
1996
2000
2004
2008
2012
Note: Mortgage spread equals the Freddie Mac 30-year fixed rate mortgage yield minus the 10-year U.S. Treasury yield. Source: Federal Reserve (Federal Financial Institutions Examination Council Report), Freddie Mac, FactSet
25
Fixed Income
GLOBAL PERSPECTIVES
120 100
% of GDP
80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Advanced economies, General government gross debt Emerging & Developing Economies, General government gross debt
2 0 (2) (4) (6) (8) (10) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Advanced economies, General government net lending/borrowing Emerging & Developing Economies, General government net lending/borrowing
% of GDP
26
Fixed Income
GLOBAL PERSPECTIVES
Germany
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
27
Fixed Income
GLOBAL PERSPECTIVES
100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 1952
1957
1962
1967
1972
1977
1982
1987
1992
1997
2002
2007
2012
28
Fixed Income
GLOBAL PERSPECTIVES
A Capital-Spending-Led Recovery
Corporations have ample capacity to retool with cash not debt while contributions to growth from fiscal policy, housing, and consumption may be muted.
15.5 14.5
Nominal Investment Spending Net Cash Flow
21
19
13.5 17 12.5 15 11.5 13 10.5 9.5 8.5 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 11
29
Fixed Income
GLOBAL PERSPECTIVES
3,500
3,000
Federal Balance Sheet ($)
2,500
Million ns
2,000
ECB Balance Sheet ()
1,500
1,000
500 2007
2007
2008
2008
2009
2009
2010
2010
2011
2011
2012
30
Fixed Income
GLOBAL PERSPECTIVES
OAS S
400 300 200 100 0 2007 2008 2009 2010 2011 2012
10% 5% 0% 1991
1998
2005
2012
2008
2009
2010
2011
2012
0 2007
2008
2009
2010
2011
2012
Source: Barclays Capital Aggregate Benchmark Index data, Moodys. Data as of 2/29/12.
31
Fixed Income
GLOBAL PERSPECTIVES
Residential Housing
The excess supply of existing homes is at the lowest level since the housing crisis began in 2007. We are past the worst point of house price deflation and should see slow improvement going forward.
3 4 5 6 7 8 9 10 11 12 1990
National House Price Inflation (annual % change, Case-Shiller Index) Months Supply of Existing Single-family Homes (shown inverted)
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
32
Fixed Income
GLOBAL PERSPECTIVES
11%
9%
8%
7%
6%
33
Fixed Income
GLOBAL PERSPECTIVES
Pac Pac Pac Pac S&P 500 Ex-Japan Ex-Japan Ex-Japan Ex-Japan -37.0% 17.1% 33.2% 31.7% 73.0% EME 32.6% 32 6% UK 30.7% S&P 500 15.8% Japan 6.3% 6 3% Europe Ex-UK 17.5% 17 5% UK 8.4% S&P 500 5.5% Japan -4.1% 4 1% Europe Ex-UK -45.0% 45 0% UK -48.3% EME -47.1% Pac Ex-Japan -50.0% % UK 43.4% 43 4% Europe Ex-UK 33.9% S&P 500 26.5% Japan 6.4% 6 4% Japan 15.6% 15 6% S&P 500 15.1% UK 8.8% Europe Ex-UK 2.4% 2 4%
Pac S&P 500 Ex-Japan -12.7% 12 7% 11.9% 11 9% Japan -14.2% Europe Ex-UK -14.5% EME -18.2% 18 2% UK 9.0% Europe Ex-UK 8.2% Japan 7.8% 7 8%
Note: All data are based on equity indices for each regional or country index and are total returns including dividends for each calendar year or partial year. Source: MSCI, Standard & Poors, FactSet
34
International
GLOBAL PERSPECTIVES
Currency Apr-12
YTD
2011
2010
2009
2008
2007
2006
2005
8.2 5.3 53
Emerging Mkt
USD local
Emerging market returns have surpassed by far the developed world equity markets over the past 10 years
(3.9) (3.3) 1.3 (0.3) 1.5 1.0 (3.2) (6.1) (0.6) 8.2 5.8 9.0 4.3 13.0 11.1 7.8 11.9 11.9 (14.5) (12.1) (2.5) (1.8) 2.4 5.1 8.8 12.2 33.9 29.0 43.4 27.7 73.0 45.8 6.4 9.3 26.5 (45.0) 17.5 (42.7) (48.3) (28.5) 6.6 8.4 6.6 36.4 22.5 30.7 14.6 33.2 25.9 6.3 7.3 15.8 11.3 28.6 7.4 20.1 14.8 20.3 25.6 44.7 4.9 (21.2) (12.7) (4.4) (1.8) (8.6) (5.7) (3.1) (4.7) 4.8 9.6 7.6 18.1 14.6 21.8 11.8 7.5 0.3 19.5 (6.1) (6.7) (2.9) 1.2 3.1 (0.5) (5.3) (12.6) 1.0 5.9 1.5 5.7 4.6 13.2 7.7 3.1 (1.6) 4.7
UK
USD local
Pac x-Japan
USD local
Japan
USD local
S&P 500
Note: Returns for periods greater than one year are annualized. All returns reflect total return including dividends expressed as a percentage. Source: MSCI, Standard & Poors, FactSet
35
International
GLOBAL PERSPECTIVES
-3
-15
41
28
Note: All returns reflect total return including dividends expressed as a percentage. Source: MSCI, Standard & Poors, FactSet
36
International
GLOBAL PERSPECTIVES
1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
break even
2012
37
International
GLOBAL PERSPECTIVES
Major Currencies
Although the U.S. dollar dropped only about 1% in 2011, the dollar is 38% below its 1985 peak compared to a tradeweighted basket of world currencies.
