3Q 2018 Separately Managed Accounts CLEARBRIDGE DIVIDEND STRATEGY PORTFOLIOS INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Disclosure Merrill Lynch Disclosure Investing involves risk including possible loss of principal Information is current as of the date of this material Any opinions expressed herein are from a third party and are given in good faith, are subject to change without notice, and are considered correct as of the stated date of their issue Merrill Lynch, Pierce, Fenner & Smith Incorporated is not a tax or legal advisor Clients should consult a personal tax or legal advisor prior to making any tax or legal related investment decisions Bank of America Corporation ( Bank of America ) is a financial holding company that, through its subsidiaries and affiliated companies, provides banking and investment products and other financial services Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated ( MLPF&S ), a registered broker-dealer and Member SIPC, and other subsidiaries of Bank of America Corporation Merrill Lynch Life Agency is a licensed insurance agency and a wholly owned subsidiary of Bank of America Corporation Merrill Lynch offers a broad range of brokerage, investment advisory and other services There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties It is important to understand the differences, particularly when determining which service or services to select The views and opinions expressed in this presentation are not necessarily those of Bank of America Corporation; Merrill Lynch, Pierce, Fenner & Smith Incorporated; or any affiliates Merrill Lynch has not participated in preparing this presentation and accepts no responsibility for the accuracy of the information contained herein For more information about these services and their differences, speak with your Financial Advisor Nothing discussed or suggested in these materials should be construed as permission to supersede or circumvent any Bank of America, Merrill Lynch, Pierce, Fenner & Smith Incorporated policies, procedures, rules, and guidelines Investment products offered through MLPF&S and insurance and annuity products offered through Merrill Lynch Life Agency Inc: ARE NOT FDIC INSURED MAY LOSE VALUE ARE NOT BANK GUARANTEED ARE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY ARE NOT DEPOSITS ARE NOT A CONDITION TO ANY BANKING SERVICE OR ACTIVITY 2
Introduction About Legg Mason Meet our investment managers Having honed their expertise over many decades and market cycles, our global asset managers offer specialized capabilities across a scope of asset classes and strategies Each skilled team operates with independent vision to help deliver powerful financial solutions for both individuals and institutions Investing with conviction Acting with conviction and discipline, we look beyond short-term, conventional thinking to rigorously pursue long-term value across differentiated fixed income, equity, and alternative solutions Real estate investment specialists Clarion Partners is a leading private equity and debt real estate investment manager established in 1982 Clarion invests in the Americas across a broad range of property types and risk profiles, with the goal of consistently creating value for its clients Quality-focused equity Global investment manager with over 50 years of experience and long-tenured portfolio managers who seek to build income, high active share or low volatility portfolios Global alternative investments One of the world s largest hedge fund investors, recognized as a global leader in structuring comprehensive alternative investment strategies for institutional and high net worth clients Active equity specialists An active equity specialist that builds global, stock-driven portfolios based on fundamental research, devoting all of its resources to delivering optimum investment outcomes and superior client relationships Systematic investment solutions QS Investors is a quantitative asset manager that provides multi-asset class and global equity solutions Their approach unites intellectual and academic precision with the power of data and technology in their quest to elevate the certainty of outcomes they deliver Global listed infrastructure investing RARE is a dedicated infrastructure investment manager focused on global listed infrastructure investments Established in 2006, RARE has grown to become one of the largest listed infrastructure managers globally Small-cap equity Known for its disciplined, valueoriented approach to managing small-caps An asset class pioneer, the firm s founder is one of the longest-tenured active managers Fixed income One of the world s leading global fixed income managers Founded in 1971, the firm is known for team management, proprietary research and a long-term fundamental value approach Active share is a measure of the percentage of stock holdings in a manager s portfolio that differs from the benchmark index 3
