497 1 d722458d497.htm LEGG MASON TARGET RETIREMENT SERIES Legg Mason Target Retirement Series

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LEGG MASON PARTNERS EQUITY TRUST

SUPPLEMENT DATED MAY 12, 2014

TO THE STATEMENT OF ADDITIONAL INFORMATION OF

LEGG MASON TARGET RETIREMENT 2015,

LEGG MASON TARGET RETIREMENT 2020,

LEGG MASON TARGET RETIREMENT 2025,

LEGG MASON TARGET RETIREMENT 2030,

LEGG MASON TARGET RETIREMENT 2035,

LEGG MASON TARGET RETIREMENT 2040,

LEGG MASON TARGET RETIREMENT 2045,

LEGG MASON TARGET RETIREMENT 2050 AND

LEGG MASON TARGET RETIREMENT FUND,

DATED JUNE 1, 2013

 

 

Effective June 30, 2014, the following supplements, and to the extent inconsistent therewith supersedes, the information contained in the funds’ Statement of Additional Information:

Effective June 30, 2014, the funds will be renamed as follows:

 

Current Name

 

New Name

Legg Mason Target Retirement 2015

  QS Legg Mason Target Retirement 2015

Legg Mason Target Retirement 2020

  QS Legg Mason Target Retirement 2020

Legg Mason Target Retirement 2025

  QS Legg Mason Target Retirement 2025

Legg Mason Target Retirement 2030

  QS Legg Mason Target Retirement 2030

Legg Mason Target Retirement 2035

  QS Legg Mason Target Retirement 2035

Legg Mason Target Retirement 2040

  QS Legg Mason Target Retirement 2040

Legg Mason Target Retirement 2045

  QS Legg Mason Target Retirement 2045

Legg Mason Target Retirement 2050

  QS Legg Mason Target Retirement 2050

Legg Mason Target Retirement Fund

  QS Legg Mason Target Retirement Fund

Effective June 30, 2014, the name of the funds’ subadviser will change from Legg Mason Global Asset Allocation, LLC to QS Legg Mason Global Asset Allocation, LLC.

Effective May 30, 2014, the following replaces the address for LMGAA in the section of the Statement of Additional Information titled “Investment Management and Other Services – Subadvisory Arrangements”:

LMGAA has offices at 880 Third Avenue, New York, New York 10022.

Effective May 30, 2014, the following language replaces the section of the fund’s Statement of Additional Information titled “Investment Management and Other Services – Portfolio Managers – Other Accounts Managed by the Portfolio Managers”:

Portfolio Managers

The following tables set forth certain additional information with respect to the portfolio managers for each fund. Unless noted otherwise, all information is provided as of January 31, 2014.

Other Accounts Managed by the Portfolio Managers

The table below identifies the portfolio managers, the number of accounts (other than the funds) for which each portfolio manager has day-to-day management responsibilities and the total assets in such

 


accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, other accounts and, if applicable, the number of accounts and total assets in the accounts where fees are based on performance.

 

       

Type of Account

  Number of
Accounts
Managed
  Total Assets
Managed ($)
  Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
  Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target
2015
  Y. Wayne Lin   Registered investment
companies
  20   3.6 billion   None   None
    Other pooled investment vehicles   3   124.0 million   None   None
    Other accounts   3   1.5 million   None   None
  Thomas Picciochi*   Registered investment companies   None   None   None   None
    Other pooled investment vehicles   4   1.1 billion   None   None
    Other accounts   2   118.3 million   None   None
  Ellen Tesler*   Registered investment companies   None   None   None   None
    Other pooled investment vehicles   4   1.1 billion   None   None
    Other accounts   2   118.3 million   None   None
  Prashant Chandran   Registered investment companies   5   46.13 million   None   None
    Other pooled investment vehicles   4   1.01 billion   1   130.64 million
    Other accounts   2   7.16 million   None   None
  S. Kenneth Leech   Registered investment companies   106   195.07 billion   None   None
    Other pooled investment vehicles   242   90.07 billion   9   1.63 billion
    Other accounts   710   171.7 billion   57   15.72 billion

 

       

