STRATEGY OVERVIEW 3Q 2020 | As of September 30, 2020 U.S. High Yield Strategy Profile OBJECTIVE We strive to provide an attractive total return by seeking to generate a high level of income and modest capital gains, while attempting to protect against inflation. Over a complete economic cycle of several years, we seek to outperform the high yield benchmark, on an average annual basis, by more than one percentage point net of fees. UNIVERSE High yield corporate bond issuers generally rated below BBB- or Baa3 by at least one rating agency. On occasion, the strategy will invest in unrated securities deemed to be of comparable quality. We may also invest, to limited degrees and dependent on client guidelines, in investment-grade corporate bonds, preferred stock, and convertible securities. INVESTMENT PROCESS SUMMARY Summary We apply our top-down global fixed income process when structuring high yield portfolios. The top-down process establishes the cyclical quality bias of the portfolio. This macroeconomic perspective is combined and incorporated with our quantitative screens and fundamental analysis when constructing high yield portfolios. The cheapness of individual sectors and issuers is determined using these quantitative and qualitative credit tools. The subsequent portfolio will generally consist of 50 to 100 high yield corporate bonds that we believe to be undervalued by the credit markets. Quantitative Screens OUR COMPETITIVE ADVANTAGE Based on our proprietary quantitative deselection screen, we aim to identify those sectors and issuers that offer greater yield and return than the index with lower comparable risk. Our quantitative deselection screen The strategy seeks the best high yield identifies those sectors and issuers based on a number of factors, including (i) sector economics and risks; (ii) opportunities around the U.S. while yield and option-adjusted spread analysis; and (iii) the probability of credit default or coercive restructuring. applying a disciplined macro-driven Fundamental Analysis approach to risk management. Fundamental research and quantitative We believe that fundamental research is critical to constructing a portfolio that will outperform its representative index. We focus on identifying those issuers based on their future ability to provide a better than screens are an integral part of the index yield and total return. We analyze the (i) quality of a company's earnings in relation to management's bottom-up security selection process goals and risk tolerance, (ii) specific issuer bond covenants, (iii) position of an issue within the capital structure, while top-down decisions establish the and (iv) value and range of a firm's assets across the respective capital structure. portfolio’s quality and sector biases. SELL DISCIPLINE We follow a disciplined approach to sell decisions, with issues sold for two primary reasons valuation and fundamental deterioration. An issue is typically sold as it approaches our yield target and/or another more compelling investment opportunity arises. Alternatively, an issue may also be sold when the initial thesis supporting the investment is no longer valid, and we believe significant downside is likely. STRATEGY OVERVIEW U.S. High Yield Update 3Q 2020 | As of September 30, 2020 AT A GLANCE ASSETS UNDER MANAGEMENT (M) (Shown in USD) • Primary Benchmark: Bloomberg Barclays U.S. Corporate High Yield Index or other Brandywine Global, Firmwide 62,006 high yield benchmark, as specified by client direction Fixed Income Product Group 51,706 • Portfolio construction combines the Global Fixed Income team macroeconomic U.S. High Yield 276 strategy with the quantitative and fundamental sector and security selection analysis of the High Yield team ANNUALIZED RETURNS2 (%) (Results shown in USD) • Yield, option-adjusted spread, and expected total return adjusted for default probability are our primary measures of value Gross Net BUSHY BAUHY2 QTD 4.05 3.88 4.60 4.71 • Investments typically are concentrated in sectors and individual issuers that we believe offer the best total return potential YTD 1.56 1.07 0.62 -0.30 • Portfolios normally consist of 50 to 100 