Our Firm LMPFA offers investment advisory services to institutional separate account clients under the
name “Legg Mason Partners.” Such services are described below under “Investment
Management Services Provided to Institutional Clients.”
Legg Mason Partners Fund Adviser, LLC (“LMPFA”) became registered as an investment
adviser with the U.S. Securities and Exchange Commission (“SEC”) in May 2006. LMPFA is a
wholly-owned subsidiary of publicly-held Legg Mason, Inc. LMPFA was established in 2006 to
provide investment management and administrative services to U.S. registered investment
companies (“Legg Mason Funds”). LMPFA typically does not provide day-to-day investment
management services for the Legg Mason Funds, but instead retains various Legg Mason
investment advisory affiliates (“Legg Mason Advisory Affiliates”) as sub-advisers to provide
such investment management services.
As of March 31, 2019, LMPFA managed approximately $156.4 billion on a discretionary basis
on behalf of the Legg Mason Funds. As of March 31, 2019, Legg Mason Partners did not have
any discretionary or non-discretionary assets under management in institutional separate
accounts.
This brochure is focused primarily on the investment advisory and client services that Legg
Mason Partners offers and provides with respect to institutional separate account clients.
Investment Advisory Services Provided to Institutional Clients Legg Mason Partners offers institutional clients the ability to access a wide range of institutional
investment management strategies that are available from certain Legg Mason Advisory
Affiliates. Legg Mason Partners enters into an investment management or advisory agreement
directly with the client (such a client is referred to in this brochure as a “LMP Contracted
Client” and the account established by such a client is referred to in this brochure as a
“LMP Contracted Account”), and in turn delegates day-to-day investment management or
advisory responsibilities to the Legg Mason Advisory Affiliate responsible for the investment
strategy selected by such LMP Contracted Client. Such delegation to the Legg Mason
Advisory Affiliate is effected pursuant to a sub-adviser agreement (“Sub-Adviser Agreement”)
between Legg Mason Partners and the applicable Legg Mason Advisory Affiliate. In this
brochure, a Legg Mason Advisory Affiliate that serves as a sub-adviser to Legg Mason
Partners pursuant to a Sub-Adviser Agreement is referred to as a “Legg Mason Sub-Adviser.”
LMP Contracted Clients that access the investment advisory services of a Legg Mason
Advisory Affiliate through Legg Mason Partners, instead of by contracting directly with the
Legg Mason Advisory Affiliate, benefit from the general oversight provided by Legg Mason
Partners, as described in Item 8 (Methods of Analysis, Investment Strategies and Risk of Loss),
from the additional periodic account reviews performed by Legg Mason Partners, as described in
Item 13 (Review of Accounts), and from the value-added relationship management services
described below.
LMPFA intends to provide investment advisory services to LMP Contracted Clients on a
discretionary basis as well as on a non-discretionary basis. Under a non-discretionary
arrangement, the LMP Contracted Client is responsible for deciding whether to follow the
investment advice of the applicable Legg Mason Sub-Adviser received in the form of investment
model portfolios and, if it decides to do so, for taking the necessary steps to implement such
investment advice.
Form ADV Brochures of Legg Mason Sub-Advisers Since day-to-day investment management or advisory responsibilities for LMP Contracted
Accounts are delegated to Legg Mason Sub-Advisers, the responses to several of the items
in this brochure refer clients and potential clients to the Form ADV brochure of the
applicable Legg Mason Sub-Adviser for a description of the investment strategies and business
practices and policies of such Legg Mason Sub-Adviser. Legg Mason Partners will provide a
LMP Contracted Client with a copy of the Form ADV brochure of the applicable Legg Mason Sub-Adviser selected by such client at or prior to the time that it enters into an investment management or advisory agreement with the client. LMP Contracted Clients should carefully review both this brochure and the Form ADV brochure of the applicable Legg Mason Sub-Adviser.
Customization Management of LMP Contracted Accounts may be tailored to client needs and requirements
through investment objectives, guidelines, limitations and restrictions (collectively, “Investment
Guidelines”) that are established by the LMP Contracted Client and agreed to by Legg Mason
Partners. Investment Guidelines typically are referenced or set forth in the investment advisory
or management agreement. Investment Guidelines may include, without limitation, restrictions
or limitations on the types of issuers, securities or instruments in which an account’s assets may
be invested, percentage limitations on the portion of a LMP Contracted Account’s assets that
may be invested in securities of a particular issuer, industry, sector or country, and risk exposure
requirements and limitations.
