CLEARBRIDGE MID CAP GROWTH PORTFOLIOS

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1 4Q 2017 Separately Managed Accounts Product Commentary CLEARBRIDGE MID CAP GROWTH PORTFOLIOS Brian Angerame, Derek Deutsch, CFA, Aram Green and Jeffrey Russell, CFA Portfolio Managers Mid Cap Growth Portfolios Annualized returns net and gross of fees - PRELIMINARY (%) as of December 31, 2017 Inception: 07/31/14 1-mo QTR YTD 1-yr 3-yr 5-yr 7-yr Since Incept. Net of fees N/A N/A 5.84 "Pure" gross of fees Russell Midcap Growth Index N/A N/A N/A N/A The strategy returns are preliminary composite returns, subject to future revision (downward or upward). Please visit for the latest performance figures. YTD numbers are not annualized. Monthly, quarterly and YTD numbers are not annualized. Past performance is no guarantee of future results. Please see the GIPS endnotes for important additional information regarding the portfolio performance and for effects of fees. Management and performance of individual accounts may vary for reasons that include the existence of different implementation practices and model requirements in different investment programs. Fees: Gross performance shown does not reflect the deduction of investment management fees and certain transaction costs, which will reduce portfolio performance. Net performance includes the deduction of a 3.0% annual wrap fee, which is the maximum anticipated wrap fee for equity and balanced portfolios. Actual fees may vary. For fee schedules, contact your financial professional, or if you enter into an agreement directly with Legg Mason Private Portfolio Group, LLC (LMPPG), refer to LMPPG's Form ADV disclosure document. Returns reflect the reinvestment of dividends and other earnings. The Russell Midcap Growth Index is an unmanaged index of those companies in the Russell Midcap Index chosen for their growth orientation. Please note that an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. Key takeaways Information technology was a primary driver of performance, led by e-commerce and information security companies. Strong earnings have supported mid-cap growth stocks, with accelerating global economies and passage of tax reform expected to further augment earnings growth. Consumer discretionary stocks also outperformed, boosted by a strong holiday season. Market overview and outlook Stocks maintained their positive momentum through the fourth quarter, with growth stocks leading the market higher. The S&P 500 Index gained 6.64%, the Russell Midcap Index added 6.07%, and the small-cap Russell 2000 Index advanced 3.34%. The benchmark Russell Midcap Growth Index was up 6.81% for the quarter to finish 25.27% higher for 2017, outperforming its value counterpart by 131 basis points for the quarter and 1,193 basis points for the year. The successful passage of tax legislation in December was the latest catalyst to spur stocks higher. There seems little controversy about the pro-cyclical impact of the tax legislation. Boards and managements are busy computing the companyspecific benefits of the tax legislation, and how to apportion those benefits among customers, employees, stakeholders and reinvestment. Corporate earnings and aggregate after-tax cash flow will be enhanced, continuing the multi-year string of good INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

2 earnings news, abetted recently by the acceleration of non-u.s. economies. Markets have been further buoyed by recent data points indicating high consumer confidence (e.g., vibrant holiday sales), rising home prices, good industrial orders, stable to firming commodity prices, and decade-low levels of reported unemployment. Many of our companies report a dearth of capable candidates for specified skills, greater competition for existing employees and an upward bias to compensation. The performance of mid-cap growth stocks diverged somewhat from the broader market, as the defensive consumer staples sector joined the more cyclical industrials and financials sectors as top performers. Consumer discretionary stocks also outperformed and were a driver of solid results for the Portfolio. We believe the retail group has been overly punished relative to their fundamentals, and we continue to see attractive value in our retail holdings. Ross Stores, for example, was up 25% during the quarter, helped by a strong holiday shopping season. Information technology (IT) and health care stocks, meanwhile, lagged the benchmark during the fourth quarter. The fact that we do not hold the market proved beneficial. This high active share approach was most notable among our IT holdings, which were the leading contributors to strong relative performance. E-commerce platforms GrubHub (food delivery) and MercadoLibre (Latin America) were among the top performers during the quarter as enablers of greater online spending across different parts of the consumer economy. Keeping those transactions secure and protecting customer data is also crucial to online businesses, spurring demand for the security and threat protection services of Portfolio companies Fortinet and Splunk. Our long-term practice is to invest with a concentrated number of progressive managements that are developing innovative (and in