legg mason global funds plc semi-annual report (unaudited) · semi-annual report (unaudited) for...

Legg Mason Global Funds Plc

An Umbrella Fund with Segregated Liability between Sub-Funds

Semi-Annual Report (Unaudited)

For the six months ended August 31, 2008

Table of Contents

General Information 2

Letter to Shareholders 7

Portfolio of Investments – Western Asset U.S. Money Market Fund 8

Portfolio of Investments – Western Asset U.S. Core Bond Fund 11

Portfolio of Investments – Western Asset U.S. Core Plus Bond Fund 20

Portfolio of Investments – Western Asset Euro Core Plus Bond Fund 26

Portfolio of Investments – Western Asset Diversified Strategic Income Bond Fund 31

Portfolio of Investments – Western Asset Global Multi Strategy Fund 40

Portfolio of Investments – Western Asset U.S. High Yield Bond Fund 52

Portfolio of Investments – Western Asset Emerging Markets Bond Fund 60

Portfolio of Investments – Western Asset Global High Yield Bond Fund 64

Portfolio of Investments – Western Asset U.S. Short-Term Government Income Fund 72

Portfolio of Investments – Western Asset U.S. Adjustable Rate Income Fund 74

Portfolio of Investments – Western Asset Inflation Management Fund 78

Portfolio of Investments – Western Asset Asian Opportunities Fund 80

Portfolio of Investments – Brandywine Global Opportunities Bond Fund 82

Portfolio of Investments – Legg Mason Value Fund 85

Portfolio of Investments – Legg Mason Growth Fund 86

Portfolio of Investments – ClearBridge U.S. Appreciation Fund 87

Portfolio of Investments – ClearBridge U.S. Fundamental Value Fund 89

Portfolio of Investments – ClearBridge U.S. Large Cap Growth Fund 91

Portfolio of Investments – ClearBridge U.S. Aggressive Growth Fund 92

Portfolio of Investments – Royce U.S. Small Cap Opportunity Fund 94

Portfolio of Investments – Royce Smaller Companies Fund 99

Portfolio of Investments – PCM U.S. Equity Fund 101

Portfolio of Investments – GC Global Equity Fund 102

Portfolio of Investments – Batterymarch European Equity Fund 104

Portfolio of Investments – Batterymarch Pacific Equity Fund 106

Portfolio of Investments – Batterymarch 130/30 Global Equity Fund 108

Portfolio of Investments – Batterymarch International Large Cap Fund 114

Portfolio of Investments – Batterymarch Emerging Markets Equity Fund 117

Balance Sheet – Legg Mason Global Funds Plc 122

Profit and Loss Account – Legg Mason Global Funds Plc 148

Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares – Legg Mason Global Funds Plc 158

Notes to Financial Statements – Legg Mason Global Funds Plc 204

Financial Information – Total Expense Ratios (TER) – Legg Mason Global Funds Plc 270

Financial Information – Portfolio Turnover Rate (PTR) – Legg Mason Global Funds Plc 275

Statement of Major Portfolio Changes – Western Asset U.S. Money Market Fund 276

Statement of Major Portfolio Changes – Western Asset U.S. Core Bond Fund 276

Statement of Major Portfolio Changes – Western Asset U.S. Core Plus Bond Fund 276

Statement of Major Portfolio Changes – Western Asset Euro Core Plus Bond Fund 277

Statement of Major Portfolio Changes – Western Asset Diversified Strategic Income Bond Fund 278

Statement of Major Portfolio Changes – Western Asset Global Multi Strategy Fund 278

Statement of Major Portfolio Changes – Western Asset U.S. High Yield Bond Fund 279

Statement of Major Portfolio Changes – Western Asset Emerging Markets Bond Fund 279

Statement of Major Portfolio Changes – Western Asset Global High Yield Bond Fund 280

Statement of Major Portfolio Changes – Western Asset U.S. Short–Term Government Income Fund 280

Statement of Major Portfolio Changes – Western Asset U.S. Adjustable Rate Income Fund 280

Statement of Major Portfolio Changes – Western Asset Inflation Management Fund 281

Statement of Major Portfolio Changes – Western Asset Asian Opportunities Fund 281

Statement of Major Portfolio Changes – Brandywine Global Opportunities Bond Fund 282

Statement of Major Portfolio Changes – Legg Mason Value Fund 282

Statement of Major Portfolio Changes – Legg Mason Growth Fund 283

Statement of Major Portfolio Changes – ClearBridge U.S. Appreciation Fund 283

Statement of Major Portfolio Changes – ClearBridge U.S. Fundamental Value Fund 284

Statement of Major Portfolio Changes – ClearBridge U.S. Large Cap Growth Fund 285

Statement of Major Portfolio Changes – ClearBridge U.S. Aggressive Growth Fund 285

Statement of Major Portfolio Changes – Royce U.S. Small Cap Opportunity Fund 286

Statement of Major Portfolio Changes – Royce Smaller Companies Fund 286

Statement of Major Portfolio Changes – PCM U.S. Equity Fund 287

Statement of Major Portfolio Changes – GC Global Equity Fund 287

Statement of Major Portfolio Changes – Batterymarch European Equity Fund 288

Statement of Major Portfolio Changes – Batterymarch Pacific Equity Fund 289

Statement of Major Portfolio Changes – Batterymarch 130/30 Global Equity Fund 289

Statement of Major Portfolio Changes – Batterymarch International Large Cap Fund 290

Statement of Major Portfolio Changes – Batterymarch Emerging Markets Equity Fund 291

Legg Mason Global Funds Plc Semi-Annual Report August 31, 2008

1

2

General Information

Board of Directors

John Alldis (Luxembourg)

Frank Ennis *

Joseph Keane *

Joseph LaRocque (U.S.)

* Independent non-executive Irish Resident Directors

Registered Office

Riverside Two

Sir John Rogerson’s Quay

Grand Canal Dock

Dublin 2, Ireland

Distributors and Shareholder Servicing Agents

Legg Mason Investor Services, LLC

100 Light Street

Baltimore, Maryland 21202

U.S.A.

Legg Mason Investments (Europe) Limited

75 King William Street

London EC4N 7BE

United Kingdom

Legg Mason Asset Management Hong Kong Limited

12/F, York House

The Landmark

15 Queen’s Road Central

Hong Kong

Legg Mason International Equities (Singapore) Pte. Limited

1 George Street, #23-02

Singapore 049145

Legg Mason Investments (Taiwan) Limited

55 Floor-1, Taipei 101 Tower

Xin Yi Road

Section 5, Taipei, 110

Taiwan

Distributor Status (relevant to U.K. Shareholders only)

It is intended that Legg Mason Global Funds Plc (the ‘‘Company’’) will pursue a distribution policy so that certification as a distributing fund is

obtained for each launched distributing share class of each of the funds of the Company (the ‘‘Funds’’) in respect of the twelve-month period

ended February 29, 2008 and subsequent periods. There is no guarantee, however, that certification will be obtained or that, once obtained,

certification will continue to be available or obtained for future accounting periods. U.K. Shareholders should be aware that HM Revenue &

Customs are currently consulting on the future of the U.K.’s Offshore Fund rules and it is likely that new legislation will be enacted in 2009 that

will fundamentally change the existing regime. Once any new regime is announced, the Company will seek to comply with the requirements in

order to ensure a comparable tax position for U.K. shareholders in the Funds and share classes currently benefiting from the certification as a

distributing fund. For the year from March 1, 2006 to February 28, 2007 certification was obtained for the following share classes:

Sub-Fund Share Class

Western Asset U.S. Money Market Fund Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Western Asset U.S. Core Bond Fund Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Western Asset Euro Core Plus Bond Fund Class A US$ Distributing (D), Class A Euro Distributing (D), Class B US$ Distributing (D), Class C US$

Distributing (D)

Western Asset Diversified Strategic Income

Bond Fund

Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Western Asset Global Multi Strategy Fund Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Western Asset U.S. High Yield Bond Fund Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Western Asset Emerging Markets Bond Fund Class A US$ Distributing (D), Class B US$ Distributing (D), Class C US$ Distributing (D)

Brandywine Global Opportunities Bond Fund Class A US$ Distributing (S), Class B US$ Distributing (S), Class C US$ Distributing (S)

Legg Mason Value Fund Class A US$ Distributing (A), Class B US$ Distributing (A), Class C US$ Distributing (A), Galleon Class

Legg Mason Growth Fund Class A US$ Distributing (A), Class B US$ Distributing (A), Class C US$ Distributing (A)

Royce U.S. Small Cap Opportunity Fund Class A US$ Distributing (A), Class B US$ Distributing (A), Class C US$ Distributing (A)

Royce Smaller Companies Fund Class A US$ Distributing (A), Class B US$ Distributing (A), Class C US$ Distributing (A)

Batterymarch European Equity Fund Class A US$ Distributing (A), Class A Euro Distributing (A), Class B US$ Distributing (A), Class C US$

Distributing (A)

Batterymarch Pacific Equity Fund Class A US$ Distributing (A), Class B US$ Distributing (A), Class C US$ Distributing (A)


3

General Information – (continued)

Swiss Representative and Paying Agent

BGG, Banque Genevoise de Gestion

Rue Rodolphe-Toepffer 15

1200 Geneva

Switzerland

BGG, Banque Genevoise de Gestion is acting as the Company’s Swiss

representative and paying agent for shares distributed in or from

Switzerland.

The Prospectus, the Simplified Prospectus, the Memorandum and the

Articles of Association of the Company, the annual and semi-annual

reports and the breakdown of the purchase and sale transaction of

the Funds, may be obtained free of charge at the office of the Swiss

representative.

Irish Legal Adviser

Arthur Cox

Earlsfort Centre

Earlsfort Terrace

Dublin 2, Ireland

Custodian

PNC International Bank Limited ††

Riverside Two


Grand Canal Dock

Dublin 2, Ireland

Independent Auditors

PricewaterhouseCoopers

Chartered Accountants &

Registered Auditors

One Spencer Dock

North Wall Quay

Dublin 1, Ireland

Administrator

PNC Global Investment Servicing (Europe) Limited ?Riverside Two


Grand Canal Dock

Dublin 2, Ireland

Sponsoring Broker

Davy Stockbrokers Limited

Davy House

49 Dawson Street

Dublin 2, Ireland

Investment Manager Legg Mason Value Fund

Legg Mason Capital Management, Inc.

100 Light Street


U.S.A.

Investment Manager Western Asset U.S. Money Market Fund

Western Asset U.S. Core Bond Fund

Western Asset U.S. Core Plus Bond

Fund IWestern Asset Euro Core Plus Bond

Fund IWestern Asset Euro Absolute Return

Bond Fund †

Western Asset Diversified Strategic

Income Bond Fund

Western Asset Global Multi Strategy

Fund

Western Asset U.S. High Yield Bond

Fund

Western Asset Emerging Markets Bond

Fund

Western Asset Global High Yield Bond

Fund

Western Asset U.S. Short-Term

Government Income Fund

Western Asset U.S. Adjustable Rate

Income Fund

Western Asset Inflation Management

Fund

Western Asset Asian Bond Fund †

Western Asset Asian Opportunities

Fund ‡

Brandywine Global Opportunities Bond

Fund

Legg Mason Growth Fund

ClearBridge U.S. Appreciation Fund

ClearBridge U.S. Fundamental Value

Fund

ClearBridge U.S. Large Cap Growth

Fund

ClearBridge U.S. Aggressive Growth

Fund

Royce U.S. Small Cap Opportunity Fund

Royce Smaller Companies Fund ILM Strategic European Equity Fund †

PCM U.S. Equity Fund

GC Global Equity Fund IGC Global SRI Equity Fund †

Batterymarch European Equity Fund

Batterymarch Pacific Equity Fund

Batterymarch 130/30 Global Equity

Fund ‡

Batterymarch International Large Cap

Fund

Batterymarch Emerging Markets Equity

Fund ‡

Batterymarch U.S. Large Cap Fund †

LMIE China Fund †

LMIE Japan Equity Fund †



London EC4N 7BE

United Kingdom


4


Sub-Investment Manager Western Asset U.S. Money Market

Fund


Western Asset U.S. Core Plus Bond

Fund IWestern Asset Euro Core Plus Bond

Fund IWestern Asset Euro Absolute

Return Bond Fund †

Western Asset Diversified Strategic

Income Bond Fund

Western Asset Global Multi

Strategy Fund

Western Asset U.S. High Yield

Bond Fund

Western Asset Emerging Markets

Bond Fund

Western Asset Global High Yield

Bond Fund

Western Asset U.S. Short-Term


Western Asset U.S. Adjustable Rate

Income Fund

Western Asset Inflation

Management Fund

Western Asset Asian Bond Fund †


Fund ‡

Western Asset Management Company Limited

10 Exchange Square

Primrose Street

London EC2A 2EN

United Kingdom

Western Asset Management Company

385 East Colorado Boulevard

Pasadena, California 91101

U.S.A.

Sub-Investment Manager Western Asset Asian Bond Fund †


Fund ‡

Western Asset Management Company Pte. Limited

1 George Street, #23-01

Singapore 049145

Sub-Investment Manager Brandywine Global Opportunities

Bond Fund

GC Global Equity Fund ¥IGC Global SRI Equity Fund †¥

Brandywine Global Investment Management, LLC

2929 Arch Street

Suite 800

Philadelphia, Pennsylvania 19104

U.S.A.

Sub-Investment Manager GC Global Equity Fund ¥IGC Global SRI Equity Fund †¥

Global Currents Investment Management, LLC ¥

Delaware Corporate Center II

2 Righter Parkway

Wilmington, Delaware 19803

U.S.A.

Sub-Investment Manager Legg Mason Growth Fund

Legg Mason Capital Management, Inc.

100 Light Street


U.S.A.

Sub-Investment Manager ClearBridge U.S. Appreciation Fund

ClearBridge U.S. Fundamental

Value Fund

ClearBridge U.S. Large Cap Growth

Fund

ClearBridge U.S. Aggressive

Growth Fund

ClearBridge Advisors LLC

620 8th Ave., 48th Floor

New York, New York 10018

U.S.A.

Sub-Investment Manager Royce U.S. Small Cap Opportunity

Fund

Royce Smaller Companies Fund I

Royce & Associates, LLC

1414 Avenue of the Americas

New York, New York 10019

U.S.A.

Sub-Investment Manager PCM U.S. Equity Fund

Private Capital Management, L.P.

8889 Pelican Bay Boulevard

Suite 500

Naples, Florida 34108

U.S.A.

Sub-Investment Manager Batterymarch European Equity

Fund



Fund ‡

Batterymarch International Large

Cap Fund

Batterymarch Emerging Markets

Equity Fund ‡

Batterymarch U.S. Large Cap

Fund †

Batterymarch Financial Management, Inc.

200 Clarendon Street

Boston, Massachusetts 02116

U.S.A.


5


Sub-Investment Manager LMIE China Fund †

Legg Mason International Equities Limited

9th Floor, 10 Exchange Square

Primrose Street

London EC2A 2EN

United Kingdom

Legg Mason Asset Management Hong Kong Limited

12/F, York House

The Landmark

15 Queen’s Road Central

Hong Kong

Sub-Investment Manager LMIE Japan Equity Fund †

Legg Mason International Equities (Singapore) Pte. Limited

1 George Street #23-02

Singapore 04145


6


Fund Launch Dates

Western Asset U.S. Money Market Fund: February 27, 2004

Western Asset U.S. Core Bond Fund: August 31, 2002

Western U.S. Core Plus Bond Fund I: April 20, 2007Western Asset Euro Core Plus Bond Fund I: October 1, 2003Western Asset Diversified Strategic Income Bond Fund:

February 24, 2004

Western Asset Global Multi Strategy Fund: August 29, 2002

Western Asset U.S. High Yield Bond Fund: February 27, 2004

Western Asset Emerging Market Bond Fund: February 24, 2004

Western Asset Global High Yield Bond Fund: April 20 2007

Western Asset U.S. Short-Term Government Income Fund:

April 20, 2007

Western Asset U.S. Adjustable Rate Income Fund: April 20, 2007

Western Asset Inflation Management Fund: April 20, 2007

Western Asset Asian Opportunities Fund ‡: June 12, 2008

Brandywine Global Opportunities Bond Fund: October 1, 2003

Legg Mason Value Fund: March 20, 1998

Legg Mason Growth Fund: February 25, 2004

ClearBridge U.S. Appreciation Fund: April 20, 2007

ClearBridge U.S. Fundamental Value Fund: April 20, 2007

ClearBridge U.S. Large Cap Growth Fund: April 20, 2007

ClearBridge U.S. Aggressive Growth Fund: April 20, 2007

Royce U.S. Small Cap Opportunity Fund: November 8, 2002

Royce Smaller Companies Fund I: March 1, 2004

PCM U.S. Equity Fund: January 2, 2008

GC Global Equity Fund I: September 1, 2006

Batterymarch European Equity Fund: August 31, 2002

Batterymarch Pacific Equity Fund: February 25, 2004

Batterymarch 130/30 Global Equity Fund ‡: June 27, 2008

Batterymarch International Large Cap Fund: April 20, 2007

Batterymarch Emerging Markets Equity Fund ‡: April 28, 2008

† As at August 31, 2008, these Funds have not commenced

trading.

†† Effective July 3, 2008, PFPC Bank Limited changed its name to

PNC International Bank Limited.

? Effective July 17, 2008, PFPC International Limited changed its

name to PNC Global Investment Servicing (Europe) Limited.

‡ Commenced trading during the period.

¥ Effective 3 June 2008, Global Currents Investment Management,

LLC ("GCIM") succeeded Brandywine Global Investment

Management, LLC as sub-investment manager of this Fund.

I Effective April 21, 2008, the Western Asset Euro Core Bond Fund

changed its name to the Western Asset Euro Core Plus Bond

Fund; the Western Asset Investment Grade Total Return Bond

Fund changed its name to the Western Asset U.S. Core Plus

Bond Fund; the Brandywine Global Equity Fund changed its

name to the GC Global Equity Fund and the Royce 100 Equity

Fund changed its name to the Royce Smaller Companies Fund.

For More Information

For further information on the range of sub-funds (the ‘‘Funds’’) within Legg Mason Global Funds Plc, contact:

For professional investors in the U.K. and Europe



London EC4N 7BE,

United Kingdom

Tel: + 44 (0) 207 070 7444

www.leggmason.co.uk

For authorised dealers in the Americas

Legg Mason Investments

1395 Brickell Avenue

Suite 1550

Miami, Florida 33131, U.S.A.

Tel: + 305 529 4400

www.leggmasonamericas.com

Go to the relevant website for information on:

. Daily prices

. Literature, including fact sheets providing the latest information on each Fund

. More information about Legg Mason’s asset management affiliates managing the Funds


7

Letter to Shareholders

Dear Shareholder,

We are pleased to provide you with the financial report for Legg

Mason Global Funds plc for the six months ending August 31, 2008.

In this report we highlight the key drivers behind the performance of

bond and equity markets over the period.

Fixed Income Markets

The six months to the end of August 2008 saw further volatility in

global bond markets on the back of investors’ vacillating appetite for

risk. Investment-grade and high-yield corporate bonds initially

benefited from a recovery in risk appetites. However, a return of

risk aversion later in the period boosted government bonds and led to

a setback in non-government sectors.

Early in the period, investors became more optimistic following

aggressive rate reductions and the announcement of additional

lending facilities by the US Federal Reserve (the ‘‘Fed’’). The Fed-

brokered emergency rescue of investment bank Bear Stearns by JP

Morgan Chase in mid-March also provided support. This led investors

to unwind some of their safe-haven investments in government bonds

and reallocate funds to the riskier segments of the bond market. From

June, however, risk aversion returned, and as commodity prices

continued to surge, a number of the major central banks raised

concerns over the outlook for inflation and the US financial sector saw

further bankruptcies. This led to renewed weakness in non-

government bonds.

The Fed continued its campaign against downside risks to growth for

much of the period, as economic data remained weak and financial

markets continued to struggle. It cut interest rates by a total of 1.0%

to 2.0%. The Bank of England also reduced rates, while the European

Central Bank remained concerned about the upside risks to inflation

and increased rates by 0.25% to 4.25%. The Bank of Japan (‘‘BofJ’’)

remained on the sidelines in order to assess the global economic

outlook.

US Equity Markets

US equity markets remained volatile and chaotic over the six months

to the end of August. Nevertheless, the period can be broken down

into three discernable periods: a volatile rally until mid-May, a sharp

retreat until mid-July, followed by a moribund recovery, which left the

major indices in negative territory for the period.

Until mid-May, market participants had begun to look beyond the

credit crisis, believing that perhaps the worst of the crisis was over.

The economic data also provided support, as the Gross Domestic

Product (‘‘GDP’’) numbers showed a slowing economy, but not a

recessionary one, leading some commentators to assert that the US

would avoid recession. However, as with other markets, the sharp

spike in oil prices severely dampened market sentiment as the knock-

on effects of wider inflationary pressures appeared to tie the hands of

the Fed in terms of cutting interest rates to stave off an economic

slowdown. As commodity prices and commodity-related equity

sectors surged, equity markets dropped overall.

In mid-July, equity markets rose following a sudden, sharp correction

in oil and other commodity prices, brought on by expectations that

slowing global growth would reduce commodity demand. The

nascent recovery, however, never really gained steam as a further

raft of downbeat economic news reignited fears of a recession.

Financial stocks recovered from a deeply oversold position in July,

after a revival of the perception that perhaps the worst was over for

financial stocks. But, as subsequent events were to prove, this

perception proved to be misplaced.

European Equity Markets

European markets began the period brightly against a backdrop of

stable economic growth, positive earnings and robust business

investment. Despite the credit crisis and the ongoing economic

woes of the US, the European economy posted strong positive growth

figures, and investors responded by driving equity markets upwards.

As the period unfolded, however, spiking oil prices, falling demand

and a drop in confidence nipped the rally in the bud and markets

turned sharply negative in early May. The negative tone was

reinforced by a spate of downbeat economic news in June, with

business surveys revealing a glum mood among European business

leaders. As oil prices surged to record highs in July, the markets

continued to fall, but when oil prices began to correct in July and

August, the market rebounded. It didn’t get far, however, as the

economic gloom continued. Official statistics revealed that the

Eurozone economy had contracted during the second quarter for

the first time since 2002. Germany, France and Italy led the

contraction, with Germany down the most after a buoyant first

quarter. The contraction resulted from falls in construction activity,

consumer spending, and capital investment.

Asian Equities Markets

Despite a brief rally in April and May, Asian equity markets fared

worse than other equity asset classes over the six-month period to the

end of August. Singapore, Taiwan and Hong Kong were the region’s

best performing markets, although all three declined in absolute

terms, while Pakistan, India and Korea were the region’s laggards.

The region’s heavyweights, India and China, have underperformed

significantly in the correction since October 2007, as global risk

appetite diminished and a portion of some of the earlier substantial

inflows into these markets subsided. Rising domestic inflation in both

economies has led to further monetary tightening measures and both

countries’ governments also reduced subsidies on gasoline and other

oil products in response to inflationary pressures. However, both

China and India, which previously had begun to look stretched on a

valuations basis, have now reverted to earnings multiples more in line

with other Asian markets. In Taiwan, after the strong performance

earlier in the year that followed favourable election results, the

market declined sharply. Thailand also declined, but this was due to

political instability.

Thank you for your continued support. We look forward to helping

you continue to meet your financial goals.

Yours sincerely,

Legg Mason Investments Europe Limited

Past performance is no guarantee of future results. The information is

not intended to be a forecast of future events, a guarantee of future

results or investment advice.

Please refer to pages 8 through 120 for a list and percentage breakdown of theholdings in each of the Funds of the Company. Also please note that portfolioholdings are subject to change without notice. The Funds’ portfolio holdingspresented herein are as of August 31, 2008 and therefore may not represent theFunds’ current portfolio holdings.


Western Asset U.S. Money Market Fund

Portfolio of Investments as at August 31, 2008

Face Value(000’s)

CouponRate/Yield%

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Government Agency Discount Notes — 6.83%

Federal Home Loan Bank (FHLB) — 1.64%

35,000 FHLB, Discount Notes 2.132 10/24/2008 34,893 0.72



79,667 1.64

Federal Home Loan Mortgage Corporation (FHLMC) — 3.45%

15,000 FHLMC, Discount Notes 2.555 9/12/2008 14,990 0.31








167,763 3.45

Federal National Mortgage Association (FNMA) — 1.74%

40,000 FNMA, Discount Notes 2.435 11/12/2008 39,809 0.82



84,278 1.74

Total U.S. Government Agency Discount Notes (Cost $331,709) 331,708 6.83

U.S. Government Agency Obligations — 0.62%


10,000 FHLB 4.500 10/24/2008 10,002 0.21

5,000 FHLB † 2.291 12/3/2008 5,000 0.10

15,000 FHLB † 2.355 6/10/2009 15,000 0.31

Total U.S. Government Agency Obligations (Cost $30,002) 30,002 0.62

U.S. Treasury Obligations — 0.62%

U.S. Treasury Notes — 0.31%

15,000 U.S. Treasury Notes 4.500 4/30/2009 15,247 0.31

U.S. Treasury Bills — 0.31%

15,000 U.S. Treasury Bill 1.847 11/13/2008 14,945 0.31

Total U.S. Treasury Obligations (Cost $30,192) 30,192 0.62

U.S. Corporate Bonds and Notes — 1.63%

19,350 Bank of America Corp.,

Senior Unsecured 3.375 2/17/2009 19,398 0.40

500 Bank of Scotland PLC,

Notes 144A † 2.463 10/8/2008 500 0.01

230 Citigroup, Inc., Senior

Unsecured † 2.848 12/26/2008 230 0.01

500 First Tennessee Bank NA,

Senior Unsecured 144A † 2.476 10/16/2008 500 0.01

500 HSBC Finance Corp. † 2.481 10/6/2008 500 0.01

23,000 Wells Fargo Bank NA, Notes 2.480 9/26/2008 23,000 0.47

35,000 Wells Fargo Bank NA,

Notes † 2.561 6/3/2009 35,000 0.72

Total U.S. Corporate Bonds and Notes (Cost $79,128) 79,128 1.63

Commercial Paper — 37.74%

7,000 ABN Amro North America

Finance 2.713 9/8/2008 6,997 0.14

Face Value(000’s)

CouponRate/Yield%

MaturityDate

Value(000’s)$

% ofNetAssetValue

10,000 Allied Irish Bank NA 2.856 9/8/2008 9,995 0.21


58,714 AT&T, Inc. 2.121 9/2/2008 58,714 1.21

15,000 Aust & NZ Banking Group 2.748 9/15/2008 14,985 0.31

15,000 Aust & NZ Banking Group 2.717 11/10/2008 14,923 0.31

25,000 Bank of America Corp. 2.709 11/21/2008 24,851 0.51



36,000 Bank of Ireland PLC 2.671 9/16/2008 35,963 0.74


31,363 BMW US Capital, LLC 2.051 9/3/2008 31,361 0.65

11,000 BNZ International Funding 2.781 9/5/2008 10,997 0.23




50,000 CBA Finance 2.628 9/5/2008 49,989 1.03

30,000 CBA Finance 2.748 9/15/2008 29,970 0.62

20,000 CBA Finance 2.455 9/22/2008 19,973 0.41

15,000 CBA Finance 2.744 10/31/2008 14,933 0.31

15,000 Credit Suisse 3.046 1/16/2009 14,830 0.31

60,000 Danske Corp. 2.466 9/16/2008 59,943 1.24

25,000 Danske Corp. 2.481 9/22/2008 24,966 0.51

25,000 Danske Corp. 2.502 9/22/2008 24,965 0.51

12,000 Danske Corp. 2.515 10/2/2008 11,975 0.25

1,307 Depfa Bank PLC 2.691 9/10/2008 1,306 0.03

7,000 Depfa Bank PLC 2.537 9/15/2008 6,994 0.14

20,000 Depfa Bank PLC 2.537 9/16/2008 19,980 0.41

60,000 Dresdner Bank AG 2.504 9/19/2008 59,929 1.23

24,000 General Electric Capital

Corp. 2.100 9/2/2008 24,000 0.49


Corp. 2.727 9/2/2008 25,000 0.52


Corp. 2.496 10/17/2008 24,923 0.51

23,000 ING (U.S.) Funding LLC 2.985 10/24/2008 22,902 0.47







20,000 Intesa Funding LLC 2.578 10/8/2008 19,949 0.41

20,000 Intesa Funding LLC 2.800 12/1/2008 19,861 0.41

44,266 Issuer Entity LLC † * + 2.671 10/30/2008 43,361 0.89

50,000 JPMorgan Chase & Co. 2.737 12/2/2008 49,659 1.02

30,000 JPMorgan Chase & Co. 2.775 12/9/2008 29,775 0.61

40,000 Kredietbank NA Finance

Corp. 2.446 9/16/2008 39,962 0.82

43,000 Landesbank

BadenWurttemburg 2.505 9/26/2008 42,928 0.88

35,000 Natixis Banque Populaires 2.485 9/15/2008 34,969 0.72

50,000 Nordea Bank NA 2.405 9/15/2008 49,957 1.03

25,000 Nordea Bank NA 2.415 9/16/2008 24,977 0.51

15,000 Nordea Bank NA 2.707 9/26/2008 14,973 0.31

21,100 Pepsi Bottling Group 2.161 9/2/2008 21,100 0.43

12,000 Royal Bank of Scotland 2.474 9/11/2008 11,993 0.25


41,000 San Paolo IMI US

Financial Co. 2.608 10/1/2008 40,914 0.84


The accompanying notes are an integral part of the Financial Statements

8


Portfolio of Investments as at August 31, 2008 – (continued)

Face Value(000’s)

CouponRate/Yield%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Commercial Paper — (continued)

20,000 Skandinav Enskilda Bank 2.744 9/4/2008 19,997 0.41






20,000 Societe Generale 3.046 10/30/2008 19,903 0.41


50,000 Svenska Handelsbanken AB 2.739 10/30/2008 49,781 1.03

35,000 Svenska Handelsbanken AB 2.837 12/5/2008 34,743 0.72

11,000 Swedbank 2.774 9/2/2008 11,000 0.23

25,000 Swedbank 2.473 9/5/2008 24,995 0.52

16,000 Swedbank 2.807 9/9/2008 15,991 0.33

13,000 Swedbank 2.962 9/18/2008 12,983 0.27

16,000 Swedbank 2.496 9/30/2008 15,969 0.33

25,000 Toyota Motor Credit Corp. 2.775 10/29/2008 24,891 0.51

20,000 Toyota Motor Credit Corp. 2.639 11/17/2008 19,889 0.41

12,600 UBS AG 2.506 9/2/2008 12,600 0.26

22,198 UBS AG 2.558 9/3/2008 22,196 0.46

9,000 Unicredito Italiano Bank

Ireland 3.040 9/16/2008 8,989 0.19

11,000 Westpac Banking Corp. 2.593 9/12/2008 10,992 0.23




Total Commercial Paper (Cost $1,832,204) 1,832,204 37.74

Certificates of Deposit — 48.73%

34,000 Abbey National Treasury

Services PLC 2.750 10/30/2008 34,000 0.70


Services PLC 2.840 11/25/2008 12,001 0.25


Services PLC 3.050 2/6/2009 15,000 0.31

30,000 ABN Amro Bank NV 3.010 10/24/2008 30,009 0.62



40,000 American Express Bank 2.640 9/22/2008 40,000 0.82

25,000 Banco Bilbao Vizcaya

Argentaria S.A. 2.750 10/7/2008 25,000 0.52


Argentaria S.A. 2.805 11/3/2008 20,000 0.41


Argentaria S.A. 2.770 11/7/2008 30,000 0.62


Argentaria S.A. 2.750 11/24/2008 16,000 0.33


Argentaria S.A. 2.760 11/24/2008 23,000 0.47


Argentaria S.A. 3.190 12/22/2008 7,000 0.14

15,000 Banco Santander S.A. 3.000 10/23/2008 15,000 0.31




25,000 Bank of Montreal 2.490 9/25/2008 25,000 0.52

15,000 Bank of Montreal 2.510 9/29/2008 15,000 0.31

50,000 Bank of Montreal 2.760 10/31/2008 50,000 1.03

15,000 Bank of Montreal 2.730 11/13/2008 15,000 0.31

Face Value(000’s)

CouponRate/Yield%

MaturityDate

Value(000’s)$

% ofNetAssetValue

10,700 Bank of Montreal 3.050 1/26/2009 10,700 0.22

10,000 Bank of Nova Scotia 2.600 10/1/2008 10,000 0.21



18,000 Bank of Scotland PLC 3.500 10/22/2008 18,010 0.37

20,000 Bank of Tokyo Mitsubishi 2.810 11/6/2008 20,000 0.41





10,000 Barclays Bank PLC 2.850 9/8/2008 10,000 0.21





15,000 Barclays Bank PLC † 2.910 5/13/2009 15,000 0.31

25,000 BNP Paribas 2.700 10/6/2008 25,000 0.52

35,000 BNP Paribas 2.960 10/24/2008 35,000 0.72

20,000 BNP Paribas 2.740 11/24/2008 20,000 0.41

15,000 BNP Paribas 3.060 1/2/2009 15,000 0.31

25,000 BNP Paribas 3.075 2/13/2009 25,000 0.52

20,000 Calyon NY 2.520 9/4/2008 20,000 0.41

40,000 Calyon NY 2.900 10/1/2008 40,000 0.82

10,000 Calyon NY 2.790 10/8/2008 10,000 0.21

13,000 Calyon NY 2.930 10/23/2008 13,002 0.27

25,000 Canadian Imperial Bank 2.840 11/28/2008 25,000 0.52

45,000 Depfa Bank PLC 2.700 10/10/2008 45,000 0.93

10,000 Depfa Bank PLC 2.800 10/10/2008 10,000 0.21

35,000 Depfa Bank PLC 2.910 11/28/2008 35,000 0.72

100,000 Deutsche Bank AG 2.700 11/3/2008 100,000 2.06

40,000 Dexia Credit Local 2.660 9/3/2008 40,000 0.82




50,000 Fortis Bank NY 2.700 9/3/2008 50,000 1.03

40,000 Fortis Bank NY 2.680 9/4/2008 40,000 0.82

25,000 Fortis Bank NY 2.760 10/6/2008 25,000 0.52

15,000 HSBC Bank USA 2.760 11/17/2008 15,000 0.31

22,000 KBC Bank NV 2.660 9/8/2008 22,000 0.45

12,000 KBC Bank NV 2.650 10/6/2008 12,000 0.25

100,000 Lloyds TSB Bank PLC 2.600 10/6/2008 100,000 2.06

25,000 Lloyds TSB Bank PLC 2.610 10/14/2008 25,000 0.51

30,000 Nordea Bank PLC 4.700 10/24/2008 30,042 0.62

15,000 PNC Bank NA † 3.015 2/23/2009 15,000 0.31

25,000 Rabobank Nederland 2.700 9/22/2008 25,000 0.51



25,000 Royal Bank of Canada 2.600 9/3/2008 25,000 0.51








Financial Co. 2.800 11/24/2008 20,000 0.41


Financial Co. 3.210 4/22/2009 5,000 0.10



9



Face Value(000’s)

CouponRate/Yield%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Certificates of Deposit — (continued)

20,000 San Paulo IMI US

Financial Co. 2.800 10/14/2008 20,000 0.41



20,000 Svenska Handlesbanken AB 3.080 12/30/2008 20,000 0.41

18,000 Toronto Dominion Bank 2.860 9/8/2008 18,000 0.37






10,000 UBS AG 5.030 9/15/2008 10,000 0.21

40,000 UBS AG Stamford 2.500 9/15/2008 40,000 0.82

40,000 UBS AG Stamford 2.520 9/30/2008 40,000 0.82

22,000 Unicredito Italiano Bank 2.750 9/10/2008 22,000 0.45

15,000 Unicredito Italiano Bank 4.720 9/15/2008 15,000 0.31

12,000 Wachovia Bank NA 4.500 12/1/2008 12,000 0.25

22,000 Wachovia Bank NA 3.100 12/29/2008 22,000 0.45

24,000 Wells Fargo Bank NA 2.410 9/4/2008 24,000 0.49

35,000 Wells Fargo Bank NA, Note 2.430 9/9/2008 35,000 0.72

Total Certificates of Deposit (Cost $2,365,766) 2,365,766 48.73

Promissory Note — 1.03% (Cost $50,000)

50,000 Goldman Sachs Group, Inc. * 4.750 9/16/2008 50,000 1.03

Time Deposits — 3.27%

13,554 BNP Paribas 2.063 9/2/2008 13,554 0.28

65,000 Calyon Grand Cayman 2.125 9/2/2008 65,000 1.34

80,000 Commerzbank Capital

Funding 2.130 9/2/2008 80,000 1.65

Total Time Deposits (Cost $158,554) 158,554 3.27

Total Investments (Cost $4,877,554) 4,877,554 100.47

Liabilities in Excess of Other Assets (23,003) (0.47)

Total Net Assets $4,854,551 100.00

144A Securities exempt from registration under Rule 144A of the Securities Act of 1933,as amended. These securities may only be resold, in transactions exempt fromregistration, to qualified institutional buyers. At August 31, 2008, these securitiesamounted to $1,000,000 or 0.02% of net assets.

* Illiquid

† Variable rate security. The interest rate shown reflects the rate in effect atAugust 31, 2008.

+ Security is valued in good faith at fair value by or at the discretion of the InvestmentManager.

ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET EXCEPT FOR TIMEDEPOSITS, WHICH ARE DEPOSITS WITH CREDIT INSTITUTIONS.

Analysis of Total Assets% of TotalAssets

Transferable securities and money market instruments admitted to

official stock exchange listing or traded on a regulated market 96.43%

Deposits with credit institutions 3.24%

Other Assets 0.33%

Total Assets 100.00%



10



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Asset – Backed Securities — 7.66%

52 Countrywide Home Equity

Loan Trust, Series 2002 – F,

Class A † 2.817 11/15/2028 35 0.09


Loan Trust, Series 2004 – R,

Class 2A † 2.717 3/15/2030 118 0.31


Loan Trust, Series 2006 –

RES, Class 4F1B 144A † 2.727 5/15/2034 66 0.17

710 Fremont Home Loan Trust,

Series 2006 – B, Class 2A2 † 2.572 8/25/2036 663 1.74

– Keycorp Student Loan Trust,

Series 2005 – A, Class 1A1 † 2.818 12/27/2019 – –

137 Lehman XS Trust,

Series 2005 – 7N,

Class 1A1B † 2.761 12/25/2035 62 0.16


Series 2006 – GP2,

Class 1A1A † 2.531 6/25/2046 460 1.21


Series 2007 – 2N,

Class 3A1 † 2.551 2/25/2037 665 1.75

151 RAAC Series, Series 2006 –

RP1, Class A3 144A † 2.761 10/25/2045 117 0.31

18 Residential Asset Mortgage

Products, Inc., Series 2003 –

RS2, Class AII † 3.141 3/25/2033 10 0.03

19 Residential Asset Securities

Corp., Series 2001 – KS2I,

Class AII † 2.921 6/25/2031 17 0.05

439 SLM Student Loan Trust,

Series 2006 – 5, Class A2 † 2.790 7/25/2017 437 1.15

115 Terwin Mortgage Trust,

Series 2006 – 10SL,

Class A3 † 4.750 10/25/2037 31 0.08

271 Truman Capital Mortgage

Loan Trust, Series 2006 – 1,

Class A 144A † 2.721 3/25/2036 230 0.61

Total Asset – Backed Securities (Cost $3,522) 2,911 7.66

Collateralised Mortgage – Backed Obligations — 31.33%

224 American Home Mortgage

Assets, Series 2006 – 3,

Class 3A12 † 2.651 10/25/2046 139 0.37


Assets, Series 2006 – 4,

Class 1A12 † 2.671 10/25/2046 192 0.50


Investment Trust,

Series 2004 – 1, Class 1A † 2.811 4/25/2044 40 0.11

70 Bank of America Commercial

Mortgage, Inc., Series 2005

– 5, Class A4 † 5.115 10/10/2045 66 0.17

145 Bear Stearns Alt – A Trust,

Series 2004 – 11,

Class 2A2 † 6.682 11/25/2034 110 0.29

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

184 Bear Stearns Alt – A Trust,

Series 2004 – 11,

Class 2A6A † 5.126 11/25/2034 160 0.42

173 Countrywide Alternative


Class 1A1 † 2.721 7/25/2035 110 0.29



Class A3 † 2.811 9/25/2035 176 0.46



Class 1A1 † 2.791 11/20/2035 143 0.38



J12, Class 2A1 † 2.731 8/25/2035 276 0.73

126 Countrywide Home Loan

Mortgage Pass Through

Trust, Series 2004 – 25,

Class 1A1 † 2.791 2/25/2035 88 0.23




Class 2A1 † 2.801 2/25/2035 107 0.28




Class 6A1 † 2.761 3/25/2035 80 0.21




Class 1A2 † 2.751 4/25/2035 105 0.28




Class 1A1 † 2.761 5/25/2035 109 0.29

200 Credit Suisse Mortgage

Capital Certificates,

Series 2006 – C2, Class A3 † 5.847 3/15/2039 187 0.49

560 Credit Suisse Mortgage

Capital Certificates,

Series 2007 – C4, Class A4 † 6.004 7/15/2017 513 1.35

120 CS First Boston Mortgage

Securities Corp., Series 2005

– C2, Class A4 4.832 4/15/2037 111 0.29

340 GE Capital Commercial

Mortgage Corp., Series 2005

– C4, Class A4 † 5.512 11/10/2045 324 0.85

573 GMAC Commercial

Mortgage Securities, Inc.,

Series 1999 – C2, Class A2 6.945 9/15/2033 578 1.52

133 Greenpoint Mortgage

Funding Trust, Series 2005 –

AR1, Class A2 † 2.681 6/25/2045 102 0.27

652 Harborview Mortgage Loan


Class 4A † 5.253 1/19/2035 643 1.69



Class 2A1A † 2.686 5/19/2035 101 0.27



11



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Collateralised Mortgage – Backed Obligations — (continued)



Class 2A1A † 2.616 2/15/2047 594 1.56



Class 2A1B † 2.666 1/25/2047 320 0.84



Class 2A1A † 2.666 9/19/2046 538 1.42

100 JP Morgan Chase

Commercial Mortgage


– CB12, Class A4 4.895 9/12/2037 93 0.24

100 JP Morgan Chase

Commercial Mortgage


– CB13, Class A4 † 5.471 1/12/2043 95 0.25

1,552 LB – UBS Commercial

Mortgage Trust, Series 2001

– C3, Class X 144A † 0.936 6/15/2036 33 0.09

641 Mastr Alternative Loans


Class 7A1 144A † 2.861 11/25/2033 592 1.56

150 Mastr Reperforming Loan


Class 1A1 144A 6.000 8/25/2034 144 0.38

90 Merrill Lynch/Countrywide

Commercial Mortgage Trust,

Series 2007 – 5, Class A4 5.378 8/12/2048 80 0.21

190 Morgan Stanley Capital I,

Series 2005 – HQ6,

Class A4A 4.989 8/13/2042 177 0.47

348 Morgan Stanley Mortgage


8AR, Class 4A2 † 5.363 10/25/2034 319 0.84



11AR, Class 2A3 † 6.625 6/25/2037 179 0.47

857 Residential Accredit Loans,

Inc., Series 2005 – QO3,

Class A1 † 2.861 10/25/2045 559 1.47

724 Residential Accredit Loans,

Inc., Series 2007 – QO1,

Class A1 † 2.611 2/25/2047 450 1.18

16 Structured Adjustable Rate

Mortgage Loan Trust,

Series 2004 – 10,

Class 1A1 † 6.194 8/25/2034 14 0.04



Series 2005 – 19XS,

Class 1A1 † 2.781 10/25/2035 275 0.72

913 Thornburg Mortgage

Securities Trust, Series 2005

– 3, Class A3 † 2.721 10/25/2035 911 2.40

130 Wachovia Bank Commercial

Mortgage Trust, Series 2005

– C18, Class A4 4.935 4/15/2042 121 0.32

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

199 Washington Mutual


Certificates, Series 2004 –

AR13, Class A1A † 2.860 11/25/2034 167 0.44




AR13, Class A1A1 † 2.762 10/25/2045 92 0.24




AR17, Class A1A2 † 2.762 12/25/2045 79 0.21




AR19, Class A1A2 † 2.762 12/25/2045 415 1.09




AR6, Class 2A1A † 2.702 4/25/2045 81 0.21




AR8, Class 1A1A † 2.742 7/25/2045 300 0.79

830 Wells Fargo Mortgage

Backed Securities Trust,

Series 2004 – S, Class A7 † 3.542 9/1/2034 818 2.15

Total Collateralised Mortgage – Backed Obligations

(Cost $15,833) 11,906 31.33

Corporate Bonds and Notes — 30.23%

Agriculture — 0.11%

40 Reynolds American, Inc.,

Senior Secured 7.875 5/15/2009 41 0.11

Airlines — 0.82%

210 Delta Air Lines, Inc., Pass

Through Certificates † 6.619 3/18/2011 200 0.52


Through Certificates 6.821 8/10/2022 77 0.20

42 Northwest Airlines Corp.,

Pass Through Certificates 7.575 3/1/2019 36 0.10

313 0.82

Basic Materials — 0.38%

140 Weyerhaeuser Co., Senior

Unsecured 6.750 3/15/2012 144 0.38

Communications — 0.93%

380 Sprint Capital Corp.,

Company Guaranteed 6.900 5/1/2019 352 0.93

Electric — 0.11%

40 Wisconsin Power & Light

Co., Debentures 6.375 8/15/2037 40 0.11

Energy — 2.97%

120 Anadarko Petroleum Corp.,

Senior Unsecured Notes † 3.176 9/15/2009 119 0.31



12



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Corporate Bonds and Notes — (continued)

Energy — (continued)


Senior Unsecured 5.950 9/15/2016 39 0.10


Senior Unsecured Bonds 6.450 9/15/2036 230 0.61

20 Apache Corp., Senior

Unsecured Notes 6.250 4/15/2012 21 0.06

240 ConocoPhillips Holding Co.,


10 Kerr – McGee Corp.,


190 Pemex Project Funding

Master Trust, Company

Guaranteed 6.625 6/15/2035 188 0.49

245 XTO Energy, Inc., Senior

Notes 7.500 4/15/2012 260 0.68

1,129 2.97

Financials – Banks — 2.79%

30 KeyBank NA, Senior

Unsecured 5.500 9/17/2012 24 0.06

10 Rabobank Capital Funding II,

Bonds 144A † 5.260 Perpetual 9 0.02

60 Rabobank Capital Funding

Trust, Company

Guaranteed 144A † 5.254 Perpetual 52 0.14

130 SunTrust Capital VIII, Bank

Guaranteed † 6.100 12/15/2036 88 0.23

50 Wachovia Capital Trust III,

Bank Guaranteed † 5.800 Perpetual 27 0.07

300 Wachovia Corp.,

Subordinated 5.625 10/15/2016 248 0.65

590 Washington Mutual Bank/

Henderson NV, Subordinated 5.500 1/15/2013 389 1.03

220 Washington Mutual, Inc.,


5 Wells Fargo & Co.,

Subordinated 5.000 11/15/2014 5 0.01

100 Wells Fargo Capital X,


1,060 2.79

Financials – Capital Markets — 1.58%

140 Lehman Brothers Holdings

Capital Trust V, Junior

Subordinated † 5.857 Perpetual 73 0.19

40 Lehman Brothers Holdings,

Inc., Senior Unsecured 6.200 9/26/2014 38 0.10


Inc., Subordinated Notes 6.500 7/19/2017 248 0.65


Inc., Subordinated 6.750 12/28/2017 242 0.64

601 1.58

Financials – Diversified — 11.03%

75 American Express Co.,

Subordinated Debentures † 6.800 9/1/2066 65 0.17

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

300 The Bear Stearns Cos, Inc.,

Subordinated Notes 5.550 1/22/2017 280 0.74



10 Citigroup, Inc., Subordinated 6.125 8/25/2036 8 0.02


Unsecured 5.875 5/29/2037 17 0.04


Unsecured 6.875 3/5/2038 154 0.41

920 Countrywide Financial Corp.,

Senior Subordinated 6.250 5/15/2016 750 1.97

120 Ford Motor Co., Senior

Unsecured 7.450 7/16/2031 62 0.16

380 Ford Motor Credit Co. LLC,






20 General Electric Capital

Corp., Senior Unsecured 5.450 1/15/2013 20 0.05


Corp., Subordinated † 6.375 9/15/2066 201 0.53

110 General Motors Corp.,

Senior Unsubordinated 8.375 7/15/2033 54 0.14

100 Glen Meadow Pass –

Through Trust, Pass Through

Certificates 144A † 6.505 2/12/2067 82 0.22

90 GMAC LLC, Senior

Unsecured 5.625 5/15/2009 81 0.21

120 GMAC LLC, Senior

Unsecured 7.750 1/19/2010 96 0.25

40 GMAC LLC, Notes 7.250 3/2/2011 27 0.07

70 GMAC LLC, Senior

Unsecured 8.000 11/1/2031 38 0.10

80 Goldman Sachs Capital II,

Company Guaranteed † 5.793 Perpetual 50 0.13

120 The Goldman Sachs Group,

Inc., Subordinated 5.625 1/15/2017 109 0.29

210 HSBC Finance Corp., Senior

Unsecured 4.625 9/15/2010 209 0.55

120 JP Morgan & Co., Inc.,

Subordinated † 3.574 2/15/2012 123 0.32

190 Morgan Stanley, Senior

Unsecured Notes 5.625 1/9/2012 187 0.49

30 Morgan Stanley,



Unsecured Notes † 3.235 10/18/2016 25 0.07

113 Residential Capital LLC,

Senior Secured 144A 8.500 5/15/2010 78 0.21


Secured 144A 9.625 5/15/2015 190 0.50

60 SLM Corp., Senior Unsecured 5.000 10/1/2013 49 0.13





13



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Financials – Diversified — (continued)

80 Toyota Motor Credit Corp.,

Senior Unsecured † 2.831 4/7/2010 80 0.21

4,192 11.03

Food — 0.05%

10 The Kroger Co., Company

Guaranteed 6.400 8/15/2017 10 0.03

10 The Kroger Co., Company

Guaranteed 6.150 1/15/2020 10 0.02

20 0.05

Health Care — 0.04%

16 Tenet Healthcare Corp.,


Healthcare – Services — 0.03%

10 WellPoint, Inc., Senior

Unsecured 5.875 6/15/2017 10 0.03

Industrials — 0.45%

30 Eastman Kodak Co., Senior

Unsecured 7.250 11/15/2013 30 0.08

110 General Electric Co., Senior

Unsecured 5.000 2/1/2013 111 0.29

30 Waste Management, Inc.,


171 0.45

Insurance — 2.47%

20 American International

Group, Inc., Senior

Unsecured 5.850 1/16/2018 17 0.04


Group, Inc., Junior

Subordinated 6.250 3/15/2037 86 0.23

365 MetLife, Inc., Junior

Subordinated Bond 6.400 12/15/2036 291 0.77

640 The Travelers Cos, Inc.,

Junior Subordinated

Debentures † 6.250 3/15/2037 545 1.43

939 2.47

Media — 1.79%

490 Comcast Corp., Company

Guaranteed 6.500 1/15/2015 497 1.31


Guaranteed 6.500 1/15/2017 121 0.32

20 Liberty Media LLC,

Debentures 3.750 2/15/2030 10 0.03

10 News America, Inc.,


40 Time Warner, Inc., Company

Guaranteed 6.875 5/1/2012 41 0.11

679 1.79

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Miscellaneous Manufacturing — 0.20%

80 Tyco International

Group S.A., Company

Guaranteed 144A 6.875 1/15/2029 77 0.20

Pharmaceuticals — 0.61%

120 Cardinal Health, Inc., Senior

Unsecured 5.850 12/15/2017 116 0.31

120 Wyeth, Senior Unsecured 5.950 4/1/2037 115 0.30

231 0.61

Retail — 1.47%

149 CVS Pass – Through Trust,

Pass Through

Certificates 144A 5.789 1/10/2026 137 0.36


Pass Through

Certificates 144A 5.880 1/10/2028 8 0.02


Pass Through

Certificates 144A 6.036 12/10/2028 405 1.06

10 Wal – Mart Stores, Inc.,


560 1.47

Technology — 0.16%

60 Electronic Data Systems


Telecommunications — 0.22%

40 Verizon Communications,


40 Verizon Global Funding

Corp., Senior Unsecured

Notes 7.375 9/1/2012 43 0.11

83 0.22

Transportation — 0.26%

120 SeaRiver Maritime, Inc.,


Utilities — 1.76%

10 Dominion Resources, Inc,

Notes 4.750 12/15/2010 10 0.02

30 Dominion Resources, Inc.,

Senior Notes 5.125 12/15/2009 30 0.08

40 Dominion Resources, Inc.,

Senior Notes 5.700 9/17/2012 41 0.11

10 FirstEnergy Corp., Series C,


30 Kinder Morgan Energy

Partners LP, Senior Notes 5.000 12/15/2013 29 0.08


Partners LP, Senior

Unsecured Notes 6.000 2/1/2017 60 0.16


Partners LP, Senior

Unsecured 6.950 1/15/2038 29 0.08

20 Oncor Electric Delivery Co.,

Senior Secured 6.375 1/15/2015 20 0.05



14



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Utilities — (continued)

140 Pacific Gas & Electric Co.,


300 Sonat, Inc., Senior Unsecured 7.625 7/15/2011 306 0.80

670 1.76

Total Corporate Bonds and Notes (Cost $13,104) 11,488 30.23

U.S. Denominated Bonds and Notes — 6.22%

Canada — 0.06%

20 Anadarko Finance Co.,


Cayman Islands — 1.62%

85 Resona Preferred Global

Securities Cayman Ltd.,

Junior Subordinated 144A † 7.191 Perpetual 73 0.19

120 Shinsei Finance Cayman Ltd.,


100 SMFG Preferred Capital USD

1 Ltd., Subordinated 144A † 6.078 Perpetual 81 0.21

383 Systems 2001 AT LLC, Pass

Through Certificates 144A 6.664 9/15/2013 390 1.03

616 1.62

Germany — 0.03%

10 Hypothekenbank in Essen

AG, Pfandbriefe 144A 5.000 1/20/2012 10 0.03

Iceland — 1.25%

100 Glitnir Banki HF, Notes 144A 6.375 9/25/2012 77 0.20

100 Glitnir Banki HF,

Subordinated Notes 144A † 6.693 6/15/2016 60 0.16

260 Kaupthing Bank HF, Senior

Notes 144A * 7.625 2/28/2015 242 0.64

140 Kaupthing Bank HF,

Subordinated Notes 144A 7.125 5/19/2016 95 0.25

474 1.25

Japan — 0.45%

200 Aiful Corp., Notes 144A 5.000 8/10/2010 170 0.45

Jersey Channel Islands — 0.15%

30 HBOS Capital Funding LP,

Bank Guaranteed 144A † 6.071 Perpetual 24 0.06

40 HSBC Capital Funding LP,

Bank Guaranteed 144A † 4.610 Perpetual 36 0.09

60 0.15

Kazakhstan — 0.32%

120 KazMunaiGaz Finance Sub

BV, Company

Guaranteed 144A 8.375 7/2/2013 122 0.32

Kyrgyzstan — 0.31%

120 Vale Overseas Ltd., Company

Guaranteed 6.875 11/21/2036 118 0.31

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Luxembourg — 0.97%

120 Gaz Capital S.A., Senior

Unsecured 144A 6.212 11/22/2016 108 0.29


Unsecured 144A 6.510 3/7/2022 119 0.31


Group S.A., Company

Guaranteed 6.125 11/1/2008 20 0.05


Group S.A., Company

Guaranteed 6.125 1/15/2009 10 0.03


Group S.A., Company

Guaranteed 6.750 2/15/2011 10 0.03


Group S.A., Company

Guaranteed 6.375 10/15/2011 100 0.26

367 0.97

Mexico — 0.15%

60 America Movil SAB de CV,


Netherlands — 0.56%

5 Deutsche Telekom

International Finance BV,


75 Deutsche Telekom


Senior Notes 5.750 3/23/2016 72 0.19

130 Royal KPN NV, Senior

Unsubordinated Notes 8.000 10/1/2010 138 0.36

215 0.56

South Korea — 0.09%

35 Export – Import Bank of

Korea, Notes 144A 5.250 2/10/2014 34 0.09

United Kingdom — 0.26%

120 Royal Bank of Scotland

Group PLC, Junior

Subordinated 144A † 6.990 Perpetual 100 0.26

Total U.S. Denominated Bonds and Notes (Cost $2,636) 2,365 6.22

U.S. Denominated Debt Obligations — 0.75% (Cost $268)

Russia — 0.75%

256 Russian Government

International Bond,

Unsubordinated † 7.500 3/31/2030 286 0.75

U.S. Government Agency Discount Notes — 0.38% (Cost $146)


147 FNMA Discount Notes ? zero

coupon 12/15/2008 146 0.38

U.S. Government Agency Mortgage – Backed Securities — 48.98%


10 FHLMC Corp. 5.450 7/9/2010 10 0.03

100 FHLMC Corp. 4.125 9/27/2013 100 0.26



15



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Government Agency Mortgage – Backed Securities — (continued)

Federal Home Loan Mortgage Corporation (FHLMC) — (continued)

200 FHLMC Corp., 30 Year

September TBA ** 5.500 9/15/2038 197 0.52

1,900 FHLMC Gold, 15 Year

September TBA ** 5.000 9/15/2023 1,881 4.95

1,026 FHLMC Non Gold Pool, Pool

#1N1454 † 5.888 4/1/2037 1,047 2.76

275 FHLMC Non Gold Pool, Pool

#1G2125 † 5.950 8/1/2037 279 0.73

3,514 9.25


2,000 FNMA, 15 Year

September TBA ** 5.500 9/15/2023 2,016 5.30

10 FNMA, Pool #8242, Notes 9.500 12/1/2009 10 0.03

364 FNMA, Pool #745959 5.500 11/1/2036 360 0.95

911 FNMA, Pool #942040 6.000 7/1/2037 921 2.42

94 FNMA, Pool #950385 † 5.861 8/1/2037 95 0.25

253 FNMA, Pool #946803 6.500 9/1/2037 260 0.68

7,500 FNMA, 30 Year

September TBA ** 5.000 9/15/2038 7,209 18.97

280 FNMA, 30 Year

September TBA ** 5.500 9/15/2038 277 0.73

1,000 FNMA, 30 Year

October TBA ** 5.000 10/15/2038 959 2.52

12,107 31.85

Government National Mortgage Association (GNMA) — 7.88%

500 GNMA, 30 Year

September TBA ** 6.000 9/15/2038 507 1.33

4 GNMA, Pool #464051,

Bonds 7.000 7/15/2028 5 0.01

164 GNMA, Pool #557522,

Bonds 7.000 7/15/2031 172 0.45

112 GNMA, Pool #565347,

Bonds 7.000 8/15/2031 118 0.31

130 GNMA, Pool #584344,

Bonds 7.000 4/15/2032 136 0.36

68 GNMA, Pool #615217 5.000 8/15/2033 66 0.17

21 GNMA, Pool #633717 7.000 9/15/2034 23 0.06

612 GNMA, 30 Year

January TBA ** 5.000 1/15/2035 599 1.58

560 GNMA, 30 Year April,

Bonds TBA ** 5.000 4/15/2035 548 1.44

700 GNMA, 30 Year

September TBA ** 6.500 9/15/2037 721 1.90

100 GNMA zero

coupon 9/1/2038 101 0.27

2,996 7.88

Total U.S. Government Agency Mortgage – Backed Securities

(Cost $18,386) 18,617 48.98


Federal Agricultural Mortgage Corp. — 0.16%

60 Federal Agricultural

Mortgage Corp. 3.875 8/19/2011 60 0.16

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Federal Farm Credit Bank — 0.05%

20 Federal Farm Credit Bank 5.125 8/25/2016 21 0.05


10 FHLB 5.000 9/18/2009 10 0.03

70 FHLB 3.625 5/29/2013 69 0.18

79 0.21


100 FHLMC Corp., Notes 5.300 5/12/2020 99 0.26

50 FHLMC Corp. 6.750 9/15/2029 61 0.16

90 FHLMC Corp. 5.625 11/23/2035 88 0.23

248 0.65


10 FNMA 5.000 10/15/2010 10 0.03

110 FNMA 5.250 8/1/2012 102 0.27

281 FNMA 5.000 6/1/2035 272 0.71

130 FNMA 6.000 4/18/2036 133 0.35

517 1.36

Tennessee Valley Authority — 1.27%

430 Tennessee Valley Authority,

Series E, Bonds 6.250 12/15/2017 482 1.27



U.S. Treasury Bonds — 3.56%

100 U.S. Treasury Bond 6.250 8/15/2023 121 0.32

10 U.S. Treasury Bond 5.000 5/15/2037 11 0.03

720 U.S. Treasury Inflationary

Index Bond *** + 2.375 1/15/2027 808 2.12


Index Bond + 1.750 1/15/2028 117 0.31


Index Bond *** + 3.875 4/15/2029 205 0.54


Index Bond *** + 3.375 4/15/2032 92 0.24

1,354 3.56



Index Note + 2.625 7/15/2017 23 0.06

80 U.S. Treasury Note 2.875 6/30/2010 81 0.21

70 U.S. Treasury Note 2.750 7/31/2010 70 0.19

140 U.S. Treasury Note 3.500 5/31/2013 143 0.37

10 U.S. Treasury Note 4.000 8/15/2018 10 0.03

327 0.86

U.S. Treasury Strip Principal — 0.13%

130 U.S. Treasury Strip Principal 4.620 5/15/2030 48 0.13




16



Shares (000’s)

Value(000’s)$

% ofNetAssetValue

Preferred Stock — 0.81%

7 FHLMC Corp. 98 0.26

– FNMA 6 0.02

5 FNMA 76 0.20

6 General Motors Corp. 67 0.17

– Home Ownership Funding

Corp. II 144A 45 0.12

– Home Ownership Funding

Corp. 144A 15 0.04

Total Preferred Stock (Cost $699) 307 0.81

Total Investments Excluding Options (Cost $57,664) 51,162 134.61

Contracts(000’s)

Value(000’s)$

% ofNetAssetValue

Options — 0.13%

Purchased options — 0.15%

600 Credit Default, CDX.NA.

IG.10, Spread 110bps,

Goldman Sachs Group, Inc.,

09/22/2008, Swaption Payer 9 0.02

1 IBM Corp., November 2097,

Call 99.90 51 0.13

60 0.15

Written Options – (0.02)

(1,200) Credit Default, CDX.NA.

IG.10, Spread 155bps,

Goldman Sachs Group, Inc.,

09/22/2008, Swaption Payer (4) (0.01)

– US 1 Year Note, December

2008, Call 96.50 (1) –


2008, Call 117.50 (5) (0.01)

(10) (0.02)

Total Options (Cost $7) 50 0.13

Total Investments (Cost $57,671) 51,212 134.74


Total Net Assets $38,009 100.00


* Illiquid

** Securities purchased on a to-be-announced basis (Note 1).

*** The rate of interest on this type of security is tied to the Consumer Price Index (CPI).The coupon rate is the rate as of August 31, 2008.

+ TIPS


– Amounts designated as " – " are either $0, less than $1,000 or less than 1,000shares.

? Security held as collateral for future contracts trading as at August 31, 2008.

ABBREVIATIONS:

TBA – To Be Announced

TIPS – Treasury Inflation Protected Security

ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET EXCEPT FOR FUTURES,OPTIONS AND SWAPS, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTS DEALTON A REGULATED MARKET.


Transferable securities admitted to an official exchange listing or

traded on a regulated market 76.86%

Financial Derivative Instruments (1.27)%

Other Assets 24.41%




17



Schedule of Futures Contracts

NominalValue

Notional Cost(000’s) $

NotionalValue(000’s) $

UnrealisedGains(000’s) $

UnrealisedLosses(000’s) $

NetUnrealisedGain/(Loss)(000’s) $

% of NetAsset Value

90 day Euro$ June 2009 12 2,906 2,907 1 – 1 –

90 day Euro$ March 2009 44 10,654 10,674 20 – 20 0.05

U.S. 10 Year Note December 2008 (81) 9,331 9,356 – (25) (25) (0.06)

U.S. 5 Year Note (CBT) December 2008 37 4,137 4,142 5 – 5 0.01

U.S. Long Bond December 2008 2 236 235 – (1) (1) –

Total Market Value of Future Contracts 14 $27,264 $27,314 $26 $(26) – –

Schedule of Credit Default Swaps

Counterparty Reference Entity

Buy/Sell

Protection Pay/Receive

Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Barclays Capital, Inc. CDX.NA.IG.HVOL.8, 0.75%, due 6/20/12 Sell 0.75% 06/20/12 (100) $(9)

Barclays Capital, Inc. CDX.NA.IG.HVOL.8, 0.75%, due 6/20/12 Sell 0.75% 06/20/12 (100) (9)

Barclays Capital, Inc. CDX.NA.HVOL.9, 1.40%, due 12/20/12 Sell 1.40% 12/20/12 (750) (68)




Barclays Capital, Inc. CDX.NA.IG.9, 0.80%, due 12/20/17 Sell 0.80% 12/20/17 (610) (27)


Bear Stearns Securities Corp. CDX.NA.IG.8, 0.35%, due 6/20/12 Sell 0.35% 06/20/12 (600) (27)

Bear Stearns Securities Corp. CDX.NA.IG.8, 0.35%, due 6/20/12 Sell 0.35% 06/20/12 (90) (4)

Bear Stearns Securities Corp. HY.9 25-35% Tranche, due 12/20/12 Sell 3.50% 12/20/12 (300) (24)

Bear Stearns Securities Corp. ABX.HE.AAA.07-02, due 1/25/38 Sell 0.76% 01/25/38 (100) (54)

Credit Suisse First Boston, Inc. CDX.NA.IG.HVOL.10, 3.50%, due 6/20/13 Buy 3.50% 06/20/13 100 –

Goldman Sachs Group, Inc. CDX.NA.IG.HVOL.8, 0.75%, due 6/20/12 Sell 0.75% 06/20/12 (100) (9)

Goldman Sachs Group, Inc. Countrywide Financial Convertible Bond, due 2/8/31 Sell 6.00% 09/20/12 (100) 8






Goldman Sachs Group, Inc. CDX.NA.IG.HVOL.10, 3.50%, due 6/20/13 Sell 3.50% 06/20/13 (100) –


Goldman Sachs Group, Inc. CDX9.NA.IG.9, 0.80%, due 12/20/17 Sell 0.80% 12/20/17 (460) (20)

Greenwich Capital Markets, Inc. CDX.NA.IG.8, 0.35%, due 6/20/12 Sell 0.35% 06/20/12 (100) (5)



Greenwich Capital Markets, Inc. CDX.NA.IG.HVOL.8, 0.75%, due 6/20/12 Sell 0.75% 06/20/12 (100) (9)





Greenwich Capital Markets, Inc. Countrywide Home Loans, Inc., 4.00%, due 3/22/11 Sell 0.86% 09/20/12 (100) (9)

Greenwich Capital Markets, Inc. Countrywide Home Loans, Inc., 4.00%, due 3/22/11 Sell 6.00% 09/20/12 (100) 8

Greenwich Capital Markets, Inc. Countrywide Home Loans, Inc., 4.00%, due 9/20/12 Sell 6.10% 09/20/12 (100) 8

Greenwich Capital Markets, Inc. Residential Capital Corp., Senior Notes, 6.50%, due 4/17/13 Sell 4.90% 09/20/12 (100) (73)





Greenwich Capital Markets, Inc. Ryland Group, 5.38%, due 1/15/15 Sell 2.40% 12/20/12 (100) (9)

Lehman Brothers, Inc. CDX.NA.IG.10, 1.55%, due 6/20/13 Buy 1.55% 06/20/13 8500 (45)

Merrill Lynch, Inc. HY.9 23-35% Tranche, due 12/20/12 Sell 3.50% 12/20/12 (500) (39)

$(875)



18




Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Credit Default Swaps- Financial Assets at Fair Value $24

Credit Default Swaps- Financial Liabilities at Fair Value (899)

Credit Default Swaps- Financial Assets and Liabilities at Fair Value $(875)

Schedule of Interest Rate Swaps

Counterparty Floating Rate Index Pay/Receive Fixed Rate

Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Credit Suisse First Boston, Inc. 3 month USD – LIBOR Receive 0.00% 4/06/70 400 $378

Lehman Brothers, Inc. 3 month USD – LIBOR Receive 0.00% 4/06/85 160 151

Lehman Brothers, Inc. 3 month USD – LIBOR Receive 0.00% 4/06/84 310 293

Lehman Brothers, Inc. 3 month USD – LIBOR Pay 0.00% 2/09/85 (2,244) (2,267)

Goldman Sachs Group, Inc. 3 month USD – LIBOR Pay 0.00% 2/09/85 (405) (409)

Goldman Sachs Group, Inc. 3 month USD – LIBOR Pay 0.00% 9/09/84 (2,343) (2,367)

Credit Suisse First Boston, Inc. 3 month USD – LIBOR Pay 0.00% 8/06/69 (1,600) (1,512)

Lehman Brothers, Inc. 3 month USD – LIBOR Pay 0.00% 8/06/84 (640) (604)

Lehman Brothers, Inc. 3 month USD – LIBOR Pay 0.00% 8/06/83 (1,270) (1,198)

Barclays Capital, Inc. 3–Month USD – LIBOR Pay 2.63% 8/05/98 (167) (170)

Barclays Capital, Inc. 3–Month USD – LIBOR Pay 2.65% 8/05/98 (149) (152)

Bear Stearns Securities Corp. 3 month USD – LIBOR Pay 2.72% 9/05/86 (700) (700)

Goldman Sachs Group, Inc. Fixed Receive 3.75% 9/09/84 2,353 2,334

Bear Stearns Securities Corp. Fixed Receive 3.93% 9/05/86 700 698

Barclays Capital, Inc. 6 Month Fixed Receive 4.40% 8/05/98 149 155

Barclays Capital, Inc. Fixed Receive 4.40% 8/05/98 167 173

Lehman Brothers, Inc. Fixed Receive 4.50% 2/09/85 2,221 2,264

Goldman Sachs Group, Inc. Fixed Receive 4.50% 2/09/85 412 409

Credit Suisse First Boston, Inc. Fixed Receive 4.79% 8/06/69 1,600 1,523

Lehman Brothers, Inc. Fixed Receive 4.95% 8/06/83 1,270 1,211

Lehman Brothers, Inc. Fixed Receive 5.14% 8/06/84 640 612

Credit Suisse First Boston, Inc. Fixed Pay 5.22% 4/06/70 (400) (388)

Lehman Brothers, Inc. Fixed Pay 5.25% 4/06/84 (310) (300)

Lehman Brothers, Inc. Fixed Pay 5.33% 4/06/85 (160) (156)

$(22)

Interest Rate Swaps – Financial Assets at Fair Value 10,201

Interest Rate Swaps – Financial Liabilities at Fair Value (10,223)

Interest Rate Swaps – Financial Assets and Liabilities at Fair Value $(22)



19

Western Asset U.S. Core Plus Bond Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Auto Parts & Equipment — 0.07%

USD 10 Visteon Corp., Senior

Unsecured 8.250 8/1/2010 9 0.02

24 Visteon Corp., Senior

Unsecured 144A 12.250 12/31/2016 16 0.05

25 0.07


USD 140 Freeport–McMoRan

Copper & Gold, Inc., Senior

Unsecured 8.375 4/1/2017 149 0.44

Beverages — 0.18%

USD 60 Diageo Capital PLC,


Computers — 0.12%

USD 40 Sungard Data Systems, Inc.,


Diversified — 0.21%

USD 80 Capmark Financial Group,

Inc., Company Guaranteed 5.875 5/10/2012 52 0.15

20 Kansas City Southern

Railway, Company

Guaranteed 8.000 6/1/2015 20 0.06

72 0.21

Electric — 0.17%

USD 55 FirstEnergy Corp., Series C,


Energy — 1.42%

USD 50 Anadarko Petroleum Corp.,

Senior Unsecured Bonds 6.450 9/15/2036 46 0.14

30 Chesapeake Energy Corp.,


45 Dynegy Holdings, Inc., Senior

Unsecured 7.750 6/1/2019 42 0.12

180 Kerr–McGee Corp.,




Guaranteed 6.625 6/15/2035 44 0.13


Unsecured 5.500 6/15/2018 121 0.35

482 1.42


USD 119 Bank of America Corp.,

Junior Subordinated † 8.000 Perpetual 106 0.31

130 SunTrust Capital VIII, Bank

Guaranteed † 6.100 12/15/2036 89 0.26

160 Wachovia Capital Trust III,


100 Wachovia Corp.,

Subordinated 5.625 10/15/2016 83 0.24

110 Wachovia Corp., Senior

Unsecured 5.750 2/1/2018 93 0.28

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

100 Wells Fargo Capital X,


544 1.60

Financials – Capital Markets — 0.81%

USD 170 Lehman Brothers Holdings,

Inc., Subordinated Notes 6.500 7/19/2017 151 0.45


Inc., Subordinated † 6.000 5/3/2032 123 0.36

274 0.81


USD 70 American Express Co.,

Subordinated Debentures † 6.800 9/1/2066 61 0.18



420 Capital One Capital IV,

Company Guaranteed † 6.745 2/17/2037 290 0.85


Unsecured 6.125 11/21/2017 160 0.47


Unsecured 6.875 3/5/2038 96 0.28






Corp., Subordinated † 6.375 9/15/2066 192 0.57

140 Glen Meadow Pass–Through

Trust, Pass Through

Certificates 144A † 6.505 2/12/2067 114 0.34


Unsecured 8.000 11/1/2031 502 1.48



230 JP Morgan Chase Capital

XVIII, Company Guaranteed 6.950 8/17/2036 202 0.59

120 McGuire Air Force Base/Fort

Dix Privitized Military

Housing Project, Bonds 144A 5.611 9/15/2051 102 0.30

130 Merrill Lynch & Co., Inc.,

Notes 5.450 2/5/2013 121 0.36


Unsecured 6.625 4/1/2018 102 0.30


Secured 144A 9.625 5/15/2015 79 0.23



1,610 State of Illinois 5.100 6/1/2033 1,516 4.46

400 Toyota Motor Credit Corp.,


5,245 15.43

Food — 0.27%

USD 90 Safeway, Inc., Senior

Unsecured 5.800 8/15/2012 92 0.27



20



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Corporate Bonds and Notes — (continued)


USD 40 DaVita, Inc., Company

Guaranteed 6.625 3/15/2013 39 0.12

145 HCA, Inc., Senior Secured 9.625 11/15/2016 146 0.43

70 UnitedHealth Group, Inc.,


60 WellPoint, Inc., Senior

Unsecured 5.875 6/15/2017 58 0.17

311 0.92

Insurance — 1.25%

USD 60 American International

Group, Inc., Senior

Unsecured 5.850 1/16/2018 50 0.15

90 Liberty Mutual Group, Inc.,

Company Guaranteed 144A 7.800 3/15/2037 68 0.20

120 MetLife, Inc., Junior

Subordinated 6.400 12/15/2036 96 0.28

70 The Travelers Cos, Inc.,

Junior Subordinated

Debentures † 6.250 3/15/2037 60 0.17

100 Willis North America, Inc.,


60 Willis North America, Inc.,


426 1.25

Leisure & Lodgings — 0.10%

USD 50 Caesars Entertainment, Inc.,


Media — 1.27%

USD 280 Comcast Corp., Company

Guaranteed 6.500 1/15/2017 282 0.83

30 Echostar DBS Corp.,


80 Time Warner Cable, Inc.,



Guaranteed 7.700 5/1/2032 40 0.12

432 1.27


USD 60 Cardinal Health, Inc., Senior

Unsecured 5.850 12/15/2017 58 0.17

130 GlaxoSmithKline Capital,


80 Hospira, Inc., Senior

Unsecured 5.550 3/30/2012 80 0.24

60 Wyeth, Senior Unsecured 5.950 4/1/2037 58 0.17

326 0.96

Pipelines — 1.97%

USD 10 DCP Midstream LLC, Senior

Unsecured 144A 6.750 9/15/2037 9 0.03

420 El Paso Corp., Senior

Unsecured 7.800 8/1/2031 415 1.22

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

100 Energy Transfer Partners LP,


40 SemGroup LP, Senior

Notes 144A * 8.750 11/15/2015 7 0.02

120 Williams Cos., Inc., Senior

Unsecured 8.750 3/15/2032 135 0.40

668 1.97

Real Estate Management & Development — 0.54%

USD 230 iStar Financial, Inc., Senior

Unsecured 5.950 10/15/2013 162 0.48

20 Ventas Realty LP/Ventas

Capital Corp., Company

Guaranteed 9.000 5/1/2012 21 0.06

183 0.54

Retail — 0.22%

USD 79 CVS Pass–Through Trust,

Pass Through

Certificates 144A 6.943 1/10/2030 75 0.22


USD 210 AT&T, Inc., Senior Unsecured 5.500 2/1/2018 205 0.60

210 AT&T, Inc., Senior Unsecured 6.300 1/15/2038 198 0.58





751 2.21

Utilities — 3.00%

USD 260 The AES Corp., Senior

Notes 144A 8.000 6/1/2020 249 0.73

60 Edison Mission Energy,


490 Energy Future Holdings

Corp., Series R, Unsecured 6.550 11/15/2034 343 1.01


Corp., Company

Guaranteed 144A 11.250 11/1/2017 89 0.26


Partners LP, Senior

Unsecured 5.950 2/15/2018 107 0.31


Partners LP, Senior

Unsecured 6.950 1/15/2038 98 0.29

80 Pacific Gas & Electric Co.,


1,020 3.00


U.S. Denominated Debt Obligations — 0.21% (Cost $75)

Mexico — 0.21%

USD 68 Mexico Government

International Bond, Medium

Term Notes 6.750 9/27/2034 73 0.21



21



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



USD 40 FNMA 5.250 8/1/2012 37 0.11

211 FNMA 5.000 6/1/2035 204 0.60

Total U.S. Government Agency Obligations (Cost $239) 241 0.71

U.S. Government Agency Discount Notes — 14.31%

USD – FHLB Discount Notes zero

coupon 1/2/2009 1,090 3.21

3,500 FNMA Discount Notes zero

coupon 11/5/2008 3,484 10.25

292 FNMA Discount Notes? zero

coupon 12/15/2008 290 0.85

Total U.S. Government Agency Discount Notes (Cost $4,866) 4,864 14.31

U.S. Government Agency Mortgage–Backed Securities — 45.59%


USD 400 FHLMC Corp., 30 Year

September TBA ** 5.500 9/15/2038 394 1.16


USD 900 FNMA, 15 Year

September TBA ** 5.500 9/15/2023 907 2.67

2,900 FNMA, 30 Year

September TBA ** 6.000 9/15/2038 2,928 8.61

400 FNMA, 15 Year

September TBA ** 5.000 9/1/2023 396 1.17

6,000 FNMA, 30 Year

September TBA ** 5.000 9/15/2038 5,768 16.97

3,500 FNMA, 30 Year

September TBA ** 5.500 9/15/2038 3,456 10.17

1,600 FNMA, 30 Year

September TBA ** 6.500 9/15/2038 1,646 4.84

15,101 44.43

Total U.S. Government Agency Mortgage–Backed

Securities (Cost $15,235) 15,495 45.59



USD 600 U.S. Treasury Inflationary

Index Bond *** 1.750 1/15/2028 587 1.73


Index Bond *** 3.625 4/15/2028 667 1.96

1,254 3.69



Index Note *** 1.625 1/15/2018 313 0.92

U.S. Treasury Strip Principal — 0.00%

USD 2 United States Treasury Strip

Principal, Series S0 4.480 11/15/2022 1 –


Collateralised Mortgage–Backed Obligations — 13.29%

USD 253 Bear Stearns Alt–A Trust 6.165 5/25/2036 156 0.46

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Loan Trust, Series 2004–AL1,

Class A1 † 2.849 6/25/2038 66 0.20


Loan Trust, Series 2005–J12,

Class 2A1 † 2.731 8/25/2035 103 0.30


Loan Trust, Series 2006–

OA10, Class 4A1 † 2.789 8/25/2046 119 0.35



Trust † 2.751 2/25/2035 40 0.12



Trust † 2.771 3/25/2035 71 0.21

53 Deutsche Alt–A Securities,

Inc. Alternate Loan Trust † 2.961 2/25/2035 44 0.13

130 Deutsche Mortgage

Securities, Inc. 144A † 5.088 6/26/2035 111 0.33

1,043 FHLMC Corp. Non Gold

Pool † 5.599 12/1/2037 1,057 3.11

247 Finance America Mortgage

Loan Trust † 3.511 9/25/2033 205 0.60

75 First Horizon Alternative

Mortgage Securities † 2.831 2/25/2037 41 0.12

169 GMAC Mortgage Corp. Loan

Trust, Series 2006–HE1,

Class A † 2.682 11/25/2036 83 0.24


Funding Trust, Series 2007–

AR1, Class 1A1A † 2.679 2/25/2047 191 0.56


Trust † 3.461 1/25/2016 80 0.23

112 Homestar Mortgage

Acceptance Corp. † 2.911 7/25/2034 91 0.27

342 MASTR Adjustable Rate

Mortgages Trust,

Series 2007–3, Class 12A1 † 2.672 5/25/2047 212 0.62

243 MASTR Adjustable Rate

Mortgages Trust 144A † 5.649 11/25/2035 194 0.57

233 MASTR Reperforming Loan

Trust 144A † 2.811 5/25/2035 205 0.60

200 Merrill Lynch Mortgage

Trust † 5.416 11/12/2037 189 0.56

130 RBSGC Mortgage Pass

Through Certificates † 2.911 1/25/2037 98 0.29

276 Residential Accredit Loans

Inc † 2.821 1/25/2037 168 0.50

150 Residential Asset

Securitization Trust 6.000 7/25/2037 97 0.29


Securitization Trust 6.250 9/25/2037 93 0.27

243 Structured Asset Mortgage

Investments, Inc. † 2.702 2/25/2036 152 0.45



Certificates † 5.761 11/25/2036 187 0.55



22



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Collateralised Mortgage–Backed Obligations — (continued)



Certificates † 2.781 8/25/2045 161 0.47



Certificates, Series 2005–

AR8, Class 1A1A † 2.742 7/25/2045 150 0.44

181 Washington Mutual MSC

Mortgage Pass–Through

Certificates 7.000 7/25/2033 153 0.45

Total Collateralised Mortgage–Backed Obligations (Cost $5,408) 4,517 13.29

Asset–Backed Securities — 5.37%

USD 127 Bear Stearns Second Lien

Trust 144A † 2.681 12/25/2036 85 0.25

236 CDCMC † 3.811 8/25/2033 200 0.59

119 Countrywide Asset–Backed

Certificates † 3.131 7/25/2034 100 0.30


Certificates 5.071 4/25/2035 201 0.59


Funding Trust † 2.861 9/25/2034 120 0.35

340 GSAA Trust † 2.761 3/25/2037 120 0.35

170 GSAA Trust † 2.761 5/25/2037 68 0.20

350 GSAA Trust † 2.781 4/25/2047 203 0.60

191 Morgan Stanley ABS Capital

I † 3.481 10/25/2033 157 0.46

70 Nelnet Student Loan Trust † 4.280 4/25/2024 69 0.20

330 Nomura Asset Acceptance

Corp. 6.431 8/25/2036 135 0.40

130 Ownit Mortgage Loan Asset

Backed Certificates † 2.911 3/25/2036 107 0.32


Corp. 6.349 3/25/2032 77 0.23


Corp. 2004–Ks3 Ai4 3.770 1/25/2032 181 0.53

Total Asset–Backed Securities (Cost $2,060) 1,823 5.37


Canada — 0.18%

60 Rogers Cable, Inc., Senior

Unsecured 6.250 6/15/2013 61 0.18


110 Shinsei Finance Cayman Ltd.,


150 SMFG Preferred Capital USD

1 Ltd., Subordinated 144A † 6.078 Perpetual 122 0.36

188 0.55

France — 0.13%

45 Cie Generale de

Geophysique–Veritas,


Iceland — 1.88%


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue




Unsecured 144A † 7.451 Perpetual 74 0.22


Notes 144A 5.750 10/4/2011 81 0.24



100 Landsbanki Islands HF, Senior

Unsecured 144A 6.100 8/25/2011 87 0.26

170 Landsbanki Islands HF, Junior

Subordinated 144A † 7.431 Perpetual 102 0.30

638 1.88

India — 0.25%

100 ICICI Bank Ltd.,

Unsecured 144A † 6.375 4/30/2022 84 0.25

Japan — 0.49%



168 0.49



BV, Company

Guaranteed 144A 8.375 7/2/2013 102 0.30



Guaranteed 8.250 1/17/2034 56 0.17


Guaranteed 6.875 11/21/2036 69 0.20

125 0.37


70 Telecom Italia Capital S.A.,



Group S.A., Company

Guaranteed 144A 6.875 1/15/2029 145 0.43

208 0.61

Mexico — 0.11%

20 America Movil Sab de CV,

Unsecured 6.375 3/1/2035 19 0.06



37 0.11


50 Deutsche Telekom



70 Royal KPN NV, Senior

Unsubordinated Bonds 8.375 10/1/2030 80 0.24

100 TuranAlem Finance BV, Bank

Guaranteed 144A 8.250 1/22/2037 71 0.21



23



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Denominated Bonds and Notes — (continued)

Netherlands — (continued)

100 TuranAlem Finance BV,


277 0.82

Spain — 0.45%

80 Telefonica Emisiones SAU,


75 Telefonica Emisiones SAU,


156 0.45


160 Barclays Bank PLC, Junior


80 British Telecommunications

PLC, Senior Unsecured 9.125 12/15/2030 94 0.28

222 0.66


Shares (000’s)

Value(000’s)$

% ofNetAssetValue



4 FNMA 58 0.17



Contracts(000’s)

Value(000’s)$

% ofNetAssetValue

Options — (0.05)%

Written Options — (0.05)%


2008, Call 115.50 (3) (0.01)


2008, Call 117.50 (4) (0.01)


2008, Call 117 (4) (0.01)


2008, Call 118 (4) (0.01)


2008, Put 108 – –


2008, Put 111 (1) –

Contracts(000’s)

Value(000’s)$

% ofNetAssetValue


2008, Put 112 (2) (0.01)

Total Options (Cost $(18)) (18) (0.05)





* Illiquid

** Securities purchased on a to-be-announced basis (Note 1).

*** TIPS


– Amounts designated as "–" are either $0, less than $1,000 or less than 1,000shares.