Value-Added Relationship Management Services In addition to providing institutional clients with access to a wide range of investment
management strategies that are available from Legg Mason Sub-Advisers, Legg Mason Partners’
client service team provides value-added relationship management services in a consultative
manner to LMP Contracted Clients. Such value-added services include:
• coverage by individuals with broad and deep knowledge of the institutional investment
management marketplace and the wide range of investment capabilities of multiple Legg
Mason Sub-Advisers that can be accessed through Legg Mason Partners;
• guidance and assistance on investment policy matters;
• oversight of the customization and delivery of client reporting and communication
services;
• access to research publications, investment conferences, and general and bespoke
investor education tools and programs; and
• account-specific liaison services consisting of: frequent client meetings and discussions;
prompt dissemination of relevant organizational information concerning Legg Mason
Partners and the applicable Legg Mason Sub-Adviser; timely responses to client requests
for information; and providing a clear line of communication with the applicable Legg
Mason Sub-Adviser on behalf of the client to address and resolve any issues or concerns
that may arise.
In providing the value-added services described above, Legg Mason Partners’ client service team
strives to meet institutional clients’ expectations by providing a high level of accountability and
service excellence.
Legg Mason Partners’ client service team is part of Legg Mason Global Distribution, a unit of
Legg Mason that is responsible for promoting a broad range of investment products and services
to institutional clients and to financial intermediaries and for providing ongoing client servicing
to such clients and intermediaries.
Clients of Legg Mason Advisory Affiliates Serviced by Legg Mason Partners In some instances, clients may wish to retain a Legg Mason Advisory Affiliate directly by
entering into an investment management or advisory agreement with such Legg Mason
Advisory Affiliate rather than with Legg Mason Partners. Legg Mason Partners anticipates
entering into a client services agreement (“Services Agreement”) with each Legg Mason
Advisory Affiliate with which it has entered into a Sub-Adviser Agreement pursuant to which it
will provide the same value-added relationship management services with respect to the
accounts of clients that have direct contractual relationships with Legg Mason Advisory
Affiliates that it provides with respect to LMP Contracted Accounts. Such direct accounts are
referred to in this brochure as “LMP Serviced Accounts.” Unlike LMP Contracted Clients,
clients that establish LMP Serviced Accounts directly with a Legg Mason Advisory
Affiliate are not investment advisory clients of Legg Mason Partners. A LMP Serviced
Account pays an investment advisory or management fee directly to the Legg Mason
Advisory Affiliate with which it contracts. Pursuant to the Services Agreement between Legg
Mason Partners and such Legg Mason Advisory Affiliate, the Legg Mason Advisory Affiliate
pays a portion of such fee to Legg Mason Partners for providing value-added relationship
management services with respect to such LMP Serviced Account.
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Legg Mason Partners does not have a set fee schedule pursuant to which it charges
investment advisory fees to its LMP Contracted Clients because fees are highly negotiable
and depend on a number of factors, including the nature and extent of services being
provided by Legg Mason Partners in respect of each client and such client’s specific needs
and customization and servicing requirements, whether driven by jurisdictional,
regulatory, contractual or other requirements, as well as the subadvisory fees that Legg
Mason Partners is able to negotiate with each of its Legg Mason Sub-Advisers as
compensation for provision of its sub-advisory services to Legg Mason Partners. The
investment advisory fees that Legg Mason Partners charges to LMP Contracted Clients
may be lower or higher than the fees in the fee schedules set forth in each Legg Mason
Sub-Adviser’s Form ADV Part 2A brochure to reflect circumstances that may apply to a
specific client account, although any negotiation of fees with a LMP Contracted Client is
done in conjunction with the negotiation of subadvisory fees with the applicable Legg
Mason Sub-Adviser.
A LMP Serviced Account is charged an investment advisory fee directly by the Legg Mason
Advisory Affiliate with which it contracts. Pursuant to the Services Agreement between Legg
Mason Partners and such Legg Mason Advisory Affiliate, the Legg Mason Advisory Affiliate
pays a portion of such fee to Legg Mason Partners for providing value-added relationship
management services with respect to such LMP Serviced Account.
How and When Clients are Billed Advisory fees for LMP Contracted Accounts are generally based on assets under management,
are usually billed quarterly, and are payable in arrears or as mutually agreed upon with the LMP
Contracted Client. LMP Contracted Clients may agree to pay applicable advisory fees by
authorizing their custodians to debit their accounts upon receipt of an invoice from Legg Mason
Partners or from the applicable Legg Mason Sub-Adviser, acting as billing agent for Legg Mason
Partners.
In the event a LMP Contracted Client pays Legg Mason Partners fees in arrears and terminates
its investment management or advisory agreement, the LMP Contracted Client will be charged
a pro-rated fee through the termination date. In the event fees are paid in advance, a pro- rata
refund of the fees will be made when the agreement is terminated prior to the end of the period
for which fees have already been paid.
What’s Not Included in our Fee The fees set forth in the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A brochure and
in the investment management or advisory agreement between Legg Mason Partners and a
Legg Mason Contracted Client are solely for the provision of investment advisory services
furnished by Legg Mason Partners and the Legg Mason Sub-Adviser and do not include
other fees a Legg Mason Contracted Client may incur, such as brokerage commissions and
mark-ups and mark-downs, transfer fees, exchange or similar fees (such as for ADRs), custody
fees and fees charged by other service providers.
