Legg MasonBrandywineGlobal Fixed Income FundBrian Hess, Associate PM and Senior Research Analyst19 June 2012Fund data as of 31 May 2012This document is aimed exclusively at Qualified Investors as defined by Art 10, Section 3 of the Swiss Collective InvestmentSchemes Act of 23 June 2006 (“CISA”) and must not be provided to, or used by retail investors.
An Award-Winning Investment Manager*: Brandywine GlobalLegg Mason Subsidiary Focused on Value Investing• U$37 billion* in AUM• Headquartered in Philadelphia, with offices in San Francisco, Singapore and London Assets Under Management• Almost 160 employees worldwide (by strategy type; USD billions)An Active and Experienced High-Conviction Manager Managing global fixed income portfolios since 1998 Manages over $27bn in fixed income assetsStrong Team-Oriented Investment Approach• Top-down, value-oriented approach• Head PMs have been partners since 1995 and team has over 90 years of combined experience• Culture of partnership and teamwork Page 2 Source: Brandywine as of 31 March 2012. * Brandywine Global named the 2012 winner of Institutional Investor‟s 3rd Annual US Investment Management Awards for Global Fixed Income.
Brandywine‟s Global Fixed Income Team Global Fixed Income Portfolio Managers Stephen S Smith, David F Hoffman, Jack P McIntyre Brian R Hess, CFA, Associate Managing Director Managing Director Portfolio Manager, Associate Portfolio and Portfolio and Portfolio Senior Research Manager Manager Manager Analyst Inv exp: 10 years Inv exp: 35+ years Inv exp: 35+ years Inv exp: 24 years Joined: 2003 Joined: 1991 Joined: 1995 Joined: 1991 Co-Heads Global Fixed Income Fixed Income Research and Implementation Francis A Tracy Chen Carole Lye, Min Tian, Christopher R Dennis W. Dow, Renato Latini Travis Crumley, Kristen Mugan, Scotland, CFA CAIA, Coolidge CFA, CFA, Research Analyst Global Macro Manager, Portfolio Head Trader, Fixed Trader, Fixed Trader, Fixed Director of Global Senior Research Research Specialist Implementation Income Trader, Fixed Income Income Macro Research Analyst – Credit Inv exp: 4 years Income Joined: 2008 Inv exp: 4 years Inv exp: 13 years Inv exp: 19 years Inv exp: 8 years Inv exp: 4 years Specialist Inv exp: 33 years Joined: 2006 Joined: 2010 Joined: 2000 Inv exp: 6 years Joined: 2005 Joined: 2007 Joined: 2006 Inv exp: 13 years Joined: 2006 Joined: 2008• A focused, cohesive and agile team• Over three decades of fixed income experience• Joint responsibility for investment policy• Stephen and David have managed the Fund together since its inception• No leavers from investment team since Fund inception on 30 September 2003 Page 3 Brandywine Global Investment Management (Asia) Pte., Ltd., formally known as Brandywine Asset Management (Asia) Pte., Ltd.; Established in September 2003 as a wholly owned subsidiary of Brandywine Asset Management, LLC, Brandywine Asset Management (Asia) Pte., Ltd., provides a full range of investment advisory and fund management services to institutional clients in Singapore. Source: Brandywine as of 31 March 2012.
