Currency Impact: Local Currency vs. U.S. Dollar
(One-year ended January 31, 2008)

Chart of the Week for February 08, 2008 - February 14, 2008

International investing involves many risks including the risk that foreign currency exchange rates change relative to the U.S. dollar. A weakening dollar, compared with local currencies, can bolster returns as we have seen with many countries for the year ended January 31, 2008. On the other hand a strengthening dollar, compared with local currencies, can have the inverse effect of taking away from return.

The chart above illustrates the currency impact from a sampling of countries within the Morgan Stanley Capital International (MSCI) Europe, Australasia, and the Far East (EAFE) Developed and Emerging Markets Indexes. The returns represent the difference between the country's U.S. dollar return and the country's local currency return. Currency changes had a material impact in Brazil which returned 63.4% in U.S. dollars and only 35.6% in local currency. The difference, 27.8%, was the currency impact of the weakened dollar. Conversely, currency changes had little impact in China which returned 36.2% in U.S. dollars and a very similar, 35.9% in local currency. The currency impact was only 0.3% as China maintained a relatively static currency exchange rate with the U.S. over the last year.

International investing involves many other risks such as different and possibly less strict accounting and financial reporting standards than the U.S., possibly less supervision of stock exchanges and broker-dealers then the U.S., higher transaction costs of non-U.S. markets, and the risk that political events or financial problems may weaken a particular county's or region's economy. Also, emerging market investing may involve more substantial risks. No one can be certain which direction the U.S., international or currency markets will move in the future, as past trends are no guarantee of future results. It is important for investors to keep a long term focus, balance risk with potential reward, remain diversified, and not chase performance.

This illustration was compiled by information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing.

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The performance data quoted represents past performance. Past performance is no guarantee of future results. Investment returns and principal value will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data illustrated. For performance data current to the most recent month end, contact ICMA-RC Investor Services at 800-669-7400.