Type of Account

  Number of
Accounts
Managed
  Total Assets
Managed ($)
  Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
  Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target
2020
  Y. Wayne Lin   Registered
investment companies
  20   3.6 billion   None   None
    Other pooled investment vehicles   3   124.0 million   None   None
    Other accounts   3   1.5 million   None   None
  Thomas Picciochi*   Registered
investment companies
  None   None   None   None
    Other pooled investment vehicles   4   1.1 billion   None   None
    Other accounts   2   118.3 million   None   None
  Ellen Tesler*   Registered investment companies   None   None   None   None
    Other pooled investment vehicles   4   1.1 billion   None   None
    Other accounts   2   118.3 million   None   None
  Prashant Chandran   Registered investment companies   6   46.16 million   None   None
    Other pooled investment vehicles   4   1.01 billion   1   130.64 million
    Other accounts   2   7.16 million   None   None

 

2


       

Type of Account

  Number of
Accounts
Managed
  Total Assets
Managed ($)
  Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
  Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
  S. Kenneth Leech   Registered investment companies   107   195.07 billion   None   None
    Other pooled investment vehicles   242   90.07 billion   9   1.63 billion
    Other accounts   710   171.7 billion   57   15.72 billion

 

        

Type of Account

  Number of
Accounts
Managed
  Total Assets
Managed ($)
  Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
  Assets Managed
for which
Advisory Fee is
Performance-
Based ($)

Target
2025

   Y. Wayne
Lin
  Registered investment companies   20   3.6 billion   None   None
     Other pooled investment vehicles   3   124.0 million   None   None
     Other accounts   3   1.5 million   None   None
   Thomas
Picciochi*
  Registered investment companies   None   None   None   None
     Other pooled investment vehicles   4   1.1 billion   None   None
     Other accounts   2   118.3 million   None   None
   Ellen
Tesler*
  Registered investment companies   None   None   None   None
     Other pooled investment vehicles   4   1.1 billion   None   None
     Other accounts   2   118.3 million   None   None
   Prashant
Chandran
  Registered investment companies   6   46.16 million   None   None
     Other pooled investment vehicles   4   1.01 billion   1   130.64 million
     Other accounts   2   7.16 million   None   None
   S. Kenneth
Leech
  Registered investment companies   107   195.07 billion   None   None
     Other pooled investment vehicles   242   90.07 billion   9   1.63 billion
     Other accounts   710   171.7 billion   57   15.72 billion

 

        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)

Target
2030

   Y. Wayne
Lin
  Registered investment companies    20    3.6 billion    None    None
     Other pooled investment vehicles    3    124.0 million    None    None
     Other accounts    3    1.5 million    None    None
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Ellen
Tesler*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None

 

3


         

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
   Prashant
Chandran
   Registered investment companies    6    46.16 million    None    None
      Other pooled investment vehicles    4    1.01 billion    1    130.64 million
      Other accounts    2    7.16 million    None    None
   S. Kenneth
Leech
   Registered investment companies    107    195.07 billion    None    None
      Other pooled investment vehicles    242    90.07 billion    9    1.63 billion
      Other accounts    710    171.7 billion    57    15.72 billion

 

        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target 2035    Y. Wayne
Lin
  Registered investment companies    20    3.6 billion    None    None
     Other pooled investment vehicles    3    124.0 million    None    None
     Other accounts    3    1.5 million    None    None
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Ellen
Tesler*
  Registered
investment
companies
   None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Prashant
Chandran
  Registered
investment companies
   6    46.16 million    None    None
     Other pooled investment vehicles    4    1.01 billion    1    130.64 million
     Other accounts    2    7.16 million    None    None
   S. Kenneth
Leech
  Registered
investment companies
   107    195.07 billion    None    None
     Other pooled investment vehicles    242    90.07 billion    9    1.63 billion
     Other accounts    710    171.7 billion    57    15.72 billion

 

        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target 2040    Y. Wayne
Lin
  Registered investment companies    20    3.6 billion    None    None
     Other pooled investment vehicles    3    124.0 million    None    None
     Other accounts    3    1.5 million    None    None
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None

 

4


         

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
   Ellen Tesler*    Registered investment companies    None    None    None    None
      Other pooled investment vehicles    4    1.1 billion    None    None
      Other accounts    2    118.3 million    None    None
   Prashant Chandran    Registered investment companies    6    46.16 million    None    None
      Other pooled investment vehicles    4    1.01 billion    1    130.64 million
      Other accounts    2    7.16 million    None    None
   S. Kenneth Leech    Registered investment companies    107    195.07 billion    None    None
      Other pooled investment vehicles    242    90.07 billion    9    1.63 billion
      Other accounts    710    171.7 billion    57    15.72 billion

