Future for Investors Prof. Jeremy J. Siegel ~ The Wharton School CFO Forum Tel Aviv Gala Event ~ January 1, 2008

2 The Aging of the Population The Most Critical Long-term Economic Issue Facing the Developed World Long-Term Issues

3 Long Term Demographic Trends Past marked by (1) rising life expectancy and (2) falling Retirement Age But this trend Cannot Continue 1.6 Years 15.9 Years

4 Age Wave -- US

5 Age Wave – Japan

6 Big Questions The Biggest Questions Facing the Developed World Who Will Produce the Goods? Who Will Buy the Assets?

7 Retirement Age must rise dramatically 15.9 Years 11.6 Years

8 But there is Hope n Outside the developed countries, the population of the world is much younger. n Let’s look at India.

9 Age Wave -- India

10 Exchange of goods for assests n Throughout history, the “old” have sold assets to the young in exchange for goods. n Today in US, Florida’s retirees can sell assets to and import goods from the other 49 states. n In the future the US will sell its assets to the rest of the world. n Success of this solution depends on growth in the developing world.

11 World GDP 2005Population % 15.2% 46.7% 53.3%

% 77.1% Population 2050World GDP % 87.7%

13 Retirement Age with high growth in LDCs 15.9 Years 11.6 Years 15.4 Years

14 Retirement Age with high growth in LDCs

15 The Global Solution The answer to our question: Who will produce our goods? Who will buy our assets? Is the same: The Developing Countries By the middle of this century Developing Countries will own most of world’s capital.

16 Stock Market Capitalization %92.7% 33.0% 67.0% Stock Market Capitalization 2050

17 Conclusions n I believe that growth in developing world will offset slowing in aging economies and support future equity prices. n Biggest threat to capital markets is retreat from globalization. n Equity Markets depend on integration of world economy.