CLEARBRIDGE VALUE TRUST

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1 3Q 2017 Product Commentary CLEARBRIDGE VALUE TRUST Sam Peters, CFA, and Jean Yu, CFA Portfolio Managers Average annual total returns and fund expenses (%) as of September 30, 2017 Class C 3-mo 1-yr 5-yr 10-yr Excluding sales charges Since Incept. (04/16/82) Gross Net Including effects of maximum sales charges S&P 500 Index N/A - - Performance shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than the original cost. Class C shares have a one-year contingent deferred sales charge (CDSC) of 0.95%. If sales charges were included, performance shown would be lower. Total returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Total return figures are based on the NAV per share applied to shareholder subscriptions and redemptions, which may differ from the NAV per share disclosed in Fund shareholder reports. Performance would have been lower if fees had not been waived and/or reimbursed in various periods. Returns for less than one year are cumulative. Performance for other share classes will vary. For the most recent month-end information, please visit Gross expenses are the Fund's total annual operating expenses for the share class(es) shown. Net expenses are the Fund's total annual operating expenses for the share classes indicated and would reflect contractual fee waivers and/or reimbursements, where these reductions reduce the fund's gross expenses. These arrangements cannot be terminated prior to December 31, 2018 without the Board s consent. In periods of market volatility, assets may decline significantly, causing total annual fund operating expenses to become higher than the numbers shown in the table above. S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. Key takeaways U.S. equities continued their strong 2017 performance in the third quarter, and global economic growth appears to be broad based. The broad framework for tax reform was outlined in September and has the potential to enhance economic growth, although its completion or enactment remains uncertain. Although we cannot realistically time any shift in the market, we continue to differentiate the Fund from the increasingly crowded and highly valued indexes. Market overview U.S. equities continued their strong 2017 performance in the third quarter. The market appeared to shrug off Washington s lack of progress on health care, U.S.-North Korea tensions and a devastating hurricane season in the Southeast, focusing instead on healthy economic signals. The broad framework for tax reform was outlined in September and has the potential to enhance economic growth, although its completion or enactment remains uncertain. In terms of the broader market, the information technology (IT), energy and telecommunication services sectors led the stock market (as measured by the S&P 500 Index) during the quarter, while consumer staples, consumer discretionary and real estate lagged. Global economic growth appears to be broad based. U.S. second-quarter GDP growth was revised up to 3.1% from an initial 2.6%, the fastest pace in two years. Europe is showing improvement: while unemployment, at over 9%, more than INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

2 doubles the U.S. rate, this number has been steadily falling since 2013, and annual GDP growth in the eurozone has now improved the last five quarters. The Federal Reserve announced it would begin shrinking its $4.5 trillion balance sheet of bond holdings in October at a gradual but accelerating pace. The U.S. lost 33,000 jobs in September, partly as a result of hurricanes in Texas and the Southeast, after an upwardly revised gain of 169,000 in August. Hourly wages grew by 0.45% in September, for a yearover-year gain of 2.9%, and unemployment fell to 4.2%, the lowest since Overall industrial activity remained strong, as manufacturing expanded and services, while coming off a 21-month high, continued a broad upward trend since March. The U.S. 10-year Treasury finished largely flat, at 2.33%. The U.S. dollar, as measured by the trade-weighted DXY Index, fell 2.7% in the quarter, continuing its year-to-date decline. The euro, which is particularly important to many multinational companies, has strengthened by more than 12% year-to-date against the dollar, which could be explained by a change in relative growth expectations between the U.S. and Europe. On the commodities front, oil prices rebounded. WTI crude rose to $51.67 at the end of the quarter from $46.04 at the end of June. The S&P 500 Index closed up 4.5%, while the Dow Jones Industrial Average gained 5.6%. Small cap stocks outperformed large caps during the quarter, with the Russell 2000 returning 5.7% versus 4.5% for the Russell Looking at investment style, growth-oriented stocks outperformed their value counterparts, as the Russell 1000 Value Index returned 3.1% to the Russell 1000 Growth s 5.9% during the third quarter. Fund highlights During the third quarter of 2017, the