A Cry for Help from Income Investors · 5/21/2013 · In recent years, investors all over the...

A Cry for Help from Income InvestorsMay 21, 2013

by Sponsored Content from Legg Mason Global Income SurveyGLOBAL SUMMARY REPORT

Key themes from the survey

Income is a top priority globally

Investors attach far greater importance to income generating products today than they did five years ago

A gap in expectations

There’s a substantial gap in expectations between what investors want from their income investments and what theyactually receive

A hunger for knowledge

Faced with numerous challenges, from their own risk aversion to macro issues like volatility and inflation, investors want toknow more about income investing — and to receive more ideas from financial advisors

Moving beyond “home bias”

Investors are growing more open to seeking income opportunities outside their home countries

Awareness of risk

Investors remain concerned about the potential risks, real or otherwise, involved in global strategies

About the survey

In recent years, investors all over the globe have seen long-held assumptions about income investing shattered by acombination of low interest rates, market volatility and declining home values.

In response, many investors are rethinking their approach to income, diversifying across asset classes, sectors andcontinents. Yet how do they feel about the new realities of income investing?

Recognizing that this is truly a global issue, Legg Mason commissioned a special research study of affluent investors inNorth America, Europe and Asia to gauge their attitudes concerning income investments. Among the topics explored in thesurvey:

Are investors getting the results they expect from their income investments?To what degree are they utilizing international strategies in the search for income?What risks concern them most?How do investors differ from country to country?

This paper provides a global overview of the survey results, with key findings by region and country provided asappendices. Detailed country reports are available separately. For more information, visit Legg Mason’s global thoughtleadership website at www.lmthoughtleadership.com.

Methodology

A quantitative online survey methodology was used to conduct this study. A total of 3,028 investors across multiple regions(shown below) completed the survey during the period December 1, 2012 through January 30, 2013.

, © 2020 Advisor Perspectives, Inc. All rights reserved.

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Respondents had to meet the following screening criteria:

Sole or joint decision-maker for household investment decisions$200,000+ investable assets (includes investment real estate but not primary residence/vacation property)Age 40-75

In all markets, interviews were fairly evenly split between investors with $200K-$999K and $1MM+ in household totalinvestable assets. The data was then weighted to be representative of the $200K+ investor marketplace. Medianhousehold assets of respondents in our study is $625K†. Statistical testing was conducted at the 95% confidence level.

Legg Mason was not identified as sponsor of the survey to respondents. Respondents were not screened or selectedbased on usage of Legg Mason products or familiarity with Legg Mason. Respondents received a token payment (lessthan $10 USD) to incent them to complete the survey.

The research was conducted by Northstar Research Partners, an independent global marketing research firm with officesin New York, Toronto and London. Northstar conducts research across a wide range of industry sectors and is arecognized leader in financial services marketing research. For more information, please visit www.northstarhub.com.

INVESTOR PRIORITIES AND MOTIVATORS

Importance of income investing: already high, and growing across the globe

Nearly 7 in 10 (69%) investors worldwide say that investing in income generating products is an extremely important orimportant priority. Another 23% say it is at least somewhat important.

Asian investors are more likely than investors in Europe and North America to say investing in income generatingproducts is extremely important (29% vs. 23% in both Europe and North America).In all markets surveyed (except Japan) at least 6 in 10 investors say investing in income generating products isextremely important or important. Indeed, no more than 12% (except Japan at 20%) say investing in incomegenerating products is not important to their investment strategy.

Not only do investors worldwide say that investing for income is important, but 57% indicate that it is of growing importance.

While more than half of investors globally say investing for income is more important than five years ago, only 48% ofinvestors in Europe feel this way (this is significantly below Asia (60%), Australia (60%) and North America (56%)).There are stark differences, however, on this measure within Asia and within Europe.Within Asia, 80%+ of investors in Hong Kong, Singapore and China say investing in income generating products ismore of a priority than five years ago, whereas only 33% of investors in Japan and 45% of investors in Taiwan feelthis way.Within Europe, 67% of Italian investors say investing in income generating products is more of a priority, followed bySpain (49%) and the UK (47%). Only 38% of investors in France and Germany, however, say investing for income ismore important than five years ago.

Growing and protecting wealth are prime motivators for income investing, although the emphasis on each variesby region

When it comes to investing for income, investors in Asia and Australia are decidedly more focused on growing their wealththan investors in North America and Europe; the latter two regions are comparatively more focused on peace of mind.


http://www.northstarhub.com/

All regions think about protecting their wealth when investing for income, but investors in Asia are significantly lessmotivated by the notion of maintaining their current lifestyle; they are looking to protect and grow their wealth.