Performance Fees From time to time, Legg Mason Partners may also charge performance-based advisory fees to
qualified Legg Mason Contracted Clients, the terms of which are negotiated with such clients,
but in all events, such arrangements shall comply with applicable provisions of the Investment
Advisers Act of 1940 and related rules. Please see Item 6 (Performance-Based Fees and Side-
By-Side Management).
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General LMPFA generally charges fees based on assets under management but may, in consultation with
the applicable Legg Mason Sub-Adviser, enter into performance-based fee arrangements that
allow for it to receive fees that are based in whole or in part on agreed upon measures of account
performance.
How Conflicts of Interest Relating to Performance-Based Fees are Addressed Performance-based fee arrangements may create an incentive for the applicable Legg Mason
Sub-Adviser to favor accounts with higher fees in the allocation of investment opportunities,
especially those of limited availability. Each Legg Mason Sub-Adviser has adopted policies and
procedures that are designed to address this conflict of interest. Please refer to Item 6
(Performance-Based Fees and Side-by-Side Management) of the applicable Legg Mason Sub-
Adviser’s Form ADV Part 2A brochure for a description of such Legg Mason Sub-Adviser’s
policies and procedures.
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Types of Institutional Clients Legg Mason Partners’ institutional separately managed account clients may include U.S. and
non-U.S. government institutions, agencies and authorities, sovereign wealth funds, investment
advisers, banks, insurance companies, corporations, public and private pension funds,
foundations, endowments, family offices and trusts, and other types of institutional clients.
Registered Investment Fund and Non-U.S. Investment Pool Clients In addition to Legg Mason Partners’ institutional separately managed account business, LMPFA
provides investment management and administrative services to the Legg Mason Funds, which
are U.S. registered investment companies, as well as sub-administration services (non-advisory in
nature) to non-U.S. investment pools.
Account Minimums The minimum account size for each investment strategy that is available through Legg Mason
Partners is established by the applicable Legg Mason Sub-Adviser. Please refer to Item 7
(Types of Clients) of the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A brochure for
a description of the minimum account size applicable to an investment strategy. Account
minimums may be waived to reflect existing relationships, anticipated client additions to assets
under management, changing market conditions, client servicing requirements, or for other
reasons. Any waivers of account minimums is done in consultation with the applicable Legg
Mason Sub-Adviser.
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General Legg Mason Partners does not directly manage or advise LMP Contracted Accounts, but rather
delegates day-to-day management or advisory responsibilities with respect to such accounts to a
Legg Mason Sub-Adviser. Please refer to Item 8 (Methods of Analysis, Investment Strategies
and Risk of Loss) of the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A
brochure for a description of the methods of analysis and investment strategies, and the
material risks associated with such strategies, used by the Legg Mason Sub-Adviser in
managing or advising client accounts.
Oversight of Legg Mason Sub-Advisers LMPFA performs certain oversight functions with respect to Legg Mason Sub-Advisers. Such
oversight is conducted through periodic reviews that are designed to confirm that each Legg
Mason Sub-Adviser is adequately staffed and resourced, is operationally sound, and has
implemented appropriate policies and procedures that are reasonably designed to comply with
the U.S. federal securities laws. The oversight performed by LMPFA also seeks to confirm that
Legg Mason Contracted Accounts are being managed or advised in accordance with the selected
investment strategy and applicable Investment Guidelines. Any issues that are identified in
connection with such reviews are escalated and addressed with management of the applicable
Legg Mason Sub- Adviser. Oversight and reviews of Legg Mason Sub-Advisers are conducted
by senior LMPFA management, LMPFA’s Chief Compliance Officer (“CCO”), and the Legg
Mason Compliance Department, as described below. While LMPFA performs the basic
oversight described in this Item 8, LMPFA does not review or make any independent
determinations with respect to the merits of a Legg Mason Sub-Adviser’s investment decisions.
A senior LMPFA executive is responsible for overseeing each Legg Mason Sub-Adviser
contracting with Legg Mason Partners to provide subadvisory services with respect to LMP
Contracted Clients. The responsible senior executive seeks to stay current on business
developments at the applicable Legg Mason Sub-Adviser, including financial, staffing,
marketing, compliance, and technology-related issues.
LMPFA’s CCO performs certain oversight functions with respect to the operations of the Legg
Mason Sub-Advisers. This oversight is conducted through a review of policies and procedures,
due diligence visits, and periodic reviews of compliance with applicable policies and procedures
and regulatory matters. On an annual basis, LMPFA’s CCO determines whether the Legg
Mason Sub-Advisers have adopted and implemented policies and procedures that are reasonably
designed to comply with U.S. federal securities laws in connection with the services they provide
to Legg Mason Partners’ LMP Contracted Clients. The policies and procedures that are reviewed
may include, without limitation, those relating to best execution, soft dollars, proxy voting, trade
allocation, trade communication, Code of Ethics and personal trading, broker-dealer
counterparty approval, and compliance with Investment Guidelines. If LMPFA’s CCO
determines that the policies and procedures do not meet required standards, LMPFA’s CCO
will work with the Legg Mason Sub- Adviser in resolving the deficiencies.