many cases essential) products and services. Our management teams have the financial resources to invest through a more austere macro and capital markets environment. We structure the Portfolio with resilient businesses that, over time, can result in substantially higher firm values. The presence of activists continues in the mid-cap marketplace, and this was an impetus behind the re-rating of several of our investments, including restaurant chain Buffalo Wild Wings. Generally, we welcome the engagement of activists who aim to improve returns and strengthen operating discipline, especially when managements stray from the core mission or do not execute crisply. The Portfolio had several investments at year end in which activists are involved. Health care continued to suffer from relatively weak earnings growth, and also because it benefits less from tax reform than other sectors. Our health care exposure was a detractor from results during the quarter. Biotechnology company Alexion Pharmaceuticals was hurt by perceived competitive threats to its key Soliris franchise, while INC Research, a contract research organization, traded lower on contract delays that caused the company to lower its guidance. We believe both INC and Alexion continue to represent good value and stable fundamentals that position them well for future growth. We acknowledge that overall stock valuations are elevated compared with recent norms, but so too are corporate earnings and returns on capital. Long-term interest rates remain very subdued. Potential returns from equities appear well-balanced compared with alternative returns in fixed income markets, in our view. The past year delivered exceptional equity market returns. While the U.S. stock market and mid-cap stocks have risen sharply, we believe there continue to be attractive investment opportunities in well-managed and carefully vetted mid-cap growth companies. In the fourth quarter, we took advantage of the opportunities uncovered by our research to add six new positions to the Portfolio. Portfolios highlights For the three-month period ended December 31, 2017, the ClearBridge Mid Cap Growth Portfolios returned 8.11% (gross of fees), while the benchmark Russell Midcap Growth Index gained 6.81% for the same period. On an absolute basis, the Portfolios had gains in eight of the nine sectors in which they were invested for the fourth quarter. The largest contributors to performance were the IT, consumer discretionary and industrials sectors. On a relative basis, the Portfolios outperformed their benchmark, driven primarily by stock selection decisions. Stock selection in the IT sector was the largest contributor to relative results. Stock selection in the real estate and consumer discretionary sectors also supported relative performance. On the negative side, stock selection in the health care, industrials and financials sectors hurt relative performance. On an individual stock basis, the largest contributors to absolute returns in the fourth quarter included GrubHub, Buffalo Wild Wings and MercadoLibre. Alexion 2

3 Pharmaceuticals, First Republic Bank and Expedia were the greatest detractors from absolute returns. The Portfolios initiated six new positions in the fourth quarter: Progressive, in the financials sector, Varian Medical Systems, Illumina and Idexx Laboratories, in the health care sector, Expedia, in the consumer discretionary sector, and Switch, in the IT sector. We also closed positions in Parexel International, in the health care sector, Signature Bank, in the financials sector, and Whirlpool, in the consumer discretionary sector. Top contributors 1 Contribution to equity return % GrubHub, Inc Buffalo Wild Wings, Inc MercadoLibre, Inc Ross Stores, Inc Marriott International, Inc The leading individual contributors for the quarter included: GrubHub (GRUB), in the IT sector, is the largest online food ordering and delivery company. Shares were lifted by another strong quarter of sales and earnings, driven by growth in active diners using the platform. The company has been active in adding coverage to more cities through recent acquisitions. Bottom contributors 1 Contribution to equity return % Alexion Pharmaceuticals, Inc First Republic Bank Expedia, Inc Check Point Software Technologies Ltd Incyte Corporation The bottom individual contributors for the quarter included: Alexion Pharmaceuticals (ALXN), in the health care sector, is a biotechnology company focused on developing treatments for severe and ultra-rare disorders. Shares were lower on the potential for competition to its Soliris franchise. First Republic Bank (FRC), in the financials sector, offers private banking and wealth management services in the coastal urban markets in the U.S. The stock was hurt by weakness in net interest margins as the yield curve flattened. Expedia (EXPE), in the consumer discretionary sector, is an online travel portal offering airline, hotel and related accommodations. The stock fell sharply as higher customer acquisition costs weighed on growth and margins. Buffalo Wild Wings (BWLD), in the consumer discretionary sector, franchises and operates restaurants in the U.S. and Canada, offering a variety of menu items, including chicken wings and a range of beers. The stock re-rated on news that it is being acquired by Roark Capital, owner of the Arby s fast food chain. The acquisition was spurred in part by the involvement of an activist investor. MercadoLibre (MELI), in the IT sector, offers e-commerce and online payment platforms to businesses in Latin America. The company capped off a strong year with results that topped estimates, defraying earlier concerns about its free shipping policies in selected economies. 