Future for InvestorsProf. 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

U.S. Life Expectancy and Retirement Age

56

60

64

68

72

76

80

1950-1955

1955-1960

1960-1965

1965-1970

1970-1975

1975-1980

1980-1985

1985-1990

1990-1995

1995-2000

2000-2005

Life Expectancy

Retirement Age

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

U.S. Life Expectancy and Retirement Age

Life Expectancy

Retirement Age

56

60

64

68

72

76

80

84

88

1950

-195

5

1955

-196

0

1960

-196

5

1965

-197

0

1970

-197

5

1975

-198

0

1980

-198

5

1985

-199

0

1990

-199

5

1995

-200

0

2000

-200

5

2005

-201

0

2010

-201

5

2015

-202

0

2020

-202

5

2025

-203

0

2030

-203

5

2035

-204

0

2040

-204

5

2045

-205

0

15.9 Years

11.6Years

8

But there is Hope

Outside the developed countries, the population of the world is much younger.

Let’s look at India.

9

Age Wave -- India

10

Exchange of goods for assests

Throughout history, the “old” have sold assets to the young in exchange for goods.

Today in US, Florida’s retirees can sell assets to and import goods from the other 49 states.

In the future the US will sell its assets to the rest of the world.

Success of this solution depends on growth in the developing world.

11

Western Europe

19%

U.S.21%

Low Income5%

Mid Income5%

Eastern Europe

5%

Latin Am/Carib

8%

India6%

China14%

Hi Inc. nonOECD

3%

Canada2%

Aus / NZ1%

Japan7%

Sub-Saharan

Africa2%

Indonesia2%Western

Europe 6.14%

U.S.4.61%

Low Income13.44%

Mid Income5.61%

Eastern Europe4.60%

Latin Am/Carib

8.68%

India17.07%

China20.35%

Hi Inc. nonOECD

1.57%

Canada0.50%

Aus / NZ0.37%

Japan1.98%

Sub-Saharan

Africa11.62%

Indonesia3.45%

World GDP 2005Population 2005

84.8%

15.2%

46.7%

53.3%

12

Western Europe

7%

U.S.10%

Low Income9%

Mid Income7%

Eastern Europe

4%

Latin Am/Carib

10%

India18%

China19%

Hi Inc. nonOECD

2%

Canada1%

Aus / NZ1%

Japan2%Sub-

Saharan Africa

7%

Indonesia3%

22.9%

77.1%

Population 2050 World GDP 2050

Western Europe 4.41%

U.S.4.35%

Low Income16.48%

Mid Income5.43%

Eastern Europe2.46%

Latin Am/Carib

8.63%

India17.55%

China15.34%

Hi Inc. nonOECD

1.51%

Canada0.47%

Aus / NZ0.36%

Japan1.24%

Sub-Saharan

Africa18.64%

Indonesia3.14%

12.3%

87.7%

13

Retirement Age with high growth in LDCs

U.S. Life Expectancy and Retirement Age

Life Expectancy

Retirement Age

Developing Countries High

Growth56

60

64

68

72

76

80

84

88

1950

-195

5

1955

-196

0

1960

-196

5

1965

-197

0

1970

-197

5

1975

-198

0

1980

-198

5

1985

-199

0

1990

-199

5

1995

-200

0

2000

-200

5

2005

-201

0

2010

-201

5

2015

-202

0

2020

-202

5

2025

-203

0

2030

-203

5

2035

-204

0

2040

-204

5

2045

-205

0

15.9 Years

11.6 Years

15.4 Years

14

Retirement Age with high growth in LDCs

U.S. Life Expectancy and Retirement Age

Life Expectancy

Retirement Age

0%

2%

4%

6%

8%56

60

64

68

72

76

80

84

88

1950

-195

5

1955

-196

0

1960

-196

5

1965

-197

0

1970

-197

5

1975

-198

0

1980

-198

5

1985

-199

0

1990

-199

5

1995

-200

0

2000

-200

5

2005

-201

0

2010

-201

5

2015

-202

0

2020

-202

5

2025

-203

0

2030

-203

5

2035

-204

0

2040

-204

5

2045

-205

0

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

Western Europe 29.40%

U.S.46.00%

Emerging Eastern Europe /

Asia4.70%

Emerging Latin Amer

1.50%

India0.40%

China0.70%

Canada3.50%

Developed Asia Ex-Japan3.50%

Japan10.30%

Western Europe

8.8%

U.S.16.6%

Low Income6.4%

Mid Income5.6%

Eastern Europe

3.4%

Latin Am/Carib

10.6%

India14.1% China

20.3%

Hi Inc. nonOECD

3.1%

Canada1.1%

Aus / NZ0.7%

Japan2.6%

Sub-Saharan

Africa4.2% Indonesia

2.4%

Stock Market Capitalization 2006

7.3% 92.7% 33.0%

67.0%

Stock Market Capitalization 2050

17

Conclusions

I believe that growth in developing world will offset slowing in aging economies and support future equity prices.

Biggest threat to capital markets is retreat from globalization.

Equity Markets depend on integration of world economy.