W W W. W A T S O N W Y A T T. C O M FUNDO de PENSÕES Member Briefing Session

2 Investment Basics Risk and Return Asset Classes Correlation

3 Major Type of Risks Maintaining your purchase power – a can of soft drink worth $3 10 years ago and now worth $6. Inflation Risk Concentration Risk Market Timing Risk Diversifying your investment – Investing in one stock has higher risk than investing in two or more stocks Consistent investing – excessive timing the market would result in “buying high and selling low”

4 Risk and Return Money Market Global Bonds Global Equities Higher Returns Higher Risks Source: WW Asset Model

5 Correlation - Example = Stock A = Stock B Perfect Positive Correlation Perfect Negative Correlation Perfectly Uncorrelated Partially Correlated

6 Risk Management Capital Appreciation Diversification Market Timing

7 Manage Inflation Risk $350 $221 Inflation Risk can be mitigated by investing in Equities and Bonds $148 $130

8 Global Equities and Global Bond Invest in various stocks – Region (US, Japan, Europe, Asia …) – Sector (Financial, Energy, Technology, Consumer …) – Companies with different attributes Invest in various types of bonds – Region (US, Japan, Europe, Asia...) – Type (Corporate, Government …) – Maturity (short and long term …) – Credit Rating (various credit ratings) Risk of specific single entity is diversified

9 Consistent Investing = Monthly Investment $$$$$ Accounts Long Term Perspective years of investment horizon + Appropriate Asset Classes Equities Bonds Money Market

10 Investment Strategies Thinking Process Barbell Strategy Dollar Cost Averaging

11 How much are you saving? MOP$15,000 21% 12 X X X 36 Estimated Future Savings * Monthly Income 21% 12 X X X Number of years until retirement * Only serves as a reference This formula aims to assess how much money you can save until retirement Assumptions: Salary Inflation = Investment Return = Inflation MOP$1,360,800

12 How much do you need? * Only serves as a reference This formula aims to assess how much money you need at retirement to maintain your expenditure MOP$15,000 60% 12 X X X 15 Estimated Savings Needed* Monthly Income 60% 12 X X X Number of years lived after retirement MOP$1,620,000

13 Implementation When extended to equity or multi-asset investments, the barbell strategy means balancing the risk of investments by investing at two ends of the risk spectrum Global Equity Global Bond Money Market High Risk Assets Low Risk Assets

14 Dollar-Cost-Averaging Month$ / ShareAmounted Invested Shares Purchased January181,0001,000 / 18 = 55 February91,0001,000 / 9 = 111 March151,0001,000 / 15 = 66 Total3, = 232 Average Market Price Sum of share prices ( ) Frequency (3) = Average COST per share Total amount invested ($3,000) Total no. of shares purchased (232) = =$12.9 =$14.0

15 Portfolio Management Switching Arrangement Monitoring Framework Post Retirement Management

16 Switch at the Right Time? Balanced Option Switch future contributions to conservative option

17 Balanced Option Switch at the Right Time? 11% Switch all balances to conservative option

18 Switch at the Right Time? 35% Balanced Option

19 Should I switch or not? Switch depends on your own profile, not the market Buy high and sell low Bear the transaction cost Remember it’s long term investing!

20 Retirement - Is it the end? Run the inflation risk Re-invest the benefits Low risk asset classes You are likely to live for many years after retirement!

W W W. W A T S O N W Y A T T. C O M Thank You The presentation is not intended for stock picking and does not represent MACAO SAR’s view

22 Preserve your gain! Return Age Aggressive BalancedConservative 90% Equities 10% Bonds 0% Cash Aggressive 50% Equities 30% Bonds 20% Cash 30% Equities 40% Bonds 30% Cash 100% Cash

23 Your moneys are saved! You Macao SAR Government Trustee (Macao SAR Government) 7% 14% Administrator (Macao SAR Government) Custodian Investment Managers