Bill Fries

Vinson Walden

Target Manager Allocation: 16% - 17%

Size of Company: All sizes

Stock-Picking Style: Eclectic - may invest in traditional value stocks or growth stocks

Fries believes that a bottom-up approach to investing in undervalued securities will generate above-average returns with below market risk. His idea of value centers on his assessment of the intrinsic worth of an investment. The goal is to uncover promising companies with sound business fundamentals at a time when their intrinsic value is not fully recognized by the marketplace.

The Fries team's initial search for investment ideas involves the use of quantitative screens as well as other sources. Starting with the international equity universe, the team screens Thornburg's databases for companies that appear attractive across a number of value parameters. The team looks for securities that have low price-to earnings, low price-to-cash flow and low price-to-book ratios. Companies ranging from small-cap to large-cap are considered. Additionally, screens are employed in order to identify stocks where business prospects may be improving. The typical screen generates a list exceeding 125 stocks from which only a few may be selected for further research.

The team will not purchase a security simply because it is priced cheaply relative to the market. The team spends the majority of its time on internal, bottom-up research, in its efforts to understand the fundamental merit of each stock that has been identified as promising. These efforts include financial statement analysis, discussions with senior management of the companies, as well as consideration of the company's competitors, suppliers and clientele. Fries seeks to uncover companies with promising prospects that are not yet reflected in the price of the stock. Many of the investments made may be contrary to the popular consensus at the time of purchase. Ultimately, Fries and his team attempt to estimate the business value of each company. In addition to estimating the business value for each stock, the analysis also seeks to identify where potential weaknesses may lie in an attempt to minimize downside risk. Each of the researched stocks is classified into a category of value: Basic Value – Stocks of financially sound companies with established businesses that are selling at low valuations relative to the company's net assets or potential earning power; Consistent Earners – Companies with steady earnings and dividend growth that are selling at attractive values and are priced below historical norms; or Emerging Franchises – Companies in the process of establishing a leading position in a product, service or market that is expected to grow at an above-average rate.

The dynamics of the companies in those categories differ and, therefore, merit specific consideration within the context of that category. For example, Basic Value companies are generally more cyclically oriented than Emerging Franchises and require analysis of the companies' product cycles and the historical and prospective impact of the economy on their business. Within the context of each value category, the team evaluates the most attractive prospects. Generally, the segment of the International Fund's portfolio allocated to the team is expected to include stocks from each category. Because of the diversification across these categories, the segment of the International Fund's portfolio managed by the team will typically be eclectic and cannot be easily labeled as "growth" or "value," "small-cap" or "large-cap." Manager bio.

Target Manager Allocation: 16% - 17%

Size of Company: All sizes, but mostly large and mid-sized companies

Stock-Picking Style: Value

Herro employs Harris' value investment philosophy and process to manage his portion of the fund's assets. This investment philosophy is based upon the belief that, over time, a company's stock price converges with the company's intrinsic or true business value. By "true business value," Harris means an estimate of the price a knowledgeable buyer would pay to acquire the entire business. In making its investment decisions, Harris uses a "bottom-up" approach focused on individual companies, rather than focusing on specific economic factors or specific industries.

The chief consideration in the selection of stocks is the size of the discount of a company's stock price compared to the company's perceived true business value. In addition, Harris looks for companies with the following characteristics, although not all companies will have all of these attributes: free cash flows and intelligent investment of excess cash, earnings that are growing and are reasonably predictable, and a high level of management ownership in the company. Once Harris determines that a stock is selling at a significant discount and that the company has some of the aforementioned attributes, Harris generally will consider buying that stock for a strategy. Harris usually sells a stock when the price approaches its estimated worth. This means Harris sets specific "buy" and "sell" targets for each stock held in its clients' discretionary accounts. Harris also monitors each holding and adjusts those price targets as warranted to reflect changes in a company's fundamentals. Harris attempts to manage some of the risks of investing in stocks of companies by purchasing stocks whose prices it considers low relative to the companies' intrinsic values. In addition, Harris seeks companies with solid finances and proven records and continuously monitors each portfolio holding. Harris attempts to manage some of the risks of investing in foreign securities by considering the relative political and economic stability of a company's home country, the company's ownership structure, and the company's accounting practices. Manager bio.