Investment Approach and GoalsBrandywine Global doesn’t believe in ’Benchmark hugging’• Benchmark investing favours investing in the biggest debtors instead of the most disciplined• It believes benchmark investing is more likely to increase risk rather than lower itBrandywine Global’s Investment PhilosophyBrandywine Global aims to exploit over- and under-valuations in bond and currency markets that result from priceimbalances in order to generate returns.Brandywine Global seeks returns in the portfolio by:- Investing in bonds from around the world with the highest real yields- Actively managing currency exposures in order to protect capital and enhance returns- Patiently rotating among countries- Controlling risk and preserving capital by purchasing undervalued securities Page 5
Investment Process Overview Macro Economic Research • Identifying high real yield • Analysing macro • Identifying macro risks countries economic factors Establishing Investment Themes Alpha Decisions Strategy Review and • Country Allocation • Duration • Currency Allocation Monitoring Feedback Portfolio Construction and Market Risk Analysis Source: Brandywine Global Investment Management LLC. Page 7
Investment Process is Driven by Macro ThemesDiversification within macro themes helps to reduce risk:• Macro themes can be diversified across a variety of countries and currencies (diverse investment ideas allow for the same theme to play out slightly differently across different assets)• Diversification smoothes out day-to-day volatility Theme #1 Theme #2 Theme #3 Global growth improving Driver of global growth shifts EU debt crisis unresolved from G3 to G20 Maintain Select Reduce US Hold Hold Hold some Bias away commodity and UK Asia/EM No Euro from EM Debt peripherals Treasuries EU debt currencies duration currencies and USD Source: Brandywine, as at 31 March 2012. The views expressed above are those of Brandywine Global Investment Management, LLC, and are not intended as a Page 8 recommendation, investment advice, forecast or guarantee of future results. It should not be assumed that investment in the regions or currencies listed and account quality ratings or duration ranges were or will prove profitable, or that investment decisions it makes in the future will be profitable. International securities and ADRs may be subject to market/currency fluctuations, investment risks, and other risks involving foreign economic, political, monetary, taxation, auditing and/or legal factors. There may be additional risks associated with international investments. International investing may not be suitable for everyone. There is no guarantee that the investment strategy will meet its objective. Past performance is no guarantee of future results.
Three Sources of Alpha – Country AllocationBrandywine Global’s country allocation process seeksto identify relative value worldwide, analysing:• Secular and political analysis, critically examines and 100%monitors 90% – Long-term shifts in inflation 80% – Political changes that impact fiscal and monetary policy 70% – Debt and pension liability trends 60% – Trade Dynamics 50% – Immigration Dynamics 40%• Each country‟s business and liquidity cycle through 30% – Inflation pressures 20% – Employment 10% – Fiscal/monetary policy 0% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 – Capacity constraints Australia* Canada Denmark ECU Finland France Germany* Iceland – Real interest rates Ireland Italy* Malaysia* Mexico* New Zealand* Norway Poland* Singapore South Africa* South Korea* Spain Sweden U.K.* U.S.* Source: Brandywine, as at 31 March 2012 Page 9
Three Sources of Alpha – Currency AllocationBrandywine Global approaches currency allocationas a long-term investor, looking for: 100% • Currency valuation extremes, as defined by purchasing power parity • JPM Real Trade Weighted Index: Currency valuations relative to other currencies 75% • Circumstances in which valuation extremes change economic behaviour • Geopolitical factors 50% • Currencies with high, real interest rates relative to other countries • Its focus on high real yields leads the portfolio to 25% undervalued currencies with the potential to appreciate • It hedges if currencies are so overvalued that the overvaluation is changing economic behaviour 0% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11Short-term factors are also considered: Australia Canada Chile China Denmark ECU Net core Euro position Finland France Germany Iceland Ireland • Market sentiment, hedging costs, technicals Italy Norway Japan Poland Korea Singapore Malaysia South Africa Mexico Spain New Zealand Sweden U.K. U.S. Source: Brandywine, as at 31 December 2011 Page 10
Three Sources of Alpha – Duration DecisionBrandywine Global determines its duration in each Historical Duration* Year scountry through an analysis of: 10 – Real interest rates 9 – Secular trends 8 – Position in the business liquidity cycle – Monetary policy 7Brandywine Global believes longer duration 6securities offer higher potential returns: 5 • Investors participate fully as rates decline 4 • Duration “risk” limited by investing in only a select group of high yield countries while avoiding investments in markets 3 with poor return potential 2 B randy wine Global Fixed Incom eBrandywine Global believes shorter duration 1 Representative A ccount Citigroup W GB Isecurities offer defensive characteristics: • When real yields are well below historical norms 0 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 • When inflation pressures are increasing Mont hl y Source: Brandywine, as at 31 March 2012 Page 11
Risk Management is at the Core of the Investment Process• Brandywine believes that risk is the probability of permanent capital loss and is not a relative measure Focus is on avoiding capital loss rather than budgeting risk relative to a benchmark.• Although it is a high conviction manager, it diversifies positions within broad themes. Price Risk Information Risk • The risk that a security (or portfolio of securities) will • Generated from events that will affect intrinsic value in the future decline in value • What is the macro story and what is the potential for surprise? • Exists when the current price is well above Brandywine‟s • Market perception often lags reality in recognising changes and view of intrinsic value sustainability of fundamental trends. How does Brandywine minimise this risk? How does Brandywine minimise this risk? • Its emphasis on valuation anomalies in the macro process • Its consideration of which key secular macro trends should fundamentally reduces risk. minimise this risk. • Its focus on buying assets that are out of favor and deeply discounted is relative to their intrinsic value. Page 12
Risk Management is at the Core of the Investment Process (cont.)• Two-part sign off - conviction from both Steve Smith and David Hoffman required• Gradually adding to positions as comfort increases• Restrict maximum allocation to less liquid markets (0% allocation if no conviction on position)• Do not believe that tracking error is a relevant measure of risk• Risk systems used include Wilshire Axiom and Barclays Point Page 13
Portfolio Construction - Typical Investment Parameters Source: Brandywine. Page 14 1 Client-approved adjustments to guideline allocations may occur depending on market conditions. 2 NRSO is the acronym for Nationally Recognised Statistical Rating Organisation 3 The fund is permitted to invest up to 10% in investment grade rated Emerging Markets debt as set out in the prospectus.
