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GLOBAL BOND INVESTING
IN A LOW RATE WORLD
This information is only for use by professional clients, eligible counterparties or qualified investors. It is not aimed at, or for use by, retail clients.
LEGG MASON WESTERN ASSET
STRUCTURED OPPORTUNITIES FUND
Amanda Stitt
Investment Director
Legg Mason Global Asset Management
1974: First
investment in Agency
RMBS
1987:
First investment
in Non-Agency RMBS
1990: First
investment in ABS
1991: Invested in Resolution
Trust Corporation
(RTC) programs
1991: First
investment in CMBS
2009: Launched
US Treasury
PPIP
Jan 2016: Launched
UCITS Structured
Opportunities Fund
WESTERN ASSET’S MBS/STRUCTURED PRODUCT
EXPERIENCE
Assets Under Management: Dedicated MBS/Structured Product mandates $12.7 billion* Firm wide Structured Products assets under management of $55.6 billion
Source: Legg Mason, as at 30 September 2016. *Included in the Firm wide AUM. 2
Anup Agarwal 19 Years’ Experience
Western Asset Management Company – Head
of MBS/ABS, 2013-
Education
Temple University, M.B.A. Finance
Elliott Neumayer 13 Years’ Experience
Western Asset Management Company –
Product Specialist, 2004-
Education
Loyola Marymount University, M.B.A., B.A
Product Specialist Portfolio Manager
A History of Structured Product Experience and Innovation
2005:
Bought protection
on subordinate
RMBS– first large
protection trade
2007:
Launched Structured
Products Fund
2014
First Commercial
Real Estate
Mezzanine
opportunity
WHY STRUCTURED CREDIT
Provides attractive yield, investing in securities backed by residential, commercial and consumer
loans
Focus on adjustable rate securities and active management of duration provides some immunity in
a rate rising environment
Good diversifier in broader portfolio. Relatively low correlation to other fixed income sectors
Sector to benefit from strong consumer and real estate fundamentals
More dependent on US domestic growth and more sheltered from global economic developments
than other fixed income sectors
Sector has evolved since financial crisis with better underwriting and loan quality leading to a
higher quality asset class over recent years
Underappreciated asset class that we believe is significantly undervalued
* As of 31 July 2016.
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors.
3
COMPOSITE PERFORMANCE
Source: Western Asset, as at 30 September 2016.
*Information provided is supplemental to the Structured Product Levered Composite as provided in the appendix. ¹Information provided is supplemental to the
Structured Product Composite as provided in the appendix. ²Information provided is supplemental to the Agency MBS Plus Aggregate Composite as provided in
the appendix.
³Information provided is supplemental to the Agency MBS Composite as provided in the appendix.
US MBS = US Mortgage Backed Securities Index, US Broad Fixed-Income = Barclays U.S. Aggregate Index, US Treasury = US Treasury 10-Year Bellwether
Index, Hedge Fund Universe = DJ/CS Hedge Fund Index, Emerging Markets =JPM EMBI Global, US High-Yield = US HY 2% Issuer Capped Index, US Equity =
S&P 500 TR.
4
US MBSUS Broad Fixed-Income
US Treasury
Hedge Fund Universe
Emerging Markets
US High-Yield
US Equity
WA STRUCTURED PRODUCT¹
WA US AGENCY MBS PLUS AGGREGATE²
WA US AGENCY MBS4
-5
0
5
10
15
20
-4 -2 0 2 4 6 8 10 12 14
Rew
ard
(ann
ualiz
ed r
etur
n %
)
Risk (standard deviation %)
5 Years Ending 30 Sep 16*
ProductUS
Treasury
US
MBS
US Broad
Fixed-Income
US
High-Yield
Emerging
Markets
US
Equity
Hedge Fund
Universe
WA Structured Product¹ 2.12 -0.05 0.10 0.09 0.35 0.26 0.23 0.56
WA US Agency MBS Plus Aggregate² 2.34 0.81 0.98 0.87 0.16 0.45 -0.11 0.08
WA US Agency MBS³ 1.23 0.40 0.43 0.43 0.18 0.26 0.01 0.33
Sharpe Ratio 0.47 1.17 1.03 1.30 1.01 1.45 1.13
CorrelationsSharpe
Ratio
LEGG MASON WESTERN ASSET
STRUCTURED OPPORTUNITIES FUND
Inception date: 13 January 2016
Portfolio Targets Investment aim: To maximise total return.