ABBREVIATIONS:

USD - United States Dollar

TBA - To Be Announced

TIPS - Treasury Inflation Protected Security

ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE OR TRADED ON A REGULATED MARKET WITH THE EXCEPTION OFOPTIONS AND FUTURES, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTS DEALTON A REGULATED MARKET.


Transferable securities admitted to an official exchange listing or traded on aregulated market 84.21%

Financial Derivative Instruments 0.02%

Other Assets 15.77%




24




NominalValue






% of NetAsset Value

90 day Euro$ June 2009 9 2,179 2,181 2 – 2 0.01

90 day Euro$ March 2009 25 6,057 6,065 8 – 8 0.02

90 day Euro$ September 2008 22 5,351 5,345 – (6) (6) (0.02)

U.S. 10 Year Note December 2008 (20) 2,309 2,310 – (1) (1) –

U.S. 10 Year Note September 2008 (2) 231 233 – (2) (2) –


U.S. 5 Year Note (CBT) September 2008 10 1,104 1,124 20 – 20 0.06

U.S. Long Bond December 2008 (21) 2,458 2,464 – (4) (4) (0.01)

Total Market Value of Future Contracts 94 $27,623 $27,669 $43 $(13) $30 0.10%



25

Western Asset Euro Core Plus Bond Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue


Eurozone — 48.28%

EUR 86 ABN Amro Bank NV,


280 Anglian Water Services

Financing PLC, European

Medium Term Notes, Senior

Secured 4.625 10/7/2013 269 2.16

98 AstraZeneca PLC, European

Medium Term Notes,

Unsubordinated 5.125 1/15/2015 98 0.79

50 Aviva PLC † 6.875 5/22/2038 46 0.37

150 AXA S.A., Junior


100 Banca Intesa 5.750 5/28/2018 99 0.79

50 Banca Italease S.p.A., Senior

Unsecured † 5.108 11/23/2010 44 0.36

50 Banca Monte dei Paschi di

Siena S.p.A., European

Medium Term Notes,


100 Banco Popolare SC, Junior


54 Banque Federative du Credit

Mutuel, European Medium

Term Notes, Subordinated

Notes † 4.471 Perpetual 43 0.35

50 BAT International Finance

PLC, European Medium Term

Notes, Company Guaranteed 5.375 6/29/2017 47 0.38

100 Bayerische Landesbank,

European Medium Term

Notes, Subordinated Notes 5.750 10/23/2017 95 0.76

202 BES Finance Ltd., European

Medium Term Notes, Bank

Guaranteed † 4.500 Perpetual 158 1.27

60 British Telecommunications

PLC, Senior Unsecured 5.250 1/22/2013 58 0.47

363 Bundesrepublik Deutschland,

Series 03 4.500 1/4/2013 368 2.97


Series 98 4.750 7/4/2028 295 2.37

150 Caisse Nationale des Caisses

d’epargne et de Prevoyance,


Notes, Junior Subordinated † 6.117 Perpetual 119 0.96

40 Central European

Distribution Corp., Secured

Notes 8.000 7/25/2012 39 0.31



50 Clondalkin Acquisition BV,

Senior Secured † 6.958 12/15/2013 43 0.35

200 Commerzbank Capital

Funding Trust I, Bank


150 Credit Agricole S.A.,

Subordinated Notes † 4.130 Perpetual 116 0.94

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue

150 Deutsche Postbank Funding

Trust IV, Subordinated † 5.983 6/29/2049 120 0.96

30 Deutsche Telekom



100 Dexia Credit Local, Junior


19 Eco-Bat Finance PLC,


50 ELM BV for Swiss Life

Insurance & Pension Group,


Notes, Company


100 ELM BV for Swiss

Reinsurance Co., Secured † 5.252 Perpetual 76 0.61

23 Eurohypo Capital Funding

Trust 1, Subordinated † 6.445 Perpetual 19 0.15

40 FCE Bank PLC, Senior

Unsecured † 5.955 9/30/2009 37 0.30

50 Fortis Bank S.A./NV,


136 Fortis Hybrid Financing, Bank


350 French Treasury Note BTAN 3.750 1/12/2013 344 2.77

5 Fresenius Finance BV,


8 Fresenius Medical Care

Capital Trust V, Company

Guaranteed 7.375 6/15/2011 8 0.07

50 Gaz Capital for Gazprom 6.605 2/13/2018 45 0.36

150 Generali Finance BV,


96 GlaxoSmithKline Capital PLC,






Inc., Junior Subordinated 4.750 10/12/2021 116 0.94

100 Groupama S.A.,


120 HBOS PLC, European

Medium Term Notes,




155 HSH Nordbank AG,

Subordinated † 5.266 2/14/2017 125 1.00

50 Hypo Real Estate

International Trust I, Junior


50 Intesa Sanpaolo S.p.A.,

Subordinated 6.625 5/8/2018 49 0.40

50 Investor AB, Senior

Unsubordinated 4.000 3/14/2016 45 0.36

33 ISS Global A/S, Senior

Unsubordinated 4.750 9/18/2010 31 0.25



26



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue


Eurozone — (continued)

50 Koninklijke KPN NV,


Notes, Senior Notes 4.500 3/18/2013 47 0.38

50 Lecta S.A., Senior Secured † 7.589 2/15/2014 37 0.30


Inc., European Medium Term

Notes, Subordinated Notes † 4.625 3/14/2019 103 0.83

262 Lloyds TSB Bank PLC,


50 Mapfre S.A., Subordinated † 5.921 7/24/2037 43 0.34

100 Merrill Lynch & Co., Inc.,


50 Millipore Corp., Senior

Unsecured Notes 5.875 6/30/2016 46 0.37

100 Muenchener

Rueckversicherungs AG,


150 MUFG Capital Finance 2 Ltd.,


50 National Capital Instruments

LLC, Bank Guaranteed † 5.905 9/29/2008 37 0.30

50 Nordic Telephone Co.

Holdings ApS, Senior

Secured 8.250 5/1/2016 45 0.36



Guaranteed 5.500 2/24/2025 128 1.03

50 RBS Capital Trust A, Bank


142 RBS Capital Trust C, Bank


8 Royal Bank of Scotland PLC,


100 RZB Finance Jersey IV Ltd.,


50 SNS Reaal, European

Medium Term Notes,


150 Standard Chartered Bank,


Notes, Subordinated Notes 5.875 9/26/2017 144 1.16

80 Stora Enso Oyj, European

Medium Term Notes Senior

Unsecured 5.125 6/23/2014 67 0.54


Guaranteed 6.250 9/27/2011 40 0.32

72 Unicredito Italiano Capital

Trust III, Company


99 Zagrebacka Banka DD,


Total Corporate Bonds and Notes (Cost E6,888) 5,998 48.28

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue

U.S. Government Agency Mortgage-Backed Securities — 3.79% (Cost E434)


USD 700 FNMA, 30 Year

September TBA * 5.500 9/15/2038 471 3.79

Foreign Corporate Bonds and Notes — 6.44%

DKK – Nordea Kredit

Realkreditaktieselskab,

Mortgage Bonds 4.000 1/1/2038 – –

2,065 Realkredit Danmark A/S,

Series 23D, Mortgage Bonds 6.000 10/1/2041 270 2.17

GBP 100 Alliance & Leicester PLC,

Senior Secured 6.250 9/27/2010 123 0.99

60 Annington Finance No. 4,

Class C1, Secured 8.070 1/10/2023 71 0.57

6 BAT International Finance

PLC, European Medium Term


15 Dignity Finance PLC, Class B,

Secured 8.151 12/31/2030 19 0.15

50 Irish Nationwide Building

Society, European Medium

Term Notes, Senior

Unsubordinated 5.875 12/15/2008 61 0.49

43 Royal & Sun Alliance

Insurance Group, Company


26 SL Finance PLC, Company


50 Standard Life Funding BV,


Notes, Bank Guaranteed † 6.140 Perpetual 53 0.43

33 TCNZ Finance Ltd., European

Medium Term Notes,


18 TCNZ Finance Ltd., Company

Guaranteed 5.625 5/14/2018 20 0.16

50 Telecom Italia S.p.A.,


Notes, Senior

Unsubordinated 5.875 5/19/2023 54 0.44

Total Foreign Corporate Bonds and Notes (Cost E946) 800 6.44

Government Securities — 36.76%

EUR 261 Belgium Government Bond,

Series 44 5.000 3/28/2035 268 2.16

300 Bundesobligation, Series 147 2.500 10/8/2010 291 2.34


Series 03 4.250 1/4/2014 268 2.16


Series 03 4.750 7/4/2034 183 1.48


Series 05 4.000 1/4/2037 282 2.27


Series 94 6.250 1/4/2024 94 0.75

297 Bundesrepublik Deutschland 5.250 1/4/2011 305 2.45

1,400 Deutschland Bundesrepublic 5.250 7/4/2010 1,427 11.48

103 France Government Bond

OAT 5.000 10/25/2011 105 0.85



27



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue

Government Securities — (continued)


OAT 5.750 10/25/2032 367 2.95


OAT 4.750 4/25/2035 20 0.16


OAT 4.000 4/25/2055 376 3.03

100 Slovenia Government

International Bond,

Unsubordinated Notes 6.000 3/24/2010 103 0.83

HUF 9,290 Hungary Government Bond,

Series 12/C 6.000 10/24/2012 36 0.29

PLN 195 Poland Government Bond,

Series 0509 6.000 5/24/2009 58 0.47

600 Poland Government Bond,

Series 0922 5.750 9/23/2022 173 1.40


Series 1013 5.000 10/24/2013 77 0.62


Series 1015 6.250 10/24/2015 95 0.76

USD 60 Turkey Government Bond + 10.000 2/15/2012 39 0.31

Total Government Securities (Cost E4,632) 4,567 36.76


Canada — 0.05%

10 OPTI Canada, Inc., Senior

Secured 8.250 12/15/2014 7 0.05

France — 0.05%

10 Cie Generale de

Geophysique Veritas,


Iceland — 0.82%


Notes 144A ** 7.625 2/28/2015 101 0.82


120 HSBK Europe BV, Bank

Guaranteed 144A 7.250 5/3/2017 68 0.54

Russia — 0.49%

100 Kuznetski Capital for Bank of

Moscow, Subordinated

Notes 6.807 5/10/2017 61 0.49


100 Vedanta Resources PLC 8.750 1/15/2014 68 0.55

United States — 3.99%



10 Community Health Systems,


10 Complete Production

Service, Inc., Company

Guaranteed 8.000 12/15/2016 7 0.05





Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue

10 DRS Technologies, Inc.,



Unsecured 7.750 6/1/2019 6 0.05






Corp., Series Q, Senior

Unsecured 6.500 11/15/2024 5 0.04




Corp., Company

Guaranteed 144A 11.250 11/1/2017 108 0.87

20 Freeport-McMoRan


Unsecured 8.375 4/1/2017 14 0.12

5 Frontier Communications



Unsecured 8.000 11/1/2031 90 0.72

10 Graham Packaging Co., Inc.,


5 HCA, Inc., Senior Unsecured 6.500 2/15/2016 3 0.02


5 The Hertz Corp., Company

Guaranteed 8.875 1/1/2014 3 0.03

10 Idearc, Inc., Company

Guaranteed 8.000 11/15/2016 3 0.02

10 MGM Mirage, Company

Guaranteed 7.625 1/15/2017 6 0.05

5 NRG Energy, Inc., Company

Guaranteed 7.250 2/1/2014 3 0.03


Guaranteed 7.375 1/15/2017 3 0.03

10 Qwest Corp., Senior

Unsecured 6.875 9/15/2033 5 0.04


Senior Secured 6.750 6/15/2017 7 0.05

5 RH Donnelley Corp., Senior

Unsecured 8.875 10/15/2017 2 0.01


Notes 144A ** 8.750 11/15/2015 1 0.01

5 Service Corp. International,





5 Station Casinos, Inc., Senior

Unsecured 7.750 8/15/2016 2 0.02

5 Steel Dynamics, Inc.,




10 Sungard Data Systems, Inc.,




28



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)E

% ofNetAssetValue


United States — (continued)





Guaranteed *** 6.750 4/1/2017 6 0.05


Unsecured 8.250 8/1/2010 1 0.01


Unsecured 144A 12.250 12/31/2016 2 0.01

10 Windstream Corp.,


494 3.99

Total U.S. Denominated Bonds and Notes (Cost E1,022) 806 6.49

Total Investments Excluding Options (Cost E13,922) 12,642 101.76

Options — 0.00% (Cost E5)

Purchased Options: 0.00%

– 3 Month Euribor September 2008, Call 96.00 – –

Total Investments (Cost E13,927) 12,642 101.76

Liabilities in Excess of Other Assets (218) (1.76)

Total Net Assets E12,424 100.00

144A Securities exempt from registration under Rule 144A of the Securities Act of 1933,as amended. These securities may only be resold, in transactions exempt fromregistration, to qualified institutional buyers. At August 31, 2008, these securitiesamounted to E279,877 or 2.25% of net assets.

* Securities purchased on a to-be-announced basis (Note 1).

** Illiquid

*** REITS – Real Estate Investment Trusts

+ The rate of interest on this type of security is tied to the Consumer Price Index (CPI).The coupon rate is the rate as of August 31, 2008.


– Amounts designated as "-" are either E0, less than E1,000 or less than 1,000shares.

ABBREVIATIONS:

DKK - Danish Krone

EUR - Euro

GBP - British Pound

HUF - Hungarian Forint

PLN - Polish Zloty



ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF OPTIONS, FUTURES AND SWAPS WITH ARE FINANCIAL DERIVATIVEINSTRUMENTS DEALT ON A REGULATED MARKET.




Other Assets 8.48%




29




NominalValue

Notional Cost(000’s) EUR

NotionalValue(000’s) EUR

UnrealisedGains(000’s) EUR

UnrealisedLosses(000’s) EUR

NetUnrealisedGain/(Loss)(000’s) EUR

% of NetAsset Value

Euro–Bobl September 2008 (10) 1,067 1,081 – (14) (14) (0.12)

Euro–Bund September 2008 (1) 115 115 – – – –

Long Gilt Future December 2008 (3) 416 416 – – – –

U.S. 10 Year Note December 2008 (1) 78 78 – – – –

U.S. 5 Year Note (CBT) December 2008 (13) 914 915 – (1) (1) (0.01)

Total Market Value of Future Contracts (28) E2,590 E2,605 – E(15) E(15) 0.13%



Buy/Sell


Expiration

Date

Notional

Amount

(000’s) EUR

Value

(000’s) EUR

UBS Warburg ITRX.HVOL.9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 302 E (8)

UBS Warburg ITRX.HVOL.9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 302 (8)

UBS Warburg ITRX.XO.S9, 6.50%, due 6/20/13 Sell 6.50% 06/20/13 (110) (4)

UBS Warburg ITRX.XO.S9, 6.50%, due 6/20/13 Buy 6.50% 06/20/13 37 (1)

E (21)

Credit Default Swaps- Financial Assets at Fair Value –


Credit Default Swaps- Financial Assets and Liabilities at Fair Value E (21)



30

Western Asset Diversified Strategic Income Bond Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


USD 330 ACE Securities Corp.,

Series 2006–SL3, Class A1 † 2.572 6/25/2036 110 0.12

37 Amortizing Residential

Collateral Trust, Series 2002–

BC1M, Class A † 2.741 1/1/2032 25 0.03

52 Bear Stearns Asset Backed

Securities Trust, Series 2001–

3, Class A1 † 2.922 10/27/2032 42 0.05


Certificates, Series 2003–1,

Class 3A † 3.152 6/25/2033 10 0.01


Loan Trust, Series 2002–F,

Class A † 2.817 11/15/2028 29 0.03

252 Fleet Home Equity Loan

Trust, Series 2003–1,

Class A1 † 2.721 1/20/2033 149 0.17


Loan Trust, Series 2006–4SL,

Class A1 † 2.611 3/25/2036 82 0.09

327 RAAC Series, Series 2006–

RP2, Class A 144A † 2.711 2/25/2037 262 0.29

14 Residential Asset Mortgage

Products, Inc., Series 2003–

RS2, Class AII † 3.141 3/25/2033 7 0.01

110 Residential Funding

Securities Corp., Series RP2,

Class A1 144A † 2.911 6/25/2033 85 0.09

320 SACO I, Inc., Series 2006–5,

Class 1A † 2.611 4/25/2036 71 0.08


Class 2A3 † 2.652 6/25/2036 84 0.09


Class A † 2.602 6/25/2036 82 0.09

8 Sail Net Interest Margin

Notes, Series 2003–3,

Class A 144A * 7.750 4/27/2033 – –

36 Wachovia Asset

Securitization, Inc.,

Series 2002–HE2, Class A † 2.902 12/25/2032 27 0.03



USD 600 Bank of America Commercial

Mortgage, Inc., Series 2006–

1, Class A4 † 5.372 9/10/2045 552 0.61

50 Banc of America Mortgage

Securities, Inc., Series 2005–

C, Class 2A1 † 4.703 4/25/2035 47 0.05

228 Bear Stearns Adjustable Rate

Mortgage Trust,

Series 2004–4, Class A6 † 3.652 6/25/2034 225 0.25

295 Commercial Mortgage Pass

Through Certificates,

Series 2001–J2A,

Class A1 144A 5.447 7/16/2034 295 0.33

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



Trust, Series 2006–HYB3,

Class 2A1A † 5.706 5/20/2036 41 0.05

86 Drexel Burnham Lambert

CMO Trust, Series X, Class 3

zero

coupon 12/1/2018 86 0.10


Trust, Series 2005–AR5,

Class 3A1 † 5.063 9/19/2035 48 0.05

859 Heller Financial Commercial

Mortgage Asset,

Series 2000–PH1, Class A2 7.750 11/15/2009 880 0.98

620 JP Morgan Chase

Commercial Mortgage

Securities Corp.,

Series 2006–CB15,

Class A4 † 5.814 6/12/2043 583 0.65

107 JP Morgan Mortgage Trust,

Series 2005–A6, Class 7A1 † 4.963 8/25/2035 98 0.11

61 Mastr Adjustable Rate

Mortgages Trust,

Series 2006–2, Class 3A1 † 4.850 1/25/2036 56 0.06


Investors, Inc., Series 2005–

A1, Class 2A1 † 4.521 12/25/2034 39 0.04


Trust, Series 2006–C1,

Class A4 † 5.841 5/12/2039 253 0.28


Loan Trust, Series 2004–8AR,

Class 4A1 † 5.363 10/25/2034 24 0.03



Series 2004–20, Class 2A1 † 5.188 1/25/2035 210 0.23




AR12, Class 1A1 † 4.833 10/25/2035 48 0.05




AR14, Class 1A4 † 5.050 12/25/2035 102 0.11




AR7, Class A4 † 4.919 8/25/2035 96 0.11

47 Wells Fargo Mortgage


Series 2006–AR8,

Class 2A3 † 5.240 4/25/2036 45 0.05

271 Zuni Mortgage Loan Trust,

Series 2006–OA1, Class A1 † 2.602 8/25/2036 260 0.29



USD 55 Activant Solutions, Inc.,


100 The AES Corp., Senior

Unsecured 9.375 9/15/2010 105 0.12



31



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



Unsecured 8.875 2/15/2011 426 0.47

105 Affinion Group, Inc.,


380 AIG SunAmerica Global

Financing VI, Senior

Secured 144A 6.300 5/10/2011 377 0.42

104 Airplanes Pass Through

Trust, Series D, Company

Guaranteed † + 10.875 3/15/2012 – –

30 Alliance One International,


69 Allied Security Escrow Corp.,


10 American Greetings Corp.,


50 American Tower Corp.,




145 Appleton Papers, Inc.,

Series B, Company

Guaranteed 9.750 6/15/2014 115 0.13

41 Ashtead Capital, Inc., Senior

Secured 144A 9.000 8/15/2016 37 0.04

25 Ashton Woods USA LLC/

Ashton Woods Finance Co.,


30 Bank of America Corp.,


200 Bank of America Corp.,

Subordinated 5.420 3/15/2017 178 0.20

100 Belden & Blake Corp.,

Secured 8.750 7/15/2012 102 0.11

35 Blockbuster, Inc., Company

Guaranteed † 9.000 9/1/2012 28 0.03

110 Boyd Gaming Corp., Senior


35 Buffets, Inc., Company

Guaranteed 12.500 11/1/2014 – –

25 Carrols Corp., Company

Guaranteed 9.000 1/15/2013 21 0.02

282 CCH I Holdings LLC/CCH I

Holdings Capital Corp.,

Senior Secured 11.000 10/1/2015 216 0.24

26 CCH II LLC/CCH II Capital

Corp., Company Guaranteed 10.250 10/1/2013 23 0.03

55 CCM Merger, Inc.,

Notes 144A 8.000 8/1/2013 44 0.05

30 Ceridian Corp., Senior

Unsecured 144A 12.250 11/15/2015 27 0.03

20 Charter Communications

Holdings LLC/Charter

Communications Holdings

Capital Corp., Senior

Unsecured 11.750 5/15/2011 13 0.01

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue





Unsecured 12.125 1/15/2012 13 0.01



110 Cleveland Electric

Illuminating Co., Senior

Unsecured 5.650 12/15/2013 109 0.12

340 Comcast Cable

Communications LLC,



Guaranteed 6.500 1/15/2015 305 0.34


Guaranteed 6.500 1/15/2017 141 0.16



Guaranteed 8.000 12/15/2016 44 0.05

100 ConocoPhillips Holding Co.,


11 Continental Airlines, Inc.,


25 CSC Holdings, Inc., Series B,




100 CSC Holdings, Inc., Senior

Unsecured † 6.750 4/15/2012 98 0.11

190 Daimler Finance North

America LLC, Company

Guaranteed 5.875 3/15/2011 191 0.21

170 DaVita, Inc., Company

Guaranteed 7.250 3/15/2015 167 0.19

70 Devon Energy Corp., Senior

Unsecured 7.950 4/15/2032 81 0.09

70 DI Finance/DynCorp

International, Series B, Senior


25 Dole Food Co., Inc.,







Unsecured 8.750 2/15/2012 91 0.10





20 Education Management LLC/

Education Management







32



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



Unsecured 7.375 12/15/2012 76 0.08


Unsecured 7.750 1/15/2032 683 0.76

250 El Paso Performance–Linked

Trust, Senior

Unsecured 144A 7.750 7/15/2011 253 0.28

10 Electronic Data Systems



Corp., Series P, Senior

Unsecured 5.550 11/15/2014 55 0.06



Unsecured 6.500 11/15/2024 21 0.02




Corp., Company

Guaranteed 144A 11.250 11/1/2017 839 0.93

50 Enterprise Products

Operating LP, Company

Guaranteed † 8.375 8/1/2066 49 0.05

20 EPL Finance Corp., Company

Guaranteed 11.750 11/15/2013 19 0.02

175 EXCO Resources, Inc.,

Secured 7.250 1/15/2011 173 0.19

150 Exelon Corp., Senior

Unsecured 5.625 6/15/2035 129 0.14

5 Expedia, Inc., Company

Guaranteed 144A 8.500 7/1/2016 5 0.01

15 Eye Care Centers of America,


335 FirstEnergy Corp., Series C,



Unsecured 8.875 1/15/2022 31 0.03


Unsecured 6.625 10/1/2028 24 0.03


Unsecured 7.450 7/16/2031 196 0.22


Unsecured 8.900 1/15/2032 24 0.03











150 Freeport–McMoRan


Unsecured 8.375 4/1/2017 159 0.18



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue




Debentures 8.250 7/15/2023 37 0.04



15 Georgia Gulf Corp.,





Unsecured 5.625 5/15/2009 799 0.89

50 GMAC LLC, Senior

Unsecured 6.875 8/28/2012 29 0.03

400 GMAC LLC, Notes 6.750 12/1/2014 217 0.24


Unsecured 8.000 11/1/2031 452 0.50



190 Graphic Packaging

International Corp.,


45 H&E Equipment Services,


30 Hawaiian Telcom

Communications, Inc.,

Series B, Company

Guaranteed 12.500 5/1/2015 5 0.01





Guaranteed 10.500 1/1/2016 203 0.23

190 Hess Corp., Senior

Unsecured 6.650 8/15/2011 200 0.22


Unsecured 7.300 8/15/2031 95 0.11

20 Huntsman International LLC,



Guaranteed 8.000 11/15/2016 14 0.01

75 Inn of the Mountain Gods

Resort & Casino, Senior

Secured 12.000 11/15/2010 53 0.06

125 Interface, Inc., Senior Notes 10.375 2/1/2010 131 0.15

25 Interface, Inc., Company

Guaranteed 9.500 2/1/2014 26 0.03

35 International Coal Group,


250 JPMorgan Chase & Co.,

Subordinated 5.125 9/15/2014 237 0.26


Subordinated 5.150 10/1/2015 28 0.03

25 K Hovnanian Enterprises,

Inc., Senior Notes 8.625 1/15/2017 17 0.02


Railway, Company

Guaranteed 7.500 6/15/2009 51 0.06



33



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


230 Kerr–McGee Corp.,


85 Keystone Automotive

Operations, Inc., Senior


110 L–3 Communications Corp.,


95 Leiner Health Products, Inc.,

Company Guaranteed * 11.000 6/1/2012 5 0.01

10 Level 3 Financing, Inc.,


25 Mandalay Resort Group,


55 Mariner Energy, Inc.,


110 Metals USA, Inc., Senior

Secured 11.125 12/1/2015 115 0.13


Guaranteed 8.375 2/1/2011 45 0.05


Guaranteed 6.750 9/1/2012 43 0.05


Guaranteed 7.625 1/15/2017 41 0.05

160 Mirant North America LLC,


70 Neiman Marcus Group, Inc.,



Senior Secured 7.125 6/1/2028 25 0.03

105 NewPage Corp., Senior

Secured † 9.051 5/1/2012 98 0.11

85 Norcraft Cos. LP/Norcraft

Finance Corp., Company

Guaranteed 9.000 11/1/2011 85 0.09

25 Norcraft Holdings LP/

Norcraft Capital Corp.,

Senior Discount Notes 3.090 9/1/2012 22 0.02


Guaranteed 7.250 2/1/2014 74 0.08


Guaranteed 7.375 2/1/2016 252 0.28

115 NTK Holdings, Inc., Senior

Discount Notes 10.570 3/1/2014 48 0.05

100 Ocwen Capital Trust I,


115 Orion Power Holdings, Inc.,


40 Oxford Industries, Inc.,


80 Penhall International Corp.,

Senior Secured 144A 12.000 8/1/2014 58 0.06

35 Plastipak Holdings, Inc.,

Senior Notes 144A 8.500 12/15/2015 29 0.03

25 Pride International, Inc.,


320 Qwest Communications

International, Inc., Series B,


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

75 Radnor Holdings Corp.,

Senior Notes †+* 11.000 3/15/2010 – –

50 Realogy Corp., Company

Guaranteed 12.375 4/15/2015 23 0.03


Senior Secured 7.250 6/1/2012 186 0.21


Unsecured 8.875 1/15/2016 39 0.04

10 The River Rock

Entertainment Authority,

Senior Secured 9.750 11/1/2011 9 0.01

50 RSC Equipment Rental, Inc.,


35 Rural Cellular Corp., Senior

Notes 9.875 2/1/2010 36 0.04

5 Sbarro, Inc., Company

Guaranteed 10.375 2/1/2015 3 –

60 Sealed Air Corp., Senior

Unsecured 144A 6.950 5/15/2009 61 0.07


Notes 144A * 8.750 11/15/2015 19 0.02

10 Sequa Corp., Company

Guaranteed 144A 11.750 12/1/2015 9 0.01


Guaranteed 144A † 13.500 12/1/2015 9 0.01





15 Snoqualmie Entertainment

Authority, Senior

Secured 144A † 6.875 2/1/2014 11 0.01

180 Sonat, Inc., Senior Unsecured 7.625 7/15/2011 183 0.20



55 Stone Energy Corp., Senior


105 Suburban Propane Partners

LP/Suburban Energy Finance

Corp., Senior Notes 6.875 12/15/2013 96 0.11










Guaranteed 6.875 5/1/2012 82 0.09

25 Tube City IMS Corp.,


175 Turning Stone Resort Casino

Enterprise, Senior

Unsecured 144A 9.125 12/15/2010 172 0.19


Group S.A., Company

Guaranteed 144A 6.875 1/15/2029 50 0.06



34



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


23 Tyco International Ltd. / Tyco

International Finance S.A.,


70 U.S. Investigations Services,

Inc., Company

Guaranteed 144A 10.500 11/1/2015 62 0.07

19 United Air Lines, Inc.,

Series 00–1, Pass Through

Certificates 8.030 7/1/2011 21 0.02



Certificates 7.811 10/1/2009 45 0.05



Certificates 6.831 9/1/2008 42 0.05

90 Vanguard Health Holding

Co. II LLC, Company

Guaranteed 9.000 10/1/2014 88 0.10



Guaranteed ** 6.500 6/1/2016 24 0.03



Guaranteed ** 6.750 4/1/2017 48 0.05


Unsecured 8.250 8/1/2010 14 0.01


Unsecured 144A 12.250 12/31/2016 26 0.03

240 Wachovia Corp.,

Subordinated 5.250 8/1/2014 204 0.23

20 Westlake Chemical Corp.,


180 Weyerhaeuser Co., Senior

Unsecured 6.750 3/15/2012 185 0.21

25 Whiting Petroleum Corp.,

Series A, Company

Guaranteed 7.000 2/1/2014 24 0.03


Unsecured 7.625 7/15/2019 105 0.12


Unsecured 8.750 3/15/2032 478 0.53




Foreign Bonds and Notes — 23.62%

Australian Dollar Bonds — 1.26%

AUD 1,330 Queensland Treasury Corp.,

Series 11G, Local

Government Guaranteed 6.000 6/14/2011 1,134 1.26

British Pound Sterling Bonds — 4.65%

GBP 280 Alliance & Leicester PLC,

Senior Secured 6.250 9/27/2010 504 0.56

75 Constellation Brands, Inc.,

Series CEUR, Company

Guaranteed 8.500 11/15/2009 136 0.15

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

310 Danske Bank A/S, Junior


190 First Hydro Finance PLC 9.000 7/31/2021 358 0.40

177 Greene King Finance PLC † 6.785 3/15/2036 226 0.25

140 HCA, Inc., Senior Notes 8.750 11/1/2010 242 0.27



350 SMFG Preferred Capital GBP

1 Ltd., Junior Subordinated † 6.164 Perpetual 511 0.57

310 Swedbank AB,



Guaranteed 7.125 12/21/2009 595 0.66

130 Virgin Media Finance PLC,


4,186 4.65

Euro Bonds — 14.65%

EUR 70 ABN Amro Bank NV,


370 Akerys Holdings S.A.,


261 Ardagh Glass Finance PLC,


400 Banco Bradesco S.A.,


Note, Subordinated Notes 8.000 4/15/2014 622 0.69



79 Boats Investments BV,

Secured † 12.455 12/15/2015 59 0.07

100 Carlson Wagonlit BV, Senior

Secured † 10.713 5/1/2015 106 0.12

40 Central European

Distribution Corp., Secured

Notes 8.000 7/25/2012 57 0.06



265 Cirsa Capital

Luxembourg S.A., Company

Guaranteed 7.875 7/15/2012 311 0.35


Senior Secured † 6.958 12/15/2013 104 0.12

75 Codere Finance

Luxembourg S.A., Senior

Secured 8.250 6/15/2015 92 0.10

700 Commerzbank Capital



277 Corral Finans AB † 6.463 4/15/2010 346 0.38

384 Edcon Holdings Proprietary

Ltd., Senior Secured † 10.458 6/15/2015 310 0.34

67 Edcon Proprietary Ltd.,

Senior Secured † 8.208 6/15/2014 67 0.07

550 ELM BV for Swiss Life



Notes, Company




35



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Foreign Bonds and Notes — (continued)

Euro Bonds — (continued)



136 Europcar Groupe S.A., Senior

Secured † 8.465 5/15/2013 144 0.16


Unsecured 8.125 5/15/2014 179 0.20


OAT Principal Strip

zero

coupon 10/25/2032 420 0.47



370 General Motors Corp. 8.375 7/5/2033 255 0.28



198 Hellas Telecommunications

Finance, Senior Secured † 12.963 7/15/2015 134 0.15

180 Hellas Telecommunications II

SCA, Subordinated Notes † 10.963 1/15/2015 183 0.20

52 HSH Nordbank AG,

Subordinated † 5.266 2/14/2017 61 0.07

600 HSH Nordbank AG,


86 Impress Holdings BV, Senior

Secured † 8.088 9/15/2013 113 0.13


Subordinated 9.250 9/15/2014 158 0.18

102 Kabel Deutschland GmbH,

Senior Secured 10.750 7/1/2014 151 0.17

290 Lecta S.A., Senior Secured † 7.589 2/15/2014 314 0.35

460 Lloyds TSB Bank PLC,


245 Lottomatica S.p.A., Junior

Subordinated † 8.250 3/31/2066 313 0.35


Unsecured Notes 5.875 6/30/2016 310 0.34

250 Morgan Stanley zero

coupon 12/20/2008 342 0.38

180 M–Real Oyj, Senior

Unsecured † 9.333 12/15/2010 197 0.22

700 MUFG Capital Finance 2 Ltd.,


125 The New Reclamation Group

Party Ltd., Senior Secured 8.125 2/1/2013 154 0.17



Secured 8.250 5/1/2016 86 0.10



Secured † 10.463 5/1/2016 270 0.30

221 NXP BV/NXP Funding LLC,


143 OI European Group BV,


99 Sensata Technologies BV,



170 Smurfit Kappa Funding PLC,


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

50 UPC Holding BV,

Series REGS, Senior

Unsecured 8.000 11/1/2016 64 0.07

245 UPC Holding BV, Senior

Secured 7.750 1/15/2014 329 0.37

197 VAC Finanzierung GmbH,

Senior Secured 9.250 4/15/2016 256 0.28

103 WDAC Subsidiary Corp.,

Senior Notes 8.500 12/1/2014 105 0.12

242 Wind Acquisition

Finance S.A., Senior Secured 9.750 12/1/2015 351 0.39

245 Zlomrex International


13,188 14.65

Hungarian Forint Bond — 3.06%


Series 12/C 6.000 10/24/2012 994 1.10

321,760 Hungary Government Bond,

Series 14/C 5.500 2/12/2014 1,764 1.96

2,758 3.06

Total Foreign Bonds and Notes (Cost $23,869) 21,266 23.62


Canada — 1.48%

90 Abitibi–Consolidated Co. of

Canada, Senior

Secured 144A 13.750 4/1/2011 95 0.11

290 Conoco Funding Co.,


400 Devon Financing Corp. ULC,


300 General Motors Nova Scotia

Finance Co., Company

Guaranteed 6.850 10/15/2008 298 0.33

50 GT Group Telecom, Inc.,

Senior Discount Notes + 13.250 2/1/2010 – –

75 Methanex Corp., Senior

Unsecured 8.750 8/15/2012 79 0.09

25 Novelis, Inc., Company

Guaranteed † 7.250 2/15/2015 23 0.03


Secured 8.250 12/15/2014 30 0.03

40 Rogers Wireless, Inc., Senior


30 Sun Media Corp., Company

Guaranteed 7.625 2/15/2013 28 0.03

1,328 1.48


100 Resona Preferred Global

Securities Cayman Ltd.,




345 0.38



36



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Denmark — 0.02%



Secured 144A 8.875 5/1/2016 19 0.02

France — 0.03%

30 Cie Generale de



Iceland — 1.07%





Notes 144A * 7.625 2/28/2015 353 0.39


Unsecured 144A 6.100 8/25/2011 243 0.27

962 1.07

India — 0.32%

340 ICICI Bank Ltd., Unsecured † 6.375 4/30/2022 289 0.32

Japan — 0.10%


Kyrgystan — 0.55%


Guaranteed 6.875 11/21/2036 496 0.55



Unsecured 144A 6.212 11/22/2016 162 0.18


Unsecured 144A 6.510 3/7/2022 195 0.22

450 TNK–BP Finance S.A.,


120 TNK–BP Finance S.A. 144A 7.875 3/13/2018 107 0.12


Group S.A., Company

Guaranteed 6.125 11/1/2008 30 0.03


Group S.A., Company

Guaranteed 6.000 11/15/2013 189 0.21

1,086 1.21

Mexico — 0.01%

10 Kansas City Southern de

Mexico S.A. de CV, Senior

Unsubordinated 7.625 12/1/2013 10 0.01



Guaranteed 144A 7.250 5/3/2017 621 0.69

30 Montell Finance Co. BV,



Senior Secured 7.875 10/15/2014 37 0.04



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

707 0.79

Russia — 1.71%

417 Kuznetski Capital for Bank of

Moscow, Subordinated

Notes 6.807 5/10/2017 371 0.41

720 RSHB Capital S.A. for OJSC

Russian Agricultural Bank,

Subordinated Notes † 6.970 9/21/2016 687 0.76

1,058 1.17







USD 633 FNMA 5.000 6/1/2035 612 0.68


USD 2 GNMA, Pool #1849 8.500 8/20/2024 2 –

5 GNMA, Pool #489977 6.500 10/15/2028 6 0.01

29 GNMA, Pool #488246 6.500 6/15/2029 30 0.03

48 GNMA, Pool #513003 6.500 7/15/2029 49 0.06

2 GNMA, Pool #518316 7.000 12/15/2030 3 –

26 GNMA, Pool #583599 8.000 5/15/2032 29 0.03

119 0.13

Total U.S. Government Agency Obligations (Cost $722) 731 0.81

U.S. Government Agency Mortgage – Backed Securities — 34.43%


USD 73 FHLMC Corp., Class B 9.500 9/1/2021 14 0.02

2 FHLMC Corp., Pool #E00870 7.000 8/1/2015 2 –

2 FHLMC Corp., Pool #E82313 7.000 1/1/2016 2 –

11 FHLMC Corp., Pool #E00968 7.000 3/1/2016 12 0.01

4 FHLMC Corp., Pool #C59558 6.500 10/1/2031 4 –

5 FHLMC Corp., Pool #C62049 6.500 11/1/2031 5 0.01

422 FHLMC Corp., Pool #C61643 6.500 12/1/2031 438 0.49

441 FHLMC Corp., Pool #A51601 5.000 8/1/2036 425 0.47

902 1.00


USD 6 FNMA, Pool #580137 6.500 5/1/2016 6 0.01

85 FNMA, Pool #589481 5.500 7/1/2016 87 0.10

25 FNMA, Pool #599789 6.500 8/1/2016 26 0.03

7 FNMA, Pool #597049 6.500 9/1/2016 8 0.01

42 FNMA, Pool #615013 6.500 12/1/2016 44 0.05

42 FNMA, Pool #254142 6.500 1/1/2017 44 0.05

813 FNMA, Pool #811499 5.000 9/1/2020 806 0.89

23 FNMA, Pool #850294 5.000 12/1/2020 23 0.02

33 FNMA, Pool #850779 5.000 1/1/2021 33 0.04

367 FNMA, Pool #867183 5.500 2/1/2021 371 0.41

31 FNMA, Pool #896644 5.000 3/1/2021 31 0.03

53 FNMA, Pool #847844 5.000 4/1/2021 52 0.06

652 FNMA, Pool #896085 5.000 5/1/2021 647 0.72

328 FNMA, Pool #871335 5.500 5/1/2021 331 0.37

75 FNMA, Pool #885510 5.000 6/1/2021 75 0.08

195 FNMA, Pool #896597 5.000 8/1/2021 194 0.21



37



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Government Agency Mortgage – Backed Securities — (continued)

Federal National Mortgage Association (FNMA) — (continued)

540 FNMA, Pool #366094 6.000 9/1/2025 549 0.61

1 FNMA, Pool #443272 6.500 9/1/2028 1 –

24 FNMA, Pool #527250 7.000 11/1/2029 25 0.03

5 FNMA, Pool #535159 7.000 2/1/2030 5 0.01

2 FNMA, Pool #568866 7.500 1/1/2031 3 –

44 FNMA, Pool #585629 6.000 5/1/2031 45 0.05

31 FNMA, Pool #576864 6.500 5/1/2031 32 0.04

225 FNMA, Pool #592273 6.000 5/1/2031 228 0.25

2 FNMA, Pool #582665 7.500 6/1/2031 2 –

89 FNMA, Pool #581864 6.500 7/1/2031 92 0.10

13 FNMA, Pool #605525 7.000 7/1/2031 14 0.02

36 FNMA, Pool #587907 7.500 7/1/2031 39 0.04

153 FNMA, Pool #591159 6.000 8/1/2031 155 0.17

15 FNMA, Pool #592826 6.500 8/1/2031 15 0.02

36 FNMA, Pool #605858 6.500 9/1/2031 38 0.04

59 FNMA, Pool #601140 7.000 9/1/2031 62 0.07

12 FNMA, Pool #610437 6.500 10/1/2031 13 0.01

5 FNMA, Pool #254008 7.000 10/1/2031 6 0.01

16 FNMA, Pool #607769 6.500 11/1/2031 17 0.02

42 FNMA, Pool #621634 6.500 1/1/2032 44 0.05

85 FNMA, Pool #632553 6.500 2/1/2032 88 0.10

8,759 FNMA, Pool #745563 5.500 8/1/2034 8,658 9.61

9,547 FNMA, Pool #893365 5.000 7/1/2035 9,186 10.20

32 FNMA, Pool #817685 6.000 11/1/2035 33 0.04

338 FNMA, Pool #745275 5.000 2/1/2036 325 0.36

162 FNMA, Pool #745355 5.000 3/1/2036 155 0.17

650 FNMA, Pool #852644 6.000 3/1/2036 657 0.73

51 FNMA, Pool #879815 6.000 4/1/2036 51 0.06

184 FNMA, Pool #885823 6.000 6/1/2036 186 0.21

113 FNMA, Pool #896247 6.000 7/1/2036 114 0.13

1,538 FNMA, Pool #888030 † 5.500 12/1/2036 1,522 1.69

1,400 FNMA, 30 Year

September TBA *** 5.000 9/15/2038 1,346 1.49

2,600 FNMA, 30 Year

October TBA *** 5.000 10/15/2038 2,493 2.77

28,977 32.18


USD 8 GNMA, Pool #486470 6.500 8/15/2028 9 0.01

13 GNMA, Pool #486516 6.500 9/15/2028 13 0.01

17 GNMA, Pool #781001 7.500 3/15/2029 18 0.02

632 GNMA, Pool #613030 5.000 8/15/2033 617 0.69

413 GNMA, Pool #655340 5.500 5/15/2036 413 0.46

57 GNMA, Pool #620298 6.500 7/15/2036 59 0.06

1,129 1.25

Total U.S. Government Agency Mortgage–Backed Securities

(Cost $30,659) 31,008 34.43

U.S. Treasury Obligations — 0.06% (Cost $49)


USD 50 U.S. Treasury Bond 4.750 2/15/2037 53 0.06

Face Value(000’s)

Value(000’s)$

% ofNetAssetValue

Collective Investment Scheme — 5.93% (Cost $6,107)

36 Legg Mason U.S.$ High Yield Bond Fund, Class M 5,337 5.93

Warrants — 0.00% (Cost $0)

– Cybernet Internet Services International, Inc.,

expiring July, 2009 + – –

– GT Group Telecom, Inc., expiring February,

2010 144A + – –

– IWO Holdings, Inc., expiring January, 2011 144A +* – –

– Merrill Corp., expiring May, 2009 144A + – –

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

Common Stock — 0.00%

2 Aurora Foods, Inc. + – –

61 Home Interiors and Gifts, Inc. 144A + * 1 –

– McLeod USA, Inc., Class A + – –

Total Common Stock (Cost $1) 1 –


– ION Media Networks, Inc., Series B – –


Contracts(000’s)

Value(000’s)$

% ofNetAssetValue

Options — 0.07%

Purchased Options — 0.07%

3,000 6 Month LIBOR, 3.946% Fixed, 10/17/2010,

Goldman Sachs, Swaption Receiver – –

– 90 Day Sterling March 2009, Call 94.50 66 0.07

– GBP Libor September 2008, Call 94.75 – –

66 0.07

Written Options — 0.00%

(700)6 Month LIBOR, 4.48% Fixed, 10/17/2018, Goldman

Sachs, Swaption Receiver (3) –



Other Assets in Excess of Liabilities 1,524 1.69



* Illiquid

** REITS – Real Estate Investment Trusts

*** Securities purchased on a to–be–announced basis (Note 1).






38



ABBREVIATIONS:

AUD – Australian Dollar

EUR – Euro

GBP – British Pound

HUF – Hungarian Forint

USD – United States Dollar


ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF OPTIONS, SWAPS AND FUTURES, WHICH ARE FINANCIAL DERIVATIVEINSTRUMENTS AND COLLECTIVE INVESTMENT SCHEMES.




Collective Investment Scheme 5.23%

Other Assets 11.88%



NominalValue






% of NetAsset Value


U.S. 10 Year Note September 2008 (4) 450 467 – (17) (17) (0.02)



U.S. Long Bond December 2008 3 353 352 – (1) (1) –

Euro–Bobl September 2008 16 2,565 2,539 26 – 26 0.03

Euro–Bund September 2008 9 1,531 1,507 24 – 24 0.03

Total Market Value of Future Contracts (138) $39,661 $39,733 $111 $(63) $48 0.06%



Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Barclays Capital London Nell AF S.A., 8.38%, due 8/15/15 Sell 3.85% 09/20/12 (350) $(144)

Goldman Sachs London Banca per Il Leasing Italease, 4.34%, due 2/8/12 Sell 0.60% 06/20/10 (360) (43)


Goldman Sachs London Countrywide Home Loans, Inc., 4.00%, due 3/22/11 Sell 0.60% 06/20/12 (710) (68)


Goldman Sachs London Rolls Royce Plc, 4.50%, due 3/16/11 Buy 0.15% 06/20/12 1,080 21

Goldman Sachs London Unilever Capital Corp., 7.13%, due 11/1/10 Buy 0.19% 06/20/12 1,080 7

Goldman Sachs London Stora Enso OYJ, Senior Note, 7.38%, due 5/15/11 Sell 0.90% 09/20/12 (691) (95)

Goldman Sachs London ITRAXX HIVOL S9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 1,188 (45)

Royal Bank of Scotland ITRAXX HIVOL S9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 1,222 (46)

$(459)

Credit Default Swaps- Financial Assets at Fair Value 28





39

Western Asset Global Multi Strategy Fund


Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Collateralised Mortgage – Backed Obligations — 0.18%

USD 785 Bayview Financial Acquisition

Trust, Series 2007–A,

Class 1A1 † 6.129 5/28/2037 722 0.16

79 BlackRock Capital Finance

LP, Series 1996–R1,

Class B3 † 9.585 9/25/2026 27 0.01

77 MLCC Mortgage Investors,

Inc., Series 2004–C,

Class A3 † 4.441 7/25/2029 72 0.01

4 OCWEN Residential MBS

Corporation, Series 1998–

R1, Class B4 *þ 7.000 10/25/2040 – –

Total Collateralised Mortgage – Backed Obligations (Cost $875) 821 0.18


Australian Government Issues — 0.89%

AUD 4,650 Queensland Treasury Corp.,

Series 11G 6.000 6/14/2011 3,967 0.89

Brazil Government Issues — 1.83%

BRL 3,000 Brazil Notas do Tesouro

Nacional, Series F 9.810 7/1/2010 1,714 0.38

4,000 Brazil Notas do Tesouro


7,460 Republic of Brazil (JP

Morgan) 9.810 7/1/2010 4,257 0.96

8,176 1.83

British Pound Sterling Bonds — 5.77%

GBP 190 The AES Corp., Senior

Unsecured 8.375 3/1/2011 341 0.08

1,200 Alliance & Leicester PLC,

Senior Secured 6.250 9/27/2010 2,162 0.49

50 Anglo Irish Asset Finance,


240 Annington Finance No. 4,

Class C1, Secured 8.070 1/10/2023 419 0.09

1,450 BNP Paribas, Subordinated † 5.954 Perpetual 2,301 0.52

98 BUPA Finance PLC, Company


900 Credit Agricole S.A.,

Subordinated † 5.136 Perpetual 1,355 0.30

1,350 Danske Bank A/S, Junior


20 Dignity Finance PLC, Class B,

Secured 8.151 12/31/2030 36 0.01

310 First Hydro Finance PLC,

Series BR, Company

Guaranteed 9.000 7/31/2021 585 0.13

664 Greene King Finance PLC † 6.785 3/15/2036 847 0.19

480 HCA, Inc., Senior Notes 8.750 11/1/2010 831 0.19


Bank Guaranteed † 8.208 Perpetual 1,476 0.33

1,430 ING Groep NV,


50 Irish Nationwide Building

Society, Senior

Unsubordinated 5.875 12/15/2008 89 0.02

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

1,000 Resona Bank Ltd.,

Subordinated Notes † 5.986 Perpetual 1,646 0.37

294 Royal & Sun Alliance

Insurance Group, Company


1,230 SMFG Preferred Capital GBP

1 Ltd., Junior Subordinated † 6.164 Perpetual 1,795 0.40

1,310 Swedbank AB,


1,250 TuranAlem Finance BV, Bank

Guaranteed 7.125 12/21/2009 1,982 0.45

1,370 Unicredito Italiano Capital

Trust IV, Company

Guaranteed † 5.396 Perpetual 2,089 0.47

26 United Kingdom Gilt 5.000 9/7/2014 49 0.01

61 United Kingdom Gilt 4.750 9/7/2015 113 0.03



25,702 5.77

Egyptian Government Issues — 1.63%

EGP 19,150 Egypt Treasury Bills,

Series 364 6.270 11/11/2008 3,480 0.78

15,650 Egypt Treasury Bills zero

coupon 4/14/2009 2,689 0.61


coupon 5/5/2009 1,083 0.24

7,252 1.63

Euro Bonds — 15.00%

EUR 1,650 ABN Amro Bank NV,


995 Akerys Holdings S.A.,


950 Ardagh Glass Finance PLC,

Company Guaranteed 7.125 6/15/2017 1,143 0.26

921 AXA S.A., Junior


300 Banca Italease S.p.A. † 5.208 3/14/2012 376 0.08

860 Banca Popolare di Lodi

Investors Trust III, Company


250 Banco Bradesco S.A.,

Subordinated 8.000 4/15/2014 389 0.09



519 Banque Federative du Credit

Mutuel, European Medium

Term Notes, Subordinated

Notes † 4.471 Perpetual 612 0.14

1,700 Bayerische Landesbank,


Notes, Subordinated Notes 5.750 10/23/2017 2,368 0.53

280 BCM Ireland Finance Ltd.,

Senior Secured † 9.965 8/15/2016 349 0.08

395 Boats Investments BV,

Secured † 12.455 12/15/2015 296 0.07

544 Bombardier, Inc., Senior

Unsecured Notes 7.250 11/15/2016 764 0.17



40



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



94 Bundesobligation 144A 3.250 4/17/2009 137 0.03


Series 02, Bonds 5.000 1/4/2012 11 –


Series 99, Bonds 5.375 1/4/2010 60 0.01


Bonds 5.500 1/4/2031 198 0.04

190 Carlson Wagonlit BV, Senior

Secured † 10.713 5/1/2015 201 0.05

482 Cirsa Capital

Luxembourg S.A., Company

Guaranteed 7.875 7/15/2012 566 0.13


Senior Secured † 6.958 12/15/2013 298 0.07

514 Clondalkin Industries BV,

Senior Secured 8.000 3/15/2014 569 0.13

204 Codere Finance

Luxembourg S.A., Senior

Secured 8.250 6/15/2015 251 0.06

2,500 Commerzbank Capital



1,090 Corral Finans AB † 6.463 4/15/2010 1,360 0.31

1,600 Credit Agricole S.A.,


1,000 Deutsche Postbank Funding

Trust IV, Subordinated † 5.983 6/29/2049 1,171 0.26

1,600 Dexia Credit Local, Junior


1,125 Edcon Holdings Proprietary

Ltd., Senior Secured † 10.458 6/15/2015 908 0.20

314 Edcon Proprietary Ltd, Senior

Secured † 8.208 6/15/2014 313 0.07

1,300 ELM BV for Swiss Life



Notes, Company


950 ELM BV for Swiss

Reinsurance Co., Secured † 5.252 Perpetual 1,062 0.24




Secured † 8.465 5/15/2013 588 0.13


Unsecured 8.125 5/15/2014 483 0.11

1,538 FCE Bank PLC, Senior

Unsecured † 5.955 9/30/2009 2,098 0.47

6,020 France Government Bond

OAT Principal Strip

zero

coupon 10/25/2032 2,845 0.64



1,700 General Motors Corp. 8.375 7/5/2033 1,172 0.26



3,275 GMAC International Finance

BV, Company Guaranteed 5.750 5/21/2010 3,652 0.82

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Unsecured 4.750 9/14/2009 889 0.20

440 Hellas Telecommunications

Finance, Senior Secured † 12.963 7/15/2015 297 0.07

510 Hellas Telecommunications II

SCA, Subordinated Notes † 10.963 1/15/2015 520 0.12

1,440 HSBC Capital Funding LP,

Company Guaranteed † 5.369 Perpetual 1,890 0.42

95 HSH Nordbank AG,

Subordinated † 5.266 2/14/2017 112 0.03

1,450 HSH Nordbank AG,


1,450 HT1 Funding GmbH,



Secured † 8.088 9/15/2013 260 0.06


Subordinated 9.250 9/15/2014 646 0.15

374 Kabel Deutschland GmbH,

Senior Secured 10.750 7/1/2014 554 0.12

446 Koninklijke KPN NV, Senior

Notes 4.500 3/18/2013 620 0.14

1,033 Lecta S.A., Senior Secured † 7.589 2/15/2014 1,118 0.25

1,610 Lloyds TSB Bank PLC,


530 Lottomatica S.p.A., Junior

Subordinated † 8.250 3/31/2066 676 0.15

590 LyondellBasell Industries AF

SCA, Senior Secured 8.375 8/15/2015 528 0.12


Unsecured Notes 5.875 6/30/2016 711 0.16

550 Morgan Stanley zero

coupon 12/20/2008 753 0.17

670 M-Real Oyj, Senior

Unsecured † 9.333 12/15/2010 732 0.16

1,806 MUFG Capital Finance 2 Ltd.,

Bank Guaranteed † 4.850 Perpetual 1,957 0.44

450 National Capital Instruments

LLC, Bank Guaranteed † 5.905 9/29/2008 490 0.11

463 The New Reclamation Group

Party Ltd., Senior Secured 8.125 2/1/2013 567 0.13



Secured 8.250 5/1/2016 344 0.08



Secured † 10.463 5/1/2016 840 0.19



375 OI European Group BV,


1,650 Royal Bank of Scotland

Group PLC, Junior


355 Royal KPN NV, Medium Term

Notes, Senior

Unsubordinated 4.750 1/17/2017 475 0.11

243 Sensata Technologies BV,




41



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue




420 Smurfit Kappa Funding PLC,


890 SNS Reaal, European

Medium Term Notes,


388 TRW Automotive, Inc. 6.375 3/15/2014 438 0.10

313 UPC Holding BV,

Series REGS, Senior

Unsecured 8.000 11/1/2016 404 0.09

735 UPC Holding BV, Senior

Secured 7.750 1/15/2014 987 0.22

323 VAC Finanzierung GmbH,

Senior Secured 9.250 4/15/2016 419 0.09

268 WDAC Subsidiary Corp.,

Senior Notes 8.500 12/1/2014 272 0.06



211 Xstrata Finance Canada,


636 Zlomrex International


66,819 15.00

Hungarian Forint Bonds — 2.00%


Series 12/C 6.000 10/24/2012 4,776 1.07

755,000 Hungary Government Bond,

Series 14/C 5.500 2/12/2014 4,139 0.93

8,915 2.00

Indian Government Bonds — 0.86%

INR 177,300 Indian Government Bond

Linked Note (JP Morgan) 8.070 5/31/2010 3,818 0.86

Japanese Yen Bonds — 1.74%

JPY 180,000 Development Bank of Japan 1.750 3/17/2017 1,708 0.38

184,000 European Investment Bank,


278,000 Kreditanstalt fuer

Wiederaufbau, Government

Guaranteed 2.050 2/16/2026 2,407 0.54

204,000 Kreditanstalt fuer

Wiederaufbau, Government

Guaranteed 2.600 6/20/2037 1,937 0.44

7,740 1.74

Mexican Peso Bonds — 0.84%

MXN 37,730 Mexican Bonos 9.000 6/20/2013 3,750 0.84

Russian Ruble Bonds — 0.88%

RUB 11,150 Gazprom OAO, Series A7,

Bonds 6.790 10/29/2009 443 0.10

47,590 Gazprom OAO, Series A8,

Bonds 6.950 8/6/2009 1,894 0.43


Bonds 7.000 10/27/2011 142 0.03

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

35,100 JPMorgan Chase Bank NA,

Unsubordinated 9.500 2/11/2011 1,423 0.32

3,902 0.88

Turkey Government Issues — 2.26%

TRY 12,980 Turkey Government Bond 14.000 1/19/2011 10,053 2.26



USD 560 AAC Group Holding Corp.,

Senior Unsecured 144A

zero

coupon 10/1/2012 532 0.12

235 Activant Solutions, Inc.,


160 Advanced Medical Optics,



Secured 144A 8.750 5/15/2013 59 0.01


Unsecured 8.000 10/15/2017 754 0.17





430 AIG SunAmerica Global

Financing VI, Senior

Secured 144A 6.300 5/10/2011 427 0.10









95 American Standard, Inc.,


825 AMH Holdings, Inc., Senior

Notes

zero

coupon 3/1/2014 553 0.12

30 Anheuser Busch Cos., Inc.,

Debentures 6.500 5/1/2042 27 0.01

27 ANR Pipeline Co.,

Debentures 9.625 11/1/2021 35 0.01


Series B, Company

Guaranteed 9.750 6/15/2014 359 0.08


Secured 144A 9.000 8/15/2016 168 0.04




80 Associated Materials, Inc.,



Secured 8.750 7/15/2012 1,007 0.23


Guaranteed † 9.000 9/1/2012 285 0.06





42



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Guaranteed 12.500 11/1/2014 3 –

1,275 CCH I Holdings LLC/CCH I


Senior Secured 11.000 10/1/2015 979 0.22




Notes 144A 8.000 8/1/2013 169 0.04

5,821 CDX North America High

Yield, Series 8T1, Pass

Through Certificates 144A 7.625 6/29/2012 5,436 1.22

340 Cengage Learning

Acquisitions, Inc., Senior

Notes 144A 10.500 1/15/2015 291 0.07


Unsecured 144A 12.250 11/15/2015 151 0.03





Unsecured 11.750 5/15/2011 122 0.03





Unsecured 12.125 1/15/2012 59 0.01

420 Charter Communications,

Inc., Senior Secured 144A 10.875 9/15/2014 441 0.10









610 CII Carbon LLC, Company

Guaranteed 11.125 11/15/2015 601 0.14

216 Cincinnati Bell Telephone

Co. LLC, Company

Guaranteed 6.300 12/1/2028 166 0.04

240 CMP Susquehanna Corp.,


200 Colorado Interstate Gas Co.,


530 Comcast Cable

Communications LLC,



Guaranteed 6.500 1/15/2015 56 0.01


Guaranteed 6.500 1/15/2017 40 0.01

340 Community Health Systems,




Guaranteed 8.000 12/15/2016 265 0.06

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

10 ConocoPhillips, Company

Guaranteed 4.750 10/15/2012 10 –






Unsecured 7.625 4/1/2011 191 0.04


Unsecured † 6.750 4/15/2012 267 0.06

720 DAE Aviation Holdings, Inc.,



Guaranteed 7.250 3/15/2015 359 0.08

277 Delhaize America, Inc.,


180 Denny’s Holdings, Inc.,


10 Devon Energy Corp., Senior

Unsecured 7.950 4/15/2032 12 –






530 Dollar General Corp.,







Unsecured 7.750 6/1/2019 507 0.11




















Unsecured 7.750 6/15/2010 77 0.02

550 El Paso Corp., Senior Notes 8.050 10/15/2030 552 0.12

1,050 El Paso Corp., Senior

Unsecured 7.800 8/1/2031 1,037 0.23

200 El Paso Natural Gas Co.,




43



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Corp., Series P, Senior

Unsecured 5.550 11/15/2014 23 0.01



Unsecured 6.500 11/15/2024 93 0.02

1,390 Energy Future Holdings



Corp., Company

Guaranteed 144A 11.250 11/1/2017 2,814 0.63



Guaranteed † 8.375 8/1/2066 227 0.05


Guaranteed 11.750 11/15/2013 227 0.05


Secured 7.250 1/15/2011 460 0.10


Guaranteed 144A 8.500 7/1/2016 39 0.01



2,210 Ford Motor Credit Co. LLC,






200 Forest City Enterprises, Inc.,


1,630 Freeport-McMoRan


Unsecured 8.375 4/1/2017 1,728 0.39

35 Freescale Semiconductor,



Capital Trust IV, Company

Guaranteed 7.875 6/15/2011 51 0.01




Corp., Debentures 7.050 10/1/2046 76 0.02


Corp., Notes 6.750 3/15/2032 40 0.01








Unsecured 6.875 8/28/2012 194 0.04

2,270 GMAC LLC, Senior

Unsecured 8.000 11/1/2031 1,224 0.28




Inc., Senior Unsecured 6.875 1/15/2011 21 –

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue








175 Hawaiian Telcom


Series B, Company

Guaranteed 12.500 5/1/2015 31 0.01

90 Hawker Beechcraft

Acquisition Co LLC/Hawker

Beechcraft Notes Co,



Acquisition Co. LLC/Hawker

Beechcraft Notes Co.,


30 HCA, Inc., Notes 9.000 12/15/2014 28 0.01



1,065 HCA, Inc., Senior Secured 9.625 11/15/2016 1,074 0.24


Guaranteed 8.875 1/1/2014 234 0.05


Guaranteed 10.500 1/1/2016 627 0.14


Unsecured 6.650 8/15/2011 326 0.07


Unsecured 7.875 10/1/2029 337 0.08

20 HSBC Finance Corp., Senior

Unsecured 6.500 11/15/2008 20 –


Guaranteed 8.000 11/15/2016 292 0.07



Secured 12.000 11/15/2010 492 0.11




80 Ipalco Enterprises, Inc.,

Senior Secured 8.625 11/14/2011 83 0.02

1,050 John Deere Capital Corp.,



Subordinated 5.750 1/2/2013 20 –


Railway, Company

Guaranteed 7.500 6/15/2009 233 0.05

40 Kellogg Co., Series B, Senior

Unsecured 7.450 4/1/2031 46 0.01




200 Kraft Foods, Inc., Senior

Unsecured 4.125 11/12/2009 199 0.05



44



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


620 L-3 Communications Corp.,

Series B, Company

Guaranteed 6.375 10/15/2015 594 0.13


Company Guaranteed ** 11.000 6/1/2012 31 0.01

260 Leucadia National Corp.,








1,300 McDonald’s Corp., Senior

Unsecured 5.350 3/1/2018 1,287 0.29


Secured 11.125 12/1/2015 502 0.11

125 MetroPCS Wireless, Inc.,



Guaranteed 8.500 9/15/2010 5 –


Guaranteed 8.375 2/1/2011 231 0.05


Guaranteed 7.625 1/15/2017 367 0.08

150 Michaels Stores, Inc.,




250 Morgan Stanley,


1,850 Morgan Stanley, Senior

Unsecured 6.625 4/1/2018 1,719 0.39






Senior Secured 7.125 6/1/2028 218 0.05


Secured † 9.051 5/1/2012 717 0.16

100 Nextel Communications,

Inc., Series D, Company

Guaranteed 7.375 8/1/2015 81 0.02

270 Noranda Aluminium Holding

Corp., Senior Unsecured † 8.578 11/15/2014 215 0.05



Guaranteed 9.000 11/1/2011 368 0.08




270 Nortek, Inc., Senior


1,050 NRG Energy, Inc., Company

Guaranteed 7.375 2/1/2016 1,037 0.23


Guaranteed 7.375 1/15/2017 15 –

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Discount Notes 10.570 3/1/2014 263 0.06





320 Parker Drilling Co., Senior

Notes 9.625 10/1/2013 334 0.08

4,096 Pemex Project Funding


Guaranteed 6.625 6/15/2035 4,043 0.91


Senior Secured 144A 12.000 8/1/2014 407 0.09

210 PetroHawk Energy Corp.,



Senior Notes 144A 8.500 12/15/2015 129 0.03










International, Inc., Company

Guaranteed 7.250 2/15/2011 250 0.06


Unsecured 7.875 9/1/2011 238 0.05


Unsecured 7.500 10/1/2014 186 0.04


Guaranteed 12.375 4/15/2015 294 0.07

1,730 Residential Capital LLC,

Secured 144A 9.625 5/15/2015 571 0.13


Series A 1, Senior Secured 6.500 7/15/2010 165 0.04

900 RH Donnelley Corp., Series A

2, Senior Discount Notes 6.875 1/15/2013 493 0.11


Unsecured 8.875 10/15/2017 126 0.03

350 The River Rock

Entertainment Authority,

Senior Secured 9.750 11/1/2011 326 0.07




Notes 9.875 2/1/2010 205 0.05



430 Ryerson, Inc., Senior

Secured 144A 12.000 11/1/2015 421 0.09

1,170 Safeway, Inc., Senior

Unsecured 6.350 8/15/2017 1,193 0.27


Guaranteed 10.375 2/1/2015 135 0.03


Notes 144A ** 8.750 11/15/2015 92 0.02



45



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Guaranteed 144A 11.750 12/1/2015 141 0.03