Within Europe, UK and German investors are most likely to cite growing wealth as a motivator when investing forincome (62% and 58%, respectively), while France and Italy are least likely (43% and 40%, respectively).Income investors in Spain, by a wide margin, are most likely to say that peace of mind is their primary motivator wheninvesting for income (58%).Within Asia, Japan varies from the other markets surveyed with only 46% saying growing wealth is a motivator

A “reality gap” between what investors expect and receive from income investments

A common thread throughout countries in North America, Australia, Europe and Asia is that investors are often obtainingreturns on their income producing investments that are less than they were seeking.

The largest gaps between desired and actual rates of return are seen in Taiwan (4.0% gap), China (3.4%), Japan (2.9%),Spain (2.9%), Australia (2.7%) and the U.S. (2.6%). The smallest gaps are in Italy (1.3%), Germany (1.5%) and the UK(1.5%).

Given this reality gap, it’s not surprising that investors express anxiety about meeting their income needs

Sizable percentages of investors say they are worried about market volatility, higher taxes, inflation, and the low rateenvironment, although the specific causes of anxiety vary by country.

Market volatility: of most concern in the U.S. Canada, Spain, Italy, Australia, Japan, Singapore and Taiwan (50%+cite as cause of anxiety) and of least concern in Germany (21%) and the UK (36%).Higher taxes: of most concern in the U.S., France, Spain and Italy (50%+ cite as cause of anxiety) and of leastconcern in Hong Kong (23%), Singapore (34%) and Japan (36%).Inflation: a widespread concern in many markets, with the highest percentages expressing anxiety about it in China(76%), Taiwan (68%) and Australia (67%) and the lowest percentages in Japan (29%), Italy (45%), France (46%) andHong Kong (46%).Low rate environment: a widespread concern, with the high percentages expressing anxiety about it in the UK

Global trend toward greater investor engagement and focus

In the wake of the 2008 financial crisis, investors have been forced to confront new realities in the search for income. As aresult, they are becoming more engaged in the selection of investment strategies, seeking more knowledge andopportunities.

Globally, 80% of investors say they would like to become more knowledgeable about investing for income. The onlymarkets where less than 7 in 10 investors express this sentiment are Germany (55%) and Japan (66%); yet even inthese countries a majority are looking to learn more.Additionally, 75% of investors globally say they are always on the lookout for better income opportunities (Japan isnotably lower on this measure at 46%).

The hunger for knowledge presents opportunities for financial advisors

Investors are becoming more engaged and putting greater emphasis on income generation. Yet sizable proportions ofthese investors do not feel they have a good understanding of the range of income producing products available to them.


Most importantly, investors are crying out for help. Among those using an advisor, solid majorities say they want theiradvisors to bring them more and/or better opportunities for generating investment income.

PRODUCT USAGE

Risk tolerance varies considerably by country; China most aggressive by a wide margin

When investing in income generating products, we see a pattern emerging where investors in North America, Europe (withthe exception of Italy) and Australia are more conservative in their approach while Asian nations (except Japan) are moreadventurous.

In Asia, 55% describe their risk tolerance when investing in income generating products as “aggressive” (withChinese investors highest at 71%). By contrast, only a minority of investors in North America (35%), Europe (28%)and Australia (29%) describe their approach as aggressive.Within Europe, Italy stands out from all other nations, with 45% describing their risk tolerance when investing forincome as aggressive (UK is next highest at 27%).

Fixed income products lead the way for generating income

In all regions, except Australia, we see widespread usage of fixed income products (investment grade bonds, high yieldbonds, guaranteed income products) to meet income needs.

In North America, more than half of investors (53%) generate income from fixed income products; 27% useinvestment grade bonds and 21% use high yield bonds. Canadian investors, though, are far more likely thanAmericans to use guaranteed income products (52% vs. 34%).In Europe there is fairly broad usage of fixed income (56%), but it varies dramatically by country: Germany (41%), UK(48%), Spain (62%), Italy (80%). We see higher use of guaranteed income products in Spain, France and Italy than inthe UK and Germany. Overall, Europeans are slightly more likely to be using investment grade bonds (20%) thanhigh yield bonds (16%).There is more widespread usage of fixed income products within Asia (71% currently using). China and Hong Kongare highest, with 87% and 85% of investors, respectively, relying on fixed income products to meet their incomeneeds. Singapore (69%) and Taiwan (63%) are in the next tier, with Japan (52%) lowest of the Asia nations. Asian


income investors are as likely to be using high yield bonds as investment grade bonds.Australia is lowest of all markets, with just 33% saying they use fixed income products to meet their income needs.