Expected volatility range: 5-7%
Targeted return: 6% to 8%*
Expected duration: <1 year
Fund description Aims to exploit investment opportunities across residential & commercial mortgages and asset-backed securities
Focus on more liquid areas of non-agency mortgage backed securities and asset-backed securities sectors (investment grade and
high yield, various tranches and classes)
Significant floating rate exposure resulting in low sensitivity to interest rate changes
Allocations allowed to agency MBS/ABS, corporate debt and government debt
Opportunistic use of interest rate and credit hedges to minimise downside risks
Portfolio seeks to perform well as US economy improves and rates rise
Investment guidelines No financial leverage
Min 65% in MBS and ABS (not issued or guaranteed by Government-sponsored entities or agencies of the U.S. Government)
Max 35% (in aggregate) in agency MBS/ABS, corporate debt, government debt and cash/cash equivalents
Max 50% in non-USD securities (typically less than 5% non-USD exposure).
Invests in cash bonds, futures, options and other derivatives (max 20% in derivatives on equity indices)
Source: Legg Mason, as at 30 June 2016. Please refer to the LMGF Plc Prospectus for further details of the Fund hard limits. *Yield levels described are
targets and there is no guarantee that they will be met. 5
Residential MBS
Agency MBS (Fannie Mae, Freddie Mac, Ginnie
Mae)
Collateralised mortgage obligations (CMOs)
Pre-2007 non-agency Residential Mortgage Backed
Securities (RMBS)
Post-2007 non-agency RMBS (including
Government Sponsored Enterprises risk transfer
securities)
Commercial MBS
Conduit (multiple loans & properties)
Single borrower
Mezzanine
Commercial real estate collateralised loan
obligations (CRE CLOs)
INVESTMENT UNIVERSE The Fund can invest across the various subsectors of Mortgage Backed Securities (MBS) and Structured
Products, with a focus on consumer, residential and commercial sectors. Primary strategies include:
Source: Legg Mason, as at 30 June 2016. These are internal guidelines and are subject to change. 6
ABS (Consumer)
home equity lines of credit
student loans
unsecured personal loans
auto loans
credit card loans
small business loans
small balance commercial loans
aircraft leases
THE SIZE AND LIQUIDITY OF THE UNIVERSE
Source: Bank of America/Merrill Lynch Global Research, Fannie Mae, Freddie Mac, Ginnie Mae, Intex, Commercial Mortgage
Alert, J.P. Morgan, Federal Reserve Bank, as at 30 September 2016. * As at 31 March 2016.
7
2.8
0.8
5.9
0.6
3.6 3.4
0
1
2
3
4
5
6
7
Non-securitised Commercial Mortgages*
CommercialMBS
Agency MBS Pre '07ResidentialNon-Agency
MBS
ResidentialWhole Loans
Asset Backed
Outstanding Issuance ($trn) USD trn
36.1
31
22.5
0
5
10
15
20
25
30
35
40
CommercialMBS
Pre '07Residential Non-
Agency MBS
Asset Backed
Average Monthly Volumes ($bn) USD bn
Source: Bloomberg, TRACE, since January 2014.
SUB-SECTOR YIELDS
Source: Western Asset, as at 30 September 2016. Past performance is not a reliable indicator of future results. 8
3%
6%
2%
4%
2%
5%
2%
6%
0%
2%
4%
6%
8%
10%
12%
IG Non-IG IG Non-IG IG Non-IG IG Non-IG
6%
10%
4%
7%
3%
8%
4%
10%
Commercial Mortgages Pre ‘07 Residential
Mortgages
Post ‘07 Residential
Mortgages
Consumer Loans
PRE 2007 VS NOW
Loans from pre 2007 RMBS that have defaulted has cleaned out low quality/fraudulent loans and
what remains is seasoned loans with lower loan-to-value levels with more stable cash flows.