ClearBridge Value Trust Class C shares generated a total return of 3.19%, excluding the effects of sales charges. In comparison, the Fund s unmanaged benchmark, the S&P 500 Index, returned 4.48% and the Lipper Multi-Cap Core Funds category average was 3.96% for the same period. On an absolute basis, six of the 11 sectors in which the Fund was invested in for the third quarter generated positive returns. The consumer discretionary, financials and information technology (IT) sectors contributed the most to absolute returns, while the industrials sector detracted the most. Relative Fund underperformance was driven by stock selection effects and sector allocation. Stock selection in the consumer discretionary and an underweight to the consumer staples sector financials sectors contributed the most to relative returns. Meanwhile, stock selection in the IT and industrials sectors and an underweight in the IT sector detracted from relative performance for the third quarter. Adient, Alexion Pharmaceuticals, Celgene, Microsoft and Citigroup were the largest contributors to performance, while the biggest detractors included Allergan, United Continental, Mylan, Pioneer Natural Resources and Johnson Controls. During the quarter we initiated positions in AECOM, Delta Air Lines, Fluor, Kinder Morgan, Mondelez International, O'Reilly Automotive, Plains GP Holdings and Voya Financial. We closed positions in Altaba, Ameriprise Financial, Amazon.com, Calpine, Norwegian Cruise Line, Ralph Lauren, United Continental Holdings and UnitedHealth Group. We also acquired shares of Brighthouse Financial following its spin-off from existing holding MetLife. Top contributors Alexion Pharmaceuticals (ALXN), in the consumer discretionary sector, saw shares plummet at the end of the second quarter, as the new CEO Ludwig announced the departure of four top executives in one press release, including the CFO, the head of research and development (R&D), human resource chief, and chief commercial officer. The market took the shake-up as a potential signal that the business was facing tremendous challenges and worried that the cleanup of sales practices might lead to drastic slowdown of sales growth. Investors were especially rattled by the resignation of CFO Dave Anderson, as Anderson just joined the company six months ago after the previous management left on the report of deceptive sales practices and had been well received by investors. ALXN stock recovered in third quarter, as the company was able to recruit a biotech industry veteran CFO Paul Clancy from his position as CFO of Biogen. Clancy s decision to join was viewed as a significant de-risk event, a stamp of approval regarding Alexion s accounting practices and business outlook. The management further announced significant restructuring plan and provided more clarity over the company s strategic direction. Furthermore, the market has gained confidence regarding the upcoming FDA approval decision on October 23 regarding Alexion s application to add the Myasthenia Gravis (MG) indication to the label of its largest drug Soliris. We see continued recovery of Alexion stock going forward, as growth reaccelerates with the approval of MG and as the management team executes on the development of next generation Soliris to sustain the growth runway. 2

3 Citigroup (C), in the financials sector, was a solid performer in the third quarter amid mounting optimism around a turn in profitability in its U.S. credit cards business as well as accelerating capital return after the Federal Reserve agreed to allow the bank to return more than 100% of its net income to shareholders in the form of dividends and buybacks. Previous headwinds to the stock include investments in the cards business in the form of promotional interest rates and rewards, which have weighed on the near-term profitability of this growing book of business. Management believes that the mix of promos will decline, and as such the revenue generation of this portfolio will improve, helping to improve the earnings power of the enterprise. On the capital return front, for a long period of time the market had not been giving Citi full credit for its excess, but now has been forced to acknowledge the value of this asset as the company has accelerated its share repurchase program and increased its dividend. Microsoft (MSFT), in the IT sector, develops, licenses and supports software products, services, and devices worldwide. It posted very strong second-quarter earnings and is executing well across its business lines, especially its Azure cloud services business. In addition, enterprise customers are beginning to implement Windows 10 and Office 365 continued its growth trajectory. Top detractors Mylan (MYL), in the health care sector, had a miserable third quarter but has recovered almost all of the loss since the beginning of the fourth quarter. The stock traded off gradually since the start of the third quarter, as its generic competitors reported poor