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Emerging Markets Debt Strategy Profile

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Emerging Markets Debt Strategy Profile STRATEGY OVERVIEW 2Q 2015 | As of June 30, 2015 Emerging Markets Debt Strategy Profile OBJECTIVE We strive to capture income and generate principal growth through capital appreciation when market conditions permit. Our goal is to outperform the benchmark by 2% annually over rolling five-year periods. UNIVERSE Sovereign debt and currencies of countries in the JP Morgan GBI-EM Global Diversified Index and or countries considered "emerging" by the portfolio managers. We also may invest in corporate debt issued in these countries. INVESTMENT PHILOSOPHY We believe in mean reversion with respect to the valuation of bonds and currencies. At extremes, interest rates and exchange rates affect economic activity, thus creating a feedback cycle that supports mean reversion. This tendency has existed for decades, and we believe that it will continue to work due to the importance of the business cycle on asset prices and economic trends. INVESTMENT PROCESS SUMMARY Our approach is to seek undervalued assets globally by utilizing a top-down macroeconomic framework and a value-driven process. Real yield is our primary measure of value in the global bond market. We also actively OUR COMPETITIVE ADVANTAGE manage our currency exposures and focus on owning undervalued currencies with the potential for appreciation. We hedge currencies that we believe are overvalued or pose downside risk. We structure portfolios along The strategy employs a top-down, macroeconomic themes involving business cycle analysis, inflation trends, monetary policies, and political risk. value-based, and benchmark-agnostic approach for managing global fixed income COUNTRY ROTATION assets. Backed by a rigorous We concentrate investments in the 10 to 15 countries or markets with the most attractive combination of total macroeconomic research process return potential and durable fundamentals. Macroeconomic analysis is combined with quantitative screening to designed to anticipate risk and identify value and opportunity. Fundamental factors drive the country-weighting process and once an investment uncover value, the strategy targets becomes fully valued, we look to take profits and reallocate into a more undervalued segment of the universe. sovereigns with an attractive CURRENCY MANAGEMENT combination of high real yields and durable fundamentals. Currency exposures are actively managed. We seek to invest in bonds denominated in undervalued currencies that possess supportive fundamentals. We hedge overvalued currencies or those with weak fundamentals. DURATION MANAGEMENT We concentrate duration risk where real yields are the most attractive. Larger interest rate exposure is assumed in countries with greater value and positions are established along the yield curve where we find the best risk vs. reward profile. Portfolio duration generally ranges from 1 to 10 years. ISSUE SELECTION Within a specific bond market security selection is based on yield curve analysis, desired duration, and liquidity considerations. STRATEGY OVERVIEW Emerging Markets Debt - Update 2Q 2015 | As of June 30, 2015 AT A GLANCE ASSETS UNDER MANAGEMENT (M) (Shown in USD) Brandywine Global, Firmwide 67,284 Primary Benchmark: JP Morgan GBI-EM Global Diversified Index or other emerging Fixed Income Product Group 50,785 markets bond benchmark, as specified by client direction Emerging Markets Debt 96 Returns are driven by the pursuit of value through high real-yielding bonds and active currency management. Inflation, monetary trends, political risk, the business cycle, ANNUALIZED RETURNS (%) (Results shown in USD) demographics, and liquidity measures are also considered Duration management is determined on a country-by-country basis, establishing Gross Net JPGEMG JPGEMB positions along the yield curve where we have determined the best risk/reward profile QTD - 1.89 - 2.06 - 0.96 - 0.67 exists YTD - 5.27 - 5.61 - 4.88 - 3.64 Investments will typically be concentrated in the 10 to 15 countries that we believe 1 Year - 10.12 - 10.75 - 15.39 - 11.35 offer the best total return potential 3 Year 0.43 - 0.27 - 3.78 - 1.90 Since Inception 2.86 2.15 - 1.36 0.06 TYPICAL INVESTMENT GUIDELINES Inception Date: 1/1/2012 Country Currency CALENDAR YEAR RETURNS (%) (Results shown in USD) U.S. 0 - 20% 0 - 100% Gross Net JPGEMG JPGEMB Other Developed Markets in Aggregate 0 - 10% 0 - 60% Mexico 0 - 25% 0 - 25% 2015 - 5.27 - 5.61 - 4.88 - 3.64 Brazil 0 - 25% 0 - 25% 2014 4.64 3.91 - 5.72 - 2.28 Turkey 0 - 25% 0 - 25% 2013 - 7.41 - 8.06 - 8.98 - 7.26 South Africa 0 - 25% 0 - 25% 2012 20.28 19.45 16.76 14.75 Poland 0 - 25% 0 - 25% 1 REGION & CURRENCY ALLOCATIONS (%) Malaysia 0 - 25% 0 - 25% Russia 0 - 25% 0 - 25% Indonesia 0 - 25% 0 - 25% Philippines 0 - 15% 0 - 15% Colombia 0 - 15% 0 - 15% Chile 0 - 15% 0 - 15% Hungary 0 - 15% 0 - 15% Thailand 0 - 15% 0 - 15% Peru 0 - 15% 0 - 15% Other Index and Non-Index Countries in Aggregate 0 - 30% 0 - 30% 1 CHARACTERISTICS Emerging Markets Debt JPGEMG Average Quality A- N/R Average Maturity (Years) 11.79 7.32 Average Modified Duration (Years) 6.22 4.94 Average Coupon (%) 6.69 - Current Yield (%) 6.24 - Average Yield to Maturity (%) 5.80 6.79 Number of Issues 23 - ■ Region ■ Currency ■ JPGEMG Past performance is no guarantee of future results. 