October PRUDENTIAL INTERNATIONAL INVESTMENTS ADVISERS, LLC. Global Investment Outlook & Strategy

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1 PRUDENTIAL INTERNATIONAL INVESTMENTS ADVISERS, LLC. Global Investment Outlook & Strategy October 2015 Market Volatility likely to Remain Elevated on China Growth Concerns & Fed Rate Uncertainty. Stocks to Recover with ECB & BoJ likely to Expand QE Buying, Fed Delays Rate Lift-off, Solid GDP Growth in U.S. & U.K., Healthy Earnings & Improved Valuation after Q3 Sell-off Bond Yields likely to be Range-bound as Elevated Risk Aversion, Low Inflation & ECB & BoJ QE Buying/Expansion Offset by Solid U.S. Growth & Fed Rate Uncertainty John Praveen, PhD Chief Investment Strategist FOR MORE INFORMATION CONTACT: Theresa Miller Phone: prudential.com John Praveen s Global Investment Outlook for October 2015 expects global stock market volatility to remain elevated in the near term with continued China concerns and Fed rate uncertainty. However, stocks are likely to rebound with liquidity support as the ECB & BoJ expand QE, the Fed delays rate hikes, solid GDP growth in the U.S. & U.K., healthy earnings growth and improved valuation following the Q3 correction. Stocks: The global sell-off continued in September with China growth concerns and Fed rate uncertainty. Further, the Volkswagen scandal hit Eurozone stocks in late September wiping out the Grexit relief rally following the positive result in the September 20th Greek election with the re-election of the Syriza party. By September-end, developed markets declined -3.7% for YTD loss of -5.4%, while emerging markets fell -2%, down -9% YTD. Looking beyond current struggles driven by China and Emerging Markets growth concerns, and Fed rate uncertainty, stocks are likely to stabilize and rebound with: 1) Liquidity & interest rate support with the ECB and the BoJ likely to expand QE buying, and the U.S. Fed choosing to delay rate lift-off to Q4. Further, China s PBoC and the government continue to take easing measures to support growth and emerging central banks have been cutting rates (Taiwan & India); 2) Improved Growth in Developed Economies while Emerging Markets (EM) Struggle: While there are concerns about growth in China and other EM, GDP growth in the developed economies remains healthy led by solid growth in the U.S. and U.K. Japanese GDP growth is expected to post a modest rebound in H2 & Eurozone growth is likely to remain on improving track; 3) Solid Earnings Outlook: Global earnings outlook remains solid with upward revisions to the outlook for Eurozone and Japanese earnings offset by downward revisions to EM earnings expectations; 4) Improved Valuations: Stocks remain cheap relative to bonds with the earnings yield gap widening as bond yields continue to fall while equity earnings yield rose with P/E multiples falling as stock market sell-off continued from August to September. Bonds: Global bond yields remained volatile in September, rising ahead of the Fed meeting in September but fell with the equity sell-off in late September. Looking ahead, bond yields are likely to be range bound. Yields are likely to be under modest upward pressure from: 1) Solid GDP growth in the U.S. and U.K, and improving growth in Japan and Eurozone; 2) Potential Fed tightening tantrum; 3) Valuations relative to stocks have deteriorated with the rise in equity yields on falling P/E multiples. However, bonds remain supported by: 1) Safe haven demand with elevated risk aversion on China growth concerns and rising Middle East tensions; 2) Increased QE buying by ECB & BoJ; & 3) Low inflation with Eurozone inflation turning negative. 1 *Prudential International Investments Advisers, LLC. (PIIA) is a business of Prudential Financial, Inc., (PFI), which is not affiliated in any manner with Prudential plc, a company headquartered in the United Kingdom. For informational use only. Not intended as investment advice. See Disclosures on the last page for important information.