Equity income fund usage higher in North America and Asia than in Europe and Australia

Equity income funds have emerged as a commonly used product to meet income needs and may take on even moreprominence; more than half of investors globally (54%) say they are now more inclined to use equities to generate income.In addition, in all regions, those investing for income are more likely to increase than decrease their allocation to equityincome funds.

Within North America, Canadians are most likely to be using equity income funds (52% vs. 40% of U.S. investors)Within Europe, equity income fund usage is highest in Italy (49%)Within Asia, equity income fund usage is high across the board except for Japan (22%).

North American investors, particularly in the U.S., are least likely to generate investment income through realestate

Only 17% of North American investors use real estate to generate income (16% in U.S. and 24% in Canada) vs. far higherfigures across Europe (33%), Asia (28%) and Australia (36%).

In Singapore, 59% of those using income generating products say they plan to increase their usage of real estate togenerate income, by far the highest of all countries surveyed.

Specialized investment vehicles such as MLPs, REITs, infrastructure finance and currency trading are infrequentlyused to generate income, but comparatively more so in Asia

North America, Europe and particularly Australia see low percentages of investors using specialized investment vehicles(US: 10%, Canada: 13%, UK: 8%, France: 11%, Germany: 8%, Spain 7%, Italy 14%, Australia: 4%). Of these countries,the U.S. has the highest proportion of income investors (23%) planning to increase their allocation to specializedinvestment vehicles.

Asian markets surveyed are higher, sometimes significantly higher, than Europe, North America and Australia in theirusage of specialized investment vehicles (Taiwan: 12%, Japan: 15%, Hong Kong: 22%, Singapore: 31%, China: 34%) aswell as their desire to increase allocations to this asset class.

MLPs, or Master Limited Partnerships, are a special type of investment partnership under the U.S. tax code limited to, © 2020 Advisor Perspectives, Inc. All rights reserved.

specific industries, including energy development.

REITs, or Real Estate Investment Trusts, invest in real estate or loans backed by real estate, and issue shares in suchinvestments, which may be illiquid.

ATTITUDES TOWARD INTERNATIONAL INVESTING

Investors are increasingly open to international investing, particularly European and Asian investors

In 10 of the 13 countries surveyed, a majority of investors are open to investing internationally for equities and fixedincome. The exceptions are France, Australia and Japan.

Asian investors (particularly China) stand out for their openness to invest internationally for fixed income.

There is a clear trend of investors around the world becoming more open to the notion of going outside their homecountries for income opportunities, although the focus on international investing for income varies considerably by region.Asian and European investors show positive momentum toward international investing for income while this is less thecase in North America and, in particular, Australia.

North American and Australian investors (along with French investors) have the lowest percentage of their incomeproducing assets invested internationally.A different story emerges in Europe and Asia, where a higher percentage of income producing assets are investedinternationally (Spain is highest in Europe).

The main barriers to directing more income assets internationally are global uncertainty and perceptions of risk

In most markets surveyed, global uncertainty is the most often cited major barrier to investing internationally, with 55% ofinvestors globally saying this is a major barrier. Higher risk in general (real or otherwise), lack of transparency and currencyrisk are also often cited as major barriers to international income investing.

Concerns about global uncertainty are highest in France (70%), Australia (70%), Taiwan (66%), the U.S. (64%), andJapan (63%).French, Australian and Japanese investors raise the most barriers to international investing.

Few in any market, however, cite better income opportunities at home as a barrier to international investing, suggestingthat investors recognize there are good opportunities outside their home market but fears of global uncertainty and riskmay make them reticent to explore them.

United States remains popular choice for international income investing

In all regions, the U.S. is at or near the top of the list in terms of consideration for international income investing.Interestingly, Japan and China tend to be quite low in terms of preference among investors in other Asian countries.

Russia receives the lowest preference level for international income investing, particularly among U.S., Canadian andAustralian investors.

For income opportunities, the United States is far more popular among Chinese investors than China is among Americaninvestors. Nearly 9 in 10 (87%) Chinese investors open to international income investing would consider investing in theUnited States. By contrast, just 55% of Americans would consider investing in China.