On behalf of LMPFA, the Legg Mason Compliance Department assists with the oversight of the
compliance systems of Legg Mason Sub-Advisers in several ways. The Legg Mason
Compliance Department maintains recommended standards for establishing an effective
compliance program. These include identifying an individual who is responsible for all
compliance issues, reporting certain events immediately to the Legg Mason Legal Department
and the Legg Mason Compliance Department (e.g., regulatory inquiries) and adopting a written
policies and procedures manual that addresses a variety of compliance topics. The Legg Mason
Compliance Department also conducts periodic, risk-based reviews of each Legg Mason Sub-
Adviser. The examinations test a range of issues based on a risk assessment of the applicable
Legg Mason Sub-Adviser. Each examination results in a written report, including a written
response on the part of the Legg Mason Sub-Adviser to identified deficiencies. The reports are
shared with LMPFA’s senior management and CCO.
An additional source of oversight of the services provided by a Legg Mason Sub-Adviser,
particularly with respect to determining that a LMP Contracted Account is being managed or
advised in accordance with the selected investment strategy and applicable Investment
Guidelines, is provided through the periodic account reviews that are conducted by Legg
Mason Partners’ Account Review Committee, as described in Item 13 (Review of Accounts) of
this brochure.
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Legg Mason Partners is required to disclose all material facts regarding any legal or disciplinary
events that would be material to a client’s evaluation of Legg Mason Partners or the integrity of
Legg Mason Partners’ management. Legg Mason Partners has no information to disclose under
this Item 9.
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Legg Mason Sub-Advisers Legg Mason Partners has arrangements that are material to its institutional investment
management business with various Legg Mason Sub-Advisers. Specifically, Legg Mason
Partners anticipates entering into a Sub-Adviser Agreement with each of the following Legg
Mason Sub-Advisers whereby such entities will provide investment management or advisory
services to LMP Contracted Clients:
• Brandywine Global Investment Management, LLC
• ClearBridge Investments, LLC
• Martin Currie Inc.
• QS Investors, LLC
• RARE Infrastructure (North America) Pty Limited
• Royce & Associates, LP
• Western Asset Management Company, LLC
Legg Mason Partners may enter into Sub-Adviser Agreements with other Legg Mason
investment advisory affiliates as well (any such Legg Mason investment advisory affiliate that
enters into a Sub-Adviser Agreement is also referred to as a “Legg Mason Sub-Adviser”).
Certain of the Legg Mason Sub-Advisers also may be registered as a commodity pool operator
and/or a commodity trading advisor.
In addition to its relationships with Legg Mason Sub-Advisers relating to its institutional
investment management business, LMPFA has relationships with various Legg Mason Advisory
Affiliates that serve as sub-advisers to one or more Legg Mason Funds. Such affiliates are
identified in Item 7 of LMPFA’s Form ADV Part 1, which is available on the SEC’s website at
www.adviserinfo.sec.gov.
Limited Purpose Broker-Dealer Affiliate LMPFA has an affiliate, Legg Mason Investor Services, LLC (“LMIS”), which is registered as a
limited purpose broker-dealer. LMIS acts as the principal underwriter of the Legg Mason Funds
for which LMPFA provides investment management and administrative services and as the
placement agent or distributor for certain unregistered funds.
Certain members of LMPFA’s senior management and certain members of Legg Mason
Partners’ client service team are registered representatives of LMIS in order to allow them to
market registered and unregistered funds in addition to Legg Mason Partners’ institutional
separately managed account services. Members of LMPFA’s senior management and Legg
Mason Partners’ marketing and client service team do not receive commissions or other sales-
based compensation for the sale of registered and unregistered funds.
Commodity Pool Operator Status In connection with its provision of investment management and administrative services with
respect to certain Legg Mason Funds, LMPFA is registered as a commodity pool operator and
certain of its management personnel are registered as Associated Persons or Registered
Principals with the National Futures Association.
Conflicts of Interest As described in Item 4 (Advisory Business), the investment advisory services provided by Legg
Mason Partners to LMP Contracted Clients consist of providing such clients with access to a
wide range of investment management strategies that are available from Legg Mason Sub-
Advisers and performing the general oversight of Legg Mason Sub-Advisers described in Item 8
(Methods of Analysis, Investment Strategies and Risk of Loss) and the additional periodic
account reviews described in Item 13 (Review of Accounts). The decision to select a particular
investment strategy and Legg Mason Sub-Adviser is in all cases made by the LMP Contracted
Client. Accordingly, Legg Mason Partners does not view itself as having a conflict of interest in
furnishing such investment advisory services to LMP Contracted Clients even though the
investment advisory fee that will be paid by the LMP Contracted Client, as well as the portion of
such fee that will be retained by Legg Mason Partners after compensating the applicable Legg
Mason Sub-Adviser, will vary depending on which investment strategy and Legg Mason Sub-
Adviser are selected by the LMP Contracted Client.