2 Market Outlook: Stock Markets in Sharp Sell-off in Q3. Volatility likely to Remain Elevated on China & EM Growth Concerns & Fed Rate Uncertainty. Stocks Likely to Recover with ECB & BoJ likely to Expand QE, Solid GDP in U.S. & U.K., Healthy Earnings & Improved Valuation Bond Yields likely to be Range-bound with Solid GDP Growth in U.S. & U.K. and Fed Rate Uncertainty Offset by QE Expansion by ECB & BoJ, Low Inflation & Elevated Risk Aversion on China Concerns & Rising Middle-East Tensions Stock Market Outlook (October): Global stock markets suffered another sharp sell-off in September as the turbulence from August continued with China growth concerns and uncertainty regarding Fed rate lift-off ahead of the September FOMC meeting. Further, the Volkswagen diesel emission test scandal hit Eurozone stocks in late September wiping out the Grexit relief rally following the positive result in the September 20 th Greek snap election which saw the reelection of Syriza party, ensuring that the bail-out deal would not unravel, atleast for now. By September-end, developed markets declined -3.7% for YTD loss of -5.4%, while emerging markets fell -2% for YTD loss of -9%. Looking ahead, stocks are likely to remain volatile in the near term with continued concerns about China and emerging markets growth, continued decline in oil and commodity prices, uncertainty about Fed rate lift-off and increased geopolitical tensions. However, looking beyond current struggles, stocks are likely to stabilize and rebound with continued favorable liquidity and interest rate backdrop with Fed rate hikes likely to be modest and gradual, the ECB and BoJ likely to expand QE, further stimulus in China, rate cuts by several EM central banks, solid GDP growth in the U.S. & U.K. & growth improvement in Eurozone & Japan, healthy earnings growth and improved valuations following the Q3 equity sell-off: 1) Favorable Liquidity & Interest Rate Backdrop as Fed Delays Rate Lift-off on Global Concerns, ECB and BoJ likely to Expand QE, China Continues Easing Measures, Other Central Banks Cut Rates: The global monetary back-drop remains supportive with the U.S. Federal Reserve choosing to delay rate lift-off to Q4 given ongoing concerns about China slowdown and Emerging Markets growth and turbulence in global financial markets. While the Fed remains confident that U.S. domestic demand remains solid and labor market is improving, they highlighted low inflation and sluggish wage growth. More importantly, the Fed cautioned that recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. The minutes of the September meeting indicate that while most Fed members felt that recent adverse global economic and financial developments would have only a "small" impact on the US economy. However, they were concerned about the increase in downside risks to both U.S. activity and inflation. Under the circumstances, it was "decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated". Like the U.S. Fed, the BoE is on track to start rate hikes given the solid U.K. GDP growth. However, U.K. inflation remains muted. Recent speeches by BoE members suggest that with muted price pressures and the Fed decision to delay rate lift-off to Q4, the BoE is unlikely to hike rates before The ECB is likely to expand QE stimulus in the next few months with Eurozone inflation dipping into negative territory. At the September meeting the ECB left policy unchanged but made minor changes to their asset purchase policy, giving it more flexibility to expand QE if necessary. Specifically, the ECB increased the share of bonds it can purchase to 33% of each issue from 25%. At the press conference, President Draghi renewed the ECB Put and assured that the ECB could expand its stimulus program if the slowdown in emerging economies and turbulence in financial markets makes it difficult to lift inflation to the ECB s 2% target. The ECB s message in September reiterates its reassurance in July that it stands ready to use "all the instruments available within its mandate" and adjust the size, composition and duration of its QE to provide stimulus. The Bank of Japan (BoJ) is currently on hold but is also likely to expand QE stimulus with inflation undershooting BoJ target and risks to growth due to the China slowdown. 2 For informational use only. Not intended as investment advice.