1 Portfolio characteristics are based on a model portfolio, not an actual client account. The model portfolio is a hypothetical portfolio whereby the portfolio characteristics are based on simulated trading and account activity of a client account invested in this strategy. The model portfolio assumes no withdrawals, contributions or client-imposed restrictions. Portfolio characteristics of individual client accounts may differ from those of the model portfolio as a result of account size, client-imposed restrictions, the timing of client investments, market conditions, contributions, withdrawals and other factors. Please see Endnotes for additional information. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the sectors and securities listed, and it should not be used as the sole basis for any investment decision. Past performance is no guarantee of future results. 3

4 Market capitalization 2 Market cap breakdown ($) Portfolio Benchmark Above 50 billion billion billion billion billion Weighted average market cap ($bil) Top 10 equity holdings 2 Percent of equity MercadoLibre Inc 3.37 SBA Communications Corp 3.35 IDEX Corp 3.04 Ross Stores Inc 2.99 Fortinet Inc 2.98 Affiliated Managers Group Inc 2.90 Marriott International Inc/MD 2.86 Mettler-Toledo International Inc 2.78 Rockwell Automation Inc 2.74 Aspen Technology Inc 2.72 Total number of holdings 53 Sector highlights 2 Average sector ings and performance (%) Gross of fees from 09/30/17 to 12/31/17 Sector Port. Port. return Benchmark* Benchmark* return Weight diff. Active contrib. Information Technology Health Care Industrials Consumer Discretionary Financials Real Estate Materials Consumer Staples Energy Telecomm Service Utilities Cash *Benchmark: Russell Midcap Growth Index. 2 Portfolio characteristics are based on a model portfolio, not an actual client account. The model portfolio is a hypothetical portfolio whereby the portfolio characteristics are based on simulated trading and account activity of a client account invested in this strategy. The model portfolio assumes no withdrawals, contributions or client-imposed restrictions. Portfolio characteristics of individual client accounts may differ from those of the model portfolio as a result of account size, client-imposed restrictions, the timing of client investments, market conditions, contributions, withdrawals and other factors. Please see Endnotes for additional information. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the sectors and securities listed, and it should not be used as the sole basis for any investment decision. Past performance is no guarantee of future results. 4

5 Important information 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, a 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. All investments involve risk, including possible loss of principal amount invested. Please refer to for more information about the Portfolio, including objective, risks and investment process. The information presented does not constitute and should not be construed as investment advice with respect to any investment discussed. There is no guarantee that investment objectives will be met. An investor cannot invest directly in an index. Investments are not FDIC insured or guaranteed by any government agency. Values may fluctuate due to market conditions and other factors. Professional money management may not be suitable for all investors. Separately managed accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment advisor. Client portfolios are managed based on investment instructions or advice provided by one or both of the following Legg Masonaffiliated subadvisors: ClearBridge Investments, LLC and Western Asset Management Company. Management is implemented by LMPPG, the designated subadvisor or, in the case of certain programs, the program sponsor or its designee. which involve risks in addition to those ordinarily associated with investing in domestic securities, including the potentially negative effects of currency fluctuation, political and economic developments, foreign taxation, and differences in auditing and other financial standards. These risks are magnified in emerging markets. There is no guarantee that the Portfolio s objective will be met. Market, security and/or other investment considerations may result in higher turnover from time to time. Also, all capitalization ranges will not necessarily be represented in an individual account. Definitions and additional information An investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charge. Bps stands for basis points. A basis point is one one-hundredth of one percent (1/100% or 0.01%). The Russell Midcap Index is a complete subset of both the Russell 1000 and the Russell The Russell Midcap Index is used