0914
Commentary
Legg Mason Global Funds plc
■ INVESTMENT INVOLVES RISKS. The value of the Fund can be volatile and investors may not get back the amount originally invested. Past performance is
not indicative of future results.
■ The Fund is a sub-fund of Legg Mason Global Funds plc, an open-ended umbrella investment company constituted in Ireland. The Fund seeks to maximise total return
through capital appreciation and income by investing at least two-thirds of its Net Asset Value in investment grade debt securities denominated in the currencies of, or
issuers located primarily in developed countries around the world. The Sub-Investment Manager will concentrate investments in undervalued markets that provide the
best opportunity for declining interest rates and a return to lower real rates over time.
■ Investors will be exposed to debt securities, credit, liquidity, concentration and currency risks.
■ The Fund may invest in inflation protected securities, whose value generally fluctuates in response to changes to interest rates.
■ The Fund may use certain types of financial derivative instruments ("FDIs") extensively for investment and other non-hedging purposes, which may involve a higher
degree of risk such as counterparty, volatility, liquidity, leverage and valuation risks. The Fund may suffer a total or significant loss arising from the extensive use of
FDIs.
■ The Fund may invest in emerging markets which involve special risks, including liquidity, volatility, currency, political, economic, legal and regulatory risks.
■ Investors should not invest based on this marketing material alone. Offering documents should be read for further details, including the risk factors.
Legg Mason Brandywine
Global Fixed Income Fund
QUICK VIEW
Key performance drivers
 The Fund rose 3.55%¹ in US dollar terms yearto-date, outperforming its benchmark index,
which was up 1.03%.
 Exposure to Mexico, Australia and Brazil hurt.
 Exposure to Poland, Italy, Hungary, Malaysia
and South Korea contributed.
 Zero exposure to the Japanese yen and
underweight exposure to the euro contributed.
 Exposure to emerging markets (EM), both cash
bonds and currencies hurt performance.
Views and positioning
 The manager reduced duration in the Polish
government bond exposure.
 The manager lowered US duration by selling
longer-dated US Treasuries.
 US dollar exposure was 41.7% at month end.
 Duration contribution was 0.52 years.
Current activity and manager outlook
 The manager anticipates better-than-expected
growth in developed markets, led by the US.
 The manager believes Europe and Japan
should improve in the second half of 2014.
 The manager expects long safe-haven rates to
remain capped.
 Towards the end of 2014, the manager believes
there is a likelihood of a 30-50 basis point snapback in US/global Treasury yields.
Performance1 to 30/09/14
Legg Mason Brandywine
Global Fixed Income Fund
Citigroup World Government Bond Index
3 Months
YTD
1 Year
-2.55%
3.55%
3.03%
-3.78%
1.03%
-0.07%
Past performance is no guide to future returns and may not be repeated.
Market Review
Sovereign bond markets recorded mixed returns in local currency terms over
September. Mexican bonos, United Kingdom (UK) gilts and the Canadian and
South African bond markets were among the main laggards. Conversely,
peripheral European markets (such as Ireland, Italy and Spain), South Korea,
Poland and Hungary all registered positive returns in local currency terms.
South Korea and Poland were down in US dollar terms, however, as their
currencies weakened against the US dollar.
Currency performance was predominantly negative over the month with most
currencies weakening against the US dollar. Currencies such as the Russian
ruble, Chilean peso, Hungarian forint, euro, Japanese yen and Polish zloty all
weakened over the course of the month, with the Chinese renminbi and the US
dollar strengthening.
Fund Review
The Legg Mason Brandywine Global Fixed Income Fund rose 3.55%¹ in US
dollar terms year-to-date, outperforming its benchmark, the Citigroup World
Government Bond Index, which was up 1.03%.
In terms of returns, exposure to Mexico, Australia and Brazil hurt performance
as these markets posted negative returns in September. On the other hand,
exposure to Poland, Italy, Hungary, Malaysia and South Korea contributed to
performance in local currency terms. In addition, lack of exposure to Canada,
France and Netherlands and the underweight exposure to Germany added
value.
In terms of currencies, the Fund’s lack of exposure to the Japanese yen and
underweight exposure to the euro proved beneficial.
In general, the Fund’s exposure to emerging markets (EM), both cash bonds
and currencies, hurt performance as EM saw a sell-off in some markets in
September. Allocations to the Mexican peso, Chilean peso, Brazilian real,
Indian rupee, Indonesian rupiah and South Korean won detracted from
performance as these currencies lost value against the US dollar.