$/
rising vs. $
falling vs. $
rising vs. $
12/31/11: 1.55 4/30/12: 1.62 Change: 4.5%
1.2 12 1988 1991 1994 1997 2000 2003 2006 2009 2012
1986
1991
1995
1999
2004
2008
2012
Source: FactSet
38
International
GLOBAL PERSPECTIVES
International Economics
China, India and Brazil are growing rapidly, and China is now second only to the U.S., while Germanys exportdriven economy is the runaway euro zone leader.
Countries Developed Markets US Germany Canada UK Eurozone E Japan Ireland Emerging Markets Brazil Russia India China Mexico 2,426 1,689 1,674 7,294 1,122 11.9 13.9 1.4 7.1 9.9 6.7% 4.5% 7.8% 8.9% 5.4% 3.9% 8.9% 9.4% 10.4% 5.2% 10.9 % 34.3 % 16.1 % 27.8 % 32.2 % 206 138 1,205 1,343 115 6.2 6.5 7.2 4.1 5.12 29 39 26 36 27 USD (Billions) 15,319 3,481 1,713 2,435 12,694 12 694 6,062 208 GDP Per Capita 49.3 42.8 50.3 38.2 25.5 25 5 47.6 45.8 1-Yr Change 1.7% 3.6% 2.5% 0.7% 1.6% 1 6% (0.7%) (0.4%) 5-Yr Change 2.7% 3.9% 2.8% 2.6% 3.3% 3 3% 1.7% 5.3% Trade (% of GDP) Exports 9.8 % 41.7 % 27.7 % 18.3 % 18.5 18 5 % 13.9 % 60.4 % Demographics Population Unemployment Median (Millions) % Age 314 82 34 63 329 127 5 8.2 6.7 7.2 7.8 10.7 10 7 4.5 14.3 45 35 37 45 41 40
39
International
GLOBAL PERSPECTIVES
Balance S Sheet Strength S Long-term Debt to Capital Ratio 35.6 37.1 24.6
Note: Valuation and Profitability figures are weighted harmonic averages, a statistical technique that reduces the effects of extreme outlying data on the f f ff f average. Long-term Debt to Capital figures are weighted averages. Source: FactSet
40
International
GLOBAL PERSPECTIVES
World GDP
80 70 60 50
60,000
40,000
40 30
20,000
20 10
Global Emerging Markets Top 8*
0 1991
1995
1999
2003
2007
2011
Source: Th W ld B k G S The World Bank Group *China, India, Russia, Brazil, Mexico, Korea, Indonesia and Taiwan Data as of 12/31/10.
41
International
GLOBAL PERSPECTIVES
50
120
30
100
80 20 60 10 40 0
Least Dev. Most Dev China U.S. US Brazil Japan
*G7= France, Italy, Germany, Japan, U.K., U.S and Canada Source: IMF, CIA World Factbook
42
International
GLOBAL PERSPECTIVES
Euro Zone
Even with total debt at 152% of GDP, Greece accounts for less then 3% of the euro zone, but Italy and Spain are major economies with much higher total debt at 120% of GDP.