 

        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target 2045    Y. Wayne
Lin
  Registered investment companies    20    3.6 billion    None    None
     Other pooled investment vehicles    3    124.0 million    None    None
     Other accounts    3    1.5 million    None    None
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Ellen
Tesler*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Prashant
Chandran
  Registered investment companies    6    46.16 million    None    None
     Other pooled investment vehicles    4    1.01 billion    1    130.64 million
     Other accounts    2    7.16 million    None    None
   S. Kenneth
Leech
  Registered investment companies    107    195.07 billion    None    None
     Other pooled investment vehicles    242    90.07 billion    9    1.63 billion
     Other accounts    710    171.7 billion    57    15.72 billion

 

         

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target 2050    Y. Wayne
Lin
   Registered investment companies    20    3.6 billion    None    None
      Other pooled investment vehicles    3    124.0 million    None    None
      Other accounts    3    1.5 million    None    None

 

5


        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Ellen
Tesler*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Prashant
Chandran
  Registered investment companies    6    46.16 million    None    None
     Other pooled investment vehicles    4    1.01 billion    1    130.64
million
     Other accounts    2    7.16 million    None    None
   S. Kenneth
Leech
  Registered investment companies    107    195.07 billion    None    None
     Other pooled investment vehicles    242    90.07 billion    9    1.63
billion
     Other accounts    710    171.7 billion    57    15.72
billion

 

        

Type of Account

   Number of
Accounts
Managed
   Total Assets
Managed ($)
   Number of
Accounts
Managed for
which Advisory
Fee is
Performance-
Based
   Assets Managed
for which
Advisory Fee is
Performance-
Based ($)
Target Retirement Fund    Y. Wayne
Lin
  Registered investment companies    20    3.6 billion    None    None
     Other pooled investment vehicles    3    124.0 million    None    None
     Other accounts    3    1.5 million    None    None
   Thomas
Picciochi*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None
   Ellen
Tesler*
  Registered investment companies    None    None    None    None
     Other pooled investment vehicles    4    1.1 billion    None    None
     Other accounts    2    118.3 million    None    None

 

* As of March 31, 2014

Effective May 30, 2014, the following supplements the section of the funds’ Statement of Additional Information titled “Investment Management and Other Services – Portfolio Managers – Portfolio Manager Compensation – LMGAA”:

        The portfolio manager compensation will be different for certain portfolio managers until May 2015 as a result of Legg Mason Inc.’s acquisition of QS Investors. The portfolio managers who are currently managing the funds will continue to receive compensation under the current compensation policies until May 2015, when the compensation structure will change to the structure described below. For the portfolio managers who are managing the funds effective May 30, 2014, they will be compensated under the policies set forth below.

 

 

6


Portfolio Manager Compensation Structure (effective May 30, 2014 for portfolio managers who are managing the funds effective May 30, 2014 and effective May 2015 for portfolio managers who are currently managing the funds)

        Portfolio managers will be eligible for total compensation comprised of base salary and variable compensation.

        Base Salary. Base salary is the fixed portion of the portfolio manager compensation and is linked to professional experience and qualifications and financial services industry peer comparison.

        Variable Compensation. Variable compensation for portfolio managers will be linked to the metrics for which they have responsibility; checking and implementing quantitative model output, minimizing transaction costs and market impact, monitoring client portfolios for appropriate market risk and ensuring adherence to regulatory and investment guidelines. Portfolio manager compensation is not tied to peer group and/or relative benchmark performance. The qualitative analysis of a portfolio manager’s individual performance is based on, among other things, the results of an annual management and internal peer review process, and management’s assessment of overall portfolio manager contributions to the investment team, the investment process and overall performance (distinct from fund and other account performance). Other factors taken into consideration include adherence to Compliance Policies and Procedures, Risk Management procedures and the firm’s Code of Ethics.

Effective May 30, 2014, the following replaces the section of the funds’ Statement of Additional Information titled “Investment Management and Other Services – Portfolio Managers – Portfolio Manager Compensation – Potential Conflicts of Interest”:

Potential Conflicts of Interest

        The subadviser maintains policies and procedures reasonably designed to detect and minimize material conflicts of interest inherent in circumstances when a portfolio manager has day-to-day portfolio management responsibilities for multiple portfolios. Nevertheless, no set of policies and procedures can possibly anticipate or relieve all potential conflicts of interest. These conflicts may be real, potential, or perceived; certain of these conflicts are described in detail below.