As part of the account establishment process, Legg Mason Partners’ client service
representatives may have a conflict of interest in working with institutional clients to select an
investment strategy and Legg Mason Sub-Adviser for a LMP Contracted Account due to the fact
that the investment advisory fee that will be paid by the LMP Contracted Client, as well as the
portion of such fee that will be retained by Legg Mason Partners after compensating the
applicable Legg Mason Sub-Adviser, will vary depending on which investment strategy and
Legg Mason Sub-Adviser are selected by the LMP Contracted Client. Legg Mason Partners
addresses this conflict of interest through the maintenance of supervisory and compliance
policies and procedures that require that marketing and client service personnel either: (i) limit
their dealings with clients and potential clients to furnishing information about available
investment strategies and Legg Mason Sub-Advisers, or (ii) provide clients and potential clients
with recommendations concerning available investment strategies and Legg Mason Sub-
Advisers that are consistent with the client’s investment objectives, risk tolerance, investment
time horizon and other relevant factors and the expertise and investment style of the
recommended Legg Mason Sub-Adviser(s).
In addition, the incentive compensation that Legg Mason Partners pays to individual members of
its client service team is not based exclusively on the investment management revenues
generated for Legg Mason Partners by such members, but rather takes into account a variety of
additional factors, including:
• the overall profitability of Legg Mason Global Distribution (the Legg Mason unit of
which the client service team is a part);
• management’s qualitative assessment of the individual’s contribution to the growth and
retention of Legg Mason Global Distribution’s overall business;
• management’s qualitative assessment of the individual’s performance in the delivery of
value-added relationship management services to clients; and
• to the extent applicable, management’s qualitative assessment of the individual’s
execution of his or her business management responsibilities.
Legg Mason Partners believes that its approach to compensating members of its client service
team helps to mitigate conflicts of interest that such members may have in providing information
and recommendations to clients and prospective clients concerning available investment
strategies and Legg Mason Sub-Advisers.
Affiliated Indexes LMPFA provides investment management services to certain exchange- traded funds
(“ETFs”) that are based on indexes developed, owned, and managed by certain of the Legg
Mason Sub-Advisers (each, an “Affiliated Index”). The ETFs for which LMPFA acts as
investment manager, and a Legg Mason Sub-Adviser acts as sub-adviser (“Affiliated Index
ETFs”), seek to track the performance of a particular Affiliated Index. LMPFA and/or the Legg
Mason Sub-Advisers may, from time to time, manage other funds or accounts that invest in
these Affiliated Index ETFs. In the future, LMPFA and/or the Legg Mason Sub- Advisers
may manage client accounts, including LMP Contracted Accounts, that track the same
Affiliated Indexes or which are based on the same, or substantially similar, strategies as the
Affiliated Index.
The operation of the Affiliated Indexes, the Affiliated Index ETFs, and other accounts
LMPFA or the Legg Mason Sub-Advisers manage in this manner, including LMP Contracted
Accounts, if any, may give rise to potential conflicts of interest. For example, any accounts
managed by LMPFA or the Legg Mason Sub-Advisers that seek to track the same Affiliated
Indexes, including LMP Contracted Accounts, may engage in purchases and sales of securities
at different times. These differences may result in the certain accounts having more
favorable performance relative to that of the Affiliated Index or other accounts that seek to
track the Affiliated Index. Other potential conflicts include, among others, the potential for
unauthorized access to and/or use of Affiliated Index information or role in the management
of the Affiliated Index, allowing Affiliated Index changes that benefit LMPFA or the Legg
Mason Sub-Advisers, or some accounts managed by LMPFA or the Legg Mason Sub-
Advisers.
LMPFA and the Legg Mason Sub-Advisers have adopted a series of policies and procedures as
well as other controls that are designed to address potential conflicts that may arise in
connection with the operation of the Affiliated Indexes, Affiliated Index ETFs, and other
accounts, including a policy requiring the holdings of an ETF to be publicly disclosed on a
daily basis and a policy to prevent the misuse of material non- public information.
As an “affiliated person” to the Affiliated Index ETFs, Legg Mason Sub-Advisers recognize that
their activities relating to the construction of the Affiliated Indexes could raise concerns
regarding the potential ability to manage the Affiliated Indexes to the benefit or detriment of the
Affiliated Index ETFs. Legg Mason Sub-Advisers also further recognize the potential for
conflicts of interest that may arise for individuals who may have access to and/or knowledge of
changes to an Affiliated Index’s composition, methodology or the constituent securities in an
Affiliated Index prior to the time that the holdings of the Affiliated Index ETFs are publicly
disseminated. This information could be deemed to be material, non-public information.