Amit Wadhwaney

Target Manager Allocation: 16% - 17%

Size of Company: All sizes

Stock-Picking Style: Value

Wadhwaney manages portfolios with a value-oriented style that is focused on buying and holding stocks of businesses that he believes are "safe" and that are selling significantly below their intrinsic value. To meet the safe criterion, businesses must be understandable and have strong finances and competent management. A business's finances are considered strong if the company has quality assets and if it is not heavily dependent on external capital by virtue of low debt levels in comparison to its existing and future cash resources. Value is measured in various ways depending on the nature of a business, but in general, valuations are assessed based on either liquidation value or what a private buyer is willing to pay for the business. In addition, Wadhwaney prefers businesses that are likely to compound their value over time. This could arise from a company's leadership position in the industry or management's ability to convert its resources in a competent fashion (such as sales of surplus land, purchases of businesses, re-financings, spin-offs, reorganizations, or repurchases of stock).

Wadhwaney's research objective is to develop a comprehensive understanding of a company's business model and its environment, assess its true value, and to compare the company's position within its industry. Significant emphasis is placed on the quality of management and the transparency a company provides with respect to real and contingent liabilities that may affect the integrity of the balance sheet. Fundamental research is relied on to make these assessments, and focuses on analyzing the balance sheet rather than forecasting future revenues and earnings. Wall Street research is seldom utilized. Stockholder mailings, regulatory filings, financial statements, industry publications and conferences, and field research are utilized as primary sources of information on a company. Interviewing company management, and meeting its peers, suppliers, and customers is also an important part of the process.

Wadhwaney tends to hold stocks for multi-year periods. He will generally sell an investment only when there has been a fundamental change in the business or capital structure of the company that significantly reduces the investment's inherent value, or when he believes the stock is clearly overvalued relative to his assessment of the underlying intrinsic value of the business. Manager bio.

Target Manager Allocation: 16% - 17%

Size of Company: All sizes, but mostly large- and mid-sized

Stock-Picking Style: Growth

Mastholm's investment approach is bottom-up all capitalization growth, primarily in developed markets. Mastholm screens a universe of 28,000 companies on a daily basis to identify stocks with accelerating earnings or positive news impacting current or future earnings. Companies that pass Mastholm's initial screens are reviewed to identify purchase candidates with the following characteristics: clarity of accounting and confirmation of real earnings growth, operating results significantly higher than analysts' expectations, wide divergence of analyst expectations, stock price below historical average range, and trading liquidity that meets guidelines.

Candidates with these characteristics become the highest priorities for fundamental analysis by the team. Fundamental research is allocated among the portfolio managers based on country or industry expertise.

The fundamental analysis process is designed to uncover catalysts that drive earnings not fully recognized by the market. Industry analysts are interviewed to understand the assumptions that led to their original earnings forecast, and companies are contacted to discuss how their explanation differs from that of industry analysts and to identify trends not recognized or fully discounted by the market. Competitors, suppliers and vendors are questioned to cross-reference the information garnered from analysts and companies. The portfolio managers spend a significant amount of time visiting with companies abroad that are in the portfolio or under consideration.

Investments are primarily concentrated in developed markets. Mastholm tends to remain fully invested in stocks at all times, and does not hedge currencies except under rare circumstances.

Manager bio.

Target Manager Allocation: 16% - 17%

Size of Company: All sizes, but mostly large and mid-sized companies

Stock-Picking Style: Growth

In selecting investments for the International Fund, Gendelman takes a research intensive, hands-on fundamental approach. Gendelman believes in combining top-down macroeconomic and thematic views with bottom-up stock selection to identify high-quality companies with attractive growth characteristics. The ultimate objective is to find companies with earnings-growth potential that may not be recognized by the market at large. He is typically drawn to companies where he can tangibly identify a sustainable market advantage, an event that could realize franchise value, or a unique low-cost advantage relative to competition. In determining whether a particular company is suitable for investment, Gendelman and his team consider a number of different attributes. These may include the company's specific market expertise or dominance, its franchise durability and pricing power, financial attributes (with a preference for strong balance sheets, improving returns on equity, and the ability to generate free cash flow), the quality of management, and valuations in the context of the team's projected growth rates.

In order to be flexible across the growth spectrum, Gendelman divides the growth universe into three categories—core growth, aggressive growth, and lifecycle change. Core growth companies represent a group that the team has extensively modeled and where, in Gendelman's view, the conviction level is high. Aggressive growth companies are those that are generally trading at a premium valuation to their sector and/or market, but that also have higher growth expectations. This category could also include higher-risk companies such as those in emerging markets or industries that are in the early stages of fast growth. Lifecycle change companies are those that Gendelman believes to be undergoing meaningful fundamental changes such as new management, new products, or divestiture.