Is It Too Late To Halt The Recession in Europe? Source: Brandywine/Thomson Datastream, as at 31 May 2012 Page 16
China Is Getting What It Wants, A Slowing Economy Source: Brandywine/Thomson Datastream, as at 30 April 2012 Page 17
US Households Are “Cleaning Up” Their Balance Sheets US Household Debt (Quarterly Change, Annualised) Source: Brandywine/Thomson Datastream, as at 31 December 2011 Page 18
Tame German & Chinese Inflation Measures Are Key For Further Stimulus Source: Brandywine/Thomson Datastream, as at 30 April 2012 Page 19
Coordinated Global Liquidity By G4 Central Banks, Part One Of Reflation Source: Brandywine/Thomson Datastream, as at 25 May 2012 Page 20 *Rebased to 100, as at Jan 2007
Brandywine Remains Uninvested In The Yen Source: Brandywine/Thomson Datastream, as at 31 December 2011 Page 21
Despite The G3‟s Woes, The Global Economy Has A Solid Base Source: Brandywine/Thomson Datastream, as at 31 December 2011 Page 22
The Need for Diversification Outside of Your Domestic Market• Bond and Currency returns vary significantly from country to country, year over year• Restricting your global bond allocations to G3 economies will restrict your diversification and opportunity set• Global flexibility and high conviction are key to maximise total return potential from bonds, currencies and duration allocations – Allocate to global bond funds that are not driven by benchmarks Page 23
Legg Mason Brandywine Global Fixed Income FundPortfolio Characteristics & Comparisons – 31 May 2012 Page 28 Source: Brandywine at 31 May 2012. For illustrative purposes only. The fund is permitted to invest up to 10% in investment grade rated Emerging Markets debt as set out in the prospectus.
Legg Mason Brandywine Global Fixed Income FundPortfolio Characteristics & Comparisons – 31 May 2012 * Source: Brandywine at 31 May 2012. For illustrative purposes only. Page 29 **USD Short-term corporate paper issued with an explicit government guarantee
Legg Mason Brandywine Global Fixed Income FundPortfolio Characteristics & Comparisons – 31 May 2012 * Source: Brandywine at 31 May 2012. For illustrative purposes only.. Page 30 *Denotes calculations that include only fixed income
Legg Mason Brandywine Global Fixed Income FundPerformance Attribution – YTD Source: Brandywine, as at 31 May 2012. Due to methodology differences, the returns calculated by the attribution system may differ from the official Page 31 portfolio and benchmark returns displayed at the top of the page. The differences are captured in the “Other” line at the bottom of the page. Contents herein should be treated as confidential and proprietary Information. This material may not be reproduced or used in any form or medium without express written permission. Data is obtained through Wilshire Axiom and is believed to be accurate. Past performance is no guarantee of future results.
