GLOBAL ALPHA STRATEGY INSIGHT JULY

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STRATEGY INSIGHT JULY 2016 FOR PROFESSIONAL CLIENTS ONLY The Marti Currie Global Alpha strategy aims to provide superior log-term returs by ivestig i a highcovictio, diversified portfolio of

1 STRATEGY INSIGHT JULY 2016 FOR PROFESSIONAL CLIENTS ONLY The Marti Currie Global Alpha strategy aims to provide superior log-term returs by ivestig i a highcovictio, diversified portfolio of primarily large- ad medium-sized compaies. The strategy haresses the full resources of a itegrated ad experieced ivestmet floor brigig together regioal ad sector specialists for the beefit of our Global Alpha cliets.

Global Alpha team The strategy is maaged by Paul Sloae ad Chris Coor.

Our dedicated Global Alpha team icludes eight ivestmet professioals with sigificat global sector expertise.

All Global Alpha ivestmet expertise ad resource is housed i a sigle locatio, eablig efficiet commuicatio, decisio makig ad implemetatio.

2 Global Alpha team The strategy is maaged by Paul Sloae ad Chris Coor. Paul joied Marti Currie i 2003 ad has 23 years experiece havig previously worked at Deutsche Bak, Royal Bak of Scotlad ad Stadard Life. Chris has 10 years experiece ad joied Marti Currie i Our dedicated Global Alpha team icludes eight ivestmet professioals with sigificat global sector expertise. The team further beefits from the extesive research capability of Marti Currie s regioal teams across the ivestmet floor brigig together a wealth of kowledge, complemetig the i-team capability. All Global Alpha ivestmet expertise ad resource is housed i a sigle locatio, eablig efficiet commuicatio, decisio makig ad implemetatio. Paul Sloae Portfolio Maager Chris Coor Portfolio Maager Portfolio Maager Paul Sloae Portfolio Maager Chris Coor Global resources Ruairidh Stewart Healthcare Gavi MacGregor Idustrials & Utilities Matt Frakli Techology, media & telecoms Jamie Mariai Pa-Europe Marti Currie ivestmet platform North America Global sector screes Compay meetigs Global emergig markets Local market research trips Japa Materials & Eergy Robbie McNab Cosumer Gaurav Jai Global Alpha team research Regioal research Sources of idea geeratio Idustry aalysis Asia Fiacials Pieter va Diepe Portfolio characteristics Lauch date 2 Jue 2006 Bechmark Performace objective Market capitalisatio Sector/coutry allocatio MSCI ACWI MSCI ACWI idex plus 3% p.a. (gross) over rollig three years Large- ad mid-cap As a result of stock selectio maaged withi factor risk aalysis Number of stocks Miimum active stock weight 1% Maximum active stock weight 5% Turover Expected c.35% per aum Portfolio costructio Low relative R-squared High active share Neutral beta Past performace is ot a guide to future returs. The characteristics show are guidelies oly ad ot hard risk limits. Relative R-Squared is the percetage of active risk explaied by model factors (e.g. coutries, currecies, sectors, styles, iterest rates, idices ad commodities), the lower the figure, the more stock drive the portfolio. Active share is a measure of the percetage differece betwee the portfolio holdigs ad the idex costituets. We geerally cosider >70% as a high active share. Beta is a measure of the sesitivity of a portfolio to idex movemets. We geerally cosider a beta of as eutral.

3 PAGE 3 Ivestmet philosophy We focus o two specific market iefficiecies. Firstly, we believe that the market ofte uderestimates the ability of quality compaies to sustai high levels of retur o ivested capital. These high retur compaies geerate capital that ca be reivested i a way that helps to maitai their completive advatages. Short time-horizos mea that the market ofte fails to appreciate ad adequately value these reivestmet opportuities ad the log-term value that they ca create. We refer to these busiesses as compouders. We also see opportuities i compaies that ca materially ad sustaiably improve their ability to geerate returs o ivested capital. The market typically uderestimates ad udervalues the power of this chage, ad what it meas for log-term value creatio. We refer to these busiesses as challegers. We believe that the best way to exploit these compay-specific iefficiecies is to coduct fudametal, bottom-up research ad use these ivestmet ideas to build stock-focused portfolios. Ivestmet process Our ivestmet process ca be broke dow ito four compoets: idea geeratio, fudametal aalysis, covictio buildig ad portfolio costructio, as illustrated i the followig diagram. Cosistet approach across ew ideas ad stocks held Idea geeratio Clear research ageda Fudametal aalysis Covictio buildig Risk aware portfolio costructio Key questios High covictio Stock-drive addressed ivestmet ideas portfolios Idea geeratio Geeratig 100% of stock ideas iterally, portfolio maagers Paul Sloae ad Chris Coor are supported by a deeply resourced group of dedicated research specialists coverig sectors ad idustries globally. The global team further beefits from Marti Currie s extesive regioal research resource across the ivestmet floor brigig together a wealth of kowledge o both a sector ad coutry basis complemetig the i-team capability. The team also udertake local market research trips ad have a active compay iteractio schedule with aroud 1,500 compay meetigs aually. These meetigs provide essetial opportuities for the team to better uderstad busiesses ad their maagemet. Weekly cluster meetigs brig sector specialists together with their colleagues i regioal teams esurig that Global Alpha has access to the best ideas ad iformatio from across the ivestmet floor. These meetigs provide a forum to share kowledge, debate ideas ad agree the upcomig research ageda.