Euro Area 2010 GDP by Country Austria Slovak 3% Belgium Republic Slovenia Cyprus yp 1% 4% 0% 0% Finland Portugal Spain 2% 2% 12% Netherlands 6% Malta France 0% 21% Luxembourg 0% Italy 17% Ireland 2% Greece 3% Germany 27%
0 2000 Euro Zone Debt
Gross Debt in Euros (billions) Debt as % of GDP
43
International
GLOBAL PERSPECTIVES
Currency Apr-12
YTD
2011
2010
2009
2008
2007
USD USD
1.5 (0.8)
13.8 4.7
(17.3) (18.4)
29.1 24.2
25.8 11.7
N/A (54.1)
N/A 42.1
(2.3) (13.8)
16.3 9.0
N/A (7.2)
Source: Factset
International
GLOBAL PERSPECTIVES
2,000
1,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
45
International
GLOBAL PERSPECTIVES
Consumer Trends
At about 70% of GDP, the U.S. consumer is the game changer in the economic recovery. Consumption, income and retail sales are at new highs, and retail sales are rising consistently.
14000
$ billions
8,000
450
7,000
400
350
Retail Sales
2,000
1,000 1 000
Source: FactSet
46
Economy
GLOBAL PERSPECTIVES
Consumer Confidence
U.S. consumer confidence seems low, but consumer confidence is backward-looking and has often been a contrary indicator for subsequent stock market returns.
160 140 120 100 80
Total Index Index Level Market returned 16.3% in subsequent 12 months
2007
2008
2009
2010
2011
2012
47
Economy
GLOBAL PERSPECTIVES
2.0 % 1.0 0.0 (1.0) (1 0) (2.0) (3.0) (4.0) 1986 1988 1990 1992 1994 1996 1998 2000 2002
Recessions
2004
2006
2008
2010
2012
2010
2011
2012
Source: Bloomberg, Factset The Conference Board U.S. Leading Index consists of the weighted average of the following indices: 1. 1 Average weekly hours manufacturing hours, 2. 2 Average weekly initial jobless claims 3. Manufacturers 3 Manufacturers new orders consumer orders, 4. Vendor performance, slower deliveries 5. Manufacturers new orders, capital 6. Building permits, new private housing units 7. Stock prices, 500 common stocks 8. Money Supply, M2 9. Interest Rate Spreads10. Index of consumer expectations
48
Economy
GLOBAL PERSPECTIVES
Broadening Manufacturing
U.S. manufacturing capacity utilization is expanding from record lows and is nearing historically normal levels. Manufacturing is a significant part of the U.S. economy, accounting for 61% of U.S. exports.
90 %
U.S. Manufacturing Capacity Utilization U.S. Export Composition
Agriculture Products, 6%
85
, Other, 4%
80
78%
75
Services, 30%
70
65
Manufacturing Products, Products 61%
60 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
49
Economy
GLOBAL PERSPECTIVES
Broadening Manufacturing
U.S. factory activity remains in expansionary territory as does the global index, but the euro zone is hovering at the precipice of economic contraction.
65 60 55 50 45 40 35 30 2002 2004 2006 2008 2010 2012
Manufacturing
65 60
Global Manufacturing
Euro zone PMI
Non Manufacturing
56.8
55
54.8 50.5
50
47.7 47 7
45 Global PMI 40 35
Contractionary (<50)
50
Economy
GLOBAL PERSPECTIVES
1,600
Business Fixed Investment
1,400
Highest level ever
1,200
1,000
800
600 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Factset
51
Economy
GLOBAL PERSPECTIVES
Employment Payrolls
Total payrolls, including all non-farm employment, have been positive, but not enough to bring unemployment rates down significantly.
000s
Total Payrolls
(400) (600) (800) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: FactSet
52
Economy
GLOBAL PERSPECTIVES
Unemployment Rate
High unemployment may reluctantly recover as growth resumes; recent reports are encouraging, and news of job growth and payrolls has been positive.
800,000
000s Recessions
12% 11%
Unemployment Rate
10% 9% 8% 7%
600,000
400,000
6% 5%
Initial U I i i l Unemployment Claims l Cl i
4% 200,000 3% 2% 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
53
Economy
GLOBAL PERSPECTIVES
Breakdown Consumption: 71% Government: 20% Investment: 12% Exports: 12% E t Imports: (15%)
1Q12 2.2%
Gro owth of $1
Percent (%)
$ $7 5 $6 0 $5 $ $4 (5) Real GDP Cumulative Value starting at $1 ( ) (10) 1951 1956 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 $3 $2 $1
Source: Bloomberg
54
Economy
GLOBAL PERSPECTIVES
Inflation CPI
Core and headline inflation remain under control; while commodities prices spiked dramatically in 2009-2010, recent figures show a marked softening.
700
Index Level %
15 600 10 500
Core Inflation (right axis) Headline Inflation (right axis) CRB Index (left)
400
300 0 200
100 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
(5)
Note: Core CPI reflects consumer price inflation excluding food and energy. Source: Factset.
