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SALOMON SMITH BARNEY EQUITYRESEARCH:GLOBAL Global Asset Allocation July 16, 2001 Reasons for Global Investing Five Good Reasons to Invest Globally ? Many opportunities exist outside the United States. Currently, there are 3,702 companies globally with capitalizations of $1 billion or more, 1,774 of which are outside of the U.S. Many of these are highly profitable and have attractive valuations and high earnings growth. ? Since many industries are competing globally, in order to invest In the best company in an industry, one has to set ones Investment universe globally. ? Regional leadership In terms of returns tends to vary over time. Since 1984, a strategy of Investing solely in the regions that had outperformed in the past five years would have done poorly. ? Diversification benefits from investing abroad still exist. ? Emerging markets offer a unique opportunity to invest In an asset class selling at a discount to developed markets.  Reasons for Global Investing July 16, 2001 Global Investing The Efficient Frontier During the early 1990s, many investors became convinced that international investing was a good idea after seeing the data displayed in Figure 1. This figure shows the efficient frontier (risk/return curve) for different combinations of U.S. and international investing between January 1977 and December 1990. International investing is represented by the EAFE Index, which is an index of developed markets, excluding the United States and Canada. The efficient frontier curve shows the pattern of higher return and reduced risk that was the backbone of the arguments for investing abroad up through the mid 1990s. For example, if one invested 60% in the United States and 40% in EAFE rather than investing 100% in the U.S. market, one could not only have achieved a higher return (15. 1 % versus 13. 1 %) but also have lowered the volatility of returns (14. 1 % versus 15.8%). However, between January