Legg Mason Brandywine Global Fixed Income FundPortfolio Positioning Summary• We believe that we are selectively positioned to take advantage of economic reacceleration in the United States, China, and most of the emerging world while at the same time being defensively positioned with respect to the continuing financial stresses in Europe. Country Themes Currency Themes Pan Europe: Pan Europe: • Reduced exposure in the Eurozone including Ireland, Spain, • Minimal exposure to the euro. Germany, France and Greece, among others. • Preference for British bonds • Preference for the British pound sterling. United States: United States: • Preference for the US Dollar • Reduced duration exposure in the US. Japan: • Remain un-invested in Japanese yen Japan: Emerging Markets: • Remain un-invested in Japanese government bonds. • Exposure to undervalued EM currencies Asia ex Japan: • The capital allocation from Brandywine‟s zero weight in the Japanese yen is used to fund currency positions in the Malaysian ringgit and South Korean won, among others. Source: Brandywine at 31 May 2012. Page 32
Legg Mason Brandywine Global Fixed Income FundPerformance Returns as at 31 May 2012Annualised in USD Source: Legg Mason as at 31 May 2012. NAV to NAV with gross income reinvested without initial charges but reflecting annual management fees, Page 33 based in USD for class A shares. *Fund launched on 30/09/2003. Past performance is not an indicator of future results and may not be repeated
Summary: Why Brandywine for Global Bonds?Legg Mason Brandywine Global Fixed Income Fund High conviction, Brandywine Global‟s conviction levels drive the composition of the Fund, not a benchmark. Active management allows investors to gain overweight exposure to countries that are likely to outperform and underweight exposure to those who are likely to underperform. Top down approach that can capitalise on shifting geographic and macro trends.Superior risk adjusted returns designed to capture market upside but aiming to avoid market downside, and to provide long term performance. Access to high real yields with diversification outside of G3 countries. Taking advantage of currency risk to enhance returns. Page 34
Defensive Strategy with Strong Upside/Downside Capture The performance of the Brandywine Global Fixed Income Investment Grade (IG) Composite has been used to demonstrate the portfolio manager‟s longer term track record in managing global bonds Since July 1995 / Based on Quarterly Returns / Single Computation 125% Performance driven, but defensive style: Brandywine returned 21% more than the Global Fixed Income – IG (Gross) 1 % 20 market during up periods and avoided 72% of the market downside. Global Fixed Income – IG (Net)Upside Capture 1 5% 1 10% 1 1 5% 0 Citigroup World Government Bond Index 1 0% 0 95% 1 % 0 30 % 50 % 70 % 90 % 10% 1 Downside Capture Source: Brandywine / Zephyr Style Advisor as at 31 March 2012. Based on Global Fixed Income (IG) composite return. The composite includes all fully discretionary, fee- paying actively managed Global Fixed Income accounts with a minimum market value of $3 million. Returns are presented gross of fees and assume reinvestment of dividends, interest, capital gains and other earnings. There Page 36 are differences between the composite return and the Legg Mason Brandywine Global Fixed Income Fund including differences in the amount of assets under management, cash flows, fees and expenses, and applicable regulatory requirements, including investment and borrowing restrictions. The past performance of the Brandywine Fixed Income product is, therefore, not indicative of the future performance of the Legg Mason Brandywine Global Fixed Income Fund.
Long Term Strategy Returns in Excess of the Rate of InflationFor illustrative purposes onlyThis chart is for illustrative purposes only and is based on the Brandywine Global Fixed Income Composite, which has been managed differently from the fund since June2010, when the fund became sovereign only. Growth of $1 Source: Brandywine Global, as at 31 March 2012. Based on Global Fixed Income Investment Grade composite return. There are differences between the Page 37 composite return and the Legg Mason Brandywine Global Fixed Income Fund including differences in the amount of assets under management, cash flows, fees and expenses, and applicable regulatory requirements, including investment and borrowing restrictions. The past performance of the composite shown is, therefore, not indicative of the future performance of the Legg Mason Brandywine Global Fixed Income Fund.