9
Loans originated with no assets, no income and no job verification
Appraisal fraud
Loan officer compensation
No risk retention policy on behalf of issuers
Issuer(s) driving origination via reverse inquiry
Weak representation, warranty and enforcement constructs
Funding decisions directed by securitisers
Regulatory changes has reduced ability of banks to lend
Dodd Frank has increased regulation
on lending and risk retention by issuers
Loan underwriting process has improved significantly since the
global financial crisis
Consumer and real estate fundamentals are at historically
attractive levels
Selective process focused on quality borrowers and loans with low loan to
values
Cause(s) of Crisis Regulatory & Rating Agency
Environment Post-Crisis
PEOPLE, PROCESS, PORTFOLIO,
PERFORMANCE
10
MORTGAGE AND ASSET-BACKED INVESTMENT TEAM
As of 30 September 2016.
The above includes both investment and non-investment professionals (analysts and product specialists). 11
Anup Agarwal (19 years) Head of MBS/ABS
Elliott R. Neumayer (13 years) Product Specialist
Kevin X. Zhang (3 years) Product Analyst
Alba Abourjeili, CFA (14 years)
Andre Ashook, CFA (7 years)
Benjamin Birnbaum (10 years)
Greg E. Handler, CFA (16 years)
Sean O. Johnson, CFA (27 years)
Ian Justice (18 years)
Liam P. Lynch (15 years)
MBS/Structured Product
Jenny Park, CFA (11 years)
Sudibyo Pradono (13 years)
Ravi Sharma (11 years)
David F. Shriver (9 years)
Harris A. Trifon (16 years)
Bonnie M. Wongtrakool, CFA (17 years)
Investment Management Professionals
• Chief Investment Officer: S. Kenneth Leech
• Deputy CIO Michael C. Buchanan
• 125 Investment Professionals on five
continents and 7 offices
• 21 years of average experience
Major Investment Committees
• Global Investment Strategy Committee
• Global Credit Committee
• US Broad Market Strategy Committee
• Global Emerging Markets Strategy
Committee
• Unconstrained Asset Allocation Committee
Western Asset Investment Team
Independent Risk Management Function
• Chief Risk Officer Kenneth J. Winston
• Independent evaluation of strategies and
risks in portfolios
• Market and Credit Risk Committee
• 40 investment risk professionals of which
10 are PhDs, across four offices.
Sector and Regional Teams
• Global credit
• Investment grade
• High-yield
• Emerging markets
• MBS/ABS
• Long duration
• US municipal
• Liquidity
• Insurance
• US
• Europe
• UK
• Japan
• Asia
• Brazil
• Australia / New
Zealand
Mortgage and Asset-Backed Investment Team
Risk Management Legal &
Compliance Investment
Support
MBS/ABS INVESTMENT PROCESS
Risk Management
Portfolio Construction
MBS/ABS
Portfolio
Mortgage and Asset-Backed Investment Process and Team Interaction
Security Selection
Strategic
Portfolio
Strategy Committees
Macro and Credit
Investment Outlook
Client Objectives
and Guidelines
Interest Rate Duration
Yield Curve
Credit Quality
Sector
Mortgage and Asset-Backed Team US Broad Strategy Committee
Source: Western Asset, as at 30 June 2016.
12
BOTTOM UP FUNDAMENTAL ANALYSIS FOR
CREDIT SENSITIVE SECURITIES
13
Purchase Decision Due Diligence Process
Security
Evaluation Broad Market
Trends
Analyse macro trends
including real estate,
unemployment and
consumer spending
Follow macro subsector
trends such as regional real
estate, CRE rent growth,
auto sales, used car prices
Evaluate current consumer
behavior, such as debt
burdens and bankruptcy
filings
Understand changes to
credit underwriting
standards
Understand financing
options available to issuers
Recognise servicing industry
dynamics
Follow any government
initiatives affecting loans
Collateral
Analysis
Credit analysis of the issuer
motivation and economics
Evaluate soundness of
issuer underwriting criteria
Review key loan
characteristics
Use historical performance
to construct default and
prepayment curves
Examine trends in collateral
performance metrics
Estimate loss severities
based on current collateral
valuations
Structural
Analysis
Master trusts vs. revolving
vs. discrete structures
Size and thickness of a
tranche
Adequacy of tranche level
credit enhancement
Structural nuances of cash
flow waterfall
Performance and ratings
triggers
Substitution criteria
Issuer influence,
economics and incentives
Scenario
Analysis
Multiple default and
prepayment scenarios
Test triggers to modify
waterfall
Stress recovery by varying
external factors
Liquidity stresses
Structural stresses including
payment priority changes
Analyse to call and/or to
maturity
Source: Western Asset, as at 30 June 2016. These are internal guidelines and are subject to change.