In identifying specific companies to research, Gendelman may consider macro-economic factors such as interest rates, inflation, central bank policy, credit spreads, the regulatory environment and the global competitive landscape. In addition, Gendelman may also examine other factors such as industry consolidation and the sustainability of economic trends. The objective of this "top-down" analysis is to identify sectors, industries and companies that may benefit from the overall trends Gendelman has observed.

In researching companies, Gendelman and his team rely heavily on fundamental analysis. Fundamental work generally starts with building a detailed financial model of a company. The objective of this exercise is to identify key leverage points in the business that may drive earnings and cash flow. Fundamental work also involves meeting with various levels of a company's management and often also with its customers, suppliers, distributors, and competitors. These meetings help Gendelman and his team confirm key leverage points in a business model and gain confidence in the overall business strategy.

Gendelman does not follow a rigid valuation discipline. Rather, a company's valuation is assessed on an ongoing basis in the context of its fundamentals, industry, and its stage of growth. Gendelman's assessment of what stage the economic cycle is in may impact his valuation sensitivity. Gendelman uses a variety of valuation metrics depending upon company-specific circumstances. For example, he may use discounted-cash-flow analysis if he expects significant change in future cash flow, while for more mature industries he may find "metrics" such as price-to-earnings and free cash flow yield just as useful.

A stock may be sold for four main reasons. A significant change in Gendelman's macro or thematic outlook could lead to a shift in portfolio emphasis and trigger a sale. Valuations may become too expensive in relation to underlying earnings growth fundamentals. An adverse change in fundamentals relative to the team's expectations may also result in a sale. Finally, a superior new idea can displace an existing holding. Manager bio.

Howard Appleby

Jean-Francois Ducrest

Jim LaTorre

Ted Wendell

Target Manager Allocation: 16% - 17%

Size of Company: All sizes, but mostly large- and mid-sized

Stock-Picking Style: Blend

The team’s investment philosophy and process are characterized by:

• An in-depth understanding of a company and its industry leads to a long investment time horizon (3-5+ years) and results in low portfolio turnover
• Analysis of the attractiveness of countries and industries from a top-down perspective, though stocks are selected on a bottom-up basis
• Stock selection, not top-down views, determines industry and country weightings
• Low portfolio turnover minimizes transaction and market-impact costs
• An emphasis on quality “blue chip” companies with long-term catalysts that should lead to expanding profit margins
• A willingness to think independently and deviate significantly from benchmark industry and country weightings
• Concentration in their best ideas that they believe have the most attractive risk/reward potential

The investment process encompasses a top-down, thematic approach coupled with intensive, fundamental, bottom-up industry and company analysis. It is not uncommon for an idea to be monitored for years before a position is taken. Research is focused on identifying secular trends (rather than shorter-term cycles) that will drive margin expansion. Patient due diligence of companies, countries and regions are critical to the investment process. Northern Cross believes this due diligence, in combination with a top-down investment theme, provides the best opportunity to invest in truly undervalued companies. Before qualifying a country for investment, Northern Cross analyzes the stability of its currency, political, social, and economic environment and its legal infrastructure. Consequently, the team focuses on companies located in Europe, the Pacific Basin and emerging industrialized countries whose economic and political regimes appear stable and are believed to provide adequate protection to foreign shareholders.

Among the long-term drivers of stock price appreciation the team looks for are the following: margin expansion, pricing power driven by industry consolidation, franchise value, restructuring, asset plays.

On-site company meetings play an important role in the portfolio construction process, with each company held in the portfolio typically visited at least twice per year. Contact with company management and other key people serve to help the team gain insight and understanding of the business's operations and judge the strength of company management. The team utilizes a worldwide network of brokers/traders and local contacts for additional insight and trade execution.

Rigid buy/sell price targets are avoided, and the relative attractiveness of a stock or group of similar stocks is continuously evaluated. No single set of metrics is used to value all companies. Typically, the team looks for companies with strong and sustainable market positions that are selling at low price/earnings multiples relative to other stocks in the same country and industry. In addition to assessing a company's relative price/earnings ("P/E") ratio, other valuation metrics considered include the potential for long-term margin expansion compared to the enterprise value/sales multiple, the long-term sustainable free cash flow yield, and the absolute P/E ratio looking many years out.

Positions are commonly sold when a new idea presents better risk/reward characteristics, the stock’s price reaches the underlying business value, there is an adverse change in the economic, political or regulatory environment, management fails to execute their business plan, there is an overwhelming change in the company’s policy of shareholder rights.

The team does not plan to hedge currencies. However, in a market where the local currency is expected to be weak, investments are often made in companies with assets or earning streams denominated in U.S. dollars.

 Manager bio.