Legg Mason Brandywine Global Fixed Income FundKey Technical Details Investment objective: Maximise total return, consisting of income and capital appreciation Launch date: 30 September 2003 Benchmark: Citigroup WGBI Un-Hedged (USD) Portfolio Manager: Team approach Base Currency: USD Other Currencies: EUR, GBP, JPY and CHF Management fee (Class A Dist (S) USD shares): 1.10% p.a. ISIN BLOOMBERG WKN VALOREN Sedol Legg Mason Brandywine Global Fixed IE0033637442 LEGGLOB ID A0B9F1 1701474 3363744 Income Fund (Class A Dist (S) USD shares) Page 38
Legg Mason Brandywine Global Fixed Income FundKey Technical Details – Active Share Classes Legg Mason Brandywine Global Fixed Income Fund – Share Classes ISINClass A Distr. (M) USD IE00B556SN66Class A Distr. (S) USD IE0033637442Class A Acc. USD IE00B19Z4J92Class A Distr. (S) (Hedged) EUR IE00B23Z8Z66Class A Acc. (Hedged) EUR IE00B23Z8X43Class A Distr. (S) (Hedged) GBP IE00B23Z9087Class B Distr. (S) USD IE0034203715Class B Acc. USD IE00B23Z9202Class C Distr. (S) USD IE0034203822Class C Acc. USD IE00B23Z9319Class E Acc. USD IE00B50ZNB17Premier Class Distr. (S) USD IE00B0D43V07Premier Class Acc. USD IE00B23Z9426Premier Class Acc. EUR IE00B3QRTV97Premier Class Acc. (Hedged) EUR IE00B23Z9533 Page 39
Investment Manager Track Record – Best/Worst Quarterly PerformanceSource: Brandywine Global Investment Management LLC as at 31 December 2011. Based on Global Fixed Income Investment Grade composite return. The composite (Global Fixed Income Investment Grade composite) includes all fully Page 40 discretionary, fee paying actively managed Global Fixed Income accounts with a minimum market value of $3 million. Returns are presented gross of fees and assume reinvestment of dividends, interest, capital gains and other earnings. There are differences between the composite return and the Legg Mason Brandywine Global Fixed Income Fund including differences in the amount of assets under management, cash flows, fees and expenses, and applicable regulatory requirements, including investment and borrowing restrictions. The past performance of the composite shown is, therefore, not indicative of the future performance of the Legg Mason Brandywine Global Fixed Income Fund.
Global Fixed Income Investment-Grade CompositeAAnnualised Performance nnualized Perf o rmance Calendar Year Performance Calend ar Year Perf o rmance 18 30 16 25 14 20 12 10 15 8 10 6 5 4 2 0 0 -5 1 Year 3 Year 5 Year 7 Year 10 Year Since Inception* -10 (7/1/1992) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Com posite Com posite CW GB I¹ B CGA ² Excess Gross Return Com posite Com posite CW GB I¹ Excess Gross Return B CGA ² Period Return Gross Return Net Return Return Year Return Gross Return Net Return Return ( %) of Fees ( %) of Fees ( %) ( %) ( %) CW GB I¹ B CGA ² of Fees ( %) of Fees ( %) ( %) CW GB I¹ B CGA ² 1 Year 9.52 8.93 5.12 5.26 4.40 4.26 2012 3.59 3.45 -0.51 0.87 4.10 2.72 3 Year 15.71 15.07 6.23 7.53 9.48 8.18 2011 7.61 7.02 6.35 5.64 1.26 1.97 5 Year 9.58 8.98 6.78 6.37 2.80 3.21 2010 12.90 12.29 5.17 5.55 7.73 7.35 7 Year 7.62 7.04 5.18 5.29 2.44 2.33 2009 17.85 17.22 2.55 6.94 15.30 10.91 10 Year 10.94 10.34 7.88 7.33 3.06 3.61 2008 -2.60 -3.13 10.89 4.79 -13.49 -7.39 Since 2007 10.32 9.73 10.95 9.48 -0.63 0.84 Inception* 10.10 9.50 6.42 6.35 3.68 3.75 2006 5.55 4.97 6.12 6.64 -0.57 -1.09 (7/1/1992) 2005 -2.83 -3.36 -6.87 -4.48 4.04 1.65 2004 12.74 12.13 10.35 9.27 2.39 3.47*Supplemental Information 2003 21.29 20.64 14.91 12.51 6.38 8.78 2002 27.07 26.39 19.49 16.53 7.58 10.54 Com posite Return Gross of Fees ( %) Com posite Return Net of Fees ( %) ¹CW GB I ( Citig ro u p W o rld Go ve rn m e n t B o n d In d e x ( Un h e d g e d ) ) ²B CGA ( B arclay s Cap ital Glo b al Ag g re g ate B o n d In d e x) Source: Brandywine as at 31 March 2012. Results shown in USD. Based on Global Fixed Income Investment Grade composite return. The composite (Global Fixed Income Investment Grade composite) includes all fully discretionary, fee paying actively managed Global Fixed Income accounts with a minimum market value of $3 million. Returns are presented gross of fees and assume reinvestment of Page 41 dividends, interest, capital gains and other earnings. There are differences between the composite return and the Legg Mason Brandywine Global Fixed Income Fund including differences in the amount of assets under management, cash flows, fees and expenses, and applicable regulatory requirements, including investment and borrowing restrictions. The past performance of the composite shown is, therefore, not indicative of the future performance of the Legg Mason Brandywine Global Fixed Income Fund.