3 China s PBoC and the government continue to take easing measures to support growth. The PBoC last cut rates and lowered the required reserve ratio for banks on August 25th, for the second time in two months, in response to the plunge in the domestic stock market and on further signs that the economy is weakening. Further easing measures by the PBoC and fiscal stimulus are likely over the next few months. Several emerging central banks have been cutting rates (Taiwan & India) or are on track to cut rates (Thailand). 2) Solid H2 Growth in U.S. & U.K, Eurozone on Track to Improve, Japan Rebound after Q2 Contraction. Emerging Economies Struggle with China Slowdown Concerns, Brazil & Russia in Recession: Global growth remains uneven with continued solid growth in the U.S. and U.K., Eurozone on track to improve and Japan on track to rebound after the Q2 contraction. Emerging markets continued to struggle as China slowdown concerns casts a shadow on growth outlook in most Asian economies, while Brazil and Russia are in recession. China GDP growth was stable around 7% but there are increased concerns about China growth and its impact on other Asian and Emerging Economies. After a solid 3.9% GDP rebound in Q2 (revised higher from 3.7%), U.S. GDP growth in Q3 is tracking around 2.5% supported by consumer spending and improved investment spending but a drag from trade. Consumer spending remains supported by rising employment and strengthening consumer confidence. The outlook for investment spending remains good with ISM business confidence in both manufacturing and services remaining above 50, despite the recent pullback. Housing is also contributing to growth. Earlier, U.S. Q2 GDP growth was revised even higher to 3.9% from 3.7% in the second report and 2.3% initially reported. Stronger business investment and government spending, and growing inventories led the upward revision. Eurozone growth is likely to show steady improvement with Grexit risk reduced following the solid win by Syriza in the September 20 snap election and reappointment of Tsipras as PM. Eurozone GDP growth is likely to remain modest, around 1.6% with consumption supported by falling unemployment and low oil prices and exports supported by the weak Euro. Eurozone Q2 GDP growth was revised upward to 1.6% QoQ annualized from 1.2% in the initial estimate. U.K. GDP is expected to grow at a solid pace in H2 with consumer spending underpinned by falling unemployment and investment spending supported by business confidence and BoE rate hikes pushed out to early Earlier, U.K. GDP grew a solid 2.8% QoQ annualized in Q2, rebounding from a modest 1.6% growth in Q1. Japanese GDP is expected to post a modest rebound in Q3, around 2%. Earlier, Japan s Q2 GDP was revised higher to a relatively smaller contraction of -1.2% QoQ annualized from original reported -1.6%. In contrast to solid or improving growth in the developed economies, the Emerging Economies continue to struggle with China slowdown concerns and soft growth in the Asian economies. The exception seems to be India where growth remains above 7% as the economy benefits from lower oil and commodity prices, and rate cuts by the RBI. Despite concerns, China GDP growth remains stable around 7% with aggressive PBoC stimulus and likely fiscal stimulus. GDP growth in Latin America & EM Europe is expected to remain weak with Brazil and Russia in recession. 3) U.S. Q2 Earnings Season Finishes on a Strong Note. Eurozone Q2 Results Surprise Positively, Full Year Outlook Revised Higher. Japanese Earnings Revised Modestly Higher as Growth Expected to Recover After Q2 Contraction. EM Outlook Revised Further Lower: Global earnings growth expectations remains around 3% for 2015 with upward revisions to the outlook for Eurozone and Japanese earnings offset by downward revisions to EM earnings expectations. U.S. Q2 earnings season ended with earnings results much better than expected. Eurozone Q2 earnings results continue to come in stronger than expected and earnings for full year 2015 are expected around 11% supported by improving GDP growth and weak euro boosting sales and margins. Japanese earnings expectations for 2015 have been revised higher to around 17% with GDP growth expected to rebound modestly after the contraction in Q2. Emerging Markets earnings growth for 2015 has been further revised lower to 0%. 4) Valuation - Stock Market Multiples Improve in August and September with the Sharp Market Correction: Stock market P/E multiples, both in developed markets (DM) and emerging markets (EM), improved significantly in August and September as stock market sell-off continued from August to September. The P/E multiple for 3 For informational use only. Not intended as investment advice.