Guaranteed 144A † 13.500 12/1/2015 141 0.03





320 Sierra Pacific Resources,



1,030 SLM Corp., Senior Unsecured 5.375 5/15/2014 853 0.19




Authority, Senior

Secured 144A † 6.875 2/1/2014 205 0.05

285 Southern Natural Gas Co.,



Company Guaranteed 7.625 1/30/2011 10 –




Unsecured 7.750 8/15/2016 209 0.05














185 Swift Transportation Co.,

Inc., Senior Secured 144A † 10.554 5/15/2015 65 0.01








Guaranteed 6.875 5/1/2012 123 0.03

255 Tube City IMS Corp.,



Enterprise, Senior

Unsecured 144A 9.125 9/15/2014 63 0.01


Inc., Company

Guaranteed 144A 10.500 11/1/2015 356 0.08

358 U.S. Oncology Holdings, Inc.,


Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Series 00-2, Pass Through

Certificates 7.811 10/1/2009 168 0.04



Certificates 7.032 10/1/2010 108 0.02



Certificates 7.186 4/1/2011 615 0.14

1,060 UnitedHealth Group, Inc.,


80 Universal Hospital Services,

Inc., Senior Secured † 6.303 6/1/2015 74 0.02



1,010 Vanguard Health Holding

Co. II LLC, Company

Guaranteed 9.000 10/1/2014 992 0.22



Guaranteed 8.750 5/1/2009 61 0.01



Guaranteed 9.000 5/1/2012 32 0.01



Guaranteed *** 6.750 4/1/2017 223 0.05


Inc., Senior Unsecured 7.750 12/1/2030 5 –


Inc., Bonds 6.900 4/15/2038 455 0.10

40 Verizon Global Funding


15 Verizon New York, Inc.,

Series B, Debentures 7.375 4/1/2032 15 –

170 Visant Holding Corp., Senior

Notes 8.750 12/1/2013 162 0.04


Unsecured 8.250 8/1/2010 134 0.03


Unsecured 144A 12.250 12/31/2016 279 0.06

170 W&T Offshore, Inc.,






112 Westlake Chemical Corp.,



Series A, Company

Guaranteed 7.000 2/1/2014 418 0.09


Unsecured 7.500 1/15/2031 61 0.01

1,265 Williams Cos., Inc., Senior

Unsecured 8.750 3/15/2032 1,423 0.32





46



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Notes 7.500 4/15/2012 42 0.01



Argentina — 0.11%

470 Telefonica de Argentina S.A.,


Bermuda — 0.19%

635 Intelsat Jackson Holdings

Ltd., Company Guaranteed 11.250 6/15/2016 666 0.15

210 Petroplus Finance Ltd.,


852 0.19

British Virgin Islands — 0.63%

590 Galaxy Entertainment

Finance Co. Ltd., Company

Guaranteed † 8.133 12/15/2010 566 0.13

1,170 GTL Trade Finance, Inc.,


996 GTL Trade Finance, Inc.,

Company Guaranteed 144A 7.250 10/20/2017 1,003 0.23

2,748 0.63

Canada — 0.67%

770 Abitibi-Consolidated Co. of

Canada, Senior

Secured 144A 13.750 4/1/2011 808 0.18

390 Conoco Funding Co.,


10 Devon Financing Corp. ULC,

Company Guaranteed 6.875 9/30/2011 11 –

40 General Motors Nova Scotia

Finance Co., Company

Guaranteed 6.850 10/15/2008 40 0.01


Unsecured 8.750 8/15/2012 252 0.06


Guaranteed † 7.250 2/15/2015 357 0.08


Secured 7.875 12/15/2014 326 0.07


Secured 8.250 12/15/2014 230 0.05

20 Rogers Wireless, Inc., Senior

Subordinated Notes 8.000 12/15/2012 21 –


Guaranteed 7.625 2/15/2013 559 0.13

3,020 0.67


250 Odebrecht Finance Ltd.,




320 0.08

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Denmark — 0.04%



Secured 144A 8.875 5/1/2016 193 0.04

France — 0.06%

250 Cie Generale de

Geophysique Veritas,


Germany — 0.18%

240 ABN Amro Bank/

Deutschland for OAO

Gazprom, Secured 9.625 3/1/2013 259 0.06

510 ABN Amro Bank/

Deutschland for OAO

Gazprom, Secured 144A 9.625 3/1/2013 553 0.12

812 0.18

Iceland — 0.30%






Unsecured 144A 6.100 8/25/2011 617 0.14

1,319 0.30

India — 0.11%


388 ICICI Bank Ltd.,

Unsecured 144A † 6.375 4/30/2022 326 0.07

496 0.11

Ireland — 0.06%

290 VIP Finance Ireland Ltd. for

OJSC Vimpel

Communications,

Bonds 144A 8.375 4/30/2013 280 0.06



BV, Company

Guaranteed 144A 8.375 7/2/2013 903 0.20

Kyrgystan — 0.68%


Guaranteed 8.250 1/17/2034 387 0.09

2,681 Vale Overseas Ltd., Company

Guaranteed 6.875 11/21/2036 2,627 0.59

3,014 0.68


630 Evraz Group S.A.,

Notes 144A 8.875 4/24/2013 613 0.14

280 Evraz Group S.A.,

Notes 144A 9.500 4/24/2018 268 0.06


Unsecured 144A 6.510 3/7/2022 330 0.07

170 Gaz Capital S.A. 7.288 8/16/2037 146 0.03



47



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Luxembourg — (continued)

265 Gazstream SA for OAO

Gazprom, Company

Guaranteed 144A 5.625 7/22/2013 263 0.06

390 TNK-BP Finance S.A.,


3,260 TNK-BP Finance S.A. 144A 7.875 3/13/2018 2,910 0.65


Group S.A., Company

Guaranteed 6.375 10/15/2011 523 0.12

870 UBS Luxembourg S.A. for

OJSC Vimpel

Communications 8.250 5/23/2016 804 0.18


Finance S.A., Senior

Secured 144A 10.750 12/1/2015 405 0.09

6,611 1.48

Mali — 0.04%

181 Teekay Corp., Senior Notes 8.875 7/15/2011 188 0.04

Mexico — 0.44%

577 Axtel SAB de CV, Company

Guaranteed 11.000 12/15/2013 616 0.14


Guaranteed 7.625 2/1/2017 78 0.02

1,050 Axtel SAB de CV, Senior

Unsecured Notes 144A 7.625 2/1/2017 1,021 0.23

170 Banco Mercantil del

Norte S.A., Subordinated

Notes 144A † 6.135 10/13/2016 166 0.04

41 Desarrolladora Homex S.A.B.

de CV, Company

Guaranteed 7.500 9/28/2015 41 0.01

1,922 0.44


520 Arpeni Pratama Ocean Line

Investment BV, Secured 8.750 5/3/2013 417 0.09


Guaranteed 144A 9.250 10/16/2013 469 0.11

1,490 HSBK Europe BV, Bank

Guaranteed 144A 7.250 5/3/2017 1,233 0.28






Guaranteed 144A 8.250 1/22/2037 552 0.12

1,066 TuranAlem Finance BV,


3,749 0.84

Russia — 0.83%

770 Lukoil International Finance

BV 6.356 6/7/2017 689 0.15


BV, Company Guaranteed 6.656 6/7/2022 723 0.16

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Senior Notes 144A 7.175 5/16/2013 138 0.03



Notes 144A 7.125 1/14/2014 526 0.12




1,222 RSHB Capital S.A. for OJSC


Senior Secured 144A 6.299 5/15/2017 1,085 0.24

310 Russian Government

International Bond,

Unsubordinated † 7.500 3/31/2030 346 0.08

3,726 0.83

Thailand — 0.29%

1,630 True Move Co. Ltd.,


Venezuela — 0.23%

970 Petrozuata Finance, Inc.,



900 Vedanta Resources PLC,

Senior Unsecured 144A 8.750 1/15/2014 896 0.20



1,406 0.31


U.S. Denominated Debt Obligations — 6.25%

Argentina — 0.18%

USD 1,051 Argentina Bonos, Series VII 7.000 9/12/2013 788 0.18

Brazil — 1.24%

USD 199 Brazilian Government

International Bond 7.125 1/20/2037 222 0.05

4,006 Brazilian Government

International Bond,

Unsubordinated Bonds 11.000 8/17/2040 5,292 1.19

5,514 1.24

Canada — 0.05%

USD 120 Canadian Government

Bond + 4.000 12/1/2031 233 0.05

Colombia — 0.36%

USD 1,473 Colombia Government

International Bond 7.375 9/18/2037 1,614 0.36

Ecuador — 0.16%

USD 361 Ecuador Government


435 Ecuador Government

International Bond 144A † 10.000 8/15/2030 385 0.09

704 0.16



48



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Denominated Debt Obligations — (continued)

Mexico — 0.28%

USD 610 Kansas City Southern de


Notes 9.375 5/1/2012 637 0.14

624 Mexico Government


1,243 0.28


USD 1,890 ATF Capital BV, Bank

Guaranteed 144A 9.250 2/21/2014 1,866 0.42

Panama — 0.40%

USD 274 Panama Government


1,361 Panama Government


1,753 0.40

Peru — 0.02%

USD 1 Peruvian Government

International Bond 8.750 11/21/2033 1 –

97 Peruvian Government


101 0.02

Turkey — 2.08%

USD 4,110 Turkey Government Bond 10.000 2/15/2012 3,935 0.88

59 Turkey Government




5,286 Turkey Government


9,291 2.08

Venezuela — 1.06%

USD 702 Bolivarian Republic of

Venezuela 9.375 1/13/2034 611 0.14

197 Republic of Venezuela 144A 10.750 9/19/2013 202 0.04

443 Republic of Venezuela 8.500 10/8/2014 412 0.09

4,190 Republic of Venezuela,

Unsecured 5.750 2/26/2016 3,237 0.73


4,728 1.06

Total U.S. Denominated Debt Obligations (Cost $28,379) 29,835 6.25



USD 390 U.S. Treasury Bond 5.375 2/15/2031 440 0.10

1,610 U.S. Treasury Bond 4.500 2/15/2036 1,626 0.36

4,800 U.S. Treasury Inflationary

Index Bond * + 3.875 4/15/2029 8,193 1.84

10,259 2.30

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


USD 3,260 U.S. Treasury Inflationary

Index Note * + 2.000 1/15/2016 3,712 0.83

300 U.S. Treasury Note 3.875 5/15/2010 309 0.07

100 U.S. Treasury Note 4.500 4/30/2012 106 0.03

30 U.S. Treasury Note 4.250 8/15/2014 32 0.01

367 U.S. Treasury Note 5.125 5/15/2016 406 0.09

4,565 1.03


U.S. Government Agency Mortgage-Backed Securities — 21.67%


USD 618 FHLMC Corp., Pool #A51601 5.000 8/1/2036 596 0.14

3,621 FHLMC Corp., Pool #G02648 5.500 12/1/2036 3,576 0.80

10,380 FHLMC Corp., Pool #G03982 5.000 3/1/2038 9,980 2.24

14,152 3.18


USD 35 FNMA, Pool #489454 5.000 1/1/2014 35 0.01

1,130 FNMA, Pool #255765 5.000 7/1/2020 1,121 0.25

71 FNMA, Pool #255806 5.000 8/1/2020 70 0.02

462 FNMA, Pool #829094 5.500 10/1/2020 466 0.11

21 FNMA, Pool #784278 5.500 11/1/2020 21 0.01

40 FNMA, Pool #850915 5.500 12/1/2020 40 0.01

347 FNMA, Pool #845151 5.500 1/1/2021 350 0.08

393 FNMA, Pool #879980 5.500 3/1/2021 396 0.09

65 FNMA, Pool #868609 5.000 4/1/2021 65 0.01

698 FNMA, Pool #880435 5.000 5/1/2021 692 0.16

32 FNMA, Pool #880945 5.500 5/1/2021 33 0.01

82 FNMA, Pool #885383 5.000 6/1/2021 81 0.02

376 FNMA, Pool #881911 5.500 6/1/2021 380 0.09

2,270 FNMA, Pool #896585 5.500 7/1/2021 2,292 0.51

1,089 FNMA, Pool #896597 5.000 8/1/2021 1,080 0.24

19 FNMA, Pool #256397 5.500 9/1/2021 19 –

7,098 FNMA, Pool #745563 5.500 8/1/2034 7,016 1.58

6,524 FNMA, Pool #814887 5.000 4/1/2035 6,276 1.41

9,904 FNMA, Pool #893365 5.000 7/1/2035 9,529 2.14

1,639 FNMA, Pool #832747 5.000 9/1/2035 1,577 0.35

843 FNMA, Pool #842754 4.500 10/1/2035 783 0.18

243 FNMA, Pool #797668 5.000 10/1/2035 234 0.05

135 FNMA, Pool #745000 6.000 10/1/2035 136 0.03

2,881 FNMA, Pool #845007 5.000 11/1/2035 2,772 0.62

46 FNMA, Pool #848501 4.500 12/1/2035 43 0.01

463 FNMA, Pool #878457 6.000 12/1/2035 468 0.11

901 FNMA, Pool #745275 5.000 2/1/2036 869 0.20

1,455 FNMA, Pool #745355 5.000 3/1/2036 1,400 0.31

1,994 FNMA, Pool #884019 6.000 5/1/2036 2,015 0.45

3,394 FNMA, Pool #891912 6.000 6/1/2036 3,430 0.77

192 FNMA, Pool #887638 6.000 7/1/2036 194 0.04

81 FNMA, Pool #887278 6.500 7/1/2036 83 0.02

681 FNMA, Pool #896530 6.000 8/1/2036 689 0.16

2,795 FNMA, Pool #901366 6.000 9/1/2036 2,825 0.63

6,491 FNMA, Pool #888030 † 5.500 12/1/2036 6,422 1.44

294 FNMA, Pool #906260 5.000 1/1/2037 283 0.06

355 FNMA, Pool #912204 5.000 2/1/2037 342 0.08

422 FNMA, Pool #923100 5.000 3/1/2037 406 0.09

413 FNMA, Pool #899163 5.000 4/1/2037 397 0.09

733 FNMA, Pool #917982 5.000 5/1/2037 706 0.16



49



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

U.S. Government Agency Mortgage-Backed Securities — (continued)

Federal National Mortgage Association (FNMA) — (continued)

2,008 FNMA, Pool #928306 6.000 5/1/2037 2,029 0.46

507 FNMA, Pool #919579 5.000 6/1/2037 488 0.11

670 FNMA, Pool #940407 6.000 6/1/2037 677 0.15

103 FNMA, Pool #940372 6.000 7/1/2037 104 0.02

193 FNMA, Pool #959249 5.000 8/1/2037 186 0.04

436 FNMA, 30 Year

August TBA ++ 5.000 8/1/2037 420 0.09

337 FNMA, Pool #920608 5.000 12/1/2037 324 0.07

10,221 FNMA, Pool #257042 6.500 1/1/2038 10,524 2.36

8,042 FNMA, Pool #962767 5.000 4/1/2038 7,737 1.74

99 FNMA, Pool #962957 5.000 5/1/2038 95 0.02

78,620 17.66


1,381 GNMA, Pool #636109 5.000 1/15/2035 1,350 0.30

79 GNMA, Pool #520485 5.500 12/15/2035 79 0.02

170 GNMA, Pool #653630 5.500 7/15/2036 170 0.04

170 GNMA, Pool #620298 6.500 7/15/2036 176 0.04

1,903 GNMA, Pool #657632 6.000 8/15/2036 1,935 0.43

3,710 0.83

Total U.S. Government Agency Mortgage-Backed Securities

(Cost $95,836) 96,482 21.67

Collective Investment Scheme — 4.68% (Cost $22,016)

139 Legg Mason U.S.$ High Yield Bond Fund, Class M 20,831 4.68


Options — 0.06%

Purchased Options — 0.06%

10,850 6 Month LIBOR, 3.946% Fixed, 10/17/2010,

Goldman Sachs, Swaption Receiver 1 –

– 90 Day Sterling March 2009, Call 94.50 292 0.06

– GBP Libor September 2008, Call 94.75 – –

293 0.06

Written Options — 0.00%

(2,550)6 Month LIBOR, 4.48% Fixed, 10/17/2018,

Goldman Sachs, Swaption Receiver (11) –






* The rate of interest on this type of security is tied to the Consumer Price Index (CPI).The coupon rate is the rate as of August 31, 2008.

** Illiquid

*** REITS–Real Estate Investment Trusts

+ TIPS

++ Securities purchased on a to-be-announced basis (Note 1).



þ Security is valued in good faith at fair value by or at the discretion of the InvestmentManager.

ABBREVIATIONS:

AUD - Australian Dollar

BRL - Brazilian Real

EGP - Egyptian Pound

EUR - Euro

GBP - British Pound


INR - Indian Rupee

JPY - Japanese Yen

MXN - Mexican Peso

RUB - Russian Ruble

TRY - Turkish Lira




ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF OPTIONS, FUTURES AND SWAPS, WHICH ARE FINANCIAL DERIVATIVEINSTRUMENTS DEALT ON A REGULATED MARKET.




Collective Investment Scheme 4.55%

Other Assets 6.36%




50




NominalValue






% of NetAsset Value

U.S. 10 Year Note December 2008 (21) 2,422 2,425 – (3) (3) –

U.S. 5 Year Note (CBT) December 2008 100 11,182 11,194 11 – 11 –


Euro�Bobl September 2008 73 11,495 11,587 92 – 92 0.02

Euro�Bund September 2008 68 11,208 11,388 180 – 180 0.04




Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Barclays Capital Inc. Turkey Government International Bond, 11.88%, due 1/15/30 Sell 2.79% 06/20/15 (459) $(6)



Goldman Sachs London Countrywide Home Loans, Inc., 4.00%, due 3/22/11 Sell 0.60% 06/20/12 (1,960) (187)


Goldman Sachs London Ford Motor Credit Co. LLC, 7.00%, due 10/1/13 Sell 3.50% 06/20/12 (2,000) (520)

Goldman Sachs London Rolls Royce Plc, 4.50%, due 3/16/11 Buy 0.15% 06/20/12 2,030 40

Goldman Sachs London Unilever Capital Corp., 7.13%, due 11/1/10 Buy 0.19% 06/20/12 2,030 13

Goldman Sachs London ITRAXX HIVOL S9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 5,303 (201)

Royal Bank of Scotland ITRAXX HIVOL S9, 2.60%, due 6/20/13 Buy 2.60% 06/20/13 5,453 (207)

$(1,268)


Credit Default Swaps- Financial Liabilities at Fair Value (1,321)

Credit Default Swaps- Financial Assets and Liabilities at Fair Value $(1,268)



51

Western Asset U.S. High Yield Bond Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Collateralised Mortgage–Backed Obligations — 0.02% (Cost $39)

73 BlackRock Capital Finance

LP, Series 1997–R1,

Class B3 144A 7.750 3/25/2037 14 0.02


Advertising — 0.88%





180 RH Donnelley, Inc., Company

Guaranteed 144A 11.750 5/15/2015 132 0.18

654 0.88

Aerospace/Defense — 1.02%

200 BE Aerospace, Inc., Senior

Unsecured 8.500 7/1/2018 209 0.28




Guaranteed 144A 11.750 12/1/2015 123 0.17


Guaranteed 144A † 13.500 12/1/2015 123 0.17

754 1.02






342 0.46

Airlines — 1.91%


Series C, Pass Through

Certificates 7.339 4/19/2014 147 0.20

430 DAE Aviation Holdings, Inc.,






Certificates 8.030 7/1/2011 360 0.48



Certificates 6.831 9/1/2008 227 0.31



Certificates 6.932 9/1/2011 112 0.15

1,416 1.91

Apparel — 0.21%



Auto Manufacturers — 1.42%



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Debentures 8.250 7/15/2023 244 0.33

1,250 General Motors Corp.,


1,052 1.42


200 Allison Transmission,








Unsecured 8.250 8/1/2010 187 0.25


Unsecured 144A 12.250 12/31/2016 397 0.54

1,272 1.72



Series B, Company

Guaranteed 9.750 6/15/2014 98 0.13





Unsecured 8.375 4/1/2017 360 0.49






Secured † 9.051 5/1/2012 492 0.67


Secured 10.000 5/1/2012 68 0.09

106 Newpage Holding Corp.,

Senior Notes † 9.986 11/1/2013 98 0.13



140 Rock–Tenn Co., Company

Guaranteed 144A 9.250 3/15/2016 144 0.19

690 Ryerson, Inc., Senior

Secured 144A 12.000 11/1/2015 676 0.91

280 Verso Paper Holdings LLC &

Verso Paper, Inc., Company

Guaranteed 11.375 8/1/2016 238 0.32

3,224 4.35

Commercial Services — 6.83%




Secured 144A 9.000 8/15/2016 140 0.19


Unsecured 144A 12.250 11/15/2015 209 0.28



52



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Commercial Services — (continued)










Guaranteed 10.500 1/1/2016 821 1.11



Senior Secured 144A 12.000 8/1/2014 490 0.66





165 Ticketmaster, Senior

Notes 144A 10.750 8/1/2016 169 0.23


Inc., Company

Guaranteed 144A 10.500 11/1/2015 27 0.04


Inc., Company

Guaranteed 144A 11.750 5/1/2016 194 0.26

5,058 6.83

Consumer Staples — 0.62%




665 AMH Holdings, Inc.,

Series 11.250000, Senior

Discount Notes

zero

coupon 3/1/2014 446 0.60

170 Capmark Financial Group,



Railway, Company

Guaranteed 7.500 6/15/2009 71 0.10





923 1.25

Energy — 13.52%

280 Atlas Pipeline Partners LP,



Secured 8.750 7/15/2012 895 1.21







Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue





Guaranteed 8.000 12/15/2016 187 0.25


Unsecured 7.750 6/1/2019 683 0.92


Unsecured 7.750 6/15/2010 245 0.33


Unsecured 7.800 8/1/2031 385 0.52


Secured 7.250 1/15/2011 505 0.68



200 Key Energy Services, Inc.,






180 Markwest Energy Partners LP

/ Markwest Energy Finance

Corp., Senior Notes 144A 8.750 4/15/2018 179 0.24

230 Parallel Petroleum Corp.,





Senior Notes 144A 7.875 6/1/2015 56 0.08



190 Quicksilver Resources, Inc.,


740 SandRidge Energy, Inc.,

Senior Notes 144A 8.000 6/1/2018 694 0.94


Notes 144A * 8.750 11/15/2015 137 0.18



170 Southwestern Energy Co.,

Senior Notes 144A 7.500 2/1/2018 174 0.23





60 Targa Resources Partners LP,

Senior Notes 144A 8.250 7/1/2016 55 0.07

80 Tennessee Gas Pipeline Co.,


550 VeraSun Energy Corp.,


315 W&T Offshore, Inc.,



Series A, Company

Guaranteed 7.000 2/1/2014 504 0.68



53



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Energy — (continued)


Unsecured 7.625 7/15/2019 941 1.27

10,021 13.52

Entertainment — 0.49%

200 Downstream Development

Authority of the Quapaw

Tribe of Oklahoma, Senior

Secured 144A 12.000 10/15/2015 163 0.22

250 Indianapolis Downs LLC &


Secured 144A 11.000 11/1/2012 199 0.27

362 0.49


1,105 Ocwen Capital Trust I,



320 AAC Group Holding Corp.,

Senior Unsecured 144A

zero

coupon 10/1/2012 304 0.41

830 Airplanes Pass Through

Trust, Series D, Company

Guaranteed † *** 10.875 3/15/2012 – –

385 AmeriCredit Corp.,



Notes 144A 8.000 8/1/2013 294 0.40

110 Citigroup, Inc., Junior











Unsecured 8.000 11/1/2031 677 0.91






Senior Secured 144A 8.500 5/15/2010 268 0.36


Secured 144A 9.625 5/15/2015 119 0.16

520 SLM Corp., Notes 8.450 6/15/2018 477 0.64


Authority, Senior

Secured 144A † 6.875 2/1/2014 157 0.21


Co. II LLC, Company

Guaranteed 9.000 10/1/2014 511 0.69

5,950 8.03

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Financials – Real Estate — 0.67%







Guaranteed 10.500 4/15/2014 24 0.03


Guaranteed 11.000 4/15/2014 162 0.22


Guaranteed 12.375 4/15/2015 156 0.21

495 0.67

Food — 0.07%

50 Stater Brothers Holdings,


Healthcare – Products — 1.06%

265 Advanced Medical Optics,


100 Biomet, Inc., Company

Guaranteed † 10.375 10/15/2017 105 0.14


Guaranteed 11.625 10/15/2017 153 0.21


Capital Trust IV, Company

Guaranteed 7.875 6/15/2011 51 0.07





786 1.06


360 CRC Health Corp., Company

Guaranteed 10.750 2/1/2016 277 0.38


Guaranteed 6.625 3/15/2013 166 0.22


Guaranteed 7.250 3/15/2015 236 0.32




200 HCA, Inc., Notes 7.690 6/15/2025 156 0.21

250 IASIS Healthcare LLC / IASIS


Guaranteed 8.750 6/15/2014 251 0.34





1,325 Tenet Healthcare Corp.,


615 U.S. Oncology Holdings, Inc.,


4,787 6.46



54



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Home Builders — 0.41%

300 K Hovnanian Enterprises,


Home Furnishing and Appliances — 1.16%



Guaranteed 9.000 11/1/2011 672 0.90




863 1.16

Household Products — 0.76%



460 Jarden Corp., Company

Guaranteed 7.500 5/1/2017 410 0.55


Notes 8.750 12/1/2013 95 0.13

562 0.76

Industrial — 2.91%

170 American Railcar Industries,


295 Associated Materials, Inc.,


130 Gulfmark Offshore, Inc.,


300 Horizon Lines, Inc., Senior

Notes 4.250 8/15/2012 247 0.33


Secured 11.125 12/1/2015 402 0.54

210 Nortek Holdings, Inc., Senior

Secured 144A 10.000 12/1/2013 196 0.26




Discount Notes 10.570 3/1/2014 95 0.13


Senior Notes 144A 8.500 12/15/2015 75 0.10


Senior Notes † * *** 11.000 3/15/2010 – –

90 Solo Cup Co., Company

Guaranteed 8.500 2/15/2014 79 0.11





70 Terex Corp., Company

Guaranteed 7.375 1/15/2014 69 0.09

2,157 2.91

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Insurance — 0.53%


Group, Inc., Junior

Subordinated

Debentures 144A † 8.175 5/15/2048 394 0.53

Internet — 0.03%


Guaranteed 144A 8.500 7/1/2016 24 0.03




230 Caesars Entertainment, Inc.,


190 Harrah’s Operating Co., Inc.,




Secured 12.000 11/15/2010 614 0.83

185 Mandalay Resort Group,



Guaranteed 8.375 2/1/2011 105 0.14


Guaranteed 7.500 6/1/2016 69 0.09


Unsecured 6.000 4/1/2012 129 0.18


Unsecured 7.750 8/15/2016 263 0.36




Enterprise, Senior

Unsecured 144A 9.125 12/15/2010 296 0.40

2,007 2.71

Media — 5.40%

1,817 CCH I Holdings LLC/CCH I


Senior Secured 11.000 10/1/2015 1,395 1.88



185 Cengage Learning


Notes 144A 10.500 1/15/2015 158 0.21





Unsecured 11.750 5/15/2011 109 0.15





Unsecured 12.125 1/15/2012 119 0.16

310 Charter Communications,






55



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Media — (continued)


Unsecured 144A 8.500 6/15/2015 251 0.34

110 DirecTV Holdings LLC/

DirecTV Financing Co.,





Guaranteed 8.000 11/15/2016 326 0.44

455 RH Donnelley Corp.,

Series A–2, Senior Discount

Notes 6.875 1/15/2013 249 0.34

410 TL Acquisitions, Inc., Senior


4,001 5.40

Packaging & Containers — 0.36%

380 Berry Plastics Holding Corp.,




Company Guaranteed * 11.000 6/1/2012 48 0.07

Pipelines — 0.41%



Guaranteed † 8.375 8/1/2066 306 0.41




Guaranteed 9.000 5/1/2012 93 0.12



Guaranteed ** 6.750 4/1/2017 190 0.26

283 0.38

Retail — 4.00%

15 AutoNation, Inc., Company

Guaranteed 7.000 4/15/2014 13 0.02


Guaranteed † 9.000 9/1/2012 226 0.30


Guaranteed 55.270 11/1/2014 3 –


Guaranteed 9.000 1/15/2013 34 0.05








Guaranteed 11.750 11/15/2013 300 0.40



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

75 Inergy LP/Inergy Finance

Corp., Company

Guaranteed 144A 8.250 3/1/2016 70 0.10










Guaranteed 10.375 2/1/2015 217 0.29




2,967 4.00


305 Activant Solutions, Inc.,


410 First Data Corp., Company

Guaranteed 144A 9.875 9/24/2015 354 0.48









1,222 1.65


250 ALLTEL Communications,

Inc., Company

Guaranteed 144A 10.375 12/1/2017 287 0.39


Co. LLC, Company

Guaranteed 6.300 12/1/2028 38 0.05




Corp., Debentures 7.050 10/1/2046 26 0.04

160 Hawaiian Telcom


Series B, Company

Guaranteed 12.500 5/1/2015 28 0.04












56



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Telecommunications — (continued)


International, Inc., Company

Guaranteed 7.250 2/15/2011 123 0.17





60 Virgin Media, Inc., Senior

Unsecured 144A 6.500 11/15/2016 55 0.07



2,390 3.23

Utilities — 9.25%


Unsecured 8.000 10/15/2017 645 0.87


Notes 144A 8.000 6/1/2020 19 0.03








Corp., Company

Guaranteed 144A 11.250 11/1/2017 2,765 3.73

220 Ipalco Enterprises, Inc.,

Senior Secured 8.625 11/14/2011 229 0.31

68 Mirant Mid Atlantic LLC, Pass





Guaranteed 7.250 2/1/2014 247 0.33


Guaranteed 7.375 2/1/2016 652 0.88


Guaranteed 7.375 1/15/2017 68 0.09



280 Sierra Pacific Resources,


710 Texas Competitive Electric

Holdings Co. LLC, Company

Guaranteed 144A 10.500 11/1/2016 680 0.92

6,856 9.25



Bermuda — 1.19%

700 Intelsat Jackson Holdings

Ltd., Senior Unsecured 144A 9.500 6/15/2016 703 0.95

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

200 Petroplus Finance Ltd.,


880 1.19

Canada — 2.92%


Canada, Company

Guaranteed 144A † 15.500 7/15/2010 432 0.58


Canada, Senior

Secured 144A 13.750 4/1/2011 394 0.53

155 GT Group Telecom, Inc.,

Senior Discount Notes *** 13.250 2/1/2010 – –


Unsecured 8.750 8/15/2012 504 0.68


Guaranteed † 7.250 2/15/2015 561 0.76


Secured 7.875 12/15/2014 133 0.18


Guaranteed 7.625 2/15/2013 137 0.19

2,161 2.92

Denmark — 0.65%



Secured 144A 8.875 5/1/2016 481 0.65

France — 0.46%

340 Cie Generale de



Ireland — 0.23%

200 Smurfit Kappa Treasury

Funding Ltd., Company

Guaranteed 7.500 11/20/2025 174 0.23




Secured 144A 10.750 12/1/2015 282 0.38

Mali — 0.14%


Mexico — 0.88%



Notes 9.375 5/1/2012 125 0.17



Unsubordinated 7.625 12/1/2013 529 0.71

654 0.88





Senior Secured † 5.541 10/15/2013 70 0.09



57



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Netherlands — (continued)


Senior Secured 7.875 10/15/2014 66 0.09



679 0.91


185 Ashtead Holdings PLC,

Senior Secured 144A 8.625 8/1/2015 165 0.22

135 Inmarsat Finance PLC,

Company Guaranteed

zero

coupon 11/15/2012 138 0.95



922 2.01



3 Aurora Foods, Inc. *** – –

1 Bank of America Corp. 457 0.62

– Crown Castle International Corp. – –

1,779 Home Interiors and Gifts, Inc. 144A * *** 18 0.02


– McLeod USA, Inc., Class A *** – –

Total Common Stock (Cost $519) 475 0.64

Preferred Stock — 0.23% (Cost $200)

4 Citigroup, Inc. 171 0.23

Face Value(000’s)

Value(000’s)$

% ofNetAssetValue

Warrants — 0.00%

– Cybernet Internet Services International, Inc., expiring

July, 2009 *** – –

– GT Group Telecom, Inc., expiring February, 2010

144A*** – –

– IWO Holdings, Inc., expiring January, 2011 144A* *** – –

– Merrill Corp., expiring May, 2009 144A*** – –

Total Warrants (Cost $0) – –


Contracts(000’s)

Value(000’s)$

% ofNetAssetValue

Options — (0.04)%

Written Options — (0.04)%

(500) Credit Default, CDX.NA.HY.10, Spread 500bps,

Barclays Capital, Inc., 09/22/2008, Swaption Receiver (7) (0.01)

(500) Credit Default, CDX.NA.HY.10, Spread 500bps, JP

Morgan Securities, Inc., 09/22/2008, Swaption

Receiver (6) (0.01)


Morgan Securities, Inc., 10/20/2008, Swaption

Receiver (4) –

Contracts(000’s)

Value(000’s)$

% ofNetAssetValue

(500) Credit Default, CDX.NA.HY.10, Spread 500bps,

Barclays Capital, Inc., 09/22/2008, Swaption Payer (4) –


Morgan Securities, Inc., 09/22/2008, Swaption Payer (4) (0.01)


Morgan Securities, Inc., 10/20/2008, Swaption Payer (7) (0.01)

Total Options (Cost $(51)) (32) (0.04)





* Illiquid


*** Security is valued in good faith by or at the discretion of the Investment Manager.


– Amounts designated as " – " are either $0, less than $1,000 or less than 1,000

ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF SWAPS AND OPTIONS, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTSDEALT ON A REGULATED MARKET.




Other Assets 5.44%




58





Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Deutsche Bank Securities, Inc. Visteon Corp Senior Notes , 7.00%, due 3/10/14 Sell 5.00% 06/20/10 (100) $(28)

Deutsche Bank Securities, Inc. Visteon Corp Senior Notes , 7.00%, due 3/10/14 Sell 5.00% 06/20/10 (100) (27)

JP Morgan Securities, Inc. CDS.NA.HY.10, 5.00%, due 6/20/13 Buy 5.00% 06/20/13 600 44

$(11)






59

Western Asset Emerging Markets Bond Fund


Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Argentina Government Issues — 0.33%

EUR 1,006 Argentina Government

International Bond,



BRL 2,570 Brazil Notas do Tesouro

Nacional, Series B 10.211 5/15/2017 2,535 2.09

1 Brazil Notas do Tesouro

Nacional, Series F, Notes 9.810 1/1/2010 1 –





10,400 8.57

Egypt Government Issues — 5.68%

EGP 16,200 Egypt Treasury Bills 6.190 10/28/2008 2,958 2.44

6,350 Egypt Treasury Bills 6.330 11/25/2008 1,148 0.95


coupon 4/28/2009 2,778 2.29

6,884 5.68

Indonesia Government Issues — 2.03%

IDR 1,412,000 Indonesia Treasury Bond,

Series FR20, Bonds 11.000 9/15/2025 138 0.11

7,799,000 Indonesia Treasury Bond,

Series FR42, Bonds 10.250 7/15/2027 714 0.59


Series FR43, Bonds 10.250 7/15/2022 815 0.67


Series FR45, Bonds 9.750 5/15/2037 799 0.66

2,466 2.03

Malasyia Government Issues — 1.59%

MYR 983 Bank Negara Malaysia

Monetary Notes, Series 1708

zero

coupon 10/7/2008 288 0.24

1,235 Bank Negara Malaysia


zero

coupon 10/21/2008 362 0.30



zero

coupon 11/13/2008 353 0.29



zero

coupon 11/25/2008 389 0.32

207 Bank Negara Malaysia


zero

coupon 10/7/2008 61 0.05



zero

coupon 2/17/2009 43 0.04



zero

coupon 9/23/2008 9 0.01


Monetary Notes–Islamic,

Series 6208

zero

coupon 9/16/2008 30 0.02



Series 6808

zero

coupon 9/30/2008 144 0.12



Series 7208

zero

coupon 10/7/2008 18 0.01

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Series 8408

zero

coupon 10/28/2008 236 0.19

1,933 1.59

Russia Government Issues — 5.72%


Bonds 6.790 10/29/2009 4,086 3.37


Bonds 6.950 8/6/2009 1,550 1.28


Bonds 7.000 10/27/2011 1,304 1.07

6,940 5.72



Argentina — 2.76%

USD 1,609 Argentina Bonos, Series VII 7.000 9/12/2013 1,207 0.99

2,787 Republic of Argentina, Notes 8.280 12/31/2033 2,073 1.71

– Republic of Argentina zero

coupon 12/15/2035 71 0.06

3,351 2.76

Brazil — 1.58%

USD 387 Brazilian Government

International Bond,

Unsubordinated 8.000 1/15/2018 432 0.36

1,183 Brazilian Government


1,911 1.58

Colombia — 2.61%

USD 2,893 Colombia Government


Ecuador — 1.70%

USD 1,965 Ecuador Government


360 Ecuador Government

International Bond 144A † 10.000 8/15/2030 319 0.26

2,058 1.70

Gabon — 0.60%

USD 717 Gabonese Republic 144A 8.200 12/12/2017 731 0.60

Mexico — 2.08%

USD 885 Mexico Government


1,510 Mexico Government


2,527 2.08

Panama — 2.59%





60



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Panama — (continued)

2,736 Panama Government


3,144 2.59

Peru — 0.65%



Russia — 1.01%

USD 880 Russia Government

International Bond,

Unsubordinated 11.000 7/24/2018 1,227 1.01

Turkey — 9.49%

USD 240 Turkey Government

International Bond, Notes 9.500 1/15/2014 276 0.23


International Bond, Notes 7.250 3/15/2015 1,144 0.94







11,514 9.49

Venezuela — 6.65%

USD 2,238 Bolivarian Republic of

Venezuela 9.375 1/13/2034 1,947 1.61

2,990 Republic of Venezuela 8.500 10/8/2014 2,781 2.29


Unsecured 5.750 2/26/2016 3,195 2.63


8,064 6.65



USD 39 FNMA Discount Notes ? zero

coupon 12/15/2008 39 0.03

U.S. Treasury Obligations — 0.02% (Cost $18)


USD 18 U.S. Treasury Note 5.125 5/15/2016 20 0.02


Brazil — 0.69%

850 Globo Comunicacoes e

Participacoes S.A.,

Bonds 144A 7.250 4/26/2022 842 0.69






1,095 0.90

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


215 CSN Islands IX Corp.,


400 EEB International Ltd.,




1,318 1.09

India — 0.23%



1,940 KazMunaiGaz Finance Sub

BV 8.375 7/2/2013 1,969 1.62

Kyrgystan — 4.79%


Guaranteed 8.250 1/17/2034 848 0.70

5,058 Vale Overseas Ltd., Company

Guaranteed 6.875 11/21/2036 4,957 4.09

5,805 4.79


2,700 Evraz Group S.A.,

Notes 144A 8.875 4/24/2013 2,626 2.16

170 Gaz Capital S.A. 6.212 11/22/2016 151 0.12


Unsecured 144A 6.212 11/22/2016 63 0.05

2,785 Gaz Capital S.A., Senior

Unsecured 8.625 4/28/2034 2,889 2.38

1,310 TNK–BP Finance S.A. 7.500 7/18/2016 1,172 0.97







OJSC Vimpel

Communications 8.250 5/23/2016 906 0.75

8,933 7.35

Mexico — 7.63%


Guaranteed 11.000 12/15/2013 217 0.18


Guaranteed 7.625 2/1/2017 408 0.34

510 Axtel SAB de CV, Senior

Unsecured Notes 144A 7.625 2/1/2017 496 0.41

435 Desarrolladora Homex SAB

de CV, Company

Guaranteed 7.500 9/28/2015 431 0.35



Notes 9.375 5/1/2012 366 0.30



Guaranteed 6.625 6/15/2035 3,020 2.49



61



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Mexico — (continued)


Master Trust 144A 6.625 6/15/2035 4,324 3.56

9,262 7.63


1,060 ATF Capital BV, Bank

Guaranteed 9.250 2/21/2014 1,041 0.86


Guaranteed 144A 9.250 10/16/2013 201 0.17


Guaranteed 144A 7.250 5/3/2017 439 0.36


Guaranteed 144A 8.250 1/22/2037 340 0.28

650 TuranAlem Finance BV,


2,481 2.05

Russia — 6.35%


BV 6.356 6/7/2017 277 0.23

1,744 Lukoil International Finance

BV, Company Guaranteed 6.656 6/7/2022 1,482 1.22



Notes 144A 7.125 1/14/2014 2,017 1.66









Notes 7.750 5/29/2018 541 0.45



Bonds 7.175 5/16/2013 1,002 0.83

7,700 6.35

Thailand — 1.83%

1,810 True Move Co. Ltd. 10.750 12/16/2013 1,451 1.20

980 True Move Co. Ltd.,


2,216 1.83


1,950 Vedanta Resources PLC 8.750 1/15/2014 1,954 1.61



Guaranteed 144A 11.125 11/15/2015 355 0.29



Unsecured 8.375 4/1/2017 95 0.08

450 0.37

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

Venezuela — 4.45%

89 Petrozuata Finance, Inc.,


5,104 Petrozuata Finance, Inc.,


5,388 4.45









ABBREVIATIONS:


EGP - Egyptian Pound

EUR - Euro

IDR - Indonesian Rupiah

MYR - Malaysian Ringgit

RUB - Russian Ruble


ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALSTOCK EXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THEEXCEPTION OF FUTURES AND SWAPS, WHICH ARE FINANCIAL DERIVATIVEINSTRUMENTS DEALT ON A REGULATED MARKET.




Other Assets 6.01%




62




NominalValue




UnrealisedLosses (000’s)$


% of NetAsset Value

U.S. 5 Year Note (CBT) December 2008 29 3,241 3,246 5 – 5 –

U.S. 5 Year Note (CBT) September 2008 4 442 450 8 – 8 0.01

Total Market Value of Future Contracts 33 $3,683 $3,696 $13 – $13 0.01%



Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Barclays Capital Inc. Turkey Government International Bond, 11.88%, due 1/15/30 Sell 2.79% 06/20/15 (323) $(4)

HSBC Securities (USA) Inc. RSHB, 7.18%, due 5/16/13 Sell 2.70% 08/20/11 (1,424) (14)

$(18)

Credit Default Swaps- Financial Assets at Fair Value –





Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

HSBC Securities (USA), Inc. 3 Month USD- LIBOR Receive 2.80% 7/08/82 (1,424) $(1,424)

HSBC Securities (USA), Inc. Fixed (RUB) Pay 7.15% 7/08/82 1,423 1,391

$(33)

Interest Rate Swaps – Financial Assets at Fair Value 1,391

Interest Rate Swaps – Financial Liabilities at Fair Value (1,424)

Interest Rate Swaps – Financial Assets and Liabilities at Fair Value $(33)



63

Western Asset Global High Yield Bond Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Advertising — 0.67%

USD 115 Affinion Group, Inc.,


1,065 Affinion Group, Inc.,


1,152 0.67

Aerospace/Defense — 0.27%

USD 440 BE Aerospace, Inc., Senior

Unsecured 8.500 7/1/2018 459 0.27


USD 270 Alliance One International,




782 0.45

Airlines — 0.92%

USD 340 Continental Airlines, Inc.,

Series C, Pass Through

Certificates 7.339 4/19/2014 257 0.15



1,020 DAE Aviation Holdings, Inc.,




1,591 0.92

Auto Manufacturers — 1.65%

USD 1,060 Ford Motor Co., Senior

Unsecured 7.450 7/16/2031 546 0.32



3,540 General Motors Corp.,

Senior Unsubordinated 8.375 7/15/2033 1,752 1.02

2,841 1.65


USD 400 Allison Transmission,








Unsecured 8.250 8/1/2010 474 0.28

1,281 Visteon Corp., Senior

Unsecured 144A 12.250 12/31/2016 877 0.51

2,857 1.66


USD 520 Appleton Papers, Inc.,

Series B, Company

Guaranteed 9.750 6/15/2014 411 0.24

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



1,370 Georgia Gulf Corp.,




580 Metals USA Holdings Corp.,



Secured 11.125 12/1/2015 894 0.52

1,260 NewPage Corp., Senior

Secured † 9.051 5/1/2012 1,181 0.68

562 Newpage Holding Corp.,

Senior Notes † 9.986 11/1/2013 521 0.30



370 Rock–Tenn Co., Company

Guaranteed 144A 9.250 3/15/2016 379 0.22

1,530 Ryerson, Inc., Senior

Secured 144A 12.000 11/1/2015 1,499 0.87

620 Verso Paper Holdings LLC &

Verso Paper, Inc., Company

Guaranteed 11.375 8/1/2016 527 0.31

7,761 4.50


USD 1,364 Allied Security Escrow Corp.,



Secured 144A 9.000 8/15/2016 526 0.30


Unsecured 144A 12.250 11/15/2015 515 0.30

1,602 DI Finance/DynCorp


Subordinated Notes 9.500 2/15/2013 1,590 0.92


International, Company

Guaranteed 144A 9.500 2/15/2013 299 0.17

1,005 Education Management LLC/



1,015 H&E Equipment Services,


1,720 The Hertz Corp., Company

Guaranteed 10.500 1/1/2016 1,518 0.88

1,000 Penhall International Corp.,

Senior Secured 144A 12.000 8/1/2014 720 0.42





365 Ticketmaster, Senior

Notes 144A 10.750 8/1/2016 374 0.22

9,440 5.47

Consumer Staples — 0.44%

USD 815 Dole Food Co., Inc.,




64



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



USD 480 AMH Holdings, Inc., Senior

Discount Notes

zero

coupon 3/1/2014 321 0.19

380 Capmark Financial Group,






1,735 1.01

Energy — 9.38%

USD 640 Atlas Pipeline Partners LP,



Secured 8.750 7/15/2012 946 0.55



1,585 Chesapeake Energy Corp.,




Guaranteed 8.000 12/15/2016 221 0.13


Unsecured 7.750 6/1/2019 637 0.37

960 Dynegy Holdings, Inc.,


200 Dynegy Roseton/

Danskammer Pass Through

Trust Series B, Pass Through

Certificates 7.670 11/8/2016 196 0.11

1,050 El Paso Corp., Senior

Unsecured 7.800 8/1/2031 1,037 0.60



Guaranteed † 8.375 8/1/2066 623 0.36



Guaranteed † 7.034 1/15/2068 30 0.02

1,405 EXCO Resources, Inc.,

Secured 7.250 1/15/2011 1,391 0.81

1,015 International Coal Group,

Inc., Company Guaranteed 10.250 7/15/2014 1,030 0.60

400 Key Energy Services, Inc.,






420 Markwest Energy Partners LP

/ Markwest Energy Finance

Corp., Senior Notes 144A 8.750 4/15/2018 418 0.24

505 Parallel Petroleum Corp.,






Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

440 Quicksilver Resources, Inc.,


1,660 SandRidge Energy, Inc.,

Senior Notes 144A 8.000 6/1/2018 1,556 0.90

1,520 SemGroup LP, Senior

Notes 144A * 8.750 11/15/2015 281 0.16



370 Southwestern Energy Co.,

Senior Notes 144A 7.500 2/1/2018 378 0.22



130 Targa Resources Partners LP,

Senior Notes 144A 8.250 7/1/2016 118 0.07

1,395 VeraSun Energy Corp.,



Series A, Company

Guaranteed 7.000 2/1/2014 352 0.20

16,187 9.38

Entertainment — 0.44%

USD 500 Downstream Development

Authority of the Quapaw

Tribe of Oklahoma, Senior

Secured 144A 12.000 10/15/2015 409 0.24

435 Indianapolis Downs LLC &


Secured 144A 11.000 11/1/2012 346 0.20

755 0.44


RUB 1,630 JPMorgan Chase Bank NA,

Notes 144A 9.500 2/11/2011 66 0.04


USD 810 AmeriCredit Corp.,



Notes 144A 8.000 8/1/2013 684 0.40

420 Citigroup, Inc., Junior









Unsecured 8.000 11/1/2031 1,289 0.75


Acquisition Co LLC/Hawker

Beechcraft Notes Co,


1,330 Hawker Beechcraft



Company Guaranteed † 8.875 4/1/2015 1,327 0.77



65



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Financials – Diversified — (continued)

300 Mirant Escrow Corp. * *** zero

coupon 1/3/2009 – –


Senior Secured 144A 8.500 5/15/2010 795 0.46


Secured 144A 9.625 5/15/2015 476 0.27

1,150 SLM Corp., Notes 8.450 6/15/2018 1,055 0.61


Authority, Senior

Secured 144A † 6.875 2/1/2014 253 0.15


Co. I LLC, Senior Discount

Notes †

zero

coupon 10/1/2015 390 0.22


Co. II LLC, Company

Guaranteed 9.000 10/1/2014 712 0.41

11,891 6.89


USD 570 Ashton Woods USA LLC/





354 0.20

Food — 0.31%

USD 452 Dole Food Co., Inc.,


120 Stater Brothers Holdings,


529 0.31


USD 595 Advanced Medical Optics,



Guaranteed † 10.375 10/15/2017 199 0.12


Guaranteed 11.625 10/15/2017 405 0.23





1,600 0.93


USD 810 CRC Health Corp., Company

Guaranteed 10.750 2/1/2016 624 0.36


Guaranteed 6.625 3/15/2013 419 0.24


Guaranteed 7.250 3/15/2015 541 0.32



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue







1,234 U.S. Oncology Holdings, Inc.,


6,094 3.53


USD 780 K Hovnanian Enterprises,



USD 1,600 Norcraft Cos. LP/Norcraft


Guaranteed 9.000 11/1/2011 1,592 0.92



Series 9.750000, Senior

Discount Notes 3.090 9/1/2012 765 0.45

2,357 1.37


USD 115 American Greetings Corp.,


790 Jarden Corp., Company

Guaranteed 7.500 5/1/2017 703 0.41


Notes 8.750 12/1/2013 605 0.35

1,417 0.82


USD 20 American Achievement


330 American Railcar Industries,


1,350 Associated Materials, Inc.,








50 Moll Industries, Inc., Senior

Subordinated Notes* *** 10.500 7/1/2010 – –

160 Nortek Holdings, Inc., Senior

Secured 144A 10.000 12/1/2013 150 0.09



1,115 NTK Holdings, Inc., Senior

Discount Notes 10.570 3/1/2014 468 0.27


Senior Notes † * *** 11.000 3/15/2010 – –

200 Solo Cup Co., Company

Guaranteed 8.500 2/15/2014 176 0.10



66



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Industrial — (continued)





4,180 2.42

Insurance — 0.51%

USD 1,140 American International

Group, Inc., Junior

Subordinated

Debentures 144A † 8.175 5/15/2048 881 0.51

Internet — 0.03%

USD 55 Expedia, Inc., Company

Guaranteed 144A 8.500 7/1/2016 54 0.03


USD 70 Boyd Gaming Corp., Senior




400 Caesars Entertainment, Inc.,


500 Harrah’s Operating Co., Inc.,


1,535 Inn of the Mountain Gods


Secured 12.000 11/15/2010 1,094 0.63


Guaranteed 7.625 1/15/2017 301 0.17


Unsecured 6.000 4/1/2012 247 0.14




Unsecured 7.750 8/15/2016 307 0.18




Enterprise, Senior

Unsecured 144A 9.125 12/15/2010 788 0.46

3,840 2.23

Media — 4.53%

USD 4,222 CCH I Holdings LLC/CCH I


Senior Secured 11.000 10/1/2015 3,240 1.88



1,275 Cengage Learning


Notes 144A 10.500 1/15/2015 1,090 0.63





Unsecured 11.750 5/15/2011 211 0.12

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue





Unsecured 12.125 1/15/2012 330 0.19




Unsecured † 6.750 4/15/2012 707 0.41


Unsecured 144A 8.500 6/15/2015 171 0.10



1,250 Idearc, Inc., Company

Guaranteed 8.000 11/15/2016 566 0.33

900 RH Donnelley Corp.,

Series A–2, Senior Discount

Notes 6.875 1/15/2013 493 0.28


Unsecured 8.875 1/15/2016 365 0.21

7,822 4.53


USD 2,160 Leiner Health Products, Inc.,

Company Guaranteed* 11.000 6/1/2012 108 0.06


USD 220 Realogy Corp., Company

Guaranteed 10.500 4/15/2014 130 0.07


Guaranteed 11.000 4/15/2014 399 0.23


Guaranteed 12.375 4/15/2015 398 0.23



Guaranteed ** 6.500 6/1/2016 342 0.20

1,269 0.73

Retail — 4.45%

USD 675 Blockbuster, Inc., Company

Guaranteed † 9.000 9/1/2012 535 0.31


Guaranteed 12.500 11/1/2014 9 –


Guaranteed 9.000 1/15/2013 275 0.16








Guaranteed 11.750 11/15/2013 446 0.26



160 Inergy LP/Inergy Finance

Corp., Company

Guaranteed 144A 8.250 3/1/2016 150 0.09



67



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Retail — (continued)







1,040 Neiman Marcus Group, Inc.,



Senior Secured 7.125 6/1/2028 420 0.24

1,125 Sbarro, Inc., Company

Guaranteed 10.375 2/1/2015 776 0.45

1,180 Suburban Propane Partners


Corp., Senior Notes 6.875 12/15/2013 1,074 0.62

7,683 4.45


USD 650 Activant Solutions, Inc.,


560 First Data Corp., Company

Guaranteed 144A 9.875 9/24/2015 483 0.28









1,690 0.98


USD 640 ALLTEL Communications,

Inc., Company

Guaranteed 144A 10.375 12/1/2017 736 0.43


Co. LLC, Company

Guaranteed 6.300 12/1/2028 150 0.09

530 Hawaiian Telcom


Series B, Company

Guaranteed 12.500 5/1/2015 93 0.05

1,870 Level 3 Financing, Inc.,




100 Pillowtex Escrow

Position ***

zero

coupon 12/15/2017 – –

1,040 Qwest Communications





1,220 Sprint Capital Corp.,


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

130 Virgin Media, Inc., Senior

Unsecured 144A 6.500 11/15/2016 119 0.07

1,150 Windstream Corp.,


6,308 3.66

Utilities — 7.17%

USD 795 The AES Corp., Senior

Unsecured 8.000 10/15/2017 783 0.45


Notes 144A 8.000 6/1/2020 149 0.09





100 EEB International Ltd.,



Corp., Company

Guaranteed 144A 11.250 11/1/2017 4,339 2.51




Guaranteed 7.250 2/1/2014 641 0.37

1,305 NRG Energy, Inc., Company

Guaranteed 7.375 2/1/2016 1,289 0.75

2,840 Texas Competitive Electric

Holdings Co. LLC, Company

Guaranteed 144A 10.500 11/1/2016 2,719 1.58

12,379 7.17



Argentina Government Issues — 0.04%

ARS – Argentina Government



BRL 534 Brazil Notas do Tesouro

Nacional, Series B 10.211 5/15/2017 527 0.31


Nacional, Series F 9.810 7/1/2010 903 0.52

902 Brazil Notas do Tesouro

Nacional, Series F 9.810 1/1/2012 497 0.29

1,927 1.12

Egypt Government Issues — 2.59%

EGP 12,350 Egypt Treasury Bills,

Series 364 6.270 11/11/2008 2,244 1.30

12,150 Egypt Treasury Bills 6.190 10/28/2008 2,218 1.29

4,462 2.59

Indonesia Government Issues — 0.40%


Series FR20, Bonds 11.000 9/15/2025 147 0.08


Series FR42, Bonds 10.250 7/15/2027 146 0.08



68



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Indonesia Government Issues — (continued)


Series FR43, Bonds 10.250 7/15/2022 239 0.14


Series FR45, Bonds 9.750 5/15/2037 165 0.10

697 0.40

Malaysia Government Issues — 0.34%

MYR 397 Bank Negara Malaysia


zero

coupon 10/21/2008 116 0.07



zero

coupon 11/13/2008 42 0.02



zero

coupon 11/25/2008 41 0.02



zero

coupon 9/23/2008 18 0.01



Series 4708

zero

coupon 9/23/2008 302 0.18



Series 7208

zero

coupon 10/7/2008 35 0.02



Series 8408

zero

coupon 10/28/2008 28 0.02

582 0.34

Russia Government Issues — 1.32%


Bonds 6.790 10/29/2009 1,289 0.75


Bonds 6.950 8/6/2009 579 0.33


Bonds 7.000 10/27/2011 411 0.24

2,279 1.32



Bermuda — 0.91%

1,560 Intelsat Jackson Holdings

Ltd., Senior Unsecured 144A 9.500 6/15/2016 1,566 0.91


1,268 GTL Trade Finance, Inc.,


Canada — 3.08%

1,603 Abitibi–Consolidated Co. of

Canada, Company

Guaranteed 144A † 15.500 7/15/2010 1,210 0.70

1,000 Abitibi–Consolidated Co. of

Canada, Senior

Secured 144A 13.750 4/1/2011 1,050 0.61


Unsecured 8.750 8/15/2012 971 0.56

2,080 Novelis, Inc., Company

Guaranteed † 7.250 2/15/2015 1,929 1.12

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Secured 7.875 12/15/2014 148 0.09

5,308 3.08




Chile — 0.04%

70 Enersis S.A., Senior

Unsecured 7.375 1/15/2014 74 0.04

Denmark — 0.48%



Secured 144A 8.875 5/1/2016 828 0.48

France — 0.18%

305 Cie Generale de



Germany — 0.01%

10 ABN Amro Bank/

Deutschland for OAO

Gazprom, Secured 9.625 3/1/2013 11 0.01

India — 0.35%


Ireland — 0.28%

410 Smurfit Kappa Treasury

Funding Ltd., Company

Guaranteed 7.500 11/20/2025 357 0.21

130 VIP Finance Ireland Ltd. for

OJSC Vimpel

Communications,

Bonds 144A 8.375 4/30/2013 126 0.07

483 0.28



BV 8.375 7/2/2013 345 0.20



Guaranteed 8.250 1/17/2034 286 0.17



Unsecured 144A 6.510 3/7/2022 85 0.05









OJSC Vimpel

Communications 8.250 5/23/2016 765 0.44



69



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Luxembourg — (continued)



Secured 144A 10.750 12/1/2015 543 0.31

1,915 1.10

Mali — 0.18%


Mexico — 1.85%



1,340 Axtel SAB de CV, Company

Guaranteed 7.625 2/1/2017 1,303 0.75

1,525 Kansas City Southern de


Notes 9.375 5/1/2012 1,594 0.92



Unsubordinated 7.625 12/1/2013 255 0.15

3,200 1.85


1,750 ATF Capital BV, Bank

Guaranteed 144A 9.250 2/21/2014 1,728 1.00


Guaranteed 144A 9.250 10/16/2013 182 0.11

1,050 HSBK Europe BV, Bank

Guaranteed 144A 7.250 5/3/2017 869 0.50

1,635 Montell Finance Co. BV,



Senior Secured † 5.541 10/15/2013 194 0.11


Senior Secured 7.875 10/15/2014 328 0.19




Guaranteed 144A 8.250 1/22/2037 248 0.14

1,075 TuranAlem Finance BV,


5,238 3.02

Russia — 0.85%


BV, Company Guaranteed 6.656 6/7/2022 152 0.09



Senior Notes 144A 7.175 5/16/2013 185 0.11



Notes 144A 7.125 1/14/2014 614 0.36




Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue



Senior Secured 144A 6.299 5/15/2017 246 0.14

1,455 0.85

Sweden — 0.25%

504 Corral Finans AB,

Secured 144A † 4.291 4/15/2010 426 0.25

Thailand — 1.66%

3,570 True Move Co. Ltd. 10.750 12/16/2013 2,863 1.66


360 Ashtead Holdings PLC,

Senior Secured 144A 8.625 8/1/2015 320 0.19


1,430 Virgin Media Finance PLC,


2,023 1.18


1,420 HCA, Inc., Senior Secured 9.625 11/15/2016 1,432 0.83


Unsecured 8.875 10/15/2017 175 0.10

1,607 0.93

Venezuela — 0.74%

1,233 Petrozuata Finance, Inc.,




Argentina — 0.53%

USD 458 Argentina Bonos, Series VII 7.000 9/12/2013 344 0.20

757 Republic of Argentina, Notes 8.280 12/31/2033 563 0.33

907 0.53

Colombia — 0.12%

USD 150 Republic of Colombia,

Unsubordinated 8.250 12/22/2014 171 0.10

38 Republic of Colombia, Bonds 7.375 1/27/2017 42 0.02

213 0.12

Ecuador — 0.27%

USD 525 Ecuador Government


Panama — 0.22%



Peru — 0.15%


International Bond,


234 Peruvian Government


253 0.15



70



Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Russia — 0.11%

USD 138 Russia Government

International Bond,

Unsubordinated 11.000 7/24/2018 192 0.11

Turkey — 1.39%

USD 187 Turkey Government









International Bond,

Unsecured 6.875 3/17/2036 1,070 0.62

2,391 1.39

Uruguay — 0.00%

USD 2 Republic of Uruguay, Bonds 7.875 1/15/2033 2 –

Venezuela — 1.28%

USD 265 Bolivarian Republic of

Venezuela 9.375 1/13/2034 230 0.13

3 Republic of Venezuela, Oil–

Linked payment obligation † 4/15/2020 88 0.05

182 Republic of Venezuela 144A 10.750 9/19/2013 187 0.11



Unsecured 5.750 2/26/2016 1,653 0.96

2,214 1.28


Shares (000’s)

Value(000’s)$

% ofNetAssetValue


– American Tower Corp. – –

1 Bank of America Corp. 1,207 0.70

3,128 Home Interiors and Gifts, Inc. 144A* *** 31 0.02

Total Common Stock (Cost $1,355) 1,238 0.72





Warrants — 0.00%

1 Pillowtex Corp. *** – –

Total Warrants (Cost $0) – –





* Illiquid


*** Security is valued in good faith at fair value by or at the discretion of the InvestmentManager.



ABBREVIATIONS:

ARS – Argentine Peso

BRL – Brazilian Real

EGP – Egyptian Pound

IDR – Indonesian Rupiah

MYR – Malaysian Ringgit

RUB – Russian Ruble


ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET.




Other Assets 3.24%




71

Western Asset U.S. Short-Term Government Income Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Asset–Backed Securities — 0.18% (Cost $90)

USD 90 Nelnet Student Loan Trust † 4.280 4/25/2024 89 0.18




Index Bond * ** 2.375 1/15/2027 528 1.10



Indexed Note * ** 2.500 7/15/2016 452 0.94

940 U.S. Treasury Note 4.500 3/31/2009 953 1.99

2,850 U.S. Treasury Note 4.000 8/31/2009 2,901 6.04

4,306 8.97




USD 6 FHLMC, Pool #E81637 8.000 9/1/2010 6 0.01

95 FHLMC, Pool #G11169 7.500 10/1/2014 98 0.20

62 FHLMC, Pool #O20122 7.500 9/1/2023 67 0.14

405 FHLMC, Pool #G80176 8.000 12/17/2023 443 0.92

720 FHLMC, Pool #G00767 7.500 8/1/2027 780 1.62

295 FHLMC, Pool #G80210 8.000 8/20/2027 321 0.67

570 FHLMC, Pool #G80204 8.500 10/20/2027 631 1.31

286 FHLMC, Pool #G00921 7.500 4/1/2028 310 0.65

462 FHLMC, Pool #C14619 7.500 9/1/2028 500 1.04

106 FHLMC, Pool #N30699 7.000 8/1/2030 111 0.23

2,376 FHLMC Gold, Pool #G03695 5.500 11/1/2037 2,346 4.89

4,383 FHLMC Gold, Pool #G03696 5.500 1/1/2038 4,325 9.01

1,133 FHLMC Non Gold, Pool

#555537 9.500 1/1/2021 1,247 2.60

1,157 FHLMC Non Gold, Pool

#789586 † 5.669 7/1/2032 1,173 2.44

12,358 25.73


USD 620 FNMA, Series 1 4.750 11/19/2012 641 1.33

200 FNMA, 15 Year

September TBA *** 5.500 9/15/2023 202 0.42

410 FNMA, 15 Year

September TBA *** 6.000 9/15/2023 420 0.87

262 FNMA, Pool #545048 7.000 10/1/2015 274 0.57

354 FNMA, Pool #545816 8.000 3/1/2017 374 0.78

209 FNMA, Pool #545854 8.500 3/1/2017 221 0.46

200 FNMA, Pool #555210 6.500 10/1/2017 204 0.42

411 FNMA, Pool #705794 7.000 1/1/2018 421 0.88

137 FNMA, Pool #633510 8.000 6/1/2018 149 0.31

545 FNMA, Pool #516216 8.000 8/1/2019 588 1.22

267 FNMA, Pool #516217 8.500 8/1/2019 290 0.60

291 FNMA, Pool #545383 9.000 3/1/2020 298 0.62

1,368 FNMA, Pool #555319 7.500 3/1/2021 1,478 3.08

825 FNMA, Pool #545746 8.000 10/1/2021 892 1.86

2,418 FNMA, Pool #254305 6.500 5/1/2022 2,517 5.24

191 FNMA, Pool #125308 7.500 5/1/2024 206 0.43

127 FNMA, Pool #612040 9.500 10/1/2024 141 0.29

765 FNMA, Pool #303278 7.000 1/1/2025 810 1.69

258 FNMA, Pool #547542 8.500 10/1/2026 282 0.59

181 FNMA, Pool #721749 9.000 10/1/2026 200 0.42

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

600 FNMA, Pool #713213 9.000 12/1/2026 662 1.38

237 FNMA, Pool #689978 8.500 3/1/2027 259 0.54

368 FNMA, Pool #595463 8.500 4/1/2027 403 0.84

204 FNMA, Pool #721748 9.000 5/1/2027 225 0.47

43 FNMA, Pool #648571 8.500 9/1/2030 46 0.10

1,734 FNMA, Pool #545376 8.500 10/1/2030 1,887 3.93

331 FNMA, Pool #581418 7.000 6/1/2031 350 0.73

1,659 FNMA, Pool #598559 6.500 8/1/2031 1,733 3.61

649 FNMA, Pool #613142 7.000 11/1/2031 684 1.43

536 FNMA, Pool #621672 † 5.967 1/1/2032 548 1.14

525 FNMA, Pool #555318 7.000 4/1/2032 559 1.16

236 FNMA, Pool #555194 8.000 5/1/2032 255 0.53

1,193 FNMA, Pool #708340 † 4.884 4/1/2033 1,201 2.50

2,690 FNMA, 30 Year

September TBA *** 5.000 9/15/2038 2,586 5.38

3,000 FNMA, 30 Year

October TBA *** 5.000 10/15/2038 2,876 5.99

24,882 51.81


USD 144 GNMA, Pool #780210 8.000 7/15/2010 150 0.31

70 GNMA, Pool #385981 9.000 11/15/2024 77 0.16

618 GNMA, Pool #780162 8.500 6/15/2025 681 1.42

58 GNMA, Pool #405539 8.500 12/15/2025 64 0.14

972 2.03


Securities (Cost $37,742) 38,212 79.57


USD 173 FNMA Discount Notes * ? zero

coupon 12/15/2008 172 0.36


USD 1,493 FHLMC Gold 6.000 12/1/2037 1,506 3.14

7,000 FNMA † 5.316 2/17/2009 7,000 14.58

281 FNMA 5.000 6/1/2035 272 0.56





* The rate of interest on this type of security is tied to the Consumer Price Index (CPI).The coupon rate is the rate as of August 31, 2008.

** TIPS

*** Securities purchased on a to–be–announced basis (Note 1).


? Security held as collateral for future contract trading as at August 31, 2008.

ABBREVIATIONS:






72








Other Assets 9.73%



NominalValue






% of NetAsset Value

90 day Euro$

December 2008 30 7,275 7,277 2 – 2 –

90 day Euro$ March 2009 8 1,938 1,941 3 – 3 0.01

90 day Euro$

September 2009 36 8,701 8,704 3 – 3 0.01


U.S. 10 Year Note September 2008 (2) 233 233 – – – –

U.S. 2 Year Note (CBT) December 2008 (4) 849 849 – (1) (1) –

U.S. 5 Year Note (CBT) December 2008 (7) 783 783 – (1) (1) –

U.S. Long Bond

December 2008 (5) 586 587 – (1) (1) –

Total Market Value of Future Contracts (58) $33,499 $33,541 $8 $(36) $(28) (0.05)%



73

Western Asset U.S. Adjustable Rate Income Fund


Face Value(000’s)$

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



USD 300 Glitnir Banki HF,

Bonds 144A † 3.255 1/18/2012 226 0.45


Notes 144A † 3.511 8/25/2009 279 0.55

505 1.00


USD 400 Kaupthing Bank HF, Senior

Notes 144A 5.750 10/4/2011 326 0.65

Total Corporate Bonds and Notes (Cost $1,005) 831 1.65


USD 82 FNMA Discount Notes ? zero

coupon 12/15/2008 81 0.16



USD 300 FHLB System † ? 2.625 1/28/2009 300 0.59


USD 600 FHLMC Corp., 30 Year

September TBA * 5.500 9/15/2038 592 1.17

255 FHLMC Corp. Remics, Pool

#2579 † 2.917 11/15/2026 254 0.50

103 FHLMC Non Gold, Pool

#555464 10.500 12/1/2020 118 0.23


#846676 † 5.963 2/1/2023 20 0.04


#846738 † 6.168 3/1/2029 654 1.30


#787010 † 5.985 12/1/2029 140 0.28

1,778 3.52


USD 240 FNMA, Pool #70009 † 6.240 4/1/2018 244 0.48

622 FNMA, Pool #535037 † 6.610 4/1/2025 629 1.25

1,267 FNMA, Pool #535320 † 6.439 5/1/2028 1,271 2.52

278 FNMA, Pool #323808 † 6.711 5/1/2028 281 0.56

148 FNMA, Pool #737480 † 6.750 9/1/2033 148 0.29

2,200 FNMA, 30 Year

September TBA * 5.000 9/15/2038 2,115 4.19

5,400 FNMA, 30 Year

September TBA * 5.500 9/15/2038 5,332 10.57

1,000 FNMA, 30 Year

October TBA * 5.000 10/15/2038 959 1.90

405 FNMA Grantor Trust,

Series 2002–T19, Class A4 † 5.778 3/25/2042 393 0.78

1,183 FNMA Remics, Series 2005–

86, Class FC † 2.772 10/25/2035 1,137 2.25

913 FNMA Whole Loan,

Series 2003–W6, Class 6A † 5.860 8/25/2042 916 1.82

13,425 26.61


USD 78 GNMA, Pool #80283 † 5.375 5/20/2029 78 0.16

166 GNMA, Pool #80291 † 5.375 6/20/2029 167 0.33


CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

97 GNMA, Pool #80593 † 5.375 4/20/2032 98 0.19

208 GNMA, Pool #80602 † 5.375 5/20/2032 209 0.41

150 GNMA, Pool #80616 † 5.625 7/20/2032 150 0.30

151 GNMA, Pool #80636 † 5.625 9/20/2032 152 0.30

444 GNMA, Pool #80664 † 5.500 1/20/2033 448 0.89

1,302 2.58

Total U.S. Government Agency Mortgage–Backed Securities

(Cost $16,702) 16,805 33.30


USD 695 American Home Mortgage

Assets, Series 2006–2,

Class 2A1 † 2.662 9/25/2046 426 0.84

103 Banc of America Mortgage


A, Class 1A1 † 6.785 2/25/2034 101 0.20

783 Bear Stearns Alt–A Trust,

Series 2004–10, Class 1A1 † 2.812 9/25/2034 656 1.30


Series 2004–11, Class 1A2 † 3.312 11/25/2034 333 0.66


Series 2005–2, Class 1A1 † 2.722 3/25/2035 271 0.54

2,028 Bear Stearns Asset Backed


SD3, Class A † 3.079 10/25/2033 1,839 3.65

1,170 Citigroup Mortgage Loan

Trust, Inc., Series 2007–AR4,

Class 2A1A † 5.471 3/25/2037 794 1.57


Loan Trust, Series 2004–AL1,

Class A1 † 2.849 6/25/2038 157 0.31


Loan Trust, Series 2006–

OA17, Class 1A1A † 2.666 12/20/2046 533 1.06




Class 1A2 † 2.751 4/25/2035 281 0.56


Mortgages Pass Through


Class 1A1 † 2.972 6/25/2018 692 1.37

1,263 Countrywide Home Loan



Class 2A4 † 2.872 8/25/2033 1,252 2.48




Class 2A1 † 4.278 9/25/2033 1,063 2.11



Trust, Series 2003–HYB1,

Class 1A1 † 6.822 5/19/2033 216 0.43




Class 2A1 † 2.722 3/25/2036 440 0.87



74




CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Mortgage Securities,

Series 2005–AA12,

Class 1A1 † 5.912 2/25/2036 462 0.92


Mortgage Securities † 2.831 2/25/2037 104 0.21

269 First Horizon Asset Securities,

Inc., Series 2005–AR2,

Class 1A1 † 4.903 5/25/2035 219 0.43


Trust, Series 2006–HE1,

Class A † 2.682 11/25/2036 249 0.49

883 GSAMP Trust, Series 2006–

SEA1, Class A 144A † 2.772 5/25/2036 712 1.41

229 GSR Mortgage Loan Trust,

Series 2004–11, Class 1A1 † 4.949 9/25/2034 209 0.41

1,328 Harborview Mortgage Loan


Class 2A1A † 2.666 9/19/2046 806 1.60

1,645 Harborview Mortgage Loan


Class 2A1A † 2.676 11/19/2036 1,019 2.02

307 Impac CMB Trust,

Series 2003–8, Class 1A2 † 3.472 10/25/2033 293 0.58

392 Impac Secured Assets CMN

Owner Trust, Series 2004–3,

Class 1A4 † 2.872 11/25/2034 325 0.64

539 Impac Secured Assets CMN

Owner Trust, Series 2005–1,

Class 5A1 † 2.742 7/25/2035 299 0.59

169 Mastr Adjustable Rate

Mortgages Trust,

Series 2003–6, Class 5A1 † 6.490 12/25/2033 127 0.25

1,139 Mastr Alternative Loans


Class 7A1 144A † 2.861 11/25/2033 1,051 2.08

1,497 Merrill Lynch Mortgage

Investors, Inc., Series 2005–

A2, Class A4 † 4.488 2/25/2035 1,419 2.81

488 New York Mortgage Trust,

Inc., Series 2005–2, Class A † 2.802 8/25/2035 458 0.91

1,200 Residential Accredit Loans,

Inc., Series 2006–QO7,

Class 3A2 † 2.804 9/25/2046 679 1.35


Securitization Trust,

Series 2003–A5, Class A5 † 3.099 6/25/2033 219 0.44

1,786 Residential Asset

Securitization Trust,

Series 2004–A2, Class 1A3 † 2.999 5/25/2034 1,515 3.00

1,671 Residential Funding

Mortgage Securities I,

Series 2003–S10, Class A2 † 2.872 6/25/2033 1,572 3.12



Series 2004–1, Class 2A † 2.782 2/25/2034 132 0.26


CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Series 2004–17, Class A1 † 4.601 11/25/2034 363 0.72



Series 2004–7, Class A1 † 2.742 6/25/2034 574 1.14

812 Structured Asset Investment

Loan Trust, Series 2003–BC1,

Class A2 † 3.152 1/25/2033 714 1.41


Investment, Inc.,

Series 2003–CL1, Class 1F2 † 3.072 7/25/2032 478 0.95


Investments, Inc.,

Series 2003–AR2, Class A1 † 2.836 12/19/2033 287 0.57


Investments, Inc.,

Series 2005–AR3,

Class 2A1 † 6.355 8/25/2035 216 0.43

1,491 Structured Asset Mortgage

Investments, Inc.,

Series 2006–AR6,

Class 1A3 † 2.662 7/25/2036 895 1.77

1,447 Structured Asset Securities

Corp., Series 1998–8,

Class M1 † 3.412 8/25/2028 1,248 2.47

299 Structured Asset Securities

Corp., Series 2002–16A,

Class 1A1 † 6.222 8/25/2032 299 0.59


Corp., Series 2002–8A,

Class 7A1 † 5.742 5/25/2032 405 0.80



Class 2A9 † 3.012 3/25/2028 631 1.25



Class 2A9 † 2.972 4/25/2033 382 0.76

1,066 Structured Asset Securities

Corp., Series 2004–NP1,

Class A 144A † 2.872 9/25/2033 963 1.91



1, Class I2A † 2.922 3/25/2044 299 0.59



3, Class A1 † 2.702 10/25/2035 169 0.33



3, Class A4 † 2.742 10/25/2035 464 0.92




AR10, Class 1A1 † 5.930 9/25/2036 507 1.01


Alternative Mortgage Pass–


Series 2006–AR3,

Class A1A † 4.261 5/25/2046 327 0.65



75




CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue



Alternative Mortgage Pass–


Series 2006–AR6, Class 2A † 4.251 8/1/2046 386 0.77



Certificates, Series 2003–S4,

Class 2A9 † 3.611 6/25/2033 162 0.32

520 Washington Mutual MSC

Mortgage Pass–Through

CTFS, Series 2002–AR1,

Class 1A1 † 6.207 11/25/2030 491 0.97



USD 96 Ameriquest Mortgage


8, Class AV2 † 2.902 10/25/2033 80 0.16

77 Ameriquest Mortgage


R8, Class A5 † 2.842 9/25/2034 76 0.15

133 Argent Securities, Inc.,

Series 2004–W10, Class A2 † 2.862 10/25/2034 94 0.19



1, Class A1 † 2.972 11/25/2042 689 1.36



SD1, Class A † 3.049 12/25/2033 217 0.43

1,333 Bear Stearns Asset Backed


B01, Class 2A2 † 2.999 9/25/2034 1,213 2.40

276 Business Loan Express,

Series 2002–AA,

Class A 144A † 3.122 6/25/2028 255 0.51

795 Business Loan Express,

Series 2003–2A,

Class A 144A † 3.272 1/25/2032 686 1.36

22 Centex Home Equity,

Series 2005–D, Class AV2 † 2.742 10/25/2035 22 0.04


Certificates, Series 2004–6,

Class 2A4 † 2.922 11/25/2034 370 0.73

2 First Franklin Mortgage Loan

Asset Backed Certificates,

Series 2002–FF3, Class A2 † 3.392 8/25/2032 2 0.01

127 Option One Mortgage Loan


Class A1 † 2.972 8/25/2032 115 0.23

223 Option One Mortgage Loan


Class A2 † 3.012 8/25/2032 204 0.40

1,029 RAAC Series, Series 2006–

RP3, Class A 144A † 2.742 5/25/2036 842 1.67

920 Renaissance Home Equity

Loan Trust, Series 2003–2,

Class A † 2.912 8/25/2033 789 1.56


CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

2,136 Renaissance Home Equity


Class A † 2.972 12/25/2033 1,760 3.49


Class 1A † 2.732 6/25/2036 320 0.63


Class A1 † 2.752 11/25/2020 386 0.77


Class 1A † 2.611 4/25/2036 121 0.24

9 Saxon Asset Securities Trust,

Series 2002–1, Class AV1 † 2.972 3/25/2032 9 0.02

123 Specialty Underwriting &

Residential Finance,

Series 2003–BC1, Class A † 3.152 1/25/2034 100 0.20

1,034 Truman Capital Mortgage


Class A 144A † 2.902 3/25/2037 809 1.60






* Securities purchased on a to–be–announced basis (Note 1).