corporate domestic and foreign issuers with 1 Year 3.77 3.10 3.25 2.30 position sizes limited to 5% at purchase 3 Year 3.98 3.31 4.20 3.82 5 Year 6.82 6.13 6.79 6.60 7 Year 5.12 4.45 5.32 5.18 TYPICAL INVESTMENT GUIDELINES 10 Year 6.93 6.24 6.46 6.27 Country Currency Since Inception 7.72 7.03 7.08 6.92 U.S. 0% - 100% 0% - 100% Inception Date: 1/1/2010 Non-U.S. (USD) 0% - 25% 2 • Corporate bonds issuers rated below investment grade CALENDAR YEAR RETURNS (%) (Results shown in USD) • Position sizes limited to 5% at purchase Gross Net BUSHY BAUHY2 2020 1.56 1.07 0.62 -0.30 • No more than 25% of portfolio in any one sector 2019 13.26 12.54 14.32 14.41 • Maximum cash position of 10% 2018 -3.34 -3.96 -2.08 -2.28 2017 8.93 8.23 7.50 7.48 1,2 CHARACTERISTICS 2016 16.04 15.30 17.13 17.49 U.S. High Yield BUSHY 2015 -4.07 -4.70 -4.47 -4.64 3 Average Quality B+ B+ 2014 1.39 0.74 2.45 2.50 Average Maturity (Years) 9.73 6.34 2013 8.94 8.24 7.44 7.42 Average Modified Duration (Years) 3.96 4.88 2012 14.74 14.01 15.81 15.58 Average Coupon (%) 6.21 6.04 2011 9.63 8.93 4.98 4.38 Current Yield (%) 6.10 6.08 2010 18.79 18.03 15.12 15.19 Average Yield-to-Worst (%) 5.91 5.77 SECTOR WEIGHTS2,3 (%) QUALITY RATINGS1,2 (%) REGION ALLOCATION1,2 (%) Basic Industry BBB or Higher 3.0 North & Central America 63.1 BB 45.5 Eurozone 1.0 Capital Goods B 37.9 Europe ex-Eurozone 1.6 Cash CCC 13.5 Japan - Communications Asia-Pacific ex-Japan - Consumer Cyclical South America - Consumer Non-Cyclical Middle East & Africa 2.8 Derivative P/L Emerging Markets 31.0 Energy Supranational - Financials Other 0.3 Government Other Industrial Technology Transportation Utilities 0 5 10 15 20 25 U.S. High Yield BUSHY Past performance is no guarantee of future results. Brandywine Global Investment Management, LLC 1735 Market Street, Suite 1800, Philadelphia, PA 19103 | 800.348.2499 / 215.609.3500 | BrandywineGlobal.com STRATEGY OVERVIEW U.S. High Yield Composite 3Q 2020 | As of September 30, 2020 ANNUALIZED RETURNS (%) (Results shown in USD) Gross Net BUSHY BAUHY2 QTD 4.05 3.88 4.60 4.71 YTD 1.56 1.07 0.62 -0.30 1 Year 3.77 3.10 3.25 2.30 3 Year 3.98 3.31 4.20 3.82 5 Year 6.82 6.13 6.79 6.60 7 Year 5.12 4.45 5.32 5.18 10 Year 6.93 6.24 6.46 6.27 Since Inception 7.72 7.03 7.08 6.92 Inception Date: 1/1/2010 GIPS INFORMATION (%, unless otherwise noted) (Results shown in USD) Market Value Total Firm Assets Composite Composite BUSHY BAUHY2 Year or YTD Gross Net BUSHY BAUHY2 # of Accounts (M) (M) Dispersion Rolling 3Y SD Rolling 3Y SD Rolling 3Y SD 2020 1.56 1.07 0.62 -0.30 4 238 62,006 - 7.08 8.99 9.13 2019 13.26 12.54 14.32 14.41 5 236 74,024 - 3.64 4.02 4.13 2018 -3.34 -3.96 -2.08 -2.28 6 422 70,070 0.23 4.26 4.59 4.64 2017 8.93 8.23 7.50 7.48 7 578 74,382 - 5.39 5.57 5.60 2016 16.04 15.30 17.13 17.49 6 546 65,498 - 5.96 6.00 6.03 2015 -4.07 -4.70 -4.47 -4.64 5 263 68,819 - 5.42 5.26 5.27 2014 1.39 0.74 2.45 2.50 6 361 63,375 - 4.75 4.50 4.44 2013 8.94 8.24 7.44 7.42 5 144 50,050 - 5.84 6.41 6.42 2012 14.74 14.01 15.81 15.58 5 98 42,894 - 6.49 7.08 7.03 2011 9.63 8.93 4.98 4.38 2 29 33,122 - - - - 2010 18.79 18.03 15.12 15.19 1 17 31,996 - - - - BUSHY = Bloomberg Barclays U.S. High Yield BAUHY2 = ICE BofAML U.S. High Yield II Organization: Brandywine Global Investment Management, LLC (the "Firm") is a wholly owned, independently operated, subsidiary of Legg Mason, Inc. Brandywine Global Investment Management, LLC claims compliance with the Global investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Brandywine Global Investment Management, LLC has been independently verified for the periods January 1, 1993 through June 30, 2019. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The U.S. High Yield Composite has been examined for the periods January 1, 2010 through June 30, 2019. The verification and performance examination reports are available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Disclosed total firm assets represent the total market value of all discretionary and nondiscretionary, fee-paying and non-fee-paying assets under the Firm's management. Composite Description: The U.S. High Yield Composite (the "Composite") Inception date: January 1, 2010.