Global Fixed Income Investment-Grade Composite Disclosure As of 31 March 2012 / Results shown in $USD Com posite CW GB I¹ B lendedA ² Year Com posite Com posite CW GB I¹ B lendedA ² Market Firm Com posite St. Dev. St. Dev. St. Dev. Com posite Com posite or Return Gross Return Net Return Return Value A ssets Dispersion ( % 3-Year ( % 3-Year ( % 3-Year Return Gross Return Net CW GB I¹ B lendedA ² YTD of Fees ( %) of Fees ( %) ( %) ( %) # of A ccts ( $MM) ( $MM) ( %) Rolling) Rolling) Rolling) Period of Fees ( %) of Fees ( %) Return ( %) Return ( %) 2012 3.30 3.18 -0.51 0.00 34 7,394 37,184 0.17 7.55 6.78 6.47 1 Year 9.86 9.37 5.12 5.55 2011 8.64 8.15 6.35 6.42 35 6,993 33,122 0.45 8.33 7.57 7.19 3 Year 16.68 16.17 6.23 7.57 2010 13.77 13.27 5.17 6.00 32 5,542 31,996 0.67 11.26 9.26 8.90 5 Year 9.22 8.74 6.78 6.98 2009 21.10 20.57 2.55 5.97 33 5,532 29,199 1.14 10.95 8.83 8.44 7 Year 8.15 7.64 5.18 5.62 2008 -8.30 -8.71 10.89 7.73 36 5,120 32,755 1.25 9.17 7.39 7.12 10 Year 12.01 11.46 7.88 8.17 2007 10.71 10.19 10.95 10.29 35 6,394 49,208 0.24 5.16 5.48 5.01 Since 2006 8.59 8.00 6.12 6.62 31 4,390 39,241 0.49 5.08 5.86 5.50 Inception* 9.47 8.92 6.13 6.43 2005 -0.72 -1.26 -6.87 -5.53 23 2,616 26,332 0.82 6.53 7.24 6.88 (1/1/1998) 2004 14.27 13.65 10.35 10.46 13 1,543 18,547 0.34 6.72 7.50 6.93 2003 27.30 26.62 14.91 16.24 9 726 12,680 1.19 8.20 7.69 7.06 *Supplemental Information 2002 27.03 26.34 19.49 18.22 8 567 7,990 0.44 9.25 7.34 6.67 Com posite Return Gross of Fees ( %) Com posite Return Net of Fees ( %) CW GB I¹ Re tu rn ( %) B lendedA ² Re tu rn ( %) Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2012 3.30 - - - 3.18 - - - -0.51 - - - 0.00 - - - 2011 2.15 2.91 2.48 0.84 2.03 2.79 2.37 0.73 0.66 3.32 2.38 -0.12 0.82 3.26 1.75 0.46 2010 2.55 1.68 10.10 -0.89 2.43 1.57 9.98 -1.01 -1.33 0.29 8.18 -1.76 -0.78 0.33 8.14 -1.54 2009 -2.67 12.86 9.49 0.69 -2.78 12.74 9.37 0.58 -4.81 3.48 6.16 -1.93 -3.96 4.74 6.79 -1.36 2008 2.19 0.16 -5.41 -5.29 2.07 0.05 -5.51 -5.39 9.66 -4.23 -2.97 8.81 8.53 -3.76 -3.36 6.72 2007 0.98 0.92 5.82 2.66 0.85 0.80 5.71 2.55 1.15 -1.54 7.20 3.92 1.30 -1.46 6.65 3.60 2006 0.91 2.55 1.98 2.89 0.77 2.41 1.84 2.75 -0.41 3.17 1.44 1.80 -0.14 2.74 1.84 2.04 2005 -2.27 1.21 0.82 -0.45 -2.40 1.07 0.69 -0.59 -2.58 -1.43 -1.12 -1.92 -2.45 -0.82 -0.77 -1.59 2004 1.28 -0.57 4.48 8.60 1.15 -0.70 4.34 8.46 1.86 -3.33 3.28 8.50 1.95 -3.32 3.65 8.13 2003 6.93 7.83 2.57 7.63 6.79 7.69 2.43 7.49 3.11 3.88 1.97 5.21 3.53 4.55 2.03 5.25 2002 0.56 12.00 3.07 9.42 0.43 11.86 2.93 9.27 -1.61 11.65 3.87 4.73 -1.04 9.80 3.29 5.34¹CWGBI = Citigroup World Government Bond Index (Unhedged) ²BlendedA = 90% CWGBI ; 5% ML High Yield ; 5% JPM Emrg Markets Page 42 ¹CWGBI = Citigroup World Government Bond Index (Unhedged) ²BlendedA = 90% CWGBI ; 5% ML High Yield ; 5% JPM Emrg Markets
Global Fixed Income Investment-Grade Composite DisclosureOrganization: Brandywine Global Investment Management, LLC (the "Firm"), is a wholly owned, independently operated, subsidiary of Legg Mason, Inc. The Firm has prepared and presented this report in compliance with the Global InvestmentPerformance Standards (GIPS®). For the periods July 1, 2000 through June 30, 2006, the Firm has been verified by Kreischer Miller. A verification includes assessing whether the Firm (1) complied with the composite construction requirementsof the GIPS standards on a firm-wide basis, and (2) designed its processes and procedures to calculate and present performance results in compliance with the GIPS standards. Kreischer Miller has also performed an examination of thecomposite performance presentation from the composite Inception Date through June 30, 2006. A composite examination includes testing a specific composite in order to assess whether that composite’s