Introduction ClearBridge Long and distinguished history in equity market investing Well-established global investment manager with a legacy dating back more than 50 years Owned by Legg Mason, operating with investment independence Offices in New York, Baltimore, San Francisco and Wilmington ClearBridge timeline 1962-1997 Boutique Asset Managers Individual, specialized asset manager firms Smith Barney Asset Loeb Rhoades Asset Davis Skaggs Asset Shearson Asset Salomon Brothers Asset 2005 present Benefits of Scale Citigroup forms a Combined Asset Citigroup Asset 1998-2005- Singular Focus on Investment Managers 4
Introduction ClearBridge A long-term commitment to fundamental investing ClearBridge Investments time-tested investment process has guided the Firm throughout its history An investment philosophy focused on quality businesses: Differentiated business models Sustainable returns Strong financial characteristics Seasoned management teams A long-term approach with low turnover An investment culture developed over five decades that is dedicated to training and advancement Independent risk management supported by a team of risk and portfolio analytics professionals Innovative compensation program aligning ClearBridge with clients Managers seek to keep portfolio turnover low to allow for the positive compounding effect of dividends over time, although market, security and other investment considerations may cause turnover to be higher from time to time Also, all capitalization ranges will not necessarily be represented in an individual account 5
Your investment portfolio Dividend Strategy ClearBridge Dividend Strategy Portfolios Overview ClearBridge Dividend Strategy Portfolios invest primarily in dividendpaying stocks that offer the potential for income growth and capital appreciation over time The investment team believes that companies that exhibit market leadership, coupled with solid balance sheets and strong dividend profiles, are attractive investment candidates for the long-term investor Key differentiators Experience and Judgment Proven, successful team investing in dominant franchises that pay an attractive dividend yield Disciplined Investment Process Strong focus on income growth Portfolio management does not deviate from its investment approach Identify strong, well run businesses Seek companies with predictable revenues and superior margins and return on investment Avoid deep cyclicals, turnarounds and enterprises that cannot be reasonably analyzed Defined Risk at Security and Portfolio Level Constant monitoring and evaluation of outcomes at the security level Rigorous portfolio review to ensure fundamental and valuation case intact Strong focus on diversification across portfolio Dividends and yields represent past performance, there is no assurance they will continue to be paid in the future Limited investments also may be made in non-dividend paying stocks that are not expected to pay a dividend in the near future Diversification does not assure a profit or protect against market loss 6
Your investment portfolio Dividend Strategy ClearBridge Dividend Strategy Portfolios Philosophy Total return portfolio focused on large cap, high-quality companies that: Pay an attractive dividend Have the potential to significantly grow their dividends Provide consistent and competitive risk-adjusted returns Objectives The strategy seeks: Attractive growth of dividend income Long-term capital appreciation To focus on capital preservation in challenging markets Risks: All investments involve risk, including the loss of principal, and there is no guarantee that investment objectives will be met Investments may be made in small- and mid-cap companies, which involve a higher degree of risk and volatility than investments in large-cap companies While most investments are in US companies, investments may be made in ADRs and US-traded ordinary shares of non-us companies in developed and emerging markets which involve risks in addition to those ordinarily associated with investing in domestic securities, including the potentially negative effects of currency fluctuations, political and economic developments, foreign taxation and differences in auditing and other financial standards These risks are magnified in emerging markets Limited investments also may be made in non-dividend paying stocks that are not expected to pay a dividend in the near future The managers may sometimes hold significant portions of portfolio assets in cash equivalents while waiting for buying opportunities Managers seek to keep portfolio turnover low to allow for the positive compounding effect of dividends over time, although market, security and other investment considerations may cause turnover to be higher from time to time Also, all capitalization ranges will not necessarily be represented in an individual account 7