Accordingly, in an effort to help to mitigate these potential conflicts of interest, the Legg Mason
Sub-Advisers have adopted information barrier procedures on the data and research used to
generate the Affiliated Indexes and personal trading restrictions on employees with knowledge of
the constituents of an Affiliated Index prior to the information being made public. They have
also delegated the administration of the Affiliated Indexes to a third party.
To the extent it is intended that an account (other than the Affiliated Index ETFs)
managed by LMPFA or a Legg Mason Sub-Adviser, including a LMP Contracted Account,
track an Affiliated Index, the account’s performance and/or holdings may not match those of
the Affiliated Index, and may vary substantially from those of such index for any period of time
for reasons including, but not limited to, the account’s investment guidelines, restrictions,
liquidity requirements or cash inflows. The Legg Mason Sub- Advisers are not obligated to
license the Affiliated Indexes to clients or other third- parties.
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Personal Trading Code of Ethics As part of an overall internal compliance program, LMPFA has adopted a code of ethics (“Code
of Ethics”) and other related policies and procedures (“Related Policies”). The Code of Ethics
and Related Policies are based on the principle that LMPFA owes a fiduciary duty to its clients.
The Code of Ethics emphasizes that LMPFA employees and supervised persons must avoid
activities, interests and relationships that might (i) present a conflict of interest or the appearance
of a conflict of interest with LMPFA’s clients, or (ii) otherwise interfere with LMPFA’s ability
to make decisions in the best interests of the firm’s clients. The Code of Ethics and Related
Policies impose standards of business conduct, including requirements to put client interests first
and to not take inappropriate advantage of employment-related information. The Code of Ethics
and Related Policies are intended to mitigate or obviate potential conflicts of interest between
LMPFA’s employees and supervised persons and LMPFA’s clients and assure compliance with
applicable laws and regulations.
Personal Trading Investment and trading activities by LMPFA employees in the same securities held by LMPFA
client accounts may create conflicts of interest, or potential conflicts of interest, between
LMPFA’s employees and supervised persons and LMPFA’s investment advisory clients. Such
conflicts or potential conflicts could include:
•
using knowledge of open, executed or pending portfolio transactions in a client account,
including a Legg Mason Fund or a LMP Contracted Account, or in a LMP Serviced
Account to profit from the market effect of such transactions; and
• using knowledge of portfolio holdings in a Legg Mason Fund to engage in a short-term
trading strategy involving such Legg Mason Fund.
The Code of Ethics includes Policies and Procedures on Personal Trading Activities (“Personal
Trading Policy”). The Personal Trading Policy is intended to mitigate or obviate potential
conflicts of interest between LMPFA’s employees and supervised persons and LMPFA’s
investment advisory clients with respect to personal trading activities of LMPFA employees.
Key elements of LMPFA’s Personal Trading Policy include the following:
•
Employees and supervised persons are prohibited from making a purchase or sale of a
security at a time when they are in possession of nonpublic information to the effect that
a Legg Mason Advisory Affiliate is or may be considering a purchase or sale of such
security.
• Employees and supervised persons are prohibited from engaging in securities transactions
that involve the use of nonpublic knowledge of the portfolio holdings of a Legg Mason
Fund to engage in any short-term or other trading strategy involving such fund.
•
Employees and supervised persons are subject to a 60 day holding period with respect to
their purchase of shares of a Legg Mason Fund.
•
Investment in initial public offerings (IPOs) or other new issues or in private placements
by employees and supervised persons requires the pre-approval of the Legg Mason
Compliance Department.
• Subject to certain exceptions, employees and supervised persons must effect personal
securities transactions through brokerage firms which have agreed to forward information
regarding the transactions to LMPFA’s Compliance Department.
In addition to the Personal Trading Policy, LMPFA and Legg Mason Advisory Affiliates
maintain Informational Barrier policies and procedures that restrict or limit access by LMPFA
and its employees and supervised persons to information relating to the investment intentions,
activities, transactions and portfolio holdings of Legg Mason Funds and other client accounts
managed by Legg Mason Advisory Affiliates.
A Legg Mason Sub-Adviser or Legg Mason Advisory Affiliate may treat LMPFA employees
and supervised persons who have access to information concerning the transactions and portfolio
holdings in a LMP Contracted Account or a LMP Serviced Account as being subject to the
requirements of such affiliate’s own code of ethics and personal trading policy. Please refer to
Item 11 (Code of Ethics, Participation or Interest in Client Transactions and Personal Trading) of
the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A brochure for a description of the
Legg Mason Sub-Adviser’s code of ethics and personal trading policy.
Gifts and Entertainment; Political Contributions and Outside Business Activities The Code of Ethics and Related Policies also include provisions that address situations where the
potential for conflicts exist. These include:
•
Reporting of gifts and entertainment given or received by employees, if required.
•
Limits on the type, frequency, and value of business gifts and entertainment given or
received by our employees.