Multi-country funds are far more popular than single country funds

In nearly all countries surveyed, the strong preference for international income investing is multi-country over singlecountry. For example, in the U.S. and UK, two-thirds prefer multi-country and just 1 in 10 single country (the remainderhave no preference).


INVESTOR SATISFACTION WITH INCOME INVESTMENTS

A majority of investors in all markets are satisfied with their income producing investments, though few are very satisfied

In all countries surveyed, except Japan, at least two-thirds of investors are satisfied with their income producinginvestments (in Japan, only 55% are satisfied).

Yet, investors clearly expect and hope for more. Globally, only 12% of investors are very satisfied with their incomeproducing investments.

The percentage of very satisfied is lowest in Taiwan (6%), France (7%), Italy (7%), China (9%) and Japan (9%).

In addition, four in ten (42%) investors worldwide are generating less income than hoped for, nearly twice as many as aregenerating more income (22%).

Countries where investors are most likely to be generating less income than hoped for are the U.S. (48%), Canada (42%),France (46%), Spain (46%), Australia (45%), Japan (48%) and Taiwan (55%).

Addressing the challenges investors face when investing for income

A trade-off analysis was conducted to force investors to prioritize the challenges they face when investing for income. Fourareas emerged as top challenges across the globe:

Having to take on too much risk to obtain good yieldsGeo-political uncertaintyGeo-economic uncertainty (all markets except Germany rate this as a top challenge)Inflation (of highest concern in the UK and Australia)

Beyond these three areas, the impact of other challenges varies by country:

Low yield environment: a top challenge in the U.S., Canada, UK, Australia, Germany and Singapore but not inother markets surveyedUncertainty over tax law changes: a top challenge in the U.S., France, Germany, Spain, Italy and TaiwanLack of transparency about how income producing mutual funds are invested: France, Germany, Spain, Italy,China, Japan, Singapore, Hong Kong and TaiwanPotential for bond values to decline if interest rates rise: UK, Germany and Hong Kong

The issue of trust as it relates to income investing is a top challenge in selected European nations, which is perhaps notsurprising given the Euro crisis of the past few years:

Cannot trust government to fulfill debt obligation: Spain, Germany and Italy (also the U.S. and Japan)Cannot trust corporations to fulfill debt obligations: Spain, Germany and ItalyRating agencies can’t be trusted: Spain and Italy

APPENDIX A:

PORTFOLIO DYNAMICS

U.S. and Canadian investors have the highest allocation to equities, but Asian investors are most likely to increaseallocation to equities in 2013

U.S. investors have an average of 39% of their portfolio allocated to equities, the highest of all markets surveyed; theirneighbor Canada is right behind at 35 percent. In contrast, the average allocation to equities in the five European nationssurveyed ranges from 18% (France) to 27% (UK), and in Asia from 23% (China) to 27% (Taiwan). Australia, at 19%, is atthe low end for allocation to equities.

Among those who own equities, product usage varies by market. Whereas in the U.S. and Canada the predominantvehicle used is equity mutual funds (49% and 46%, respectively), individual securities are more widely used in allother markets, particularly Australia (68%), Japan (68%) and Taiwan (63%).Again, among those who own equities, several markets also stand out in terms of their usage of ETFs: Spain (22%),China (19%), Japan (21%), and Hong Kong (19%). In the U.S. and Canada, ETF usage is just 8% and 9% of equityowners, respectively.


Looking ahead to 2013, however, we see a different story emerging with the Asian nations and Australia more likely thanthe U.S., Canada and European nations to increase their allocation to equities. For example, in the U.S., 29% plan toincrease their allocation to equities whereas in China this figure is 44%.

Nonetheless, the U.S. and Canada are similar to Asia in believing now is a good time to be investing in equities (aboutthree-quarters of investors in each of these markets feel this way, with the exception of China and Taiwan, 59% and 56%,respectively). European and Australian investors, however, are not as convinced with significantly fewer believing now isan opportune time to invest in equities (49-59% in each market, with the exception of the UK at 65%).

Allocations to fixed income are somewhat more consistent across markets; in all countries, except Italy, allocationto fixed income is less than the allocation to equities

The average allocation to fixed income ranges from lows of 7% in Australia and 8% in Japan to a high of 24% in Italy. U.S.and Canada also have higher than average allocations to fixed income at 19% and 21%, respectively. Other European andAsian markets have allocations in the 10-17% range.