ABBREVIATIONS:



ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF FUTURES, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTS DEALT ON AREGULATED MARKET.




Other Assets 5.00%




76




NominalValue






% of NetAsset Value

90 day Euro$ December 2009 3 720 723 3 – 3 0.01

90 day Euro$ December 2010 (3) 715 713 – (3) (3) (0.01)

90 day Euro$ June 2009 33 7,949 7,996 47 – 47 0.09

90 day Euro$ March 2009 67 16,259 16,254 – (5) (5) (0.01)

90 day Euro$ September 2009 6 1,443 1,451 8 – 8 0.02



U.S. 5 Year Note (CBT) December 2008 (25) 2,793 2,788 – (5) (5) (0.01)




77

Western Asset Inflation Management Fund


Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue

Corporate Bonds and Notes — 0.20% (Cost $25)


USD 44 Residential Capital LLC, –

Secured 144A 9.625 5/15/2015 15 0.20



USD 40 Bank of America Corp., –



USD 35 JPMorgan Chase & Co., –


40 SLM Corp., Senior –

Unsecured 5.375 1/15/2013 34 0.47

20 SLM Corp., Senior –

Unsecured 5.375 5/15/2014 16 0.23

82 1.13

Total U.S. Corporate Bonds and Notes (Cost $129) 118 1.61



USD 564 FNMA, Pool #2777 PI * 5.000 5/15/2024 9 0.13


USD 200 FNMA, 30 Year –

September TBA ** 5.000 9/15/2038 192 2.63

200 FNMA, 30 Year –

September TBA ** 5.500 9/15/2038 198 2.70

390 5.33


Securities (Cost $392) 399 5.46


USD 500 GSAMP Trust, Series –2004–

OPT, Class M3 † 3.611 11/25/2034 399 5.46

115 Renaissance Home Equity –

Loan Trust, Series 2003–4, –

Class M3 † 4.361 3/25/2034 71 0.98

3 SACO I, Inc., Series –2005–2,

Class A 144A † 2.672 4/25/2035 2 0.02

51 Structured Asset Securities –

Corp., Series 2003–8, Class

–2A9 † 3.012 3/25/2028 44 0.60

Total Collateralised Mortgage–Backed Obligations (Cost $672) 516 7.06

Treasury Bonds/Notes — 84.44%

USD 90 France Government Bond –

OAT *** 3.150 7/25/2032 180 2.46

575 U.S. Treasury Inflationary –

Index Bond *** + 2.375 1/15/2025 690 9.44

1,180 U.S. Treasury Inflationary –

Index Bond *** + 2.000 1/15/2026 1,274 17.41


Index Bond *** + 1.750 1/15/2028 117 1.61


Index Note *** + ? 0.875 4/15/2010 203 2.77

Face Value(000’s)

CouponRate %

MaturityDate

Value(000’s)$

% ofNetAssetValue


Index Note *** + 3.500 1/15/2011 294 4.02


Index Note *** 2.375 4/15/2011 114 1.56


Index Note *** + 3.000 7/15/2012 372 5.09


Index Note *** + 1.875 7/15/2013 308 4.21


Index Note *** + 2.000 1/15/2014 547 7.47


Index Note *** + 1.625 1/15/2015 762 10.41


Index Note *** + 1.875 7/15/2015 231 3.16


Index Note *** + 2.000 1/15/2016 752 10.27


Index Note *** 2.375 1/15/2017 230 3.15


Index Note *** + 2.625 7/15/2017 103 1.41

Total Treasury Bonds/Notes (Cost $6,073) 6,177 84.44


Iceland — 1.76%





128 1.76

Kyrgystan — 0.40%

30 Vale Overseas Ltd., –


Total U.S. Denominated Bonds and Notes (Cost $241) 158 2.16

Shares (000’s)

Value(000’s)$

% ofNetAssetValue




3 FNMA 42 0.58







78



144A Securities exempt from registration under Rule 144A of the Securities Act of 1933,as amended. These securities may only be resold, in transactions exempt fromregistration, to qualified institutional buyers. At August 31, 2008, these securitiesamounted to $144,732 or 1.98% of net assets.

* Illiquid

** Securities purchased on a to–be–announced basis (Note 1).

*** TIPS

+ The rate of interest on this type of security is tied to the Consumer Price Index (CPI).The coupon rate is the rate as of August 31, 2008.



ABBREVIATIONS:




ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET WITH THE EXCEPTIONOF FUTURES, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTS DEALT ON AREGULATED MARKET.




Other Assets 2.62%



NominalValue






% of NetAsset Value

90 Day LIBOR Future September 2008 2 471 468 – (3) (3) (0.04)

Total Market Value of Future Contracts 2 $471 $468 – $(3) $(3) (0.04)%



79

Western Asset Asian Opportunities Fund


Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Cayman Islands Government Issues — 1.95%

SGD 1,000 OCBC Capital Corp. † 5.100 Perpetual 709 1.95

Hong Kong Government Issues — 3.41%

HKD 10,000 Hong Kong Government

Bond 2.710 2/20/2023 1,240 3.41


MYR 1,000 Bank Negara Malaysia


zero

coupon 9/4/2008 295 0.81

5,000 National Agricultural

Cooperative Federation 5.700 7/1/2013 1,464 4.03

1,759 4.84

Singapore Government Issues — 6.40%

SGD 250 CCT MTN Pte Ltd. 3.850 8/20/2010 176 0.48

2,200 Singapore Government Bond 4.000 9/1/2018 1,661 4.57

700 Singapore Government Bond 3.500 3/1/2027 490 1.35

2,327 6.40

Taiwan Government Issues — 12.86%

TWD 150,000 Taiwan Government Bond 2.000 7/20/2013 4,672 12.86

Thailand Government Issues — 7.26%

THB 90,600 Thailand Government Bond 4.250 3/13/2013 2,640 7.26


Commercial Paper — 13.70%

USD – Aviva PLC 2.400 9/10/2008 999 2.75

– Fonterra Co–Operative

Group Ltd. 2.800 11/24/2008 993 2.73

– Swedish Housing Finance 2.600 10/22/2008 996 2.74

– Toyota Finance Australia 2.350 10/20/2008 997 2.74

– Toyota Motor Finance BV 2.500 11/17/2008 995 2.74

Total Commercial Paper (Cost $4,981) 4,980 13.70

Total Return Swaps — 7.76%


Counterparty Citibank N.A. 9.500 6/15/2015 968 2.66


Counterparty Citibank N.A. 9.500 6/17/2015 968 2.66


Counterparty USB AG 9.500 7/19/2023 886 2.44

Total Total Return Swaps (Cost $2,811) 2,822 7.76


British Virgin Islands – 0.53 %

200 Galaxy Entertainment

Finance Co. Ltd., Company

Guaranteed † 8.133 12/15/2010 192 0.53

Canada — 0.71%

250 Sino–Forest Corp. 9.125 8/17/2011 256 0.71


150 Agile Property Holdings Ltd. 9.000 9/22/2013 131 0.36

150 MGTI Finance Co. Ltd. 8.375 9/15/2010 150 0.41

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

200 Parkson Retail Group Ltd. 7.125 5/30/2012 197 0.54

478 1.31

Hong Kong — 0.55%

200 HKCG Finance Ltd. 6.250 8/7/2018 201 0.55


150 Arpeni Pratama Ocean Line

Investment BV, Secured 8.750 5/3/2013 121 0.33

200 Indo Integrated Energy BV 8.500 6/1/2012 197 0.54

318 0.87

Singapore — 2.67%

1,000 Temasek Financial I Ltd. 4.500 9/21/2015 969 2.67

South Korea — 0.83%

300 Shinsegae Co. Ltd. 6.125 6/27/2011 303 0.83

Thailand — 0.32%

150 True Move Co. Ltd.,






Guaranteed 11.125 11/15/2015 148 0.41






– Amounts designated as "–" are either $0, less than $1,000 or less than 1,000 shares.

ABBREVIATIONS:

HKD - Hong Kong Dollar



THB - Thai Baht

TWD - Taiwanese Dollar


MTN - Medium Term Note

SGD - Singapore Dollar

ALL SECURITIES ARE TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIALEXCHANGE LISTING OR TRADED ON A REGULATED MARKET EXCEPT FOR FUTURESAND SWAPS, WHICH ARE FINANCIAL DERIVATIVE INSTRUMENTS DEALT ON AREGULATED MARKET.




Other Asests 37.09%




80




NominalValue





UnrealisedGain/(Loss)(000’s) $

% of NetAsset Value

U.S. 2 Year Note (CBT) December 2008 (22) 4,667 4,670 – (3) (3) (0.01)

Total Market Value of Future Contracts (22) $4,667 $4,670 – $(3) $(3) (0.01)%



Buy/Sell


Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Citigroup Global Markets Republic of Philippines Note, 10.63%, due 3/16/25 Sell 2.62% 09/20/13 (1,000) $7

$7


Credit Default Swaps- Financial Liabilities at Fair Value –

Credit Default Swaps- Financial Assets and Liabilities at Fair Value $7



Expiration

Date

Notional

Amount

(000’s) $

Value

(000’s) $

Lehman Brothers, Inc. Fixed (MYR) Receive 2.90% 9/07/97 3,371 $(129)

Lehman Brothers, Inc. Fixed (CNY) Pay 2.90% 9/06/84 2,000 22

HSBC Securities (USA) Inc. 6 Month USD – LIBOR Receive 3.08% 9/07/98 (1,500) (2)

Lehman Brothers, Inc. 6 Month USD – LIBOR Receive 3.13% 9/06/84 (2,000) (3)

JP Morgan Securities, Inc. 3 Month HKD – HIBOR Pay 3.13% 9/07/98 (2,947) (1)

JP Morgan Securities, Inc. Fixed (KRW) Receive 4.20% 9/07/98 2,947 79

Lehman Brothers, Inc. 3 Month MYR– KLIBOR Pay 4.72% 9/07/97 (3,371) 118

UBS Ltd. Fixed (KRW) Receive 5.30% 2/07/99 1,046 (72)

Lehman Brothers, Inc. 3 Month KRW – CD Pay 5.35% 9/06/80 (2,039) 111

Lehman Brothers, Inc. 3 Month KRW – CD Pay 5.35% 2/06/81 (1,942) 106

Lehman Brothers, Inc. Fixed (KRW) Receive 5.44% 2/06/81 1,942 (86)

Lehman Brothers, Inc. Fixed (KRW) Receive 5.44% 9/06/80 2,039 (110)

Citigroup Global Markets Fixed (KRW) Receive 5.46% 9/07/98 1,874 (127)

Citigroup Global Markets 3 Month KRW – CD Pay 5.66% 9/07/98 (1,874) 130

UBS Ltd. 3 Month KRW – CD Pay 5.67% 2/07/99 (1,046) 72

HSBC Securities (USA) Inc. Fixed (PHP) Pay 8.00% 9/07/98 1,499 (8)

Lehman Brothers, Inc. O/N INR MIBOR Pay 8.25% 9/06/80 (3,033) 59

Lehman Brothers, Inc. Fixed (INR) Receive 8.36% 9/06/80 3,033 (154)

UBS Ltd. O/N INR MIBOR Pay 9.20% 6/07/98 (4,240) 134

UBS Ltd. Fixed (INR) Receive 9.66% 6/07/98 4,240 (111)

$28

Interest Rate Swaps – Financial Assets at Fair Value 831

Interest Rate Swaps – Financial Liabilities at Fair Value (803)

Interest Rate Swaps – Financial Assets and Liabilities at Fair Value $28



81

Brandywine Global Opportunities Bond Fund


Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Biotechnology — 2.03%

USD 6,170 Amgen, Inc., Senior

Unsecured 6.900 6/1/2038 6,392 1.13

4,950 Biogen Idec, Inc., Senior

Unsecured 6.875 3/1/2018 5,059 0.90

11,451 2.03

Computers — 0.40%

USD 2,350 Dell, Inc., Senior

Unsecured 144A 6.500 4/15/2038 2,240 0.40


USD 5,550 Fifth Third Bancorp,

Subordinated 8.250 3/1/2038 4,176 0.74


USD 3,733 The Goldman Sachs Group,

Inc., Subordinated 6.750 10/1/2037 3,285 0.58

Food — 1.02%

USD 5,780 Kraft Foods, Inc., Senior

Unsecured 7.000 8/11/2037 5,751 1.02

Healthcare–Services — 1.00%

USD 6,313 UnitedHealth Group, Inc.,


Insurance — 0.54%

USD 3,060 Berkshire Hathaway Finance

Corp., Company

Guaranteed 144A 5.400 5/15/2018 3,046 0.54

Media — 2.98%

USD 1,095 Comcast Corp., Company

Guaranteed 6.450 3/15/2037 1,010 0.18

5,690 Comcast Corp., Company

Guaranteed 6.950 8/15/2037 5,553 0.99

7,420 Time Warner Cable, Inc.,


3,080 Viacom, Inc., Senior

Unsecured 6.875 4/30/2036 2,781 0.49

16,800 2.98


USD 1,572 Abbott Laboratories, Senior

Unsecured 6.150 11/30/2037 1,591 0.28

3,715 Bristol–Myers Squibb Co.,


4,200 GlaxoSmithKline Capital,

Inc., Company Guaranteed 6.375 5/15/2038 4,202 0.75

9,426 1.67

Retail — 1.51%

USD 1,575 Target Corp., Senior

Unsecured 6.500 10/15/2037 1,550 0.27

5,590 Wal–Mart Stores, Inc., Senior

Unsecured 6.500 8/15/2037 5,723 1.02

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

1,235 Wal–Mart Stores, Inc., Senior

Unsecured 6.200 4/15/2038 1,222 0.22

8,495 1.51

Software — 0.74%

USD 4,133 Oracle Corp., Notes 6.500 4/15/2038 4,176 0.74


USD 6,925 AT&T, Inc., Senior Unsecured 6.400 5/15/2038 6,617 1.18

Water — 0.83%

USD 5,073 American Water Capital

Corp., Senior Unsecured 6.593 10/15/2037 4,676 0.83



Australia Government Issues — 11.79%

AUD 39,520 New South Wales Treasury

Bills, Series 17RG, Local


11,210 New South Wales Treasury

Corp., Series 12RG, Local


28,860 Queensland Treasury Corp.,

Series 15G, Local


66,402 11.79

Canada Government Issues — 4.91%

CAD 22,150 Canada Government Bond 6.000 6/1/2011 22,597 4.01

NZD 7,500 Province of Ontario Canada,

Series G, Medium Term

Notes, Unsubordinated

Bonds 6.250 6/16/2015 5,045 0.90

27,642 4.91

France Government Issues — 3.92%

EUR 16,905 France Government Bond

OAT 4.000 10/25/2038 22,100 3.92

Iceland Government Issues — 1.89%

ISK 501,700 Inter–American

Development Bank 11.500 2/5/2009 6,004 1.07

390,200 International Bank for

Reconstruction &

Development, Senior

Unsecured 11.500 3/6/2009 4,625 0.82

10,629 1.89


MYR 1,206 Malaysia Government Bond,

Series 1/01 3.833 9/28/2011 354 0.06

5,260 Malaysia Government Bond,

Series 4/05 3.756 4/28/2011 1,545 0.28

44,385 Malaysia Government Bond,

Series 5/06 3.718 6/15/2012 12,911 2.29

14,810 2.63



82



Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue


Mexico Government Bonds — 2.36%

MXN 143,120 Mexican Bonos 7.750 12/14/2017 13,274 2.36

New Zealand Dollar Bonds — 1.95%

NZD 12,810 General Electric Capital

Corp., Senior Unsecured 7.625 12/10/2014 8,565 1.52

NZD 3,510 New Zealand Government

Bond, Series 415 6.000 4/15/2015 2,444 0.43

11,009 1.95

Poland Government Issues — 5.44%

PLN 73,685 Poland Government Bond,

Series 1017 5.250 10/25/2017 30,651 5.44

Singapore Government Issues — 2.00%

SGD 15,659 Singapore Government Bond 2.625 4/1/2010 11,284 2.00

South African Government Issues — 3.03%

ZAR 124,365 Republic of South Africa

Bond, Series R153 13.000 8/31/2010 17,079 3.03

Sweden Government Issues — 4.40%

NZD 7,660 Svensk Exportkredit AB 7.625 6/30/2014 5,513 0.98

SEK 124,900 Sweden Government Bond,

Series 1048 4.000 12/1/2009 19,244 3.42

24,757 4.40

United Kingdom Government Issues — 6.30%

GBP 7,875 United Kingdom Gilt 4.750 9/7/2015 14,603 2.59

11,800 United Kingdom Gilt 4.000 9/7/2016 20,877 3.71

35,480 6.30




USD 28,250 FHLMC Gold, 30 Year

September TBA † 5.000 9/15/2038 27,138 4.82


USD 18,695 FNMA 6.000 4/18/2036 19,176 3.40


U.S. Government Agency Mortgage–Backed Securities — 2.22% (Cost $12,548)


USD 13,005 FNMA, 30 Year

September TBA † 5.000 9/15/2038 12,501 2.22


USD 2,884 Countrywide Alternative

Loan Trust 5.750 8/25/2037 2,435 0.43

2,963 Countrywide Alternative

Loan Trust 6.000 8/25/2037 2,044 0.36

6,872 Countrywide Alternative

Loan Trust * 6.500 9/25/2037 4,663 0.83



Trust 5.750 7/25/2037 3,754 0.67

4,729 Deutsche Mortgage

Securities, Inc. * 5.650 8/28/2036 4,252 0.76

Face Value(000’s)

CouponRate%

MaturityDate

Value(000’s)$

% ofNetAssetValue

4,827 Deutsche Mortgage

Securities, Inc. * 5.650 9/28/2036 4,342 0.77

12,930 GS Mortgage Securities

Corp. 144A * 5.972 8/27/2037 10,893 1.93

6,305 GSAA Trust 5.995 3/25/2046 4,772 0.85

5,979 JPMorgan Alternative Loan

Trust 144A 6.000 11/25/2036 5,140 0.91

9,655 JPMorgan Alternative Loan

Trust 144A 6.000 12/25/2036 7,917 1.41

4,766 Master Resecuritization

Trust 144A 6.000 6/27/2036 4,218 0.75

5,576 RBSGC Mortgage Pass


9,232 RBSGC Mortgage Pass


13,850 Wells Fargo Mortgage


Series 2007–11, Class A36 6.000 8/1/2037 11,005 1.95

7,404 Wells Fargo Mortgage

Backed Securities Trust 6.000 8/25/2037 6,199 1.10

Total Collateralised Mortgage–Backed Obligations

(Cost $90,833) 83,874 14.89


Luxembourg – 1.61%

1,955 Covidien International

Finance S.A., Company

Guaranteed 6.550 10/15/2037 1,988 0.35

3,309 Tyco Electronics Group S.A.,


3,715 Tyco Electronics Group S.A.,


9,048 1.61


6,650 AstraZeneca PLC, Senior

Unsecured 6.450 9/15/2037 6,820 1.21






* Variable rate security. The interest rate shown reflects the rate in effect atAugust 31, 2008.

† Securities purchased on a to–be–announced basis (Note 1).



83



ABBREVIATIONS:

AUD – Australian Dollar

CAD – Canadian Dollar

EUR – Euro

GBP – British Pound

ISK – Icelandic Krona

MXN – Mexican Peso

MYR – Malaysian Ringgit

NZD – New Zealand Dollar

PLN – Polish Zloty

SEK – Swedish Krona

SGD – Singapore Dollar


ZAR – South African Rand







Other Assets 12.54%




84

Legg Mason Value Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue



69 Nucor Corp. 3,638 0.65


521 Amazon.Com, Inc. 42,127 7.51

675 Cisco Systems, Inc. 16,241 2.89

1,020 eBay, Inc. 25,421 4.53

48 Google, Inc., Class A 22,122 3.94


International, Inc. 1,496 0.27

1,366 Time Warner, Inc. 22,360 3.98

992 Yahoo!, Inc. 19,230 3.43

148,997 26.55

Consumer, Cyclical — 6.39%

283 JC Penney Co., Inc. 11,013 1.96

271 Sears Holdings Corp. 24,873 4.43

35,886 6.39

Consumer, Non–cyclical — 14.65%

813 Aetna, Inc. 35,056 6.25

307 Amgen, Inc. 19,308 3.44

914 UnitedHealth Group, Inc. 27,843 4.96

82,207 14.65

Financial — 19.80%


Group, Inc. 15,560 2.77


298 Capital One Financial Corp. 13,167 2.35

1,327 Citigroup, Inc. 25,190 4.49

1,103 FHLMC Corp. 4,972 0.89


Inc. 4,739 0.84

649 JPMorgan Chase & Co. 24,995 4.45

422 Merrill Lynch & Co., Inc. 11,950 2.13

19 NYSE Euronext 767 0.14

111,126 19.80


1,262 Eastman Kodak Co. 20,432 3.64

836 General Electric Co. 23,486 4.18

43,918 7.82


595 CA, Inc. 14,224 2.54

305 Electronic Arts, Inc. 14,897 2.65

495 Hewlett–Packard Co. 23,211 4.14

172 International Business

Machines Corp. 20,937 3.73

463 Texas Instruments, Inc. 11,351 2.02

84,620 15.08

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

Utilities — 7.51%

2,764 The AES Corp. 42,174 7.51








Other Assets 2.12%




85



Shares (000’s)

Value(000’S)$

% ofNetAssetValue



47 Amazon.Com, Inc. 3,822 6.02


120 eBay, Inc. 2,994 4.71

7 Google, Inc., Class A 3,046 4.80

144 Nokia Oyj, ADR 3,620 5.70

44 Qualcomm, Inc. 2,290 3.61

153 Yahoo!, Inc. 2,963 4.67

21,811 34.35

Consumer, Non-cyclical — 6.76%

55 Kraft Foods, Inc., Class A 1,727 2.72

80 Quanta Services, Inc. 2,568 4.04

4,295 6.76

Energy — 6.27%

31 Halliburton Co. 1,340 2.11

36 Nabors Industries Ltd. 1,289 2.03

27 XTO Energy, Inc. 1,351 2.13

3,980 6.27

Financial — 16.94%

55 American Express Co. 2,179 3.43


Group, Inc. 2,618 4.12

168 Citigroup, Inc. 3,190 5.03

178 FHLMC Corp. 801 1.26


10,758 16.94


25 Caterpillar, Inc. 1,761 2.77

14 FedEx Corp. 1,180 1.86

26 Foster Wheeler Ltd. 1,272 2.00

45 General Cable Corp. 2,225 3.50

44 The Shaw Group, Inc. 2,170 3.42

53 Thomas & Betts Corp. 2,456 3.87

11,064 17.42



107 EMC Corp. 1,630 2.57

106 Red Hat, Inc. 2,224 3.50


8,413 13.25

Utilities — 3.12%

116 Reliant Energy, Inc. 1,979 3.12





ABBREVIATIONS:

ADR - American Depositary Receipt




Other Assets 4.40%




86



Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Aerospace and Defense — 4.52%

5 Honeywell International, Inc. 256 0.78

8 Raytheon Co. 468 1.42

12 United Technologies Corp. 761 2.32

1,485 4.52

Air Freight & Logistics — 1.52%

8 United Parcel Service, Inc.,

Class B 498 1.52


3 Weyerhaeuser Co. 166 0.51

Beverages — 1.06%

5 PepsiCo, Inc. 349 1.06


2 Amgen, Inc. 124 0.38

Capital Markets — 0.61%

7 Merrill Lynch & Co., Inc. 202 0.61

Chemicals — 4.29%

3 Celanese Corp. 100 0.30

7 Cytec Industries, Inc. 330 1.01

8 EI Du Pont de Nemours & Co. 338 1.03

2 Monsanto Co. 255 0.78

6 PPG Industries, Inc. 383 1.17

1,406 4.29

Commercial Services & Supplies — 0.53%

5 Pitney Bowes, Inc. 175 0.53

Communications Equipment — 2.82%

26 Cisco Systems, Inc. 625 1.91

6 Qualcomm, Inc. 300 0.91

925 2.82

Computers & Peripherals — 2.92%

22 EMC Corp. 342 1.04

5 International Business Machines Corp. 617 1.88

959 2.92

Diversified Telecommunication Services — 0.69%

6 Verizon Communications, Inc. 227 0.69

Electric Utilities — 1.16%

10 Duke Energy Corp. 169 0.52

6 NRG Energy, Inc. 212 0.64

381 1.16

Electronic Equipment & Instruments — 0.31%

1 Apple, Inc. 103 0.31

Energy — 0.58%

7 Covanta Holding Corp. 189 0.58

Energy Equipment & Services — 1.71%

10 Nabors Industries Ltd. 366 1.12

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

2 Schlumberger Ltd. 195 0.59

561 1.71

Engineering & Construction — 0.41%

4 McDermott International, Inc. 133 0.41

Environmental Control — 1.81%

17 Waste Management, Inc. 595 1.81


3 The Bank of New York Mellon Corp. 89 0.27

8 Wells Fargo & Co. 247 0.75

336 1.02


11 JPMorgan Chase & Co. 405 1.23

Food & Staples Retailing — 2.74%

15 Wal–Mart Stores, Inc. 898 2.74

Food Products — 3.01%

4 Cadbury Schweppes PLC, ADR 178 0.54

4 General Mills, Inc. 253 0.77

3 HJ Heinz Co. 147 0.45

13 Kraft Foods, Inc., Class A 410 1.25

988 3.01


4 Medtronic, Inc. 210 0.64

Healthcare Providers & Services — 0.72%

8 UnitedHealth Group, Inc. 235 0.72

Hotels, Restaurants & Leisure — 1.35%

8 Marcus Corp. 131 0.40

5 McDonald’s Corp. 312 0.95

443 1.35


6 Kimberly–Clark Corp. 358 1.09

12 Procter & Gamble Co. 809 2.47

1,167 3.56

Industrial Conglomerates — 5.10%

5 3M Co. 366 1.12

29 General Electric Co. 811 2.47

12 Tyco International Ltd. 495 1.51

1,672 5.10

Industrials — 0.58%

4 Dover Corp. 189 0.58

Insurance — 6.99%

3 Aflac, Inc. 181 0.55

– Berkshire Hathaway, Inc., Class A 1,283 3.91

2 Radian Group, Inc. 7 0.02

19 The Travelers Cos, Inc. 824 2.51

2,295 6.99



87



Shares (000’s)

Value(000’S)$

% ofNetAssetValue

Common Stock — (continued)

Internet Software & Services — 3.76%

3 Amazon.Com, Inc. 204 0.62

8 eBay, Inc. 194 0.59

1 Google, Inc., Class A 371 1.13

12 VeriSign, Inc. 376 1.15

5 Yahoo!, Inc. 88 0.27

1,233 3.76

Media — 4.84%

8 Cablevision Systems Corp., Class A 248 0.75

17 Comcast Corp., Class A 370 1.13

– Gannett Co., Inc. 6 0.02

23 Time Warner, Inc. 370 1.13

18 The Walt Disney Co. 595 1.81

1,589 4.84

Metals & Mining — 1.06%

7 Alcoa, Inc. 212 0.65

2 Freeport–McMoRan Copper & Gold, Inc.,

Class B 135 0.41

347 1.06

Oil, Gas & Consumable Fuels — 10.91%

5 Anadarko Petroleum Corp. 315 0.96

2 BP PLC, ADR 115 0.35

5 Devon Energy Corp. 559 1.70

23 El Paso Corp. 389 1.18

3 EnCana Corp. 242 0.74

12 Exxon Mobil Corp. 928 2.83

13 Newfield Exploration Co. 570 1.73

4 SandRidge Energy, Inc. 134 0.41

12 Spectra Energy Corp. 330 1.01

3,582 10.91


9 Abbott Laboratories 497 1.51

9 Bristol–Myers Squibb Co. 192 0.58

2 Eli Lilly & Co. 89 0.27

7 Forest Laboratories, Inc. 232 0.71

14 Johnson & Johnson 1,000 3.05

3 Novartis AG, ADR 178 0.54

13 Pfizer, Inc. 245 0.75

8 Schering–Plough Corp. 160 0.49

2,593 7.90


28 Annaly Capital Management, Inc. 411 1.25

5 Chimera Investment Corp. 34 0.11

8 Forest City Enterprises, Inc., Class A 240 0.73

685 2.09

Semiconductors & Semiconductor Equipment — 2.35%

19 Intel Corp. 441 1.34

27 LSI Corp. 178 0.54

12 NVIDIA Corp. 154 0.47

773 2.35

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

Software — 4.26%

9 Automatic Data Processing, Inc. 391 1.19

25 Microsoft Corp. 690 2.10

15 Oracle Corp. 318 0.97

1,399 4.26

Speciality Retail — 0.50%

4 Home Depot, Inc. 105 0.32

3 Staples, Inc. 61 0.18

166 0.50


17 AT&T, Inc. 537 1.64

Thrifts & Mortgage Finance — 0.37%

7 Hudson City Bancorp, Inc. 121 0.37





– Amounts designated as " – " are either $0, less than $1,000 or less than 1,000 shares.

ABBREVIATIONS:





Other Assets 8.56%




88

ClearBridge U.S. Fundamental Value Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue



35 Boeing Co. 2,288 1.40

62 Honeywell International, Inc. 3,116 1.90

68 Raytheon Co. 4,084 2.49

9,488 5.79

Air Freight & Logistics — 2.11%

54 United Parcel Service, Inc.,

Class B 3,456 2.11

Building Products — 0.31%

18 Simpson Manufacturing Co.,

Inc. 503 0.31


7 Franklin Resources, Inc. 690 0.42

7 Greenhill & Co., Inc. 494 0.30

149 JPMorgan Chase & Co. 5,726 3.49


66 State Street Corp. 4,432 2.70

13,485 8.22

Chemicals — 1.79%

66 EI Du Pont de Nemours & Co. 2,929 1.79

Commercial Banks — 1.07%

56 Comerica, Inc. 1,567 0.96

14 East West Bancorp, Inc. 175 0.11

1,742 1.07



239 Motorola, Inc. 2,248 1.37

5,471 3.34



Machines Corp. 3,663 2.24

Consumer Finance — 1.56%

65 American Express Co. 2,567 1.57


20 Baker Hughes, Inc. 1,560 0.95

89 Halliburton Co. 3,915 2.39

20 Schlumberger Ltd. 1,875 1.14

17 Transocean, Inc. 2,177 1.33

9,527 5.81

Food & Staples Retailing — 3.09%

86 Wal–Mart Stores, Inc. 5,059 3.09

Food Products — 2.78%

75 Kraft Foods, Inc., Class A 2,368 1.45

81 Unilever PLC, ADR 2,179 1.33

4,547 2.78



Shares (000’s)

Value(000’S)$

% ofNetAssetValue

48 McDermott International, Inc. 1,659 1.01

4,947 3.02

Insurance — 3.92%

25 Allied World Assurance

Holdings Ltd. 970 0.59

113 Chubb Corp. 5,447 3.33

6,417 3.92


119 eBay, Inc. 2,954 1.80

Life Sciences & Tools — 0.87%

111 Enzo Biochem, Inc. 1,434 0.87

Machinery — 2.96%

39 Caterpillar, Inc. 2,780 1.70

42 Dover Corp. 2,069 1.26

4,849 2.96

Media — 5.03%

229 Time Warner, Inc. 3,751 2.29

139 The Walt Disney Co. 4,490 2.74

8,241 5.03

Metals & Mining — 0.64%

30 Barrick Gold Corp. 1,045 0.64


47 Anadarko Petroleum Corp. 2,883 1.76

1,275 Berkley Resources, Inc. 258 0.16

26 Chevron Corp. 2,235 1.36

13 ConocoPhillips 1,081 0.66

100 El Paso Corp. 1,683 1.03

21 Exxon Mobil Corp. 1,680 1.03

2 Murphy Oil Corp. 173 0.11

22 Weatherford International

Ltd. 851 0.52

10,844 6.63

Paper & Forest Products — 1.30%

39 Weyerhaeuser Co. 2,136 1.30


73 Abbott Laboratories 4,183 2.55


58 Merck & Co., Inc. 2,078 1.27

86 Novartis AG, ADR 4,803 2.93

102 Wyeth Corp. 4,402 2.69

19,777 12.07


237 Applied Materials, Inc. 4,242 2.59

105 Novellus Systems, Inc. 2,376 1.45

12 Samsung Electronics Co. Ltd.,

GDR 144A 2,796 1.71

267 Taiwan Semiconductor

Manufacturing Co. Ltd., ADR 2,591 1.58




89



Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Semiconductors & Semiconductor Equipment — (continued)

17 Verigy Ltd. 305 0.19

16,557 10.11

Software — 2.79%

66 Lawson Software, Inc. 537 0.33

146 Microsoft Corp. 3,990 2.43

92 Wave Systems Corp., Class A 43 0.03

4,570 2.79


152 The Gap, Inc. 2,956 1.80

142 Home Depot, Inc. 3,846 2.35

44 Williams–Sonoma, Inc. 775 0.47

7,577 4.62

Wireless Telecommunication Services — 2.24%

144 Vodafone Group PLC, ADR 3,668 2.24






ABBREVIATIONS:


GDR - Global Depositary Receipt




Other Assets 5.01%




90

ClearBridge U.S. Large Cap Growth Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Beverages — 6.00%

27 The Coca–Cola Co. 1,405 2.80

23 PepsiCo, Inc. 1,600 3.20

3,005 6.00


49 Amgen, Inc. 3,108 6.20

34 Biogen Idec, Inc. 1,740 3.47

36 Genentech, Inc. 3,508 7.00

31 Vertex Pharmaceuticals, Inc. 821 1.64

9,177 18.31





36 Qualcomm, Inc. 1,894 3.78

3,462 6.91

Diversified Financial Services — 4.65%


Inc. 568 1.13

54 The Nasdaq OMX Group 1,763 3.52

2,331 4.65

Healthcare Equipment & Supplies — 2.35%

22 Medtronic, Inc. 1,178 2.35


22 Procter & Gamble Co. 1,506 3.00


35 General Electric Co. 997 1.99

Insurance — 7.58%


Group, Inc. 885 1.76

– Berkshire Hathaway, Inc.,

Class A 2,915 5.82

3,800 7.58


76 Akamai Technologies, Inc. 1,750 3.49

54 Amazon.Com, Inc. 4,359 8.70

58 eBay, Inc. 1,446 2.89

7,555 15.08

Media — 4.72%

63 Time Warner, Inc. 1,030 2.05


2,368 4.72



Retail — 3.55%

19 Sears Holdings Corp. 1,777 3.55

Shares (000’s)

Value(000’S)$

% ofNetAssetValue


70 Intel Corp. 1,604 3.20

45 NVIDIA Corp. 568 1.14


3,737 7.46

Software — 9.25%


38 Microsoft Corp. 1,031 2.06

88 Red Hat, Inc. 1,850 3.69

4,636 9.25


45 Home Depot, Inc. 1,219 2.43








Other Assets 0.26%




91

ClearBridge U.S. Aggressive Growth Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue



66 L–3 Communications Holdings, Inc. 6,870 3.82


50 Alkermes, Inc. 669 0.37

134 Amgen, Inc. 8,390 4.66

137 Biogen Idec, Inc. 6,972 3.87

14 Genentech, Inc. 1,363 0.76

113 Genzyme Corp. 8,869 4.93

75 Isis Pharmaceuticals, Inc. 1,326 0.74

10 Micromet, Inc. 62 0.03

62 Vertex Pharmaceuticals, Inc. 1,671 0.93

29,322 16.29


118 Nokia Oyj, ADR 2,975 1.65


104 SanDisk Corp. 1,499 0.83

84 Seagate Technology 1,256 0.70

2,755 1.53

Diversified Financial Services — 4.46%

12 Astoria Financial Corp. 256 0.14

21 CIT Group, Inc. 220 0.12

36 Cohen & Steers, Inc. 1,036 0.57

206 Lehman Brothers Holdings, Inc. 3,307 1.84


8,037 4.46

Electronic Equipment & Instruments — 2.43%

133 Tyco Electronics Ltd. 4,377 2.43


50 Core Laboratories NV 6,157 3.42

Healthcare Equipment & Supplies — 3.39%

113 Covidien Ltd. 6,110 3.39

Healthcare Providers & Services — 4.25%

252 UnitedHealth Group, Inc. 7,658 4.25


133 Tyco International Ltd. 5,703 3.17

Internet & Catalog Retail — 0.90%

119 Liberty Media Corp. – Interactive, Class A 1,617 0.90

Machinery — 2.02%

90 Pall Corp. 3,635 2.02

Media — 17.60%

288 Cablevision Systems Corp., Class A 9,310 5.17

29 CBS Corp., Class B 465 0.26

57 Comcast Corp., Class A 1,202 0.67

461 Comcast Corp., Special Class A 9,745 5.41

45 Discovery Holding Co., Class A 912 0.51

20 Liberty Global, Inc., Class A 720 0.40

21 Liberty Global, Inc., Class C 690 0.38

24 Liberty Media Corp. – Capital, Series A 387 0.22

95 Liberty Media Corp. – Entertainment, Series A 2,645 1.47

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

636 Sirius XM Radio, Inc. 846 0.47

21 Viacom, Inc., Class B 612 0.34


5 World Wrestling Entertainment, Inc., Class A 78 0.04

31,688 17.60


208 Anadarko Petroleum Corp. 12,834 7.13

58 National Oilwell Varco, Inc. 4,282 2.38

347 Weatherford International Ltd. 13,387 7.43

30,503 16.94


46 BioMimetic Therapeutics, Inc. 527 0.29

251 Forest Laboratories, Inc. 8,958 4.98

119 ImClone Systems, Inc. 7,673 4.26

20 Teva Pharmaceutical Industries Ltd., ADR 955 0.53

85 Valeant Pharmaceuticals International 1,556 0.86

19,669 10.92


169 Broadcom Corp., Class A 4,060 2.25

20 Cree, Inc. 466 0.26

35 DSP Group, Inc. 271 0.15

83 Intel Corp. 1,905 1.06

4 Standard Microsystems

Corp. 129 0.07

6,831 3.79

Software — 1.74%

79 Autodesk, Inc. 2,807 1.56


3,140 1.74


75 Charming Shoppes, Inc. 405 0.23


25 Advent Software, Inc. 1,156 0.64


23 Arris Group, Inc. 215 0.12

Thrifts & Mortgage Finance — 1.02%

111 New York Community Bancorp, Inc. 1,834 1.02





ABBREVIATIONS:




92






Other Assets 0.07%




93



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Advertising and Publishing — 0.24%

10 Harris Interactive, Inc. 17 0.02

20 MDC Partners, Inc., Class A 162 0.22

179 0.24


16 Applied Signal Technology,

Inc. 260 0.34

18 Be Aerospace, Inc. 419 0.55

3 CPI Aerostructures, Inc. 23 0.03

11 Ducommun, Inc. 297 0.39

30 Hexcel Corp. 630 0.83

22 Kaman Corp. 663 0.87

2,292 3.01

Apparel and Shoes — 2.64%

56 Bernard Chaus, Inc. 21 0.03

44 Frederick’s of Hollywood

Group, Inc. 37 0.05

20 Hanesbrands, Inc. 477 0.63

37 Hartmarx Corp. 92 0.12

30 Jones Apparel Group, Inc. 596 0.78

45 Quiksilver, Inc. 349 0.46

57 Unifi, Inc. 228 0.30

4 The Warnaco Group, Inc. 206 0.27

2,006 2.64

Banking — 3.51%

15 Bancorpsouth, Inc. 348 0.46

15 Boston Private Financial

Holdings, Inc. 130 0.17

11 Cascade Financial Corp. 103 0.13

40 First Bancorp. 378 0.50

27 First Commonwealth Financial

Corp. 303 0.40

15 FirstMerit Corp. 306 0.40

28 Franklin Bank Corp. 16 0.02

35 Guaranty Bancorp. 197 0.26

20 Old National Bancorp. 348 0.46

7 Pacific Mercantile Bancorp. 44 0.06

3 Superior Bancorp. 23 0.03

13 Texas Capital Banshares, Inc. 200 0.26

14 Umpqua Holdings Corp. 190 0.25

8 United Western Bancorp, Inc. 85 0.11

2,671 3.51

Building Systems and Components — 0.70%

10 NCI Building Systems, Inc. 383 0.50

29 PGT, Inc. 150 0.20

533 0.70


13 Perceptron, Inc. 93 0.12

23 Rent–A–Center, Inc. 517 0.68

67 Quiksilver, Inc. 238 0.31

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

33 Volt Information Sciences,

Inc. 463 0.61

1,311 1.72

Components and Systems — 5.11%

4 Analogic Corp. 271 0.36

27 Benchmark Electronics, Inc. 439 0.58

12 Concurrent Computer Corp. 84 0.11

68 Cray, Inc. 380 0.50

80 Dot Hill Systems Corp. 175 0.23

30 Furmanite Corp. 361 0.47

52 Hypercom Corp. 234 0.31

71 InFocus Corp. 104 0.14

17 Interphase Corp. 57 0.07

43 Kemet Corp. 70 0.09

15 Mentor Graphics Corp. 183 0.24

30 Mercury Computer Systems,

Inc. 276 0.36

60 Merix Corp. 112 0.15

93 Modtech Holdings, Inc. 8 0.01

19 OSI Systems, Inc. 429 0.56

38 Planar Systems, Inc. 105 0.14

38 SCM Microsystems, Inc. 96 0.13

14 Sigmatron International, Inc. 93 0.12

46 Vishay Intertechnology, Inc. 408 0.54

3,885 5.11

Construction Materials — 0.91%

37 Trex Co., Inc. 688 0.91

Consumer Products — 0.22%

68 Delias, Inc. 169 0.22

Direct Marketing — 0.17%

19 Alloy, Inc. 133 0.17

Distribution — 0.18%

40 Bell Microproducts, Inc. 88 0.12

37 Building Materials Holding

Corp. 45 0.06

133 0.18

Drugs and Biotech — 0.56%

40 Cambrex Corp. 261 0.34

12 Par Pharmaceutical Cos., Inc. 164 0.22

425 0.56

Electrical Components & Equipment — 0.52%

35 Cherokee International Corp. 102 0.13

12 Greatbatch, Inc. 293 0.39

395 0.52

Electronics — 0.39%

6 Varian, Inc. 298 0.39

Energy Services — 0.89%

4 James River Coal Co 148 0.20



94



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Energy Services — (continued)

61 Newpark Resources, Inc. 526 0.69

674 0.89

Engineering & Construction — 0.60%

17 Matrix Service Co. 457 0.60


25 CIT Group, Inc. 261 0.34

Forest Products & Paper — 0.49%

38 Louisiana–Pacific Corp. 373 0.49

Health Services — 2.10%

22 Albany Molecular Research,

Inc. 390 0.51

42 Allion Healthcare, Inc. 290 0.38

17 AMICAS, Inc. 51 0.07

11 Kindred Healthcare, Inc. 340 0.45

6 LifePoint Hospitals, Inc. 203 0.27

19 Medical Staffing Network


15 RehabCare Group, Inc. 275 0.36

1,599 2.10

Healthcare–Products — 0.53%

21 Angiodynamics, Inc. 348 0.46

39 DEL Global Technologies

Corp. 58 0.07

406 0.53


32 Champion Enterprises, Inc. 155 0.21

8 Fleetwood Enterprises, Inc. 18 0.02

27 Hovnanian Enterprises, Inc.,

Class A 191 0.25

11 MDC Holdings, Inc. 456 0.60

14 Toll Brothers, Inc. 341 0.45

1,161 1.53


9 Dorel Industries, Inc., Class B 281 0.37

24 Furniture Brands

International, Inc. 211 0.28

34 La–Z–Boy, Inc. 255 0.34

31 Zygo Corp. 329 0.43

1,076 1.42

Industrial Components — 2.38%

19 Barnes Group, Inc. 458 0.60

28 CTS Corp. 364 0.48

35 Gerber Scientific, Inc. 311 0.41

20 GrafTech International Ltd. 413 0.54

28 Newport Corp. 263 0.35

1,809 2.38

Insurance — 0.93%

1 AMBAC Financial Group, Inc. 10 0.01

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

17 Fidelity National Financial,

Inc., Class A 236 0.31

14 Horace Mann Educators

Corp. 209 0.28

1 MBIA, Inc. 11 0.02

36 Meadowbrook Insurance

Group, Inc. 238 0.31

704 0.93

Internet Software and Services — 3.74%

33 1–800–Flowers.Com, Inc.,

Class A 203 0.27

41 Access Integrated

Technologies, Inc., Class A 68 0.09

52 Earthlink, Inc. 484 0.64

41 Infospace, Inc. 476 0.63

29 Interwoven, Inc. 423 0.55

23 Jupitermedia Corp. 27 0.03

40 Lionbridge Technologies, Inc. 129 0.17

2 Looksmart Ltd. 7 0.01

49 MIVA, Inc. 50 0.06

56 RealNetworks, Inc. 371 0.49

70 SupportSoft, Inc. 244 0.32

16 TeleCommunication Systems,

Inc., Class A 134 0.18

18 Valueclick, Inc. 230 0.30

2,846 3.74

IT Services — 0.16%

30 Technology Solutions Co. 121 0.16

Leisure and Entertainment — 1.51%

29 Cinemark Holdings, Inc. 420 0.55

26 Regal Entertainment Group,

Class A 441 0.58

10 Steinway Musical Instruments 286 0.38

1,147 1.51

Machinery — 6.36%

9 Astec Industries, Inc. 306 0.40

9 Baldor Electric Co. 303 0.40

15 EnPro Industries, Inc. 624 0.82

17 FEI Co. 458 0.60

54 Flow International Corp. 367 0.48

7 Gardner Denver, Inc. 311 0.41

23 Gehl Co. 347 0.46

14 Hardinge, Inc. 229 0.30

9 Hurco Cos, Inc. 298 0.39

19 Intermec, Inc. 388 0.51

15 Keithley Instruments, Inc. 143 0.19

33 LeCroy Corp. 275 0.36

24 Mueller Water Products, Inc.,

Class B 254 0.34

24 Thermadyne Holdings Corp. 531 0.70

4,834 6.36

Media and Broadcasting — 0.31%

4 Ballantyne of Omaha, Inc. 17 0.02



95



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Media and Broadcasting — (continued)

20 COX Radio, Inc., Class A 222 0.29

239 0.31

Medical Products and Devices — 1.28%

32 Digirad Corp. 51 0.07

29 Healthtronics, Inc. 122 0.16

24 Home Diagnostics, Inc. 245 0.32

23 PharMerica Corp. 551 0.73

969 1.28

Metal Fabrication and Distribution — 3.67%

9 Carpenter Technology Corp. 353 0.46

11 Commercial Metals Co. 292 0.38

11 Haynes International, Inc. 614 0.81

12 Insteel Industries, Inc. 202 0.27

1 Ladish Co., Inc. 29 0.04

22 NN, Inc. 356 0.47

5 Northwest Pipe Co. 301 0.40

20 Timken Co. 640 0.84

2,787 3.67

Mining — 0.71%

5 Century Aluminum Co. 258 0.34

8 RTI International Metals, Inc. 284 0.37

542 0.71

Miscellaneous Manufacturing — 1.56%

16 Crane Co. 573 0.75

46 Flanders Corp. 322 0.43

24 Griffon Corp. 292 0.38

1,187 1.56

Oil and Gas — 1.38%

16 Allis–Chalmers Energy, Inc. 235 0.31

14 Pengrowth Energy Trust 252 0.33

18 Pioneer Drilling Co. 298 0.39

6 Swift Energy Co. 262 0.35

1,047 1.38

Other Consumer Services — 0.34%

67 Autobytel, Inc. 78 0.10

12 Lincoln Educational Services

Corp. 181 0.24

259 0.34

Other Financial Services — 0.53%

26 Advanta Corp., Class B 195 0.26

16 Evercore Partners, Inc.,

Class A 207 0.27

402 0.53

Other Industrial Products — 1.98%

30 Ferro Corp. 657 0.87

32 Maxwell Technologies, Inc. 398 0.52

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

13 Trinity Industries, Inc. 450 0.59

1,505 1.98

Paper and Packaging — 0.66%

30 Chesapeake Corp. 38 0.05

91 Graphic Packaging Holding

Corp. 260 0.34

12 Temple–Inland, Inc. 202 0.27

500 0.66

Printing — 0.52%

32 Bowne & Co., Inc. 392 0.52

Publishing — 1.06%

34 McClatchy Co., Class A 122 0.16

20 Media General, Inc., Class A 240 0.32

17 Scholastic Corp. 444 0.58

806 1.06

Pumps, Valves and Bearings — 0.37%

5 CIRCOR International, Inc. 283 0.37


6 Hilltop Holdings, Inc. 57 0.08

24 RAIT Financial Trust 145 0.19

202 0.27

Restaurants and Lodgings — 0.20%

21 Rubio’s Restaurants, Inc. 121 0.16

4 Ruby Tuesday, Inc. 30 0.04

151 0.20

Retail Stores — 9.92%

18 Bebe Stores, Inc. 178 0.23

30 Brown Shoe Co., Inc. 456 0.60

22 Cabela’s, Inc. 267 0.35

4 Cash America International,

Inc. 170 0.22

5 The Childrens Place Retail

Stores, Inc. 210 0.28

23 Collective Brands, Inc. 327 0.43

20 Conn’s, Inc. 375 0.49

42 Cost Plus, Inc. 53 0.07

18 Design Within Reach, Inc. 76 0.10

29 Dillard’s, Inc., Class A 373 0.49

39 Eddie Bauer Holdings, Inc. 243 0.32

32 Fred’s, Inc., Class A 449 0.59

36 Gander Mountain Co. 128 0.17

16 Genesco, Inc. 567 0.75

5 Group 1 Automotive, Inc. 110 0.14

27 Hot Topic, Inc. 165 0.22

71 Jamba, Inc. 95 0.13

60 Krispy Kreme Doughnuts, Inc. 256 0.34

29 Lithia Motors, Inc., Class A 141 0.19

24 Liz Claiborne, Inc. 389 0.51

31 MarineMax, Inc. 248 0.33

11 New York & Co., Inc. 133 0.18

22 Pacific Sunwear of California 137 0.18

24 Penske Auto Group, Inc. 315 0.41



96



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Retail Stores — (continued)

44 PEP Boys–Manny Moe & Jack 384 0.50

23 Rex Stores Corp. 300 0.39

37 Saks, Inc. 425 0.56

22 Sonic Automotive, Inc.,

Class A 231 0.30

20 Tuesday Morning Corp. 84 0.11

10 Tween Brands, Inc. 108 0.14

31 West Marine, Inc. 151 0.20

7,544 9.92

Semiconductors and Equipment — 7.83%

30 Actel Corp. 416 0.55

27 Advanced Energy Industries,

Inc. 439 0.58

28 Anadigics, Inc. 95 0.12

41 AXT, Inc. 148 0.19

30 Brooks Automation, Inc. 289 0.38

16 BTU International, Inc. 158 0.21

16 Cascade Microtech, Inc. 96 0.13

19 Cohu, Inc. 317 0.42

10 Cypress Semiconductor Corp. 324 0.43

85 Electroglas, Inc. 126 0.17

33 Fairchild Semiconductor


35 GSI Group, Inc. 175 0.23

48 Ikanos Communications, Inc. 124 0.16

44 Kulicke & Soffa Industries, Inc. 225 0.29

53 Nanometrics, Inc. 193 0.25

18 Novellus Systems, Inc. 401 0.53

30 Pericom Semiconductor Corp. 408 0.54

36 PLX Technology, Inc. 207 0.27

62 Sanmina–SCI Corp. 145 0.19

62 Silicon Storage Technology,

Inc. 204 0.27

49 TriQuint Semiconductor, Inc. 307 0.40

15 Ultra Clean Holdings 106 0.14

27 Veeco Instruments, Inc. 461 0.60

37 White Electronic Designs

Corp. 184 0.24

5,955 7.83

Software — 2.63%

17 Aspen Technology, Inc. 249 0.33

52 Bottomline Technologies, Inc. 593 0.78

31 Epicor Software Corp. 265 0.35

46 Evans & Sutherland

Computer Co. 53 0.07

60 Majesco Entertainment Co. 54 0.07

25 MSC.Software Corp. 325 0.42

29 QAD, Inc. 189 0.25

12 Quadramed Corp. 106 0.14

34 SumTotal Systems, Inc. 166 0.22

2,000 2.63

Speciality Chemicals and Materials — 5.45%

37 Aceto Corp. 313 0.41

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

16 Calgon Carbon Corp. 335 0.44

39 Chemtura Corp. 256 0.34

10 Cytec Industries, Inc. 508 0.67

8 HB Fuller Co. 195 0.26

26 Lydall, Inc. 304 0.40

28 Material Sciences Corp. 213 0.28

22 Park Electrochemical Corp. 602 0.79

13 Penford Corp. 214 0.28

57 PolyOne Corp. 465 0.61

23 Solutia, Inc. 380 0.50

34 Spartech Corp. 356 0.47

4,141 5.45


38 Borland Software Corp. 71 0.09

44 GenCorp, Inc. 347 0.46

418 0.55


26 ADC Telecommunications,

Inc. 263 0.35

34 ClearOne Communications,

Inc. 162 0.21

30 General Communication, Inc.,

Class A 304 0.40

27 Globecomm System, Inc. 270 0.36

37 Harmonic, Inc. 321 0.42

46 Harris Stratex Networks, Inc.,

Class A 432 0.57

14 Loral Space &

Communications, Inc. 256 0.34

24 MasTec, Inc. 332 0.44

54 Network Equipment

Technologies, Inc. 175 0.23

23 Oplink Communications, Inc. 302 0.40

10 Optical Cable Corp. 69 0.09

40 Powerwave Technologies, Inc. 204 0.27

58 Symmetricom, Inc. 283 0.37

35 Tekelec 579 0.76

31 Tollgrade Communications,

Inc. 209 0.27

82 Utstarcom, Inc. 268 0.35

75 Westell Technologies, Inc.,

Class A 68 0.09

4,497 5.92

Textiles — 1.03%

19 Albany International Corp.,

Class A 583 0.77

26 Dixie Group, Inc. 200 0.26

783 1.03

Transportation and Logistics — 1.04%

19 AirTran Holdings, Inc. 46 0.06

26 StealthGas, Inc. 437 0.58

– Velocity Express Corp. – –



97



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Transportation and Logistics — (continued)

17 YRC Worldwide, Inc. 308 0.40

791 1.04









Other Assets 8.62%




98

Royce Smaller Companies Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue



19 Ceradyne, Inc. 847 1.47

29 HEICO Corp., Class A 838 1.46

1,685 2.93

Apparel, Shoes & Accessories — 4.92%

18 Columbia Sportswear Co. 722 1.26

34 Fossil, Inc. 1,011 1.76

18 K–Swiss, Inc., Class A 304 0.53

29 Timberland Co., Class A 480 0.83

12 Wolverine World Wide, Inc. 311 0.54

2,828 4.92

Building Systems and Components — 3.38%

21 Apogee Enterprises, Inc. 412 0.72

49 Drew Industries, Inc. 786 1.37

27 Simpson Manufacturing Co., Inc. 742 1.29

1,940 3.38


13 Cintas Corp. 400 0.70

19 CRA International, Inc. 754 1.31

18 Heidrick & Struggles


41 Korn/Ferry International 731 1.27

22 MPS Group, Inc. 249 0.44

15 Robert Half International, Inc. 382 0.66

12 SRA International, Inc., Class A 279 0.49

43 TrueBlue, Inc. 713 1.24

4,042 7.04

Drugs and Biotechnology — 0.49%

8 Alpharma, Inc., Class A 282 0.49

Energy Services — 11.22%

18 Calfrac Well Services Ltd. 425 0.74

50 Ensign Energy Services, Inc. 1,129 1.97

17 Oil States International, Inc. 940 1.64

38 Pason Systems, Inc., Class A 553 0.96

24 RPC, Inc. 439 0.76

27 Tesco Corp. 914 1.59

41 Trican Well Service Ltd. 826 1.44

18 Unit Corp. 1,215 2.12

6,441 11.22


6 Greenhill & Co., Inc. 377 0.66

56 Knight Capital Group, Inc., Class A 968 1.68

14 SEI Investments Co. 340 0.59

13 Stifel Financial Corp. 545 0.95

2,230 3.88

Food and Tobacco Processors — 2.27%

24 Industrias Bachoco SAB de CV 715 1.25

17 Sanderson Farms, Inc. 587 1.02

1,302 2.27

Shares (000’s)

Value(000’S)$

% ofNetAssetValue


12 Ethan Allen Interiors, Inc. 326 0.57

Industrial Components — 2.23%

5 Clarcor, Inc. 192 0.33

9 Regal–Beloit Corp. 432 0.75

9 Watts Water Technologies, Inc., Class A 244 0.43

868 1.51

Industrial Distribution — 0.63%

7 MSC Industrial Direct Co., Class A 363 0.63

Insurance — 2.92%

16 Brown & Brown, Inc. 325 0.56

27 Max Capital Group Ltd. 694 1.21

28 Validus Holdings Ltd. 659 1.15

1,678 2.92

Investment Companies — 1.07%

65 KKR Financial Holdings LLC 614 1.07

Machinery — 9.09%

10 Columbus McKinnon Corp. 268 0.47

24 Gardner Denver, Inc. 1,099 1.91

19 Kennametal, Inc., Class A 669 1.16

12 Lincoln Electric Holdings, Inc. 977 1.70

12 Rofin–Sinar Technologies, Inc. 477 0.83

10 Tennant Co. 312 0.54

11 Wabtec Corp. 647 1.13

17 Woodward Governor Co. 774 1.35

5,223 9.09

Metal Fabrication and Distribution — 7.52%

21 AM Castle & Co. 414 0.72

9 Carpenter Technology Corp. 349 0.61

13 Haynes International, Inc. 748 1.30

15 Reliance Steel & Aluminum Co. 847 1.48

12 Schnitzer Steel Industries, Inc., Class A 787 1.37

40 Sims Group Ltd., ADR 1,173 2.04

4,318 7.52

Mining — 11.86%

11 Agnico–Eagle Mines Ltd. 624 1.09

96 Denison Mines Corp. 546 0.95

105 Fronteer Development Group, Inc. 356 0.62

82 Gammon Gold, Inc. 743 1.29

106 Lundin Mining Corp. 499 0.87

12 Major Drilling Group International 502 0.87

56 Novagold Resources, Inc. 361 0.63

32 Pan American Silver Corp. 856 1.49

16 Randgold Resources Ltd., ADR 698 1.22

78 Red Back Mining, Inc. 500 0.87

60 Silvercorp Metals, Inc. 249 0.43

35 Silver Standard Resources, Inc. 879 1.53

6,813 11.86

Oil and Gas — 2.12%

16 Cimarex Energy Co. 861 1.50



99



Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Oil and Gas — (continued)

9 St. Mary Land & Exploration Co. 359 0.62

1,220 2.12

Other Consumer Services — 1.43%

30 Corinthian Colleges, Inc. 396 0.69

25 Universal Technical Institute, Inc. 427 0.74

823 1.43


18 Endo Pharmaceuticals Holdings, Inc. 418 0.73

Printing — 0.51%

14 Courier Corp. 293 0.51

Real Estate — 0.86%

13 The St. Joe Co. 492 0.86

Retail — 2.88%

18 AnnTaylor Stores Corp. 435 0.76

35 Men’s Wearhouse, Inc. 771 1.34

25 Williams–Sonoma, Inc. 449 0.78

1,655 2.88

Semiconductors and Equipment — 4.57%

23 Lam Research Corp. 856 1.49

37 MKS Instruments, Inc. 832 1.45

37 Sigma Designs, Inc. 632 1.10

9 Varian Semiconductor

Equipment Associates, Inc. 304 0.53

2,624 4.57

Software — 1.65%

19 Fair Isaac Corp. 448 0.78

38 MSC.Software Corp. 499 0.87

947 1.65

Sports and Recreation — 2.13%

39 Thor Industries, Inc. 889 1.55

30 Winnebago Industries 335 0.58

1,224 2.13


35 Adtran, Inc. 805 1.40

24 Foundry Networks, Inc. 434 0.75

24 Netgear, Inc. 406 0.71

1,645 2.86

Transportation and Logistics — 2.31%

17 Arkansas Best Corp. 588 1.02

28 Heartland Express, Inc. 458 0.80

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

12 Universal Truckload Services, Inc., Class A 284 0.49

1,330 2.31





ABBREVIATIONS:

ADR – American Depositary Receipt




Other Assets 7.22%




100



Shares (000’s)

Value(000’S)$

% ofNetAssetValue



1 Electro Rent Corp. 9 1.10

1 Sotheby’s 19 2.17

28 3.27


3 Motorola, Inc. 23 2.71

Environmental Control — 1.25%

– Mine Safety Appliances Co. 11 1.25


– Bank of Hawaii Corp. 16 1.82

– Berkshire Hills Bancorp, Inc. 10 1.22

– Capital City Bank Group, Inc. 7 0.84

– First Citizens BancShares, Inc., Class A 15 1.71

1 Seacoast Banking Corp. of Florida, Class A 10 1.11

1 Sterling Financial Corp. 8 0.94

1 Suffolk Bancorp. 18 2.04

1 Trustco Bank Corp. 12 1.35

– Whitney Holding Corp. 9 1.00

105 12.03


1 Asta Funding, Inc. 8 0.86

– Northern Trust Corp. 32 3.70

1 Oppenheimer Holdings, Inc., Class A 16 1.83

1 Raymond James Financial, Inc. 37 4.26

93 10.65


– Avatar Holdings, Inc. 6 0.73

– Pope Resources, Inc. LP 10 1.14

16 1.87

Financials – Savings Institutions — 10.15%

1 Anchor Bancorp Wisconsin, Inc. 5 0.62

1 First Defiance Financial Corp. 8 0.94

1 First Financial Holdings, Inc. 11 1.26

1 MutualFirst Financial, Inc. 12 1.34

1 OceanFirst Financial Corp. 11 1.24

1 Provident Financial Services, Inc. 7 0.88

1 Provident New York Bancorp. 11 1.27

1 Willow Financial Bancorp, Inc. 12 1.37

– WSFS Financial Corp. 11 1.23

88 10.15


2 Health Management Associates, Inc., Class A 10 1.20

Hotels, Restaurants & Leisure — 19.46%

1 Ameristar Casinos, Inc. 12 1.33

1 Boyd Gaming Corp. 17 1.96

2 Dover Downs Gaming & Entertainment, Inc. 13 1.48

1 International Game Technology 24 2.71

1 Marcus Corp. 17 1.98

1 MGM Mirage 43 5.00

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

2 Royal Caribbean Cruises Ltd. 43 5.00

169 19.46


2 Eastman Kodak Co. 24 2.79

– Triumph Group, Inc. 6 0.63

30 3.42

Media — 7.57%

1 Hearst-Argyle Television, Inc. 28 3.19

1 John Wiley & Sons, Inc., Class A 38 4.38

66 7.57

Office Furnishings — 1.30%

– Herman Miller, Inc. 11 1.30

Retail — 1.57%

1 AutoNation, Inc. 14 1.57


– Cymer, Inc. 3 0.35

2 Mattson Technology, Inc. 10 1.17

1 Novellus Systems, Inc. 18 2.09

31 3.61

Software — 9.55%

– Avid Technology, Inc. 9 1.07

1 CA, Inc. 24 2.75

1 Mentor Graphics Corp. 15 1.68

1 Symantec Corp. 24 2.82

1 TIBCO Software, Inc. 11 1.23

83 9.55


1 Electronics for Imaging, Inc. 12 1.34


3 Sprint Nextel Corp. 29 3.31

Total Common Stock (Cost $941) 819 94.26

Total Investments (Cost $941) 819 94.26

Other Assets in Excess of Liabilities 50 5.74

Total Net Assets $869 100.00


Analysis of Total Assets% of Total

Asset


Other Assets 7.14%




101

GC Global Equity Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Bahamas — 0.53%

10 Teekay Corp. 348 0.53

Belgium — 0.30%

14 Fortis 197 0.30

Bermuda — 0.20%

14 BW GAS Ltd. 135 0.20

Brazil — 1.38%

58 Cosan S.A. Industria e Comercio 910 1.38

Canada — 2.16%

98 Bombardier, Inc., Class B 758 1.15

30 Ensign Energy Services, Inc. 666 1.01

1,424 2.16

China — 0.54%

11 Trina Solar Ltd., ADR 360 0.54

France — 10.68%

9 BNP Paribas 812 1.23

38 France Telecom S.A. 1,128 1.71

17 Sanofi–Aventis S.A. 1,217 1.84

3 Societe Generale 301 0.46

11 Technip S.A. 920 1.39

22 Total S.A. 1,610 2.44

28 Vivendi S.A. 1,063 1.61

7,051 10.68

Germany — 11.57%

14 Bayerische Motoren Werke AG 553 0.84

14 Fresenius Medical Care AG & Co. KGaA 763 1.16

27 Henkel KGaA 1,065 1.61

92 Infineon Technologies AG 786 1.19

18 MTU Aero Engines Holding AG 621 0.94

27 SAP AG 1,507 2.28

13 Siemens AG 1,371 2.08

4 Stada Arzneimittel AG 240 0.36

42 Symrise AG 732 1.11

7,638 11.57

Hong Kong — 4.72%

96 Cheung Kong Holdings, Ltd. 1,370 2.08

60 Jardine Matheson Holdings Ltd. 1,744 2.64

3,114 4.72

Ireland — 0.80%

23 Ryanair Holdings PLC, ADR 528 0.80

Israel — 1.10%

15 Teva Pharmaceutical

Industries Ltd., ADR 729 1.10

Japan — 5.20%

– Mizuho Financial Group, Inc. 931 1.41

61 Nipponkoa Insurance Co. Ltd. 404 0.61

2 SBI Holdings, Inc. 404 0.61

17 Sony Corp. 639 0.97

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

– Sumitomo Mitsui Financial Group, Inc. 1,059 1.60

3,437 5.20


64 Aegon NV 752 1.14

South Africa — 0.39%

29 Gold Fields Ltd., ADR 260 0.39

Spain — 1.28%

13 Acerinox S.A. 248 0.38

24 Telefonica S.A. 596 0.9

844 1.28

Switzerland — 5.19%

6 Lonza Group AG 834 1.26

15 Nobel Biocare Holding AG 500 0.76

17 Novartis AG 960 1.45

5 Synthes, Inc. 715 1.08

19 UBS AG 421 0.64

3,430 5.19

Taiwan — 0.99%

124 Advanced Semiconductor Engineering, Inc.,

ADR 443 0.67

28 Silicon Motion Technology Corp., ADR 208 0.32

651 0.99

Thailand — 0.42%

252 Ratchaburi Electricity Generating Holding PCL,

NVDR 281 0.42


150 Barclays PLC 968 1.46

92 British Sky Broadcasting Group PLC 777 1.18

78 Cadbury PLC 899 1.36

49 Diageo PLC 906 1.37

55 Enterprise Inns PLC 301 0.46

46 HSBC Holdings PLC 717 1.08

61 Punch Taverns PLC 321 0.49

296 Vodafone Group PLC 758 1.15

5,647 8.55


17 Alcoa, Inc. 553 0.84

13 Amgen, Inc. 823 1.25

9 Anheuser–Busch Cos, Inc. 611 0.93

11 Apollo Group, Inc., Class A 681 1.03




16 Clorox Co. 952 1.44

15 The Coca–Cola Co. 802 1.21

15 Devon Energy Corp. 1,500 2.27

16 Dr Pepper Snapple Group, Inc. 402 0.61


27 HCC Insurance Holdings, Inc. 687 1.04

24 HJ Heinz Co. 1,183 1.79

57 Intel Corp. 1,297 1.96



102



Shares (000’s)

Value(000’S)$

% ofNetAssetValue




47 Maidenform Brands, Inc. 710 1.07

23 Marsh & McLennan Cos, Inc. 718 1.09

13 Medtronic, Inc. 704 1.07

81 Mylan, Inc. 1,049 1.59

53 News Corp., Class B 754 1.14

22 NRG Energy, Inc. 833 1.26

7 OM Group, Inc. 252 0.38


27 SanDisk Corp. 389 0.59

68 Sara Lee Corp. 914 1.38

32 SLM Corp. 533 0.81

67 Tyson Foods, Inc., Class A 973 1.47

33 U.S. Bancorp. 1,039 1.57

23 UnitedHealth Group, Inc. 688 1.04


22 Wyeth Corp. 948 1.44

27,656 41.88


Rights — 0.00% (Cost $–)


64 Aegon NV – –




– Amounts designated as "–" are either $0, less than $1,000 or less than 1,000 shares.

ABBREVIATIONS:


PCL – Public Company Limited

NVDR – Non Voting Depository Receipt




Other Assets 1.73%




103



Face Value(000’s) E

Value(000’S)E

% ofNetAssetValue


Austria — 3.38%

12 Erste Group Bank AG 488 1.27

6 OMV AG 262 0.68

10 Telekom Austria AG 140 0.36

3 Vienna Insurance Group 106 0.28

8 Voestalpine AG 305 0.79

1,301 3.38

Belgium — 1.05%

4 Ackermans & van Haaren NV 244 0.63

3 Mobistar S.A. 161 0.42

405 1.05

Denmark — 1.16%

7 FLSmidth & Co. A/S 359 0.93

2 Novo Nordisk A/S, Class B 87 0.23

446 1.16

Finland — 3.28%

3 Konecranes Oyj 70 0.18

38 Nokia Oyj 649 1.69

13 Nokian Renkaat Oyj 317 0.82

13 Sampo Oyj, Class A 226 0.59

1,262 3.28

France — 11.19%


7 Bouygues 267 0.69

6 Cap Gemini S.A. 238 0.62

4 CNP Assurances 287 0.74

22 France Telecom S.A. 437 1.13

10 GDF Suez 408 1.06

2 Groupe Danone 100 0.26

8 Sanofi–Aventis S.A. 382 0.99

10 SEB S.A. 355 0.92

14 SES S.A. 232 0.60

2 Societe Generale 112 0.29

4 Thales S.A. 154 0.40

16 Total S.A. 804 2.09

13 Vivendi S.A. 337 0.88

4,312 11.19

Germany — 12.13%

15 BASF SE 589 1.53

11 Bayer AG 610 1.59

2 Daimler AG 78 0.20

16 E.ON AG 622 1.61

7 Fresenius Medical Care AG & Co. KGaA 247 0.64

8 GEA Group AG 168 0.44

7 Hannover Rueckversicherung AG 191 0.50

5 Kloeckner & Co. AG 148 0.38

7 Leoni AG 200 0.52

3 Q–Cells AG 216 0.56

4 RWE AG 327 0.85

3 Salzgitter AG 362 0.94

9 SAP AG 328 0.85

6 Siemens AG 415 1.08


Value(000’S)E

% ofNetAssetValue

1 Wacker Chemie AG 170 0.44

4,671 12.13

Greece — 1.84%

30 Alpha Bank AE 511 1.33

8 OPAP S.A. 197 0.51

708 1.84

Italy — 6.61%

4 Assicurazioni Generali S.p.A. 100 0.26

69 Enel S.p.A. 434 1.13

32 ENI S.p.A. 704 1.83

19 Fiat S.p.A. 202 0.52

10 Finmeccanica S.p.A. 188 0.49

77 Intesa Sanpaolo S.p.A. 281 0.73

14 Prysmian S.p.A. 226 0.59

6 Saipem S.p.A. 157 0.41

68 UniCredit S.p.A. 252 0.65

2,544 6.61


12 ArcelorMittal 628 1.63

12 Imtech NV 209 0.54

5 ING Groep NV 98 0.26

39 Koninklijke Ahold NV 333 0.86

6 Koninklijke Boskalis Westminster NV 258 0.67

14 Koninklijke Kpn NV 157 0.41

19 Koninklijke Philips Electronics NV 425 1.10

2 Nutreco Holding NV 92 0.24

30 Royal Dutch Shell PLC, Class A 701 1.82

24 Royal Dutch Shell PLC, Class B 557 1.45

8 Sligro Food Group NV 197 0.51

3,655 9.49

Norway — 0.66%

32 DnB NOR ASA 254 0.66

Portugal — 1.56%

108 Energias de Portugal S.A. 373 0.97

32 Portugal Telecom SGPS S.A. 230 0.59

603 1.56

Spain — 7.44%

28 Banco Bilbao Vizcaya Argentaria S.A. 326 0.85

66 Banco Santander S.A. 760 1.97

7 Corp. Financiera Alba 256 0.66

8 Grupo Catalana Occidente S.A. 150 0.39

13 Iberdrola S.A. 108 0.28

14 Indra Sistemas S.A. 246 0.64

50 Mapfre S.A. 164 0.42

6 Red Electrica de Espana 233 0.61


2,866 7.44

Sweden — 1.13%

15 Nordea Bank AB 135 0.35

13 Scania AB, Class B 125 0.32



104




Value(000’S)E

% ofNetAssetValue


Sweden — (continued)

11 SSAB Svenskt Stal AB, Series A 176 0.46

436 1.13


19 ABB Ltd. 314 0.82

8 Aryzta AG 277 0.72

3 Baloise Holding AG 180 0.47

2 Lonza Group AG 154 0.40

35 Nestle S.A. 1,049 2.72


5 PSP Swiss Property AG 194 0.51

4 Roche Holding AG 416 1.08

2 Swiss Life Holding AG 186 0.48

1 Zurich Financial Services AG 116 0.30

3,699 9.61


23 AMEC PLC 238 0.62

42 Amlin PLC 150 0.39

16 Anglo American PLC 582 1.51

14 AstraZeneca PLC 470 1.22

15 Atkins WS PLC 167 0.43

42 BG Group PLC 626 1.62

20 BHP Billiton PLC 423 1.10

147 BP PLC 959 2.49

20 British American Tobacco PLC 465 1.21

37 Carillion PLC 149 0.39

87 Compass Group PLC 396 1.03

16 Drax Group PLC 144 0.37

48 GlaxoSmithKline PLC 769 2.00


28 IMI PLC 175 0.45

16 Imperial Tobacco Group PLC 354 0.92

27 Inmarsat PLC 170 0.44

8 Intermediate Capital Group PLC 128 0.33

27 International Power PLC 132 0.34

151 Legal & General Group PLC 187 0.49

15 Pennon Group PLC 112 0.29

10 Reckitt Benckiser Group PLC 351 0.91

11 Rio Tinto PLC 711 1.85

121 Royal & Sun Alliance Insurance Group PLC 225 0.58

91 Royal Bank of Scotland Group PLC 266 0.69

8 Severn Trent PLC 142 0.37

5 Standard Chartered PLC 100 0.26

62 Standard Life PLC 193 0.50

23 Subsea 7, Inc. 356 0.92

60 Tesco PLC 284 0.74


8 Xstrata PLC 292 0.76

11,062 28.72

Total Common Stock (Cost E43,282) 38,224 99.25


Value(000’S)E

% ofNetAssetValue

Preferred Stock — 0.53% (Cost E222)

Germany — 0.53%

4 Fresenius SE 203 0.53

Total Investments (Cost E43,504) 38,427 99.78


Total Net Assets E38,511 100.00




Other Assets 2.53%




105



Face Value(000’s)

Value(000’S)$

% ofNetAssetValue


China — 15.82%

1,671 Angang Steel Co. Ltd., Class H 2,271 0.56

238 Anhui Conch Cement Co. Ltd., Class H 1,233 0.30

1,221 China Coal Energy Co., Class H 2,051 0.50

7,616 China Construction Bank Corp., Class H 6,186 1.51

639 China COSCO Holdings Co. Ltd., Class H 1,220 0.30

845 China Life Insurance Co. Ltd., Class H 3,232 0.79

1,835 China Merchants Bank Co. Ltd., Class H 6,136 1.50

1,001 China Merchants Property Development Co.