results, citing deteriorating generic pricing due to accelerating FDA approvals of new generic product entrants. The stock plunged on second-quarter earnings release, as the company cut its 2017 sales guidance and also backed away from its $6/share 2018 EPS target. However, we believed the reaction was overdone, because the largest piece of the guidance cut was due to delay of new product approvals, not an if but a when issue. This bore out as the company announced the approval of its first major complex generic product gcopaxone for multiple sclerosis, which could potentially add $0.40-$0.50/share, or 8%-9% of its earnings. Mylan is also waiting to get approval for gadvair and gneulasta, both are large opportunities. Longer term pipeline includes more significant opportunities such as ginsulin. The new products approvals will likely more than offset the generic pricing pressure and allow Mylan to growth through the current generic industry down cycle. Trading at 7.6x forward 12-month earnings, we continue to like Mylan as an attractive investment. Allergan (AGN), in the health care sector, underperformed due to a patent challenge to its second largest product, Restasis. We think the probability of a successful generic launch of Restasis in 2018 is still below 50%, but a successful challenge would hit earnings by roughly 10%. We think much of the Restasis risk is reflected in the current stock price. What is not fully reflected in the stock price is Allergan s robust new product pipeline, with the majority of trials reading out in Even modest success on the pipeline, combined with continued growth in Allergan s Botox and broader dermatology franchise supports a much higher business value in 2018 and beyond. Pioneer Natural Resources (PXD), in the energy sector, underperformed when it missed production guidance during the quarter. The main issue was a slight delay in drilling, that has been addressed, but caused fewer wells to come on line. However, this modest miss in expectations was coupled with a rising production of natural gas relative to oil, which caused many investors to worry that Pioneer s oil reserves had been compromised. However, Pioneer addressed this fear, by arguing that its oil production would not been reduced by higher gas production, and the subsequent quarter supported Pioneer s positive framing of the gas-to-oil ratio issue. As the smoke cleared, Pioneer s stock was down roughly in line with the delay in production from delayed wells, and we used the sell off to further build our position in what we believe is one of the lowest cost oil producers in North America. Outlook As complex systems, markets are often most vulnerable when they appear the most stable. Although we cannot realistically time any shift in the market, we continue to differentiate the Fund from the increasingly crowded and highly valued indexes. This is uncomfortable in many ways, but our active valuation discipline is guiding us accordingly. Just as we provide liquidity by buying fear early in cycles, we are providing liquidity by selectively selling optimism late in the cycle. In both cases, patience is required, but the Fund remains very well balanced across risk and return drivers and sells comfortably below our assessment of underlying business value. To maintain portfolio balance, we continue to try to buy defensive names when price is below business value. Fortunately, stocks with defensive attributes are getting less expensive to buy as the reflation narrative shift builds, but we 3

4 are hopeful that the value opportunity in high-quality stocks would continue to expand as the cycle ages. At this point, finding value that meets our threshold is still challenging, but getting less so. We continue to remain focused on our long-term goal of generating attractive risk-adjusted returns across every cycle, which should provide some level of contentment to our shareholders. With the current market cycle now dominated by indexes at record highs with record-low volatility, passive investing is providing short-term rewards that are driving investor behavior. When this dynamic inevitably shifts, the crowd will desperately need liquidity, and truly active managers like us will be able to selectively provide it. Investment vehicles may come in and out of fashion, but human behavior remains a constant. 4