55
Economy
GLOBAL PERSPECTIVES
20 15 10
207
200
180
5 0
134
120
(15) (20)
100 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
(25) 2012
56
Economy
GLOBAL PERSPECTIVES
2,500
1,500
57
Economy
GLOBAL PERSPECTIVES
1.4 1.3
1.4
1.2
14.3% 20%
0.9 0.8 0.8
Defense
0.8
Other Mandatory
19%
05
06
07
08
09
10
11
12
13
14
15
16
Source: Congressional Budget Office, Office of Management and Budget, Data as of 10/31/11.
58
Economy
GLOBAL PERSPECTIVES
120
% of GDP
Deficit Levels
> 90% of GDP
16,000,000
100
12,000,000 80
Debt
8,000,000
60
40 4,000,000
Debt > 9.4% of GDP
20
Deficit
0
Deficit
0 2004 2012 1964 1970 1976 1982 1988 1994 2000 2006 2012
1964
1972
1980
1988
1996
Source: Factset
59
Economy
GLOBAL PERSPECTIVES
4,000 4 000
3,000
2,000
Japan 21%
1,000
China 27%
60
Economy
GLOBAL PERSPECTIVES
3 30.0%
3 30.0%
28. .0%
20.0%
16.5%
12.5 5%
15.0%
16.5%
17.0%
18.0%
20.0%
24.3%
S Singapore
Russia
China
25.0% %
Indonesia
28. .0%
3 30.0%
33.0%
Canada
H Hong Kong
Australia
France
U.K.
India
33.3%
Ireland
Brazil
34.0%
O OECD AVG
Germany
Turkey
U.S.A.
Japan
35.0%
61
Economy
GLOBAL PERSPECTIVES
Copper
10,000
$1,600 $1 600
1,664
8,000
$1,200
6,000 6 000
8,529
$800
4,000
503
Nominal Price/o Price/oz.
415
$400
2,000
Real Price/oz.
$0 1976
1982
1988
1994
2000
2006
2012
62
Source: FactSet, (gold divided by CPI U.S. city average with 9/30/1976 = 100)
Economy
GLOBAL PERSPECTIVES
1,000
800
600 60 40 20 200 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 0
400
Note: Oil Prices are West Texas Intermediate light crude spot price (NYMEX). Source: US Dept of Energy, FactSet
63
Economy
GLOBAL PERSPECTIVES
Horn River
Montney
Colorado Group
Gammon Bakken
Utica
Horton Bluff
Mowry
Utica Antrim
Green River Mobrara New Albany Excello/Mulkey Pierre Woodford Fayetteville Palo Duro Barnett/ Woodford Barnett Haynesville Bossier Chattanooga Floyd/ Conasauga/ Neal Ohio Marcellus
Sources of Energy in U.S. Manufacturing Natural Gas: Electricity: Liquefied Petroleum: Coal: Fuel Oil: Other : 27% 13% 11% 8% 2% 39%
Monterey
Mancos
Eagle Ford
Note: Oil Prices are West Texas Intermediate light crude spot price (NYMEX). Source: Ad S Advanced R d Resources, SPE/H ldit h N 2002 Hill 1999 C i 1994 H t P bli hi SPE/Holditch Nov 1999, Cain, Hart Publishing, 2008 modified f difi d from Ziff E Energy G Group Source: U.S. Dept of Energy, FactSet Source: Census Bureau, http://upload.wikimedia.org/wikipedia/commons/b/b4/Plate_tectonics_map.gif
64
Economy
GLOBAL PERSPECTIVES
250
200
Highest Export Level FEB 12 $181B
150
100
1994
1996
1998
2000
2002
2004
Source: FactSet
65
Economy
GLOBAL PERSPECTIVES
Cash 1.00
Hdge Fds 0.09 0.03 0.12 0.74 0 74 0.82 0.75 0.82 0.45 1.00
Note: Correlation coefficients describe the degree to which two variables are related, ranging from -1 to +1. Larger values (positive or negative) indicate stronger correlation, with +1 indicating the variables tend to move together and -1 indicating the variables move opposite one another. Zero correlation indicates independent movement. All Long Run Correlation coefficients are calculated based on monthly total return data for 20 years, except for Cash movement Long-Run years which goes back 12 years. Standard deviations are calculated based on monthly data that is annualized. Source: Barclays Capital, MSCI, Russell Investments, Standard & Poors, Citigroup, FTSE, NAREIT, HFR, FactSet
66
Allocation
GLOBAL PERSPECTIVES
67
Allocation
GLOBAL PERSPECTIVES
Note: All returns are annual returns except year-to-date (YTD) returns above. When considering alternative investments, investors should consider various risks i l di th use of l i i k including the f leverage and other speculative i d th l ti investment practices, illiquid i t t t ti illi id instruments, and complex t structures. These t d l tax t t Th investments are intended for sophisticated investors only, as defined by law. All investing involves substantial risk of loss. Source: CSFB/Tremont, NCREIF, Standard & Poors, Bloomberg
68
Allocation
GLOBAL PERSPECTIVES
Small-Cap Stocks p
100
Large-Cap Stocks Corporate Bonds
Growth of $1
10
0.1 01 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
Source: FactSet
69
Allocation
GLOBAL PERSPECTIVES
7.08% 14.60%
8.31% 11.92%
Index returns for the period 1995-2011 (YTD): S&P 500, S&P400 Midcap, S&P600 Smallcap, MSCI EAFE, MSCI BRIC, Barclays Capital U.S. Corporate Bonds, Bonds Barclays Capital U S Treasury Bonds Barclays Capital Global Aggregate Bonds Barclays Capital U S High Yield Bonds NAREIT REIT For U.S. Bonds, Bonds, U.S. Bonds., REIT. illustration only. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Source: FactSet. Returns data from 9/30/1995-12/30/2011.