Ltd. 1,215 0.30

1,670 China Overseas Land & Investment Ltd. 2,783 0.68

4,864 China Petroleum & Chemical Corp., Class H 4,723 1.15

1,443 China Railway Construction Corp., Class H 1,984 0.48

1,636 China Shipping Development Co. Ltd., Class H 3,858 0.94

1,676 China Yurun Food Group Ltd. 2,879 0.70

2,433 Golden Eagle Retail Group Ltd. 2,247 0.55

15,001 Industrial & Commercial Bank of China, Class H 10,304 2.52

4,012 PetroChina Co. Ltd., Class H 5,179 1.27

1,979 Shandong Chenming Paper Holdings Ltd.,

Class H 1,508 0.37

3,306 Yanzhou Coal Mining Co. Ltd., Class H 5,734 1.40

64,743 15.82

Hong Kong — 17.60%

6,652 Champion REIT 3,277 0.80

2,862 Chaoda Modern Agriculture 3,038 0.74

330 Cheung Kong Holdings, Ltd. 4,709 1.15

5,075 China Agri–Industries Holdings Ltd. 3,429 0.84

1,460 China Mobile Ltd. 16,599 4.06

359 CLP Holdings Ltd. 2,918 0.71

1,456 CNOOC Ltd. 2,267 0.55

295 Esprit Holdings Ltd. 2,443 0.60

512 Hang Lung Group Ltd. 2,185 0.53

107 Hang Seng Bank Ltd. 2,107 0.51

563 Hongkong Land Holdings Ltd. 2,038 0.50

334 Hutchison Whampoa Ltd. 3,103 0.76

969 Industrial and Commercial Bank of China Asia

Ltd. 2,131 0.52

90 Jardine Matheson Holdings Ltd. 2,599 0.64

6,478 Lenovo Group Ltd. 4,368 1.07

978 Li & Fung Ltd. 2,992 0.73

1,796 New World Development Ltd. 2,730 0.67

1,911 Pacific Basin Shipping Ltd. 2,594 0.63

2,000 Sinofert Holdings Ltd. 1,304 0.32

302 Sun Hung Kai Properties Ltd. 4,132 1.01

105 Swire Pacific Ltd., Class A 1,048 0.26

72,011 17.60

India — 9.58%

22 Aban Offshore Ltd. 1,053 0.26

212 Bank of India 1,279 0.31

389 Crompton Greaves Ltd. 2,374 0.58

50 Divi’s Laboratories Ltd. 1,715 0.42

259 Everest Kanto Cylinder Ltd. 1,762 0.43

348 GAIL India Ltd. 3,109 0.76

138 Glenmark Pharmaceuticals Ltd. 1,978 0.48

12 ICICI Bank Ltd., ADR 385 0.09

322 Indian Bank 917 0.22

Face Value(000’s)

Value(000’S)$

% ofNetAssetValue

268 Indraprastha Gas Ltd. 697 0.17

28 Infosys Technologies Ltd., ADR 1,164 0.29

83 Opto Circuits India Ltd. 605 0.15

297 Piramal Healthcare Ltd. 2,286 0.56

239 Reliance Industries Ltd. 11,524 2.82

209 Satyam Computer Services Ltd. 1,975 0.48

94 Satyam Computer Services Ltd., ADR 2,101 0.51

330 Sintex Industries Ltd. 2,324 0.57

59 Sun Pharmaceutical Industries Ltd. 1,965 0.48

39,213 9.58

Indonesia — 2.98%

7,000 Aneka Tambang Tbk PT 1,437 0.35

4,000 Bank Rakyat Indonesia 2,533 0.62

700 Indo Tambangraya Megah PT 2,096 0.51

860 PT Astra International Tbk 1,943 0.48

3,700 United Tractors Tbk PT 4,169 1.02

12,178 2.98

Korea, Republic Of — 20.70%

79 CJ Home Shopping 4,826 1.18

220 Halla Climate Control 2,056 0.50

50 Hyundai Mobis 4,153 1.02

25 Hyundai Motor Co. 1,631 0.40

170 Kia Motors Corp. 2,025 0.50

69 Kookmin Bank, ADR 3,798 0.93

300 Korea Exchange Bank 3,772 0.92

90 Korea Gas Corp. 6,481 1.58

95 KT&G Corp. 7,944 1.94

85 LG Corp. 4,853 1.19

100 LG Display Co. Ltd. 2,460 0.60

63 LG Electronics, Inc. 5,848 1.43

181 LIG Insurance Co. Ltd. 3,369 0.82

8 POSCO, ADR 857 0.21

14 POSCO 6,015 1.47

21 Samsung Electronics Co. Ltd. 9,711 2.37

30 Samsung Fire & Marine Insurance Co. Ltd. 5,447 1.33

180 Shinhan Financial Group Co. Ltd. 8,237 2.01

250 Top Engineering Co. Ltd. 1,206 0.30

84,689 20.70

Malaysia — 2.25%

654 Digi.Com Bhd 4,421 1.08

1,494 IOI Corp. Bhd † 2,246 0.55

850 Public Bank Bhd 2,549 0.62

9,216 2.25

Pakistan — 0.90%

2,572 Fauji Fertilizer Co. Ltd. 3,508 0.86

118 Lucky Cement Ltd. 90 0.02

22 Lucky Cement Ltd., GDR * 67 0.02

3,665 0.90

Philippines — 1.11%

77 Philippine Long Distance Telephone Co. 4,562 1.11

Singapore — 6.22%

306 DBS Group Holdings Ltd. 3,873 0.95



106



Face Value(000’s)

Value(000’S)$

% ofNetAssetValue


Singapore — (continued)

723 Keppel Corp. Ltd. 5,033 1.23

294 Oversea–Chinese Banking Corp. 1,669 0.41

2,261 Parkway Life Real Estate Investment Trust 1,724 0.42

996 SembCorp Marine Ltd. 2,648 0.65

705 Singapore Press Holdings Ltd. 2,045 0.50

2,165 Singapore

Telecommunications Ltd. 5,370 1.31

231 United Overseas Bank Ltd. 3,082 0.75

25,444 6.22

Taiwan — 15.30%

91 Asia Cement Corp. 101 0.02

599 Asustek Computer, Inc. 1,379 0.34

939 Cathay Financial Holding Co. Ltd. 1,812 0.44

10,106 China Life Insurance Co. Ltd. 5,303 1.30

3,097 China Steel Corp. 3,791 0.93

72 Chunghwa Telecom Co. Ltd., ADR 1,769 0.43

2,299 Chunghwa Telecom Co. Ltd. 5,717 1.40

2,276 First Financial Holding Co. Ltd. 1,714 0.42

1,420 First Steamship Co. Ltd. 2,705 0.66

10 Gintech Energy Corp. 76 0.02

982 HON HAI Precision Industry Co. Ltd. 4,933 1.21

221 HTC Corp. 4,092 1.00

1,013 Huaku Development Co. Ltd. 2,508 0.61

2,614 Quanta Computer, Inc. 3,921 0.96

3,765 Taiwan Mobile Co. Ltd. 6,756 1.65

3,482 Taiwan Semiconductor Manufacturing Co. Ltd. 6,442 1.57

585 Taiwan Semiconductor Manufacturing Co.

Ltd., ADR 5,676 1.39

2,215 TSRC Corp. 2,679 0.65

472 U–Ming Marine Transport Corp. 1,244 0.30

62,618 15.30

Thailand — 1.30%

377 Bangkok Bank PCL, Class F 1,299 0.32

300 PTT Exploration & Production PCL 1,305 0.32

350 PTT PCL 2,719 0.66

5,323 1.30


Preferred Stock — 1.46% (Cost $8,142)




Indonesia — 0.05%

617 United Tractors Tbk PT † 192 0.05




* Illiquid

† Security is valued in good faith at fair value by or at the discretion of the InvestmentManager.

ABBREVIATIONS:


GDR – Global Depositary Receipt





Other Assets 8.21%




107

Batterymarch 130/30 Global Equity Fund


Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Australia — 2.95%

5 Bendigo and Adelaide Bank

Ltd. 45 0.49

8 Lion Nathan Ltd. 63 0.68

2 National Australia Bank Ltd. 46 0.50

20 Telstra Corp. Ltd. 74 0.80

2 Wesfarmers Ltd. 44 0.48

272 2.95

Austria — 0.48%


44 0.48

Belgium — 0.24%

– Mobistar S.A. 22 0.24

22 0.24

Brazil — 0.87%

1 Gerdau S.A. 17 0.18

– Unibanco – Uniao de Bancos

Brasileiros S.A. 36 0.39

1 Usinas Siderurgicas de Minas

Gerais S.A., Class A 28 0.30

81 0.87

Canada — 3.17%

– Agrium, Inc. 29 0.31

8 Bombardier, Inc., Class B 58 0.63

2 Ensign Energy Services, Inc. 47 0.51

2 Nexen, Inc. 64 0.69

– Potash Corp. of Saskatchewan 63 0.68

2 Talisman Energy, Inc. 32 0.35

293 3.17

Denmark — 0.67%

1 H Lundbeck A/S 28 0.30

1 Sydbank A/S 34 0.37

62 0.67

Finland — 0.36%

1 Fortum Oyj 33 0.36

33 0.36

France — 2.19%

– Alstom S.A. 20 0.22

– Bouygues 24 0.26

1 Eutelsat Communications 25 0.27

1 Sanofi-Aventis S.A. 36 0.39

1 SES S.A. 24 0.26

1 Total S.A. 73 0.79

202 2.19

Germany — 6.79%

1 BASF SE 81 0.88

2 Bayer AG 119 1.29

– Bilfinger Berger AG 28 0.30

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

2 E.ON AG 123 1.33


– Muenchener

Rueckversicherungs AG 44 0.48

1 RWE AG 92 1.00

– SAP AG 19 0.21

1 Thyssenkrupp AG 51 0.55

1 Wincor Nixdorf AG, Class B 39 0.42

626 6.79

Greece — 0.39%

1 OPAP S.A. 36 0.39

36 0.39

Hong Kong — 1.41%

4 Esprit Holdings Ltd. 31 0.34

13 Hongkong Land Holdings Ltd. 48 0.52

1 Jardine Matheson Holdings

Ltd. 35 0.38

12 Noble Group Ltd. 16 0.17

130 1.41

India — 0.21%

– Reliance Industries Ltd. 19 0.21

19 0.21

Ireland — 0.21%

1 Kerry Group PLC, Class A 19 0.21

19 0.21

Israel — 0.18%

1 Israel Chemicals Ltd. 17 0.18

17 0.18

Italy — 1.87%

1 Assicurazioni Generali S.p.A. 33 0.36

7 Enel S.p.A. 65 0.70

1 ENI S.p.A. 26 0.28


173 1.87

Japan — 10.97%

– Daito Trust Construction Co.

Ltd. 16 0.17

2 Hitachi Construction

Machinery Co. Ltd. 42 0.45

4 Hitachi Ltd. 29 0.31

5 ITOCHU Corp. 40 0.43

1 Kyushu Electric Power Co.,

Inc. 18 0.20

1 Lawson, Inc. 37 0.40

8 Marubeni Corp. 53 0.57

4 Matsushita Electric Industrial

Co. Ltd. 82 0.89

9 Mazda Motor Corp. 48 0.52

1 Millea Holdings, Inc. 24 0.26

4 Mitsubishi Corp. 102 1.11

12 Mitsubishi Motors Corp. 18 0.20



108



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Japan — (continued)

2 Mitsubishi Tanabe Pharma

Corp. 28 0.30

1 Mitsubishi UFJ Lease & Finance

Co. Ltd. 29 0.31

3 Mitsui & Co. Ltd. 52 0.56

1 Mitsui Fudosan Co. Ltd. 21 0.23

2 Mitsui Osk Lines Ltd. 24 0.26

3 Nippon Electric Glass Co. Ltd. 40 0.43

4 Nippon Yusen KK 32 0.35

– Sankyo Co. Ltd. 19 0.21

6 Sekisui Chemical Co. Ltd. 37 0.40

1 Shionogi & Co. Ltd. 23 0.25

1 Suzuken Co. Ltd. 39 0.42

8 The Hiroshima Bank Ltd. 30 0.33

4 The Sumitomo Trust &

Banking Co. Ltd. 24 0.26

1 Tohoku Electric Power Co.,

Inc. 28 0.30

19 Tokyo Gas Co. Ltd. 79 0.85

1,014 10.97


– Hyundai Mobis 19 0.20

– LG Electronics, Inc. 39 0.42

58 0.62



1 CSM 31 0.34


1 Koninklijke Boskalis

Westminster NV 30 0.33


193 2.09

Norway — 1.18%

– Frontline Ltd. 24 0.26

2 Statoilhydro ASA 60 0.65

– Yara International ASA 25 0.27

109 1.18

Portugal — 1.01%

9 Jeronimo Martins SGPS S.A. 73 0.79


93 1.01

Russia — 0.50%

– Evraz Group S.A. 30 0.33

– Gazprom OAO 16 0.17

46 0.50

Singapore — 0.80%

2 Singapore Airlines Ltd. 21 0.23

4 United Overseas Bank Ltd. 53 0.57

74 0.80

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

Spain — 3.15%


6 Mapfre S.A. 27 0.29


291 3.15

Sweden — 0.39%

1 Modern Times Group AB,

Class B 36 0.39

36 0.39


3 ABB Ltd. 71 0.77

1 ACE Ltd. 42 0.46

– Lonza Group AG 14 0.15

– Zurich Financial Services AG 39 0.42

166 1.80



1 Eurasian Natural Resources

Corp., Series W/I 25 0.27



10 Royal & Sun Alliance Insurance

Group PLC 28 0.30


9 WM Morrison Supermarkets

PLC 48 0.52


446 4.82


– Abbott Laboratories 17 0.18

1 Accenture Ltd., Class A 54 0.58

– Advance Auto Parts, Inc. 17 0.18

1 Aeropostale, Inc. 34 0.37

1 Aflac, Inc. 51 0.55

1 AGCO Corp. 49 0.53

1 Amgen, Inc. 38 0.41

2 Annaly Capital Management,

Inc. 34 0.37

– Apache Corp. 23 0.25

1 Arch Capital Group Ltd. 35 0.38

– Assurant, Inc. 23 0.25

1 Bally Technologies, Inc. 24 0.26

– Baxter International, Inc. 27 0.29

– Becton Dickinson & Co. 35 0.38

1 Biogen Idec, Inc. 31 0.34

3 Brocade Communications

Systems, Inc. 24 0.26

– CF Industries Holdings, Inc. 46 0.50

1 Cimarex Energy Co. 33 0.36


– Cleveland-Cliffs, Inc. 20 0.22

4 Compuware Corp. 49 0.53

1 Constellation Brands, Inc.,

Class A 28 0.30



109



Shares (000’s)

Value(000’s)$

% ofNetAssetValue



– Corn Products International,

Inc. 18 0.19

2 Corning, Inc. 44 0.47

1 CSX Corp. 32 0.35

1 Cummins, Inc. 44 0.48

5 Dell, Inc. 106 1.15

2 Dish Network Corp., Class A 65 0.70

1 Dollar Tree, Inc. 23 0.25

3 Dr Pepper Snapple Group, Inc. 78 0.84

2 El Paso Corp. 39 0.42

2 Endo Pharmaceuticals


1 Enterprise GP Holdings LP 33 0.36

– Flowserve Corp. 27 0.29

– Google, Inc., Class A 56 0.61

2 GrafTech International Ltd. 31 0.34

1 Guess?, Inc. 41 0.44

1 H&R Block, Inc. 20 0.22

1 Herbalife Ltd. 23 0.25

3 Hewlett-Packard Co. 153 1.65

1 Highwoods Properties, Inc. 36 0.39

1 Hudson City Bancorp, Inc. 19 0.20


Machines Corp. 167 1.81

1 Invitrogen Corp. 59 0.64

1 Johnson & Johnson 70 0.76

2 KBR, Inc. 37 0.40

– Lincoln Electric Holdings, Inc. 16 0.17

– McKesson Corp. 23 0.25


1 Nabors Industries Ltd. 43 0.47

– National Fuel Gas Co. 19 0.21

3 News Corp., Class A 47 0.51

– Noble Energy, Inc. 21 0.23

1 Norfolk Southern Corp. 52 0.56

1 Northern Trust Corp. 88 0.95

1 Occidental Petroleum Corp. 87 0.94

1 Oil States International, Inc. 55 0.59


1 Owens-Illinois, Inc. 40 0.43

3 Parametric Technology Corp. 58 0.63

1 Patterson-UTI Energy, Inc. 20 0.22

2 PerkinElmer, Inc. 48 0.52

4 Pfizer, Inc. 69 0.75

– Pioneer Natural Resources Co. 19 0.21

1 Plains Exploration &

Production Co. 27 0.29

2 QLogic Corp. 30 0.32

1 Qualcomm, Inc. 58 0.63

– Ralcorp Holdings, Inc. 19 0.21

3 Reliant Energy, Inc. 46 0.50

– Reynolds American, Inc. 21 0.23

1 Ross Stores, Inc. 60 0.65

6 Schering-Plough Corp. 114 1.24

1 St. Mary Land &

Exploration Co. 24 0.26

1 StanCorp Financial Group, Inc. 59 0.64

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

– Superior Energy Services, Inc. 19 0.21

1 Sybase, Inc. 34 0.37

3 TD Ameritrade Holding Corp. 55 0.60

1 Terra Industries, Inc. 42 0.45

– The Brink’s Co. 14 0.15

3 The DIRECTV Group, Inc. 79 0.86

2 The Gap, Inc. 33 0.35

– The Mosaic Co. 42 0.46


1 Union Pacific Corp. 50 0.54

1 Unit Corp. 54 0.58

– United States Steel Corp. 40 0.43

– Universal Health Services, Inc.,

Class B 18 0.19

3 Unum Group 72 0.78

1 WABCO Holdings, Inc. 57 0.62

– Walter Industries, Inc. 28 0.30

1 Western Digital Corp. 22 0.24

4,185 45.30


Equity Swaps — 3.30%

Australia — 0.36%

(11) Alumina Ltd. + 8 0.09

(18) Fairfax Media Ltd 8 0.09

(15) Lihir Gold Ltd. 17 0.19

33 0.37

Canada — 0.60%

– Agnico-Eagle Mines Ltd. 7 0.07

(2) Fnx Mining Co., Inc. 18 0.19

(1) Fortis, Inc. Com. 3 0.03

2 Manulife Financial Corp. 1 0.01

– Niko Resources Ltd. 8 0.09

(1) Pan American Silver Corp. 8 0.09

1 Royal Bank of Canada 2 0.02

(3) Silver Wheaton Corp. 9 0.10

56 0.60

Finland — 0.04%

(1) Elisa Oyj – –

3 Nokia Oyj 4 0.04

4 0.04

France — 0.02%

– Electricite de France 2 0.02

– Neopost SA – –

2 0.02

Germany — 0.01%

(4) Infineon Technologies AG 1 0.01

1 0.01



110



Shares (000’s)

Value(000’s)$

% ofNetAssetValue

Equity Swaps — (continued)

Italy — 0.02%

(9) Terna Rete Elettrica

Nazionale S.p.A. 2 0.02

2 0.02

Japan — 0.20%

(2) Advantest Corp. 1 0.01

(1) Electric Power Development

Co. Ltd. – –

– Hirose Electric Co. Ltd. 1 0.01

– INPEX Holdings, Inc. 6 0.06

(2) NGK Spark Plug Co. Ltd. 1 0.01

(2) Nomura Research Institute

Ltd. 1 0.01

(1) Rohm Co. Ltd. – –

– SBI Holdings, Inc. 7 0.08

(2) Softbank Corp. 1 0.01

(5) Tokyu Corp. 1 0.01

19 0.20

Singapore — 0.01%

(6) City Developments Ltd. 1 0.01

1 0.01

Sweden — 0.01%

(2) Skandinaviska Enskilda

Banken AB, Class A 1 0.01

1 0.01



2 0.02


– AstraZeneca PLC 16 0.17

(3) British Land Co. PLC 1 0.01

(2) Hammerson PLC – –

5 IMI PLC 2 0.02

(41) ITV PLC 4 0.04

(17) Rentokil Initial PLC 11 0.12

(1) Smiths Group PLC 1 0.01

(2) United Utilities Group PLC 1 0.01

36 0.38


– Allegheny Technologies, Inc. 3 0.03

– Altria Group, Inc. 2 0.02

(1) Applied Materials, Inc. 2 0.02

1 Bank of Hawaii Corp. 4 0.04

1 Cullen/Frost Bankers, Inc. 3 0.03

1 Eli Lilly & Co. 1 0.01

(2) EXCO Resources, Inc. 20 0.22

(1) Expeditors International of

Washington, Inc. 4 0.04

(1) Exterran Holdings, Inc. 14 0.15

(1) General Growth Properties,

Inc. 11 0.12

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

1 Hawaiian Electric Industries,

Inc. 2 0.02

– Honeywell International, Inc. – –

4 Intel Corp. 5 0.06

(1) KLA-Tencor Corp. 1 0.01

(1) Lehman Brothers Holdings,

Inc. 6 0.06

1 McDonald’s Corp. 4 0.04

(3) NiSource, Inc. 3 0.03

(3) Old Republic International

Corp. 3 0.03

2 Pepsi Bottling Group, Inc. 3 0.03

2 Philip Morris International, Inc. 4 0.04

– Range Resources Corp. 9 0.10

(1) Red Hat, Inc. – –

(1) SanDisk Corp. 1 0.01

4 Sara Lee Corp. 5 0.06

(1) SBA Communications Corp.,

Class A – –

(1) Smithfield Foods, Inc. 4 0.04

1 Snap-On, Inc. 5 0.06

(2) Starbucks Corp. 1 0.01

– Sunoco, Inc. – –

(3) Tesoro Corp. 1 0.01

1 U.S. Bancorp. 3 0.03

3 Verizon Communications, Inc. 2 0.02

(2) Vertex Pharmaceuticals, Inc. 8 0.09

1 Vornado Realty Trust 6 0.07

3 Wal-Mart Stores, Inc. 7 0.08

(5) Washington Mutual, Inc. 4 0.04

151 1.62

Total Equity Swaps (Cost $(385)) 308 3.30



2 Royal Dutch Shell PLC – –

Total Financial Assets at Fair Value 9,048 97.92

Equity Swaps — (2.88%)

Australia — (0.09%)

(10) Foster’s Group Ltd. – –

(10) Macquarie Airports (8) (0.09)

(8) (0.09)

Canada — (0.08%)

1 Bank of Nova Scotia – –

1 Fording Canadian Coal Trust (3) (0.03)

1 Toronto-Dominion Bank (5) (0.05)

(8) (0.08)

Denmark — (0.05%)

– D/S Norden (5) (0.05)

(5) (0.05)

Finland — (0.12%)

1 Konecranes Oyj (9) (0.10)



111



Shares (000’s)

Value(000’s)$

% ofNetAssetValue

Equity Swaps — (continued)

Finland — (continued)

(5) Stora Enso Oyj, Class R (2) (0.02)

(11) (0.12)

France — (0.04%)

(1) Credit Agricole S.A. (1) (0.01)

2 France Telecom S.A. – –

(3) Television Francaise (3) (0.03)

(4) (0.04)

Germany — (0.01%)

(1) Celesio AG (1) (0.01)

(1) (0.01)

Hong Kong — (0.02%)

(4) Henderson Land Development

Co. Ltd. (1) (0.01)

(13) The Link REIT (1) (0.01)

(2) (0.02)

Italy — (0.02%)

(2) Banca Popolare di Milano Scarl (2) (0.02)

(2) (0.02)

Japan — (0.05%)

(6) J Front Retailing Co. Ltd. (2) (0.02)

– NTT Data Corp. (1) (0.01)

(1) Ono Pharmaceutical Co. Ltd. (1) (0.01)

– Sony Financial Holdings, Inc. (1) (0.01)

(5) (0.05)

Netherlands — (0.03%)

(1) SBM Offshore NV (3) (0.03)

(3) (0.03)

Switzerland — (0.09%)

1 Aryzta AG – –

– Baloise Holding AG (7) (0.08)

2 Nestle S.A. (1) (0.01)

(8) (0.09)

United Kingdom — (0.99%)

– Balfour Beatty PLC (5) (0.05)

5 BHP Billiton PLC (35) (0.38)

17 BP PLC (16) (0.17)

2 British American Tobacco PLC (1) (0.01)

(2) Carnival PLC (4) (0.04)

4 Cookson Group PLC, Class B (2) (0.02)

2 Drax Group PLC (2) (0.02)

6 IG Group Holdings PLC (3) (0.03)

10 Invensys PLC – –

(5) J Sainsbury PLC (1) (0.01)

(2) Land Securities Group PLC – –

2 Petrofac Ltd. (6) (0.07)

(3) Smith & Nephew PLC (3) (0.03)

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

41 Vodafone Group PLC (15) (0.16)

(93) (0.99)

United States — (1.29%)

(2) Aqua America, Inc. (4) (0.04)

– AT&T, Inc. (2) (0.02)

(2) CapitalSource, Inc. (1) (0.01)

– Caterpillar, Inc. (1) (0.01)

1 Chevron Corp. (16) (0.17)

1 Chubb Corp. (1) (0.01)

(2) CIT Group, Inc. (3) (0.03)

(1) Citrix Systems, Inc. – –

2 ConocoPhillips (18) (0.20)

(1) Consolidated Edison, Inc. (2) (0.02)

1 Dominion Resources, Inc. (2) (0.02)

2 DPL, Inc. (3) (0.03)

1 Edison International (6) (0.07)

1 Exxon Mobil Corp. (7) (0.08)

(1) F5 Networks, Inc. (6) (0.07)

(1) Fidelity National Financial, Inc.,

Class A (2) (0.02)

(1) Iron Mountain, Inc. (1) (0.01)

(4) KeyCorp (3) (0.03)

(2) Lamar Advertising Co., Class A (3) (0.03)

(1) Las Vegas Sands Corp. (1) (0.01)

– Leap Wireless International,

Inc. – –

(1) Marriott International, Inc.,

Class A (1) (0.01)

(2) Masco Corp. (6) (0.07)

(1) MGM Mirage (2) (0.02)

– Millipore Corp. (1) (0.01)

(1) Monster Worldwide, Inc. (1) (0.01)

1 Nucor Corp. (13) (0.14)

2 Timken Co. (1) (0.01)

(1) Weyerhaeuser Co. (4) (0.05)

(1) Wynn Resorts Ltd. (8) (0.09)

(119) (1.29)

Total Equity Swaps (Cost $870) (269) (2.88)

Total Financial Liabilities at Fair Value (269) (2.88)






ABBREVIATIONS:





112







Other Assets 10.66%




113

Batterymarch International Large Cap Fund


Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Australia — 3.37%

11 BHP Billiton Ltd. 395 1.18

26 Coca–Cola Amatil Ltd. 187 0.56

21 Computershare Ltd. 163 0.49

102 Goodman Fielder Ltd. 129 0.39

– Incitec Pivot Ltd. 55 0.16

25 Telstra Corp. Ltd. 94 0.28

4 Wesfarmers Ltd. 102 0.31

1,125 3.37

Austria — 1.83%


2 Vienna Insurance Group 119 0.36

4 Voestalpine AG 238 0.71

610 1.83

Brazil — 0.75%

2 Unibanco – Uniao de Bancos

Brasileiros S.A., GDR 251 0.75

Canada — 2.71%

3 ARC Energy Trust 83 0.25

3 Bank of Nova Scotia 120 0.36

1 Fairfax Financial Holdings Ltd. 154 0.46

2 IGM Financial, Inc. 92 0.28

3 Nexen, Inc. 78 0.23

5 Power Corp. of Canada 152 0.45

5 Shaw Communications, Inc.,

Class B 110 0.33

4 TMX Group, Inc 117 0.35

906 2.71

Denmark — 2.00%

1 D/S Norden 123 0.37

3 FLSmidth & Co. A/S 204 0.61

6 H Lundbeck A/S 134 0.41

2 Jyske Bank A/S 101 0.30

2 Novo Nordisk A/S, Class B 104 0.31

666 2.00

Finland — 2.74%

3 Konecranes Oyj 96 0.29

16 Nokia Oyj 412 1.24

3 Nokian Renkaat Oyj 122 0.36

6 Sampo Oyj, Class A 148 0.44

2 Wartsila Oyj, Class B 138 0.41

916 2.74

France — 7.83%

2 Alstom S.A. 183 0.55


1 Bouygues 78 0.23

4 Cap Gemini S.A. 243 0.73

1 CNP Assurances 120 0.36

3 Eutelsat Communications 81 0.24

10 France Telecom S.A. 298 0.89

5 GDF Suez 280 0.84

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

3 Lagardere SCA 140 0.42

3 Sanofi–Aventis S.A. 227 0.68

3 SEB S.A. 179 0.54

3 SES S.A. 82 0.25

6 Total S.A. 406 1.22

6 Vivendi S.A. 224 0.67

2,613 7.84

Germany — 9.08%

6 BASF SE 363 1.09

5 Bayer AG 412 1.24

2 Bilfinger Berger AG 120 0.36

9 E.ON AG 506 1.52

4 Fresenius Medical Care AG &

Co. KGaA 210 0.63

3 GEA Group AG 107 0.32

3 Hannover Rueckversicherung

AG 137 0.41


3 RWE AG 291 0.87

2 Salzgitter AG 262 0.78

4 SAP AG 227 0.68

2 Siemens AG 261 0.78

3,028 9.08

Greece — 1.22%

10 Alpha Bank AE 248 0.74

5 OPAP S.A. 160 0.48

408 1.22

Hong Kong — 1.51%

8 Jardine Matheson Holdings

Ltd. 219 0.66

59 Li & Fung Ltd. 182 0.54

67 New World Development Ltd. 102 0.31

503 1.51

Italy — 3.74%

11 Alleanza Assicurazioni S.p.A. 108 0.33

29 Enel S.p.A. 264 0.79

11 ENI S.p.A. 367 1.10

5 Fiat S.p.A. 77 0.23

3 Fondiaria–Sai S.p.A. 83 0.25


4 Saipem S.p.A. 175 0.52

1,249 3.74

Japan — 18.81%

5 Aisin Seiki Co. Ltd. 139 0.42

2 Alfresa Holdings Corp. 137 0.41

1 Canon, Inc. 63 0.19

7 Casio Computer Co. Ltd. 83 0.25

– Central Japan Railway Co. 156 0.47

5 Credit Saison Co. Ltd. 108 0.32

3 Daito Trust Construction Co.

Ltd. 107 0.32

44 Fukuoka Financial Group, Inc. 154 0.46



114



Shares (000’s)

Value(000’S)$

% ofNetAssetValue


Japan — (continued)

73 Hokuhoku Financial Group,

Inc. 174 0.52

4 Honda Motor Co., Ltd. 127 0.38

– INPEX Holdings, Inc. 130 0.39

24 Isuzu Motors Ltd. 90 0.27

27 ITOCHU Corp. 217 0.65

26 Kajima Corp. 80 0.24

– KDDI Corp. 221 0.66

30 Kobe Steel Ltd. 72 0.22

5 Komatsu Ltd. 103 0.31

10 Kuraray Co. Ltd. 104 0.31

28 Marubeni Corp. 174 0.52

3 Millea Holdings, Inc. 98 0.30

9 Mitsubishi Corp. 249 0.75

7 Mitsubishi Electric Corp. 60 0.18

14 Mitsubishi Tanabe Pharma

Corp. 197 0.59

9 Mitsubishi UFJ Financial

Group, Inc. 69 0.21

1 Mitsubishi UFJ Lease &

Finance Co. Ltd. 45 0.13

15 Mitsui & Co. Ltd. 257 0.77

8 Mitsui Fudosan Co. Ltd. 168 0.50

– Mizuho Financial Group, Inc. 101 0.30

1 Nidec Corp. 94 0.28

1 Nintendo Co. Ltd. 331 0.99

13 Nippon Electric Glass Co. Ltd. 173 0.52

– Nippon Telegraph &

Telephone Corp. 216 0.65

15 Nippon Yusen KK 120 0.36

19 Nipponkoa Insurance Co. Ltd. 126 0.38

57 The Nishi–Nippon City Bank

Ltd. 148 0.44

13 Oji Paper Co. Ltd. 68 0.20

51 Osaka Gas Co. Ltd. 185 0.56

6 Promise Co. Ltd. 140 0.42

3 Sankyo Co. Ltd. 142 0.43

7 Sumitomo Corp. 92 0.28

25 Sumitomo Metal Industries

Ltd 111 0.33

7 Suzuki Motor Corp. 148 0.44

52 Tokyo Gas Co. Ltd. 217 0.65

5 Toyota Motor Corp. 206 0.62

21 UBE Industries Ltd. 75 0.22

6,275 18.81


4 KT&G Corp. 368 1.11

1 LG Electronics, Inc. 131 0.39

499 1.50



3 Imtech NV 85 0.25


9 Koninklijke Ahold NV 117 0.35

13 Koninklijke Kpn NV 223 0.67

Shares (000’s)

Value(000’S)$

% ofNetAssetValue

3 Koninklijke Philips Electronics

NV 104 0.31

2 Nutreco Holding NV 123 0.37


10 Royal Dutch Shell PLC, Class B 341 1.02

1,879 5.63

Norway — 1.13%

19 DnB NOR ASA 214 0.64

8 Petroleum Geo–Services ASA 165 0.49

379 1.13

Portugal — 1.11%

40 Energias de Portugal S.A. 201 0.6


371 1.11

Russia — 0.56%

5 Gazprom OAO, ADR 187 0.56


36 Aveng Ltd. 312 0.93

21 Murray & Roberts Holdings

Ltd. 283 0.85

595 1.78

Spain — 5.25%

14 Banco Bilbao Vizcaya

Argentaria S.A. 242 0.73


10 Indra Sistemas S.A. 266 0.80

27 Mapfre S.A. 128 0.38

4 Red Electrica de Espana 224 0.67


1,750 5.25

Sweden — 0.53%

4 Scania AB, Class B 63 0.19

5 SSAB Svenskt Stal AB,

Series A 112 0.34

175 0.53


5 ABB Ltd. 132 0.40

3 Aryzta AG 134 0.40

2 Baloise Holding AG 137 0.41

17 Nestle S.A. 736 2.21


1 Pargesa Holding S.A. 124 0.37

1 Roche Holding AG 181 0.54

1 Swiss Life Holding AG 246 0.74

2,198 6.59


12 AMEC PLC 178 0.53

25 Amlin PLC 131 0.39

6 Anglo American PLC 330 0.99

7 AstraZeneca PLC 341 1.02



115



Shares (000’s)

Value(000’S)$

% ofNetAssetValue


United Kingdom — (continued)

5 Atkins WS PLC 89 0.27

21 BG Group PLC 475 1.42

9 BHP Billiton PLC 269 0.81

63 BP PLC 602 1.81

9 British American Tobacco PLC 312 0.93

7 British Energy Group PLC 92 0.28


38 GKN PLC 169 0.51

19 GlaxoSmithKline PLC 456 1.37


12 IMI PLC 109 0.33

7 Imperial Tobacco Group PLC 228 0.68

13 Invensys PLC 64 0.19

70 Legal & General Group PLC 127 0.38

18 Petrofac Ltd. 208 0.62

3 Reckitt Benckiser Group PLC 172 0.52


48 Royal Bank of Scotland Group

PLC 206 0.62


31 Standard Life PLC 141 0.42

25 Tesco PLC 175 0.52



6,611 19.82




10 Royal Dutch Shell PLC – –





ABBREVIATIONS:






Other Assets 2.59%




116

Batterymarch Emerging Markets Equity Fund


Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Argentina — 0.93%

14 Telecom Argentina S.A. 185 0.24

6 Tenaris S.A., ADR 339 0.45

5 Ternium S.A., ADR 177 0.24

701 0.93

Brazil — 16.54%

14 Agra Empreendimentos

Imobiliarios S.A. 72 0.10

26 Banco Bradesco S.A., ADR 469 0.62

39 Banco do Brasil S.A. 565 0.75

31 Banco Itau Holding

Financeira S.A., ADR 584 0.78

30 Banco Panamericano S.A. 131 0.17

15 BM&F Bovespa S.A. 113 0.15

2 Brasil Telecom

Participacoes S.A. 56 0.07

15 Camargo Correa

Desenvolvimento

Imobiliario S.A. 51 0.07

9 Cia Siderurgica Nacional S.A.,

ADR 326 0.43

109 Cia Vale do Rio Doce, ADR 2,584 3.43

6 Cyrela Brazil Realty S.A. 70 0.09

6 EDP – Energias do Brasil S.A. 106 0.14

14 Gafisa S.A., ADR 390 0.52

22 Gerdau S.A., ADR 404 0.54

108 Investimentos Itau S.A. 636 0.85

27 Localiza Rent A Car 264 0.35

11 Log–In Logistica

Intermodal S.A. 58 0.08

9 Magnesita Refratarios S.A. 108 0.14

20 Metalfrio Solutions S.A. 197 0.26

7 PDG Realty SA

Empreendimentos e

Participacoes 77 0.10

79 Petroleo Brasileiro S.A., ADR 3,377 4.49

7 SLC Agricola S.A. 104 0.14

9 Sul America S.A. 141 0.19

6 Tegma Gestao Logistica 51 0.07

7 Unibanco – Uniao de Bancos

Brasileiros S.A., GDR 849 1.13


Gerais S.A., Class A 387 0.51


Gerais S.A. 275 0.37

12,445 16.54

Chile — 0.56%

6 Cia Cervecerias Unidas S.A.,

ADR 218 0.29

2 Empresa Nacional de

Electricidad S.A., ADR 77 0.10

11 Lan Airlines S.A., ADR 130 0.17

425 0.56

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

China — 8.23%

102 Angang Steel Co. Ltd.,

Class H 139 0.18

75 Celestial Nutrifoods Ltd. 32 0.04

48 China Coal Energy Co.,

Class H 81 0.11

1,164 China Construction Bank

Corp., Class H 945 1.26

76 China COSCO Holdings Co.

Ltd., Class H 145 0.19

72 China Life Insurance Co. Ltd.,

Class H 275 0.37

211 China Merchants Bank Co.


278 China Petroleum & Chemical


1 China Petroleum & Chemical

Corp., ADR 107 0.14

221 China Railway Construction


108 China Shipping Development

Co. Ltd., Class H 255 0.34

196 China Yurun Food Group Ltd. 337 0.45

47 Golden Eagle Retail Group

Ltd. 43 0.06

2,056 Industrial & Commercial Bank

of China, Class H 1,412 1.88

306 PetroChina Co. Ltd., Class H 395 0.52

106 Shandong Chenming Paper

Holdings Ltd., Class H 81 0.11

6 The9 Ltd., ADR 113 0.15

318 Yanzhou Coal Mining Co.


6,191 8.23

Colombia — 0.33%

8 Bancolombia S.A., ADR 250 0.33

Egypt — 1.43%

77 Egyptian Financial Group–

Hermes Holding 674 0.89

109 Egyptian Kuwaiti Holding Co. 261 0.35

2 Orascom Construction

Industries 141 0.19

1,076 1.43

Hong Kong — 5.11%

466 Chaoda Modern Agriculture 495 0.66

603 China Agri–Industries

Holdings Ltd. 407 0.54

160 China Mobile Ltd. 1,813 2.41

388 China Pharmaceutical Group

Ltd. 128 0.17

108 CNOOC Ltd. 168 0.22

1,072 Lenovo Group Ltd. 723 0.96

180 Sinofert Holdings Ltd. 117 0.16

3,851 5.12



117



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Hungary — 0.46%

8 OTP Bank Nyrt 349 0.46

India — 5.10%

26 Bank of India 155 0.21

8 Divi’s Laboratories Ltd. 282 0.37

21 Everest Kanto Cylinder Ltd. 143 0.19

59 GAIL India Ltd. 529 0.70

5 GAIL India Ltd., GDR 239 0.32

7 Glenmark Pharmaceuticals

Ltd. 106 0.14

8 ICICI Bank Ltd., ADR 248 0.33

6 Reliance Industries Ltd. 275 0.37

12 Reliance Industries Ltd.,

GDR 144A 1,165 1.55

22 Satyam Computer Services

Ltd., ADR 479 0.64

6 Sun Pharmaceutical Industries

Ltd. 214 0.28

3,835 5.10

Indonesia — 1.26%

120 Indo Tambangraya Megah PT 360 0.48

105 PT Astra International Tbk 237 0.32

310 United Tractors Tbk PT 349 0.46

946 1.26

Israel — 0.31%

5 Teva Pharmaceutical

Industries Ltd., ADR 232 0.31


15 KazMunaiGas Exploration

Production, GDR 352 0.47


6 CJ Home Shopping 366 0.49

45 Halla Climate Control 421 0.56

20 Hyundai Marine & Fire

Insurance Co. Ltd. 330 0.44

5 Hyundai Mobis 415 0.55

5 Hyundai Motor Co. 326 0.43

32 Kia Motors Corp. 381 0.51

7 Kookmin Bank 357 0.47

32 Korea Exchange Bank 402 0.54

9 KT&G Corp. 714 0.95

8 LG Corp. 480 0.64

6 LG Electronics, Inc. 553 0.73

8 LG Micron Ltd. 253 0.34

16 LIG Insurance Co. Ltd. 298 0.40

1 POSCO 516 0.69


3 Samsung Fire & Marine

Insurance Co. Ltd. 545 0.72

13 Seah Besteel Corp. 297 0.39

20 Shinhan Financial Group Co.

Ltd. 915 1.22

35 Top Engineering Co. Ltd. 169 0.22

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

9,382 12.47

Kuwait — 0.32%

13 Global Investment House

KSCC, GDR 243 0.32

Malaysia — 1.36%

80 Digi.Com Bhd 541 0.72

200 IOI Corp. Bhd * 301 0.40

60 Public Bank Bhd 180 0.24

1,022 1.36

Mexico — 5.76%


Series L, ADR 1,819 2.42

11 Desarrolladora Homex SAB de

CV, ADR 577 0.77

138 Grupo Financiero Banorte

SAB de CV, Series O 552 0.73

360 Grupo Mexico SAB de CV,

Series B 601 0.80

17 Grupo Televisa S.A., ADR 394 0.52

55 Megacable Holdings SAB de

CV 108 0.14

76 Mexichem SAB de CV 175 0.23

8 Telmex Internacional SAB de

CV, ADR 111 0.15

4,337 5.76

Pakistan — 0.45%

239 Fauji Fertilizer Co. Ltd. 326 0.43

20 Lucky Cement Ltd. 15 0.02

341 0.45

Philippines — 0.50%

250 International Container

Terminal Services, Inc. 154 0.20

4 Philippine Long Distance

Telephone Co. 225 0.30

379 0.50

Poland — 0.44%

10 KGHM Polska Miedz S.A. 333 0.44

Peru — 0.26%

3 Credicorp Ltd. 197 0.26

Russia — 11.44%

8 Evraz Group S.A., GDR 566 0.75

73 Gazprom OAO, ADR 2,835 3.77


BV, ADR 665 0.88

26 Magnitogorsk Iron & Steel

Works, GDR 321 0.43

10 Mechel, ADR 276 0.37

1 MMC Norilsk Nickel 139 0.18

13 Mobile Telesystems Ojsc, ADR 904 1.20

9 NovaTek OAO, GDR 663 0.88

14 Novolipetsk Steel Ojsc, GDR 546 0.72

26 PIK Group, GDR 519 0.69



118



Shares (000’s)

Value(000’s)$

% ofNetAssetValue


Russia — (continued)

127 Sberbank 299 0.40

6 Uralkali, GDR 254 0.34

26 Vimpel–Communications,

ADR 622 0.83

8,609 11.44


57 African Bank Investments Ltd. 204 0.27

6 African Rainbow Minerals Ltd. 196 0.26

22 ArcelorMittal South Africa

Ltd. 514 0.68

20 Aspen Pharmacare Holdings

Ltd. 123 0.16

85 Aveng Ltd. 732 0.97

15 Exxaro Resources Ltd. 230 0.31

57 Firstrand Ltd. 121 0.16

4 Impala Platinum Holdings Ltd. 107 0.14

14 Kumba Iron Ore Ltd. 471 0.63

56 MTN Group Ltd. 853 1.13

56 Murray & Roberts Holdings

Ltd. 750 1.00

11 Naspers Ltd., Class N 284 0.38

12 Remgro Ltd. 284 0.38

26 Sasol Ltd. 1,454 1.93

49 Shoprite Holdings Ltd. 289 0.39

6,612 8.79

Taiwan — 9.59%

8 Asia Cement Corp. 8 0.01

16 Asustek Computer, Inc., GDR 191 0.25

716 China Life Insurance Co. Ltd. 376 0.50

580 China Steel Corp. 710 0.94

21 Chunghwa Telecom Co. Ltd.,

ADR 515 0.68

209 Chunghwa Telecom Co. Ltd. 520 0.69

381 First Financial Holding Co.

Ltd. 287 0.38

122 First Steamship Co. Ltd. 232 0.31

321 Fubon Financial Holding Co.

Ltd. 272 0.36

147 Gigabyte Technology Co. Ltd. 102 0.14

16 Gintech Energy Corp. 119 0.16

115 HON HAI Precision Industry

Co. Ltd. 578 0.77

20 HON HAI Precision Industry

Co. Ltd., GDR 199 0.27

18 HTC Corp. 338 0.45

41 Huaku Development Co. Ltd. 101 0.13

344 Quanta Computer, Inc. 516 0.69

188 Taiwan Mobile Co. Ltd. 337 0.45


Manufacturing Co. Ltd. 670 0.89


Manufacturing Co. Ltd., ADR 667 0.89

132 TSRC Corp. 160 0.21

Shares (000’s)

Value(000’s)$

% ofNetAssetValue

121 U–Ming Marine Transport

Corp. 319 0.42

7,217 9.59

Thailand — 0.68%

30 PTT PCL 233 0.31

230 Total Access Communication

PCL 277 0.37

510 0.68

Turkey — 2.67%

32 Akbank TAS 163 0.22

64 Akcansa Cimento A/S 252 0.33

186 Asya Katilim Bankasi A/S 405 0.54

51 Dogan Sirketler Grubu

Holdings 74 0.10

32 Tekfen Holding A/S 217 0.29

53 Turkcell Iletisim Hizmet A/S 355 0.47

243 Yapi ve Kredi Bankasi A/S 541 0.72

2,007 2.67


Face Value (000’s)

Value(000’s)$

% ofNetAssetValue


Brazil — 1.59%

5 AES Tiete S.A. 47 0.06

17 Bradespar S.A. 331 0.44

36 Confab Industrial S.A. 140 0.19

15 Metalurgica Gerdau S.A. 388 0.52

23 Suzano Papel e Celulose S.A. 289 0.38

Total Preferred Stock (Cost $1,432) 1,195 1.59


Indonesia — 0.02%

52 United Tractors Tbk PT * 16 0.02





* Security is valued in good faith at fair value by or at the discretion of the InvestmentManager.

ABBREVIATIONS:






119






Other Assets 3.50%




120

[This Page Intentionally Left Blank]

121

Balance SheetWesternAsset U.S. MoneyMarket Fund as atAugust 31, 2008(in 000’s)

WesternAsset U.S. CoreBond Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Core Plus BondFund as atAugust 31, 2008††(in 000’s)

Western Asset EuroCore Plus BondFund as atAugust 31, 2008††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund as atAugust 31, 2008(in 000’s)

Western AssetGlobal MultiStrategy Fund asatAugust 31, 2008(in 000’s)

Western Asset U.S.High Yield BondFund as atAugust 31, 2008(in 000’s)

Western AssetEmerging MarketsBond Fund as atAugust 31, 2008(in 000’s)

Western AssetGlobal High YieldBond Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund as atAugust 31, 2008(in 000’s)

Western AssetInflationManagementFund as atAugust 31, 2008(in 000’s)

Western AssetAsianOpportunitiesFund as atAugust 31, 2008(in 000’s) *

Brandywine GlobalOpportunitiesBond Fund as atAugust 31, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) – $ 1,322 $ 6,872 E 503 $ 3,939 $ 11,172 $ 1,750 $ 3,701 $ 486 $ 2,054 $ 1,242 $ 127 $ 12,341 $ 61,738

Amounts due from broker – 12 15 – – 6 – – – 51 5 – – –

Financial assets at fair value through profit or loss:

(Note 1)

Investments $ 4,877,554 51,162 42,247 12,642 88,468 429,059 70,576 117,260 168,010 52,085 58,059 7,535 24,231 529,427

Swap contracts at fair value – 10,225 – – 28 53 44 1,391 – – – – 838 –

Options at fair value – 60 – – 66 293 – – – – – – – –

Unrealised appreciation on forward foreign

currency contracts – – – 244 4,984 8,796 – – – – – 10 90 5,578

Unrealised appreciation on future contracts – 26 43 – 111 384 – 13 – 8 65 – – –

Receivable for investments sold – 3,342 580 10 3,117 238 356 – 831 3,155 1,659 – – –

Receivable for Redeemable Participating Shares

sold – 13 100 – – 545 49 – – – – – – 151

Interest Receivable 15,862 398 304 306 1,280 7,564 1,809 2,336 4,258 309 121 28 267 11,583

Dividend Receivable – 3 – – – – – – – – – – – –

Receivable from Investment Manager – – – – – – – – – – – 7 – –

Other assets 491 2 10 1 – 31 3 11 24 6 10 38 – 35

Total Current Assets 4,893,907 66,565 50,171 13,706 101,993 458,141 74,587 124,712 173,609 57,668 61,161 7,745 37,767 608,512

CURRENT LIABILITIES:

Cash overdraft – – – 59 – – – – – – – – – –

Amounts due to broker – – 30 – – 109 – 13 – – 43 – – –

Payable for investments purchased 31,975 17,230 16,014 446 7,652 1,001 34 1,334 152 9,408 10,328 383 – 39,712

Financial Liabilities at fair value through profit or

loss: (Note 1)

Investments – – – – – – – – – – – – – –

Options at fair value – 10 18 – 3 11 32 – – – – – – –

Swap contracts at fair value – 11,122 – 21 487 1,321 55 1,442 – – – – 803 –

Unrealised depreciation on forward foreign

currency contracts – – – 307 3,226 8,260 – – 10 – – – 594 2,753

Unrealised depreciation on futures contracts – 26 13 15 63 3 – – – 36 23 3 3 –

Distributions payable to holders of Redeemable

Participating Shares 2,825 48 27 11 113 725 161 85 112 48 17 – – –

Investment Management fees payable (Note 4) 2,164 15 19 5 50 226 41 90 116 23 27 – 1 301

Administrator and Custodian fees payable

(Note 4) 437 3 3 1 8 36 6 11 16 4 5 1 2 48

Shareholder service fees payable (Note 4) – 5 – 1 7 51 4 4 7 – – – – 75

Distribution fees payable 439 21 28 8 61 287 48 71 93 38 35 5 1 262

Transfer agent fees payable 5 – – – – – – – – – – – – –

Payable for Redeemable Participating Shares sold 245 47 5 393 132 675 73 277 486 56 186 18 – 1,651

Accrued expenses and other liabilities 1,266 29 28 15 136 128 41 66 79 33 37 20 15 458

Liabilities (excluding Net Assets attributable

to Holders of Redeemable Participating Shares) 39,356 28,556 16,185 1,282 11,938 12,833 495 3,393 1,071 9,646 10,701 430 1,419 45,260

Total Net Assets Attributable to Holders of

Redeemable Participating Shares $ 4,854,551 $ 38,009 $ 33,986 E 12,424 $ 90,055 $ 445,308 $ 74,092 $ 121,319 $ 172,538 $ 48,022 $ 50,460 $ 7,315 $ 36,348 $ 563,252

Amounts designated as "-" are either $0/E0 or less than $1,000/E1,000.

The Euro figures for the Western Asset Euro Core Bond Fund and Batterymarch European Equity Fund have been converted into U.S. Dollars in the totalfigure for the Legg Mason Global Funds Plc as at August 31, 2008, using the USD/EUR FX rate of 1.4671.

† Fund commenced trading April 28, 2008.

* Fund commenced trading June 12, 2008.

** Fund commenced trading June 27, 2008.

†† Effective April 21, 2008, the Western Asset Euro Core Bond Fund changed its name to the Western Asset Euro Core Plus Bond Fund; the WesternAsset Investment Grade Total Return Bond Fund changed its name to the Western Asset U.S. Core Plus Bond Fund; the Brandywine Global Equity Fundchanged its name to the GC Global Equity Fund and the Royce 100 Equity Fund changed its name to the Royce Smaller Companies Fund.

122



Balance SheetWesternAsset U.S. MoneyMarket Fund as atAugust 31, 2008(in 000’s)

WesternAsset U.S. CoreBond Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Core Plus BondFund as atAugust 31, 2008††(in 000’s)

Western Asset EuroCore Plus BondFund as atAugust 31, 2008††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund as atAugust 31, 2008(in 000’s)

Western AssetGlobal MultiStrategy Fund asatAugust 31, 2008(in 000’s)

Western Asset U.S.High Yield BondFund as atAugust 31, 2008(in 000’s)

Western AssetEmerging MarketsBond Fund as atAugust 31, 2008(in 000’s)

Western AssetGlobal High YieldBond Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund as atAugust 31, 2008(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund as atAugust 31, 2008(in 000’s)

Western AssetInflationManagementFund as atAugust 31, 2008(in 000’s)

Western AssetAsianOpportunitiesFund as atAugust 31, 2008(in 000’s) *

Brandywine GlobalOpportunitiesBond Fund as atAugust 31, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) – $ 1,322 $ 6,872 E 503 $ 3,939 $ 11,172 $ 1,750 $ 3,701 $ 486 $ 2,054 $ 1,242 $ 127 $ 12,341 $ 61,738

Amounts due from broker – 12 15 – – 6 – – – 51 5 – – –


(Note 1)

Investments $ 4,877,554 51,162 42,247 12,642 88,468 429,059 70,576 117,260 168,010 52,085 58,059 7,535 24,231 529,427

Swap contracts at fair value – 10,225 – – 28 53 44 1,391 – – – – 838 –

Options at fair value – 60 – – 66 293 – – – – – – – –


currency contracts – – – 244 4,984 8,796 – – – – – 10 90 5,578

Unrealised appreciation on future contracts – 26 43 – 111 384 – 13 – 8 65 – – –

Receivable for investments sold – 3,342 580 10 3,117 238 356 – 831 3,155 1,659 – – –


sold – 13 100 – – 545 49 – – – – – – 151

Interest Receivable 15,862 398 304 306 1,280 7,564 1,809 2,336 4,258 309 121 28 267 11,583

Dividend Receivable – 3 – – – – – – – – – – – –


Other assets 491 2 10 1 – 31 3 11 24 6 10 38 – 35



Cash overdraft – – – 59 – – – – – – – – – –

Amounts due to broker – – 30 – – 109 – 13 – – 43 – – –

Payable for investments purchased 31,975 17,230 16,014 446 7,652 1,001 34 1,334 152 9,408 10,328 383 – 39,712


loss: (Note 1)

Investments – – – – – – – – – – – – – –

Options at fair value – 10 18 – 3 11 32 – – – – – – –

Swap contracts at fair value – 11,122 – 21 487 1,321 55 1,442 – – – – 803 –


currency contracts – – – 307 3,226 8,260 – – 10 – – – 594 2,753

Unrealised depreciation on futures contracts – 26 13 15 63 3 – – – 36 23 3 3 –





(Note 4) 437 3 3 1 8 36 6 11 16 4 5 1 2 48

Shareholder service fees payable (Note 4) – 5 – 1 7 51 4 4 7 – – – – 75



Payable for Redeemable Participating Shares sold 245 47 5 393 132 675 73 277 486 56 186 18 – 1,651

Accrued expenses and other liabilities 1,266 29 28 15 136 128 41 66 79 33 37 20 15 458


to Holders of Redeemable Participating Shares) 39,356 28,556 16,185 1,282 11,938 12,833 495 3,393 1,071 9,646 10,701 430 1,419 45,260









123



Balance Sheet – (continued)

Legg MasonValue Fund as atAugust 31, 2008(in 000’s)

Legg MasonGrowth Fund asatAugust 31, 2008(in 000’s)

ClearBridge U.S.Appreciation Fund asat August 31, 2008(in 000’s)

ClearBridge U.S.Fundamental ValueFund as atAugust 31, 2008(in 000’s)

ClearBridge U.S.Large Cap GrowthFund as atAugust 31, 2008(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund asatAugust 31, 2008(in 000’s)

Royce U.S. SmallCap OpportunityFund as atAugust 31, 2008(in 000’s)

Royce SmallerCompanies Fund asatAugust 31, 2008††(in 000’s)

PCM U.S. EquityFund as atAugust 31, 2008(in 000’s)

GC Global EquityFund as atAugust 31, 2008††(in 000’s)

BatterymarchEuropean EquityFund as atAugust 31, 2008(in 000’s)

BatterymarchPacific EquityFund as atAugust 31, 2008(in 000’s)

Batterymarch 130/30 Global EquityFund as atAugust 31, 2008**(in 000’s)

BatterymarchInternational LargeCap Fund as atAugust 31, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) $ 10,720 $ 1,386 $ 2,663 $ 8,060 $ 80 – $ 6,374 $ 3,935 $ 25 $ 873 E 318 $ 30,623 $ 548 $ 128

Amounts due from broker – – – – – – – – – – – – – –


(Note 1)

Investments 552,566 62,300 30,341 157,453 50,331 $ 180,657 69,986 53,624 819 65,392 38,427 389,846 9,048 33,194

Swap contracts at fair value – – – – – – – – – – – – – –

Options at fair value – – – – – – – – – – – – – –


currency contracts – – – – – – – – – – – – – –

Unrealised appreciation on future contracts – – – – – – – – – – – – – –

Receivable for investments sold 930 1,459 – 10 – – 153 192 – 74 502 2,482 205 641


sold 70 – 117 – 2 50 2 24 – – – 1,015 – –

Interest Receivable 27 2 4 14 – – 8 4 – 1 – 26 1 –

Dividend Receivable 211 15 52 218 41 79 48 17 1 192 177 669 25 107

Receivable from Investment Manager – – – – – – – – – – – – – –

Other assets 20 8 5 5 9 4 14 2 37 12 2 38 – 7

Total Current Assets 564,544 65,170 33,182 165,760 50,463 180,790 76,585 57,798 882 66,544 39,426 424,699 9,827 34,077


Cash overdraft – – – – – 344 – – – 156 – – – 81

Amounts due to broker – – – – – – – – – – – – – –

Payable for investments purchased 714 1,257 – 1,238 – – 212 – – 171 669 14,423 289 455


loss: (Note 1)

Investments – – – – – – – – – – – – 269 –





Unrealised depreciation on futures contracts – – – – – – – – – – – – – –


Participating Shares – – – – – – – – – – – – – –

Investment Management fees payable (Note 4) 426 40 22 109 33 126 107 46 – 50 27 373 10 27


(Note 4) 42 5 3 15 5 16 6 5 – 6 7 37 1 3

Shareholder service fees payable (Note 4) 171 17 1 7 1 13 23 12 – 19 6 126 3 1

Distribution fees payable 258 29 22 110 34 108 – 32 1 29 24 204 4 28


Payable for Redeemable Participating Shares sold 1,160 286 297 403 248 69 137 231 – – 148 160 – 100

Accrued expenses and other liabilities 424 35 19 66 28 59 88 26 12 73 34 175 14 22


to Holders of Redeemable Participating Shares) 3,279 1,669 364 1,948 349 735 573 352 13 504 915 15,498 590 717


Redeemable Participating Shares $ 561,265 $ 63,501 $ 32,818 $ 163,812 $ 50,114 $ 180,055 $ 76,012 $ 57,446 $ 869 $ 66,040 E 38,511 $ 409,201 $ 9,237 $ 33,360







124




Legg MasonValue Fund as atAugust 31, 2008(in 000’s)

Legg MasonGrowth Fund asatAugust 31, 2008(in 000’s)

ClearBridge U.S.Appreciation Fund asat August 31, 2008(in 000’s)

ClearBridge U.S.Fundamental ValueFund as atAugust 31, 2008(in 000’s)

ClearBridge U.S.Large Cap GrowthFund as atAugust 31, 2008(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund asatAugust 31, 2008(in 000’s)

Royce U.S. SmallCap OpportunityFund as atAugust 31, 2008(in 000’s)

Royce SmallerCompanies Fund asatAugust 31, 2008††(in 000’s)

PCM U.S. EquityFund as atAugust 31, 2008(in 000’s)

GC Global EquityFund as atAugust 31, 2008††(in 000’s)

BatterymarchEuropean EquityFund as atAugust 31, 2008(in 000’s)

BatterymarchPacific EquityFund as atAugust 31, 2008(in 000’s)

Batterymarch 130/30 Global EquityFund as atAugust 31, 2008**(in 000’s)

BatterymarchInternational LargeCap Fund as atAugust 31, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) $ 10,720 $ 1,386 $ 2,663 $ 8,060 $ 80 – $ 6,374 $ 3,935 $ 25 $ 873 E 318 $ 30,623 $ 548 $ 128

Amounts due from broker – – – – – – – – – – – – – –


(Note 1)

Investments 552,566 62,300 30,341 157,453 50,331 $ 180,657 69,986 53,624 819 65,392 38,427 389,846 9,048 33,194





Unrealised appreciation on future contracts – – – – – – – – – – – – – –

Receivable for investments sold 930 1,459 – 10 – – 153 192 – 74 502 2,482 205 641


sold 70 – 117 – 2 50 2 24 – – – 1,015 – –

Interest Receivable 27 2 4 14 – – 8 4 – 1 – 26 1 –

Dividend Receivable 211 15 52 218 41 79 48 17 1 192 177 669 25 107

Receivable from Investment Manager – – – – – – – – – – – – – –

Other assets 20 8 5 5 9 4 14 2 37 12 2 38 – 7

Total Current Assets 564,544 65,170 33,182 165,760 50,463 180,790 76,585 57,798 882 66,544 39,426 424,699 9,827 34,077


Cash overdraft – – – – – 344 – – – 156 – – – 81

Amounts due to broker – – – – – – – – – – – – – –

Payable for investments purchased 714 1,257 – 1,238 – – 212 – – 171 669 14,423 289 455


loss: (Note 1)

Investments – – – – – – – – – – – – 269 –





Unrealised depreciation on futures contracts – – – – – – – – – – – – – –


Participating Shares – – – – – – – – – – – – – –

Investment Management fees payable (Note 4) 426 40 22 109 33 126 107 46 – 50 27 373 10 27


(Note 4) 42 5 3 15 5 16 6 5 – 6 7 37 1 3

Shareholder service fees payable (Note 4) 171 17 1 7 1 13 23 12 – 19 6 126 3 1

Distribution fees payable 258 29 22 110 34 108 – 32 1 29 24 204 4 28


Payable for Redeemable Participating Shares sold 1,160 286 297 403 248 69 137 231 – – 148 160 – 100



to Holders of Redeemable Participating Shares) 3,279 1,669 364 1,948 349 735 573 352 13 504 915 15,498 590 717


Redeemable Participating Shares $ 561,265 $ 63,501 $ 32,818 $ 163,812 $ 50,114 $ 180,055 $ 76,012 $ 57,446 $ 869 $ 66,040 E 38,511 $ 409,201 $ 9,237 $ 33,360







125



126

Balance Sheet – (continued)BatterymarchEmergingMarkets EquityFund as atAugust 31, 2008†(in 000’s)

Legg MasonGlobal Funds PlcTotals as atAugust 31, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) $ 2,305 $ 175,671

Amounts due from broker – 89

Financial assets at fair value through profit or

loss: (Note 1)

Investments 73,053 8,319,205

Swap contracts at fair value – 12,579

Options at fair value – 419


currency contracts – 19,816

Unrealised appreciation on future contracts – 650

Receivable for investments sold 147 20,320

Receivable for Redeemable Participating

Shares sold 45 2,183

Interest Receivable 5 46,661

Dividend Receivable 134 2,071

Receivable from Investment Manager – 7

Other assets 15 841

Total Current Assets 75,704 8,600,512


Cash overdraft – 668

Amounts due to broker – 195

Payable for investments purchased 334 155,953

Financial Liabilities at fair value through profit

or loss: (Note 1)

Investments – 269




currency contracts – 15,291

Unrealised depreciation on futures

contracts – 192

Distributions payable to holders of

Redeemable Participating Shares – 4,179

Investment Management fees payable (Note 4) 62 4,551


(Note 4) 6 741

Shareholder service fees payable (Note 4) 15 573

Distribution fees payable 21 2,317

Transfer agent fees payable – 89

Payable for Redeemable Participating Shares

sold – 7,737

Accrued expenses and other liabilities 19 3,464


to Holders of Redeemable Participating

Shares) $ 457 $ 211,554


Redeemable Participating Shares $ 75,247 $ 8,388,958


The Euro figures for the Western Asset Euro Core Bond Fund and Batterymarch European Equity Fundhave been converted into U.S. Dollars in the total figure for the Legg Mason Global Funds Plc as atAugust 31, 2008, using the USD/EUR FX rate of 1.4671.




†† Effective April 21, 2008, the Western Asset Euro Core Bond Fund changed its name to the WesternAsset Euro Core Plus Bond Fund; the Western Asset Investment Grade Total Return Bond Fund changed itsname to the Western Asset U.S. Core Plus Bond Fund; the Brandywine Global Equity Fund changed itsname to the GC Global Equity Fund and the Royce 100 Equity Fund changed its name to the Royce SmallerCompanies Fund.




127

Balance Sheet – (continued)WesternAsset U.S. MoneyMarket Fund as atFebruary 29, 2008(in 000’s)

WesternAsset U.S. CoreBond Fund as atFebruary 29, 2008(in 000’s)

Western Asset U.S.Core Plus BondFund as atFebruary 29, 2008*††(in 000’s)

Western Asset EuroCore Plus BondFund as atFebruary 29, 2008††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund as atFebruary 29, 2008(in 000’s)

Western AssetGlobal MultiStrategy Fund asatFebruary 29, 2008(in 000’s)

Western Asset U.S.High Yield BondFund as atFebruary 29, 2008(in 000’s)

Western AssetEmerging MarketsBond Fund as atFebruary 29, 2008(in 000’s)

Western AssetGlobal High YieldBond Fund as atFebruary 29, 2008*(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund as atFebruary 29, 2008*(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund as atFebruary 29, 2008*(in 000’s)

Western AssetInflationManagementFund as atFebruary 29, 2008*(in 000’s)

Brandywine GlobalOpportunitiesBond Fund as atFebruary 29, 2008(in 000’s)

Legg Mason ValueFund as atFebruary 29, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) – $ 1,873 $ 2,266 E 949 $ 2,460 $ 17,300 – $ 2,655 $ 3,663 $ 3,490 $ 3,293 $ 55 $ 54,050 $ 3,422

Amounts due from broker – – 118 – – – – 35 17 398 5 1 – –


(Note 1)

Investments $ 4,695,765 82,611 41,313 14,865 114,983 393,763 $ 80,093 134,831 235,649 67,936 88,483 9,121 555,863 898,613

Swap contracts at fair value – 704 – – 123 236 – – – – – – – –

Options at fair value – 77 – 52 1,301 2,616 – – – 46 – – – –


currency contracts – – – 172 1,185 1,851 – – – – – – 1,699 –

Unrealised appreciation on future contracts – 604 190 40 564 1,744 – 60 – 73 381 2 – –

Receivable for investments sold – 10,745 225 1,263 3,693 290 228 704 – 12,411 16,957 708 – 2,654


sold 178,107 189 – – 5 1,785 43 276 255 2 5 – 235 1,045

Interest Receivable 26,851 486 523 333 1,663 6,959 1,862 2,458 5,364 378 241 33 9,318 12

Dividend Receivable – 3 – – – – – – – – – – – 834


Other assets 935 19 11 1 54 93 35 28 58 13 18 26 111 166



Cash overdraft – – – – 259 – 107 24 – – – – – –

Amounts due to broker – 353 190 – – 841 – 60 8 270 211 1 – –

Payable for investments purchased – 32,367 282 1,948 5,179 1,105 148 – 368 23,491 25,862 1,108 15,405 –


loss: (Note 1)

Options at fair value – 18 – 54 47 125 – – – 3 – – – –

Swap contracts at fair value – 877 – – 414 781 – 1 – – – – – –


currency contracts – – – 124 1,904 2,700 – – 8 – – 7 939 –

Unrealised depreciation on futures contracts – 338 – 59 847 38 – – 17 471 170 1 – –





(Note 4) 403 5 4 1 10 34 7 12 21 5 7 1 46 81

Shareholder service fees payable (Note 4) – 8 – 2 9 51 4 3 2 – – – 74 305


Transfer agent fees payable – – – – – – – – – – – – – 85

Payable for Redeemable Participating Shares sold 101,131 62 285 15 814 160 82 628 1,468 633 466 2 545 6,850



to Holders of Redeemable Participating Shares) 108,613 34,179 891 2,256 9,836 7,065 650 1,052 2,355 25,045 26,899 1,167 17,829 8,862




The Euro figures for the Western Asset Euro Core Bond Fund and Batterymarch European Equity Fund have been converted into U.S. Dollars in the totalfigure for the Legg Mason Global Funds Plc as at February 29, 2008, using the USD/EUR FX rate of 1.5181.

* Fund commenced trading April 23, 2007.

** Effective October 5, 2007, the Royce U.S. Small Cap Fund changed its name to the Royce U.S. Small Cap Opportunity Fund.

† Fund commenced trading January 3, 2008.