4 Fudametal aalysis Daily stock discussios are a vital part of our aalysis process providig peer group challege to assumptios ad support our belief that a eviromet that ecourages collaboratio ad challege produces uique research isights ad more robust ivestmet decisios. Our aalysis aims to build up a detailed picture of the compay s operatioal characteristics. To uderstad factors that have drive historical results ad how these might evolve we coduct a fiacial aalysis ad a qualitative assessmet of the busiess. For each stock the assiged aalyst will costruct a fiacial model, which explicitly models cash flows, balace sheet ad icome statemets for the ext five years. This is sigificatly i excess of the typical moth view the market takes. The research approach is tailored to the type of stock idea, whether it be compaies with high ad sustaiable returs iappropriately priced to fade (compouders) or compaies that ca improve their ability to geerate returs o capital (challegers). Compouders domiate the portfolio. Here, the research approach is focused o idetifyig a compay s icremetal ivestmet opportuities ad whether they ca cotiue to make the returs o capital beig ivested today that they made historically. Valuatio aalysis the looks to assess whether the market is iappropriately pricig i fallig future returs o capital. Whe assessig compaies that ca improve their ability to geerate returs o capital, the team look to idetify meaigful busiess models or sector chage that they feel is sustaiable while differetiatig cyclical ad structural improvemet. Stock aalysis will also explicitly cosider Evirometal, Social ad Goverace (ESG) factors. We believe by developig a deeper uderstadig of compaies, we develop higher covictio i their ability to outperform over the loger term for our cliets.

PAGE 5 Covictio buildig The team look to build out covictio i a idea over time ad may host several stock discussios, followed by further aalysis or cotact with the compay, util comfortable with a

5 PAGE 5 Covictio buildig The team look to build out covictio i a idea over time ad may host several stock discussios, followed by further aalysis or cotact with the compay, util comfortable with a ivestmet thesis. A formal cycle of meetigs ad peer review is vital to the process providig challege to assumptios withi a ivestmet case ad ofte leads to proactive ad focused compay cotact as the team build covictio i a stock idea. Every stock cosidered for the portfolio follows this same cosistet approach esurig that ew ideas ad portfolio holdigs receive the same level of scrutiy. These sessios brig together expertise from across the floor, both from dedicated aalysts withi the Global Alpha team ad regioal teams across the ivestmet floor. A idepedet chair hosts every stock discussio esurig there is a balace of collaboratio ad challege. Itegral to these discussios is the agreemet of sigposts ad sceario aalysis. We test a rage of medium-term (five year) scearios to avoid over-cofidece i our forecastig. Whe cosiderig the valuatio of ay stock we take a systematic, three-proged approach. We look at itrisic measures (discouted cash flows), relative multiples ad cash flow metrics. This eables us to build a holistic valuatio picture of a stock uder a rage of operatioal scearios. Stock discussios also result i a clear set of ivestmet case sigposts. These are defied markers ad are used to objectively assess the progress of a ivestmet case over time.

Portfolio costructio The portfolio costructio process brigs together these compouders ad challegers to produce the optimum combiatio of the very best

As sole decisio makers, the portfolio maagers aim to costruct a portfolio that ca outperform i all market eviromets.

We believe that such portfolios are more resiliet to market shocks, volatility ad large factor swigs, protectig our cliets from uiteded shortterm

We moitor portfolio positios agaist the MSCI ACWI idex. There are o specific regioal or sector limits but idividual positios are limited to +5% active.

The iclusio of a stock i the portfolio is iflueced by the potetial valuatio upside o the cetral ivestmet case ad the skew of sceario outcomes.

The sigposts i our ivestmet case mea that the sell disciplie is embedded i the purchase decisio.

Meetig our valuatio objective with o further opportuity also leads to a sale.