STRUCTURED PRODUCT REPRESENTATIVE
ACCOUNT: HISTORICAL SECTOR ALLOCATION
0%
20%
40%
60%
80%
100%
Asset Backed Cash & Cash Equivalents Commercial Mortgage Backed
Credit Government Residential Mortgage Backed
Other
Source: Western Asset, as at 30 June 2016. For more information on the strategy composite see the composite disclosure in the appendix.
14
Portfolio
Change
(Qtr)
Weight
(%) Sector
Yield*
(%)
37.1 Pre ‘07 Residential Mortgages 5.51
15.5 Alt-A 5.18
17.3 Subprime 5.71
4.3 Prime 5.87
29.1 Post ‘07 Residential Mortgages 4.80
0.3 Agency RMBS IO 6.47
18.5 GSE Risk Transfer 4.57
8.6 Restructured Pre ‘07 Bonds 5.44
1.6 UK Mortgages 3.79
22.3 CMBS 7.26
3.7 Agency CMBS IO 4.95
11.3 Conduit Credit 9.37
0.9 Large Loan Credit 4.33
6.4 Legacy AJ/AM 10.40
2.8 Opportunistic ABS 2.34
0.0 Treasury Derivative -0.17
8.7 Cash 0.45
100.0 Total 5.99
LEGG MASON WESTERN ASSET STRUCTURED
OPPORTUNITIES FUND POSITIONS (30 SEPTEMBER 2016)
Source: Western Asset. Fund inception :13 January 2016. Portfolio characteristics may change without notice.
*Loss Adjusted Yield 15
Floating vs Fixed exposure
Floating 64.67%
Fixed 35.33%
Portfolio is currently 78% non-investment grade
If bonds have interest rate duration, then Western Asset
hedges the duration to zero. The Fund may have some
duration, generally not more than a year, as a hedge for credit
spreads based on economic environment.
LEGG MASON WESTERN ASSET STRUCTURED
OPPORTUNITIES FUND
Source: Legg Mason as at 30 September 2016. NAV to NAV with gross income reinvested without initial charges but reflecting annual management fees, based in USD for class LM shares. The LM
Class Acc. USD is not currently registered in Sweden, but used to demonstrate the longer term track record of the fund. The Class P Acc. USD is available for investors in Sweden (inception date: 4
May 2016). Past performance is not an indicator of future results and may not be repeated. *Since inception: 13 January 2016.
16
Performance to 30 September 2016 – (USD)
1.65
4.80
8.12
6.40
0
1
2
3
4
5
6
7
8
9
1 Month 3 Months 6 Months Since Inception*
%
Legg Mason Western Asset Structured Opportunities Fund - LM Class Acc. USD
STRUCTURED PRODUCT COMPOSITE:
INVESTMENT RESULTS: 30 SEPTEMBER 2016
Source: Western Asset. Returns as at 30 September 2016, in US dollars. Returns for periods greater than one year are annualised. Effective 1 October 2014 fee schedule: 1.0% flat fee on all amounts;
the minimum separate account size is US$200 million. There are differences between the above composite and the Legg Mason Western Asset Structured Opportunities Fund, including differences in
the number of holdings, 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 above composite is, therefore, not indicative of the future performance of the Legg Mason Western Asset Structured Opportunities Fund. *The Western Asset Structured Product
Strategy is not measured against a benchmark. There is no benchmark available which appropriately reflects the strategy. Past performance is not indicative of future results..
17
1.3
4.1 4.0 4.9
8.2
10.4
6.3
1.2
3.9 3.2 4.2
7.6
9.8
5.8
0.02.04.06.08.0
10.012.014.0
1 Month 3 Months 1 Year 3 Years 5 Years 7 Years Since Inception1 Aug 2007
%
Structured Product Composite (gross)* Structured Product Composite (net)*
-40
-20
0
20
40
60
80
Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16
Structured Product Composite (Gross)
Cumulative Returns (USD)
Annualised Returns (USD)
WHY THE LEGG MASON WESTERN ASSET
STRUCTURED OPPORTUNITIES FUND?