Your investment portfolio Dividend Strategy ClearBridge Dividend Strategy Portfolios investment process Define the investment universe Emphasize domestic large-capitalization stocks, but also consider mid- and smallcapitalization companies and ADR s of foreign companies opportunistically Evaluate stocks using proprietary discipline Screen for companies across all market sectors with either an attractive dividend yield, a history of (or prospects for) dividend growth, strong balance sheets, dominant positions and/or reasonable valuations Select securities and construct portfolio Conduct fundamental research and dividend analysis to identify companies with attractive growth characteristics relative to their valuation levels Review process Re-examine a current holding when valuation is realized, fundamentals deteriorate, and/or cyclical shifts alter industry s attractiveness Limited investments also may be made in non-dividend paying stocks that are not expected to pay a dividend in the near future The investment process may change over time The characteristics set forth are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios There is no guarantee investment objectives will be achieved 8
Appendix Investment Team Investment management team Scott Glasser, Managing Director, Portfolio Manager Co-Chief Investment Officer Industry since 1991 Firm since 1993 Pennsylvania State University MBA Middlebury College BA Member of the ClearBridge Investments Committee Shearson Lehman Brothers -- Portfolio Manager, Consumer Analyst Bear Stearns & Co -- Credit Analyst CIS Marketing -- Account Representative Michael Clarfeld, CFA Managing Director, Portfolio Manager Industry since 2000 Firm since 2006 Duke University BA in History Member of the CFA Institute Member of the New York Society of Securities Analysts Hygrove Partners, LLC -- Equity Analyst Diane Keady Managing Director, Portfolio Manager Industry since 2000 Firm since 1994 New York University, Leonard N Stern School of Business MBA Rutgers University BS Citigroup Asset -- US Sales and Distribution, Vice President Salomon Smith Barney -- GAAP Reporting, Vice President Smith Barney Shearson -- Technology Finance, Expense Analyst Peter Vanderlee CFA, Managing Director, Portfolio Manager Industry since 1999 Firm since 1999 New York University, Leonard N Stern School of Business MBA University of Technology, Eindhoven, Holland MS in Math/Computer Science Member of the CFA Institute Predecessor organization First Vice President Booz&Co Program Director/Senior Associate Cap Gemini America Senior Consultant Goldman Sachs -- Equity Research, Financial Analyst 9
Brandywine Global Clarion Partners ClearBridge Investments EnTrustPermal Martin Currie QS Investors RARE Infrastructure Royce & Associates Western Asset 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, fixedincome, alternatives and cash strategies invested worldwide leggmasoncom A diverse family of specialized investment managers, each with its own independent approach to research and analysis Over a century of experience in identifying opportunities and delivering astute investment solutions to clients Separately Managed Accounts (SMAs) are investment services provided by Legg Mason Private Portfolio Group, LLC (LMPPG), a federally registered investment adviser Client portfolios are managed based on investment instructions or advice provided by one or more of the following Legg Mason-affiliated sub-advisers: ClearBridge Investments, LLC and Western Asset Company is implemented by LMPPG, the designated subadviser or, in the case of certain programs, the program sponsor or its designee Investments for the program(s) discussed herein are traded primarily in US markets and unless otherwise noted, equity and fixed-income investments for such program(s) are primarily of US issuers In addition, unless otherwise noted, indexes referred to herein represent groups of securities that are issued primarily by US issuers IMPORTANT TAX INFORMATION: Legg Mason, Inc, its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations Tax-related statements, if any, may have been written in connection with the promotion or marketing of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law Any such taxpayer should seek advice based on the taxpayer s particular circumstances from an independent tax advisor Gross of fees performance results shown herein do not reflect deduction for investment management fees and transaction costs The performance of individual client accounts will vary and will be reduced by such fees and costs Please review the effect of fees and transaction costs on account performance with your financial professional Investments are not obligations of, and are not guaranteed by, LMPPG or any other Legg Mason Inc affiliate or subsidiary; are not FDIC or government insured; and are subject to risks, including possible loss of the principal amount invested Professional money management may not be suitable for all investors 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 2018 Legg Mason Investor Services, LLC, member FINRA, SIPC Legg Mason Investor Services, LLC and ClearBridge Investments, LLC are subsidiaries of Legg Mason, Inc FN1313520 PPG-Q318-V1