128



Balance Sheet – (continued)WesternAsset U.S. MoneyMarket Fund as atFebruary 29, 2008(in 000’s)

WesternAsset U.S. CoreBond Fund as atFebruary 29, 2008(in 000’s)

Western Asset U.S.Core Plus BondFund as atFebruary 29, 2008*††(in 000’s)

Western Asset EuroCore Plus BondFund as atFebruary 29, 2008††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund as atFebruary 29, 2008(in 000’s)

Western AssetGlobal MultiStrategy Fund asatFebruary 29, 2008(in 000’s)

Western Asset U.S.High Yield BondFund as atFebruary 29, 2008(in 000’s)

Western AssetEmerging MarketsBond Fund as atFebruary 29, 2008(in 000’s)

Western AssetGlobal High YieldBond Fund as atFebruary 29, 2008*(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund as atFebruary 29, 2008*(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund as atFebruary 29, 2008*(in 000’s)

Western AssetInflationManagementFund as atFebruary 29, 2008*(in 000’s)

Brandywine GlobalOpportunitiesBond Fund as atFebruary 29, 2008(in 000’s)

Legg Mason ValueFund as atFebruary 29, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) – $ 1,873 $ 2,266 E 949 $ 2,460 $ 17,300 – $ 2,655 $ 3,663 $ 3,490 $ 3,293 $ 55 $ 54,050 $ 3,422

Amounts due from broker – – 118 – – – – 35 17 398 5 1 – –


(Note 1)

Investments $ 4,695,765 82,611 41,313 14,865 114,983 393,763 $ 80,093 134,831 235,649 67,936 88,483 9,121 555,863 898,613

Swap contracts at fair value – 704 – – 123 236 – – – – – – – –

Options at fair value – 77 – 52 1,301 2,616 – – – 46 – – – –


currency contracts – – – 172 1,185 1,851 – – – – – – 1,699 –

Unrealised appreciation on future contracts – 604 190 40 564 1,744 – 60 – 73 381 2 – –

Receivable for investments sold – 10,745 225 1,263 3,693 290 228 704 – 12,411 16,957 708 – 2,654


sold 178,107 189 – – 5 1,785 43 276 255 2 5 – 235 1,045

Interest Receivable 26,851 486 523 333 1,663 6,959 1,862 2,458 5,364 378 241 33 9,318 12

Dividend Receivable – 3 – – – – – – – – – – – 834


Other assets 935 19 11 1 54 93 35 28 58 13 18 26 111 166



Cash overdraft – – – – 259 – 107 24 – – – – – –

Amounts due to broker – 353 190 – – 841 – 60 8 270 211 1 – –

Payable for investments purchased – 32,367 282 1,948 5,179 1,105 148 – 368 23,491 25,862 1,108 15,405 –


loss: (Note 1)

Options at fair value – 18 – 54 47 125 – – – 3 – – – –

Swap contracts at fair value – 877 – – 414 781 – 1 – – – – – –


currency contracts – – – 124 1,904 2,700 – – 8 – – 7 939 –

Unrealised depreciation on futures contracts – 338 – 59 847 38 – – 17 471 170 1 – –





(Note 4) 403 5 4 1 10 34 7 12 21 5 7 1 46 81

Shareholder service fees payable (Note 4) – 8 – 2 9 51 4 3 2 – – – 74 305


Transfer agent fees payable – – – – – – – – – – – – – 85

Payable for Redeemable Participating Shares sold 101,131 62 285 15 814 160 82 628 1,468 633 466 2 545 6,850



to Holders of Redeemable Participating Shares) 108,613 34,179 891 2,256 9,836 7,065 650 1,052 2,355 25,045 26,899 1,167 17,829 8,862









129




Legg MasonGrowth Fund as atFebruary 29, 2008(in 000’s)

ClearBridge U.S.AppreciationFund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.FundamentalValue Fund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.Large Cap GrowthFund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund as atFebruary29, 2008*(in 000’s)

Royce U.S. SmallCap OpportunityFund as atFebru-ary 29, 2008**(in 000’s)

Royce SmallerCompanies Fund asatFebruary 29, 2008††(in 000’s)

PCM U.S. EquityFund as atFebruary 29, 2008†(in 000’s)

GC Global EquityFund as atFebruary 29, 2008††(in 000’s)

BatterymarchEuropean EquityFund as atFebruary 29, 2008(in 000’s)

Batterymarch PacificEquity Fund as atFebruary 29, 2008(in 000’s)

BatterymarchInternational LargeCap Fund as atFebruary 29, 2008*(in 000’s)

Legg Mason GlobalFunds Plc Totals asat February 29, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) $ 521 $ 855 $ 2,037 – $ 1,759 $ 13,073 $ 3,490 $ 318 $ 3,215 E 187 $ 36,069 $ 600 $ 158,188

Amounts due from broker – – – – – – – – – – – – 574


(Note 1)

Investments 102,431 34,094 210,650 $ 72,100 210,059 83,535 50,005 660 71,621 52,869 342,816 46,079 8,725,901

Swap contracts at fair value – – – – – – – – – – – – 1,063

Options at fair value – – – – – – – – – – – – 4,119


currency contracts – – – – – – – – – – – – 4,996

Unrealised appreciation on future contracts – – – – – – – – – – – – 3,679

Receivable for investments sold – 77 1,322 611 – 1,513 124 – – 1,075 3,384 797 59,992


sold 1,001 – 27 46 49 144 1,028 – – 14 2,309 – 186,572

Interest Receivable 1 1 3 1 2 26 7 1 5 – 73 – 56,774

Dividend Receivable 63 63 438 43 71 60 20 – 81 156 874 131 2,918

Receivable from Investment Manager – – – – – – – 25 – – – – 32

Other assets 19 7 50 16 49 18 14 1 19 12 75 13 1,868

Total Current Assets 104,036 35,097 214,527 72,817 211,989 98,369 54,688 1,005 74,941 54,313 385,600 47,620 9,206,676


Cash overdraft – – – 395 – – – – – – 631 977 2,393

Amounts due to broker – – – – – – – – – – – – 1,934

Payable for investments purchased – 58 – – – 94 516 30 – 340 7,633 338 117,457


loss: (Note 1)

Options at fair value – – – – – – – – – – – – 275




Unrealised depreciation on futures contracts – – – – – – – – – – – – 1,972


Participating Shares – – – – – – – – – – – – 5,131

Investment Management fees payable (Note 4) 62 18 143 48 146 92 35 – 12 45 305 36 4,702


(Note 4) 9 3 19 7 18 9 4 – 6 5 31 4 755

Shareholder service fees payable (Note 4) 31 – 5 – 7 32 11 – 2 11 84 – 648

Distribution fees payable 51 23 142 47 124 51 29 1 32 40 177 38 2,724

Transfer agent fees payable – – – – – – – – – – – – 85

Payable for Redeemable Participating Shares sold 507 198 835 95 813 5,258 125 – – 821 602 336 123,164

Accrued expenses and other liabilities 45 31 61 37 59 53 39 27 47 35 250 33 2,795


to Holders of Redeemable Participating Shares) 705 331 1,205 629 1,167 5,589 759 58 99 1,297 9,713 1,762 271,854


Redeemable Participating Shares $ 103,331 $ 34,766 $ 213,322 $ 72,188 $ 210,822 $ 92,780 $ 53,929 $ 947 $ 74,842 E 53,016 $ 375,887 $ 45,858 $ 8,934,822







130




Legg MasonGrowth Fund as atFebruary 29, 2008(in 000’s)

ClearBridge U.S.AppreciationFund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.FundamentalValue Fund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.Large Cap GrowthFund as atFebruary29, 2008*(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund as atFebruary29, 2008*(in 000’s)

Royce U.S. SmallCap OpportunityFund as atFebru-ary 29, 2008**(in 000’s)

Royce SmallerCompanies Fund asatFebruary 29, 2008††(in 000’s)

PCM U.S. EquityFund as atFebruary 29, 2008†(in 000’s)

GC Global EquityFund as atFebruary 29, 2008††(in 000’s)

BatterymarchEuropean EquityFund as atFebruary 29, 2008(in 000’s)

Batterymarch PacificEquity Fund as atFebruary 29, 2008(in 000’s)

BatterymarchInternational LargeCap Fund as atFebruary 29, 2008*(in 000’s)

Legg Mason GlobalFunds Plc Totals asat February 29, 2008(in 000’s)

CURRENT ASSETS:

Cash (Note 8) $ 521 $ 855 $ 2,037 – $ 1,759 $ 13,073 $ 3,490 $ 318 $ 3,215 E 187 $ 36,069 $ 600 $ 158,188

Amounts due from broker – – – – – – – – – – – – 574


(Note 1)

Investments 102,431 34,094 210,650 $ 72,100 210,059 83,535 50,005 660 71,621 52,869 342,816 46,079 8,725,901


Options at fair value – – – – – – – – – – – – 4,119



Unrealised appreciation on future contracts – – – – – – – – – – – – 3,679

Receivable for investments sold – 77 1,322 611 – 1,513 124 – – 1,075 3,384 797 59,992


sold 1,001 – 27 46 49 144 1,028 – – 14 2,309 – 186,572

Interest Receivable 1 1 3 1 2 26 7 1 5 – 73 – 56,774

Dividend Receivable 63 63 438 43 71 60 20 – 81 156 874 131 2,918

Receivable from Investment Manager – – – – – – – 25 – – – – 32

Other assets 19 7 50 16 49 18 14 1 19 12 75 13 1,868

Total Current Assets 104,036 35,097 214,527 72,817 211,989 98,369 54,688 1,005 74,941 54,313 385,600 47,620 9,206,676


Cash overdraft – – – 395 – – – – – – 631 977 2,393

Amounts due to broker – – – – – – – – – – – – 1,934

Payable for investments purchased – 58 – – – 94 516 30 – 340 7,633 338 117,457


loss: (Note 1)

Options at fair value – – – – – – – – – – – – 275




Unrealised depreciation on futures contracts – – – – – – – – – – – – 1,972


Participating Shares – – – – – – – – – – – – 5,131

Investment Management fees payable (Note 4) 62 18 143 48 146 92 35 – 12 45 305 36 4,702


(Note 4) 9 3 19 7 18 9 4 – 6 5 31 4 755

Shareholder service fees payable (Note 4) 31 – 5 – 7 32 11 – 2 11 84 – 648

Distribution fees payable 51 23 142 47 124 51 29 1 32 40 177 38 2,724

Transfer agent fees payable – – – – – – – – – – – – 85

Payable for Redeemable Participating Shares sold 507 198 835 95 813 5,258 125 – – 821 602 336 123,164

Accrued expenses and other liabilities 45 31 61 37 59 53 39 27 47 35 250 33 2,795


to Holders of Redeemable Participating Shares) 705 331 1,205 629 1,167 5,589 759 58 99 1,297 9,713 1,762 271,854


Redeemable Participating Shares $ 103,331 $ 34,766 $ 213,322 $ 72,188 $ 210,822 $ 92,780 $ 53,929 $ 947 $ 74,842 E 53,016 $ 375,887 $ 45,858 $ 8,934,822







131



Balance Sheet – (continued)WesternAsset U.S.Money MarketFund(in 000’s)

WesternAsset U.S. CoreBond Fund(in 000’s)

WesternAsset U.S. CorePlus BondFund††(in 000’s)

Western AssetEuro Core PlusBond Fund††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund(in 000’s)

Western AssetGlobal MultiStrategy Fund(in 000’s)

WesternAsset U.S. HighYield Bond Fund(in 000’s)

Western AssetEmergingMarkets BondFund(in 000’s)

Western AssetGlobal HighYield Bond Fund(in 000’s)

WesternAsset U.S. Short-TermGovernmentIncome Fund(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund(in 000’s)

Western AssetInflationManagementFund(in 000’s)

Western AssetAsianOpportunitiesFund*(in 000’s)

BrandywineGlobalOpportunitiesBond Fund(in 000’s)

Legg MasonValue Fund(in 000’s)

August 31, 2008

Total Net Asset Value:

Class A US$ Accumulating $ 57,757 $ 18 $ 21 – $ 2,325 $ 13,683 $ 249 $ 18,114 $ 89,791 $ 1,431 $ 9,780 $ 66 $ 1 $ 15,379 $ 11,767

Class A US$ Distributing (A) – – – – – – – – – – – 1,500 – – 504,001

Class A US$ Distributing (D) 4,768,774 25,084 802 E 3,115 16,906 98,996 18,421 8,255 1,023 157 – – 1 – –

Class A US$ Distributing (M) – – – – 255 2,226 – 380 210 – – – – – –

Class A US$ Distributing (S) – – – – – – – – – – – – – 434,870 –

Class A Euro Accumulating – – – – – – – – – – – – 2 – 288

Class A Euro Accumulating (Hedged) – – – – 659 5,933 – – – – – – – 21,176 –

Class A Euro Distributing (D) – – – 2,337 – – – – – – – – – – –

Class A Euro Distributing (M) – – – – – – – – – – – – 2 – –

Class A Euro Distributing (M)

(Hedged) – – – – 2 72 – – – – – – – – –

Class A GBP Distributing (M)

(Hedged) – – – – – 1,178 – – – – – – – – –

Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – – 45,908 –

Class A SGD Accumulating – – – – – – – – – – – – – – 4,549

Class A SGD Accumulating (Hedged) – – – – – – – – – – – – – 14,024 –

Class B US$ Accumulating 637 122 571 – 80 723 34 50 1 36 1 59 1 1,944 96

Class B US$ Distributing (A) – – – – – – – – – – – 1 – – 8,307

Class B US$ Distributing (D) 4,111 6,946 222 2,927 19,884 35,823 5,718 4,052 73 271 1 – 1 – –

Class B US$ Distributing (S) – – – – – – – – – – – – – 10,439 –

Class C US$ Accumulating 1 76 376 – 53 3,309 62 1 15 1 1 28 1,318 115 13

Class C US$ Distributing (A) – – – – – – – – – – – 93 – – 22,550

Class C US$ Distributing (D) 3,282 5,763 7,065 4,045 13,254 235,796 6,407 10,868 1,896 319 90 – 1 – –

Class C US$ Distributing (S) – – – – – – – – – – – – – 19,397 –

Premier Class US$ Accumulating – – – – – – – – – – – – 1 – 4,465

Premier Class US$ Distributing (D) – – – – – 2,164 – – – – – – 1 – –

Premier Class GBP Distributing (M)

(Hedged) – – – – – 45,405 – – – – – – – – –

LM Class US$ Accumulating – – – – – – – – – – – – 35,019 – –

LM Class US$ Distributing (M) – – – – – – 1,306 – – – – – – – –

Class A (G) US$ Accumulating 4,129 – 1,327 – 1,001 – 5,068 43,697 28,971 1,875 6,477 1,054 – – –

Class A (G) US$ Distributing (A) – – – – – – – – – – – 452 – – –

Class A (G) US$ Distributing (D) 3,878 – 2,713 – 9,543 – 9,345 9,533 17,202 6,070 6,016 – – – –

Class B (G) US$ Accumulating 2,488 – 5,187 – 7,414 – 3,036 6,502 9,052 4,771 5,717 1,219 – – –

Class B (G) US$ Distributing (A) – – – – – – – – – – – 1,271 – – –

Class B (G) US$ Distributing (D) 6,153 – 7,216 – 13,795 – 9,815 8,210 14,589 27,185 11,924 – – – –

Class L (G) US$ Accumulating 33 – 2,532 – 675 – 1,143 2,299 1,657 521 1,512 813 – – –

Class L (G) US$ Distributing (A) – – – – – – – – – – – 759 – – –

Class L (G) US$ Distributing (D) 3,308 – 5,954 – 4,209 – 13,488 9,358 8,058 5,385 8,941 – – – –

Galleon Class – – – – – – – – – – – – – – 5,229

Amounts designated as "-" are either $0/E0 or less than $1,000/E1,000 or less than 1,000 shares.

NAV per share information represents Redeemable Participating Shares.





132


















August 31, 2008


Class A US$ Accumulating $ 57,757 $ 18 $ 21 – $ 2,325 $ 13,683 $ 249 $ 18,114 $ 89,791 $ 1,431 $ 9,780 $ 66 $ 1 $ 15,379 $ 11,767

Class A US$ Distributing (A) – – – – – – – – – – – 1,500 – – 504,001

Class A US$ Distributing (D) 4,768,774 25,084 802 E 3,115 16,906 98,996 18,421 8,255 1,023 157 – – 1 – –

Class A US$ Distributing (M) – – – – 255 2,226 – 380 210 – – – – – –


Class A Euro Accumulating – – – – – – – – – – – – 2 – 288

Class A Euro Accumulating (Hedged) – – – – 659 5,933 – – – – – – – 21,176 –


Class A Euro Distributing (M) – – – – – – – – – – – – 2 – –


(Hedged) – – – – 2 72 – – – – – – – – –


(Hedged) – – – – – 1,178 – – – – – – – – –

Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – – 45,908 –



Class B US$ Accumulating 637 122 571 – 80 723 34 50 1 36 1 59 1 1,944 96

Class B US$ Distributing (A) – – – – – – – – – – – 1 – – 8,307

Class B US$ Distributing (D) 4,111 6,946 222 2,927 19,884 35,823 5,718 4,052 73 271 1 – 1 – –

Class B US$ Distributing (S) – – – – – – – – – – – – – 10,439 –

Class C US$ Accumulating 1 76 376 – 53 3,309 62 1 15 1 1 28 1,318 115 13

Class C US$ Distributing (A) – – – – – – – – – – – 93 – – 22,550

Class C US$ Distributing (D) 3,282 5,763 7,065 4,045 13,254 235,796 6,407 10,868 1,896 319 90 – 1 – –

Class C US$ Distributing (S) – – – – – – – – – – – – – 19,397 –

Premier Class US$ Accumulating – – – – – – – – – – – – 1 – 4,465

Premier Class US$ Distributing (D) – – – – – 2,164 – – – – – – 1 – –


(Hedged) – – – – – 45,405 – – – – – – – – –

LM Class US$ Accumulating – – – – – – – – – – – – 35,019 – –

LM Class US$ Distributing (M) – – – – – – 1,306 – – – – – – – –







Class L (G) US$ Accumulating 33 – 2,532 – 675 – 1,143 2,299 1,657 521 1,512 813 – – –



Galleon Class – – – – – – – – – – – – – – 5,229







133


















August 31, 2008

Number of Redeemable Participating Shares in Issue:

Class A US$ Accumulating 551 – – – 24 137 3 177 958 14 107 1 – 144 181

Class A US$ Distributing (A) – – – – – – – – – – – 14 – – 4,082

Class A US$ Distributing (D) 4,768,531 284 9 35 193 878 218 78 12 2 – – – – –

Class A US$ Distributing (M) – – – – 3 23 – 4 2 – – – – – –


Class A Euro Accumulating – – – – – – – – – – – – – – 3

Class A Euro Accumulating (Hedged) – – – – 5 41 – – – – – – – 143 –

Class A Euro Distributing (D) – – – 26 – – – – – – – – – – –


(Hedged) – – – – – 1 – – – – – – – – –


(Hedged) – – – – – 7 – – – – – – – – –

Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – – 252 –



Class B US$ Accumulating 6 1 6 – 1 7 – – – – – 1 – 19 1

Class B US$ Distributing (A) – – – – – – – – – – – – – – 69

Class B US$ Distributing (D) 4,102 79 2 33 228 318 67 38 1 3 – – – – –

Class B US$ Distributing (S) – – – – – – – – – – – – – 92 –

Class C US$ Accumulating – 1 4 – 1 34 1 – – – – – 13 1 –

Class C US$ Distributing (A) – – – – – – – – – – – 1 – – 188

Class C US$ Distributing (D) 3,272 65 75 46 152 2,092 76 102 23 3 1 – – – –

Class C US$ Distributing (S) – – – – – – – – – – – – – 172 –

Premier Class US$ Accumulating – – – – – – – – – – – – – – 45

Premier Class US$ Distributing (D) – – – – – 23 – – – – – – – – –


(Hedged) – – – – – 261 – – – – – – – – –

LM Class US$ Accumulating – – – – – – – – – – – – 348 – –

LM Class US$ Distributing (M) – – – – – – 14 – – – – – – – –

Class A (G) US$ Accumulating 39 – 13 – 10 – 54 425 309 18 71 10 – – –


Class A (G) US$ Distributing (D) 3,865 – 29 – 107 – 111 100 203 61 70 – – – –

Class B (G) US$ Accumulating 24 – 52 – 78 – 33 64 97 46 63 11 – – –

Class B (G) US$ Distributing (A) – – – – – – – – – – – 12 – – –

Class B (G) US$ Distributing (D) 6,141 – 77 – 155 – 117 86 173 275 138 – – – –

Class L (G) US$ Accumulating – – 25 – 7 – 12 23 18 5 17 8 – – –


Class L (G) US$ Distributing (D) 3,296 – 63 – 47 – 161 98 95 55 103 – – – –

Galleon Class – – – – – – – – – – – – – – 58







134


















August 31, 2008


Class A US$ Accumulating 551 – – – 24 137 3 177 958 14 107 1 – 144 181

Class A US$ Distributing (A) – – – – – – – – – – – 14 – – 4,082

Class A US$ Distributing (D) 4,768,531 284 9 35 193 878 218 78 12 2 – – – – –



Class A Euro Accumulating – – – – – – – – – – – – – – 3

Class A Euro Accumulating (Hedged) – – – – 5 41 – – – – – – – 143 –



(Hedged) – – – – – 1 – – – – – – – – –


(Hedged) – – – – – 7 – – – – – – – – –

Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – – 252 –



Class B US$ Accumulating 6 1 6 – 1 7 – – – – – 1 – 19 1

Class B US$ Distributing (A) – – – – – – – – – – – – – – 69


Class B US$ Distributing (S) – – – – – – – – – – – – – 92 –

Class C US$ Accumulating – 1 4 – 1 34 1 – – – – – 13 1 –

Class C US$ Distributing (A) – – – – – – – – – – – 1 – – 188


Class C US$ Distributing (S) – – – – – – – – – – – – – 172 –

Premier Class US$ Accumulating – – – – – – – – – – – – – – 45

Premier Class US$ Distributing (D) – – – – – 23 – – – – – – – – –


(Hedged) – – – – – 261 – – – – – – – – –

LM Class US$ Accumulating – – – – – – – – – – – – 348 – –

LM Class US$ Distributing (M) – – – – – – 14 – – – – – – – –










Galleon Class – – – – – – – – – – – – – – 58







135



Balance Sheet – (continued)WesternAsset U.S.Money MarketFund

WesternAsset U.S. CoreBond Fund

WesternAsset U.S. CorePlus BondFund††

Western AssetEuro Core PlusBond Fund††

Western AssetDiversifiedStrategic IncomeBond Fund

Western AssetGlobal MultiStrategy Fund

WesternAsset U.S. HighYield Bond Fund

Western AssetEmergingMarkets BondFund

Western AssetGlobal HighYield Bond Fund

WesternAsset U.S. Short-TermGovernmentIncome Fund

WesternAsset U.S.Adjustable RateIncome Fund

Western AssetInflationManagementFund

Western AssetAsianOpportunitiesFund*

BrandywineGlobalOpportunitiesBond Fund

Legg MasonValue Fund

August 31, 2008

Net Asset Value Per Share:

Class A US$ Accumulating (USD) 104.77 92.54 99.79 – 95.55 100.11 92.97 102.33 93.71 104.83 91.01 108.03 101.21 106.88 64.97

Class A US$ Distributing (A) (USD) – – – – – – – – – – – 103.58 – – 123.46

Class A US$ Distributing (D) (USD) 1.00 88.23 93.28 130.14 87.38 112.71 84.69 106.23 84.56 98.69 – – 100.83 – –

Class A US$ Distributing (M) (USD) – – – – 92.43 95.68 – 96.20 93.73 – – – – – –

Class A US$ Distributing (S) (USD) – – – – – – – – – – – – – 113.40 –

Class A Euro Accumulating (EUR) – – – – – – – – – – – – 108.22 – 56.71

Class A Euro Accumulating (Hedged)

(EUR) – – – – 96.20 99.03 – – – – – – – 100.68 –

Class A Euro Distributing (D) (EUR) – – – 89.06 – – – – – – – – – – –

Class A Euro Distributing (M) (EUR) – – – – – – – – – – – – 107.96 – –


(Hedged) (EUR) – – – – 102.52 95.61 – – – – – – – – –


(Hedged) (GBP) – – – – – 97.95 – – – – – – – – –

Class A GBP Distributing (S) (Hedged)

(GBP) – – – – – – – – – – – – – 99.90 –

Class A SGD Accumulating (SGD) – – – – – – – – – – – – – – 0.58

Class A SGD Accumulating (Hedged)

(SGD) – – – – – – – – – – – – – 0.99 –

Class B US$ Accumulating (USD) 101.98 91.74 97.20 – 94.85 96.89 95.12 100.09 95.52 101.52 90.39 102.66 101.16 100.40 70.30

Class B US$ Distributing (A) (USD) – – – – – – – – – – – 106.18 – – 120.73

Class B US$ Distributing (D) (USD) 1.00 88.24 93.15 128.91 87.37 112.73 84.72 106.21 84.44 98.72 86.52 – 100.82 – –

Class B US$ Distributing (S) (USD) – – – – – – – – – – – – – 113.09 –

Class C US$ Accumulating (USD) 101.63 91.73 96.96 – 94.79 96.87 94.91 99.96 95.47 101.14 90.13 102.46 101.09 100.26 70.33

Class C US$ Distributing (A) (USD) – – – – – – – – – – – 103.49 – – 119.79

Class C US$ Distributing (D) (USD) 1.00 88.27 93.93 128.46 87.36 112.72 84.73 106.17 84.19 98.68 86.55 – 100.82 – –

Class C US$ Distributing (S) (USD) – – – – – – – – – – – – – 112.94 –

Premier Class US$ Accumulating

(USD) – – – – – – – – – – – – 101.23 – 100.22

Premier Class US$ Distributing (D)

(USD) – – – – – 94.92 – – – – – – 100.83 – –


(Hedged) (GBP) – – – – – 95.32 – – – – – – – – –

LM Class US$ Accumulating (USD) – – – – – – – – – – – – 100.59 – –

LM Class US$ Distributing (M) (USD) – – – – – – 93.64 – – – – – – – –

Class A (G) US$ Accumulating (USD) 105.02 – 100.02 – 95.46 – 93.61 102.81 93.87 104.91 91.05 108.99 – – –

Class A (G) US$ Distributing (A) (USD) – – – – – – – – – – – 102.75 – – –

Class A (G) US$ Distributing (D) (USD) 1.00 – 94.02 – 88.94 – 84.03 95.21 84.57 98.73 86.50 – – – –

Class B (G) US$ Accumulating (USD) 105.02 – 99.34 – 94.87 – 92.98 102.12 93.21 104.19 90.45 108.26 – – –

Class B (G) US$ Distributing (A) (USD) – – – – – – – – – – – 101.78 – – –

Class B (G) US$ Distributing (D) (USD) 1.00 – 94.02 – 89.05 – 84.04 95.21 84.56 98.73 86.48 – – – –

Class L (G) US$ Accumulating

(USD) *** 101.07 – 99.34 – 94.89 – 92.97 102.11 93.23 104.17 90.46 108.04 – – –

Class L (G) US$ Distributing (A) (USD) – – – – – – – – – – – 102.22 – – –

Class L (G) US$ Distributing (D) (USD) 1.00 – 94.01 – 88.98 – 84.03 95.20 84.56 98.72 86.51 – – – –

Galleon Class (USD) – – – – – – – – – – – – – – 90.52






*** Class L(G) US$ Accumulating Shares were fullly redeemed on October 8, 2008 and subsequently commenced operations again onOctober 28, 2008 at the initial offer price of $100 per share


136





WesternAsset U.S. CorePlus BondFund††






Western AssetGlobal HighYield Bond Fund

WesternAsset U.S. Short-TermGovernmentIncome Fund

WesternAsset U.S.Adjustable RateIncome Fund

Western AssetInflationManagementFund

Western AssetAsianOpportunitiesFund*



August 31, 2008



Class A US$ Distributing (A) (USD) – – – – – – – – – – – 103.58 – – 123.46

Class A US$ Distributing (D) (USD) 1.00 88.23 93.28 130.14 87.38 112.71 84.69 106.23 84.56 98.69 – – 100.83 – –


Class A US$ Distributing (S) (USD) – – – – – – – – – – – – – 113.40 –

Class A Euro Accumulating (EUR) – – – – – – – – – – – – 108.22 – 56.71


(EUR) – – – – 96.20 99.03 – – – – – – – 100.68 –


Class A Euro Distributing (M) (EUR) – – – – – – – – – – – – 107.96 – –


(Hedged) (EUR) – – – – 102.52 95.61 – – – – – – – – –


(Hedged) (GBP) – – – – – 97.95 – – – – – – – – –


(GBP) – – – – – – – – – – – – – 99.90 –

Class A SGD Accumulating (SGD) – – – – – – – – – – – – – – 0.58


(SGD) – – – – – – – – – – – – – 0.99 –


Class B US$ Distributing (A) (USD) – – – – – – – – – – – 106.18 – – 120.73

Class B US$ Distributing (D) (USD) 1.00 88.24 93.15 128.91 87.37 112.73 84.72 106.21 84.44 98.72 86.52 – 100.82 – –

Class B US$ Distributing (S) (USD) – – – – – – – – – – – – – 113.09 –


Class C US$ Distributing (A) (USD) – – – – – – – – – – – 103.49 – – 119.79

Class C US$ Distributing (D) (USD) 1.00 88.27 93.93 128.46 87.36 112.72 84.73 106.17 84.19 98.68 86.55 – 100.82 – –

Class C US$ Distributing (S) (USD) – – – – – – – – – – – – – 112.94 –


(USD) – – – – – – – – – – – – 101.23 – 100.22


(USD) – – – – – 94.92 – – – – – – 100.83 – –


(Hedged) (GBP) – – – – – 95.32 – – – – – – – – –

LM Class US$ Accumulating (USD) – – – – – – – – – – – – 100.59 – –

LM Class US$ Distributing (M) (USD) – – – – – – 93.64 – – – – – – – –








(USD) *** 101.07 – 99.34 – 94.89 – 92.97 102.11 93.23 104.17 90.46 108.04 – – –



Galleon Class (USD) – – – – – – – – – – – – – – 90.52






*** Class L(G) US$ Accumulating Shares were fullly redeemed on October 8, 2008 and subsequently commenced operations again onOctober 28, 2008 at the initial offer price of $100 per share


137



Balance Sheet – (continued)Legg MasonGrowth Fund

ClearBridge U.S.AppreciationFund

ClearBridge U.S.Fundamental ValueFund

ClearBridge U.S.Large Cap GrowthFund

ClearBridge U.S.AggressiveGrowth Fund

Royce U.S. SmallCap OpportunityFund

Royce SmallerCompanies Fund††

PCM U.S. EquityFund

GC Global EquityFund††

BatterymarchEuropean EquityFund

BatterymarchPacific Equity Fund

Batterymarch 130/30 Global EquityFund**

BatterymarchInternational LargeCap Fund

BatterymarchEmerging MarketsEquity Fund†

August 31, 2008

Total Net Asset Value: (in 000’s)

Class A US$ Accumulating $ 2,259 $ 2,943 $ 25,652 $ 3,561 $ 14,504 $ 10,390 $ 3,819 $ 862 $ 65,483 E 491 $ 93,075 $ 92 $ 642 $ 12,199

Class A US$ Distributing (A) 42,162 460 398 390 29,865 55,740 28,755 1 75 9,224 275,888 8,315 641 1

Class A Euro Accumulating 33 1,301 – 2 – 865 – 1 – – 1,590 92 – 1

Class A Euro Distributing (A) – – – – – – – 1 – 1,733 – 92 – –

Class A GBP Distributing (A) – – – – – – – – – – – – – 36,354

Class B US$ Accumulating 10 228 203 11 83 16 123 1 20 82 218 92 87 1

Class B US$ Distributing (A) 2,443 866 685 504 1,085 2,511 4,340 1 232 3,875 9,423 92 1,101 1

Class C US$ Accumulating 776 290 179 101 803 1 252 1 1 57 146 92 46 1

Class C US$ Distributing (A) 6,993 1,122 1,051 575 3,718 6,489 5,765 1 229 6,029 28,861 92 1,546 1

Premier Class US$ Accumulating 8,825 – – – – – – – – – – 93 – 25,495

Premier Class US$ Distributing (A) – – – – – – – – – – – 93 – –

Premier Class Euro Accumulating – – – – – – – – – – – 92 – 1

LM Class US$ Distributing – – – – – – – – – – – – – 1,192

Class A (G) US$ Accumulating – 11,353 53,050 19,065 70,795 – 8,100 – – 6,426 – – 4,434 –

Class B (G) US$ Accumulating – 6,111 55,162 12,212 33,029 – 2,936 – – 7,821 – – 16,918 –

Class L (G) US$ Accumulating – 8,144 27,432 13,693 26,173 – 3,356 – – 2,773 – – 7,945 –

Number of Redeemable Participating Shares in Issue: (in 000’s)

Class A US$ Accumulating 29 31 306 39 165 128 39 10 798 9 1,006 1 8 151

Class A US$ Distributing (A) 436 5 5 4 339 226 175 – 1 69 1,511 90 8 –

Class A Euro Accumulating – 9 – – – 8 – – – – 17 1 – –

Class A Euro Distributing (A) – – – – – – – – – 13 – 1 – –

Class A GBP Distributing (A) – – – – – – – – – – – – – 229

Class B US$ Accumulating – 2 2 – 1 – 1 – – 1 3 1 1 –

Class B US$ Distributing (A) 26 9 8 6 12 10 27 – 3 29 53 1 14 –

Class C US$ Accumulating 12 3 2 1 9 – 2 – – 1 2 1 1 –

Class C US$ Distributing (A) 75 12 13 6 43 27 36 – 2 46 162 1 19 –

Premier Class US$ Accumulating 93 – – – – – – – – – – 1 – 320


Premier Class Euro Accumulating – – – – – – – – – – – 1 – –

LM Class US$ Distributing – – – – – – – – – – – – – 15

Class A (G) US$ Accumulating – 118 631 208 801 – 81 – – 116 – – 54 –

Class B (G) US$ Accumulating – 64 661 134 376 – 30 – – 143 – – 209 –

Class L (G) US$ Accumulating – 85 329 151 298 – 34 – – 51 – – 98 –


Class A US$ Accumulating (USD) 77.38 95.94 83.71 91.20 88.00 80.95 96.80 86.91 82.07 81.55 92.55 92.38 81.41 80.66

Class A US$ Distributing (A) (USD) 96.76 96.02 83.75 91.23 88.04 246.57 164.66 86.87 93.53 195.39 182.58 92.38 81.32 90.86

Class A Euro Accumulating (EUR) 72.27 98.06 – 100.69 – 72.96 – 86.74 – – 63.57 99.17 – 97.15

Class A Euro Distributing (A) (EUR) – – – – – – – 86.69 – 134.20 – 99.23 – –

Class A GBP Distributing (A) (GBP) – – – – – – – – – – – – – 87.16

Class B US$ Accumulating (USD) 75.78 93.04 88.76 89.24 91.17 90.00 100.99 86.64 82.75 80.72 68.16 92.30 79.02 90.75

Class B US$ Distributing (A) (USD) 94.54 95.30 83.15 90.60 87.44 241.34 161.14 86.64 92.67 192.93 178.94 92.30 80.75 90.75

Class C US$ Accumulating (USD) 66.05 93.05 88.77 89.26 91.21 90.04 100.96 86.70 82.90 81.63 68.14 92.30 79.03 90.75

Class C US$ Distributing (A) (USD) 93.77 95.29 83.16 90.59 87.43 239.52 160.29 86.64 92.70 191.36 177.98 92.30 80.77 90.75

Premier Class US$ Accumulating (USD) 94.44 – – – – – – – – – – 92.58 – 79.61

Premier Class US$ Distributing (A) (USD) – – – – – – – – – – – 92.58 – –

Premier Class Euro Accumulating (EUR) – – – – – – – – – – – 99.38 – 97.17

LM Class US$ Distributing (USD) – – – – – – – – – – – – – 81.15

Class A (G) US$ Accumulating (USD) – 96.27 84.06 91.55 88.36 – 100.04 – – 81.01 – – 81.69 –

Class B (G) US$ Accumulating (USD) – 95.62 83.48 90.93 87.76 – 99.36 – – 80.42 – – 81.14 –

Class L (G) US$ Accumulating (USD) – 95.62 83.48 90.93 87.76 – 99.31 – – 80.47 – – 81.14 –







138



Balance Sheet – (continued)Legg MasonGrowth Fund

ClearBridge U.S.AppreciationFund

ClearBridge U.S.Fundamental ValueFund

ClearBridge U.S.Large Cap GrowthFund

ClearBridge U.S.AggressiveGrowth Fund

Royce U.S. SmallCap OpportunityFund

Royce SmallerCompanies Fund††

PCM U.S. EquityFund




Batterymarch 130/30 Global EquityFund**

BatterymarchInternational LargeCap Fund

BatterymarchEmerging MarketsEquity Fund†

August 31, 2008


Class A US$ Accumulating $ 2,259 $ 2,943 $ 25,652 $ 3,561 $ 14,504 $ 10,390 $ 3,819 $ 862 $ 65,483 E 491 $ 93,075 $ 92 $ 642 $ 12,199

Class A US$ Distributing (A) 42,162 460 398 390 29,865 55,740 28,755 1 75 9,224 275,888 8,315 641 1

Class A Euro Accumulating 33 1,301 – 2 – 865 – 1 – – 1,590 92 – 1

Class A Euro Distributing (A) – – – – – – – 1 – 1,733 – 92 – –

Class A GBP Distributing (A) – – – – – – – – – – – – – 36,354

Class B US$ Accumulating 10 228 203 11 83 16 123 1 20 82 218 92 87 1

Class B US$ Distributing (A) 2,443 866 685 504 1,085 2,511 4,340 1 232 3,875 9,423 92 1,101 1

Class C US$ Accumulating 776 290 179 101 803 1 252 1 1 57 146 92 46 1

Class C US$ Distributing (A) 6,993 1,122 1,051 575 3,718 6,489 5,765 1 229 6,029 28,861 92 1,546 1

Premier Class US$ Accumulating 8,825 – – – – – – – – – – 93 – 25,495


Premier Class Euro Accumulating – – – – – – – – – – – 92 – 1

LM Class US$ Distributing – – – – – – – – – – – – – 1,192

Class A (G) US$ Accumulating – 11,353 53,050 19,065 70,795 – 8,100 – – 6,426 – – 4,434 –

Class B (G) US$ Accumulating – 6,111 55,162 12,212 33,029 – 2,936 – – 7,821 – – 16,918 –

Class L (G) US$ Accumulating – 8,144 27,432 13,693 26,173 – 3,356 – – 2,773 – – 7,945 –


Class A US$ Accumulating 29 31 306 39 165 128 39 10 798 9 1,006 1 8 151

Class A US$ Distributing (A) 436 5 5 4 339 226 175 – 1 69 1,511 90 8 –

Class A Euro Accumulating – 9 – – – 8 – – – – 17 1 – –

Class A Euro Distributing (A) – – – – – – – – – 13 – 1 – –

Class A GBP Distributing (A) – – – – – – – – – – – – – 229

Class B US$ Accumulating – 2 2 – 1 – 1 – – 1 3 1 1 –

Class B US$ Distributing (A) 26 9 8 6 12 10 27 – 3 29 53 1 14 –

Class C US$ Accumulating 12 3 2 1 9 – 2 – – 1 2 1 1 –

Class C US$ Distributing (A) 75 12 13 6 43 27 36 – 2 46 162 1 19 –

Premier Class US$ Accumulating 93 – – – – – – – – – – 1 – 320


Premier Class Euro Accumulating – – – – – – – – – – – 1 – –

LM Class US$ Distributing – – – – – – – – – – – – – 15

Class A (G) US$ Accumulating – 118 631 208 801 – 81 – – 116 – – 54 –

Class B (G) US$ Accumulating – 64 661 134 376 – 30 – – 143 – – 209 –

Class L (G) US$ Accumulating – 85 329 151 298 – 34 – – 51 – – 98 –


Class A US$ Accumulating (USD) 77.38 95.94 83.71 91.20 88.00 80.95 96.80 86.91 82.07 81.55 92.55 92.38 81.41 80.66

Class A US$ Distributing (A) (USD) 96.76 96.02 83.75 91.23 88.04 246.57 164.66 86.87 93.53 195.39 182.58 92.38 81.32 90.86

Class A Euro Accumulating (EUR) 72.27 98.06 – 100.69 – 72.96 – 86.74 – – 63.57 99.17 – 97.15

Class A Euro Distributing (A) (EUR) – – – – – – – 86.69 – 134.20 – 99.23 – –

Class A GBP Distributing (A) (GBP) – – – – – – – – – – – – – 87.16

Class B US$ Accumulating (USD) 75.78 93.04 88.76 89.24 91.17 90.00 100.99 86.64 82.75 80.72 68.16 92.30 79.02 90.75

Class B US$ Distributing (A) (USD) 94.54 95.30 83.15 90.60 87.44 241.34 161.14 86.64 92.67 192.93 178.94 92.30 80.75 90.75

Class C US$ Accumulating (USD) 66.05 93.05 88.77 89.26 91.21 90.04 100.96 86.70 82.90 81.63 68.14 92.30 79.03 90.75

Class C US$ Distributing (A) (USD) 93.77 95.29 83.16 90.59 87.43 239.52 160.29 86.64 92.70 191.36 177.98 92.30 80.77 90.75

Premier Class US$ Accumulating (USD) 94.44 – – – – – – – – – – 92.58 – 79.61

Premier Class US$ Distributing (A) (USD) – – – – – – – – – – – 92.58 – –

Premier Class Euro Accumulating (EUR) – – – – – – – – – – – 99.38 – 97.17

LM Class US$ Distributing (USD) – – – – – – – – – – – – – 81.15

Class A (G) US$ Accumulating (USD) – 96.27 84.06 91.55 88.36 – 100.04 – – 81.01 – – 81.69 –

Class B (G) US$ Accumulating (USD) – 95.62 83.48 90.93 87.76 – 99.36 – – 80.42 – – 81.14 –

Class L (G) US$ Accumulating (USD) – 95.62 83.48 90.93 87.76 – 99.31 – – 80.47 – – 81.14 –







139





WesternAsset U.S. CorePlus BondFund*††(in 000’s)






Western AssetGlobal HighYield BondFund*(in 000’s)

WesternAsset U.S. Short-TermGovernmentIncome Fund*(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund*(in 000’s)

Western AssetInflationManagementFund*(in 000’s)



Legg MasonGrowth Fund(in 000’s)

February 29, 2008


Class A US$ Accumulating $ 17,722 $ 1,342 $ 10 – $ 585 $ 9,541 $ 28 $ 22,932 $ 141,520 $ 1,285 $ 11,821 $ 69 $ 10,825 $ 7,477 $ 2,243

Class A US$ Distributing (A) – – – – – – – – – – – 152 – 821,405 87,446

Class A US$ Distributing (D) 4,742,695 43,978 746 E 4,218 20,645 117,276 18,123 8,627 232 31 1 – – – –


Class A US$ Distributing (S) – – – – – – – – – – – – 519,924 – –

Class A Euro Accumulating – – – – – – – – – – – – – 2,672 3

Class A Euro Accumulating (Hedged) – – – – – 1,001 – – – – – – 9,601 – –


Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – 9,359 – –

Class A SGD Accumulating – – – – – – – – – – – – – 3,495 –

Class A SGD Accumulating (Hedged) – – – – – – – – – – – – 14,203 – –

Class B US$ Accumulating 61 1 422 – 1 116 1 508 1 103 104 28 866 1 46

Class B US$ Distributing (A) – – – – – – – – – – – 1 – 13,037 3,102

Class B US$ Distributing (D) 4,254 10,019 253 4,436 31,181 38,901 7,370 4,462 68 302 1 – – – –

Class B US$ Distributing (S) – – – – – – – – – – – – 10,974 – –

Class C US$ Accumulating 1 83 1 – 54 325 14 1 1 97 1 1 118 15 2,040

Class C US$ Distributing (A) – – – – – – – – – – – 1 – 30,927 8,451

Class C US$ Distributing (D) 3,659 7,709 9,526 4,677 16,163 251,708 6,086 12,067 1,257 123 287 – – – –

Class C US$ Distributing (S) – – – – – – – – – – – – 27,577 – –







Class L (G) US$ Accumulating – – 3,506 – 812 – 1,150 2,318 1,709 1,673 2,241 832 – – –

Class L (G) US$ Distributing (A) – – – – – – – – – – – 1,860 – – –


Galleon Class – – – – – – – – – – – – – 18,855 –







140


















February 29, 2008


Class A US$ Accumulating $ 17,722 $ 1,342 $ 10 – $ 585 $ 9,541 $ 28 $ 22,932 $ 141,520 $ 1,285 $ 11,821 $ 69 $ 10,825 $ 7,477 $ 2,243

Class A US$ Distributing (A) – – – – – – – – – – – 152 – 821,405 87,446

Class A US$ Distributing (D) 4,742,695 43,978 746 E 4,218 20,645 117,276 18,123 8,627 232 31 1 – – – –



Class A Euro Accumulating – – – – – – – – – – – – – 2,672 3

Class A Euro Accumulating (Hedged) – – – – – 1,001 – – – – – – 9,601 – –


Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – 9,359 – –



Class B US$ Accumulating 61 1 422 – 1 116 1 508 1 103 104 28 866 1 46

Class B US$ Distributing (A) – – – – – – – – – – – 1 – 13,037 3,102

Class B US$ Distributing (D) 4,254 10,019 253 4,436 31,181 38,901 7,370 4,462 68 302 1 – – – –

Class B US$ Distributing (S) – – – – – – – – – – – – 10,974 – –

Class C US$ Accumulating 1 83 1 – 54 325 14 1 1 97 1 1 118 15 2,040

Class C US$ Distributing (A) – – – – – – – – – – – 1 – 30,927 8,451

Class C US$ Distributing (D) 3,659 7,709 9,526 4,677 16,163 251,708 6,086 12,067 1,257 123 287 – – – –

Class C US$ Distributing (S) – – – – – – – – – – – – 27,577 – –







Class L (G) US$ Accumulating – – 3,506 – 812 – 1,150 2,318 1,709 1,673 2,241 832 – – –

Class L (G) US$ Distributing (A) – – – – – – – – – – – 1,860 – – –


Galleon Class – – – – – – – – – – – – – 18,855 –







141


















February 29, 2008


Class A US$ Accumulating 171 13 – – 6 92 – 224 1,505 12 119 1 99 97 24

Class A US$ Distributing (A) – – – – – – – – – – – 1 – 5,601 763

Class A US$ Distributing (D) 4,742,721 447 7 45 224 976 204 79 3 – – – – – –



Class A Euro Accumulating – – – – – – – – – – – – – 26 –

Class A Euro Accumulating (Hedged) – – – – – 7 – – – – – – 64 – –


Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – 48 – –



Class B US$ Accumulating 1 – 4 – – 1 – 5 – 1 1 – 8 – 1

Class B US$ Distributing (A) – – – – – – – – – – – – – 91 28


Class B US$ Distributing (S) – – – – – – – – – – – – 93 – –

Class C US$ Accumulating – 1 – – 1 3 – – – 1 – – 1 – 23

Class C US$ Distributing (A) – – – – – – – – – – – – – 217 76


Class C US$ Distributing (S) – – – – – – – – – – – – 234 – –










Galleon Class – – – – – – – – – – – – – 176 –







142


















February 29, 2008


Class A US$ Accumulating 171 13 – – 6 92 – 224 1,505 12 119 1 99 97 24

Class A US$ Distributing (A) – – – – – – – – – – – 1 – 5,601 763

Class A US$ Distributing (D) 4,742,721 447 7 45 224 976 204 79 3 – – – – – –



Class A Euro Accumulating – – – – – – – – – – – – – 26 –

Class A Euro Accumulating (Hedged) – – – – – 7 – – – – – – 64 – –


Class A GBP Distributing (S) (Hedged) – – – – – – – – – – – – 48 – –



Class B US$ Accumulating 1 – 4 – – 1 – 5 – 1 1 – 8 – 1

Class B US$ Distributing (A) – – – – – – – – – – – – – 91 28


Class B US$ Distributing (S) – – – – – – – – – – – – 93 – –

Class C US$ Accumulating – 1 – – 1 3 – – – 1 – – 1 – 23

Class C US$ Distributing (A) – – – – – – – – – – – – – 217 76


Class C US$ Distributing (S) – – – – – – – – – – – – 234 – –










Galleon Class – – – – – – – – – – – – – 176 –







143





WesternAsset U.S. CorePlus BondFund*††






Western AssetGlobal HighYield BondFund*

WesternAsset U.S. Short-TermGovernmentIncome Fund*

WesternAsset U.S.Adjustable RateIncome Fund*

Western AssetInflationManagementFund*



Legg MasonGrowth Fund

February 29, 2008



Class A US$ Distributing (A) (USD) – – – – – – – – – – – 110.77 – 146.65 114.57

Class A US$ Distributing (D) (USD) 1.00 98.28 100.04 141.42 92.85 120.21 88.75 109.56 88.57 100.55 95.43 – – – –


Class A US$ Distributing (S) (USD) – – – – – – – – – – – – 118.26 – –

Class A Euro Accumulating (EUR) – – – – – – – – – – – – – 66.49 83.04


(EUR) – – – – – 101.25 – – – – – – 98.97 – –



(GBP) – – – – – – – – – – – – 98.71 – –

Class A SGD Accumulating (SGD) – – – – – – – – – – – – – 0.67 –


(SGD) – – – – – – – – – – – – 0.99 – –


Class B US$ Distributing (A) (USD) – – – – – – – – – – – 110.49 – 143.77 112.21

Class B US$ Distributing (D) (USD) 1.00 98.29 99.90 139.61 92.84 120.23 88.77 109.53 88.45 100.58 95.56 – – – –

Class B US$ Distributing (S) (USD) – – – – – – – – – – – – 117.92 – –


Class C US$ Distributing (A) (USD) – – – – – – – – – – – 110.30 – 142.65 111.30

Class C US$ Distributing (D) (USD) 1.00 98.32 100.74 139.06 92.84 120.22 88.79 109.50 88.19 100.55 95.51 – – – –

Class C US$ Distributing (S) (USD) – – – – – – – – – – – – 117.75 – –







Class L (G) US$ Accumulating (USD) – – 104.57 – 98.32 – 93.57 102.45 93.72 104.06 98.61 110.66 – – –



Galleon Class (USD) – – – – – – – – – – – – – 107.07 –







144





WesternAsset U.S. CorePlus BondFund*††






Western AssetGlobal HighYield BondFund*

WesternAsset U.S. Short-TermGovernmentIncome Fund*

WesternAsset U.S.Adjustable RateIncome Fund*

Western AssetInflationManagementFund*



Legg MasonGrowth Fund

February 29, 2008



Class A US$ Distributing (A) (USD) – – – – – – – – – – – 110.77 – 146.65 114.57

Class A US$ Distributing (D) (USD) 1.00 98.28 100.04 141.42 92.85 120.21 88.75 109.56 88.57 100.55 95.43 – – – –


Class A US$ Distributing (S) (USD) – – – – – – – – – – – – 118.26 – –

Class A Euro Accumulating (EUR) – – – – – – – – – – – – – 66.49 83.04


(EUR) – – – – – 101.25 – – – – – – 98.97 – –



(GBP) – – – – – – – – – – – – 98.71 – –

Class A SGD Accumulating (SGD) – – – – – – – – – – – – – 0.67 –


(SGD) – – – – – – – – – – – – 0.99 – –


Class B US$ Distributing (A) (USD) – – – – – – – – – – – 110.49 – 143.77 112.21

Class B US$ Distributing (D) (USD) 1.00 98.29 99.90 139.61 92.84 120.23 88.77 109.53 88.45 100.58 95.56 – – – –

Class B US$ Distributing (S) (USD) – – – – – – – – – – – – 117.92 – –


Class C US$ Distributing (A) (USD) – – – – – – – – – – – 110.30 – 142.65 111.30

Class C US$ Distributing (D) (USD) 1.00 98.32 100.74 139.06 92.84 120.22 88.79 109.50 88.19 100.55 95.51 – – – –

Class C US$ Distributing (S) (USD) – – – – – – – – – – – – 117.75 – –







Class L (G) US$ Accumulating (USD) – – 104.57 – 98.32 – 93.57 102.45 93.72 104.06 98.61 110.66 – – –



Galleon Class (USD) – – – – – – – – – – – – – 107.07 –







145



Balance Sheet – (continued)ClearBridge U.S.AppreciationFund*

ClearBridge U.S.FundamentalValue Fund*

ClearBridge U.S.Large Cap GrowthFund*

ClearBridge U.S.Aggressive GrowthFund*

Royce U.S. SmallCap OpportunityFund**

Royce SmallerCompaniesFund††

PCM U.S. EquityFund†




BatterymarchInternational LargeCap Fund*

February 29, 2008


Class A US$ Accumulating $ 1,452 $ 29,456 $ 4,444 $ 14,195 $ 1,443 $ 1,758 $ 940 $ 73,117 E 963 $ 97,162 $ 717

Class A US$ Distributing (A) 48 238 667 33,665 79,128 27,090 1 1,063 11,906 221,168 819

Class A Euro Accumulating – – – – 1,400 – 1 – – 155 –

Class A Euro Distributing (A) – – – – – – 1 – 1,875 – –

Class B US$ Accumulating 1 1 1 6 1 59 1 1 94 313 113

Class B US$ Distributing (A) 603 541 439 963 2,426 4,088 1 255 5,685 14,363 1,099

Class C US$ Accumulating 1 68 85 95 1 1 1 1 61 88 7

Class C US$ Distributing (A) 844 1,153 609 3,346 8,381 6,784 1 405 8,092 42,638 2,665

Class A (G) US$ Accumulating 14,790 76,536 33,910 86,156 – 7,651 – – 8,094 – 5,231

Class B (G) US$ Accumulating 8,045 72,822 16,189 42,506 – 3,268 – – 13,224 – 25,562

Class L (G) US$ Accumulating 8,982 32,507 15,844 29,890 – 3,230 – – 3,022 – 9,645


Class A US$ Accumulating 15 332 48 158 19 19 10 808 16 834 8

Class A US$ Distributing (A) – 3 7 374 335 171 – 10 82 962 9

Class A Euro Accumulating – – – – 14 – – – – 1 –

Class A Euro Distributing (A) – – – – – – – – 13 – –

Class B US$ Accumulating – – – – – 1 – – 2 4 1

Class B US$ Distributing (A) 6 6 5 11 10 26 – 2 40 64 12

Class C US$ Accumulating – 1 1 1 – – – – 1 1 –

Class C US$ Distributing (A) 9 13 7 37 36 44 – 4 57 190 29

Class A (G) US$ Accumulating 150 860 366 954 – 80 – – 136 – 57

Class B (G) US$ Accumulating 82 822 176 473 – 34 – – 224 – 277

Class L (G) US$ Accumulating 92 367 172 332 – 34 – – 51 – 105


Class A US$ Accumulating (USD) 98.26 88.78 92.41 90.08 77.42 93.09 138.69 90.49 91.11 116.53 92.37

Class A US$ Distributing (A) (USD) 98.34 88.81 92.44 90.12 236.02 158.41 94.72 103.25 220.81 229.91 92.39

Class A Euro Accumulating (EUR) – – – – 67.45 – 138.69 – – 77.87 –

Class A Euro Distributing (A) (EUR) – – – – – – 94.71 – 146.53 – –

Class B US$ Accumulating (USD) 95.51 94.35 90.64 93.55 86.31 97.36 94.65 91.47 90.06 86.04 89.88

Class B US$ Distributing (A) (USD) 97.84 88.41 92.03 89.73 231.58 155.42 94.65 102.45 217.41 225.91 91.98

Class C US$ Accumulating (USD) 95.52 94.38 90.67 93.58 86.29 97.34 94.66 91.46 91.16 86.02 89.88

Class C US$ Distributing (A) (USD) 97.83 88.41 92.02 89.72 229.84 154.60 94.65 102.49 215.41 224.70 91.98

Class A (G) US$ Accumulating (USD) 98.46 89.01 92.64 90.32 – 95.95 – – 90.22 – 92.56

Class B (G) US$ Accumulating (USD) 98.03 88.63 92.24 89.93 – 95.54 – – 89.72 – 92.16

Class L (G) US$ Accumulating (USD) 98.04 88.63 92.24 89.93 – 95.49 – – 89.73 – 92.16







146



Balance Sheet – (continued)ClearBridge U.S.AppreciationFund*

ClearBridge U.S.FundamentalValue Fund*

ClearBridge U.S.Large Cap GrowthFund*

ClearBridge U.S.Aggressive GrowthFund*

Royce U.S. SmallCap OpportunityFund**

Royce SmallerCompaniesFund††

PCM U.S. EquityFund†




BatterymarchInternational LargeCap Fund*

February 29, 2008


Class A US$ Accumulating $ 1,452 $ 29,456 $ 4,444 $ 14,195 $ 1,443 $ 1,758 $ 940 $ 73,117 E 963 $ 97,162 $ 717

Class A US$ Distributing (A) 48 238 667 33,665 79,128 27,090 1 1,063 11,906 221,168 819

Class A Euro Accumulating – – – – 1,400 – 1 – – 155 –

Class A Euro Distributing (A) – – – – – – 1 – 1,875 – –

Class B US$ Accumulating 1 1 1 6 1 59 1 1 94 313 113

Class B US$ Distributing (A) 603 541 439 963 2,426 4,088 1 255 5,685 14,363 1,099

Class C US$ Accumulating 1 68 85 95 1 1 1 1 61 88 7

Class C US$ Distributing (A) 844 1,153 609 3,346 8,381 6,784 1 405 8,092 42,638 2,665

Class A (G) US$ Accumulating 14,790 76,536 33,910 86,156 – 7,651 – – 8,094 – 5,231

Class B (G) US$ Accumulating 8,045 72,822 16,189 42,506 – 3,268 – – 13,224 – 25,562

Class L (G) US$ Accumulating 8,982 32,507 15,844 29,890 – 3,230 – – 3,022 – 9,645


Class A US$ Accumulating 15 332 48 158 19 19 10 808 16 834 8

Class A US$ Distributing (A) – 3 7 374 335 171 – 10 82 962 9

Class A Euro Accumulating – – – – 14 – – – – 1 –

Class A Euro Distributing (A) – – – – – – – – 13 – –

Class B US$ Accumulating – – – – – 1 – – 2 4 1

Class B US$ Distributing (A) 6 6 5 11 10 26 – 2 40 64 12

Class C US$ Accumulating – 1 1 1 – – – – 1 1 –

Class C US$ Distributing (A) 9 13 7 37 36 44 – 4 57 190 29

Class A (G) US$ Accumulating 150 860 366 954 – 80 – – 136 – 57

Class B (G) US$ Accumulating 82 822 176 473 – 34 – – 224 – 277

Class L (G) US$ Accumulating 92 367 172 332 – 34 – – 51 – 105


Class A US$ Accumulating (USD) 98.26 88.78 92.41 90.08 77.42 93.09 138.69 90.49 91.11 116.53 92.37

Class A US$ Distributing (A) (USD) 98.34 88.81 92.44 90.12 236.02 158.41 94.72 103.25 220.81 229.91 92.39

Class A Euro Accumulating (EUR) – – – – 67.45 – 138.69 – – 77.87 –

Class A Euro Distributing (A) (EUR) – – – – – – 94.71 – 146.53 – –

Class B US$ Accumulating (USD) 95.51 94.35 90.64 93.55 86.31 97.36 94.65 91.47 90.06 86.04 89.88

Class B US$ Distributing (A) (USD) 97.84 88.41 92.03 89.73 231.58 155.42 94.65 102.45 217.41 225.91 91.98

Class C US$ Accumulating (USD) 95.52 94.38 90.67 93.58 86.29 97.34 94.66 91.46 91.16 86.02 89.88

Class C US$ Distributing (A) (USD) 97.83 88.41 92.02 89.72 229.84 154.60 94.65 102.49 215.41 224.70 91.98

Class A (G) US$ Accumulating (USD) 98.46 89.01 92.64 90.32 – 95.95 – – 90.22 – 92.56

Class B (G) US$ Accumulating (USD) 98.03 88.63 92.24 89.93 – 95.54 – – 89.72 – 92.16

Class L (G) US$ Accumulating (USD) 98.04 88.63 92.24 89.93 – 95.49 – – 89.73 – 92.16







147



Profit and Loss AccountWesternAsset U.S. MoneyMarket Fund forthe six monthsendedAugust 31, 2008(in 000’s)

WesternAsset U.S. CoreBond Fund for thesix months endedAugust 31, 2008(in 000’s)

Western Asset U.S.Core Plus BondFund for the sixmonths endedAugust 31, 2008††(in 000’s)

Western AssetEuro Core PlusBond Fund for thesix months endedAugust 31, 2008††(in 000’s)

Western AssetDiversifiedStrategic IncomeBond Fund for thesix months endedAugust 31, 2008(in 000’s)

Western AssetGlobal MultiStrategy Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Western Asset U.S.High Yield BondFund for the sixmonths endedAugust 31, 2008(in 000’s)

Western AssetEmerging MarketsBond Fund for thesix months endedAugust 31, 2008(in 000’s)

Western AssetGlobal High YieldBond Fund for thesix months endedAugust 31, 2008(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Western AssetInflationManagementFund for the sixmonths endedAugust 31, 2008(in 000’s)

Western AssetAsianOpportunitiesFund for theperiod endedAugust 31, 2008*(in 000’s)

Brandywine GlobalOpportunitiesBond Fund for thesix months endedAugust 31, 2008(in 000’s)

INVESTMENT INCOME:

Gross Dividend Income and Bond Interest

(Note 1) $ 74,009 $ 1,479 $ 1,085 E 355 $ 3,591 $ 17,662 $ 3,844 $ 4,936 $ 9,874 $ 1,530 $ 1,375 $ 332 $ 391 $ 15,230

Interest (Note 1) – 3 7 9 5 28 3 4 5 6 4 1 52 273

Equalisation (Note 1) – – – – – – – – – – – 35 – 445

Other Income 5 15 21 – 41 46 77 1 246 – – – – –

Net gain/(loss) on financial assets and liabilities at

fair value through profit or loss (Note 12) 93 (5,560) (2,813) (673) (5,398) (33,100) (3,526) (4,034) (8,002) (1,007) (6,806) (468) (192) (26,250)

Total Investment Income/(Loss) 74,107 (4,063) (1,700) (309) (1,761) (15,364) 398 907 2,123 529 (5,427) (100) 251 (10,302)

EXPENSES:

Investment Management fees (Note 4) 12,269 111 129 35 329 1,295 252 551 751 147 193 22 – 1,732

Distribution fees (Note 4) 2,483 150 184 52 403 1,686 295 438 602 243 253 32 1 1,516

Administrator and Custodian fees (Note 4) 2,453 25 20 7 51 222 39 66 100 27 32 4 7 288

Shareholder Service fees (Note 4) – 37 8 11 46 306 23 34 83 1 8 – – 433

Legal fees 94 1 1 – 2 8 2 3 4 1 1 – – 11

Audit fees 19 16 22 9 26 24 22 23 21 22 23 21 10 19

Printing fees 608 7 5 2 14 55 10 17 27 7 9 1 2 71

Dividend expense – – – – – – – – – – – – – –

Interest expense – 82 – 7 27 125 6 6 – – – – 223 –

Directors fees and expenses (Note 4) 14 – – – 1 3 – 1 1 – – – – 3

Other expenses 905 30 14 7 123 116 33 29 45 20 19 2 2 123

Total Expenses 18,845 459 383 130 1,022 3,840 682 1,168 1,634 468 538 82 245 4,196

Expense waivers and reimbursements/

recoupment (Note 4) (4) – (7) – (2) (3) – (6) (26) (1) (6) (31) – (8)

Total Net Expenses 18,841 459 376 130 1,020 3,837 682 1,162 1,608 467 532 51 245 4,188

Net Profit/(Loss) before finance costs 55,266 (4,522) (2,076) (439) (2,781) (19,201) (284) (255) 515 62 (5,959) (151) 6 (14,490)

FINANCE COSTS:

Distributions to holders of Redeemable

Participating Shares (54,603) (1,026) (507) (231) (2,309) (13,077) (2,797) (1,518) (1,973) (862) (418) (231) – (10,447)

Profit/(Loss) for the financial period 663 (5,548) (2,583) (670) (5,090) (32,278) (3,081) (1,773) (1,458) (800) (6,377) (382) 6 (24,937)

Withholding Taxes on dividends and other

taxation – (6) (2) (3) – (76) (9) (32) (31) – – (2) (1) (164)

Increase/(Decrease) in Net Assets attributable

to Redeemable Participating Shareholders $ 663 $ (5,554) $ (2,585) E (673) $ (5,090) $ (32,354) $ (3,090) $ (1,805) $ (1,489) $ (800) $ (6,377) $ (384) $ 5 $ (25,101)


Gains and losses are solely from continuing operations. There were no other gains or losses other than those dealt with in the Profit and Loss Account.

The Euro figures for the Western Asset Euro Core Bond Fund & Batterymarch European Equity Fund have been converted into U.S. Dollars in the totalfigure for the Legg Mason Global Funds Plc for the period ended August 31, 2008, using the USD/EUR rate of 1.5523.





148



Profit and Loss AccountWesternAsset U.S. MoneyMarket Fund forthe six monthsendedAugust 31, 2008(in 000’s)









Western Asset U.S.Short-TermGovernmentIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)




INVESTMENT INCOME:


(Note 1) $ 74,009 $ 1,479 $ 1,085 E 355 $ 3,591 $ 17,662 $ 3,844 $ 4,936 $ 9,874 $ 1,530 $ 1,375 $ 332 $ 391 $ 15,230

Interest (Note 1) – 3 7 9 5 28 3 4 5 6 4 1 52 273

Equalisation (Note 1) – – – – – – – – – – – 35 – 445

Other Income 5 15 21 – 41 46 77 1 246 – – – – –


fair value through profit or loss (Note 12) 93 (5,560) (2,813) (673) (5,398) (33,100) (3,526) (4,034) (8,002) (1,007) (6,806) (468) (192) (26,250)

Total Investment Income/(Loss) 74,107 (4,063) (1,700) (309) (1,761) (15,364) 398 907 2,123 529 (5,427) (100) 251 (10,302)

EXPENSES:

Investment Management fees (Note 4) 12,269 111 129 35 329 1,295 252 551 751 147 193 22 – 1,732

Distribution fees (Note 4) 2,483 150 184 52 403 1,686 295 438 602 243 253 32 1 1,516

Administrator and Custodian fees (Note 4) 2,453 25 20 7 51 222 39 66 100 27 32 4 7 288

Shareholder Service fees (Note 4) – 37 8 11 46 306 23 34 83 1 8 – – 433

Legal fees 94 1 1 – 2 8 2 3 4 1 1 – – 11

Audit fees 19 16 22 9 26 24 22 23 21 22 23 21 10 19

Printing fees 608 7 5 2 14 55 10 17 27 7 9 1 2 71

Dividend expense – – – – – – – – – – – – – –

Interest expense – 82 – 7 27 125 6 6 – – – – 223 –

Directors fees and expenses (Note 4) 14 – – – 1 3 – 1 1 – – – – 3

Other expenses 905 30 14 7 123 116 33 29 45 20 19 2 2 123

Total Expenses 18,845 459 383 130 1,022 3,840 682 1,168 1,634 468 538 82 245 4,196


recoupment (Note 4) (4) – (7) – (2) (3) – (6) (26) (1) (6) (31) – (8)

Total Net Expenses 18,841 459 376 130 1,020 3,837 682 1,162 1,608 467 532 51 245 4,188

Net Profit/(Loss) before finance costs 55,266 (4,522) (2,076) (439) (2,781) (19,201) (284) (255) 515 62 (5,959) (151) 6 (14,490)

FINANCE COSTS:


Participating Shares (54,603) (1,026) (507) (231) (2,309) (13,077) (2,797) (1,518) (1,973) (862) (418) (231) – (10,447)

Profit/(Loss) for the financial period 663 (5,548) (2,583) (670) (5,090) (32,278) (3,081) (1,773) (1,458) (800) (6,377) (382) 6 (24,937)


taxation – (6) (2) (3) – (76) (9) (32) (31) – – (2) (1) (164)


to Redeemable Participating Shareholders $ 663 $ (5,554) $ (2,585) E (673) $ (5,090) $ (32,354) $ (3,090) $ (1,805) $ (1,489) $ (800) $ (6,377) $ (384) $ 5 $ (25,101)








149



Profit and Loss Account – (continued)Legg MasonValue Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Legg MasonGrowth Fund forthe six monthsendedAugust 31, 2008(in 000’s)

ClearBridge U.S.AppreciationFund for the sixmonths endedAugust 31, 2008(in 000’s)

ClearBridge U.S.FundamentalValue Fund for thesix months endedAugust 31, 2008(in 000’s)

ClearBridge U.S.Large Cap GrowthFund for the sixmonths endedAugust 31, 2008(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund forthe six monthsendedAugust 31, 2008(in 000’s)

Royce U.S. SmallCap OpportunityFund for the sixmonths endedAugust 31, 2008(in 000’s)

Royce SmallerCompaniesFund for the sixmonths endedAugust 31, 2008††(in 000’s)

PCM U.S. EquityFund for the sixmonths endedAugust 31, 2008(in 000’s)

GC Global EquityFund for the sixmonths endedAugust 31, 2008††(in 000’s)

BatterymarchEuropean EquityFund for the sixmonths endedAugust 31, 2008(in 000’s)

BatterymarchPacific EquityFund for the sixmonths endedAugust 31, 2008(in 000’s)

Batterymarch 130/30 Global EquityFund for theperiod endedAugust 31, 2008 **(in 000’s)

BatterymarchInternational LargeCap Fund for thesix months endedAugust 31, 2008(in 000’s)

INVESTMENT INCOME:


(Note 1) $ 5,219 $ 538 $ 319 $ 2,341 $ 268 $ 771 $ 424 $ 236 $ 7 $ 1,198 E 1,284 $ 8,370 $ 36 $ 1,096

Interest (Note 1) 85 8 19 27 3 5 55 25 1 10 3 139 4 3

Equalisation (Note 1) – – – – – – – – – (4) (36) 27 – (10)

Other Income – – – – – – – – – 46 39 – – 23


fair value through profit or loss (Note 12) (125,086) (13,168) (797) (10,247) (598) (3,564) 3,317 2,384 (75) (7,156) (4,012) (110,579) (744) (5,230)

Total Investment Income/(Loss) (119,782) (12,622) (459) (7,879) (327) (2,788) 3,796 2,645 (67) (5,906) (2,722) (102,043) (704) (4,118)

EXPENSES:

Investment Management fees (Note 4) 2,972 300 130 699 213 774 423 263 5 302 195 2,215 21 185

Distribution fees (Note 4) 1,799 236 132 709 219 661 237 183 2 179 178 1,232 8 190

Administrator and Custodian fees (Note 4) 349 43 17 93 28 97 42 28 – 36 23 222 2 21

Shareholder Service fees (Note 4) 1,194 144 9 53 10 89 148 73 2 124 45 775 6 9

Legal fees 16 2 1 4 1 4 2 1 – 1 1 8 – 1

Audit fees 22 14 15 15 15 15 14 16 16 13 9 15 8 15

Printing fees 104 11 4 25 8 25 12 7 – 9 7 53 – 6

Dividend expense – – – – – – – – – – – – 9 –

Interest expense – – – – – – – – – 2 5 – – –

Directors fees and expenses (Note 4) 4 1 – 1 – 1 1 – – – – 3 – –

Other expenses 228 22 10 65 14 61 59 19 – 55 21 73 2 10

Total Expenses 6,688 773 318 1,664 508 1,727 938 590 25 721 484 4,596 56 437


recoupment (Note 4) (2) (1) (3) (10) (2) (15) (8) (2) (16) (61) (1) (11) – (3)

Total Net Expenses 6,686 772 315 1,654 506 1,712 930 588 9 660 483 4,585 56 434

Net Profit/(Loss) before finance costs (126,468) (13,394) (774) (9,533) (833) (4,500) 2,866 2,057 (76) (6,566) (3,205) (106,628) (760) (4,552)

FINANCE COSTS:


Participating Shares – – – – – – – – – – (253) – – (6)

Profit/(Loss) for the financial period (126,468) (13,394) (774) (9,533) (833) (4,500) 2,866 2,057 (76) (6,566) (3,458) (106,628) (760) (4,558)


taxation (1,566) (157) (92) (634) (81) (181) (76) (57) (2) (219) (206) (799) (3) (145)


to Redeemable Participating Shareholders $ (128,034) $ (13,551) $ (866) $ (10,167) $ (914) $ (4,681) $ 2,790 $ 2,000 $ (78) $ (6,785) E (3,664) $ (107,427) $ (763) $ (4,703)








150



Profit and Loss Account – (continued)Legg MasonValue Fund forthe six monthsendedAugust 31, 2008(in 000’s)


ClearBridge U.S.AppreciationFund for the sixmonths endedAugust 31, 2008(in 000’s)










Batterymarch 130/30 Global EquityFund for theperiod endedAugust 31, 2008 **(in 000’s)

BatterymarchInternational LargeCap Fund for thesix months endedAugust 31, 2008(in 000’s)

INVESTMENT INCOME:


(Note 1) $ 5,219 $ 538 $ 319 $ 2,341 $ 268 $ 771 $ 424 $ 236 $ 7 $ 1,198 E 1,284 $ 8,370 $ 36 $ 1,096

Interest (Note 1) 85 8 19 27 3 5 55 25 1 10 3 139 4 3

Equalisation (Note 1) – – – – – – – – – (4) (36) 27 – (10)

Other Income – – – – – – – – – 46 39 – – 23


fair value through profit or loss (Note 12) (125,086) (13,168) (797) (10,247) (598) (3,564) 3,317 2,384 (75) (7,156) (4,012) (110,579) (744) (5,230)

Total Investment Income/(Loss) (119,782) (12,622) (459) (7,879) (327) (2,788) 3,796 2,645 (67) (5,906) (2,722) (102,043) (704) (4,118)

EXPENSES:

Investment Management fees (Note 4) 2,972 300 130 699 213 774 423 263 5 302 195 2,215 21 185

Distribution fees (Note 4) 1,799 236 132 709 219 661 237 183 2 179 178 1,232 8 190

Administrator and Custodian fees (Note 4) 349 43 17 93 28 97 42 28 – 36 23 222 2 21

Shareholder Service fees (Note 4) 1,194 144 9 53 10 89 148 73 2 124 45 775 6 9

Legal fees 16 2 1 4 1 4 2 1 – 1 1 8 – 1

Audit fees 22 14 15 15 15 15 14 16 16 13 9 15 8 15

Printing fees 104 11 4 25 8 25 12 7 – 9 7 53 – 6

Dividend expense – – – – – – – – – – – – 9 –

Interest expense – – – – – – – – – 2 5 – – –

Directors fees and expenses (Note 4) 4 1 – 1 – 1 1 – – – – 3 – –

Other expenses 228 22 10 65 14 61 59 19 – 55 21 73 2 10

Total Expenses 6,688 773 318 1,664 508 1,727 938 590 25 721 484 4,596 56 437


recoupment (Note 4) (2) (1) (3) (10) (2) (15) (8) (2) (16) (61) (1) (11) – (3)

Total Net Expenses 6,686 772 315 1,654 506 1,712 930 588 9 660 483 4,585 56 434

Net Profit/(Loss) before finance costs (126,468) (13,394) (774) (9,533) (833) (4,500) 2,866 2,057 (76) (6,566) (3,205) (106,628) (760) (4,552)

FINANCE COSTS:


Participating Shares – – – – – – – – – – (253) – – (6)

Profit/(Loss) for the financial period (126,468) (13,394) (774) (9,533) (833) (4,500) 2,866 2,057 (76) (6,566) (3,458) (106,628) (760) (4,558)


taxation (1,566) (157) (92) (634) (81) (181) (76) (57) (2) (219) (206) (799) (3) (145)


to Redeemable Participating Shareholders $ (128,034) $ (13,551) $ (866) $ (10,167) $ (914) $ (4,681) $ 2,790 $ 2,000 $ (78) $ (6,785) E (3,664) $ (107,427) $ (763) $ (4,703)








151



152

Profit and Loss Account – (continued)BatterymarchEmergingMarkets EquityFund for theperiod endedAugust 31, 2008†(in 000’s)

Legg MasonGlobal Funds PlcTotals for the sixmonths endedAugust 31, 2008(in 000’s)

INVESTMENT INCOME:


(Note 1) $ 534 $ 159,239

Interest (Note 1) 14 808

Equalisation (Note 1) 5 441

Other Income – 582

Net gain/(loss) on financial assets and liabilities

at fair value through profit or loss (Note 12) (14,026) (389,905)

Total Investment Income/(Loss) (13,473) (228,835)

EXPENSES:

Investment Management fees (Note 4) 187 26,826

Distribution fees (Note 4) 80 14,510

Administrator and Custodian fees (Note 4) 20 4,378

Shareholder Service fees (Note 4) 56 3,759

Legal fees 1 172

Audit fees 10 499

Printing fees 4 1,114

Dividend expense – 9

Interest expense – 491

Directors fees and expenses (Note 4) – 36

Other expenses 3 2,122

Total Expenses 361 53,916


recoupment (Note 4) – (229)

Total Net Expenses 361 53,687

Net Profit/(Loss) before finance costs (13,834) (282,522)

FINANCE COSTS:


Participating Shares – (90,527)

Profit/(Loss) for the financial period (13,834) (373,049)


taxation (57) (4,711)


to Redeemable Participating Shareholders $ (13,891) $ (377,760)


Gains and losses are solely from continuing operations. There were no other gains or losses other thanthose dealt with in the Profit and Loss Account.

The Euro figures for the Western Asset Euro Core Bond Fund & Batterymarch European Equity Fund havebeen converted into U.S. Dollars in the total figure for the Legg Mason Global Funds Plc for theperiod ended August 31, 2008, using the USD/EUR rate of 1.5523.








153

Profit and Loss Account – (continued)WesternAsset U.S. MoneyMarket Fund forthe six monthsendedAugust 31, 2007(in 000’s)


Western Asset U.S.Core Plus BondFund for the periodendedAugust 31, 2007††*(in 000’s)






Western AssetGlobal High YieldBond Fund for theperiod endedAugust 31, 2007 *(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund forthe period endedAugust 31, 2007 *(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund forthe period endedAugust 31, 2007 *(in 000’s)

Western AssetInflationManagementFund for theperiod endedAugust 31, 2007 *(in 000’s)


Legg Mason ValueFund for the sixmonths endedAugust 31, 2007(in 000’s)

INVESTMENT INCOME:


(Note 1) $ 73,247 $ 3,030 $ 892 E 340 $ 5,664 $ 14,284 $ 3,999 $ 4,199 $ 7,378 $ 1,662 $ 2,433 $ 369 $ 13,669 $ 10,868

Interest (Note 1) 1 17 6 1 – 15 – 7 22 75 9 2 10 178

Equalisation (Note 1) – – – – – – – – – – – – (10) –

Other Income 16 1 – 8 23 206 217 – 310 – 3 – 48 –


fair value through profit or loss (Note 12) (1) (3,307) (737) (619) (5,101) (8,460) (5,477) (6,712) (15,808) (1,023) (1,970) (248) (109) 23,046

Total Investment Income/(Loss) 73,263 (259) 161 (270) 586 6,045 (1,261) (2,506) (8,098) 714 475 123 13,608 34,092

EXPENSES:

Investment Management fees (Note 4) 6,772 233 93 42 571 1,203 320 498 704 159 252 25 1,741 11,830

Distribution fees (Note 4) 1,398 292 133 63 750 1,665 382 421 602 264 339 36 1,525 7,122

Administrator and Custodian fees (Note 4) 1,313 51 14 8 90 199 48 59 91 28 41 4 288 1,384

Shareholder Service fees (Note 4) – 78 1 13 100 301 34 28 39 – 6 – 435 4,826

Legal fees 70 3 1 – 5 10 3 3 5 2 2 – 15 78

Transfer Agent fees† 32 4 1 2 8 8 3 3 2 1 2 1 9 46

Audit fees 12 8 8 7 13 14 11 12 8 8 8 8 13 17

Printing fees 70 2 – – 4 9 2 3 5 2 2 – 13 66

Interest expense – 67 – – 24 32 – 104 – – – – – –

Directors fees and expenses (Note 4) 7 – – – – 1 – – 1 – – – 2 8

Other expenses 210 37 4 5 45 59 12 25 17 14 19 1 61 364

Total Expenses 9,884 775 255 140 1,610 3,501 815 1,156 1,474 478 671 75 4,102 25,741


recoupment (Note 4) – – – – – – – – – – – (18) – –

Total Net Expenses 9,884 775 255 140 1,610 3,501 815 1,156 1,474 478 671 57 4,102 25,741

Net Profit/(Loss) before finance costs 63,379 (1,034) (94) (410) (1,024) 2,544 (2,076) (3,662) (9,572) 236 (196) 66 9,506 8,351

FINANCE COSTS:


Participating Shares (62,742) (2,270) (415) (205) (3,756) (10,870) (3,010) (1,374) (1,662) (1,042) (898) – (8,667) –

Profit/(Loss) for the financial period 637 (3,304) (509) (615) (4,780) (8,326) (5,086) (5,036) (11,234) (806) (1,094) 66 839 8,351


taxation – – – (3) 19 (23) (2) (25) (6) – – – (361) (2,864)


to Redeemable Participating Shareholders $ 637 $ (3,304) $ (509) E (618) $ (4,761) $ (8,349) $ (5,088) $ (5,061) $ (11,240) $ (806) $ (1,094) $ 66 $ 478 $ 5,487




* From commencement date on April 23, 2007 to August 31, 2007.