Loss adjusted return target of 6%-8%*
Volatility target of 5% to 7%
Low correlation to other fixed income sectors – good portfolio diversifier
Significant floating rate exposure with low total duration
Sector should benefit from strong US consumer and housing market fundamentals
Higher dependence on US domestic growth helps insulate against global macro shocks
Investment team has extensive track record in managing structured credit, backed by Western
Asset’s experience within MBS which dates back over 40 years
*Yield levels described are targets and there is no guarantee that they will be met. Please refer to the LMGF Plc Prospectus for further details of the Fund hard limits
18
MARKET REVIEW
19
OUTLOOK SUMMARY
Global recovery remains intact, albeit fragile, despite a tumultuous first quarter and Brexit
Steady but unspectacular US and global growth
US and global inflation remain subdued
Central bank accommodation aggressive and increasing
Treasuries and sovereign bonds underpinned by low policy rates
Spread sectors, having rebounded from depressed levels, should offer attractive returns
Source: Western Asset, as at 30 June 2016. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of
investors.
20
CONSUMER AND REAL ESTATE FUNDAMENTALS
REMAIN AT HISTORICALLY ATTRACTIVE LEVELS
CRE supply and demand hasn’t been as favorable in
decades…rental growth in office and retail should
accelerate as new construction remains muted. We are
cautious about retail in secondary and tertiary markets
New issue CMBS and subordinate debt opportunities
should be the biggest beneficiaries
Consumer leverage is at lowest levels in 35 years,
while mortgage availability continues to be
constrained
Student Loan ABS, legacy and new issue RMBS
should be the biggest beneficiaries
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors.
0
2
4
6
8
10
12
14
1980 1985 1990 1995 2000 2005 2010 2015
Per
cent
of D
ispo
sabl
e In
com
e
Consumer Debt Mortgage
Source: Federal Reserve. As of 31 Dec 15
Consumer Leverage
-10
-5
0
5
10
15
0
2
4
6
8
10
12
14
16
1980 1986 1992 1998 2004 2010 2016E
Annual E
ffective Rent G
rowth (%
)
Sup
ply
as a
% o
f Exi
stin
g In
vent
ory
Retail (left) Office (left)
Retail Growth (right) Office Growth (right)
Source: REIS, Bank of America. As of 31 Dec 15
Commercial Real Estate Supply and Rent Growth
21
SUPPORTIVE HOUSING FUNDAMENTALS
22
0
1
2
3
4
5
02468
101214
Feb 00 Jun 01 Oct 02 Feb 04 Jun 05 Oct 06 Feb 08 Jun 09 Oct 10 Feb 12 Jun 13 Oct 14 Feb 16
Existing H
ome S
alesInventory (M
illions)
Mon
th's
Sup
ply
Existing Home Sales Month's Supply:April 2015 at 5.3 Months (left)
Existing Home Sales Inventory:Jan 2015 at 4.82 (Millions) (right)
Sources: Wells Fargo. As of 31 Aug 16
0
2
4
6
8
10
80100120140160180200220
Jan 00 May 01 Sep 02 Jan 04 May 05 Sep 06 Jan 08 May 09 Sep 10 Jan 12 May 13 Sep 14 Jan 16
30-Yr M
ortgage R
ates (%)
Affo
rdab
ility
Inde
x Le
vel (
Bas
e=10
0)
Housing Affordability Index (left) 30-Year Mortgage Rates (right)
Sources: Wells Fargo. As of 30 Sep 16
-50%
-40%
-30%
-20%
-10%
0%
100
120
140
160
180
200
220
Jan 00 May 01 Sep 02 Jan 04 May 05 Sep 06 Jan 08 May 09 Sep 10 Jan 12 May 13 Sep 14 Jan 16
Percent D
ecline fromP
eak Level in July 2006
Inde
x Le
vel
S&P Case Shiller 20-City HPI (left) Peak-to-Trough (right)
Sources: Wells Fargo. As of 30 Jun 16
-10
-5
0
5
10
15
0
2
4
6
8
10
12
14
16
1980 1986 1992 1998 2004 2010 2016E
Annual E
ffective Rent G
rowth (%
)Sup
ply
as a
% o
f Exi
stin
g In
vent
ory
Retail (left) Office (left) Retail Growth (right) Office Growth (right)
Source: REIS, Bank of America. As of 31 Dec 15
Commercial Real Estate Supply and Rent Growth
INVESTMENT THEMES
MBS/ABS SECTORS
Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors. Past performance is not a reliable
indicator of future results.