6 Portfolio costructio The portfolio costructio process brigs together these compouders ad challegers to produce the optimum combiatio of the very best bottom-up stock ideas from across the etire ivestmet floor. As sole decisio makers, the portfolio maagers aim to costruct a portfolio that ca outperform i all market eviromets. Risk is domiated by high-covictio stock choices ad crucially, factor risks are cotrolled. We believe that such portfolios are more resiliet to market shocks, volatility ad large factor swigs, protectig our cliets from uiteded shortterm performace outcomes. A portfolio of stocks allows us to achieve portfolio diversificatio while backig our best ideas with highcovictio positios. We moitor portfolio positios agaist the MSCI ACWI idex. There are o specific regioal or sector limits but idividual positios are limited to +5% active. Stock positio sizes are determied by the risk reward opportuity ad the curret portfolio holdigs. The iclusio of a stock i the portfolio is iflueced by the potetial valuatio upside o the cetral ivestmet case ad the skew of sceario outcomes. Paul ad Chris also cosider the impact o the overall portfolio profile esurig that a potetial purchase would ot lead to uiteded factor risk exposure. The sigposts i our ivestmet case mea that the sell disciplie is embedded i the purchase decisio. We have objectives ad recorded measures to help us assess progress. Failure to meet these sigposts is a violatio of our thesis ad leads to a sale. Meetig our valuatio objective with o further opportuity also leads to a sale. Occasioally, there is a ew idea with similar characteristics to a stock i the portfolio. If we believe that the upside potetial is sigificatly higher i the ew idea, we will sell a stock o the basis of this opportuity cost. I short, a Marti Currie Global Alpha portfolio will exhibit high active share, low relative R-squared ad eutral beta characteristics. Marti Currie Global Alpha High-covictio, best-ideas portfolio Dedicated Global Alpha team of sector specialists Close iteractio with highly experieced regioal teams Clear evidece of stock-drive alpha

7 PAGE 7 Fid out more For further iformatio o Marti Currie or our strategies please visit our website You ca fid your local cotact at Alteratively please call our global offices, press office or global cosultat team o the umbers below: Ediburgh (headquarters) 44 (0) Asia ad Australia (61) New York (1) Lodo 44 (0) Global cosultats 44 (0) Media 44 (0) Importat iformatio This iformatio is issued ad approved by Marti Currie Ivestmet Maagemet Limited ( MCIM ). It does ot costitute ivestmet advice. The iformatio cotaied has bee compiled with cosiderable care to esure its accuracy. But o represetatio or warraty, express or implied, is made to its accuracy or completeess. Marti Currie has procured ay research or aalysis cotaied i this presetatio for its ow use. It is provided to you oly icidetally, ad ay opiios expressed are subject to chage without otice. The documet may ot be distributed to third parties ad is iteded oly for the recipiet. Ivestors should also be aware of the followig risk factors which may be applicable to the strategy. Ivestig i foreig markets itroduces a risk where adverse movemets i currecy exchage rates could result i a decrease i the value of your ivestmet. Emergig markets or less developed coutries may face more political, ecoomic or structural challeges tha developed coutries. Accordigly, ivestmet i emergig markets is geerally characterised by higher levels of risk tha ivestmet i fully developed markets. This strategy may hold a limited umber of ivestmets. If oe of these ivestmets falls i value this ca have a greater impact o the portfolio s value tha if it held a larger umber of ivestmets. Smaller compaies may be riskier ad their shares may be less liquid tha larger compaies, meaig that their share price may be more volatile. The strategy may ivest i derivatives to obtai, icrease or reduce exposure to uderlyig assets. The use of derivatives may restrict potetial gais ad may result i greater fluctuatios of returs for the portfolio. Certai types of derivatives may become difficult to purchase or sell i such market coditios. For Ivestors i the USA, the iformatio cotaied withi this documet is for Istitutioal Ivestors oly who meet the defiitio of Accredited Ivestor as defied i Rule 501 of the Uited States Securities Act of 1933, as ameded ( The 1933 Act ) ad the defiitio of Qualified Purchasers as defied i sectio 2 (a) (51) (A) of the Uited States Ivestmet Compay Act of 1940, as ameded ( the 1940 Act ). It is ot for iteded for use by members of the geeral public. Ay distributio of this material i Australia is by Marti Currie Australia Limited ( MCA ). Marti Currie Australia is a divisio of legg Maso Asset Maagemet Australia Limited (ABN ). Legg Maso Australia Limited holds a Australia Fiacial Services Licece (ASFL No. AFSL240827) issued pursuat to the Corporatios Act Marti Currie Ivestmet Maagemet Limited, registered i Scotlad (o SC066107) Marti Currie Ic, icorporated i New York ad havig a UK brach registered i Scotlad (o SF000300), Saltire Court, 20 Castle Terrace, Ediburgh EH1 2ES Tel: (44) Fax: (44) Both compaies are authorised ad regulated by the Fiacial Coduct Authority. Marti Currie Ic, 1350 Aveue of the Americas, Suite 3010, New York, NY is also registered with the Securities Exchage Commissio. Please ote that calls to the above umbers may be recorded.

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