4 developed markets (DM) declined to 17.7X in September from 18.3X in August. DM valuations are well below the longterm average of 21.2X and around the 18X level at the end of Emerging Market (EM) stock P/E multiples fell further to 12.2X in September from 12.6X in August. The current EM multiple is well below its own long term (20-year) historical average of 15.3X. Stocks remain cheap relative to bonds. The earnings yield gap (EYG) between U.S. stocks and bonds increased further in September as the earnings yield on U.S. stocks rose to 5.89% from 5.73% in August while the 10-year Treasury yield fell to 2.04% from 2.22%. The yield gap between U.S. stocks-bonds rose to 3.85% from 3.51% and 3.19% in the previous two months, well above its long-term (20-year) average of 1.2%. Eurozone stocks remain cheap relative to bonds on EYG basis with the yield gap widening to 4.32% from 3.93% in August as the yield on Eurozone stocks rose to 4.91% from 4.73% while the 10-year Bund yield fell to 0.59% from 0.8%. The Eurozone EYG remains well above its long-term average of 3.4% (10-year average). The Japanese stocks earnings yield gap rose to 6.45% in September from 5.86% in August, well above its long-term 10-year average of 4%. Bottom-line: The stock market sell-off continued in September with China growth concerns and uncertainty regarding Fed rate lift-off. Further, the Volkswagen scandal hit Eurozone stocks in late September wiping out the Grexit relief rally following the positive result in the September 20 th Greek election with the re-election of the Syriza party. By September end, developed markets declined -3.7% for YTD loss of -5.4%, while emerging markets fell -2%, down -9% YTD. Looking beyond current struggles driven by China and Emerging Markets growth concerns, and Fed rate uncertainty, stocks are likely to stabilize and rebound with continued favorable liquidity and interest rate backdrop, solid GDP growth in the U.S. & U.K. & growth improvement in Eurozone & Japan, healthy earnings growth and improved valuations following the recent decline. Market rebound is likely to be driven by: 1) Liquidity & interest rate backdrop remains supportive with the U.S. Fed choosing to delay rate lift-off to Q4 given ongoing concerns about China and Emerging Markets growth and turbulence in global financial markets. Further, with low inflation, Fed rate hikes are likely to be gradual and modest. Like the U.S. Fed, the BoE has pushed out U.K. rate hikes to 2016 with inflation remaining muted. The ECB indicated that it stands ready to expand QE buying if needed with President Draghi renewing the ECB Put. With Eurozone inflation dipping into negative territory, the ECB is likely to expand QE stimulus in the next few months. The Bank of Japan (BoJ) is also likely to undertake easing measures with inflation undershooting BoJ target and risks to growth due to the China slowdown. China s PBoC and the government continue to take easing measures to support growth. Several emerging central banks have been cutting rates (Taiwan & India); 2) Improved Growth in Developed Economies while Emerging Markets (EM) Struggle: While there are concerns about growth in China and other EM, GDP growth in the developed economies remains healthy led by solid growth in the U.S. and U.K., building on the Q2 rebound. Japanese GDP growth is expected to post a modest rebound in H2 after contracting -1.2% in Q2. Eurozone growth is likely to remain modest, around 1.6% in Q3, after Q2 growth of 1.2%. However, the Emerging Economies are struggling as concerns about China growth casts a shadow on the growth prospects of the other EMs, especially those dependent on exports to China. Brazil and Russia remain in recession, depressing growth in LatAm and EM Europe; 3) Solid Earnings Outlook: Global earnings outlook remains solid with upward revisions to the outlook for Eurozone and Japanese earnings offset by downward revisions to EM earnings expectations. U.S. Q2 earnings season ended with earnings results much better than expected. Eurozone Q2 earnings results continue to come in stronger than expected and earnings for full year 2015 are expected around 11% supported by improving GDP growth and weak euro boosting sales and margins. Japanese earnings expectations for 2015 have been revised higher to around 17% with GDP growth expected to rebound modestly after the contraction in Q2. Emerging Markets earnings growth for 2015 has been further revised lower 0%; 4) Improved Valuations: Stocks remain cheap relative to bonds with the earnings yield gap widening as bond yields continue to fall while equity earnings yield rose with P/E multiples falling as stock market sell-off continued from August to September. While the case for the stock market recovery is supported by favorable liquidity and interest rate backdrop, healthy GDP growth in the developed economies, solid earnings outlook and improved valuation, market volatility is likely to remain elevated until Chinese policy makers succeed in stabilizing the Chinese market and 4 For informational use only. Not intended as investment advice.