Commercial Real Estate fundamentals remain at historically attractive levels
23
APPENDIX
24
GLOSSARY
Agencies:
Fannie Mae – A government sponsored enterprise (GSE) that was created to provide a secondary mortgage market in the US. Its goal is to expand
availability and affordability of homeownership for middle- to low-income Americans
Freddie Mac: A government sponsored enterprise (GSE) that purchases, guarantees and securitizes mortgages. Its goal is to keep money flowing to
mortgage lenders in support of homeownership for middle income Americans.
Ginnie Mae: A US government corporation created to ensure liquidity for government-insured mortgages. Ginnie Mae guarantees the timely
payment of principal and interest of qualifying loans.
Alt –A – A classification of borrowers (that are contained in a non-agency residential mortgage-backed security pool) that have higher credit scores
than subprime borrowers, but are inferior to prime borrowers. This classification would also include borrowers with prime credit scores that are missing
some documentation requirements, which excludes them from prime collateral pools.
CMO – Collateralised Mortgage Obligations are created by pooling mortgage or mortgage pass-throughs and splitting their cash flows into a number
of ‘tranches’. The mortgages serve as collateral, and are organised into classes based on their risk profile. Income received from the mortgages is
passed to investors based on a predetermined set of rules, and investors receive money based on the specific CMO segment they are invested in
(called a tranche).
Commercial Real Estate Loan (CRE) – Loans on commercial properties that are income-producing and used for business purposes, for example
shopping malls, offices, hotels.
Conduit deals – Are a type of commercial mortgage-backed security (CMBS) that is backed by multiple loans and properties. These offer
diversification across borrowers, property types and regions.
GSEs – Government-sponsored enterprises (GSEs) are financing entities created by the US Congress to fund loans to certain groups of borrowers
such as homeowners, farmers and students. GSEs are also sometimes referred to as Federal Agencies.
25
GLOSSARY
Legacy bonds/securities – Securities that were issued prior to 2008-2010. These securities were issued when lending standards were less stringent,
but are now backed by seasoned loan pools with many of the defaulted borrowers having left the collateral pools during the Global Financial Crisis.
Mezzanine tranche – Tranches that are superior to equity tranches, which take the first loss from asset pools, but are subordinated to senior tranches,
which are the last to take a loss.
Non- Agency MBS – Mortgage-backed securities that are issued by private label, non-government sponsored entities.
Prime – A classification of borrowers (that are contained in a non-agency residential mortgage-backed security pool) that are considered to be of high
quality and would typically conform to agency standards, in terms of credit history, but with loan amounts that exceed the agency limits. Also referred
to as Traditional jumbos.
RMBS – Residential mortgage backed securities are securities backed by a pool of residential, non-commercial mortgage loans (i.e. single family
properties)
Sub-Prime – A classification of borrowers (that are contained in a non-agency residential mortgage-backed security pool) that have weaker credit
scores that do not meet agency credit standards
26
BIOGRAPHIES
Note: Western Asset experience reflects current position title and hire date.
27
ANUP AGARWAL
19 Years’ Experience
– Western Asset Management Company – Head of MBS/ABS, 2013-
– Stark Investments – Portfolio Manager and Head of Consumer Credit, 2007-2013
– Invesco Fixed Income – Senior Manager, Head of Credit and Research, 2003-2007
– Prudential Insurance/Questech Financial – Principal, Senior Vice President, Capital Markets, 2001-2002
– Copelco Capital, Inc./Citicorp Vendor Finance, Inc. – Managing Director, Structured Finance 1998-2001
– Moody's Investor Service – Assistant Vice President, Credit Analyst, 1997-1998
– Temple University, M.B.A. Finance
– Indian Institute of Technology, B. Tech.
GREG E. HANDLER
16 Years’ Experience
– Western Asset Management Company – Portfolio Manager/Research Analyst, 2002–
– Gould Asset Management – Financial Consulting Intern, 2001–2002
– National Economics Research Associates – Economic Consulting/Research Intern, 2001
– Pomona College, Claremont, B.S.