by institutional portfolio managers. The range of market caps covered in this 800-member index goes from about $1 billion on the low end to approximately $20 billion. The Russell Midcap Growth Index is an unmanaged index of those companies in the Russell Midcap Index chosen for their growth orientation. Please note that an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. The Russell 2000 Index comprises the 2,000 smallest companies in the Russell 3000 Index. The S&P 500 Index is an unmanaged index of common stock performance. Past performance is no guarantee of future results. Risks All investments involve risk, including loss of principal, and there is no guarantee that investment objectives will be met. In addition to investments in large-capitalization companies, investments may be made in speculative and/or small-cap and mid-cap companies, which involve a higher degree of risk and volatility than investments in larger, more established companies. In addition, because the investments may be concentrated in a limited number of industries and companies, the Portfolios may involve heightened risk. Investments may also be made in ADRs and other securities of non-u.s. companies in developed and emerging markets, 5

6 ClearBridge Mid Cap Growth SMA GIPS endnotes ($USD) Ending December 31 Inception date: July 2014; Composite creation date: June 2014 Period Total return (net) Total return (*pure gross) Russell Midcap Growth Index return Number of portfolios % of bundled fee portfolios in Composite the composite dispersion Composite 3 Yr. Standard Deviation Benchmark 3 Yr. Standard Deviation Total composite assets at end of period (USD million) % of firm assets Total firm assets at end of period (USD million) % 3.63% 7.33% <5 0 n/m n/a n/a % 100, % 0.35% -0.20% % n/a n/a % 92,536.4 Jul-Dec % 5.51% 5.07% n/a n/a n/a % 100,721.5 *Pure gross of fee returns do not reflect the deduction of any expenses, including transaction costs, and are presented as supplemental to the net of fee returns. n/m - Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. COMPLIANCE STATEMENT: ClearBridge Investments, LLC claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared and presented this report in compliance with the GIPS standards. ClearBridge Investments, LLC has been independently verified for the periods January 1, December 31, The verification reports are available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. FIRM INFORMATION: ClearBridge Investments, LLC ("ClearBridge") is a wholly owned subsidiary of Legg Mason, Inc. ("Legg Mason"). The investment advisory business now known as ClearBridge was registered in September 2005 to facilitate Legg Mason's acquisition of substantially all the equity asset management businesses known as Citigroup Asset Management. These former businesses serve as the foundation of ClearBridge and its claim of GIPS compliance for institutional accounts through predecessor firms, effective as of January In June 2008, ClearBridge combined this business with its retail business to form a single GIPS firm. As of April 1, 2013 and January 1, 2016, ClearBridge's affiliates, Global Currents Investment Management, LLC, and ClearBridge, LLC, respectively, have become part of the ClearBridge GIPS firm. COMPOSITE INFORMATION: The ClearBridge Mid Cap Growth SMA composite consists of discretionary wrap accounts with an account minimum of US $25,000. Accounts within the composite seek long-term capital appreciation and consistently superior returns relative to the Russell Midcap Growth Index. Portfolios are diversified across several economic sectors, investing primarily in companies having market capitalizations within the capitalization range of the Russell Midcap Growth Index. The main risks of this strategy are General Investment Risk, Industry and Issuer Concentration Risk, Mid Cap Risk and Non-U.S. Investment Risk. INPUT AND CALCULATION DATA: The fee schedule currently in effect is 3.00% on all assets. Net of fee composite returns are calculated by reducing each monthly composite pure gross rate of return by the highest "bundled" fee charged (3.00%) annually, prorated to a monthly ratio. The "bundled" fee includes transaction costs, investment management, custodial, and other administrative fees. The internal dispersion of annual returns is measured by the asset-ed standard deviation of portfolio returns included in the composite for the entire year. The three-year annualized ex-post standard deviation is not available because the composite does not have 36 months of data. As of December 1, 2016 the composite data was calculated using the ClearBridge Mid Cap Growth composite which is comprised of institutional accounts. Net total returns were calculated by reducing the institutional gross of fee performance by the highest bundled fee of 3.00%. A list of composite descriptions is available upon request. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Past performance is not necessarily indicative of future results. BENCHMARK INFORMATION: The Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe Legg Mason Investor Services, LLC, member FINRA, SIPC. Legg Mason Investor Services, LLC and ClearBridge Investments are subsidiaries of Legg Mason, Inc AMXX D