The manager reduced duration in the Polish government bond exposure by
0.13 years, leaving duration exposure at 0.3 years; the proceeds of this were
invested in US Treasury floaters. The manager also reduced US duration by
0.25 years by selling longer-dated US Treasuries. The proceeds were invested
in short-dated floating-rate Treasuries. Total US dollar exposure was 41.7% at
month end and duration contribution was 0.52 years.
FOR PUBLIC IN HONG KONG AND DISTRIBUTORS IN MACAU USE ONLY. PLEASE REFER TO THE IMPORTANT INFORMATION ON THE FINAL PAGE.
Brandywine Global • ClearBridge Investments • LMM • Martin Currie • Permal • QS Batterymarch • QS Legg Mason Global Asset Allocation
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0914
Commentary
Legg Mason Global Funds plc
Legg Mason Brandywine
Global Fixed Income Fund
Outlook
The manager continues to anticipate better-than-expected growth in developed markets, with the US leading the global recovery. The
manager also believes Europe and Japan should continue to improve in the second half of 2014. Despite better developed market growth,
the manager expects long safe-haven rates to remain capped as a result of the still-formidable debt overhang, a benign global inflation
environment, institutional de-risking, weak credit growth and entrenched concerns of global economic fragility. Towards the end of 2014,
however, the manager believes there is a likelihood of a 30-50 basis point snap-back in US/global Treasury yields. The manager maintains
its view that rate-hike cycles in English-speaking countries are unlikely to hurt investors. The manager feels that rate hikes in the US will be
measured as Chairwoman Yellen remains committed to dovish policy. The manager expects credit spreads in Europe and the US to remain
tight for an extended period of time after recently contracting beyond historical averages. The manager does not foresee many catalysts
threatening a sudden or significant spread widening.
This Fund is managed by Brandywine Global Investment Management
¹ Source: Legg Mason, as of 30 September 2014. Class A Acc USD performance is net of fees and is calculated on a NAV to NAV basis (USD). Performance is based
on reinvestment of any income and capital gains distribution derived from securities held in the Fund. Class A Acc USD calendar year net of fees performance for yearto-date (3.55%), 2013 (-4.03%), 2012 (7.87%), 2011 (7.92%), 2010 (8.72%), 2009 (18.68%). Benchmark: Citigroup World Government Bond Index. Investment
involves risks. Past performance is not indicative of future results.
IMPORTANT INFORMATION
Investors of fixed income funds are subject to various risks, including but not limited to, credit risks, liquidity risks and interest rate risks.
Source: Legg Mason and Brandywine Global Investment Management. This document is for information only and does not constitute a financial promotion or other
financial, professional or investment advice in any way. All data, opinions, estimates and other information are provided as of the date of this document and may be
subject to change without notice. Where past performance is quoted, such figures are not indicative of future performance. This document does not constitute an offer or
solicitation to buy or sell any units or shares in any fund. INVESTMENT INVOLVES RISKS. The value of investments and the income from them can go down as well as
up and investors may not get back the amount originally invested. Please refer to the most current offering documents for further details, including the risk factors.
If this document is distributed in Macau, this may not be used other than by the Distributors.
Any views expressed are opinions of the respective investment affiliates as of the date of this document and are subject to change without notice based on market and
other conditions and may differ from other investment affiliates or of the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of
future results or investment advice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase or sell
securities, and the information provided regarding such individual securities is not a sufficient basis upon which to make an investment decision.
Exchange rate changes may cause the value of overseas investments to rise or fall. Where the Fund’s base currency is not US/ HK Dollars, US/HK Dollar-based
investors are exposed to exchange rate fluctuations.
Neither Legg Mason nor any officer or employee of Legg Mason accepts any liability whatsoever for any loss arising from any use of this document or its contents. The
information in this document is confidential and proprietary and may not be used other than by the intended user. This document may not be reproduced, distributed or
published without prior written permission from Legg Mason.
This document has not been reviewed by the Securities and Futures Commission in Hong Kong or Monetary Authority of Macao in Macau.
Issuer: Legg Mason Asset Management Hong Kong Limited.
HK1410028
FOR PUBLIC
IN TO
HONG
AND DISTRIBUTORS
MACAU
USE ONLY.
PLEASE
REFER
THEKONG
IMPORTANT
INFORMATIONINON
THE FINAL
PAGE.
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