5 Top 10 equity holdings (%) Alphabet Inc 4.8 Oracle Corp 3.8 Microsoft Corp 3.7 Citigroup Inc 3.6 Synchrony Financial 3.5 Wells Fargo & Co 3.4 Realogy Holdings Corp 3.1 Celgene Corp 3.0 Allergan PLC 3.0 MetLife Inc 2.6 Sector allocation (%) Financials 19.0 Information Technology 16.8 Health Care 14.2 Consumer Discretionary 13.7 Industrials 10.5 Energy 10.0 Real Estate 4.7 Utilities 4.2 Consumer Staples 2.6 Materials 1.8 Telecommunication Services 0.0 Cash/Other 2.5 Percentages are based on total portfolio as of quarter end and are subject to change at any time. For informational purposes only and not to be considered a recommendation to purchase or sell any security. Definitions and additional terms: Please note that an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. Category Average Returns Source: Lipper Inc. Past performance is no guarantee of future results. Lipper returns are based on the three-month period ended September 30, 2017, and they are calculated among 820 funds in the Lipper Multi Cap Core peer group, including reinvestment of dividends and capital gains, if any, and excluding sales charges. Dow Jones Industrial Average (DJIA) is an unmanaged index composed of 30 bluechip stocks, each with annual sales exceeding $7 billion. The DJIA is price-weighted, and it reflects large-cap companies representative of U.S. industry, and it historically has moved in tandem with other major market indexes, such as the S&P 500. The DXY Dollar Index measures the value of the U.S. dollar relative to the exchange rates of six major world currencies (the euro, Japanese yen, Canadian dollar, British pound, Swedish krona and Swiss franc) which represent a majority of its most significant trading partners. Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. An index EPS is an aggregation of the EPS of its component companies. Federal Reserve Board ("Fed") is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. The Food and Drug Administration (FDA) is a government agency established in 1906 with the passage of the Federal Food and Drugs Act. The agency is currently separated into five centers, which oversee a majority of the organization's obligations involving food, drugs, cosmetics, animal food, dietary supplements, medical devices, biological goods and blood products. Forward price to earnings (forward P/E) is a measure of the price-to-earnings (P/E) ratio using forecasted earnings for the P/E calculation Gross Domestic Product (GDP) is an economic statistic that measures the market value of all final goods and services produced within a country in a given period of time. The price-to-earnings (P/E) ratio is a stock's (or index s) price divided by its earnings per share (or index earnings). The forward P/E ratio is a stock s (or index s) current price divided by its estimated earnings per share (or estimated index earnings), usually oneyear ahead. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. The Russell 1000 Growth Index is an unmanaged index of those companies in the large-cap Russell 1000 Index chosen for their growth orientation. The Russell 1000 Value Index is an unmanaged index of those companies in the largecap Russell 1000 Index chosen for their value orientation. The Russell 2000 Index is composed of the 2,000 smallest companies in the Russell 3000 Index. The Russell 3000 Value Index measures the performance of the broad value segment of the U.S. equity universe. It includes those Russell 3000 companies with lower price-tobook ratios and lower forecasted growth values. The S&P 500 Index is an unmanaged index of common stock performance. 5

6 Brandywine Global Clarion Partners ClearBridge Investments EnTrustPermal Martin Currie QS Investors RARE Infrastructure Royce & Associates Western Asset leggmasonfunds.com Youtube.com/leggmason Legg Mason is a leading global investment company committed to helping clients reach their financial goals through long-term, actively managed investment strategies. A broad mix of equities, fixed income, alternatives and cash strategies invested worldwide A diverse family of specialized investment managers, each with its own independent approach to research and analysis What should I know before investing? Over a century of experience in identifying opportunities and delivering astute investment solutions to clients Equity securities are subject to price fluctuation and possible loss of principal. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. The manager s investment style may become out of favor and/or the manager s selection process may prove incorrect, which may have a negative impact on the Fund s performance. Because this Fund expects to hold a concentrated portfolio of securities, and invests in certain regions or industries, it has increased vulnerability to market volatility. Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional. Portfolio holdings and sector allocations may not be representative of the portfolio manager's current or future investment and are subject to change at any time. Percentages are based on total portfolio as of quarter end and are subject to change at any time. For informational purposes only and not to be considered a recommendation to purchase or sell any security. ClearBridge Investments, LLC and Legg Mason Investor Services, LLC are subsidiaries of Legg Mason, Inc Legg Mason Investor Services, LLC. Member FINRA, SIPC CBAX D /17 BEFORE INVESTING, CAREFULLY CONSIDER A FUND S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. YOU CAN FIND THIS AND OTHER INFORMATION IN EACH PROSPECTUS, AND SUMMARY PROSPECTUS, IF AVAILABLE, AT PLEASE READ THE PROSPECTUS CAREFULLY. 6