• Pre-clearance and reporting of certain political contributions made by employees.
•
Reporting of all outside business activities that may be in conflict with an employee’s job
responsibilities and/or duty to clients.
Employee Reporting and Certification All employees are required to report their personal securities accounts, transactions and holdings
to the Legg Mason Compliance Department upon employment and to certify to the completeness
of the information and their compliance with the Code of Ethics on an annual basis.
How to Obtain a Copy of the Code of Ethics Existing and prospective clients of Legg Mason Partners may obtain copies of the Code of Ethics
by mailing a written request for such document to:
Legg Mason Partners Fund Advisor, LLC
620 8th Avenue, New York, NY 10018
Attention: Compliance Department
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Legg Mason Partners does not place trades on behalf of client accounts and does not select or
recommend broker-dealers for client transactions. In the case of discretionary LMP Contracted
Accounts, the applicable Legg Mason Sub-Adviser is responsible for selecting broker-dealers
for client transactions and for placing trades on behalf of LMP Contracted Accounts while in the
case of LMP Contracted Clients to which the applicable Legg Mason Sub-Adviser delivers
investment model portfolios on a non-discretionary basis, the Legg Mason Sub-Adviser
communicates updates and changes to its investment model portfolios in accordance with such
Legg Mason Sub-Adviser’s trade communication policy. Please refer to Item 12 (Brokerage
Practices) of the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A brochure for a
description of the Legg Mason Sub- Adviser’s brokerage and/or model update trade
communication practices, as applicable.
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General LMP Contracted Accounts are reviewed both by the applicable Legg Mason Sub-Adviser and by
Legg Mason Partners.
Account Reviews by Legg Mason Sub-Advisers Please refer to Item 13 (Review of Accounts) of the applicable Legg Mason Sub-Adviser’s Form
ADV Part 2A brochure for a description of the Legg Mason Sub-Adviser’s account review
practices and processes.
Account Reviews by Legg Mason Partners Legg Mason Partners maintains an Account Review Committee that reviews LMP Contracted
Accounts on a quarterly basis. The Account Review Committee is comprised of: LMPFA’s
Chief Executive Officer, LMPFA’s CCO, and the head of Legg Mason Partners’ client service
team (or each of their respective designees). The primary goal of such reviews is to confirm that
each LMP Contracted Account is being managed or advised by the applicable Legg Mason Sub-
Adviser in accordance with the investment strategy selected by the client and the Investment
Guidelines applicable to the account. A key area of focus is the LMP Contracted Account’s
performance relative to the performance of applicable benchmarks, the performance of other
client accounts managed by the applicable Legg Mason Sub-Adviser in the same strategy, and
the performance of peer group managers. The quarterly reviews also look at a LMP Contracted
Account’s portfolio holdings and transactions to confirm that they are in compliance with
applicable Investment Guidelines as well as at timing of investment model trade communications
to ensure compliance with the applicable Legg Mason Sub-Adviser’s trade communication
policy, if applicable. The Account Review Committee utilizes the services of the Legg Mason
Compliance Department to assist it with quarterly account reviews, particularly as they relate to
confirming that accounts have been managed or advised in accordance with applicable
Investment Guidelines. Any issues or concerns identified by the Account Review Committee
are discussed with the applicable Legg Mason Sub-Adviser.
Reports LMP Contracted Clients may receive written and/or online reports regarding their LMP
Contracted Accounts from the applicable Legg Mason Sub-Adviser. Please refer to Item 13
(Review of Accounts) of the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A
brochure for a description of the content and frequency of such reports. Clients are urged to
compare the custodial account statements they receive from their custodians with any written
and/or online reports concerning their LMP Contracted Account received from Legg Mason Sub-
Adviser.
Legg Mason Partners does not currently, but may in the future, furnish separate written reports to
clients. However, as part of the value-added relationship management services provided by
Legg Mason Partners, a Legg Mason Partners’ client service representative will liaise with a
LMP Contracted Client and the applicable Legg Mason Sub-Adviser to address and resolve any
questions or issues that such client may have concerning the written and/or online reports the
client receives from the applicable Legg Mason Sub-Adviser.
Client Communication Legg Mason Partners’ client service team engages in meetings and discussions with LMP
Contracted Clients on a periodic and as-requested basis concerning the management and
performance of LMP Contracted Accounts and the Legg Mason Sub-Advisers’ investment
strategies. More formal discussions and meetings typically include participation by a
representative of the applicable Legg Mason Sub-Adviser.
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No Economic Benefits from Non-Clients Legg Mason Partners does not receive economic benefits from anyone who is not a client in
connection with the advisory services it provides to LMP Contracted Accounts.
As noted in Item 4 (Advisory Business), Legg Mason Partners is paid a service fee by the
applicable Legg Mason Advisory Affiliate for providing relationship management services on
behalf of such affiliate with respect to LMP Serviced Accounts. LMP Serviced Accounts are
investment advisory clients of the applicable Legg Mason Advisory Affiliate, but, unlike LMP
Contracted Accounts, are not investment advisory clients of Legg Mason Partners.