        Allocation of Limited Investment Opportunities. If a portfolio manager identifies a limited investment opportunity (including initial public offerings) that may be suitable for multiple funds and/or accounts, the investment opportunity may be allocated among these several funds or accounts, which may limit a client’s ability to take full advantage of the investment opportunity, due to liquidity constraints or other factors.

        The subadviser has adopted trade allocation procedures designed to ensure that allocations of limited investment opportunities are conducted in a fair and equitable manner between client accounts. Nevertheless, investment opportunities may be allocated differently among client accounts due to the particular characteristics of an account, such as the size of the account, cash position, investment guidelines and restrictions or its sector/country/region exposure or other risk controls, market restrictions or for other reasons.

        Similar Investment Strategies. The subadviser and its portfolio management team may manage multiple portfolios with similar investment strategies. Investment decisions for each portfolio are generally made based on each portfolio’s investment objectives and guidelines, cash availability, and current holdings. Purchases or sales of securities for the portfolios may be appropriate for other portfolios with like objectives and may be bought or sold in different amounts and at different times in multiple portfolios. In these cases, transactions are allocated to portfolios in a manner believed by the subadviser to be the most equitable to each client, generally utilizing a pro rata allocation methodology. Purchase and sale orders for a portfolio may be combined with those of other portfolios in the interest of achieving the most favorable net results for all clients.

 

7


        Different Investment Strategies. The subadviser may manage long-short strategies alongside long-only strategies. As such, the potential exists for short sales of securities in certain portfolios while the same security is held long in one or more other portfolios. In an attempt to mitigate the inherent risks of simultaneous management of long-short and long-only strategies, the subadviser has established and implemented procedures to promote fair and equitable treatment of all portfolios. The procedures include monitoring and surveillance, supervisory reviews, and compliance oversight of short sale activity.

        Differences in Financial Incentives. A conflict of interest may arise where the financial or other benefits available to a portfolio manager or an investment adviser differ among the funds and/or accounts under management. For example, when the structure of an investment adviser’s management fee differs among the funds and/or accounts under its management (such as where certain funds or accounts pay higher management fees or performance-based management fees), a portfolio manager might be motivated to favor certain funds and/or accounts over others. Performance-based fees could also create an incentive for an investment adviser to make investments that are riskier or more speculative. In addition, a portfolio manager might be motivated to favor funds and/or accounts in which he or she or the investment adviser and/or its affiliates have a financial interest. Similarly, the desire to maintain or raise assets under management or to enhance the portfolio manager’s performance record in a particular investment strategy or to derive other rewards, financial or otherwise, could influence a portfolio manager to lend preferential treatment to those funds and/or accounts that could most significantly benefit the portfolio manager. To manage conflicts that may arise from management of portfolios with performance-based fees, performance in portfolios with like strategies is regularly reviewed by management.

        Investment professionals employed by the subadviser may manage personal accounts in which they have a fiduciary interest with holdings similar to those of client accounts. The subadviser has implemented a Code of Ethics which is designed to address the possibility that these professionals could place their own interests ahead of those of clients. The Code of Ethics addresses this potential conflict of interest by imposing reporting requirements, blackout periods, supervisory oversight and other measures designed to reduce conflict.

        The subadviser allows its employees to trade in securities that it recommends to advisory clients. The subadviser’s employees may buy, hold or sell securities at or about the same time that the subadviser is purchasing, holding or selling the same or similar securities for client account portfolios and the actions taken by such individuals on a personal basis may differ from, or be inconsistent with, the nature and timing of advice or actions taken by the subadviser for its client accounts. The subadviser and its employees may also invest in mutual funds and other pooled investment vehicles that are managed by the subadviser. This may result in a potential conflict of interest since the subadviser’s employees have knowledge of such funds’ investment holdings, which is non-public information.

Effective May 30, 2014, the following language replaces the section of the funds’ Statement of Additional Information titled “Investment Management and Other Services – Portfolio Managers – Portfolio Manager Securities Ownership”:

Portfolio Managers Securities Ownership

        The table below identifies ownership of equity securities of the fund by the portfolio managers responsible for the day-to-day management of the funds as of January 31, 2014.