5 ease fears about the economy, the Fed manages to engineer a smooth rate lift-off, and geopolitical tensions in the Middle East do not escalate. Bond Market Outlook: Bond Yields Decline as Equities Sell-off. Yields Range-bound with Solid Growth & Fed Rate Uncertainty Offset by Elevated Risk Aversion, ECB & BoJ QE Buying & Low Inflation Global bond yields declined in September after a volatile August. Bond yields were volatile heading into the September Fed meeting, with yields falling initially and then rising closer to the FOMC meeting. After the Fed decided to leave rates unchanged, yields declined. Yields fell further in late September with renewed sell-off in equity markets and increased geopolitical tensions in the Middle East. U.S. Treasury and Japanese JGB yields declined to 2.04% and 0.35%, respectively, while Eurozone yields fell to 0.59% from 0.73%. Looking ahead, bond yields are likely to be range bound with safe haven demand from global uncertainties (China growth concerns, Middle East tensions), low inflation and continued QE buying by the ECB and BoJ are offset by solid U.S. GDP growth and improving GDP growth in other developed economies, continued uncertainty around Fed rate liftoff and bond valuations deteriorating relative to stocks. Yields are likely to be under modest upward pressure from: 1) Healthy GDP growth in the Developed Economies: While Emerging Markets struggle with China slowdown concerns and Brazil and Russia in recession, GDP growth outlook remains solid in the U.S. and U.K., Eurozone and Japan on track to improve; 2) Continued Uncertainty about Fed Rate Lift-off: With the Fed choosing to delay rate lift-off to Q4 given the ongoing turbulence in global financial markets, the delay in starting the rate normalization process prolongs uncertainty; 3) Bond valuations have become even less attractive relative to stocks with stock valuations improving further as a result of the sharp decline in stock prices during August and September, while bond yields remain low; However, bonds are supported by: 1) Safe haven demand with continued concerns about China and Emerging Markets growth outlook and Middle East tensions rising again with the increased involvement of Russia in Syria and increased violence and political uncertainty in Turkey; 2) QE Buying: While Fed remains on track for rate lift-off, the ECB and BoJ are likely to expand QE buying with Eurozone inflation dipping into negative territory and Japan inflation undershooting BoJ target and risks to growth due to the China slowdown; and 3) Low inflation in the U.S., U.K. and Japan, and Eurozone inflation negative with renewed decline in oil and commodity prices. Investment Strategy: Asset Allocation: Stocks vs. Bonds - Stocks likely to Remain Volatile with China Concerns & Fed Uncertainty. Bonds Range-bound Stocks Modest Overweight as stocks likely to remain volatile on China growth concerns and Fed uncertainty. Stocks likely to recover with QE expansion by ECB & BoJ, solid GDP growth in the U.S. & U.K., healthy earnings growth & improved valuation after recent sell-off. Bonds Keep at Neutral as yields likely to be range-bound with solid GDP growth in U.S. & U.K, and Fed uncertainty offset by QE expansion by the ECB & BoJ, low inflation & elevated risk aversion on China concerns and rising Middle East tensions. Global Equity Strategy: Modest Overweight in Eurozone & Japan. Keep EM Asia at Underweight on China concerns; Keep U.K. at neutral with rate hikes delayed; Underweight in Latin America & EM Europe; Remain Underweight in U.S. Eurozone: Modest overweight with positive outcome in Greek snap elections, ECB likely to expand QE with inflation turning negative, solid earnings growth with weak Euro. Improving GDP growth but China slowdown a risk to exporters. Japan: Modest Overweight. BoJ likely to expand QE stimulus, strong earnings with weak yen tailwinds, GPIF equity buying & GDP rebound in H2. Emerging Markets: Keep EM Asia at Underweight as China market and growth concerns remain despite policy makers efforts. Underweight in LatAm & EM Europe with weak oil & commodity prices, Brazil & Russia in recession. 5 For informational use only. Not intended as investment advice.