70
Allocation
GLOBAL PERSPECTIVES
Average Returns Entire Period Annual (%) Average Down Months (%) 11.5 11.6 10.1 14.6
(9.9)
(11.4)
(10.4)
(11.1)
Subsequent Returns (% ) 1-year 3-years 14.8 11.0 20.8 15.8 12.7 7.8 20.5 19.7
Note: Assets include U.S. Large-Cap Equities (S&P 500), U.S. Small-Cap Equities (Russell 2000), International Equities (MSCI EAFE) for the period January 1980 S t b 2011 and E September d Emerging M k t E iti (MSCI E i Markets Equities Emerging M k t I d ) J i Markets Index), January 2001 S t b 2011. Th minimum monthly decline September 2011 The i i thl d li threshold defined as -7%. For illustration only. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Source: FactSet, ING Investment Management.
71
Allocation
GLOBAL PERSPECTIVES
Averag Return % ge
14 12
Other asset classes not included in the analysis: U.S. Large-cap U.S. Bonds 4.5 6.0 17.0 4.0
Log. (1-Asset)
Note: The analysis includes returns for the Russell 2000 Small-cap Index, MSCI EAFE International Index, NAREIT REIT Index and MSCI Emerging Markets Equity index for the period January 1995 June 2011. Hypothetical 2-, 3- and 4- asset portfolios were created based on equal weighting of the included assets. The return for each portfolio (vertical axis) is the average annualized return over the measurement period. The risk (horizontal axis) equals the annualized standard deviation for the period. Standard deviation measures dispersion around the average return, indicating whether the returns tend to be close to the average or spread over a wide range. The dotted line ellipses represent theoretical attainable sets of other portfolios of those assets with different asset weightings. As more assets are added to the hypothetical portfolios, historically risk tends to decline. For illustration purposes only. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Diversification does not guarantee against a loss and th t ff t lt I t ti t di tl i i d Di ifi ti d t t i t l d there i no guarantee th t a is t that diversified portfolio will consistently outperform a non-diversified portfolio. 72 Source: ING Investment Management, FactSet.
Allocation
GLOBAL PERSPECTIVES
72/28
S&P 500 Stocks Return Risk 9.67% 11.70%
60/40
Return Risk 9.88% 9.90%
Note: Based on index return data for the period 1/31/1976-9/30/2011, compounded annually. Initial hypothetical portfolios comprised of 60% S&P 500, 40% Barclays Capital U.S. Aggregate Bonds with rebalancing for the rebalanced portfolio on a quarterly basis. Risk equals historical annualized standard deviation. For illustration only. P t performance i not a guarantee of future results. Investors cannot invest directly in an i d d i ti F ill t ti l Past f is t t ff t lt I t ti t di tl i index. P tf li rebalancing may Portfolio b l i include trading costs and fees. Source: FactSet, ING Investment Management.
73
Allocation
GLOBAL PERSPECTIVES
Cash on the Sidelines and Equity Fund Flows vs. Stock Prices
The excess of M2 over M1 money supply data show record levels of cash on the sidelines, while flows into and out of equity mutual funds exhibit extreme swings that reflect stock market performance.
8,000 7,000 6,000
Money Supply M2-M1 $ billions
Index value
2,000
40
1,600
1,200
-20
S&P Index
800
1998
2002
2006
2010
400
Note: M2 minus M1 includes all savings deposits and retail money market funds and excludes currency, coins and checking account balances. Source: FactSet
74
Allocation
GLOBAL PERSPECTIVES
Life Expectancy
Improving life expectancy for those of all ages means the probability of living many years in retirement is higher than most people realize.