 

Fund

  

Portfolio Managers

   Dollar Range of
Ownership of Securities ($)
 

Target 2015

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

 

8


Fund

  

Portfolio Managers

   Dollar Range of
Ownership of Securities ($)
 

Target 2020

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2025

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2030

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2035

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2040

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2045

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Target 2050

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

Prashant Chandran

S. Kenneth Leech

    

 

 

 

 

None

None

None

None

None

  

  

  

  

  

Retirement Fund

  

Y. Wayne Lin

Thomas Picciochi*

Ellen Tesler*

    

 

 

None

None

None

  

  

  

  

 

 

* As of March 31, 2014

Effective May 30, 2014, the following is added to the first table in the section of the funds’ Statement of Additional Information titled “Disclosure of Portfolio Holdings – Ongoing arrangements”:

 

Recipient

  

Frequency

  

Delay Before Dissemination

StarCompliance

   Daily    None

 

9


Effective May 30, 2014, the Appendix to the funds’ Statement of Additional Information titled “Legg Mason Global Asset Allocation, LLC Proxy Voting Policies and Procedures” will be replaced with the following:

*  *  *

Legg Mason Global Asset Allocation, LLC Proxy Voting Policy

 

 

Introduction

Legg Mason Global Asset Allocation, LLC (“LMGAA”) has adopted and implemented policies and procedures, which it believes are reasonably designed to ensure that proxies are voted in the best economic interest of its clients and in accordance with its fiduciary duties and applicable regulations. This Policy shall apply to all accounts managed by LMGAA. In addition, LMGAA’s Proxy Policy reflects the fiduciary standards and responsibilities for ERISA accounts managed by LMGAA.

Responsibilities

Proxy votes are the property of LMGAA’s advisory clients.1 As such, LMGAA’s authority and responsibility to vote such proxies depends upon its contractual relationships with its clients. LMGAA has delegated responsibility for effecting its advisory clients’ proxy votes to Institutional Shareholder Services (“ISS”), an independent third-party proxy voting specialist. ISS votes LMGAA’s advisory clients’ proxies in accordance with their (ISS’s) proxy guidelines or, in extremely limited circumstances, LMGAA’s specific instructions. Where a client has given specific instructions as to how a proxy should be voted, LMGAA will notify and direct ISS to carry out those instructions. Where no specific instruction exists, LMGAA will follow the procedures set forth in this document and vote such proxies in accordance with ISS’s guidelines. Certain Taft-Hartley clients may direct LMGAA to have ISS vote their proxies in accordance with ISS’s (or other specific) Taft Hartley voting Guidelines.

Alternatively, clients may elect to retain proxy voting authority and responsibility. These and other proxy-related instructions must be outlined in the investment management agreement or other contractual arrangements with each client.

Clients may in certain instances contract with their custodial agent and notify LMGAA that they wish to engage in securities lending transactions. LMGAA will not vote proxies relating to securities in client accounts that are on loan. In such cases, it is the responsibility of the custodian to deduct the number of shares that are on loan to ensure they are not voted by multiple parties.

Policies

Proxy voting activities are conducted in the best economic interest of clients.

LMGAA works with ISS to ensure that all proxies are voted in accordance with what we believe to be the best economic interest of LMGAA’s clients. In addition to proxy voting services provided by ISS, LMGAA has also contracted with ISS to provide proxy advisory services. These services include research and other activities designed to gain insight into ballot decisions and make informed voting recommendations consistent with our fiduciary duty to our clients. ISS has developed and maintains Proxy Voting Guidelines (the “Guidelines”) consisting of standard voting positions on a comprehensive list of common proxy voting matters. ISS updates these Guidelines based on consideration of current corporate governance principles, industry standards, client feedback, and a number of other relevant factors. Changes to these Guidelines are communicated to LMGAA upon implementation.

While ISS has been instructed to vote our clients’ proxies in accordance with the Guidelines, LMGAA and our clients retain the right to instruct ISS to vote differently.

 

 

1  For purposes of these Policies and Procedures, “clients” refers to persons or entities: for which LMGAA serves as investment adviser or sub-adviser; for which LMGAA votes proxies; and that have an economic or beneficial ownership interest in the portfolio securities of issuers soliciting such proxies.

