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Exhibit 69: EM Equity Valuations Aggregate valuations are near neutral levels. Normalized Composite 7-Score 10 5 09 08 07 06 + 05 04 my oa 4 0.4 0.2 02 02 01 Ue 0.0 = E = NR -0.2 - — rae f= NR chile (1.2%) & EM Russia (4.5%) Taiwan (12.2%) Korea (14.4%) Turkey (1.0%) Malaysia (2.5%) Thailand (2.3%} China (26.5%) Mexico (3.5%) Philippines (1.2%) Poland (1.1%) Indonesia (2.6%) India (8.3%) Brazil (7.7%) South Africa (7.1%) Data as of December 31, 2016. Note: Based on monthly data since 1994 for Price/Forward Earnings, Price/Book Value, Price/ Cash Flow, Price/Sales, Price/Earnings-to-Growth Ratio, Dividend Yield and Return on Equity. Numbers in parentheses denote the country’s weight in MSCI EM. Only showing countries with a weight greater than 1%. Source: Investment Strategy Group, Datastream, |/B/E/S, MSCI. On the other hand, a harsher US stance on trade and foreign policy would hurt emerging market earnings, sentiment and valuation multiples. China, Korea, Mexico and Taiwan—which account for about 60% of MSCI emerging market capitalization and earnings—seem particularly vulnerable in the latter scenario. In comparison, countries with less exposure to the US economy and already strong domestic demand, such as India and Indonesia, would likely fare better. Exhibit 70: 2016 Currency Moves (vs. US Dollar) Against this uncertain backdrop and considering today's uninspiring valuations (see Exhibit 69), we remain tactically neutral on emerging market equities. That said, we continue to explore relative investment opportunities that exploit the significant domestic activity, external vulnerability and valuation differences among individual emerging countries. 2017 Global Currency Outlook In a notable departure from recent years, the US dollar did not enjoy unequivocal dominance in 2016 (see Exhibit 70). The yen, for example, ended a four-year slide against the greenback as the market questioned the BOJ’s commitment to monetary easing. Certain emerging market currencies—such as the Russian ruble and Brazilian real—also outperformed the dollar on the back of stronger commodity prices and favorable political developments at home. And while the dollar did make notable gains against the euro, pound and Mexican peso in particular, these currencies enter 2017 with a more balanced risk/reward profile as a result. The upshot is that while tightening monetary policy and potential fiscal expansion in the US will continue to favor dollar strength, those gains are likely to be more modest and reflected in a narrower set of currencies as the dollar bull market enters its fifth year. Our tactical positioning For the first time in several years, the US dollar did not appreciate against all major currencies. 2016 Spot Return (%) G10 EM Asia EM EMEA EM Latin America 25 | 20 22 20 5 15 | | uso 13 Appreciation 10 + 6 6 ci 2 2 3 8 1 2 2 2 o —_— nae == == 54 3 2 1 3 3 2 2 40 4 7 6 7 6 -15 3 29 J -16 17 17 <“ § © Bs = &€ 8 ¢ 89 s = ¢ © 8 § gs > 8 2 2 gs 2 2 8 5 = Ss £ 2@ 6 = $ FA gs EA 2 = 3 a a 2 2 ee ge <2 a ° zs eer 3 = = iS ive) New Zealand Data as of December 31, 2016. Source: Investment Strategy Group, Bloomberg. Czech Republic South Africa 60 | Goldman Sachs | JANUARY 2017 HOUSE_OVERSIGHT_014593