Life Expectancy Before Retirement 65% 49.0 40.0 31.0 22.5 18.6 26% 46% Probability of Long Life at Age 65
30
40
50 Age
60
65
80
85 Age
90
Source: Table B. Expectation of life by age, sex, Hispanic origin and race for non-Hispanic population, United States, 2007, National Vital Statistics Reports, Vol. 59, No. 9, September 28, 2011.
75
Retirement
GLOBAL PERSPECTIVES
DB Plan Sponsors in Fortune 1000 700 600 500 400 300 200 100 0 2004 2005 Number of Sponsors S
No Frozen Plans
Frozen Plans
2006
2007
2008
2009
2010
2011
% Participating P
Defined Benefit
Defined Contribution
1985
1989
1995
2000
2005
2010
76
Source: Top: Towers Watson. Bottom: Employee Benefit Research Institute, U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey: Employee Benefits in Private Industry in the United States, March 2004 March 2010, Bureau of Labor Statistics, 2004-2010.
Retirement
GLOBAL PERSPECTIVES
Actual Sources of Retirement Income 2009, Age 65 and Over Earnings g 28% Social Security 42%
Employer-sponsored saving plan Social Security Employer traditional pension Individual Retirement Account Other Oth savings and i i d investments t t Continued Employment Personally-owned guaranteed income products
44 33 29 29 26 24 14
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 1993-2011 Retirement Confidence Surveys, ebri.org Issue Brief, March 2011, No. 355. EBRI Databook on Employee Benefits, estimates from Current Population Survey, U.S. Census Bureau, March 2010 Supplement.
77
Retirement
GLOBAL PERSPECTIVES
70
$ trillions
60
58.6 58 6
50
4.2% 4 2%
40
30
Since reaching a bottom at 1% in 2008, the savings rate has moved unevenly higher.
20
(2) 1988 1991 1994 1997 2000 2003 2006 2009 2012
78
Retirement
GLOBAL PERSPECTIVES
35 30 25 Percent (%) t
Reported Total Savings and Investments: 75% have saved < $100,000
46
22
35 30 25 20 15 10 5 0
10 14 11 9 11
20 15 10
19
10 7
5 0
< $250 $250-500 $5001,000 $1,000$1 0001,500 $1,500+ $1 500+
$50100k
$100250k
250k+
Source: E l S Employee B Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 R ti fit R h I tit t d M th G ld A i t I Retirement C fid t Confidence S Survey, ebri.org I bi Issue Brief, March Bi f M h 2011, No. 355, Figure 26, Amount of Savings Workers Think They Need for Retirement, including data only for those who responded (88%), Figure 3, Reported Total Savings and Investments, Among Those Providing a Response.
79
Retirement
GLOBAL PERSPECTIVES
34
13.0
Live comfortably
Doing a good job of preparing Confidence that social security p q for retirement will provide benefits of equal value
Source: Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., 2011 Retirement Confidence Survey, ebri.org Issue Brief, March 2011, No. 355, Figure 7, Percentage of Workers Very Confident in Financial Aspects of Retirement, selected retirement responses.
80
Retirement
GLOBAL PERSPECTIVES
2003
MSCI EM 55.8% R2000 47.3% MidCap 40.1% MSCI EAFE 39.2% NAREIT/REIT 37.1% SP500 28.7% Balanced 18.5% BC U.S. 4.1% T-Bill 1.0%
2004
NAREIT/REIT 31.6% MSCI EM 25.6% MSCI EAFE 20.7% MidCap 20.2% R2000 18.3% SP500 10.9% Balanced 8.3% BC U.S. 4.3% T-Bill 1.2%
2005
MSCI EM 34.0% MSCI EAFE 14.0% MidCap 12.7% NAREIT/REIT 12.2% SP500 4.9% R2000 4.6% Balanced 4.0% T-Bill 3.0% BC U.S. 2.4%
2006
NAREIT/REIT 35.1% MSCI EM 32.2% MSCI EAFE 26.9% R2000 18.4% SP500 15.8% MidCap 15.3% Balanced 11.1% T-Bill 4.8% BC U.S. 4.3%
2007
MSCI EAFE 11.6% BC U.S. 7.0% Balanced 6.2% MidCap 5.6% SP500 5.5% T-Bill 4.7% R2000 -1.6% NAREIT/REIT -15.7% MSCI EM -39.4%
2008
BC U.S. 5.2% T-Bill 1.6% Balanced -22.1% R2000 -33.8% SP500 -37.0% NAREIT/REIT -37.7% MidCap -41.5% MSCI EAFE -43.1% MSCI EM -53.3%
2009
MSCI EM 78.5% MidCap 40.5% MSCI EAFE 32.5% NAREIT/REIT 28.0% R2000 27.2% SP500 26.5% Balanced 18.4% BC U.S. 5.9% T-Bill 0.1%
2010
NAREIT/REIT 28.0% R2000 26.9% MidCap 25.5% MSCI EM 18.9% SP500 15.1% Balanced 12.1% MSCI EAFE 8.2% BC U.S. 6.5% T-Bill 0.1%
2011
BC U.S. 7.8% NAREIT/REIT 4.7% Balanced 4.4% SP500 2.1% T-Bill T Bill 0.0% MidCap -1.5% R2000 -4.2% MSCI EAFE -11.7% MSCI EM -18.2%
NAREIT/REIT = NAREIT Equity REIT MSCI EM = MSCI Emerging Markets - Net Midcap = Russell Midcap Index
T-Bill = U.S. 30-day T-Bill R2000 = Russell 2000 Index SP500 = S&P 500
BC Agg. = Barclays Capital U.S. Aggregate Bond Index Balanced = 60% S&P 500, 40% BC Aggregate MSCI EAFE = MSCI EAFE USD
Note: For illustration only. Past performance is not a guarantee of future results. Investors cannot invest directly in an index. Source: FactSet, ING Investment Management.