6 U.K.: Keep U.K. at Neutral as BoE rate hikes delayed to 2016 and solid GDP growth offset by drag from Energy sector. U.S.: Remain Underweight with increased uncertainty around Fed rate lift-off and risk of tightening tantrum. U.S. Q2 earnings came in better than expected but face strong dollar headwinds and energy earnings drag. Q2 GDP rebound at 3.9% and growth in H2 is expected to remain solid, above 3%. Global Bond Market Strategy: Yields Range-bound with Solid GDP & Fed Uncertainty Offset by ECB & BoJ QE, Low Inflation & Risk Aversion Japan JGBs: Remain Overweight with the BoJ likely to expand QE with low inflation. GDP contracts in Q2 but likely to rebound in H2. Eurozone: Remain Overweight with positive outcome in Greek snap elections, ECB likely to expand QE buying, modest GDP growth & low inflation. U.K. Gilts: Remain Neutral with strengthening GDP growth but offset by low inflation and BoE rate hikes pushed out into late 2015 or early EM Debt: Remain Underweight on negative outlook with Fed rate uncertainty, continued volatility in China and increased Middle East tensions. U.S. Treasuries: Modest Underweight with solid growth momentum in H2 after Q2 GDP rebound (3.9%), Fed uncertainty & risk of tightening tantrum. Global Sector Strategy: Overweight: Consumer Discretionary, Healthcare, Financials & Information Technology; Modest Overweight: Industrials; Underweight: Energy, Materials, Consumer Staples, Telecomms & Utilities. Currency Strategy: Overweight: U.S. Dollar (solid growth in H2 & Fed delays rate hike but on track to start rate hikes in late 2015); Neutral: Sterling (BoE rate hikes delayed to early 2016 with low inflation but GDP growth solid); Underweight: Euro (ECB likely to expand QE while Fed starts rate hikes, modest Eurozone GDP growth) & Japanese Yen (BoJ likely to expand QE stimulus with falling inflation, Fed starts U.S. rate hikes & relatively stronger U.S. GDP growth). Follow us on Twitter: Disclosures: Prudential International Investments Advisers, LLC. (PIIA), a Prudential Financial, Inc. (PFI) company, is an investment adviser registered with the Securities and Exchange Commission of the United States. Pramerica is a trade name used by PFI and its affiliated companies in select countries outside of the United States. PFI, a company incorporated and with its principal place of business in the United States of America is not affiliated in any manner with Prudential plc, a company headquartered in the United Kingdom. The commentary presented is for informational purposes only, and is not intended as investment advice. This material has been prepared by PIIA on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. However, no assurances are provided regarding the reliability of such information. All opinions and views constitute judgments of PIIA as of the date of this writing, and are subject to change at any time without notice. There can be no assurance that any forecast made herein will be realized. Distribution of this information to any person other than the person to whom it was originally delivered and to such person s advisers is unauthorized and no part of this material may be reproduced or distributed further without the written approval of PIIA. These materials are not intended for distribution to, or use by, any person in any jurisdiction where such distribution would be contrary to local law or regulation. The companies, securities, sectors and/or markets referenced herein are included solely for illustrative purposes to highlight the economic trends, conditions, and the investment process, but may or may not be held by accounts actually managed by PIIA. The strategies and asset allocations discussed do not refer to any service or product offered by PIIA or by its affiliates The global asset and strategy allocation models presented are hypothetical allocation models shown for illustrative purposes only, and do not necessarily reflect the management of any actual account. Following the allocation recommendations presented will not necessarily result in profitable investments. Past performance is not an assurance of future results. Nothing herein should be viewed as investment advice to adopt any investment strategy, nor should it be considered an offer to provide investment advisory or other allocation services Prudential Financial, Inc. and it related entities. Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and it related entities, registered in many jurisdictions worldwide. 6 For informational use only. Not intended as investment advice.

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