performance presentation is presented,in all material respects, in conformity with the GIPS standards. Copies of the verification and composite examination reports are available upon request. Disclosed total firm assets represent the total market value of all discretionary andnondiscretionary, fee-paying and non-fee-paying assets under the Firms management. Composite Description: Global Fixed Income Investment Grade Composite (the "Composite") Inception date: July 1, 1992. Creation date: July 1, 1992. TheComposite includes all fully discretionary, fee-paying portfolios managed in the Global Fixed Income Investment Grade Strategy. The strategy invests only in U.S. and foreign investment grade fixed income securities from 8 - 12 countries. Theminimum portfolio size for inclusion in the Composite is $3 million. The Composite utilizes over-the-counter forward exchange rate contracts to manage its currency exposure. These contracts are valued daily using closing forward exchangerates. Brandywine uses WM/Reuters daily FX rates taken at 4 p.m. London time. Benchmark indices exchange rates may vary from Brandywines exchange rates periodically. The Composite returns are benchmarked to the Citigroup WorldGovernment Bond Index (CWGBI) and Lehman Brothers Global Aggregate Index (LB Global Agg). The CWGBI measures the performance of developed countries global fixed income markets invested in debt issues of U.S. and non-U.S.governmental entities. The LB Global Agg provides a broad-based measure of the global investment-grade fixed income markets by including agencies, corporates and asset backed issues. Performance Calculation: Preliminary data, if sonoted, reflects unreconciled data for the most recent reporting period. Portfolios are valued daily on a trade date basis and include dividends and interest as well as all realized and unrealized capital gains and losses. Return calculations at theportfolio level are time-weighted to account for periodic contributions and withdrawals. Performance results are calculated on a before tax, total return basis. Prior to July 1, 2007, portfolios were included in the Composite beginning with the firstfull quarter of performance through the last full quarter of performance. After July 1, 2007, portfolios are included in the Composite beginning with the first full month of performance through the last full month of performance. The Compositereturns consist of size-weighted portfolio returns using beginning of period values to weight the portfolio returns. Monthly linking of interim performance results is used to calculate quarterly and annual returns. Composites valuations and returnsare computed in U.S. Dollars ("USD"). The results are presented in USD or in other currencies (to accommodate overseas investors), the latter by converting monthly USD returns into other currency returns using the appropriate currencyexchange rate returns. Gross returns reflect the deduction of trading expenses. Net of fee returns reflect the deduction of trading expenses and the highest investment management fees charged within the composite membership as stated in thefee schedule below. Composite dispersion is calculated using the asset-weighted standard deviation method for all portfolios that were in the Composite for the entire year. Composite dispersion is not presented for periods with five or fewerportfolios. The number of accounts and market values are as of the end of the period. Past performance is no guarantee of future results. A complete list describing the Firms composites as well as any additional information regarding the Firm’spolicies for calculating and reporting performance results is available upon request. As a result of our internal review process during the quarter ended September 30, 2007, the performance