† Transfer Agent fees relate to the period from March 1, 2007 to April 22, 2007.


154



Profit and Loss Account – (continued)WesternAsset U.S. MoneyMarket Fund forthe six monthsendedAugust 31, 2007(in 000’s)








Western AssetGlobal High YieldBond Fund for theperiod endedAugust 31, 2007 *(in 000’s)

Western Asset U.S.Short-TermGovernmentIncome Fund forthe period endedAugust 31, 2007 *(in 000’s)

Western Asset U.S.Adjustable RateIncome Fund forthe period endedAugust 31, 2007 *(in 000’s)

Western AssetInflationManagementFund for theperiod endedAugust 31, 2007 *(in 000’s)



INVESTMENT INCOME:


(Note 1) $ 73,247 $ 3,030 $ 892 E 340 $ 5,664 $ 14,284 $ 3,999 $ 4,199 $ 7,378 $ 1,662 $ 2,433 $ 369 $ 13,669 $ 10,868

Interest (Note 1) 1 17 6 1 – 15 – 7 22 75 9 2 10 178

Equalisation (Note 1) – – – – – – – – – – – – (10) –

Other Income 16 1 – 8 23 206 217 – 310 – 3 – 48 –


fair value through profit or loss (Note 12) (1) (3,307) (737) (619) (5,101) (8,460) (5,477) (6,712) (15,808) (1,023) (1,970) (248) (109) 23,046

Total Investment Income/(Loss) 73,263 (259) 161 (270) 586 6,045 (1,261) (2,506) (8,098) 714 475 123 13,608 34,092

EXPENSES:

Investment Management fees (Note 4) 6,772 233 93 42 571 1,203 320 498 704 159 252 25 1,741 11,830

Distribution fees (Note 4) 1,398 292 133 63 750 1,665 382 421 602 264 339 36 1,525 7,122

Administrator and Custodian fees (Note 4) 1,313 51 14 8 90 199 48 59 91 28 41 4 288 1,384

Shareholder Service fees (Note 4) – 78 1 13 100 301 34 28 39 – 6 – 435 4,826

Legal fees 70 3 1 – 5 10 3 3 5 2 2 – 15 78

Transfer Agent fees† 32 4 1 2 8 8 3 3 2 1 2 1 9 46

Audit fees 12 8 8 7 13 14 11 12 8 8 8 8 13 17

Printing fees 70 2 – – 4 9 2 3 5 2 2 – 13 66

Interest expense – 67 – – 24 32 – 104 – – – – – –

Directors fees and expenses (Note 4) 7 – – – – 1 – – 1 – – – 2 8

Other expenses 210 37 4 5 45 59 12 25 17 14 19 1 61 364

Total Expenses 9,884 775 255 140 1,610 3,501 815 1,156 1,474 478 671 75 4,102 25,741


recoupment (Note 4) – – – – – – – – – – – (18) – –

Total Net Expenses 9,884 775 255 140 1,610 3,501 815 1,156 1,474 478 671 57 4,102 25,741

Net Profit/(Loss) before finance costs 63,379 (1,034) (94) (410) (1,024) 2,544 (2,076) (3,662) (9,572) 236 (196) 66 9,506 8,351

FINANCE COSTS:


Participating Shares (62,742) (2,270) (415) (205) (3,756) (10,870) (3,010) (1,374) (1,662) (1,042) (898) – (8,667) –

Profit/(Loss) for the financial period 637 (3,304) (509) (615) (4,780) (8,326) (5,086) (5,036) (11,234) (806) (1,094) 66 839 8,351


taxation – – – (3) 19 (23) (2) (25) (6) – – – (361) (2,864)


to Redeemable Participating Shareholders $ 637 $ (3,304) $ (509) E (618) $ (4,761) $ (8,349) $ (5,088) $ (5,061) $ (11,240) $ (806) $ (1,094) $ 66 $ 478 $ 5,487








155



Profit and Loss Account – (continued)Legg MasonGrowth Fund forthe six monthsendedAugust 31, 2007(in 000’s)

ClearBridge U.S.AppreciationFund for theperiod endedAugust 31, 2007 *(in 000’s)

ClearBridge U.S.FundamentalValue Fund forthe period endedAugust 31, 2007 *(in 000’s)

ClearBridge U.S.Large Cap GrowthFund for theperiod endedAugust 31, 2007 *(in 000’s)

ClearBridge U.S.AggressiveGrowth Fund forthe period endedAugust 31, 2007 *(in 000’s)

Royce U.S. SmallCap OpportunityFund for the sixmonths endedAugust31, 2007**(in 000’s)





BatterymarchInternationalLarge CapFund for theperiod endedAugust 31, 2007 *(in 000’s)


INVESTMENT INCOME:

Gross Dividend Income and Bond Interest (Note 1) $ 289 $ 229 $ 2,481 $ 324 $ 565 $ 2,159 $ 248 $ 26 E 1,807 $ 1,748 $ 799 $ 153,551

Interest (Note 1) 59 27 31 10 69 632 113 2 3 104 16 1,410

Equalisation (Note 1) – – – – – – – 1 – 83 – 74

Other Income 5 – 2 – – – – 1 102 1 43 1,029


fair value through profit or loss (Note 12) 5,470 797 (10,001) 2,271 (5,738) (3,234) 3,219 58 (1,390) 35,648 (691) (904)

Total Investment Income/(Loss) 5,823 1,053 (7,487) 2,605 (5,104) (443) 3,580 88 522 37,584 167 155,160

EXPENSES:

Investment Management fees (Note 4) 256 113 877 266 818 1,254 281 8 316 654 193 29,620

Distribution fees (Note 4) 219 116 872 262 709 671 200 7 283 484 201 19,150

Administrator and Custodian fees (Note 4) 36 15 113 34 99 124 29 1 36 65 21 4,210

Shareholder Service fees (Note 4) 128 2 45 7 17 439 81 4 68 229 2 6,912

Legal fees 2 1 6 2 6 6 2 – 2 3 1 228

Transfer Agent fees† 3 1 3 1 3 6 2 – 2 5 1 149

Audit fees 8 8 8 8 8 8 8 4 5 8 8 237

Printing fees 2 1 6 2 6 5 1 – 2 2 1 209

Interest expense – – – – – – – – – – – 227

Directors fees and expenses (Note 4) – – 1 – 1 1 – – – – – 22

Other expenses 8 2 19 6 16 29 12 6 14 17 6 1,013

Total Expenses 662 259 1,950 588 1,683 2,543 616 30 728 1,467 434 61,977

Expense waivers and reimbursements/recoupment

(Note 4) – – – – – – – (11) – – – (29)

Total Net Expenses 662 259 1,950 588 1,683 2,543 616 19 728 1,467 434 61,948

Net Profit/(Loss) before finance costs 5,161 794 (9,437) 2,017 (6,787) (2,986) 2,964 69 (206) 36,117 (267) 93,212

FINANCE COSTS:


Participating Shares – – – – – – – – – – – (96,992)

Profit/(Loss) for the financial period 5,161 794 (9,437) 2,017 (6,787) (2,986) 2,964 69 (206) 36,117 (267) (3,780)

Withholding Taxes on dividends and other taxation (85) (66) (564) (97) (149) (518) (65) (5) (255) (213) (107) (5,490)


to Redeemable Participating Shareholders $ 5,076 $ 728 $ (10,001) $ 1,920 $ (6,936) $ (3,504) $ 2,899 $ 64 E (461) $ 35,904 $ (374) $ (9,270)








156



Profit and Loss Account – (continued)Legg MasonGrowth Fund forthe six monthsendedAugust 31, 2007(in 000’s)










BatterymarchInternationalLarge CapFund for theperiod endedAugust 31, 2007 *(in 000’s)


INVESTMENT INCOME:

Gross Dividend Income and Bond Interest (Note 1) $ 289 $ 229 $ 2,481 $ 324 $ 565 $ 2,159 $ 248 $ 26 E 1,807 $ 1,748 $ 799 $ 153,551

Interest (Note 1) 59 27 31 10 69 632 113 2 3 104 16 1,410

Equalisation (Note 1) – – – – – – – 1 – 83 – 74

Other Income 5 – 2 – – – – 1 102 1 43 1,029


fair value through profit or loss (Note 12) 5,470 797 (10,001) 2,271 (5,738) (3,234) 3,219 58 (1,390) 35,648 (691) (904)

Total Investment Income/(Loss) 5,823 1,053 (7,487) 2,605 (5,104) (443) 3,580 88 522 37,584 167 155,160

EXPENSES:

Investment Management fees (Note 4) 256 113 877 266 818 1,254 281 8 316 654 193 29,620

Distribution fees (Note 4) 219 116 872 262 709 671 200 7 283 484 201 19,150

Administrator and Custodian fees (Note 4) 36 15 113 34 99 124 29 1 36 65 21 4,210

Shareholder Service fees (Note 4) 128 2 45 7 17 439 81 4 68 229 2 6,912

Legal fees 2 1 6 2 6 6 2 – 2 3 1 228

Transfer Agent fees† 3 1 3 1 3 6 2 – 2 5 1 149

Audit fees 8 8 8 8 8 8 8 4 5 8 8 237

Printing fees 2 1 6 2 6 5 1 – 2 2 1 209

Interest expense – – – – – – – – – – – 227

Directors fees and expenses (Note 4) – – 1 – 1 1 – – – – – 22

Other expenses 8 2 19 6 16 29 12 6 14 17 6 1,013

Total Expenses 662 259 1,950 588 1,683 2,543 616 30 728 1,467 434 61,977

Expense waivers and reimbursements/recoupment

(Note 4) – – – – – – – (11) – – – (29)

Total Net Expenses 662 259 1,950 588 1,683 2,543 616 19 728 1,467 434 61,948

Net Profit/(Loss) before finance costs 5,161 794 (9,437) 2,017 (6,787) (2,986) 2,964 69 (206) 36,117 (267) 93,212

FINANCE COSTS:


Participating Shares – – – – – – – – – – – (96,992)

Profit/(Loss) for the financial period 5,161 794 (9,437) 2,017 (6,787) (2,986) 2,964 69 (206) 36,117 (267) (3,780)

Withholding Taxes on dividends and other taxation (85) (66) (564) (97) (149) (518) (65) (5) (255) (213) (107) (5,490)


to Redeemable Participating Shareholders $ 5,076 $ 728 $ (10,001) $ 1,920 $ (6,936) $ (3,504) $ 2,899 $ 64 E (461) $ 35,904 $ (374) $ (9,270)








157



Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares

WesternAsset U.S. MoneyMarket Fund forthe six monthsendedAugust 31, 2008(in 000’s)






WesternAsset U.S. HighYield Bond Fundfor the six monthsendedAugust 31, 2008(in 000’s)



WesternAsset U.S. Short-Term GovernmentIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)



BrandywineGlobalOpportunitiesBond Fund for thesix months endedAugust 31, 2008(in 000’s)

Net Increase/(Decrease) in Net Assets

Attributable to Holders of Redeemable

Participating Shares $ 663 $ (5,554) $ (2,585) E (673) $ (5,090) $ (32,354) $ (3,090) $ (1,805) $ (1,489) $ (800) $ (6,377) $ (384) $ 5 $ (25,101)

REDEEMABLE PARTICIPATING SHARE

TRANSACTIONS

Net proceeds from sales of shares 11,964,936 3,272 1,781 1,475 5,371 117,952 6,553 3,615 10,767 1,699 833 1,825 36,343 130,777

Net proceeds from reinvested distributions 54,029 510 369 157 1,288 5,625 1,187 619 605 547 310 180 – 7,924

Cost of shares reacquired (11,958,122) (23,351) (9,334) (3,954) (27,709) (65,487) (12,169) (21,105) (79,996) (13,126) (26,790) (3,092) – (153,795)

Increase/(Decrease) in Net Assets from

Redeemable Participating Shares/

transactions 60,843 (19,569) (7,184) (2,322) (21,050) 58,090 (4,429) (16,871) (68,624) (10,880) (25,647) (1,087) 36,343 (15,094)

Increase/(Decrease) in Net Assets Attributable to

Holders of Redeemable Participating Shares 61,506 (25,123) (9,769) (2,995) (26,140) 25,736 (7,519) (18,676) (70,113) (11,680) (32,024) (1,471) 36,348 (40,195)

NET ASSETS ATTRIBUTABLE TO REDEEMABLE

PARTICIPATING SHAREHOLDERS

Beginning of the period 4,793,045 63,132 43,755 15,419 116,195 419,572 81,611 139,995 242,651 59,702 82,484 8,786 – 603,447

Currency translation – – – – – – – – – – – – – –

End of the period $ 4,854,551 $ 38,009 $ 33,986 E 12,424 $ 90,055 $ 445,308 $ 74,092 $ 121,319 $ 172,538 $ 48,022 $ 50,460 $ 7,315 $ 36,348 $ 563,252

Amount (’000$)s designated as "-" are either $0/E0 or less than $1,000/E1,000.

All Euro figures, except for the beginning of the period Net Assets attributable to Holders of Redeemable Participating Shares, for the Western AssetEuro Core Bond Fund & Batterymarch European Equity Fund have been converted into U.S. Dollars in the total figure for the Legg Mason Global FundsPlc as at August 31, 2008, using the Profit and Loss Account USD/EUR FX rate as at August 31, 2008 of 1.5523.

The beginning of period Net Assets Attributable to Holders of Redeemable Participating Shares for the Western Asset Euro Core Bond Fund &Batterymarch European Equity Fund have been converged into U.S. Dollars in the total figure using the Balance Sheet USD/EUR FX rate as atFebruary 29, 2008 of 1.5181.





158



Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares










WesternAsset U.S. Short-Term GovernmentIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund forthe six monthsendedAugust 31, 2008(in 000’s)






Participating Shares $ 663 $ (5,554) $ (2,585) E (673) $ (5,090) $ (32,354) $ (3,090) $ (1,805) $ (1,489) $ (800) $ (6,377) $ (384) $ 5 $ (25,101)


TRANSACTIONS

Net proceeds from sales of shares 11,964,936 3,272 1,781 1,475 5,371 117,952 6,553 3,615 10,767 1,699 833 1,825 36,343 130,777

Net proceeds from reinvested distributions 54,029 510 369 157 1,288 5,625 1,187 619 605 547 310 180 – 7,924

Cost of shares reacquired (11,958,122) (23,351) (9,334) (3,954) (27,709) (65,487) (12,169) (21,105) (79,996) (13,126) (26,790) (3,092) – (153,795)



transactions 60,843 (19,569) (7,184) (2,322) (21,050) 58,090 (4,429) (16,871) (68,624) (10,880) (25,647) (1,087) 36,343 (15,094)


Holders of Redeemable Participating Shares 61,506 (25,123) (9,769) (2,995) (26,140) 25,736 (7,519) (18,676) (70,113) (11,680) (32,024) (1,471) 36,348 (40,195)



Beginning of the period 4,793,045 63,132 43,755 15,419 116,195 419,572 81,611 139,995 242,651 59,702 82,484 8,786 – 603,447


End of the period $ 4,854,551 $ 38,009 $ 33,986 E 12,424 $ 90,055 $ 445,308 $ 74,092 $ 121,319 $ 172,538 $ 48,022 $ 50,460 $ 7,315 $ 36,348 $ 563,252








159



Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares –(continued)

Legg MasonValue Fund forthe six monthsendedAugust 31, 2008(in 000’s)


ClearBridge U.S.Appreciation Fundfor the six monthsendedAugust 31, 2008(in 000’s)





Royce SmallerCompanies Fundfor the six monthsendedAugust 31, 2008††(in 000’s)




BatterymarchPacific Equity Fundfor the six monthsendedAugust 31, 2008(in 000’s)

Batterymarch 130/30 Global EquityFund for theperiod endedAugust 31, 2008**(in 000’s)

BatterymarchInternationalLarge Cap Fundfor the six monthsendedAugust 31, 2008(in 000’s)



Participating Shares $ (128,034) $ (13,551) $ (866) $ (10,167) $ (914) $ (4,681) $ 2,790 $ 2,000 $ (78) $ (6,785) E (3,664) $ (107,427) $ (763) $ (4,703)


TRANSACTIONS

Net proceeds from sales of shares 164,524 17,184 6,573 6,134 2,017 8,424 26,291 11,656 – 184 2,325 189,889 10,000 1,202

Net proceeds from reinvested distributions – – – – – – – – – – 226 – – 4

Cost of shares reacquired (373,109) (43,463) (7,655) (45,477) (23,177) (34,510) (45,849) (10,139) – (2,201) (13,392) (49,148) – (9,001)



transactions (208,585) (26,279) (1,082) (39,343) (21,160) (26,086) (19,558) 1,517 – (2,017) (10,841) 140,741 10,000 (7,795)


Holders of Redeemable Participating Shares (336,619) (39,830) (1,948) (49,510) (22,074) (30,767) (16,768) 3,517 (78) (8,802) (14,505) 33,314 9,237 (12,498)



Beginning of the period 897,884 103,331 34,766 213,322 72,188 210,822 92,780 53,929 947 74,842 53,016 375,887 – 45,858


End of the period $ 561,265 $ 63,501 $ 32,818 $ 163,812 $ 50,114 $ 180,055 $ 76,012 $ 57,446 $ 869 $ 66,040 E 38,511 $ 409,201 $ 9,237 $ 33,360








160




Legg MasonValue Fund forthe six monthsendedAugust 31, 2008(in 000’s)


ClearBridge U.S.Appreciation Fundfor the six monthsendedAugust 31, 2008(in 000’s)





Royce SmallerCompanies Fundfor the six monthsendedAugust 31, 2008††(in 000’s)




BatterymarchPacific Equity Fundfor the six monthsendedAugust 31, 2008(in 000’s)

Batterymarch 130/30 Global EquityFund for theperiod endedAugust 31, 2008**(in 000’s)

BatterymarchInternationalLarge Cap Fundfor the six monthsendedAugust 31, 2008(in 000’s)



Participating Shares $ (128,034) $ (13,551) $ (866) $ (10,167) $ (914) $ (4,681) $ 2,790 $ 2,000 $ (78) $ (6,785) E (3,664) $ (107,427) $ (763) $ (4,703)


TRANSACTIONS

Net proceeds from sales of shares 164,524 17,184 6,573 6,134 2,017 8,424 26,291 11,656 – 184 2,325 189,889 10,000 1,202

Net proceeds from reinvested distributions – – – – – – – – – – 226 – – 4

Cost of shares reacquired (373,109) (43,463) (7,655) (45,477) (23,177) (34,510) (45,849) (10,139) – (2,201) (13,392) (49,148) – (9,001)



transactions (208,585) (26,279) (1,082) (39,343) (21,160) (26,086) (19,558) 1,517 – (2,017) (10,841) 140,741 10,000 (7,795)


Holders of Redeemable Participating Shares (336,619) (39,830) (1,948) (49,510) (22,074) (30,767) (16,768) 3,517 (78) (8,802) (14,505) 33,314 9,237 (12,498)



Beginning of the period 897,884 103,331 34,766 213,322 72,188 210,822 92,780 53,929 947 74,842 53,016 375,887 – 45,858


End of the period $ 561,265 $ 63,501 $ 32,818 $ 163,812 $ 50,114 $ 180,055 $ 76,012 $ 57,446 $ 869 $ 66,040 E 38,511 $ 409,201 $ 9,237 $ 33,360








161



162


BatterymarchEmergingMarkets EquityFund for theperiod endedAugust 31, 2008†(in 000’s)




Participating Shares $ (13,891) $ (377,760)


TRANSACTIONS

Net proceeds from sales of shares 91,219 12,826,913

Net proceeds from reinvested distributions – 73,790

Cost of shares reacquired (2,081) (13,066,805)



transactions 89,138 (166,102)

Increase/(Decrease) in Net Assets Attributable

to Holders of Redeemable Participating Shares 75,247 (543,862)



Beginning of the period – 8,934,822

Currency translation – (2,002)

End of the period $ 75,247 $ 8,388,958


All Euro figures, except for the beginning of the period Net Assets attributable to Holders of RedeemableParticipating Shares, for the Western Asset Euro Core Bond Fund & Batterymarch European Equity Fundhave been converted into U.S. Dollars in the total figure for the Legg Mason Global Funds Plc as atAugust 31, 2008, using the Profit and Loss Account USD/EUR FX rate as at August 31, 2008 of 1.5523.

The beginning of period Net Assets Attributable to Holders of Redeemable Participating Shares forthe Western Asset Euro Core Bond Fund & Batterymarch European Equity Fund have been convergedinto U.S. Dollars in the total figure using the Balance Sheet USD/EUR FX rate as at February 29, 2008 of1.5181.








163










Western AssetGlobal High YieldBond Fund for theperiod endedAugust 31, 2007*(in 000’s)

WesternAsset U.S. Short-Term GovernmentIncome Fund forthe period endedAugust 31, 2007*(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund forthe period endedAugust 31, 2007*(in 000’s)

Western AssetInflationManagementFund for theperiod endedAugust 31, 2007*(in 000’s)





Participating Shares $ 637 $ (3,304) $ (509) E (618) $ (4,761) $ (8,349) $ (5,088) $ (5,061) $ (11,240) $ (806) $ (1,094) $ 66 $ 478 $ 5,487


TRANSACTIONS

Net proceeds from sales of shares 12,527,363 15,024 48,234 1,747 77,372 68,706 86,693 166,305 411,749 88,717 135,306 12,376 102,227 370,048

Net proceeds from reinvested distributions 58,446 1,130 266 149 1,861 4,711 1,387 571 577 725 769 – 6,202 –

Cost of shares reacquired (8,967,311) (59,608) (5,698) (6,981) (38,067) (47,227) (21,518) (46,495) (163,913) (16,051) (29,518) (2,679) (177,767) (1,446,631)


Redeemable Participating Shares

transactions 3,618,498 (43,454) 42,802 (5,085) 41,166 26,190 66,562 120,381 248,413 73,391 106,557 9,697 (69,338) (1,076,583)


Holders of Redeemable Participating Shares 3,619,135 (46,758) 42,293 (5,703) 36,405 17,841 61,474 115,320 237,173 72,585 105,463 9,763 (68,860) (1,071,096)



Beginning of the period 45,369 111,824 – 21,385 138,792 376,057 42,868 26,818 – – – – 580,166 3,190,060


End of the period $ 3,664,504 $ 65,066 $ 42,293 E 15,682 $ 175,197 $ 393,898 $ 104,342 $ 142,138 $ 237,173 $ 72,585 $ 105,463 $ 9,763 $ 511,306 $ 2,118,964



The beginning of period Net Assets Attributable to Holders of Redeemable Participating Shares for the Western Asset Euro Core Bond Fund &Batterymarch European Equity Fund have been converged into U.S. Dollars in the total figure using the Balance Sheet USD/EUR FX rate as atAugust 31, 2007 of 1.3622

* Funds commenced trading April 23, 2007.



164












Western AssetGlobal High YieldBond Fund for theperiod endedAugust 31, 2007*(in 000’s)

WesternAsset U.S. Short-Term GovernmentIncome Fund forthe period endedAugust 31, 2007*(in 000’s)

WesternAsset U.S.Adjustable RateIncome Fund forthe period endedAugust 31, 2007*(in 000’s)

Western AssetInflationManagementFund for theperiod endedAugust 31, 2007*(in 000’s)





Participating Shares $ 637 $ (3,304) $ (509) E (618) $ (4,761) $ (8,349) $ (5,088) $ (5,061) $ (11,240) $ (806) $ (1,094) $ 66 $ 478 $ 5,487


TRANSACTIONS

Net proceeds from sales of shares 12,527,363 15,024 48,234 1,747 77,372 68,706 86,693 166,305 411,749 88,717 135,306 12,376 102,227 370,048

Net proceeds from reinvested distributions 58,446 1,130 266 149 1,861 4,711 1,387 571 577 725 769 – 6,202 –

Cost of shares reacquired (8,967,311) (59,608) (5,698) (6,981) (38,067) (47,227) (21,518) (46,495) (163,913) (16,051) (29,518) (2,679) (177,767) (1,446,631)



transactions 3,618,498 (43,454) 42,802 (5,085) 41,166 26,190 66,562 120,381 248,413 73,391 106,557 9,697 (69,338) (1,076,583)


Holders of Redeemable Participating Shares 3,619,135 (46,758) 42,293 (5,703) 36,405 17,841 61,474 115,320 237,173 72,585 105,463 9,763 (68,860) (1,071,096)



Beginning of the period 45,369 111,824 – 21,385 138,792 376,057 42,868 26,818 – – – – 580,166 3,190,060


End of the period $ 3,664,504 $ 65,066 $ 42,293 E 15,682 $ 175,197 $ 393,898 $ 104,342 $ 142,138 $ 237,173 $ 72,585 $ 105,463 $ 9,763 $ 511,306 $ 2,118,964







165










Royce SmallerCompanies Fund forthe six monthsendedAugust 31, 2007 ††(in 000’s)

GC Global EquityFund for the sixmonths endedAugust 31, 2007 ††(in 000’s)


Batterymarch PacificEquity Fund for thesix months endedAugust 31, 2007(in 000’s)

BatterymarchInternational LargeCap Fund for theperiod endedAugust 31, 2007 *(in 000’s)

Legg Mason GlobalFunds Plc Totals forthe period endedAugust 31, 2007(in 000’s)



Participating Shares $ 5,076 $ 728 $ (10,001) $ 1,920 $ (6,936) $ (3,504) $ 2,899 $ 64 E (461) $ 35,904 $ (374) $ (9,270)


TRANSACTIONS

Net proceeds from sales of shares 39,872 46,101 375,247 108,233 320,446 127,207 32,435 703 64,579 86,965 64,705 15,404,347

Net proceeds from reinvested distributions – – – – – – – – – – – 76,852

Cost of shares reacquired (54,065) (6,119) (70,683) (18,267) (51,882) (51,261) (15,317) (18) (19,899) (25,211) (6,804) (11,359,522)


Redeemable Participating Shares transactions (14,193) 39,982 304,564 89,966 268,564 75,946 17,118 685 44,680 61,754 57,901 4,121,677


Holders of Redeemable Participating Shares (9,117) 40,710 294,563 91,886 261,628 72,442 20,017 749 44,219 97,658 57,527 4,112,407



Beginning of the period 88,069 – – – – 185,098 41,868 1,455 34,867 96,368 – 4,999,251

Currency translation – – – – – – – – – – – 1,048

End of the period $ 78,952 $ 40,710 $ 294,563 $ 91,886 $ 261,628 $ 257,540 $ 61,885 $ 2,204 E 79,086 $ 194,026 $ 57,527 $ 9,112,706







166










Royce SmallerCompanies Fund forthe six monthsendedAugust 31, 2007 ††(in 000’s)

GC Global EquityFund for the sixmonths endedAugust 31, 2007 ††(in 000’s)


Batterymarch PacificEquity Fund for thesix months endedAugust 31, 2007(in 000’s)

BatterymarchInternational LargeCap Fund for theperiod endedAugust 31, 2007 *(in 000’s)

Legg Mason GlobalFunds Plc Totals forthe period endedAugust 31, 2007(in 000’s)



Participating Shares $ 5,076 $ 728 $ (10,001) $ 1,920 $ (6,936) $ (3,504) $ 2,899 $ 64 E (461) $ 35,904 $ (374) $ (9,270)


TRANSACTIONS

Net proceeds from sales of shares 39,872 46,101 375,247 108,233 320,446 127,207 32,435 703 64,579 86,965 64,705 15,404,347

Net proceeds from reinvested distributions – – – – – – – – – – – 76,852

Cost of shares reacquired (54,065) (6,119) (70,683) (18,267) (51,882) (51,261) (15,317) (18) (19,899) (25,211) (6,804) (11,359,522)


Redeemable Participating Shares transactions (14,193) 39,982 304,564 89,966 268,564 75,946 17,118 685 44,680 61,754 57,901 4,121,677


Holders of Redeemable Participating Shares (9,117) 40,710 294,563 91,886 261,628 72,442 20,017 749 44,219 97,658 57,527 4,112,407



Beginning of the period 88,069 – – – – 185,098 41,868 1,455 34,867 96,368 – 4,999,251

Currency translation – – – – – – – – – – – 1,048

End of the period $ 78,952 $ 40,710 $ 294,563 $ 91,886 $ 261,628 $ 257,540 $ 61,885 $ 2,204 E 79,086 $ 194,026 $ 57,527 $ 9,112,706







167




FOR THE PERIOD ENDED AUGUST 31, 2008

Western Asset U.S.Money Market Fund(in 000’s)

Western Asset U.S.Core Bond Fund(in 000’s)

Western Asset U.S.Core Plus Bond Fund(in 000’s)

Western Asset EuroCore Plus Bond Fund(in 000’s)

Western AssetDiversified StrategicIncome Bond Fund(in 000’s)

Western Asset GlobalMulti Strategy Fund(in 000’s)

Western Asset U.S.High Yield Bond Fund(in 000’s)

SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 528 54,980 – – – 15 – – 20 1,962 105 10,693 3 220Redeemed (148) (15,426) (13) (1,271) – (4) – – (2) (198) (60) (6,102) – (1)

Net Increase/(Decrease) 380 39,554 (13) (1,271) – 11 – – 18 1,764 45 4,591 3 219

Class A US$ Distributing (D) SharesSold 11,897,841 11,898,019 32 3,044 2 151 1 121 5 434 182 21,349 37 3,097Reinvestment of distributions 53,820 53,820 4 316 – 8 1 44 3 321 20 2,319 3 286Redeemed (11,925,851) (11,925,851) (199) (18,396) – (44) (12) (1,090) (39) (3,495) (300) (35,366) (26) (2,255)

Net Increase/(Decrease) 25,810 25,988 (163) (15,036) 2 115 (10) (925) (31) (2,740) (98) (11,698) 14 1,128

Class A US$ Distributing (M) SharesSold – – – – – – – – 1 123 22 2,122 – –Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – (2) (252) (6) (555) – –

Net Increase/(Decrease) – – – – – – – – (1) (129) 16 1,567 – –

Class A Euro Accumulating (Hedged) SharesSold – – – – – – – – 6 899 42 6,553 – –Redeemed – – – – – – – – (1) (176) (8) (1,163) – –

Net Increase/(Decrease) – – – – – – – – 5 723 34 5,390 – –

Class A Euro Distributing (D) SharesSold – – – – – – 6 493 – – – – – –Reinvestment of distributions – – – – – – – 34 – – – – – –Redeemed – – – – – – (2) (182) – – – – – –

Net Increase/(Decrease) – – – – – – 4 345 – – – – – –

Class A Euro Distributing (M) (Hedged) SharesSold – – – – – – – – – 2 1 79 – –Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – – – – – 2 1 79 – –

Class A GBP Distributing (M) (Hedged) SharesSold – – – – – – – – – – 7 1,237 – –

Net Increase/(Decrease) – – – – – – – – – – 7 1,237 – –

Class B US$ Accumulating SharesSold 5 589 1 129 2 196 – – 1 79 15 1,499 – 45Redeemed – (14) – (1) – (20) – – – – (9) (850) – (11)

Net Increase/(Decrease) 5 575 1 128 2 176 – – 1 79 6 649 – 34

Class B US$ Distributing (D) SharesSold 2,766 2,785 – – – – 8 657 2 67 28 3,215 5 445Reinvestment of distributions 16 16 1 103 – 5 – 32 3 293 5 611 – 60Redeemed (2,944) (2,944) (24) (2,251) (1) (19) (23) (2,004) (115) (10,360) (39) (4,500) (21) (1,867)

Net Increase/(Decrease) (162) (143) (23) (2,148) (1) (14) (15) (1,315) (110) (10,000) (6) (674) (16) (1,362)

Class C US$ Accumulating SharesSold – – – – 4 376 – – – – 52 5,161 1 50Redeemed – – – – – – – – – – (21) (2,078) – –

Net Increase/(Decrease) – – – – 4 376 – – – – 31 3,083 1 50

168












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 528 54,980 – – – 15 – – 20 1,962 105 10,693 3 220Redeemed (148) (15,426) (13) (1,271) – (4) – – (2) (198) (60) (6,102) – (1)

Net Increase/(Decrease) 380 39,554 (13) (1,271) – 11 – – 18 1,764 45 4,591 3 219

Class A US$ Distributing (D) SharesSold 11,897,841 11,898,019 32 3,044 2 151 1 121 5 434 182 21,349 37 3,097Reinvestment of distributions 53,820 53,820 4 316 – 8 1 44 3 321 20 2,319 3 286Redeemed (11,925,851) (11,925,851) (199) (18,396) – (44) (12) (1,090) (39) (3,495) (300) (35,366) (26) (2,255)

Net Increase/(Decrease) 25,810 25,988 (163) (15,036) 2 115 (10) (925) (31) (2,740) (98) (11,698) 14 1,128

Class A US$ Distributing (M) SharesSold – – – – – – – – 1 123 22 2,122 – –Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – (2) (252) (6) (555) – –

Net Increase/(Decrease) – – – – – – – – (1) (129) 16 1,567 – –

Class A Euro Accumulating (Hedged) SharesSold – – – – – – – – 6 899 42 6,553 – –Redeemed – – – – – – – – (1) (176) (8) (1,163) – –

Net Increase/(Decrease) – – – – – – – – 5 723 34 5,390 – –

Class A Euro Distributing (D) SharesSold – – – – – – 6 493 – – – – – –Reinvestment of distributions – – – – – – – 34 – – – – – –Redeemed – – – – – – (2) (182) – – – – – –


Class A Euro Distributing (M) (Hedged) SharesSold – – – – – – – – – 2 1 79 – –Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – – – – – 2 1 79 – –

Class A GBP Distributing (M) (Hedged) SharesSold – – – – – – – – – – 7 1,237 – –


Class B US$ Accumulating SharesSold 5 589 1 129 2 196 – – 1 79 15 1,499 – 45Redeemed – (14) – (1) – (20) – – – – (9) (850) – (11)

Net Increase/(Decrease) 5 575 1 128 2 176 – – 1 79 6 649 – 34

Class B US$ Distributing (D) SharesSold 2,766 2,785 – – – – 8 657 2 67 28 3,215 5 445Reinvestment of distributions 16 16 1 103 – 5 – 32 3 293 5 611 – 60Redeemed (2,944) (2,944) (24) (2,251) (1) (19) (23) (2,004) (115) (10,360) (39) (4,500) (21) (1,867)

Net Increase/(Decrease) (162) (143) (23) (2,148) (1) (14) (15) (1,315) (110) (10,000) (6) (674) (16) (1,362)

Class C US$ Accumulating SharesSold – – – – 4 376 – – – – 52 5,161 1 50Redeemed – – – – – – – – – – (21) (2,078) – –

Net Increase/(Decrease) – – – – 4 376 – – – – 31 3,083 1 50

169












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class C US$ Distributing (D) SharesSold 602 613 1 99 4 441 2 204 3 174 99 11,459 9 846Reinvestment of distributions 25 25 1 91 1 145 1 47 2 177 23 2,693 2 160Redeemed (1,016) (1,016) (15) (1,432) (25) (2,428) (8) (678) (28) (2,505) (124) (14,383) (4) (372)

Net Increase/(Decrease) (389) (378) (13) (1,242) (20) (1,842) (5) (427) (23) (2,154) (2) (231) 7 634

Premier Class US$ Distributing (D) SharesSold – – – – – – – – – – 23 2,279 – –Reinvestment of distributions – – – – – – – – – – – 2 – –


Premier Class GBP Distributing (M)(Hedged) SharesSold – – – – – – – – – – 264 52,306 – –Redeemed – – – – – – – – – – (3) (490) – –


LM Class US$ Distributing (M) SharesSold – – – – – – – – – – – – 14 1,380

Net Increase/(Decrease) – – – – – – – – – – – – 14 1,380

Class A (G) US$ Accumulating SharesSold 1 71 – – – – – – – – – – – 42Redeemed (7) (716) – – (4) (338) – – (1) (83) – – (6) (612)

Net Increase/(Decrease) (6) (645) – – (4) (338) – – (1) (83) – – (6) (570)

Class A (G) US$ Distributing (D) SharesSold 373 389 – – 3 310 – – 17 1,556 – – 4 381Reinvestment of distributions 44 44 – – – 30 – – 2 197 – – 1 97Redeemed (774) (774) – – (3) (333) – – (9) (810) – – (14) (1,225)

Net Increase/(Decrease) (357) (341) – – – 7 – – 10 943 – – (9) (747)

Class B (G) US$ Accumulating SharesSold 24 2,421 – – 1 142 – – – 35 – – – 1Redeemed (37) (3,848) – – (25) (2,558) – – (37) (3,628) – – (13) (1,236)

Net Increase/(Decrease) (13) (1,427) – – (24) (2,416) – – (37) (3,593) – – (13) (1,235)

Class B (G) US$ Distributing (D) SharesSold 4,573 4,585 – – 2 146 – – – 38 – – 1 43Reinvestment of distributions 89 89 – – 1 111 – – 3 225 – – 3 248Redeemed (7,248) (7,248) – – (21) (2,075) – – (57) (5,259) – – (28) (2,453)

Net Increase/(Decrease) (2,586) (2,574) – – (18) (1,818) – – (54) (4,996) – – (24) (2,162)

Class L (G) US$ Accumulating SharesSold – 32 – – – 1 – – – 1 – – – –Redeemed – – – – (9) (796) – – (1) (117) – – – –

Net Increase/(Decrease) – 32 – – (9) (795) – – (1) (116) – – – –

Class L (G) US$ Distributing (D) SharesSold 440 452 – – – 3 – – – 1 – – – 3Reinvestment of distributions 36 35 – – 1 70 – – 1 75 – – 4 336Redeemed (285) (285) – – (8) (719) – – (10) (826) – – (24) (2,137)

Net Increase/(Decrease) 191 202 – – (7) (646) – – (9) (750) – – (20) (1,798)

170












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class C US$ Distributing (D) SharesSold 602 613 1 99 4 441 2 204 3 174 99 11,459 9 846Reinvestment of distributions 25 25 1 91 1 145 1 47 2 177 23 2,693 2 160Redeemed (1,016) (1,016) (15) (1,432) (25) (2,428) (8) (678) (28) (2,505) (124) (14,383) (4) (372)

Net Increase/(Decrease) (389) (378) (13) (1,242) (20) (1,842) (5) (427) (23) (2,154) (2) (231) 7 634

Premier Class US$ Distributing (D) SharesSold – – – – – – – – – – 23 2,279 – –Reinvestment of distributions – – – – – – – – – – – 2 – –


Premier Class GBP Distributing (M)(Hedged) SharesSold – – – – – – – – – – 264 52,306 – –Redeemed – – – – – – – – – – (3) (490) – –


LM Class US$ Distributing (M) SharesSold – – – – – – – – – – – – 14 1,380

Net Increase/(Decrease) – – – – – – – – – – – – 14 1,380

Class A (G) US$ Accumulating SharesSold 1 71 – – – – – – – – – – – 42Redeemed (7) (716) – – (4) (338) – – (1) (83) – – (6) (612)

Net Increase/(Decrease) (6) (645) – – (4) (338) – – (1) (83) – – (6) (570)

Class A (G) US$ Distributing (D) SharesSold 373 389 – – 3 310 – – 17 1,556 – – 4 381Reinvestment of distributions 44 44 – – – 30 – – 2 197 – – 1 97Redeemed (774) (774) – – (3) (333) – – (9) (810) – – (14) (1,225)

Net Increase/(Decrease) (357) (341) – – – 7 – – 10 943 – – (9) (747)

Class B (G) US$ Accumulating SharesSold 24 2,421 – – 1 142 – – – 35 – – – 1Redeemed (37) (3,848) – – (25) (2,558) – – (37) (3,628) – – (13) (1,236)

Net Increase/(Decrease) (13) (1,427) – – (24) (2,416) – – (37) (3,593) – – (13) (1,235)

Class B (G) US$ Distributing (D) SharesSold 4,573 4,585 – – 2 146 – – – 38 – – 1 43Reinvestment of distributions 89 89 – – 1 111 – – 3 225 – – 3 248Redeemed (7,248) (7,248) – – (21) (2,075) – – (57) (5,259) – – (28) (2,453)

Net Increase/(Decrease) (2,586) (2,574) – – (18) (1,818) – – (54) (4,996) – – (24) (2,162)

Class L (G) US$ Accumulating SharesSold – 32 – – – 1 – – – 1 – – – –Redeemed – – – – (9) (796) – – (1) (117) – – – –

Net Increase/(Decrease) – 32 – – (9) (795) – – (1) (116) – – – –

Class L (G) US$ Distributing (D) SharesSold 440 452 – – – 3 – – – 1 – – – 3Reinvestment of distributions 36 35 – – 1 70 – – 1 75 – – 4 336Redeemed (285) (285) – – (8) (719) – – (10) (826) – – (24) (2,137)

Net Increase/(Decrease) 191 202 – – (7) (646) – – (9) (750) – – (20) (1,798)

171



172



Western AssetEmerging MarketsBond Fund(in 000’s)

Western Asset GlobalHigh Yield Bond Fund(in 000’s)

SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 20 2,191 84 8,108Redeemed (67) (6,956) (631) (60,427)

Net Increase/(Decrease) (47) (4,765) (547) (52,319)

Class A US$ Distributing (D) SharesSold 7 776 10 863Reinvestment of distributions 1 114 – 14Redeemed (9) (979) (1) (34)

Net Increase/(Decrease) (1) (89) 9 843

Class A US$ Distributing (M) SharesSold 2 207 1 107Reinvestment of distributions – – – –Redeemed (1) (133) – –

Net Increase/(Decrease) 1 74 1 107

Class A Euro Accumulating (Hedged) SharesSold – – – –Redeemed – – – –

Net Increase/(Decrease) – – – –

Class A Euro Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A Euro Distributing (M) (Hedged) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A GBP Distributing (M) (Hedged) SharesSold – – – –


Class B US$ Accumulating SharesSold – 8 – –Redeemed (5) (471) – –

Net Increase/(Decrease) (5) (463) – –

Class B US$ Distributing (D) SharesSold 1 77 – 6Reinvestment of distributions – 16 – 3Redeemed (4) (375) – –

Net Increase/(Decrease) (3) (282) – 9

Class C US$ Accumulating SharesSold – – – 15Redeemed – – – –

Net Increase/(Decrease) – – – 15



173





SharesAmount

$ SharesAmount

$

Class C US$ Distributing (D) SharesSold 1 52 10 762Reinvestment of distributions 1 139 – 33Redeemed (10) (1,030) (1) (56)


Premier Class US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –


Premier Class GBP Distributing (M)(Hedged) SharesSold – – – –Redeemed – – – –


LM Class US$ Distributing (M) SharesSold – – – –


Class A (G) US$ Accumulating SharesSold – 75 1 24Redeemed (39) (4,038) (71) (6,793)


Class A (G) US$ Distributing (D) SharesSold 1 96 8 672Reinvestment of distributions – 30 – 55Redeemed (8) (801) (35) (3,093)

Net Increase/(Decrease) (7) (675) (27) (2,366)

Class B (G) US$ Accumulating SharesSold 1 121 1 95Redeemed (21) (2,169) (41) (3,915)


Class B (G) US$ Distributing (D) SharesSold – 10 2 113Reinvestment of distributions 2 166 4 321Redeemed (30) (2,872) (54) (4,706)


Class L (G) US$ Accumulating SharesSold – – – 1Redeemed – (11) – (43)

Net Increase/(Decrease) – (11) – (42)

Class L (G) US$ Distributing (D) SharesSold – 2 – 1Reinvestment of distributions 1 154 2 179Redeemed (13) (1,270) (11) (929)

Net Increase/(Decrease) (12) (1,114) (9) (749)




FOR THE PERIOD ENDED AUGUST 31, 2008:

Western Asset U.S.Short-TermGovernment IncomeFund(in 000’s)

Western Asset U.S.Adjustable Rate IncomeFund(in 000’s)

Western Asset InflationManagement Fund(in 000’s)

Western Asset AsianOpportunities Fund(in 000’s)

Brandywine GlobalOpportunities BondFund(in 000’s)

Legg Mason Value Fund(in 000’s)

Legg Mason GrowthFund(in 000’s)

SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 2 144 8 741 – – – 1 46 4,469 130 9,461 9 767Redeemed – (2) (20) (1,861) – (1) – – (1) (78) (46) (3,287) (4) (361)

Net Increase/(Decrease) 2 142 (12) (1,120) – (1) – 1 45 4,391 84 6,174 5 406

Class A US$ Distributing (A) SharesSold – – – – 13 1,338 – – – – 1,065 144,094 27 2,944Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – (20) – – – – (2,584) (346,020) (354) (37,624)

Net Increase/(Decrease) – – – – 13 1,318 – – – – (1,519) (201,926) (327) (34,680)

Class A US$ Distributing (D) SharesSold 2 126 – – – – – 1 – – – – – –Reinvestment of distributions – 1 – – – – – – – – – – – –Redeemed – (1) – (1) – – – – – – – – – –

Net Increase/(Decrease) 2 126 – (1) – – – 1 – – – – – –

Class A US$ Distributing (S) SharesSold – – – – – – – – 528 61,160 – – – –Reinvestment of distributions – – – – – – – – 65 7,527 – – – –Redeemed – – – – – – – – (1,154) (133,900) – – – –

Net Increase/(Decrease) – – – – – – – – (561) (65,213) – – – –

Class A Euro Accumulating (Hedged) SharesSold – – – – – – – – 143 21,817 – – – –Redeemed – – – – – – – – (64) (9,782) – – – –

Net Increase/(Decrease) – – – – – – – – 79 12,035 – – – –

Class A Euro Accumulating SharesSold – – – – – – – 2 – – 6 563 – 32Redeemed – – – – – – – – – – (29) (2,864) – –

Net Increase/(Decrease) – – – – – – – 2 – – (23) (2,301) – 32

Class A Euro Distributing (M) SharesSold – – – – – – – 2 – – – – – –Reinvestment of distributions – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – – – 2 – – – – – –

Class A GBP Distributing (S) (Hedged) SharesSold – – – – – – – – 204 39,841 – – – –Reinvestment of distributions – – – – – – – – – 35 – – – –


Class A SGD Accumulating (Hedged) SharesSold – – – – – – – – 66 48 – – – –

Net Increase/(Decrease) – – – – – – – – 66 48 – – – –

Class A SGD Accumulating SharesSold – – – – – – – – – – 5,684 2,514 – –Redeemed – – – – – – – – – – (1,726) (758) – –

Net Increase/(Decrease) – – – – – – – – – – 3,958 1,756 – –

174












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 2 144 8 741 – – – 1 46 4,469 130 9,461 9 767Redeemed – (2) (20) (1,861) – (1) – – (1) (78) (46) (3,287) (4) (361)

Net Increase/(Decrease) 2 142 (12) (1,120) – (1) – 1 45 4,391 84 6,174 5 406

Class A US$ Distributing (A) SharesSold – – – – 13 1,338 – – – – 1,065 144,094 27 2,944Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – (20) – – – – (2,584) (346,020) (354) (37,624)

Net Increase/(Decrease) – – – – 13 1,318 – – – – (1,519) (201,926) (327) (34,680)

Class A US$ Distributing (D) SharesSold 2 126 – – – – – 1 – – – – – –Reinvestment of distributions – 1 – – – – – – – – – – – –Redeemed – (1) – (1) – – – – – – – – – –

Net Increase/(Decrease) 2 126 – (1) – – – 1 – – – – – –

Class A US$ Distributing (S) SharesSold – – – – – – – – 528 61,160 – – – –Reinvestment of distributions – – – – – – – – 65 7,527 – – – –Redeemed – – – – – – – – (1,154) (133,900) – – – –


Class A Euro Accumulating (Hedged) SharesSold – – – – – – – – 143 21,817 – – – –Redeemed – – – – – – – – (64) (9,782) – – – –


Class A Euro Accumulating SharesSold – – – – – – – 2 – – 6 563 – 32Redeemed – – – – – – – – – – (29) (2,864) – –

Net Increase/(Decrease) – – – – – – – 2 – – (23) (2,301) – 32

Class A Euro Distributing (M) SharesSold – – – – – – – 2 – – – – – –Reinvestment of distributions – – – – – – – – – – – – – –


Class A GBP Distributing (S) (Hedged) SharesSold – – – – – – – – 204 39,841 – – – –Reinvestment of distributions – – – – – – – – – 35 – – – –


Class A SGD Accumulating (Hedged) SharesSold – – – – – – – – 66 48 – – – –


Class A SGD Accumulating SharesSold – – – – – – – – – – 5,684 2,514 – –Redeemed – – – – – – – – – – (1,726) (758) – –

Net Increase/(Decrease) – – – – – – – – – – 3,958 1,756 – –

175












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class B US$ Accumulating SharesSold 3 286 – – 1 40 – 1 12 1,266 1 106 – 7Redeemed (4) (353) (1) (98) – (8) – – (1) (145) – (10) (1) (41)

Net Increase/(Decrease) (1) (67) (1) (98) 1 32 – 1 11 1,121 1 96 (1) (34)

Class B US$ Distributing (A) SharesSold – – – – – – – – – – 3 373 4 463Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – (25) (3,244) (6) (619)

Net Increase/(Decrease) – – – – – – – – – – (22) (2,871) (2) (156)

Class B US$ Distributing (D) SharesSold 1 94 – – – – – 1 – – – – – –Reinvestment of distributions – 2 – – – – – – – – – – – –Redeemed (1) (122) – – – – – – – – – – – –

Net Increase/(Decrease) – (26) – – – – – 1 – – – – – –

Class B US$ Distributing (S) SharesSold – – – – – – – – 13 1,501 – – – –Reinvestment of distributions – – – – – – – – 1 149 – – – –Redeemed – – – – – – – – (15) (1,733) – – – –

Net Increase/(Decrease) – – – – – – – – (1) (83) – – – –

Class C US$ Accumulating SharesSold 1 98 – – – 27 13 1,332 – – – – 12 939Redeemed (2) (193) – – – – – – – – – – (23) (2,003)

Net Increase/(Decrease) (1) (95) – – – 27 13 1,332 – – – – (11) (1,064)

Class C US$ Distributing (A) SharesSold – – – – 1 90 – – – – 13 1,739 6 590Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – (42) (5,274) (7) (693)

Net Increase/(Decrease) – – – – 1 90 – – – – (29) (3,535) (1) (103)

Class C US$ Distributing (D) SharesSold 3 294 – – – – – 1 – – – – – –Reinvestment of distributions – 3 – 2 – – – – – – – – – –Redeemed (1) (97) (2) (176) – – – – – – – – – –

Net Increase/(Decrease) 2 200 (2) (174) – – – 1 – – – – – –

Class C US$ Distributing (S) SharesSold – – – – – – – – 6 675 – – – –Reinvestment of distributions – – – – – – – – 2 213 – – – –Redeemed – – – – – – – – (70) (8,157) – – – –


Premier Class US$ Accumulating SharesSold – – – – – – – 1 – – 57 5,674 115 11,442Redeemed – – – – – – – – – – (12) (1,247) (22) (2,122)

Net Increase/(Decrease) – – – – – – – 1 – – 45 4,427 93 9,320

Premier Class US$ Distributing (D) SharesSold – – – – – – – 1 – – – – – –Reinvestment of distributions – – – – – – – – – – – – – –


LM Class US$ Accumulating SharesSold – – – – – – 348 35,000 – – – – – –

Net Increase/(Decrease) – – – – – – 348 35,000 – – – – – –

176












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class B US$ Accumulating SharesSold 3 286 – – 1 40 – 1 12 1,266 1 106 – 7Redeemed (4) (353) (1) (98) – (8) – – (1) (145) – (10) (1) (41)

Net Increase/(Decrease) (1) (67) (1) (98) 1 32 – 1 11 1,121 1 96 (1) (34)

Class B US$ Distributing (A) SharesSold – – – – – – – – – – 3 373 4 463Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – (25) (3,244) (6) (619)

Net Increase/(Decrease) – – – – – – – – – – (22) (2,871) (2) (156)

Class B US$ Distributing (D) SharesSold 1 94 – – – – – 1 – – – – – –Reinvestment of distributions – 2 – – – – – – – – – – – –Redeemed (1) (122) – – – – – – – – – – – –

Net Increase/(Decrease) – (26) – – – – – 1 – – – – – –

Class B US$ Distributing (S) SharesSold – – – – – – – – 13 1,501 – – – –Reinvestment of distributions – – – – – – – – 1 149 – – – –Redeemed – – – – – – – – (15) (1,733) – – – –

Net Increase/(Decrease) – – – – – – – – (1) (83) – – – –

Class C US$ Accumulating SharesSold 1 98 – – – 27 13 1,332 – – – – 12 939Redeemed (2) (193) – – – – – – – – – – (23) (2,003)

Net Increase/(Decrease) (1) (95) – – – 27 13 1,332 – – – – (11) (1,064)

Class C US$ Distributing (A) SharesSold – – – – 1 90 – – – – 13 1,739 6 590Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – – – – – – – (42) (5,274) (7) (693)

Net Increase/(Decrease) – – – – 1 90 – – – – (29) (3,535) (1) (103)

Class C US$ Distributing (D) SharesSold 3 294 – – – – – 1 – – – – – –Reinvestment of distributions – 3 – 2 – – – – – – – – – –Redeemed (1) (97) (2) (176) – – – – – – – – – –

Net Increase/(Decrease) 2 200 (2) (174) – – – 1 – – – – – –

Class C US$ Distributing (S) SharesSold – – – – – – – – 6 675 – – – –Reinvestment of distributions – – – – – – – – 2 213 – – – –Redeemed – – – – – – – – (70) (8,157) – – – –


Premier Class US$ Accumulating SharesSold – – – – – – – 1 – – 57 5,674 115 11,442Redeemed – – – – – – – – – – (12) (1,247) (22) (2,122)

Net Increase/(Decrease) – – – – – – – 1 – – 45 4,427 93 9,320

Premier Class US$ Distributing (D) SharesSold – – – – – – – 1 – – – – – –Reinvestment of distributions – – – – – – – – – – – – – –


LM Class US$ Accumulating SharesSold – – – – – – 348 35,000 – – – – – –

Net Increase/(Decrease) – – – – – – 348 35,000 – – – – – –

177












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 1 68 – 37 – 4 – – – – – – – –Redeemed – – (70) (6,607) (11) (1,202) – – – – – – – –

Net Increase/(Decrease) 1 68 (70) (6,570) (11) (1,198) – – – – – – – –

Class A (G) US$ Distributing (A) SharesSold – – – – – 1 – – – – – – – –Reinvestment of distributions – – – – – 14 – – – – – – – –Redeemed – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – 15 – – – – – – – –

Class A (G) US$ Distributing (D) SharesSold 2 343 – 33 – – – – – – – – – –Reinvestment of distributions 1 60 1 48 – – – – – – – – – –Redeemed (8) (816) (15) (1,355) – – – – – – – – – –

Net Increase/(Decrease) (5) (413) (14) (1,274) – – – – – – – – – –

Class B (G) US$ Accumulating SharesSold 1 69 – 2 3 314 – – – – – – – –Redeemed (21) (2,184) (61) (5,608) (4) (416) – – – – – – – –

Net Increase/(Decrease) (20) (2,115) (61) (5,606) (1) (102) – – – – – – – –

Class B (G) US$ Distributing (A) SharesSold – – – – – 5 – – – – – – – –Reinvestment of distributions – – – – 1 70 – – – – – – – –Redeemed – – – – (5) (396) – – – – – – – –

Net Increase/(Decrease) – – – – (4) (321) – – – – – – – –

Class B (G) US$ Distributing (D) SharesSold – 60 – 3 – – – – – – – – – –Reinvestment of distributions 4 407 1 137 – – – – – – – – – –Redeemed (69) (6,906) (69) (6,239) – – – – – – – – – –

Net Increase/(Decrease) (65) (6,439) (68) (6,099) – – – – – – – – – –

Class L (G) US$ Accumulating SharesSold 1 96 – 15 – 1 – – – – – – – –Redeemed (12) (1,248) (6) (563) – – – – – – – – – –

Net Increase/(Decrease) (11) (1,152) (6) (548) – 1 – – – – – – – –

Class L (G) US$ Distributing (A) SharesSold – – – – – 5 – – – – – – – –Reinvestment of distributions – – – – 1 96 – – – – – – – –Redeemed – – – – (11) (1,049) – – – – – – – –


Class L (G) US$ Distributing (D) SharesSold – 21 – 2 – – – – – – – – – –Reinvestment of distributions 1 74 1 123 – – – – – – – – – –Redeemed (12) (1,204) (47) (4,282) – – – – – – – – – –


Galleon Class SharesRedeemed – – – – – – – – – – (118) (10,405) – –

Net Increase/(Decrease) – – – – – – – – – – (118) (10,405) – –

178












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 1 68 – 37 – 4 – – – – – – – –Redeemed – – (70) (6,607) (11) (1,202) – – – – – – – –

Net Increase/(Decrease) 1 68 (70) (6,570) (11) (1,198) – – – – – – – –

Class A (G) US$ Distributing (A) SharesSold – – – – – 1 – – – – – – – –Reinvestment of distributions – – – – – 14 – – – – – – – –Redeemed – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – 15 – – – – – – – –

Class A (G) US$ Distributing (D) SharesSold 2 343 – 33 – – – – – – – – – –Reinvestment of distributions 1 60 1 48 – – – – – – – – – –Redeemed (8) (816) (15) (1,355) – – – – – – – – – –

Net Increase/(Decrease) (5) (413) (14) (1,274) – – – – – – – – – –

Class B (G) US$ Accumulating SharesSold 1 69 – 2 3 314 – – – – – – – –Redeemed (21) (2,184) (61) (5,608) (4) (416) – – – – – – – –

Net Increase/(Decrease) (20) (2,115) (61) (5,606) (1) (102) – – – – – – – –

Class B (G) US$ Distributing (A) SharesSold – – – – – 5 – – – – – – – –Reinvestment of distributions – – – – 1 70 – – – – – – – –Redeemed – – – – (5) (396) – – – – – – – –


Class B (G) US$ Distributing (D) SharesSold – 60 – 3 – – – – – – – – – –Reinvestment of distributions 4 407 1 137 – – – – – – – – – –Redeemed (69) (6,906) (69) (6,239) – – – – – – – – – –


Class L (G) US$ Accumulating SharesSold 1 96 – 15 – 1 – – – – – – – –Redeemed (12) (1,248) (6) (563) – – – – – – – – – –

Net Increase/(Decrease) (11) (1,152) (6) (548) – 1 – – – – – – – –

Class L (G) US$ Distributing (A) SharesSold – – – – – 5 – – – – – – – –Reinvestment of distributions – – – – 1 96 – – – – – – – –Redeemed – – – – (11) (1,049) – – – – – – – –


Class L (G) US$ Distributing (D) SharesSold – 21 – 2 – – – – – – – – – –Reinvestment of distributions 1 74 1 123 – – – – – – – – – –Redeemed (12) (1,204) (47) (4,282) – – – – – – – – – –


Galleon Class SharesRedeemed – – – – – – – – – – (118) (10,405) – –

Net Increase/(Decrease) – – – – – – – – – – (118) (10,405) – –

179



180



ClearBridge U.S.Appreciation Fund(in 000’s)

ClearBridge U.S.Fundamental ValueFund(in 000’s)

SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 21 2,141 25 2,210Redeemed (5) (488) (51) (4,478)

Net Increase/(Decrease) 16 1,653 (26) (2,268)

Class A US$ Distributing (A) SharesSold 5 414 3 300Reinvestment of distributions – – – –Redeemed – (1) (1) (106)


Class A US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A Euro Accumulating (Hedged) SharesSold – – – –Redeemed – – – –


Class A Euro Accumulating SharesSold 12 1,860 – –Redeemed (3) (436) – –

Net Increase/(Decrease) 9 1,424 – –

Class A Euro Distributing (M) SharesSold – – – –Reinvestment of distributions – – – –


Class A GBP Distributing (S) (Hedged) SharesSold – – – –Reinvestment of distributions – – – –


Class A SGD Accumulating (Hedged) SharesSold – – – –


Class A SGD Accumulating SharesSold – – – –Redeemed – – – –




181





SharesAmount

$ SharesAmount

$

Class B US$ Accumulating SharesSold 2 253 2 211Redeemed – (14) – –


Class B US$ Distributing (A) SharesSold 3 292 2 215Reinvestment of distributions – – – –Redeemed – – – (23)


Class B US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class B US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class C US$ Accumulating SharesSold 3 304 1 126Redeemed – (1) – –


Class C US$ Distributing (A) SharesSold 4 386 – –Reinvestment of distributions – – – –Redeemed (1) (63) – (36)

Net Increase/(Decrease) 3 323 – (36)

Class C US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class C US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Premier Class US$ Accumulating SharesSold – – – –Redeemed – – – –


Premier Class US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –


LM Class US$ Accumulating SharesSold – – – –




182





SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 4 374 34 2,981Redeemed (36) (3,671) (263) (23,289)


Class A (G) US$ Distributing (A) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class B (G) US$ Accumulating SharesSold 4 442 1 88Redeemed (22) (2,209) (162) (14,242)


Class B (G) US$ Distributing (A) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class B (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class L (G) US$ Accumulating SharesSold – 107 – 3Redeemed (7) (772) (38) (3,303)

Net Increase/(Decrease) (7) (665) (38) (3,300)

Class L (G) US$ Distributing (A) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class L (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Galleon Class SharesRedeemed – – – –





183



ClearBridge U.S. LargeCap Growth Fund(in 000’s)

ClearBridge U.S.Aggressive GrowthFund(in 000’s)

Royce U.S. Small CapOpportunity Fund(in 000’s)

Royce SmallerCompanies Fund(in 000’s)

PCM U.S. Equity Fund(in 000’s)

GC Global Equity Fund(in 000’s)

Batterymarch EuropeanEquity Fund(in 000’s)

SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E

Class A US$ Accumulating SharesSold 5 486 24 2,113 128 9,925 22 2,152 – – 1 97 – 11Redeemed (14) (1,344) (17) (1,460) (19) (1,473) (2) (199) – – (11) (1,008) (7) (414)

Net Increase/(Decrease) (9) (858) 7 653 109 8,452 20 1,953 – – (10) (911) (7) (403)

Class A US$ Distributing (A) SharesSold – 43 28 2,608 64 15,377 41 6,822 – – – 8 – 54Reinvestment of distributions – – – – – – – – – – – – 1 137Redeemed (3) (325) (63) (5,630) (173) (40,615) (37) (6,059) – – (9) (996) (14) (1,897)

Net Increase/(Decrease) (3) (282) (35) (3,022) (109) (25,238) 4 763 – – (9) (988) (13) (1,706)

Class A Euro Accumulating SharesSold – 2 – – – 68 – – – – – – – –Redeemed – – – – (6) (665) – – – – – – – –

Net Increase/(Decrease) – 2 – – (6) (597) – – – – – – – –

Class A Euro Distributing (A) SharesSold – – – – – – – – – – – – – –Reinvestment of distributions – – – – – – – – – – – – – 24Redeemed – – – – – – – – – – – – – (8)

Net Increase/(Decrease) – – – – – – – – – – – – – 16

Class B US$ Accumulating SharesSold – 11 1 76 – 23 – 63 – – – 19 – 6Redeemed – – – – – (8) – – – – – – (1) (11)

Net Increase/(Decrease) – 11 1 76 – 15 – 63 – – – 19 (1) (5)

Class B US$ Distributing (A) SharesSold 1 75 2 216 1 218 4 586 – – 2 60 – 154Reinvestment of distributions – – – – – – – – – – – – – 20Redeemed – – (1) (64) (1) (237) (3) (492) – – (1) (52) (11) (1,583)

Net Increase/(Decrease) 1 75 1 152 – (19) 1 94 – – 1 8 (11) (1,409)

Class C US$ Accumulating SharesSold – 18 8 714 – – 2 252 – – – – – –Redeemed – – – (1) – – – – – – – – – –

Net Increase/(Decrease) – 18 8 713 – – 2 252 – – – – – –

Class C US$ Distributing (A) SharesSold – 6 8 635 3 680 7 1,138 – – – – – 28Reinvestment of distributions – – – – – – – – – – – – – 45Redeemed (1) (32) (2) (169) (12) (2,851) (15) (2,416) – – (2) (145) (11) (1,516)

Net Increase/(Decrease) (1) (26) 6 466 (9) (2,171) (8) (1,278) – – (2) (145) (11) (1,443)

184












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E

Class A US$ Accumulating SharesSold 5 486 24 2,113 128 9,925 22 2,152 – – 1 97 – 11Redeemed (14) (1,344) (17) (1,460) (19) (1,473) (2) (199) – – (11) (1,008) (7) (414)

Net Increase/(Decrease) (9) (858) 7 653 109 8,452 20 1,953 – – (10) (911) (7) (403)

Class A US$ Distributing (A) SharesSold – 43 28 2,608 64 15,377 41 6,822 – – – 8 – 54Reinvestment of distributions – – – – – – – – – – – – 1 137Redeemed (3) (325) (63) (5,630) (173) (40,615) (37) (6,059) – – (9) (996) (14) (1,897)

Net Increase/(Decrease) (3) (282) (35) (3,022) (109) (25,238) 4 763 – – (9) (988) (13) (1,706)

Class A Euro Accumulating SharesSold – 2 – – – 68 – – – – – – – –Redeemed – – – – (6) (665) – – – – – – – –

Net Increase/(Decrease) – 2 – – (6) (597) – – – – – – – –

Class A Euro Distributing (A) SharesSold – – – – – – – – – – – – – –Reinvestment of distributions – – – – – – – – – – – – – 24Redeemed – – – – – – – – – – – – – (8)

Net Increase/(Decrease) – – – – – – – – – – – – – 16

Class B US$ Accumulating SharesSold – 11 1 76 – 23 – 63 – – – 19 – 6Redeemed – – – – – (8) – – – – – – (1) (11)

Net Increase/(Decrease) – 11 1 76 – 15 – 63 – – – 19 (1) (5)

Class B US$ Distributing (A) SharesSold 1 75 2 216 1 218 4 586 – – 2 60 – 154Reinvestment of distributions – – – – – – – – – – – – – 20Redeemed – – (1) (64) (1) (237) (3) (492) – – (1) (52) (11) (1,583)

Net Increase/(Decrease) 1 75 1 152 – (19) 1 94 – – 1 8 (11) (1,409)

Class C US$ Accumulating SharesSold – 18 8 714 – – 2 252 – – – – – –Redeemed – – – (1) – – – – – – – – – –

Net Increase/(Decrease) – 18 8 713 – – 2 252 – – – – – –

Class C US$ Distributing (A) SharesSold – 6 8 635 3 680 7 1,138 – – – – – 28Reinvestment of distributions – – – – – – – – – – – – – 45Redeemed (1) (32) (2) (169) (12) (2,851) (15) (2,416) – – (2) (145) (11) (1,516)

Net Increase/(Decrease) (1) (26) 6 466 (9) (2,171) (8) (1,278) – – (2) (145) (11) (1,443)

185












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E

Class A (G) US$ Accumulating SharesSold 14 1,267 21 1,904 – – 3 324 – – – – 34 1,971Redeemed (172) (15,617) (174) (15,442) – – (2) (201) – – – – (54) (3,132)

Net Increase/(Decrease) (158) (14,350) (153) (13,538) – – 1 123 – – – – (20) (1,161)

Class B (G) US$ Accumulating SharesSold – 108 – 56 – – 3 194 – – – – 1 31Redeemed (42) (3,918) (97) (8,630) – – (7) (650) – – – – (82) (4,736)

Net Increase/(Decrease) (42) (3,810) (97) (8,574) – – (4) (456) – – – – (81) (4,705)

Class L (G) US$ Accumulating SharesSold – 1 1 102 – – 1 125 – – – – 2 70Redeemed (21) (1,941) (35) (3,114) – – (1) (122) – – – – (2) (95)

Net Increase/(Decrease) (21) (1,940) (34) (3,012) – – – 3 – – – – – (25)

Premier Class US$ Accumulating SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –

Net Increase/(Decrease) – – – – – – – – – – – – – –

Premier Class US$ Distributing (A) SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –


Premier Class Euro Accumulating SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –


186












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E

Class A (G) US$ Accumulating SharesSold 14 1,267 21 1,904 – – 3 324 – – – – 34 1,971Redeemed (172) (15,617) (174) (15,442) – – (2) (201) – – – – (54) (3,132)

Net Increase/(Decrease) (158) (14,350) (153) (13,538) – – 1 123 – – – – (20) (1,161)

Class B (G) US$ Accumulating SharesSold – 108 – 56 – – 3 194 – – – – 1 31Redeemed (42) (3,918) (97) (8,630) – – (7) (650) – – – – (82) (4,736)

Net Increase/(Decrease) (42) (3,810) (97) (8,574) – – (4) (456) – – – – (81) (4,705)

Class L (G) US$ Accumulating SharesSold – 1 1 102 – – 1 125 – – – – 2 70Redeemed (21) (1,941) (35) (3,114) – – (1) (122) – – – – (2) (95)

Net Increase/(Decrease) (21) (1,940) (34) (3,012) – – – 3 – – – – – (25)

Premier Class US$ Accumulating SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –


Premier Class US$ Distributing (A) SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –


Premier Class Euro Accumulating SharesSold – – – – – – – – – – – – – –Redeemed – – – – – – – – – – – – – –


187



188



Batterymarch PacificEquity Fund(in 000’s)

Batterymarch 130/30Global Equity Fund(in 000’s)

SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 294 33,159 1 100Redeemed (122) (13,004) – –

Net Increase/(Decrease) 172 20,155 1 100

Class A US$ Distributing (A) SharesSold 669 152,250 90 9,000Reinvestment of distributions – – – –Redeemed (120) (25,784) – –

Net Increase/(Decrease) 549 126,466 90 9,000

Class A Euro Accumulating SharesSold 18 2,096 1 100Redeemed (2) (262) – –


Class A Euro Distributing (A) SharesSold – – 1 100Reinvestment of distributions – – – –Redeemed – – – –

Net Increase/(Decrease) – – 1 100

Class B US$ Accumulating SharesSold 1 126 1 100Redeemed (2) (169) – –


Class B US$ Distributing (A) SharesSold 4 874 1 100Reinvestment of distributions – – – –Redeemed (15) (3,150) – –

Net Increase/(Decrease) (11) (2,276) 1 100

Class C US$ Accumulating SharesSold 2 149 1 100Redeemed (1) (59) – –


Class C US$ Distributing (A) SharesSold 6 1,235 1 100Reinvestment of distributions – – – –Redeemed (34) (6,720) – –

Net Increase/(Decrease) (28) (5,485) 1 100



189




Batterymarch 130/30Global Equity Fund(in 000’s)

SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold – – – –Redeemed – – – –


Class B (G) US$ Accumulating SharesSold – – – –Redeemed – – – –


Class L (G) US$ Accumulating SharesSold – – – –Redeemed – – – –


Premier Class US$ Accumulating SharesSold – – 1 100Redeemed – – – –


Premier Class US$ Distributing (A) SharesSold – – 1 100Redeemed – – – –


Premier Class Euro Accumulating SharesSold – – 1 100Redeemed – – – –




190



BatterymarchInternational Large CapFund(in 000’s)

Batterymarch EmergingMarkets Equity Fund(in 000’s)

SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 1 60 165 15,133Redeemed (1) (44) (14) (1,186)

Net Increase/(Decrease) – 16 151 13,947

Class A US$ Distributing (A) SharesSold – – – 1Reinvestment of distributions – 1 – –Redeemed (1) (90) – –


Class A Euro Accumulating SharesSold – – – 2


Class A GBP Distributing (A) SharesSold – – 234 46,037Redeemed – – (5) (895)

Net Increase/(Decrease) – – 229 45,142

Class B US$ Accumulating SharesSold – 19 – 1Redeemed – (32) – –

Net Increase/(Decrease) – (13) – 1

Class B US$ Distributing (A) SharesSold 4 298 – 1Reinvestment of distributions – 1 – –Redeemed (2) (161) – –

Net Increase/(Decrease) 2 138 – 1

Class C US$ Accumulating SharesSold 1 44 – 1

Net Increase/(Decrease) 1 44 – 1

Class C US$ Distributing (A) SharesSold – – – 1Reinvestment of distributions – 2 – –Redeemed (10) (852) – –


Premier Class US$ Accumulating SharesSold – – 320 28,643


Premier Class Euro Accumulating SharesSold – – – 2


LM Class US$ Distributing SharesSold – – 15 1,397


Class A (G) US$ Accumulating SharesSold 5 523 – –Redeemed (8) (727) – –


Class B (G) US$ Accumulating SharesSold 4 256 – –Redeemed (72) (6,487) – –

Net Increase/(Decrease) (68) (6,231) – –

Class L (G) US$ Accumulating SharesSold – 2 – –Redeemed (7) (608) – –





191










SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 356 35,644 10 1,013 3 285 – – 1 63 129 12,747 – 30Redeemed (337) (34,139) – – (3) (279) – – – – (8) (754) – –

Net Increase/(Decrease) 19 1,505 10 1,013 – 6 – – 1 63 121 11,993 – 30

Class A US$ Distributing (D) SharesSold 12,446,636 12,446,636 123 12,384 14 1,312 2 228 7 661 256 30,858 39 3,863Reinvestment of distributions 58,059 58,059 9 911 – 3 1 55 3 343 18 2,153 4 414Redeemed (8,915,322) (8,915,322) (556) (55,108) – – (51) (4,998) (122) (11,628) (169) (20,174) (30) (2,967)

Net Increase/(Decrease) 3,589,373 3,589,373 (424) (41,813) 14 1,315 (48) (4,715) (112) (10,624) 105 12,837 13 1,310

Class A Euro Distributing (D) SharesSold – – – – – – 5 543 – – – – – –Reinvestment of distributions – – – – – – – 13 – – – – – –Redeemed – – – – – – – (7) – – – – – –


Class B US$ Distributing (D) SharesSold 2,900 2,900 7 683 1 73 6 545 36 3,479 54 6,501 8 771Reinvestment of distributions 54 54 1 154 – 1 – 35 7 710 5 606 1 129Redeemed (3,701) (3,701) (33) (3,391) – – (13) (1,284) (130) (12,546) (54) (6,445) (35) (3,446)

Net Increase/(Decrease) (747) (747) (25) (2,554) 1 74 (7) (704) (87) (8,357) 5 662 (26) (2,546)

Class C US$ Distributing (D) SharesSold 2,492 2,492 9 944 63 6,094 5 431 15 1,511 155 18,600 25 2,521Reinvestment of distributions 42 42 1 65 – 17 – 46 3 314 16 1,952 2 132Redeemed (3,297) (3,297) (11) (1,109) – (1) (7) (692) (57) (5,680) (165) (19,854) (21) (2,026)

Net Increase/(Decrease) (763) (763) (1) (100) 63 6,110 (2) (215) (39) (3,855) 6 698 6 627