– Universidad de Salamanca, Spain
– CFA charterholder
ELLIOTT R. NEUMAYER
13 Years’ Experience
– Western Asset Management Company – Product Specialist, 2004-
– Marshall & Stevens – Senior Associate, 2003-2004
– Loyola Marymount University, M.B.A., B.A.
COMPOSITE DISCLOSURE
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 verification does not ensure the accuracy of any specific composite
presentation.
For GIPS® purposes, the Firm is defined as Western Asset, a primarily fixed-income
investment manager comprised of Western Asset Management Company, Western Asset
Management Company Limited, Western Asset Management Company Pte. Ltd., Western
Asset Management Company Ltd, Western Asset Management Company Pty Ltd, and
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários
(DTVM) Limitada, with offices in Pasadena, New York, London, Singapore, Tokyo,
Melbourne, São Paulo, Hong Kong, and Dubai. Each Western Asset company is a wholly
owned subsidiary of Legg Mason, Inc. (“Legg Mason”) but operates autonomously, and
Western Asset, as a Firm, is held out to the public as a separate entity. Western Asset
Management Company was founded in 1971.
The Firm is comprised of several entities as a result of various historical acquisitions made
by Western Asset and their respective performance has been integrated into the Firm in line
with the portability requirements set forth by GIPS.
The Composite is valued monthly. The Composite returns are the asset-weighted average of
the performance results of all the accounts in the Composite. Gross-of-fees returns are
presented before management fees, but after all trading expenses. Net of fees results are
calculated using a model approach whereby the current highest tier of the appropriate
strategy’s fee schedule is used. This model fee does not reflect the deduction of
performance based fees. The portfolios in the Composite are all actual, fee-paying and
performance fee-paying, fully discretionary accounts managed by the Firm for at least one
full month. Investment results shown are for taxable and tax-exempt accounts and include
the reinvestment of all earnings. Any possible tax liabilities incurred by the taxable accounts
have not been reflected in the net performance. Composite performance results are time-
weighted net of trading commissions and other transaction costs including non-recoverable
withholding taxes. Policies for valuing portfolios, calculating performance, and preparing
compliant presentations are available upon request.
adjusted for weighted cash flows. The returns for commingled funds in the Composite are
calculated daily using net value (NAV), adding back the funds’ total expense ratio or
equivalent. Trade date accounting is used since inception and market values include interest
income accrued on securities held within the accounts. Performance is calculated using asset
values denominated in a base currency. Composite market value at year-end presented in the
schedule are translated to U.S. dollars using end of year exchange rates.
Composite returns are measured against a benchmark. The benchmark is unmanaged and
provided to represent the investment environment in existence during the time periods shown.
For comparison purposes, its performance has been linked in the same manner as the
Composite. The benchmark presented was obtained from third party sources deemed reliable
but not guaranteed for accuracy or completeness. Benchmark returns and benchmark three-
year annualized ex-post standard deviation are not covered by the report of independent
accountants.
Internal dispersion is calculated using the asset-weighted standard deviation of annual gross
returns of those portfolios that were included in the Composite for the entire year. For each
annual period, accounts with less than 12 months of returns are not represented in the
dispersion calculation. Periods with five or fewer accounts are not statistically representative
and are not presented. The three-year annualized ex-post standard deviation measures the
variability of the composite and the benchmark returns over the preceding 36-month period.
Any gross total three-year annualized ex-post standard deviation measures prior to 2011,
included within the "Examination Period" identified above, are not covered by the report of
independent accountants.
Past investment results are not indicative of future investment results.
Western Asset’s list of composite descriptions is available upon request. Please contact Jan
Pieterse at 626-844-9977 or [email protected]. All returns for strategies with
inception prior to January 1, 2005 are available upon request.
Western Asset claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Western Asset has been independently verified for the periods from January 1, 1993 to December 31, 2014.
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COMPOSITE DISCLOSURE:
AGENCY MBS COMPOSITE
29
As at 31 December 2015
COMPOSITE DISCLOSURE:
AGENCY MBS PLUS COMPOSITE
30
As at 31 December 2015
COMPOSITE DISCLOSURE:
STRUCTURED PRODUCT COMPOSITE
31
As at 31 December 2015
COMPOSITE DISCLOSURE:
STRUCTURED PRODUCT LEVERED COMPOSITE
32
As at 31 December 2015
IMPORTANT INFORMATION This is a sub-fund ("fund") of Legg Mason Global Funds plc ("LMGF plc"), an umbrella fund with segregated liability between sub-funds, established as an open-ended investment company with variable capital,
organised as an undertaking for collective investment in transferable securities ("UCITS") under the laws of Ireland as a public limited company pursuant to the Irish Companies Acts and UCITS regulations.