results shown reflect certain immaterial revisions toperformance information previously reported by the Firm for periods through June 30, 2007. Fee Schedule: Institutional Client Separate Account Management Fee Schedule (minimum initial investment: $50 million): 0.450% on the first $50million; 0.400% on the next $50 million, and 0.350% on any portion of assets in excess of $100 million. Institutional Client Commingled Account Management Group Trust Fee Schedule (minimum initial investment: $1 million): 0.550% flat fee onall assets. Institutional Client Commingled Account Management Global Investment Trust Fee Schedule (minimum initial investment: $1 million): 0.450% on the first $$50 million; 0.400% on the next $50 million, and 0.350% on any portion of theassets in excess of $100 million. Additional information on the Firms fee schedule can be found in Form ADV Part II which is available upon request. Page 43 Source: Brandywine as at 31 March 2012
Important InformationThe Legg Mason Brandywine Global Fixed Income Fund is a sub-fund of Legg Mason Global Funds plc, an umbrella fund with segregated liability between sub-funds, established as an open-ended investment company with variable capital and incorporated with limited liability under the laws of Ireland with registered number278601. It qualifies, and is authorised in Ireland by the Central Bank of Ireland as an undertaking for collective investment in transferable securities and is a section 264Scheme as recognised by the FSA.This document does not constitute an invitation to invest. The value of investments and the income from them can go down as well as up and investors may not getback the amounts originally invested. Fluctuations in exchange rates can affect the value of the Fund and the income from it.This fund may invest in „non-investment grade‟ bonds, which carry a higher degree of default risk than „investment grade‟ bonds.This information has been prepared from sources believed reliable but is not guaranteed by Legg Mason and is not a complete summary or statement of all available.Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation or needs of individualinvestors.This Fund is offered solely to non-US investors under the terms and conditions of the Fund‟s current prospectus – please refer to the Simplified Prospectus andProspectus documentation, which describe the full objective and risk factors associated with this Fund. Before investing you should carefully read the Prospectus.. Theprospectus, the simplified prospectus as well as the Memorandum and Articles of Association, the annual and semi-annual reports can be obtained free of charge fromthe Swiss representative and paying agent, Banque Genevoise de Gestion SA, Rue Rodolphe-Toepffer 15, CH-1206 Geneva.This document is aimed exclusively at Qualified Investors as defined by Art 10, Section 3 of the Swiss Collective Investment Schemes Act of 23 June 2006(“CISA”) and must not be provided to, or used by retail investors. This information has been prepared from sources believed reliable but is not guaranteed by LeggMason Investments (Europe) Limited and is not a complete summary or statement of all available data. Opinions expressed are subject to change without notice and donot take into account the particular investment objectives, financial situation or needs of individual investors.Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London EC2M 3AB. Registered in England and Wales,Company No. 1732037. Authorised and regulated by the Financial Services Authority.June 2012 P0116-CHThis document is aimed exclusively at Qualified Investors as defined by Art 10, Section 3 of the Swiss Collective Investment Schemes Actof 23 June 2006 (“CISA”) and must not be provided to, or used by retail investors. Page 44