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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

Brazil's Infrastructure Plays Catch Up
May 20, 2010

Brazil has become one of the globe’s beacons of growth but in terms of infrastructure investment it needs to catch up to its peers.

As you can see from the two charts below, Brazil’s investment in its infrastructure has lagged that of emerging market leaders India and China, but it’s also lagged other Latin American countries like Peru and Mexico. In terms of investment-to-GDP ratio, Brazil averaged 17 percent over the past five years, according to a Morgan Stanley report, far behind China (44 percent), India (38 percent) and Russia (24 percent).

Brazil Infrastructure Plays Catch-Up

Brazil’s infrastructure investment as a percentage of GDP has been declining for some time. In the 1970s, infrastructure investment averaged 5.4 percent of GDP but that number has dropped off to just over 2 percent in the 2000s. This is considered just enough to maintain existing infrastructure, not enough for new projects or to fill new needs.

The U.S. spends roughly the same amount and we have our decaying infrastructure to show for it.

The Brazilian National Development Bank (BNDES) estimates that infrastructure investment could total more than $145 billion over the next three years alone. Morgan Stanley believes that this figure needs to double to 4 percent of GDP if the country is to achieve 5 percent annual growth for this decade.

So where is the $290 billion worth of investment needed?

Morgan Stanley says that the biggest opportunities are in roads, railways and ports. Because they’ve received little investment so far, ports and railways are projected to increase by 24.8 percent and 12.7 percent annually respectively for the next four to five years. In addition, we’ve seen firsthand the need for more airports and large-occupancy housing in its major cities.

Luckily, Brazil already has some drivers in place to increase investment. In addition to the second-edition of the Growth Acceleration Plan we discussed back in April (Brazil’s Plan to Accelerate Growth), Brazil will play host to the 2014 World Cup and the 2016 Olympics. Morgan Stanley also sees that the development of pre-salt oil reserves, a key driver of economic growth, will spur additional investment.

Our team’s visit to Brazil last November confirms the view that the country will benefit enormously from an upgrade of its infrastructure. It will take Brazil to the next level of economic development that will lessen reliance on commodities and diversify the engine of sustainable economic growth towards internal consumption.

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A Bridge to Prosperity
April 16, 2010

Mena Infographic sml 041610Two of the Middle East’s most promising economies will soon be joined together by the world’s longest bridge. The Qatar-Bahrain Friendship Causeway is set to begin construction later this year.

Spanning roughly 24 miles, the causeway would take nine hours to walk across and is the equivalent of 536 Boeing 747s lying end-to-end.

The $2.3 billion bridge, which includes a railroad, is expected to take five years to construct.  Once completed, 10,000 to 12,000 vehicles will use it daily to cut what’s now a four-and-a-half-hour drive to a mere 40 minutes.

A stronger connection between the two nations should be a catalyst for business activity. Qatar’s 9.5 percent GDP growth in 2009 was the fastest in the world and the country currently ranks as the second richest in the world in terms of GDP per capita ($122,000).

Already a banking center of the Arab world, the causeway should aide Bahrain in its efforts to diversify the country’s economy away from oil and natural gas. In recent years, Bahrain has worked to expand trade with both the United States and surrounding countries in the Middle East, including Qatar.

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Spotlight: Global Infrastructure
March 24, 2010

India’s prime minister says his country’s “creaking infrastructure” is becoming a pressing problem and called for $1 trillion to be spent between 2012 and 2017.

The goal is astounding, but so is the need. Many of India’s 1.1 billion people live without access to clean water, reliable electricity and stable shelter.

India Infrastructure 032410

India’s rapid urbanization is overwhelming its cities.  A special Financial Times report said that only 25 percent of India’s large cities has adequate transportation systems.

India isn’t alone in its vital infrastructure needs. The International Monetary Fund says Asia has to invest $8 trillion over the next decade to fight poverty and boost productivity. In Mexico, President Felipe Calderon wants to raise some $6.6 billion in infrastructure investments by 2012.

China was early to recognize infrastructure investment as an economic growth driver, and the bulk of its 2009 stimulus package went to that purpose. It appears that other governments are seeing the light.

Don’t forget that tomorrow we will be hosting a special Web presentation called “Building a Better World: The Global Infrastructure Opportunity.” Our Global MegaTrends Fund team and researchers from Macquarie Group will participate.

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A New Record for Infrastructure
December 17, 2009

China wants to set a new record with an infrastructure project that would also link three of the nation’s economic engines.

Work began this week on what will be the world’s longest sea bridge to physically connect, and strengthen the economic ties between, mainland China and the thriving former colonies of Hong Kong and Macau.

China Bridge Map 121709

The ambitious $10 billion project includes man-made islands, a 3-mile subsea tunnel and a 23.6 mile bridge. It is scheduled to be finished in 2016.

The exploding gaming industry in Macau (under Portugal’s control until 1999)
has made it the Las Vegas of the East – its GDP has tripled in the past decade. Hong Kong (a British colony until 1997) has long been the region’s financial center and the Pearl River Delta is a sprawling manufacturing hub.

The Delta region accounts for 40 percent of China’s GDP, but it has struggled during the global recession. Once completed, the bridge will provide Delta businesses with easier access to higher-end consumers in Hong Kong and Macau. Some trips that now take three hours would be trimmed to a mere 30 minutes.

According to Reuters, Hong Kong officials estimate the bridge should generate $6.6 billion in economic benefits within the first two decades of use.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Transportation of the Future
December 2, 2009

2009-12-2 GCC MapWarren Buffett isn’t the only one who sees trains as the transportation of the future. Oil-rich nations in the Middle East are converting their petrodollars to railroads in one of the world’s biggest regional infrastructure build-outs.

The Gulf Cooperation Council has plans for a 1,300-mile railway linking all six of its member states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates). Combined spending is estimated at more than $100 billion.

That is just a fraction of the amount available for investing to support future growth. Combined assets for the region’s four largest sovereign wealth funds (Abu Dhabi, Kuwait, Qatar and Saudi Arabia) total $1.15 trillion, and that’s just a portion of the wealth amassed in that dynamic part of the world.

In September, a $7.6 billion rail system was opened in Dubai to try to ease its bumper-to-bumper road congestion. An estimated 1.8 million passengers will use the line each day.

Saudi Arabia is building a $5.3 billion rail line to connect the Islamic holy cities of Mecca and Medina as part of the country’s $400 billion infrastructure plan.

And last week, Qatar’s sovereign wealth fund signed a $26 billion construction deal with German railroad operator Deutsche Bahn for a local system for Doha, Qatar’s capital and largest city, and freight lines to bordering trading partners. Qatar is the world’s largest producer of liquefied natural gas, a rapidly growing source of energy.

The population of Doha is expected to double over the next 10 years and the country, which hosted the 2006 Asian Games, is said to be putting together bids for the 2020 Summer Olympics and 2022 World Cup.

A Qatari official hailed the 15-year Deutsche Bahn deal as “the next step in the creation of this visionary Qatari project that will truly revolutionize the ease and convenience by which people travel.”

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Net Asset Value
as of 06/15/2018

Global Resources Fund PSPFX $5.83 -0.08 Gold and Precious Metals Fund USERX $7.61 -0.07 World Precious Minerals Fund UNWPX $3.89 -0.06 China Region Fund USCOX $11.80 -0.04 Emerging Europe Fund EUROX $6.72 -0.10 All American Equity Fund GBTFX $25.97 0.05 Holmes Macro Trends Fund MEGAX $20.22 No Change Near-Term Tax Free Fund NEARX $2.20 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change