LMGF plc is authorised in Ireland by the Central Bank of Ireland (the "Central Bank"). The information and data in this material has been prepared from sources believed reliable but is not guaranteed in any
way by any Legg Mason, Inc. company or affiliate (together "Legg Mason"). No representation is made that the information is correct as of any time subsequent to its date.
It should be noted that the value of investments and the income from them may go down as well as up. Investing in a sub-fund involves investment risks, including the possible loss of the amount invested. Past
performance is not a reliable indicator of future results. An investment in a sub-fund should not constitute a substantial proportion of an investor's investment portfolio and may not be appropriate for all
investors. Investors' attention is drawn to the specific risk factors set out in a fund's share class key investor information document ("KIID") and LMGF plc's prospectus (the "Prospectus").
Bonds: There is a risk that issuers of bonds held by the fund may not be able to repay the investment or pay the interest due on it, leading to losses for the fund. Bond values are affected by the
market’s view of the above risk, and by changes in interest rates and inflation.
Liquidity: In certain circumstances it may be difficult to sell the fund’s investments because there may not be enough demand for them in the markets, in which case the fund may not be able to
minimise a loss on such investments.
Low rated bonds: The fund may invest in lower rated or unrated bonds of similar quality, which carry a higher degree of risk than higher rated bonds.
Emerging markets investment: The fund may invest in the markets of countries which are smaller, less developed and regulated, and more volatile than the markets of more developed countries.
Asset-backed securities: The timing and size of the cash-flow from asset-backed securities is not fully assured and could result in loss for the fund. These types of investments may also be
difficult for the fund to sell quickly.
Hedging: The fund may use derivatives to reduce the risk of movements in exchange rates between the currency of the investments held by the fund and base currency of the fund itself
(hedging). However, hedging transactions can also expose the fund to additional risks, such as the risk that the counterparty to the transaction may not be able to make its payments, which may
result in loss to the fund.
Interest rates: Changes in interest rates may negatively affect the value of the fund. Typically as Interest rates rise, bond values fall.
Derivatives: Investment in derivatives may cause the fund to lose as much as or more than the amount invested. Use of derivatives may also result in greater fluctuations of the value of the fund.
Fund counterparties: The fund may suffer losses if the parties that it trades with cannot meet their financial obligations.
Fund operations: The fund is subject to the risk of loss resulting from inadequate or failed internal processes, people or systems or those of third parties such as those responsible for the
custody of its assets, especially to the extent that it invests in developing countries.
Hedged class currency: The value of your investment may fall due to changes in the exchange rate between the currency of your share class and the base currency of the fund. The fund manager
will try to protect the value of your investment against such changes, but it may not succeed.
Individual securities mentioned are intended as examples only and are not to be taken as advice nor are they intended as a recommendation to buy or sell any investment or interest. Opinions expressed are
subject to change without notice and do not take into account the particular investment objectives, financial situations or needs of investors.
Before investing investors should read in their entirety LMGF plc's application form and a fund's share class KIID and the Prospectus (which describe the investment objective and risk factors in full). These and
other relevant documents may be obtained free of charge in English from LMGF plc's registered office at Riverside Two, Sir John Rogerson's Quay, Grand Canal Dock, Dublin 2, Ireland, from LMGF plc's
administrator, BNY Mellon Fund Services (Ireland) Limited, at the same address or from www.leggmasonglobal.com.
This material is not intended for any person or use that would be contrary to local law or regulation. Legg Mason is not responsible and takes no liability for the onward transmission of this material.This material
does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such offer or solicitation is not qualified to do so or to anyone
to whom it is unlawful to make such offer or solicitation.
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 UK Financial Conduct Authority. This information is only for use by professional clients, eligible counterparties or qualified investors based in the UK (excluding Channel Islands). It is not aimed
at, or for use by, retail clients.
November 2016
This information is only for use by professional clients, eligible counterparties or qualified investors. It is not aimed at, or for use by, retail clients.
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