Mondrian Local Currency Emerging Market Debt Fund

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Fund Facts as of Decembet 31st, 2016

ISIN IE00B87TX957
Total ExpenseRatio* 0.95%
Management Fee 0.70%
Benchmark JP Morgan GBI-EM Global Diversified
Inception Date 12/13/2010
Base Currency USD
Entry / Exit Charge 0.25% / 0.25%
Minimum Initial Investment $5,000,000
Minimum Subsequent Investment $1,000,000
NAV price (Previous BD price)
NAV date (Previous BD date)
Hedged No

Fund Features

Universe of Securities

Mondrian will consider investing in the government debt of all countries within the JP Morgan GBI-EM Global Diversified Index. Mondrian will also invest in local bond markets not in this index, where available and investable.

Local currency sovereign issues comprise the majority of the portfolio.

Country Allocation

Country allocation is determined by relative Prospective Real Yields (PRY).

The top-level allocation is then determined by an optimization procedure that seeks to maximize portfolio PRY subject to tracking error. High PRY markets are overweighted, subject to constraints on the degree of dispersion from the benchmark index.

Inflation forecasting is a key feature of our approach. We forecast inflation using econometric models for each local currency market. These capture the statistical relationships between demand-pull and cost-push price pressures. These models are supplemented by a quantitative analysis of factors that past statistical relationships might not capture but will affect future inflation, such as changes in government tax policy.

In order to assess sovereign credit risk, we take a quantitative approach that rates a country on four fundamental sets of factors (i) its domestic economy (ii) its institutional strength (iii) the country’s external sector and (iv) its fiscal outlook. If necessary, this rating leads to an adjustment to a country’s Prospective Real Yield (PRY) measure.

Currency Allocation

Currency management is seen as integral to a portfolio’s total return. We believe that if a local bond market offers good value, the currency is likely to appreciate. However, there are situations when a currency may be undervalued or overvalued. In such situations portfolio currency exposures may differ from country exposures.

Forecasting currency movements consistently is impossible in our opinion. We, therefore, take a Purchasing Power Parity (PPP) valuation approach in order to gauge the fair value exchange rate of a currency. The PPP fair value exchange rate between two currencies is one that maintains purchasing power between them so that a basket of goods and services costs the same using either of the currencies. Since there are many influences on short term currency movements, actual exchange rates will deviate from these fair values. However, when those deviations become large enough that the currency is extremely over or undervalued then we may decrease or increase exposure to that currency.

When a bond market is overvalued but its currency is overvalued we will use defensive hedging.

Duration

We add further value and control interest rate risk through our duration/maturity strategy, although decisions on duration/maturity are secondary to the country/currency allocation. Mondrian employs a high duration/maturity strategy in markets that have relatively high PRYs to maximize the advantage. Similarly, we will adopt a low duration/maturity stance where PRYs are relatively low as a defensive move. Typically, our overall portfolio duration is 75% to 125% of index.

The JP Morgan GBI-EM Global Diversified Index consists of regularly traded, liquid fixed-rate, local currency government bonds.

* Mondrian Investment Partners Limited (the Investment Manager) has contractually agreed to cap Administrative Expenses at 0.25% of the daily Net Asset Value of the Fund. This limit does not apply to or include the Management Fee, transaction related expenses and any nonrecurring expenses.

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