81
Retirement
GLOBAL PERSPECTIVES
60 50 40
31.8
19.6 15.9 7.8 10.3 9.4 10.1 7.1 7.7 9.8 2.0 20 Stable Value
60s
2.8 28
4.3
Bonds
Money Market
Note: Dollar weighted averages, omits minor investment options, may not sum to 100 due to rounding. Source: EBRI/ICI Participant-Directed Plan Data Collection Project.
82
Retirement
GLOBAL PERSPECTIVES
14 12 10 8 6 4 2 0 (2)
New graph N h
(4) 1982
1986
1990
1994
1999
2003
2007
2011
Note: Return data for the S&P 500 Index, Russell 2000 Small-cap Index, Barclays Capital U.S. Corporate Bond Index and the 30-day U.S. T-Bill index for rolling 18.5-year periods f lli 18 5 i d from 1963 2011 C l l t d as th compound annualized return i excess of th rate of i fl ti f each asset class. Th rate of 1963-2011. Calculated the d li d t in f the t f inflation for h t l The t f inflation is based on the monthly reported change in the Consumer Price Index (CPI). Source: FactSet, ING Investment Management.
83
Retirement
GLOBAL PERSPECTIVES
Note: Includes both 401(k) and IRA plans. Components may not add to the illustrated total due to rounding. Source: Investment Company Institute, ING Investment Management.
84
Retirement
GLOBAL PERSPECTIVES
Index Definitions
Barclays Capital U.S. Aggregate Bond Index is composed of U.S. securities in Treasury, Government-Related, Corporate, and Securitized sectors that are of investment-grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $250 million. Barclays Capital U.S. Corporate Bond Index is a component of the Barclays Capital U.S. Aggregate Index. Barclays Capital U.S. Corporate High-Yield Bond Index tracks y p p g the performance of non-investment grade U.S. dollar-denominated, fixed rate, taxable corporate bonds including those for which the middle rating of Moodys, Fitch, and S&P is Ba1/BB+/BB+ or below, and excluding Emerging Markets debt. Barclays Capital U.S. Treasury Bond Index is a component of the Barclays C it l U S A B l Capital U.S. Aggregate I d t Index. Barclays Capital Global Aggregate Bond Index measures a wide spectrum of global government, government-related, agencies, corporate and securitized fixed-income investments, all with maturities greater than one year. Barclays Emerging Market Bond Index includes fixed and floating-rate USD-denominated debt from emerging markets in the following regions: Americas, Europe, Middle East, Africa, and Asia. The Credit Suisse/Tremont Hedge Fund Index is an assetweighted hedge fund index covering over 5000 funds with at least US$50 million under management a 12 month track record, and management, 12-month record audited financial statements calculated net of performance fees and expenses. CS/Tremont sub-indexes track hedge fund strategies by methodology, asset class and/or use of leverage. Dow Jones Industrial Average is a price-weighted average computed from the stock prices of 30 large, widely held public companies in the U.S., adjusted to reflect stock splits and dividends. FTSE NAREIT US Real Estate Index presents comprehensive REIT performance across the U.S. economy, including all commercial investment and property sectors. FTSE EPRA/NAREIT Global Real Estate Index is designed to represent general trends in eligible real estate equities worldwide. The Chicago Board Options Exchange Volatility Index (CBOE VIX) is a measure of the implied volatility of S&P 500 index options. It is one measure of the market's expectation of volatility over the next 30 day period. JPMorgan Emerging Markets Bond Index Plus (EMBI+) tracks total returns for actively traded emerging markets debt instruments including U.S.-dollar denominated Brady bonds, Eurobonds, and traded loans issued by sovereign entities. y g Merrill Lynch Municipal Bond Index is an unmanaged index that includes tax-exempt fixed rate bonds across a broad range of quality and maturity segments. MSCI BRIC Equity Index is a market capitalization weighted index of about 320 companies located in Brazil, Russia, India and China. MSCI EAFE Index is a free float-adjusted market capitalization j p weighted index designed to measure the developed markets equity performance, excluding the U.S. & Canada, for 21 countries. MSCI Europe Index is a free float-adjusted market capitalization weighted index designed to measure equity performance of the developed markets in Europe consisting of 16 country indices. MSCI Pacific Index is a free float-adjusted market capitalization weighted index designed to measure developed markets equity performance of the in the Pacific region consisting of 5 countries. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that measures emerging market equity performance of 22 countries. 85
GLOBAL PERSPECTIVES
Index Definitions