1 1 QUALITY RATINGS (%) DURATION ALLOCATION (%) ■ AAA ■ 0-1 Years ■ AA ■ 1-3 Years ■ A ■ 3-7 Years ■ BBB ■ 7-10 Years ■ BB or Lower ■ 10+ Years ■ NR STRATEGY OVERVIEW Emerging Markets Debt - Investment Team 2Q 2015 | As of June 30, 2015 LEAD PORTFOLIO MANAGERS DAVID F. HOFFMAN, CFA MANAGING DIRECTOR & PORTFOLIO MANAGER David is co-lead portfolio manager for the Firm's Global Fixed Income and related strategies. He joined the Firm in 1995. Previously, David was president of Hoffman Capital, a global financial futures investment firm (1991-1995); head of fixed income investments at Columbus Circle Investors (1983-1990); senior vice president and portfolio manager at INA Capital Management (1979-1982), and fixed income portfolio manager at Provident National Bank (1975-1979). David is a CFA® charterholder and earned a B.A. in Art History from Williams College. He is a member of the Firm's Executive Board, currently serving as the Board's chair. JACK P. MCINTYRE, CFA PORTFOLIO MANAGER, SENIOR RESEARCH ANALYST As portfolio manager and senior research analyst for the Firm's Global Fixed Income and related strategies, Jack provides valuable analytical and strategic insight. He joined the Firm in 1998. Previously, he held positions as market strategist with McCarthy, Crisanti & Maffei, Inc. (1995-1998); senior fixed income analyst with Technical Data, a division of Thomson Financial Services (1992-1995); quantitative associate with Brown Brothers Harriman & Co. (1990), and investment analyst with the Public Employee Retirement Administration of Massachusetts (1987-1989). Jack is a CFA® charterholder and earned an M.B.A. in Finance from the Leonard N. Stern Graduate School of Business at New York University and a B.B.A. in Finance from the University of Massachusetts, Amherst. STEPHEN S. SMITH MANAGING DIRECTOR & PORTFOLIO MANAGER Steve is co-lead portfolio manager for the Firm's Global Fixed Income and related strategies. He is a member of the Firm's Executive Board. He joined the Firm in 1991 to diversify the Firm's investment strategies and start the global fixed income product. Previously, Steve was with Mitchell Hutchins Asset Management, Inc. as managing director of taxable fixed income (1988-1991); Provident Capital Management, Inc. as senior vice president overseeing taxable fixed income (1984-1988); Munsch & Smith Management as a founding partner (1980-1984), and First Pennsylvania Bank as vice president and portfolio manager in the fixed income division (1976-1980). Steve earned a B.S. in Economics and Business Administration from Xavier University, where he is currently chair of the university's investment and plant & building committees, a member of the executive committee, and serves on the board of trustees. Steve is also a member of the board of trustees at the Winterthur Museum & Country Estate, a nonprofit, educational institution. INVESTMENT TEAM MICHAEL ARNO, CFA RESEARCH ANALYST Mike is a research analyst on the Global Credit team. He is responsible for providing credit research analysis and support. He joined Brandywine Global as a product specialist within client service in 2006 and has been a member of the Global Credit team since April 2011. Prior to joining Brandywine Global in 2006, Mike was an associate for the Vanguard Group (2004-2006). A CFA® charterholder, he earned a B.S. in Finance from Temple University. REGINA BORROMEO 2 PORTFOLIO MANAGER Regina is a portfolio manager for Fixed Income, with a concentration in High Yield securities. Regina joined Brandywine Global Investment Management (Europe) Limited in December 2010, bringing with her ten years of investing experience. Previously, she was a Vice President - Portfolio Manager and Senior Credit Analyst, Global Fixed Income with Morgan Stanley Investment Management PLC in London (2007-2010) and held various Fixed Income Analyst positions with Morgan Stanley Investment Management in Philadelphia (2001-2007). She earned her Bachelor of Arts in Communications from the University of Pennsylvania and accomplished numerous athletic achievements in squash and tennis, including winning a bronze medal as a member of the Philippine National Squash team in the 1999 and 2005 South East Asian Games. Regina is based in London. J. PATRICK BRADLEY SENIOR VICE PRESIDENT, INVESTMENT RESEARCH As a Senior Vice President of the Firm's Global Fixed Income and related strategies, Patrick provides valuable analytical and strategic insight. Patrick joined the Firm in June 2005. Previously, he was senior director of institutional client strategy with SEI Investments (2000-2005), Director of Research and Investment Strategy of Mercantile Safe-Deposit & Trust Company (1997-2000), and director of research for PNC Financial (1981-1997). Patrick earned an M.A.
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