 

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Underlying Funds

Certain LMGAA client accounts, including clients that are “Funds of Funds,” invest in underlying investment funds, including U.S. registered investment companies (“Underlying Funds”). Proxy voting with respect to shares, units or interests in Underlying Funds present diverse and complex policy issues that make the establishment of standard proxy voting guidelines impractical. To the extent that LMGAA has proxy voting authority with respect to shares, units or interests in Underlying Funds, LMGAA shall vote such shares, units or interests in the best interest of client accounts and subject to the general fiduciary principles set forth above rather than in accordance with the Guidelines.

LMGAA’s proxy voting authority on behalf of client accounts (including a Fund of Funds) with respect to shares, units or interests in Underlying Funds is subject to the provisions below in Proxy Voting of Underlying Funds.

Manager of Manager Arrangements

LMGAA advises certain client accounts that are structured as “Manager of Managers” arrangements in which various segments of the accounts are individually managed by a number of underlying investment advisers (“Underlying Managers”). In such arrangements, LMGAA generally does not exercise any proxy voting authority with respect to securities held in the client’s account. Proxy voting authority in such arrangements is typically assigned to the Underlying Managers.

Management Oversight

Management is responsible for overseeing LMGAA’s proxy voting activities, including reviewing and monitoring the Guidelines that provide how ISS will generally vote proxies on behalf of LMGAA clients no less frequently than annually. Compliance is responsible for coordinating with ISS to administer the proxy voting process and overseeing ISS’s proxy responsibilities. Compliance monitors voting activity to ensure that votes are cast in accordance with the Guidelines or client-specific guidelines and/or any applicable regulatory requirements.

Availability of Proxy Voting Policies and Procedures and Proxy Voting Record

Copies of this Policy, as it may be updated from time to time, are made available to clients as required by law and otherwise at LMGAA’s discretion. Clients may also obtain information on how their proxies were voted by LMGAA as required by law and otherwise at LMGAA’s discretion; however, LMGAA must not selectively disclose its investment company clients’ proxy voting records. The Firm will make proxy voting reports available to advisory clients upon request.

ISS’s current Guidelines, summaries, amendments, and other pertinent information can be accessed by visiting their website at the following address: http://www.issgovernance.com/policy.

Procedures

Proxy Voting Guidelines

LMGAA will review ISS’s Guidelines as necessary to support the best economic interests of LMGAA’s clients but generally no less frequently than annually. The Firm will choose to re-adopt or amend portions of or the entirety of the Guidelines, whether as a result of the annual review or otherwise, taking solely into account the best economic interests of LMGAA’s clients. Before re-adopting or amending the Guidelines, Compliance, in consultation with Management, will thoroughly review and evaluate the proposed change(s) and rationale to evaluate potential conflicts with client or employee interests. Rationale for any decisions not to re-adopt ISS’s Guidelines will be fully documented.

Proxy Voting of Underlying Funds

Proxy Voting of Affiliated Funds

With respect to proxy voting for a client account (including a Fund of Funds) investing in shares, units or interests of Underlying Funds advised by LMGAA or an affiliate of LMGAA (including ETFs,

 

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open-end mutual funds and closed-end investment companies), proxies relating to any of such affiliated Underlying Funds generally will be voted in accordance with an echo voting procedure under which such proxies are voted in the same proportion as the votes from other shareholders of such affiliated Underlying Fund. LMGAA may vote such proxies in accordance with other voting procedures approved by Management and Compliance, provided such procedures comply with applicable law and/or regulatory requirements.

Proxy Voting of Unaffiliated Funds

With respect to proxy voting for a client account (including a Fund of Funds) investing in shares, units or interests of an Underlying Fund advised by an adviser which is unaffiliated with LMGAA (including ETFs, open-end mutual funds and closed-end investment companies), LMGAA will vote such proxies in accordance with the general fiduciary principles set forth above; provided that LMGAA: (i) will vote proxies relating to shares of ETFs in accordance with an echo voting procedure to the extent required by LMGAA’s Procedures Relating to Compliance with ETF Exemptive Orders under Section 12(d)(1) of the Investment Company Act of 1940, and (ii) will vote proxies relating to shares of open-end mutual funds and closed-end investment companies in accordance with an echo voting procedure to the extent required in order to comply with Section 12(d)(1) under the Investment Company Act of 1940 and rules thereunder. Voting procedures are intended to be in the best interest of client accounts and subject to the general fiduciary principles set forth above, and such procedures are subject to review by Management and Compliance.