As with equities, U.S. fixed income investors are most likely to use mutual funds (45%). In all other markets exceptItaly (33%) and Taiwan (39%), fewer than 3 in 10 fixed income owners use bond mutual funds.Guaranteed income products are also widely used for fixed income investing, particularly in Canada (41%), Spain(49%), and Australia (42%).

Among Western nations, Canada and Italy are the most likely to increase their allocation to fixed income in 2013 (34% and40%, respectively). In Asia, roughly 4 in 10 investors in China, Singapore and Hong Kong plan to increase their allocationto equities in 2013.

There is huge variation in terms of the percentage who believe that now is a good time to invest in fixed income. In theWest, the U.S., Canada, Spain and Italy are all fairly bullish on fixed income as are China, Singapore, Hong Kong andTaiwan in Asia (in all these markets two-thirds or more think now is a good time to invest in fixed income). Positive outlooksfor fixed income are far less common in the UK (47%), Germany (47%), France (56%) and Australia (47%).

Other notable findings related to product usage:

Allocation to investment real estate is far lower in the U.S., Canada and Japan than in other markets surveyed (althoughCanadian investors are among the most likely to increase their allocation to this asset class in 2013). Regionally, we seeAustralia with the highest average allocation to investment real estate (27% of portfolio) followed by Europe (21%).

Allocation to alternatives, while still low in all markets, is notably higher in China (7%), Singapore (7%) and Hong Kong(10%). In Europe, Italy has the highest allocation to alternatives (6%). We see, however, a growing appetite for alternatives.At least 13% of investors in all markets plan to increase their allocation to this asset class in 2013. In addition, we see asizable proportion of investors across the globe saying now is a good time to invest in alternatives; in the West, UK, Franceand Italy lead the way (4 in 10) and the figures are even higher in China (52%), Singapore (54%) and Hong Kong (60%).

In some markets we see an extraordinarily high allocation to cash: Spain (41% of assets), Japan (51%) and Taiwan (40%).All other markets are in the 25-35% range for cash allocation.

APPENDIX B:

RESULTS BY REGION


APPENDIX C:

RESULTS BY COUNTRY


Small base size (n<50).

Base size too small (n=9)


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Important information

All investments involve risk, including possible loss of principal. Past performance is no guarantee of future results. Assetallocation and diversification do not guarantee a profit or protect against loss.

Fixed income securities are subject to interest rate and credit risk, which is a possibility that the issuer of a security will beunable to make interest payments and repay the principal on its debt. As interest rates rise, the price of fixed incomesecurities falls.

Dividends and yields represent past performance, and there is no assurance they will continue to be paid in the future.Yields fluctuate and are subject to change. Foreign securities are subject to the additional risks of fluctuations in foreignexchange rates, changes in political and economic conditions, foreign taxation, and differences in auditing and financialstandards. These risks are magnified in the case of investments in emerging markets.

This document is for information only and does not constitute an invitation to the public to invest. You should be aware thatthe investment opportunities described should normally be regarded as longer term investments and they may not besuitable for everyone. The value of investments and the income from them can go down as well as up and investors maynot get back the amounts originally invested, and can be affected by changes in interest rates, in exchange rates, generalmarket conditions, political, social and economic developments and other variable factors. Past performance is no guide tofuture returns and may not be repeated. Investment involves risks including but not limited to, possible delays in paymentsand loss of income or capital. Neither Legg Mason nor any of its affiliates guarantees any rate of return or the return ofcapital invested. Please note that an investor cannot invest directly in an index. Forward-looking statements are subject touncertainties that could cause actual developments and results to differ materially from the expectations expressed. Thisinformation has been prepared from sources believed reliable but the accuracy and completeness of the information cannotbe guaranteed and is not a complete summary or statement of all available data. Individual securities mentioned areintended as examples of portfolio holdings and are not intended as buy or sell recommendations. Information and opinionsexpressed by either Legg Mason or its affiliates are current as of the date indicated, are subject to change without notice,and do not take into account the particular investment objectives, financial situation or needs of individual investors. Theinformation in this document is confidential and proprietary and may not be used other than by the intended user. NeitherLegg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any useof this document or its contents.

This document may not be reproduced, distributed or published without prior written permission from Legg Mason.Distribution of this document may be

restricted in certain jurisdictions. Any persons coming into possession of this document should seek advice for details of,and observe such restrictions (if any).