MSCI U.S. REIT Index is a free float-adjusted market capitalization weighted index comprised of equity REITs that generate a majority of g their revenue and income from real estate rental and leasing operations. NASDAQ Composite Index is a market capitalization weighted index of the performance of domestic and international common stocks listed on The NASDAQ Stock Market including over 2,800 securities. The NCREIF (National Council of Real Estate Investment Fiduciaries) Property Index (NPI) is a market value-weighted index of total rates of return for a large pool of commercial real estate properties acquired in the private market for investment purposes. Russell 3000 Index measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investible U.S. equity market. Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity market and includes approximately 1000 of the largest securities based on market capitalization and representing approximately 92% of the U.S. market. Russell 1000 Growth Index measures the large-cap growth segment of the U.S. equity market including Russell 1000 companies with higher price-to-book ratios and forecasted growth. Russell 1000 Value Index measures the large-cap value segment of the U.S. equity market including Russell 1000 companies with lower price-to-book ratios and l i t b k ti d lower expected growth. t d th Russell Midcap Index measures the performance of mid-cap stocks in the U.S. equity market including 800 of the smallest securities in the Russell 1000 Index, based on market capitalization. Russell Midcap Growth Index measures the performance of the midcap growth segment of the U.S. equity market including Russell Midcap Index companies with higher price-to-book ratios and forecasted growth. Russell Midcap Value Index measures the performance of the midcap value segment of the U.S. equity market including Russell Midcap Index companies with lower p p p price-to-book ratios and forecasted growth. Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity market including approximately 2000 of the smallest securities based on market capitalization. Russell 2000 Growth Index measures the performance of smallsmall cap growth stocks in the U.S. equity market including Russell 2000 companies with higher price-to-value ratios and forecasted growth. Russell 2000 Value Index measures the performance of small-cap growth stocks in the U.S. equity market including Russell 2000 companies with lower price-to-value ratios and forecasted growth. S&P MidCap 400 Index is a benchmark for mid-sized companies, which covers over 7% of the U.S. equity market and reflects the risk and return characteristics of the broad mid-cap universe. S&P SmallCap 600 Index covers approximately 3% of the domestic q g p portfolio of small equities market and is designed to represent a p companies that are investable and financially viable. S&P 500 Index is a gauge of the U.S. stock market which includes 500 leading companies in major industries of the U.S. economy. S&P/LSTA (Loan Syndications and Trading Association) Leveraged Loan Index (LLI) is a total return market value index that tracks fully ( ) y funded, senior secured, first lien term loans syndicated in the U.S., as well as dollar-denominated overseas loans, including 90-95% of the institutional universe. The S&P GICS (Global Industry Classification Standard) sectors provide standardized industry definitions consisting (in the U.S.) of 10 sectors, 24 industry groups, and 68 industries. 86
GLOBAL PERSPECTIVES
Important Disclosures
This information has been prepared by ING Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties th t could cause actual d k i k d t i ti that ld t l results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels and (4) increasing levels of loan defaults (5) changes in laws and regulations and (6) changes in the policies of governments and/or regulatory authorities. All indexes are unmanaged and an individual cannot invest directly in an index. Index returns do not include fees or expenses. Past performance is no guarantee of future results. The views and judgments expressed are those of ING Investment Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm firm. All investing involves risks of fluctuating prices and the uncertainties of rates of return and yield inherent in investing. All security transactions involve substantial risk of loss. You should consult your tax, legal, accounting or other advisors b t th tt di d herein. about the matters discussed h i As indicated on each page, some information was obtained from outside sources and is believed to be reliable, but ING does not guarantee its completeness or accuracy.
87
CID3520
GLOBAL PERSPECTIVES