Specific proxy voting decisions made by Management

Proxy proposals (i) that are not covered by specific client instructions or the Guidelines; or (ii) that, according to the Guidelines, should be evaluated and voted on a case-by-case basis will be referred to Management and Portfolio Management for review and to provide a voting instruction.

Certain proxy votes may not be cast

In extremely limited cases, LMGAA may determine that it is in the best economic interests of its clients not to vote certain proxies. LMGAA will abstain from voting if:

 

   

Neither the Guidelines nor specific client instructions cover an issue;

 

   

ISS does not make a recommendation on the issue; and

 

   

LMGAA cannot make a good faith determination as to what would be in the client’s best interest (e.g., material conflict cannot be mitigated).

In other cases, it may not be possible to vote certain proxies, despite good faith efforts to do so. Examples may include:

 

   

Proxy ballot was not received from the custodian;

 

   

Meeting notice was not received with adequate time for processing; or

 

   

Legal restrictions, including share blocking, that may restrict liquidity or otherwise limit trading.

ISS will coordinate with Compliance regarding any specific proxies and any categories of proxies that will not or cannot be voted. The reasons for not voting any proxy shall be documented.

Conflict of Interest Procedures

LMGAA seeks to mitigate conflicts inherent in proxy voting and maintain independence by partnering with ISS for voting and administration of all client ballots. These conflicts may include:

 

   

The issuer is a client of LMGAA;

 

   

The issuer is a material business partner of LMGAA; or

 

   

An employee, or an immediate family member of an employee, of LMGAA serves as an officer or director of the issuer.

 

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LMGAA believes that this Policy and our reliance on ISS for independent proxy decision-making reasonably ensure that these and other potential material conflicts are minimized, consistent with our fiduciary duty. Accordingly, proxies that will be voted in accordance with the Guidelines or in accordance with specific client instructions are not subject to the conflicts of interest procedures described below for items that are referred to LMGAA by ISS.

As a general matter, LMGAA takes the position that relationships between a non-LMGAA Legg Mason business unit and an issuer do not present a conflict of interest for LMGAA in voting proxies with respect to such issuer because LMGAA operates as an independent business unit from other Legg Mason business units and because of the existence of informational barriers between LMGAA and such business units.

Procedures to Address Conflicts of Interest and Improper Influence

Note: This section addresses the limited circumstances in which items that are referred to LMGAA by ISS.

Overriding Principle: ISS will vote all proxies in accordance with the Guidelines. In the limited circumstances where ISS refers items to LMGAA for input or a voting decision, LMGAA will vote those proxies in accordance with what it, in good faith, determines to be the best economic interests of LMGAA’s clients.2

Independence: Compensation for all employees, particularly those with the ability to influence proxy voting in these limited circumstances, cannot be based upon their contribution to any business activity outside of LMGAA without prior approval from Management. Furthermore, they may not discuss proxy votes with any person outside of LMGAA (and within LMGAA only on a need to know basis).

Conflict Review Procedures: For items that are referred to LMGAA from ISS, Compliance will monitor for potential material conflicts of interest in connection with proxy proposals. Promptly upon a determination that a conflict exists in connection with a proxy proposal, the vote shall be escalated to Management. Management will collect and review any information deemed reasonably appropriate to evaluate, in its reasonable judgment, if LMGAA or any person participating in the proxy voting process has, or has the appearance of, a material conflict of interest. For the purposes of this policy, a conflict of interest shall be considered “material” to the extent that a reasonable person could expect the conflict to influence, or appear to influence, LMGAA’s decision on the particular vote at issue.

The information considered may include without limitation information regarding (i) client relationships; (ii) any relevant personal conflict known or brought to their attention; (iii) and any communications with members of the Firm and any person or entity outside of the organization that identifies itself as a LMGAA advisory client regarding the vote at issue.

If notified that LMGAA has a material conflict of interest, the Firm will obtain instructions as to how the proxies should be voted, if time permits, from the affected clients. If notified that certain individuals should be recused from the proxy vote at issue, LMGAA shall do so in accordance with the procedures set forth below.