Past performance is not guarantee of future results. All investments involve risk, including possible loss of principal.Investments in equity securities are subject to price fluctuation and possible loss of principal.

* As of January 31, 2013.

† All amounts are in US dollars.

1 Excludes U.S. investors.

2 Excludes UK investors.

3 Excludes Japan investors.

4 Excludes China investors.

5 Non-BRIC Emerging Markets refers to any developing world market other than Brazil, Russia, India and China. Examplesinclude (but are not limited to) Indonesia, Mexico, South Africa and South Korea.


6 Such as MLPs, REITs, infrastructure finance and currency trading.

7 Represents the net, or unduplicated, total of investors who use/may plan to increase use of any combination of thefollowing:

guaranteed income products, investment grade bonds and high yield bonds.

8 Mean refers to the average of a set of numbers, in this case the average of the rates of return identified by investorssurveyed.

9 Figures shown are not percentages, but rather MaxDiff scores based on a series of questions which ask respondents todifferentiate between a set of four choices.

^ Small base size (n < 50).

10 Base size too small (n = 9).

11 Such as MLPs, REITs, infrastructure finance and currency trading.

12 Represents the net, or unduplicated, total of investors who use/may plan to increase use of any combination of thefollowing: guaranteed income products, investment grade bonds and high yield bonds.

13 Figures shown are not percentages, but rather MaxDiff scores based on a series of questions which ask respondents todifferentiate between a set of two choices.

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

This document may have been prepared by an advisor or entity affiliated with an entity mentioned below through commoncontrol and ownership by Legg Mason, Inc.

This material is only for distribution in the jurisdictions listed.

INVESTORS IN EUROPE:

Issued and approved by Legg Mason Investments (Europe) Limited, registered office 201 Bishopsgate, London EC2M3AB. Registered in England and Wales, Company No. 1732037. Authorized and regulated by the Financial ServicesAuthority. Client Services +44 (0)207 070 7444. This document is for use by Professional Clients and EligibleCounterparties in EU and EEA countries. In Switzerland this document is only for use by Qualified Investors. It is not aimedat, or for use by, Retail Clients in any European jurisdictions.

INVESTORS IN HONG KONG, KOREA, TAIWAN AND SINGAPORE:

This document is provided by Legg Mason Asset Management Hong Kong Limited in Hong Kong and Korea, Legg MasonAsset Management Singapore Pte. Limited (Registration Number (UEN): 200007942R) in Singapore and Legg MasonInvestments (Taiwan) Limited (Registration Number: (98) Jin Guan Tou Gu Xin Zi Di 001; Address: Suite E, 55F, Taipei101 Tower, 7, Xin Yi Road, Section 5, Taipei 110, Taiwan, R.O.C.; Tel: (886) 2-8722 1666) in Taiwan. Legg MasonInvestments (Taiwan) Limited operates and manages its business

independently. It is intended for distributors use only in respectively Hong Kong, Korea, Singapore and Taiwan. It is notintended for, nor should it be distributed to, any member of the public in Hong Kong, Korea, Singapore and Taiwan.

INVESTORS IN THE AMERICAS:

This document is provided by Legg Mason Investor Services LLC, a U.S. registered Broker-Dealer, which may includeLegg Mason International - Americas Offshore. Legg Mason Investor Services, LLC, Member FINRA/SIPC, and all entitiesmentioned are subsidiaries of Legg Mason, Inc.

INVESTORS IN CANADA:

This document is provided by Legg Mason Canada Inc. Address: 220 Bay Street, 4th Floor, Toronto, ON M5J 2W4. LeggMason Canada Inc. is affiliated with the Legg Mason companies mentioned above through common control and ownershipby Legg Mason, Inc.


INVESTORS IN AUSTRALIA:

This document is issued by Legg Mason Asset Management Australia Limited (ABN 76 004 835 839, AFSL 204827) (“LeggMason”). The contents are proprietary and confidential and intended solely for the use of Legg Mason and the clients orprospective clients to whom it has been delivered. It is not to be reproduced or distributed to any other person except to theclient’s professional advisers.

This material is not for public distribution outside the United States of America.

© 2013 Legg Mason Investor Services, LLC, member FINRA, SIPC. Legg Mason Investor Services, LLC and all entitiesmentioned above are subsidiaries of Legg Mason, Inc. 408699 LMFX015370 2/13 FN1310653


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