Introduction or Referral Arrangements with Affiliates Legg Mason Partners may enter into an introduction or referral arrangement with one or more of
its affiliates pursuant to which Legg Mason Partners compensates such affiliates for referring
clients to, or soliciting clients on behalf of, Legg Mason Partners or LMPFA.
No Referral Arrangements with Unaffiliated Third Parties Legg Mason Partners currently does not have any arrangements pursuant to which it
compensates any unaffiliated persons or entities for referring clients to, or soliciting clients
on behalf of, Legg Mason Partners or LMPFA.
Relationships with Consulting Firms and Other Intermediaries While Legg Mason Partners currently does not compensate any unaffiliated third parties for
client referrals, Legg Mason Partners may have relationships with certain consulting firms
and other intermediaries. For example, Legg Mason Partners may, from time to time, purchase
products or services, such as investment manager performance data, from consulting firms.
In addition, Legg Mason Partners may from time to time, pay a fee for inclusion of
information about the firm in databases maintained by certain unaffiliated third-party data
providers that in turn make such information available to their investment consultant clients.
Legg Mason Partners also may provide cash or non-cash support for educational, training,
marketing and other events sponsored by consulting firms and other intermediaries, subject to
internal policies and regulatory restrictions. The payments and benefits described in this
paragraph could give the firms receiving them and their personnel an incentive to favor Legg
Mason Partners’ investment advisory and management services over those of firms that do not
provide the same payments and benefits.
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Physical Custody Legg Mason Partners does not take physical custody of client assets. LMP Contracted Clients
typically retain their own custodians under arrangements negotiated independently between them
and their custodians.
Deemed Custody Although Legg Mason Partners does not have possession of LMP Contracted Clients’ assets,
under SEC rules Legg Mason Partners may be deemed to have custody of a LMP Contracted
Client’s assets if an affiliate is deemed to have custody of them or if Legg Mason Partners, the
applicable Legg Mason Sub-Adviser or another affiliate has the authority, pursuant to the
investment advisory or investment management agreement between the client and Legg Mason
Partners, to deduct Legg Mason Partners’ management or advisory fee directly from the
client’s custodial account by directly invoicing the custodian. In the latter circumstance, Legg
Mason Partners seeks to confirm that the custodian sends the client an account statement at least
quarterly.
Custodial Statements LMP Contracted Clients are urged to compare the custodial account statements they receive from
their custodians with statements they receive from the Legg Mason Sub-Advisers.
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Discretionary Authority; Delegation to Legg Mason Sub-Advisers Legg Mason Partners requires each client for which it provides discretionary advisory services
to enter into written investment management agreements that set forth the terms of the
investment advisory relationship between Legg Mason Partners and the LMP Contracted
Client. Under these agreements, Legg Mason Partners generally has discretionary authority to
determine the securities to be bought and sold for the LMP Contracted Account and to place
securities trades on behalf of such account. As described in Item 4 (Advisory Business), Legg
Mason Partners delegates such investment and trading discretionary authority to the
applicable Legg Mason Sub-Adviser that is responsible for the investment strategy selected
by the LMP Contracted Client pursuant to a Sub-Adviser Agreement.
Limitations on Discretionary Authority Legg Mason Partners’ discretionary authority, and the authority of the applicable Legg Mason
Sub-Adviser to which Legg Mason Partners delegates discretionary authority, typically is subject
to Investment Guidelines referenced or set forth in the investment advisory or management
agreement. As described in Item 4 (Advisory Business – Customization), Investment Guidelines
may include, without limitation, restrictions or limitations on the types of issuers, securities or
instruments in which an account’s assets may be invested, percentage limitations on the portion
of an account’s assets that may be invested in securities of a particular issuer, industry, sector or
country, and risk exposure requirements and limitations.
Non-Discretionary Accounts In some instances, LMPFA may provide advisory services to a particular LMP Contracted Client
on a non-discretionary basis by delivering investment model portfolios and updates thereto to
such LMP Contracted Client. Under a non-discretionary arrangement, the LMP Contracted Client
is responsible for deciding whether to follow the investment advice of the applicable Legg Mason
Sub-Adviser included in the applicable model portfolio and, if it decides to do so, for taking the
necessary steps to implement such investment advice.
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Legg Mason Partners does not vote proxies with respect to securities held in LMP Contracted
Accounts. The applicable Legg Mason Sub-Adviser is responsible for voting proxies with
respect to securities held in discretionary LMP Contracted Accounts. Please refer to Item 17
(Voting Client Securities) of the applicable Legg Mason Sub-Adviser’s Form ADV Part 2A
brochure for a description of the Legg Mason Sub-Adviser’s proxy voting policies and
procedures.
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Open Brochure from SEC website