Note: Any LMGAA employee who becomes aware of a potential material conflict of interest in respect of any proxy vote to be made on behalf of clients shall notify Management and Compliance to evaluate such conflict and determine a recommended course of action.

At the beginning of any discussion regarding how to vote any proxy, Compliance will inquire as to whether any employee or any person participating in the proxy voting process has a personal conflict of interest or has actual knowledge of an actual or apparent conflict that has not been reported to Management and/or Compliance.

 

 

2 

Any contact from external parties interested in a particular vote that attempts to exert improper pressure or influence shall be reported to Compliance.

 

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Compliance also will inquire of these same parties whether they have actual knowledge regarding whether any director, officer or employee outside of LMGAA that identifies itself as a LMGAA advisory client, has: (i) requested that LMGAA vote a particular proxy in a certain manner; (ii) attempted to influence LMGAA in connection with proxy voting activities; or (iii) otherwise communicated with the Firm regarding the particular proxy vote at issue, and which incident has not yet been reported to management and/or Compliance.

Compliance will determine whether anyone should be recused from the proxy voting process, or whether LMGAA should seek instructions as to how to vote the proxy at issue if time permits, from the affected clients. These inquiries and discussions will be properly documented.

Duty to Report: Any LMGAA employee that is aware of any actual or apparent conflict of interest relevant to, or any attempt by any person outside of organization or any entity that identifies itself as a LMGAA advisory client to influence, how LMGAA votes its proxies has a duty to disclose the existence of the situation to their manager and the details of the matter to Compliance. In the case of any person participating in the deliberations on a specific vote, such disclosure should be made before engaging in any activities or participating in any discussion pertaining to that vote.

Recusal of Members: Compliance will recuse any employee from participating in a specific proxy vote referred to LMGAA if he/she (i) is personally involved in a material conflict of interest; or (ii) as determined by Management and Compliance, has actual knowledge of a circumstance or fact that could affect their independent judgment, in respect of such vote. Management will also exclude from consideration the views of any person (whether requested or volunteered) if Management knows, or if Compliance has determined that such other person has a material conflict of interest with respect to the particular proxy, or has attempted to influence the vote in any manner prohibited by these policies.

Other Procedures That Limit Conflicts of Interest

LMGAA has adopted a number of policies, procedures and internal controls that are designed to avoid various conflicts of interest, including those that may arise in connection with proxy voting, including but not limited to the Confidential Information Policy and the Code of Ethics. The Firm expects that these policies, procedures and internal controls will greatly reduce the chance that the Firm (or, its employees) would be involved in, aware of or influenced by, an actual or apparent conflict of interest.

Recordkeeping

LMGAA will retain records of client requests for proxy voting information and any written responses thereto provided by LMGAA, and will retain any documents the Firm or Compliance prepared that were material to making a voting decision or that memorialized the basis for a proxy voting decision.

LMGAA also will create and maintain appropriate records documenting its compliance with this Policy, including records of its deliberations and decisions regarding conflicts of interest and their resolution.

With respect to LMGAA’s investment company clients, ISS will create and maintain such records as are necessary to allow such investment company clients to comply with their recordkeeping, reporting and disclosure obligations under applicable law.

LMGAA will also maintain the following records relating to proxy voting:

 

   

The name of the issuer of the portfolio security;

 

   

The exchange ticker symbol of the portfolio security (if symbol is available through reasonably practicable means);

 

   

The Council on Uniform Securities Identification Procedures number for the portfolio security (if the number is available through reasonably practicable means);

 

   

The shareholder meeting date;

 

   

A copy of each proxy statement received by LMGAA;

 

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A brief identification of the matter voted on;

 

   

Whether the matter was proposed by the issuer or by a security holder;

 

   

Whether LMGAA cast its vote on the matter;

 

   

How LMGAA cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding election of directors); and

 

   

Whether LMGAA cast its vote for or against management.

In lieu of keeping copies of proxy statements, LMGAA may rely on proxy statements filed on the EDGAR system. LMGAA also may rely on third party records of proxy statements and votes cast by LMGAA if the third party provides an undertaking to LMGAA to provide such records promptly upon request.

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The effectiveness of the changes described in this supplement are contingent upon the closing of the acquisition of QS Investors by Legg Mason, Inc.

Please retain this supplement for future reference.

 

 

LMFX016383

 

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