Class A (G) US$ Accumulating SharesSold 112 11,187 – – 20 1,966 – – 24 2,405 – – 73 7,319Redeemed (41) (4,098) – – (1) (101) – – (4) (411) – – (8) (775)

Net Increase/(Decrease) 71 7,089 – – 19 1,865 – – 20 1,994 – – 65 6,544

Class A (G) US$ Distributing (D) SharesSold 2,727 2,727 – – 41 4,134 – – 115 11,525 – – 155 15,520Reinvestment of distributions 42 42 – – – 32 – – 1 121 – – 1 74Redeemed (94) (94) – – (11) (1,123) – – (6) (652) – – (22) (2,176)

Net Increase/(Decrease) 2,675 2,675 – – 30 3,043 – – 110 10,994 – – 134 13,418

Class B (G) US$ Accumulating SharesSold 63 6,355 – – 94 9,350 – – 182 18,154 – – 73 7,293Reinvestment of distributions – – – – – – – – – 310 – – – –Redeemed (31) (3,182) – – (11) (1,046) – – (15) (1,439) – – (8) (756)


Class B (G) US$ Distributing (D) SharesSold 16,020 16,020 – – 129 12,906 – – 317 31,731 – – 223 22,287Reinvestment of distributions 198 198 – – 2 140 – – 3 – – – 3 320Redeemed 3,328 (3,328) – – (18) (1,740) – – (49) (4,838) – – (40) (3,908)


Class L (G) US$ Accumulating SharesSold – – – – 36 3,662 – – 13 1,344 – – 13 1,290Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – (1) (112) – – (2) (235) – – (1) (61)

Net Increase/(Decrease) – – – – 35 3,550 – – 11 1,109 – – 12 1,229

Class L (G) US$ Distributing (D) SharesSold 3,402 3,402 – – 85 8,452 – – 65 6,499 – – 258 25,799Reinvestment of distributions 51 51 – – 1 73 – – 1 63 – – 3 318Redeemed (150) (150) – – (14) (1,296) – – (7) (638) – – (54) (5,403)


192












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 356 35,644 10 1,013 3 285 – – 1 63 129 12,747 – 30Redeemed (337) (34,139) – – (3) (279) – – – – (8) (754) – –

Net Increase/(Decrease) 19 1,505 10 1,013 – 6 – – 1 63 121 11,993 – 30

Class A US$ Distributing (D) SharesSold 12,446,636 12,446,636 123 12,384 14 1,312 2 228 7 661 256 30,858 39 3,863Reinvestment of distributions 58,059 58,059 9 911 – 3 1 55 3 343 18 2,153 4 414Redeemed (8,915,322) (8,915,322) (556) (55,108) – – (51) (4,998) (122) (11,628) (169) (20,174) (30) (2,967)

Net Increase/(Decrease) 3,589,373 3,589,373 (424) (41,813) 14 1,315 (48) (4,715) (112) (10,624) 105 12,837 13 1,310

Class A Euro Distributing (D) SharesSold – – – – – – 5 543 – – – – – –Reinvestment of distributions – – – – – – – 13 – – – – – –Redeemed – – – – – – – (7) – – – – – –


Class B US$ Distributing (D) SharesSold 2,900 2,900 7 683 1 73 6 545 36 3,479 54 6,501 8 771Reinvestment of distributions 54 54 1 154 – 1 – 35 7 710 5 606 1 129Redeemed (3,701) (3,701) (33) (3,391) – – (13) (1,284) (130) (12,546) (54) (6,445) (35) (3,446)

Net Increase/(Decrease) (747) (747) (25) (2,554) 1 74 (7) (704) (87) (8,357) 5 662 (26) (2,546)

Class C US$ Distributing (D) SharesSold 2,492 2,492 9 944 63 6,094 5 431 15 1,511 155 18,600 25 2,521Reinvestment of distributions 42 42 1 65 – 17 – 46 3 314 16 1,952 2 132Redeemed (3,297) (3,297) (11) (1,109) – (1) (7) (692) (57) (5,680) (165) (19,854) (21) (2,026)

Net Increase/(Decrease) (763) (763) (1) (100) 63 6,110 (2) (215) (39) (3,855) 6 698 6 627

Class A (G) US$ Accumulating SharesSold 112 11,187 – – 20 1,966 – – 24 2,405 – – 73 7,319Redeemed (41) (4,098) – – (1) (101) – – (4) (411) – – (8) (775)


Class A (G) US$ Distributing (D) SharesSold 2,727 2,727 – – 41 4,134 – – 115 11,525 – – 155 15,520Reinvestment of distributions 42 42 – – – 32 – – 1 121 – – 1 74Redeemed (94) (94) – – (11) (1,123) – – (6) (652) – – (22) (2,176)


Class B (G) US$ Accumulating SharesSold 63 6,355 – – 94 9,350 – – 182 18,154 – – 73 7,293Reinvestment of distributions – – – – – – – – – 310 – – – –Redeemed (31) (3,182) – – (11) (1,046) – – (15) (1,439) – – (8) (756)


Class B (G) US$ Distributing (D) SharesSold 16,020 16,020 – – 129 12,906 – – 317 31,731 – – 223 22,287Reinvestment of distributions 198 198 – – 2 140 – – 3 – – – 3 320Redeemed 3,328 (3,328) – – (18) (1,740) – – (49) (4,838) – – (40) (3,908)


Class L (G) US$ Accumulating SharesSold – – – – 36 3,662 – – 13 1,344 – – 13 1,290Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – – – (1) (112) – – (2) (235) – – (1) (61)

Net Increase/(Decrease) – – – – 35 3,550 – – 11 1,109 – – 12 1,229

Class L (G) US$ Distributing (D) SharesSold 3,402 3,402 – – 85 8,452 – – 65 6,499 – – 258 25,799Reinvestment of distributions 51 51 – – 1 73 – – 1 63 – – 3 318Redeemed (150) (150) – – (14) (1,296) – – (7) (638) – – (54) (5,403)


193



194





SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 185 18,525 1,058 105,789Redeemed (12) (1,233) (38) (3,710)

Net Increase/(Decrease) 173 17,292 1,020 102,079

Class A US$ Distributing (D) SharesSold 12 1,308 1 78Reinvestment of distributions 1 80 – 1Redeemed (17) (1,803) – –


Class A Euro Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class B US$ Distributing (D) SharesSold 5 562 – 40Reinvestment of distributions – 32 – –Redeemed (8) (841) – –


Class C US$ Distributing (D) SharesSold 13 1,438 7 640Reinvestment of distributions 1 120 – 9Redeemed (15) (1,700) – –


Class A (G) US$ Accumulating SharesSold 759 75,930 1,701 170,092Redeemed (247) (24,531) (1,185) (118,647)


Class A (G) US$ Distributing (D) SharesSold 192 19,146 570 57,007Reinvestment of distributions – 38 – 45Redeemed (62) (6,133) (309) (30,885)


Class B (G) US$ Accumulating SharesSold 119 11,920 259 25,846Reinvestment of distributions – – – –Redeemed (15) (1,447) (42) (4,120)


Class B (G) US$ Distributing (D) SharesSold 168 16,800 327 32,741Reinvestment of distributions 2 168 4 375Redeemed (35) (3,361) (43) (4,209)


Class L (G) US$ Accumulating SharesSold 37 3,700 62 6,223Reinvestment of distributions – 133 – –Redeemed (12) (1,142) (6) (588)


Class L (G) US$ Distributing (D) SharesSold 170 16,976 133 13,293Reinvestment of distributions 1 – 1 147Redeemed (44) (4,304) (18) (1,754)





195










SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 8 771 114 11,381 – 1 – 1 559 58,024 2 185 22 2,290Redeemed – – (7) (702) – – – – (101) (10,033) – – – (20)

Net Increase/(Decrease) 8 771 107 10,679 – 1 – 1 458 47,991 2 185 22 2,270

Class A US$ Distributing (A) SharesSold – – – – – 1 – – 1,554 295,877 287 36,131 – 1Redeemed – – – – – – – – (7,431) (1,413,178) (436) (51,344) – –

Net Increase/(Decrease) – – – – – 1 – – (5,877) (1,117,301) (149) (15,213) – 1

Class A US$ Distributing (D) SharesSold – 30 – 1 – – – – – – – – – –

Net Increase/(Decrease) – 30 – 1 – – – – – – – – – –

Class A US$ Distributing (S) SharesSold – – – – – – 880 96,120 – – – – – –Reinvestment of distributions – – – – – – 55 5,950 – – – – – –Redeemed – – – – – – (1,537) (167,735) – – – – – –

Net Increase/(Decrease) – – – – – – (602) (65,665) – – – – – –

Class A Euro Accumulating SharesSold – – – – – – – – 33 4,399 – – – –Redeemed – – – – – – – – (3) (349) – – – –


Class A SGD Accumulating SharesSold – – – – – – – – 8,117 5,275 – – – –Redeemed – – – – – – – – (888) (545) – – – –

Net Increase/(Decrease) – – – – – – – – 7,229 4,730 – – – –

Class B US$ Distributing (A) SharesSold – – – – – 1 – – 10 1,841 10 1,155 4 382Redeemed – – – – – – – – (28) (5,100) (6) (724) – (7)

Net Increase/(Decrease) – – – – – 1 – – (18) (3,259) 4 431 4 375

Class B US$ Distributing (D) SharesSold 2 180 – 1 – – – – – – – – – –

Net Increase/(Decrease) 2 180 – 1 – – – – – – – – – –

Class B US$ Distributing (S) SharesSold – – – – – – 8 894 – – – – – –Reinvestment of distributions – – – – – – 1 91 – – – – – –Redeemed – – – – – – (20) (2,194) – – – – – –


Class C US$ Distributing (A) SharesSold – – – – – 1 – – 25 4,632 20 2,401 3 287Redeemed – – – – – – – – (85) (15,776) (17) (1,997) – –


Class C US$ Distributing (D) SharesSold – 6 4 402 – – – – – – – – – –Reinvestment of distributions – – – 3 – – – – – – – – – –

Net Increase/(Decrease) – 6 4 405 – – – – – – – – – –

Class C US$ Distributing (S) SharesSold – – – – – – 48 5,212 – – – – – –Reinvestment of distributions – – – – – – 1 161 – – – – – –Redeemed – – – – – – (71) (7,838) – – – – – –


196












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 8 771 114 11,381 – 1 – 1 559 58,024 2 185 22 2,290Redeemed – – (7) (702) – – – – (101) (10,033) – – – (20)

Net Increase/(Decrease) 8 771 107 10,679 – 1 – 1 458 47,991 2 185 22 2,270

Class A US$ Distributing (A) SharesSold – – – – – 1 – – 1,554 295,877 287 36,131 – 1Redeemed – – – – – – – – (7,431) (1,413,178) (436) (51,344) – –

Net Increase/(Decrease) – – – – – 1 – – (5,877) (1,117,301) (149) (15,213) – 1

Class A US$ Distributing (D) SharesSold – 30 – 1 – – – – – – – – – –

Net Increase/(Decrease) – 30 – 1 – – – – – – – – – –

Class A US$ Distributing (S) SharesSold – – – – – – 880 96,120 – – – – – –Reinvestment of distributions – – – – – – 55 5,950 – – – – – –Redeemed – – – – – – (1,537) (167,735) – – – – – –


Class A Euro Accumulating SharesSold – – – – – – – – 33 4,399 – – – –Redeemed – – – – – – – – (3) (349) – – – –


Class A SGD Accumulating SharesSold – – – – – – – – 8,117 5,275 – – – –Redeemed – – – – – – – – (888) (545) – – – –

Net Increase/(Decrease) – – – – – – – – 7,229 4,730 – – – –

Class B US$ Distributing (A) SharesSold – – – – – 1 – – 10 1,841 10 1,155 4 382Redeemed – – – – – – – – (28) (5,100) (6) (724) – (7)


Class B US$ Distributing (D) SharesSold 2 180 – 1 – – – – – – – – – –

Net Increase/(Decrease) 2 180 – 1 – – – – – – – – – –

Class B US$ Distributing (S) SharesSold – – – – – – 8 894 – – – – – –Reinvestment of distributions – – – – – – 1 91 – – – – – –Redeemed – – – – – – (20) (2,194) – – – – – –


Class C US$ Distributing (A) SharesSold – – – – – 1 – – 25 4,632 20 2,401 3 287Redeemed – – – – – – – – (85) (15,776) (17) (1,997) – –


Class C US$ Distributing (D) SharesSold – 6 4 402 – – – – – – – – – –Reinvestment of distributions – – – 3 – – – – – – – – – –

Net Increase/(Decrease) – 6 4 405 – – – – – – – – – –

Class C US$ Distributing (S) SharesSold – – – – – – 48 5,212 – – – – – –Reinvestment of distributions – – – – – – 1 161 – – – – – –Redeemed – – – – – – (71) (7,838) – – – – – –


197












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 32 3,267 323 32,318 25 1 – – – – – – 209 20,882Redeemed (10) (991) (132) (13,201) (6) – – – – – – – (38) (3,862)

Net Increase/(Decrease) 22 2,276 191 19,117 19 1 – – – – – – 171 17,020

Class A (G) US$ Distributing (A) SharesSold – – – – 6 3,077 – – – – – – – –Redeemed – – – – (1) (677) – – – – – – – –

Net Increase/(Decrease) – – – – 5 2,400 – – – – – – – –

Class A (G) US$ Distributing (D) SharesSold 112 11,230 148 14,804 – – – – – – – – – –Reinvestment of distributions 1 88 1 167 – – – – – – – – – –Redeemed (24) (2,358) (42) (4,189) – – – – – – – – – –

Net Increase/(Decrease) 89 8,960 107 10,782 – – – – – – – – – –

Class B (G) US$ Accumulating SharesSold 96 9,570 238 23,848 31 3,106 – – – – – – 112 11,149Redeemed (15) (1,442) (51) (5,132) (11) (1,073) – – – – – – (19) (1,887)

Net Increase/(Decrease) 81 8,128 187 18,716 20 2,033 – – – – – – 93 9,262

Class B (G) US$ Distributing (A) SharesSold – – – – 28 2,794 – – – – – – – –Redeemed – – – – (5) (509) – – – – – – – –


Class B (G) US$ Distributing (D) SharesSold 537 53,685 298 29,828 – – – – – – – – – –Reinvestment of distributions 6 560 3 335 – – – – – – – – – –Redeemed (100) (9,928) (47) (4,671) – – – – – – – – – –


Class L (G) US$ Accumulating SharesSold 17 1,669 38 3,839 8 752 – – – – – – 111 11,110Redeemed – – (6) (595) – – – – – – – – (3) (343)


Class L (G) US$ Distributing (A) SharesSold – – – – 26 2,642 – – – – – – – –Redeemed – – – – (4) (420) – – – – – – – –


Class L (G) US$ Distributing (D) SharesSold 83 8,309 188 18,884 – – – – – – – – – –Reinvestment of distributions 1 77 3 264 – – – – – – – – – –Redeemed (13) (1,332) (10) (1,028) – – – – – – – – – –


Galleon Class SharesRedeemed – – – – – – – – (12) (1,650) – – – –


198












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 32 3,267 323 32,318 25 1 – – – – – – 209 20,882Redeemed (10) (991) (132) (13,201) (6) – – – – – – – (38) (3,862)


Class A (G) US$ Distributing (A) SharesSold – – – – 6 3,077 – – – – – – – –Redeemed – – – – (1) (677) – – – – – – – –


Class A (G) US$ Distributing (D) SharesSold 112 11,230 148 14,804 – – – – – – – – – –Reinvestment of distributions 1 88 1 167 – – – – – – – – – –Redeemed (24) (2,358) (42) (4,189) – – – – – – – – – –


Class B (G) US$ Accumulating SharesSold 96 9,570 238 23,848 31 3,106 – – – – – – 112 11,149Redeemed (15) (1,442) (51) (5,132) (11) (1,073) – – – – – – (19) (1,887)

Net Increase/(Decrease) 81 8,128 187 18,716 20 2,033 – – – – – – 93 9,262

Class B (G) US$ Distributing (A) SharesSold – – – – 28 2,794 – – – – – – – –Redeemed – – – – (5) (509) – – – – – – – –


Class B (G) US$ Distributing (D) SharesSold 537 53,685 298 29,828 – – – – – – – – – –Reinvestment of distributions 6 560 3 335 – – – – – – – – – –Redeemed (100) (9,928) (47) (4,671) – – – – – – – – – –


Class L (G) US$ Accumulating SharesSold 17 1,669 38 3,839 8 752 – – – – – – 111 11,110Redeemed – – (6) (595) – – – – – – – – (3) (343)


Class L (G) US$ Distributing (A) SharesSold – – – – 26 2,642 – – – – – – – –Redeemed – – – – (4) (420) – – – – – – – –


Class L (G) US$ Distributing (D) SharesSold 83 8,309 188 18,884 – – – – – – – – – –Reinvestment of distributions 1 77 3 264 – – – – – – – – – –Redeemed (13) (1,332) (10) (1,028) – – – – – – – – – –


Galleon Class SharesRedeemed – – – – – – – – (12) (1,650) – – – –


199



200





SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 388 38,724 57 5,714Redeemed (46) (4,594) (14) (1,434)


Class A US$ Distributing (A) SharesSold 2 221 4 371Redeemed – – – –


Class A US$ Distributing (D) SharesSold – – – –


Class A US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class A Euro Accumulating SharesSold – – – –Redeemed – – – –


Class A SGD Accumulating SharesSold – – – –Redeemed – – – –


Class B US$ Distributing (A) SharesSold 3 330 3 294Redeemed – (1) – –


Class B US$ Distributing (D) SharesSold – – – –


Class B US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class C US$ Distributing (A) SharesSold 14 1,426 4 409Redeemed (1) (101) (1) (100)


Class C US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –


Class C US$ Distributing (S) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –




201





SharesAmount

$ SharesAmount

$

Class A (G) US$ Accumulating SharesSold 1,694 169,395 532 53,231Redeemed (473) (47,293) (101) (10,306)

Net Increase/(Decrease) 1,221 122,102 431 42,925

Class A (G) US$ Distributing (A) SharesSold – – – –Redeemed – – – –


Class A (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class B (G) US$ Accumulating SharesSold 1,167 116,658 261 26,086Redeemed (130) (12,943) (39) (4,005)

Net Increase/(Decrease) 1,037 103,715 222 22,081

Class B (G) US$ Distributing (A) SharesSold – – – –Redeemed – – – –


Class B (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Class L (G) US$ Accumulating SharesSold 485 48,493 221 22,128Redeemed (58) (5,751) (23) (2,422)


Class L (G) US$ Distributing (A) SharesSold – – – –Redeemed – – – –


Class L (G) US$ Distributing (D) SharesSold – – – –Reinvestment of distributions – – – –Redeemed – – – –


Galleon Class SharesRedeemed – – – –













SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 148 14,951 21 2,161 16 1,622 – 1 68 5,024 61 7,029 4 377Redeemed (18) (1,827) (2) (99) (6) (604) – – (58) (4,365) – – – –

Net Increase/(Decrease) 130 13,124 19 2,062 10 1,018 – 1 10 659 61 7,029 4 377

Class A US$ Distributing (A) SharesSold 19 1,892 394 118,611 58 9,858 – 33 7 1,303 335 70,458 2 251Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – (164) (48,756) (71) (11,873) – – (13) (2,522) (67) (13,389) – –

Net Increase/(Decrease) 19 1,892 230 69,855 (13) (2,015) – 33 (6) (1,219) 268 57,069 2 251

Class A Euro Accumulating SharesSold – – 21 2,822 – – – – 4 367 – – – –Redeemed – – (1) (167) – – – – (2) (132) – – – –

Net Increase/(Decrease) – – 20 2,655 – – – – 2 235 – – – –

Class A Euro Distributing (A) SharesSold – – – – – – – – 3 461 – – – –Redeemed – – – – – – – – (1) (96) – – – –


Class B US$ Distributing (A) SharesSold 7 646 2 625 6 968 2 172 9 1,552 14 3,091 5 462Redeemed (1) (99) (2) (628) (3) (428) – (18) (6) (1,097) (16) (3,420) – –

Net Increase/(Decrease) 6 (547) – (3) 3 540 2 154 3 455 (2) (329) 5 462

Class C US$ Distributing (A) SharesSold 28 2,865 10 2,988 8 1,277 5 497 19 3,199 33 6,387 22 2,255Redeemed – (46) (6) (1,611) (6) (770) – – (10) (1,677) (43) (8,402) (1) (118)

Net Increase/(Decrease) 28 2,819 4 1,377 2 507 5 497 9 1,522 (10) (2,015) 21 2,137

Class A (G) US$ Accumulating SharesSold 1,831 183,102 – – 88 8,776 – – 362 26,574 – – 77 7,721Redeemed (324) (32,722) – – (9) (874) – – (109) (7,693) – – (12) (1,257)


Class B (G) US$ Accumulating SharesSold 699 69,770 – – 53 5,269 – – 292 21,448 – – 378 37,807Redeemed (105) (10,516) – – (7) (687) – – (27) (1,948) – – (40) (3,927)


Class L (G) US$ Accumulating SharesSold 472 47,220 – – 47 4,665 – – 63 4,651 – – 159 15,832Redeemed (66) (6,672) – – (1) (81) – – (5) (369) – – (15) (1,502)


202












SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

$ SharesAmount

E SharesAmount

$ SharesAmount

$

Class A US$ Accumulating SharesSold 148 14,951 21 2,161 16 1,622 – 1 68 5,024 61 7,029 4 377Redeemed (18) (1,827) (2) (99) (6) (604) – – (58) (4,365) – – – –

Net Increase/(Decrease) 130 13,124 19 2,062 10 1,018 – 1 10 659 61 7,029 4 377

Class A US$ Distributing (A) SharesSold 19 1,892 394 118,611 58 9,858 – 33 7 1,303 335 70,458 2 251Reinvestment of distributions – – – – – – – – – – – – – –Redeemed – – (164) (48,756) (71) (11,873) – – (13) (2,522) (67) (13,389) – –

Net Increase/(Decrease) 19 1,892 230 69,855 (13) (2,015) – 33 (6) (1,219) 268 57,069 2 251

Class A Euro Accumulating SharesSold – – 21 2,822 – – – – 4 367 – – – –Redeemed – – (1) (167) – – – – (2) (132) – – – –

Net Increase/(Decrease) – – 20 2,655 – – – – 2 235 – – – –

Class A Euro Distributing (A) SharesSold – – – – – – – – 3 461 – – – –Redeemed – – – – – – – – (1) (96) – – – –


Class B US$ Distributing (A) SharesSold 7 646 2 625 6 968 2 172 9 1,552 14 3,091 5 462Redeemed (1) (99) (2) (628) (3) (428) – (18) (6) (1,097) (16) (3,420) – –

Net Increase/(Decrease) 6 (547) – (3) 3 540 2 154 3 455 (2) (329) 5 462

Class C US$ Distributing (A) SharesSold 28 2,865 10 2,988 8 1,277 5 497 19 3,199 33 6,387 22 2,255Redeemed – (46) (6) (1,611) (6) (770) – – (10) (1,677) (43) (8,402) (1) (118)

Net Increase/(Decrease) 28 2,819 4 1,377 2 507 5 497 9 1,522 (10) (2,015) 21 2,137

Class A (G) US$ Accumulating SharesSold 1,831 183,102 – – 88 8,776 – – 362 26,574 – – 77 7,721Redeemed (324) (32,722) – – (9) (874) – – (109) (7,693) – – (12) (1,257)


Class B (G) US$ Accumulating SharesSold 699 69,770 – – 53 5,269 – – 292 21,448 – – 378 37,807Redeemed (105) (10,516) – – (7) (687) – – (27) (1,948) – – (40) (3,927)


Class L (G) US$ Accumulating SharesSold 472 47,220 – – 47 4,665 – – 63 4,651 – – 159 15,832Redeemed (66) (6,672) – – (1) (81) – – (5) (369) – – (15) (1,502)


203



204

Notes to Financial Statements1. Significant Accounting Policies

The significant accounting policies and estimation techniques adopted by Legg Mason Global Funds Plc, (the ‘‘Company’’) in the preparation of the financial statements are set out below.

(a) Basis of Preparation

The financial statements have been prepared in accordance with accounting standards generally accepted in Ireland and Irish Statute comprising the Companies Acts, 1963 to 2006, and all

regulations to be construed as one with those acts, including the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2003 as amended

(the ‘‘UCITS Regulations’’). Accounting standards generally accepted in Ireland in preparing financial statements giving a true and fair view are those published by the Institute of Chartered

Accountants in Ireland and issued by the Accounting Standards Board.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all reporting periods presented,

unless otherwise stated. The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities held at fair

value through profit or loss.

The format and certain wording of the financial statements have been adapted from those contained in the Companies (Amendment) Act 1986 and Financial Reporting Standard 3:

Reporting Financial Performance (‘‘FRS 3’’) so that, in the opinion of the Directors, they more appropriately reflect the nature of the Company’s business as an investment fund.

The Company has availed of the exemption available to open-ended investment funds under Financial Reporting Standard 1: Cash Flow Statements (‘‘FRS 1’’) not to prepare a cash flow

statement.

All references to net assets throughout this document refer to net assets attributable to Holders of Redeemable Participating Shares unless otherwise stated. The Company is organised into

one main business segment. No additional disclosure is included in relation to segment reporting as the Company’s activities are limited to one main business and geographical segment. All

the Company’s assets and liabilities are held for the purposes of being traded or are expected to be realised within one year.

(b) Investments at Fair Value

The Company classified all financial instruments, including its investments in debt and equity securities, and related derivatives, as financial assets or financial liabilities at fair value through

profit or loss. These financial assets and financial liabilities are classified as held for trading at fair value through profit or loss. Financial assets or liabilities held for trading are acquired or

incurred principally for the purpose of selling or repurchasing in the short-term. Derivatives are also categorised as held for trading, as the Company does not designate any derivatives as

hedges in a hedging relationship.

Regular-way purchases and sales of investments are recognised on trade date – the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at

fair value, and transaction costs for all financial assets carried at fair value through profit or loss are expensed as incurred. Investments cease to be recognised when the rights to receive cash

flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Profit and Loss Account. Subsequent to

initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the

financial assets or financial liabilities at fair value through profit or loss category are presented in the Profit and Loss Account in the period in which they arise.

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the Balance Sheet date. The

quoted market price used for financial assets held by the Company is the current bid price. The quoted market price used for financial liabilities held by the Company is the current ask price.

When the Company holds derivatives with offsetting market risks it uses mid-market prices as a basis for establishing fair values for the offsetting risk positions and applies the bid or asking

price to the net open position, as appropriate.

The Company may from time to time invest in financial instruments that are not traded in an active market (for example in over-the-counter derivatives). The fair value is determined by using

valuation techniques. The Company uses a variety of methods and makes assumptions that are based on market conditions existing at each Balance Sheet date. Valuation techniques used

include the use of comparable recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. The prices used at the

period end which have been sourced from a single broker source are the best estimate of fair value as at the period end date. However there is a degree of uncertainty in respect of these

prices. It may not always be possible to close out the positions at the stated market value with the given counterparty. The Directors of the Company have been advised that the values

arrived at are reasonable and prudent, however actual results may differ from these estimates and the differences could be material.

(c) Forward Foreign Currency Exchange Contracts

A forward foreign currency exchange contract (‘‘forward contract’’) is a commitment to purchase or sell a foreign currency at a future date, at a negotiated rate. Forward contracts are used

to seek to manage foreign currency risks and to tactically shift portfolio currency risk. Forward contracts are generally entered into as a hedge upon the purchase or sale of a security

denominated in a foreign currency. The Fund will realise a gain or loss upon the closing or settlement of the forward transaction. Unrealised appreciation or depreciation on forward

contracts is reported in the Balance Sheet. Realised gains and losses are reported with all other foreign currency gains and losses in the Profit and Loss Account. Risks relating to forward

contracts include the potential inability of the counterparty to meet the terms of the contract and unanticipated movements in the value of a foreign currency relative to the base currency of

the fund. As at August 31, 2008, forward currency contracts held are disclosed in Note 15 to financial statements. Forward contracts are fair valued by an independent price source by

reference to the price at which a new forward contract of the same size and maturity could be undertaken.

(d) Futures Contracts

Initial margin deposits are made upon entering into futures contracts and are generally made in cash. Futures contracts are fair valued based upon their quoted daily settlement prices.

Changes in the value of open futures contracts are recognised as unrealised gains or losses on futures contracts until the contracts are terminated, at which time realised gains and losses are

recognised. Unrealised gains or losses on futures contracts are shown in the Balance Sheet. As at August 31, 2008, the futures contracts held are disclosed in the Portfolio of Investments on

pages 8 through 120.

(e) Option Contracts

The premium on purchased put options exercised is subtracted from the proceeds of the sale of the underlying security or foreign currency in determining the realised gain or loss. The

premium on purchased call options exercised is added to the cost of the securities or foreign currency purchased. Premiums paid from the purchase of options, which expire unexercised, are

treated as realised losses. The unrealised gain or loss on open option positions is calculated and recorded as the fair value of the option less the premium paid on that option. Unrealised gains

or losses on open option positions are reflected as assets or liabilities in the Balance Sheet.

The premium on written call options exercised is added to the proceeds from the sale of the underlying security or foreign currency in determining the realised gain or loss. The premium on

written put options exercised is subtracted from the cost of the securities or foreign currencies purchased. Premiums received from written options, which expire unexercised, are treated as

realised gains.

As at August 31, 2008, the option contracts held are disclosed in the Portfolio of Investments on pages 8 through 120.


205

Notes to Financial Statements – (continued)1. Significant Accounting Policies – (continued)

(f) Credit Default Swap and Interest Rate Swap Instruments

Credit default and interest rate swaps, are recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values

are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and options pricing

models, as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

Each Fixed Income Fund (as defined in Note 14), except the Western Asset U.S. Money Market Fund may enter into credit default swap agreements, provided that (i) the credit default swap

agreement must be subject to daily valuation by the Fund and independently verified at least weekly, and (ii) the risks attached to the credit default swap must be independently assessed on

a half-yearly basis and the report must be submitted to the Directors for review. A Fund may be either the buyer or seller in a credit default swap transaction. The ‘‘buyer’’ in a credit default

contract is obligated to pay the counterparty a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has

occurred. If a Fund is a buyer and no event of default occurs, the Fund will lose its investment and recover nothing. On the other hand, if the Fund is a buyer and an event of default does

occur, the Fund (the buyer) will receive the full notional value of the reference obligation that may have little or no value. Conversely, if the Fund is a seller and an event of default occurs, the

Fund (the seller) must pay the counterparty the full notional value, or ‘‘par value’’, of the reference obligation in exchange for the reference obligation. As a seller, a Fund receives a fixed rate

of income throughout the term of the contract, which typically is between six months and three years, provided that there is no default event. If an event of default occurs, the seller (the

Fund) must pay the counterparty the full notional value of the reference obligation.

The Funds purchase and sell credit default swap contracts in order to hedge against the risk of a fall in the capital price, or default, of debt securities they hold. This involves the risk that the

swap may expire worthless and the credit risk that the seller may fail to satisfy its payment obligations to the Funds in the event of a default. The Funds may only enter into such transactions

with counterparties rated A- or higher.

An interest rate swap or cross currency interest rate swap involves the exchange by a Fund with another party of their respective commitments to pay or receive cash flows e.g., an exchange

of floating rate payments for fixed-rate payments in base or foreign currencies. The purchase of a cap entitles the purchaser, to the extent that a specified index exceeds a predetermined

value, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index falls below a

predetermined value, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of buying a cap and selling a floor. Spread locks are

contracts that guarantee the ability to enter into an interest rate swap at a predetermined rate above some benchmark rate.

As at August 31, 2008, the credit default swaps held are disclosed in the Portfolio of Investments on pages 8 through 120.

(g) Securities Traded on a ‘‘To-Be-Announced’’ Basis

The Funds may trade securities on a ‘‘to-be-announced’’ (‘‘TBA’’) basis. In a TBA transaction, a Fund commits to purchase or sell securities for which specific information is not yet known at

the time of the trade. Securities purchased on a TBA basis are not settled until they are delivered to or from the relevant Fund, normally 15 to 45 days later. These transactions are subject to

market fluctuations and their current value is determined in the same manner as for other securities.

(h) Securities Sold Short

As described in Note 2, the investment objective of Batterymarch 130/30 Global Equity Fund permits the Fund to hold certain short positions through the use of financial derivative

instruments. Securities sold short are those positions where the Fund has sold a security that it does not own in anticipation of a decline in the market value of the security and are classified

as liabilities. To enter a short sale, the Fund may need to borrow the security for delivery to the buyer. On each day the short sale transaction is open, the liability to replace the borrowed

security is marked-to-market and an unrealised gain or loss is recorded in the Profit and Loss Account. While the transaction is open the Fund will also incur an expense for any dividends or

interest that will be paid to the lender of the securities. The Fund’s obligation for investments sold short is considered closed and the related liability is satisfied when it delivers or replaces the

security borrowed under the original transaction. These short positions are entered into through the use of financial derivative instruments and are collateralised by cash.

As at August 31, 2008, the securities sold short held in the Batterymarch 130/30 Global Equity Fund and are disclosed in the Portfolio of Investments on pages 8 through 120.

(i) Accounting for Investments

Security transactions are accounted for on trade date. Investments are initially recognised at fair value and transaction costs for all ‘‘fair-valued-through profit or loss’’ securities are expensed

as incurred. Gains or losses on the sale of securities are calculated by using the First-In-First-Out (‘‘FIFO’’) basis.

(j) Income from Investments

Interest income and expense are recognised in the Profit and Loss Account for all debt instruments using the effective interest method.

Dividends are credited to the Profit and Loss Account on the dates on which the relevant securities are listed as ‘‘ex-dividend’’. Dividend income is shown gross of any non-recoverable

withholding taxes, which is disclosed separately in the Profit and Loss Account, and net of any tax credits.

(k) Lending of Securities

Certain Funds may lend securities to brokers, dealers and other financial organisations to earn additional income. Each security loan is collateralised with collateral assets in an amount equal

to or greater than the current market value of the loaned securities. There is a risk of delay in receiving collateral or in recovering the securities loaned or even a loss of rights in collateral

should the borrower fail financially.

As at August 31, 2008, each of the following Funds had outstanding loans of securities to certain brokers, dealers or other financial institutions for which each Fund has a security interest

and lien upon segregated cash and/or securities equivalent to or greater than 100% of the market value of securities loaned through the Company’s’ custodian:

As at August 31, 2008

Market Value of

Loan Securities

(000’s)

$

Market Value of

Collateral

(000’s)

$

Western Asset U.S. Core Bond Fund 164 172

Western Asset Diversified Strategic Income Bond Fund 839 874

Western Asset Global Multi Strategy Fund 5,177 5,375

Western Asset U.S. High Yield Bond Fund 6,786 7,010


206

Notes to Financial Statements – (continued)1. Significant Accounting Policies – (continued)

(k) Lending of Securities – (continued)

As at February 29, 2008

Market Value of

Loan Securities

(000’s)

$

Market Value of

Collateral

(000’s)

$

Western Asset U.S. Money Market Fund 15,281 15,575

Western Asset U.S. Core Bond Fund 834 842

Western Asset Diversified Strategic Income Bond Fund 805 854

Western Asset Global Multi Strategy Fund 20,297 20,756

Western Asset U.S. High Yield Bond Fund 7,533 7,973

Western Asset Emerging Markets Bond Fund 3,927 3,968

(l) Expenses

Certain expenses are share class specific expenses and are charged direct to the share class. General fund expenses are allocated on the basis of relative net asset value.

(m) Foreign Exchange Translation

(a) Functional and presentation currency: Items included in the Company’s financial statements are measured using the currency of the primary economic environment in which it

operates (the ‘‘functional currency’’). This is the U.S. Dollar for all Funds except Western Asset Euro Core Plus Bond Fund and Batterymarch European Equity Fund, which is Euro.

The Company has adopted the functional currency of each Fund as the presentation currency for these financial statements. The financial statements of the Company are

presented in U.S. Dollars.

(b) Purchases and sales of securities, and income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. Assets and

Liabilities are translated at the foreign exchange rate at the end of the period. Differences between income and expense amounts recorded and collected or paid are adjusted

when reported by PNC International Bank Limited (formerly PFPC Bank Limited) (the ‘‘Custodian’’).

(n) Short-Term Investments

Certificates of deposit, time deposits and other short-term investments maintained with financial institutions are fair valued at their face value with interest accrued as applicable.

(o) Repurchase Agreements

Securities purchased under agreements to resell are fair valued at their face value and adjusted for any movements in foreign exchange rates. Interest rates vary for each repurchase

agreement and are set at the initiation of the agreement. It is the Company’s policy to take custody of securities purchased under repurchase agreements and to value the securities on a

daily basis to protect the Company in the event the securities are not repurchased by the counterparty. The Company will generally obtain additional collateral if the market value of the

underlying securities is less than the face value of the repurchase agreement plus any accrued interest. In the event of default on the obligation to repurchase, the Company has the right to

liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realisation and/or retention of the

collateral or proceeds may be subject to legal proceedings. Repurchase agreements have been used during the period for the purpose of efficient portfolio management.

(p) Offsetting Financial Instruments

Financial assets and liabilities are offset and the net amount reported in the statement of assets and liabilities when there is a legally enforceable right to offset the recognised amounts and

there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

(q) Equalisation

An equalisation account may be maintained so that the amount distributed is the same for all shares of the same type notwithstanding different dates of issue. A sum equal to that part of

the issued price of a share which reflects income (if any) accrued but undistributed up to the date of issue will be deemed to be an equalisation payment and treated as repaid to shareholders

to the first dividend to which the shareholder was entitled in the same accounting period as that in which the shares are issued.

(r) Critical Accounting Estimates and Assumptions

Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and

assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are outlined below.

Fair Value of Derivative Financial Instruments

The Company may, from time to time, hold financial instruments that are not quoted in active markets, such as over-the-counter derivatives. Fair values of such instruments are determined

by using valuation techniques as discussed in Note 1(b). Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed and

compared to the price provided by an independent pricing service provider.

Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates.

Changes in assumptions about these factors could affect the reported fair value of financial instruments.

The values assigned to these instruments are based upon the best available information and because of the uncertainty of the valuation, these values may differ significantly from the values

that would have been realised had a ready market for these instruments existed and the differences could be material. Entering into these agreements involves, to varying degrees, elements

of credit, legal, market and documentation risk in excess of the amounts recognised in the Profit and Loss Account. Such risks involve the possibility that there will be no liquid market for

these agreements, that the counterparties to the agreements may default on their obligations to perform or disagree as to the meaning of contractual terms in the agreements, or that there

may be unfavourable changes in interest rates or the price of the index or security underlying these transactions.

2. Investment Objectives and Policies

The principal investment objective and policies of each Fund which were applicable are listed below. There can be no assurance that any Fund will achieve its objective and there is no

guarantee that an investment strategy will succeed or attain any particular results or level of profitability.


Investment Objective – To provide a reasonable level of current income, consistent with the preservation of capital.

Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in high quality, short-term Money Market Instruments denominated in U.S. Dollars as issued

by U.S. Issuers. A minimum of 95 per cent of the Fund’s total asset value will be rated at least A1/P1 by an NRSRO or, if unrated, deemed by the Sub-Investment Manager to be of

comparable quality.


207

Notes to Financial Statements – (continued)2. Investment Objectives and Policies – (continued)


Investment Objective – To maximise total return through income and capital appreciation.

Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in debt securities that are (i) listed or traded on Regulated Markets located in developed and

Emerging Markets Countries; (ii) denominated in U.S. Dollars and (iii) rated at the time of purchase at least BBB by S&P or Baa by Moody’s or, if not rated, deemed by the Fund’s Sub-

Investment Manager to be of comparable quality. These debt securities shall be issued or guaranteed by the U.S. government, its agencies or instrumentalities and political sub-divisions,

corporate debt securities; mortgage-backed and asset-backed securities; preferred shares and other open ended collective investment schemes within the meaning of Regulation 45(e) of the

UCITS Regulations. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e)

of the UCITS Regulations. At least two-thirds of the Fund’s total asset value will be invested at all times in investments of issuers or companies that have their registered office in the United

States or that conduct a significant portion of their business activities in the United States.


Investment Objective – To maximise total return, consisting of capital appreciation and income.

Investment Policies – The Fund invests at all times at least 70 per cent of its total asset value in debt securities listed or traded on Regulated Markets in the United States listed in Schedule III

of the prospectus that are rated Investment Grade or if unrated deemed by the Sub-Investment Manager to be of comparable credit quality and which are issued by U.S. Issuers. These debt

securities shall be issued or guaranteed by the U.S. government, its agencies, instrumentalities and political sub-divisions; debt securities issued by other national governments, their agencies,

instrumentalities and political sub-divisions; debt securities of supranational organisations such as freely transferable promissory notes, bonds and debentures; corporate debt securities,

including freely transferable promissory notes, debentures, bonds; non-convertible notes; commercial paper, certificates of deposits, and bankers acceptances issued by industrial, utility,

finance, commercial banking or bank holding company organisations; and mortgage-backed and asset-backed securities structured as debt securities. A maximum of 10 per cent of the

Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund may also invest in

aggregate up to 30 per cent of its total asset value in non-publicly traded securities, Rule 144A securities, zero coupon securities, Money Market Instruments and debt securities of non-U.S.

issuers. The allocation and reallocation of the Fund’s assets will be undertaken by the Sub-Investment Manager on the basis of its analysis of economics and market conditions and the

relative risks and opportunities of particular types of fixed income securities. The average portfolio duration will vary based on the Sub-Investment Manager’s forecast for interest rates.


Investment Objective – To maximise total return, through capital appreciation and income.

Investment Policies – The Fund invests at all times at least 70 per cent of its total asset value in debt securities denominated in Euro that are listed or traded on Regulated Markets located in

developed and Emerging Market Countries as set out in Schedule III of the prospectus. The securities shall be debt securities issued or guaranteed by national governments of developed and

Emerging Market Countries, their agencies, instrumentalities, and political sub-divisions; debt securities of supranational organisations such as freely transferable promissory notes, bonds

and debentures; corporate debt securities of issuers located in or whose securities are listed or traded on Regulated Markets in developed and Emerging Market Countries; mortgage-backed

and asset-backed securities; preferred shares; and other open ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. A maximum of 10 per

cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.


Investment Objective – To provide a high level of current income.

Investment Policies – The Fund invests at least two-thirds of its total asset value in debt securities that are (i) denominated in U.S. Dollars and currencies of a variety of other developed

countries, and (ii) are listed or traded on Regulated Markets as set out in Schedule III of the prospectus. These debt securities shall be issued or guaranteed by the U.S. government, its

agencies or instrumentalities and political sub-divisions; debt securities issued or guaranteed by national governments of other countries, their agencies or instrumentalities and political sub-

divisions; debt securities of supranational organisations, corporate debt securities, structured notes that are transferable securities whose underlying exposure may be to fixed income

securities, mortgage-backed and asset-backed securities; preferred shares and other open ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS

Regulations. A maximum of 20 per cent. of the Fund’s net asset value may be invested in units or shares of open-ended collective investment schemes within the meaning of Regulation 45(e)

of the UCITS Regulations. The Fund may purchase unsecuritised participations in or assignments of floating rate mortgages or other commercial loans that are liquid and will provide for

interest rate adjustments at least every 397 days and which may be secured by real estate or other assets. Such participations, combined with any other investments that are subject to Clause

2.1 in Schedule II of the prospectus, will not exceed 10 per cent of the net asset value of the Fund in the aggregate. The Fund may invest up to 35 per cent of its total asset value in high

yielding debt securities, which shall include securities rated Ba or lower by Moody’s or BB or lower by S&P or in non-rated securities deemed by the Sub-Investment Manager to be of

comparable quality.


Investment Objective – To maximise total return through income and capital appreciation.

Investment Policies – The Fund invests primarily in debt securities denominated in U.S. Dollars, Japanese Yen, Pound Sterling, Euro and a variety of other currencies and that are traded on

or listed on any of the Regulated Markets located in developed and Emerging Market Countries as set out in Schedule III of the prospectus. The debt securities shall be issued or guaranteed

by national governments of developed and Emerging Market Countries, their agencies or instrumentalities and political sub-divisions, debt securities of supranational organisations such as

freely transferable promissory notes, bonds and debentures; corporate debt securities of issuers located in or whose securities are listed or traded on Regulated Markets in developed and

Emerging Market Countries; mortgage-backed and asset-backed securities; preferred shares and other open ended collective investment schemes within the meaning of Regulation 45(e) of

the UCITS Regulations. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation

45(e) of the UCITS Regulations. The Fund may purchase unsecuritised participations in or assignments of floating rate mortgages or other commercial loans that are liquid and will provide for

interest rate adjustments at least every 397 days and which may be secured by real estate or other assets. Such participations, combined with any other investments that are subject to Clause

2.1 in Schedule II of the prospectus, will not exceed 10 per cent of the net asset value of the Fund in the aggregate.


208



Investment Objective – To provide a high level of current income.

Investment Policies – The Fund invests at least 70 per cent of its total asset value in the following types of high-yielding debt securities of U.S. Issuers that are denominated in U.S. Dollars

that are listed or traded on Regulated Markets as listed in Schedule III of the prospectus: corporate debt securities, structured notes that are transferable securities whose underlying exposure

may be to fixed income securities; mortgage-backed and asset-backed securities that are structured as debt securities; provided that at all times at least two-thirds of the Fund’s total asset

value is invested in non-convertible debt securities. The Fund may invest in debt securities rated as low as C by Moody’s or D by S&P, which ratings indicate that the obligations are highly

speculative and may be in default or in danger of default as to principal and interest. The Fund’s remaining assets may be held in debt securities listed or traded on Regulated Markets that are

rated above BB+ by S&P or Ba1 by Moody’s, or unrated securities deemed by the Sub-Investment Manager to be of equivalent quality; preferred shares and other equity securities that are

listed or traded on Regulated Markets when such investments are consistent with the Fund’s investment objective of high current income; as well as cash or short-term Money Market

Instruments with remaining maturities of 13 months or less. The Fund may invest up to 20 per cent of its total asset value in high-yielding corporate debt securities of non-U.S. Issuers located

in developed and Emerging Market Countries, provided that such debt securities are denominated in U.S. Dollars and such issuers are domiciled in or have their principal activities located in

OECD member countries. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation

45(e) of the UCITS Regulations. At least 95 per cent of the Fund’s total asset value will be US$-denominated.


Investment Objective – To maximise total return, consisting of income and capital appreciation.

Investment Policies – The Fund invests at least 70 per cent of its total asset value in debt securities of issuers located in Emerging Market Countries (hereinafter ‘‘Emerging Market Debt

Securities’’) that are listed or traded on Regulated Markets as listed in Schedule III of the prospectus. These debt securities shall be issued or guaranteed by national governments located in

developed and Emerging Market Countries, their agencies or instrumentalities and political sub-divisions (including inflation index linked securities); corporate debt securities of issuers

located in developed and emerging markets whose securities are listed or traded on Regulated Markets; mortgage-backed securities, securitised participations in loans that are transferable

securities, structured notes that are freely transferable securities whose underlying exposure may be to fixed income securities; asset-backed securities; preferred shares and other open

ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or

shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund may purchase unsecuritised participations in or assignments of

floating rate mortgages or other commercial loans that are liquid and will provide for interest rate adjustments at least every 397 days and which may be secured by real estate or other

assets. Such participations, combined with any other investments that are subject to Clause 2.1 in Schedule II of the prospectus, will not exceed 10 per cent of the net asset value of the Fund

in the aggregate. Under normal market conditions, a minimum of 65 per cent of the Fund’s total asset value will be U.S. Dollar-denominated, and a minimum of 60 per cent of the Fund’s

total asset value will be invested in Emerging Markets Debt Securities issued by national, state or local governments, or entities affiliated with or sponsored by such governments.


Investment Objective – To generate total return. The generation of high current income is a secondary objective.

Investment Policies – The Fund invests at all times at least 70 per cent of its total asset value in high yielding debt securities listed or traded on Regulated Markets as listed in Schedule III of

the prospectus. Higher yields are generally available from securities rated BB+ or lower by S&P, or Ba1 or lower by Moody’s, or unrated securities of equivalent quality. Debt securities rated

below Investment Grade are deemed by these agencies to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal and may involve major risk of

exposure to adverse conditions. The Fund may invest in debt securities rated as low as C by Moody’s or D by S&P, which ratings indicate that the obligations are highly speculative and may

be in default or in danger of default as to principal and interest. It is not expected that the Fund will invest more than 45 per cent of its total asset value in high yield securities issued in

Emerging Market Countries, Emerging European Countries and/or Emerging Asia/Pacific Countries. It is expected that the Fund will invest in at least 10 different countries. The Fund is a

global fund, however, and is not confined to investing in any specific country or region. The Fund may purchase unsecuritised participations in or assignments of floating rate mortgages or

other commercial loans that are liquid and will provide for interest rate adjustments at least every 397 days and which may be secured by real estate or other assets. Such participations,

combined with any other investments that are subject to Clause 2.1 in Schedule II of the prospectus, will not exceed 10 per cent of the net asset value of the Fund in the aggregate. A

maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS

Regulations.


Investment Objective – To generate current income while preserving the value of its Shareholders’ investment.

Investment Policies – The Fund will invest at all times at least 70 per cent of its total asset value in debt securities issued or guaranteed by the U.S. government, its agencies,

instrumentalities or political sub-divisions that are listed or traded on Regulated Markets in the United States listed in Schedule III of the prospectus. The U.S. government securities in which

the Fund invests may comprise both direct obligations of the U.S. Treasury and obligations issued or guaranteed by U.S. government agencies, including mortgage-backed or asset-backed

securities that are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. Up to 80 per cent of the Fund’s total asset value may be

invested in direct pass-through certificates guaranteed by GNMA, FNMA or FHLMC. Up to 10 per cent of the Fund’s total asset value may be invested in collateralised mortgage obligations.

A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS

Regulations. It is expected that the Fund will maintain an average portfolio duration of between six months and three years. The Fund may invest in individual securities of any duration.


Investment Objective – To provide high current income and to limit the degree of fluctuation of its total asset value resulting from movements in interest rates.

Investment Policies – The Fund seeks to achieve its investment objective by investing at all times at least 80 per cent of its total asset value in various types of adjustable rate debt securities

issued by U.S. Issuers (including variable rate securities, floating rate securities and adjustable rate mortgage-backed and asset-backed securities that are structured as debt securities) and

listed or traded on Regulated Markets listed in Schedule III of the prospectus. The debt securities may include: debt securities issued or guaranteed by the U.S. government, its agencies,

instrumentalities and political sub-divisions; debt securities issued by other national governments, their agencies, instrumentalities and political sub-divisions; debt securities of supranational

organisations such as freely transferable promissory notes, bonds and debentures; corporate debt securities, including freely transferable promissory notes, debentures, bonds; convertible

and non-convertible notes; commercial paper, certificates of deposits, and bankers acceptances issued by industrial, utility, finance, commercial banking or bank holding company

organisations; and mortgage-backed and asset-backed securities structured as debt securities. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of

other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund invests in U.S. government securities and securities rated at the time of

purchase in the two highest long-term rating categories by a NRSRO. The Fund may invest up to 20 per cent of its total asset value in debt securities that are unrated but determined to be of

a quality equivalent to such two highest categories by the Sub-Investment Manager. It is expected that the Fund will maintain average portfolio duration of between six months and one year.

However, the Fund may invest in individual securities of any duration. The Sub-Investment Manager seeks to achieve low volatility of net asset value by diversifying the Fund’s assets among

investments that the Sub-Investment Manager believes will, in the aggregate, be resistant to significant fluctuations in market value.


209



Investment Objective – Primary investment objective is to generate total return. The generation of current income is a secondary objective.

Investment Policies – The Fund will seek to achieve its investment objective by investing at all times at least 80 per cent of its total asset value in inflation-protected securities or other

securities that the Sub-Investment Manager believes will provide protection against inflation that are issued by national governments of countries that are members of the OECD, their

agencies, instrumentalities and political sub-divisions, supranational organisations and corporate issuers such as freely transferable promissory notes, debentures and bonds and are listed or

traded on Regulated Markets as set out in Schedule III of the prospectus. The Fund may also invest up to 20 per cent of its total asset value in any other types of debt securities listed or traded

on Regulated Markets listed in Schedule III of the prospectus that may or may not be indexed to inflation including debt securities issued or guaranteed by the national governments, their

agencies, instrumentalities, and political subdivisions (including strip securities); corporate debt securities; mortgage-backed and asset-backed securities structured as debt instruments;

repurchase agreements with debt securities as the underlying instruments; structured notes that are transferable securities whose underlying exposure may be to fixed income securities;

securitised participations in loans that are freely transferable securities; Money Market Instruments; securities of other open-ended collective investment schemes within the meaning of

Regulation 45(e) of the UCITS Regulations; and (subject to a limit of 10 per cent. of the Fund’s Total Net Value) preferred shares and other equity and equity related securities. A maximum of

10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund

will not invest in securities rated below Investment Grade or in securities which are listed or traded on a Regulated Market in any Emerging Market Country, Emerging European Country or

Emerging Asia/Pacific Country. It is expected that the Fund will maintain an average credit quality between A and AAA (S&P) / A2 and Aaa (Moody’s). The Fund’s average portfolio duration is

expected to be between one and eight years. However, the Fund may invest in individual securities of any duration.


Investment Objective: To maximise total return, through income and capital appreciation.

Investment Policies: The Fund invests at least 70 per cent of its total asset value in debt securities issued by Asian issuers and in derivatives on Asian interest rates and currencies, which debt

securities and derivatives are listed or traded on Regulated Markets as set out in Schedule III of the prospectus. The Fund invests primarily in (i) debt securities issued or guaranteed by national

governments located in developed Asian countries and Emerging Asia/Pacific Countries (including but not limited to Bangladesh, China, Hong Kong, India, Indonesia, Kazakhstan, Laos,

Macao, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, Thailand, Turkey and Vietnam), their agencies, instrumentalities or political sub-divisions; (ii) corporate

debt securities issued by Asian companies; (iii) securitised participations in loans that are freely transferable securities; (iv) structured notes that are transferable securities whose underlying

exposure may be to fixed income securities; (v) mortgage-backed and asset-backed securities that are structured as debt securities; (vi) derivatives on Asian interest rates and Asian bonds

concluded with highly rated Asian or global credit institutions; (vii) Asian currencies and derivatives on those currencies. The Fund may invest no more than 10 per cent of its net asset value in

units or shares of open-ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund invests in debt securities that are rated Investment

Grade, debt securities rated below Investment Grade, and unrated debt securities. An investment in the Fund should not constitute a substantial proportion of an investment portfolio and

may not be appropriate for all investors.


Investment Objective – To maximise total return consisting of income and capital appreciation.

Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in debt securities that are (i) rated Investment Grade at the time of purchase; (ii) listed or traded

on Regulated Markets primarily in the following developed countries; and (iii) denominated in currencies of, or issuers located in, primarily the following developed countries: The United

States, Canada, Australia, Japan, Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, The Netherlands, Portugal, Spain, Denmark, Sweden, Switzerland, The United Kingdom,

New Zealand, Norway, Hungary, Poland, and the Czech Republic. The Fund may also invest in debt securities that are listed or traded on Regulated Markets located in other developed

countries as set out in Schedule III of the prospectus, provided such debt securities are rated Investment Grade at the time of purchase. See Schedule IV of the prospectus for more

information on the ratings of the various NRSROs. The Fund will not invest more than 10 per cent of its net asset value in debt securities of issuers located in Emerging Market Countries that

are not specified in the prospectus. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of

Regulation 45(e) of the UCITS Regulations. The Fund will normally hold a portfolio of debt securities of issuers located in a maximum of six countries. The average weighed duration of the

Fund’s portfolio generally ranges from 2 to 10 years but for individual markets may be greater or lesser depending on the prospects for lower interest rates and the potential for capital gains.


Investment Objective – To achieve long-term capital appreciation.

Investment Policies – The Fund invests principally in securities of the U.S. issuers, which the Investment Manager believes are undervalued. The Fund may also invest up to 25 per cent of its

total asset value in the securities of non-U.S. Issuers. At least 50 per cent of the total asset value of the Fund will be invested in equity securities. The Fund may also invest up to 5 per cent of

its net asset value in units or shares open-ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.


Investment Objective – To maximise long-term capital appreciation with a minimum long-term risk to principal.

Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in equity securities that are listed or traded on Regulated Markets as set out in Schedule III of the

prospectus. The Fund may invest in common stocks, preferred stocks, warrants and securities convertible into or exchangeable for common stocks, such as convertible bonds and debentures

but invests at all times at least two-thirds of its total asset value in equity securities. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other

collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The selection of common stocks will be made through an investment strategy referred to as

‘‘focus investing,’’ whereby companies are identified and selected as eligible investments by examining all fundamental quantitative and qualitative aspects of the company, its management

and its financial position as compared to its stock price. This is a bottom up, fundamental method of analysis as opposed to technical analysis, which is based on the study of trading volumes

and prices.


Investment Objective – To generate long-term capital appreciation.

Investment Policies – The Fund will invest at least 70 per cent of its total asset value in equity securities of U.S. Companies, which are listed or traded on Regulated Markets in the United

States listed in Schedule III of the prospectus. The Fund’s investments will include common stocks, preferred stocks and equity related securities. A maximum of 10 per cent of the Fund’s net

asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Fund may also invest in certain

types of derivatives, but only for efficient portfolio management purposes. The Sub-Investment Manager may increase the Fund’s allocation to Money Market Instruments and ancillary liquid

assets when, in the Sub-Investment Manger’s opinion, market valuation levels become excessive.


210



Investment Objective – To generate long-term capital appreciation. The generation of current income is a secondary objective.

Investment Policies – The Fund will invest at least 70 per cent of its total asset value in a diversified portfolio comprised of equity or equity-related securities of U.S. Companies and debt

securities issued by U.S. Issuers, which are listed or traded on Regulated Markets in the United States listed in Schedule III of the prospectus, provided that the Fund shall at all times invest at

least 50 per cent of its total asset value in equity securities of U.S. Companies. The Sub-Investment Manager emphasises securities which are in its judgment undervalued in the marketplace

and, accordingly, have above-average capital growth potential. The Fund may also invest in aggregate up to 30 per cent of its total asset value in Money Market Instruments, non-publicly

traded securities, equity and fixed income securities of non-U.S. Issuers (including those from Emerging Market Countries, Emerging European Countries and Emerging Asia/Pacific

Countries), American Depository Receipts, Global Depository Receipts and mortgage-backed or asset-backed securities, provided however, no more than 20 per cent of the Fund’s total asset

value may be invested in securities of issuers from Emerging Market Countries, Emerging European Countries and/or Emerging Asia/Pacific Countries. A maximum of 10 per cent of the

Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.



Investment Policies – The Fund invests at least 70 per cent of its total asset value in equity securities of a concentrated group of U.S. Companies with large market capitalisations, which are

listed or traded on Regulated Markets in the United States listed on Schedule III of the prospectus. The core holdings of the Fund will be large market capitalisation U.S. Companies that are

dominant in their respective industries, global in scope and have a long-term history of performance. The Fund’s investments will consist of common stocks and to a lesser extent preferred

stock and equity-related securities issued by or related to large market capitalisation U.S. Companies, which are believed to afford attractive opportunities for investment growth. The Fund

will not invest in securities listed or traded on Regulated Markets in any Emerging Market Countries, Emerging European Countries or Emerging Asia/Pacific Countries. A maximum of 10 per

cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.



Investment Policies – The Fund invests at least 70 per cent of its total asset value in common stocks of U.S. Companies which are listed or traded on Regulated Markets in the United States

listed in Schedule III of the prospectus and that the Sub-Investment Manager believes are experiencing, or have potential to experience, growth of earnings and/or cash flow that exceed the

average earnings and/or cash flow growth rate of companies having securities included in the Standard & Poor’s Daily Price Index of 500 Common Stocks (the ‘‘S&P 500 Index’’). The Sub-

Investment Manager anticipates that the Fund would invest primarily in the securities of small or medium-sized companies and to a lesser degree in the securities of large, well-known

companies. The Sub-Investment Manager focuses its stock selection for the Fund on the diversified group of emerging growth companies that may have passed their ‘‘start-up’’ phase and

show positive earnings and the prospect of achieving significant profit gains in the two to three years after the Fund acquires their stocks. A maximum of 10 per cent of the Funds net asset

value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.



Investment Policies – The Fund invests at least 70 per cent of its total asset value in a diversified portfolio of equity securities issued by small-cap U.S. companies (i.e., U.S. Companies with

market capitalisations of less than $2.5 billion) that are listed or traded on Regulated Markets in the United States. The Sub-Investment Manager invests the Fund’s assets in these companies

in an attempt to take advantage of what it believes are opportunistic situations for undervalued securities. Such opportunistic situations may include turnarounds, emerging growth

companies with interrupted earnings patterns, companies with unrecognised asset values or undervalued growth companies. A maximum of 10 per cent of the Fund’s net asset value may be

invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. The Sub-Investment Manager uses a value method in

managing the Fund’s assets.



Investment Policies – The Fund invests at least two-thirds of its total asset value in equity securities issued by companies with stock market capitalisations less than $5 billion that are listed

or traded on Regulated Markets as set out in Schedule III of the prospectus. Up to one third of the Fund’s total asset value may invested in (i) equity securities (including common stock,

preferred shares and convertible securities) of companies with stock market capitalisations exceeding $5 billion that are listed or traded on Regulated Markets, (ii) debt securities issued or

guaranteed by national governments and their agencies, instrumentalities and political sub-divisions, (iii) corporate debt securities of issuers located in or whose securities are listed or traded

on Regulated Markets, and (iv) repurchase agreements or cash for efficient portfolio management purposes. A maximum of 10 per cent of the Fund’s net asset value may be invested in units

or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.


Investment Objective - To achieve long-term capital appreciation.

Investment Policies – The Fund invests principally in the equity securities of companies the Sub-Investment Manager views as being undervalued by the public market on the basis of its

proprietary investment analysis. The Fund invests primarily in issuers listed or traded on Regulated Markets in North America. At least 70 per cent of the Fund’s total asset value will be

invested in equity securities of U.S. Companies that are listed or traded on Regulated Markets. The Fund will invest no more than 5 per cent of its net asset value in warrants. The Fund may

also invest in debt securities of government issuers and corporate debt securities (such as freely transferable promissory notes, bonds or debentures) provided such debt securities are rated

Investment Grade at the time of purchase, are denominated in U.S. dollars and are traded or listed on Regulated Markets in North America. A maximum of 10 per cent. of the Fund’s net

asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the Regulations. The Fund may invest in derivatives, but only

for efficient portfolio management purposes.


Investment Objective – To provide long-term capital appreciation.

Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in equity securities (including common stock and preferred shares) that are listed or traded on

Regulated Markets as set out in Schedule III of the prospectus. Up to 15 per cent of the Fund’s total asset value may be invested in equity securities of issuers located in Emerging Market

Countries. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the

UCITS Regulations. To manage capital flows, the Fund may hold cash or invest in short-term debt instruments that are cash equivalents. The Sub-Investment Manager employs a value-

oriented strategy that seeks to identify securities that are trading below their normal valuation and expectations. The Sub-Investment Manager believes that percentage holdings of individual

securities normally will range between 1 per cent and 3 per cent of the Fund’s total asset value. Assets of the Fund may be denominated in currencies other than the Base Currency of the

Fund. Therefore, the Fund may be exposed to currency risk due to fluctuations in the exchange rate between such other currencies and the U.S. Dollar. The Sub-Investment Manager may or

may not try to mitigate this risk by using various hedging strategies through the use of financial derivative instruments.


211




Investment Policies – The Fund invests at all times at least two-thirds of its total asset value in equity securities of companies that are listed or traded on Regulated Markets and that are

domiciled in or have their principal activities in Europe, including but not limited to Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, The Netherlands,

Norway, Poland, Portugal, Spain, Sweden, Switzerland, and the United Kingdom, subject to applicable limitations on investments by foreigners. The Fund seeks to achieve its investment

objective by investing primarily in securities of companies believed to afford attractive opportunities for long-term capital appreciation. A maximum of 10 per cent of the Fund’s net asset

value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.



Investment Policies – The Fund invests at least two-thirds of its total asset value in equity securities listed or traded on Regulated Markets of companies domiciled in or having their principal

activities in one or more of the following emerging Asian countries, subject to applicable limitations established by such countries on investments by foreign investors: China, Hong Kong,

Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, India and Thailand. In addition, the Fund may, from time to time, also invest in equity securities of companies domiciled

in Japan, Australia, New Zealand, Pakistan and Sri Lanka. A maximum of 10 per cent of the Fund’s net asset value may be invested in units or shares of other collective investment schemes

within the meaning of Regulation 45(e) of the UCITS Regulations. A maximum of 10 per cent of the Fund’s net asset value may be invested in equity-linked or structured notes that are

transferable securities, whose underlying exposure may be to equity securities.



Investment Policies – The Fund invests at all times at least two-thirds of its total asset value, directly or indirectly through the use of financial derivative instruments, in equity securities

(including common stock and preferred shares) that are listed or traded on Regulated Markets as set out in Schedule III of the prospectus. The Fund generally will hold, directly or indirectly

through the use of financial derivative instruments, long positions equal in value to approximately 130 per cent of its net asset value and short positions equal in value to approximately 30

per cent of its net asset value. However, the Fund may hold long positions, in equity securities that are listed or traded on Regulated Markets as set out in Schedule III of this prospectus,

ranging in value from 110 per cent to 150 per cent of the Fund’s net asset value, and short positions in such equity securities ranging in value from 10 per cent to 50 per cent of the Fund’s

net asset value, depending on the relative performance of the Fund’s securities and the availability of attractive investment opportunities. Financial derivative instruments used by the Fund

may include, but are not limited to, total return swaps, options and forward currency exchange contracts. Financial derivative instruments may be used for investment and efficient portfolio

management purposes. The Fund will not directly short securities but instead will hold short positions exclusively through financial derivative instruments. A maximum of 10 per cent of the

Fund’s net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations.



Investment Policies – The Fund will invest at all times at least 70 per cent of its total asset value in equity securities of non-U.S. Companies each of which has a capitalisation of $750 million

or more, which stocks are listed or traded on Regulated Markets as listed in Schedule III of the prospectus. Generally, the Fund invests in a number of different countries and it is expected

that the Fund will invest at least 70 per cent of its total asset value assets in equity securities of companies with large capitalisations in at least three non-U.S. markets. The Sub-Investment

Manager looks for well-established companies which appear to be reasonably valued compared to their long-term earnings potential. These companies will be organised, incorporated or

headquartered in a range of markets outside of the U.S., providing exposure to a range of non-U.S. economies. The Fund may invest in preferred stock and equity related securities, and also,

to a limited extent, may purchase units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations (subject to a maximum of 10 per

cent of the Fund’s net asset value), that invest in non-U.S. securities and which are listed or traded on Regulated Markets worldwide.



Investment Policies – The Fund will invest at all times at least 70 per cent of its total asset value in equity securities (including common stocks and preferred shares) of companies whose

seat, registered office or principal activities are in Emerging Market Countries and that are listed or traded on Regulated Markets, subject to applicable limitations established by such

countries on investments by foreign investors. Up to 30 per cent of the Fund’s total asset value may be invested in equity securities of companies domiciled in or having their principal place of

business in developed countries; debt securities issued or guaranteed by national governments, their agencies, instrumentalities, and political sub-divisions that are rated Investment Grade at

the time of purchase and that are listed or traded on Regulated Markets; corporate debt securities that are rated Investment Grade at the time of purchase and that are listed or traded on

Regulated Markets; other open-ended collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations and warrants. No more than 10 per cent of the Fund’s

net asset value may be invested in units or shares of other collective investment schemes within the meaning of Regulation 45(e) of the UCITS Regulations. A maximum of 10 per cent of the

Fund’s net asset value may be invested in equity-linked or structured notes that are transferable securities, whose underlying exposure may be to equity securities.

3. Efficient Portfolio Management

The Investment Managers may employ for certain Funds investment techniques and instruments, such as trading in futures and options and other derivative instruments for efficient portfolio

management, subject to the conditions and within the limits from time to time laid down by the Irish Financial Services Regulatory Authority (the ‘‘Financial Regulator’’). Furthermore, new

techniques and instruments may be developed which may be suitable for use by a Fund in the future and a Fund may employ such techniques and instruments subject to the prior approval

of, and any restrictions imposed by, the Financial Regulator.


212

Notes to Financial Statements – (continued)4. Operating Expenses and Other Related Party Transactions

Pursuant to separate Investment Management Agreements between the Company and Legg Mason Capital Management, Inc. and Legg Mason Investments (Europe) Limited, each

Investment Manager shall be entitled to receive an investment management fee out of the assets of the relevant Fund for its services as the Investment Manager, which shall accrue on each

dealing day and be payable monthly in arrears. The maximum Investment Management Fee for each class in issue at August 31, 2008 (expressed as a percentage of the relevant Fund’s net

asset value attributable to such class) is as follows:

Fund Name

Class A US$ Accumulating

Class A US$ Distributing (A)

Class A US$ Distributing (D)

Class A US$ Distributing (M)

Class A US$ Distributing (S)

Class A Euro Accumulating


Class A Euro Distributing (A)

Class A Euro Distributing (A) (Hedged)

Class A Euro Distributing (D)


Class A Euro Distributing (M) (Hedged)

Class A Euro Distributing (S) (Hedged)

Class A GBP Distributing (A)

Class A GBP Distributing (M) (Hedged)


Class A SGD Accumulating


Class A SGD Distributing (Q) (Hedged)

Class A SGD Distributing (S) (Hedged)

Class B US$ Accumulating

Class B US$ Distributing (A)

Class B US$ Distributing (D)

Class B US$ Distributing (S)

Class C US$ Accumulating

Class C US$ Distributing (D)

Class C US$ Distributing (A)

Class C US$ Distributing (S)

Western Asset U.S. Money Market Fund 0.80 per cent n/a 1.05 per cent 1.30 per centWestern Asset U.S. Core Bond Fund 0.95 per cent n/a 1.20 per cent 1.45 per centWestern Asset U.S. Core Plus Bond Fund 1.15 per cent n/a 1.40 per cent 1.65 per centWestern Asset Euro Core Plus Bond Fund 1.00 per cent n/a 1.25 per cent 1.50 per centWestern Asset Diversified Strategic Income Bond Fund 1.10 per cent 1.10 per cent 1.35 per cent 1.60 per centWestern Asset Global Multi Strategy Fund 1.10 per cent 1.10 per cent 1.35 per cent 1.60 per centWestern Asset U.S. High Yield Bond Fund 1.15 per cent n/a 1.40 per cent 1.65 per centWestern Asset Emerging Markets Bond Fund 1.50 per cent n/a 1.75 per cent 2.00 per centWestern Asset Global High Yield Bond Fund 1.25 per cent n/a 1.50 per cent 1.75 per centWestern Asset U.S. Short-Term Government Income Fund 1.05 per cent n/a 1.30 per cent 1.55 per centWestern Asset U.S. Adjustable Rate Income Fund 1.10 per cent n/a 1.35 per cent 1.60 per centWestern Asset Inflation Management Fund 1.10 per cent n/a 1.35 per cent 1.60 per centWestern Asset Asian Opportunities Fund 1.10 per cent 1.10 per cent 1.35 per cent 1.60 per centBrandywine Global Opportunities Bond Fund 1.10 per cent 1.10 per cent 1.35 per cent 1.60 per centLegg Mason Value Fund 1.35 per cent 1.35 per cent 1.85 per cent 1.85 per centLegg Mason Growth Fund 1.20 per cent 1.20 per cent 1.70 per cent 1.70 per centClearBridge U.S. Appreciation Fund 1.25 per cent 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Fundamental Value Fund 1.25 per cent 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Large Cap Growth Fund 1.25 per cent 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Aggressive Growth Fund 1.30 per cent 1.30 per cent 1.80 per cent 1.80 per centRoyce U.S. Small Cap Opportunity Fund 1.50 per cent 1.50 per cent 2.00 per cent 2.00 per centRoyce Smaller Companies Fund 1.50 per cent 1.50 per cent 2.00 per cent 2.00 per centPCM U.S. Equity Fund 1.50 per cent 1.50 per cent 2.00 per cent 2.00 per centGC Global Equity Fund 1.35 per cent 1.35 per cent 1.85 per cent 1.85 per centBatterymarch European Equity Fund 1.35 per cent 1.35 per cent 1.85 per cent 1.85 per centBatterymarch Pacific Equity Fund 1.50 per cent 1.50 per cent 2.00 per cent 2.00 per centBatterymarch 130/30 Global Equity Fund 1.75 per cent 1.75 per cent 2.25 per cent 2.25 per centBatterymarch International Large Cap Fund 1.40 per cent 1.40 per cent 1.90 per cent 1.90 per centBatterymarch Emerging Markets Equity Fund 1.45 per cent 1.45 per cent 1.95 per cent 1.95 per cent

Fund Name

Class A (G) US$ Accumulating

Class A (G) US$ Distributing (A)

Class A (G) US$ Distributing (D)

Class B (G) US$ Accumulating

Class B (G) US$ Distributing (A)

Class B (G) US$ Distributing (D)


Class L (G) US$ Distributing (A)

Class L (G) US$ Distributing (D)

Western Asset U.S. Money Market Fund 0.80 per cent 0.80 per cent 0.80 per centWestern Asset U.S. Core Plus Bond Fund 1.15 per cent 1.65 per cent 1.65 per centWestern Asset Diversified Strategic Income Bond Fund 1.20 per cent 1.70 per cent 1.70 per centWestern Asset U.S. High Yield Bond Fund 1.15 per cent 1.65 per cent 1.65 per centWestern Asset Emerging Markets Bond Fund 1.25 per cent 1.75 per cent 1.75 per centWestern Asset Global High Yield Bond Fund 1.25 per cent 1.75 per cent 1.75 per centWestern Asset U.S. Short-Term Government Income Fund 1.05 per cent 1.55 per cent 1.55 per centWestern Asset U.S. Adjustable Rate Income Fund 1.10 per cent 1.60 per cent 1.60 per centWestern Asset Inflation Management Fund 1.10 per cent 1.60 per cent 1.60 per centClearBridge U.S. Appreciation Fund 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Fundamental Value Fund 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Large Cap Growth Fund 1.25 per cent 1.75 per cent 1.75 per centClearBridge U.S. Aggressive Growth Fund 1.30 per cent 1.80 per cent 1.80 per centRoyce Smaller Companies Fund 1.25 per cent 1.75 per cent 1.75 per centBatterymarch European Equity Fund 1.35 per cent 1.85 per cent 1.85 per centBatterymarch International Large Cap Fund 1.40 per cent 1.90 per cent 1.90 per cent


213

Notes to Financial Statements – (continued)4. Operating Expenses and Other Related Party Transactions – (continued)

Fund Name

Premier Class CHF Accumulating (Hedged)


Premier Class US$ Distributing (A)


Premier Class US$ Distributing (M)

Premier Class US$ Distributing (S)

Premier Class Euro Distributing (A) (Hedged)

Premier Class Euro Accumulating

Premier Class Euro Accumulating (Hedged)

Premier Class Euro Distributing (A)

Premier Class Euro Distributing (M) (Hedged)

Premier Class Euro Distributing (S) (Hedged)

Premier Class GBP Distributing (A)

Premier Class GBP Distributing (A) (Hedged)

Premier Class GBP Distributing (M) (Hedged)

Premier Class GBP Distributing (S) (Hedged)

Premier Class SGD Accumulating

Premier Class SGD Accumulating (Hedged)

Premier Class SGD Distributing (Q) (Hedged)

Premier Class SGD Distributing (S) (Hedged)

LM Class Euro Accumulating (Hedged)

LM Class US$ Accumulating

LM Class US$ Distributing (A)

LM Class US$ Distributing (M)

LM Class US$ Distributing (S)

LM Class Euro Distributing (A) (Hedged)

LM Class Euro Distributing (M) (Hedged) Galleon Class

Western Asset U.S. Money Market Fund 0.50 per cent n/a n/aWestern Asset U.S. Core Bond Fund 0.45 per cent n/a n/aWestern Asset U.S. Core Plus Bond Fund 0.65 per cent n/a n/aWestern Asset Euro Core Plus Bond Fund 0.50 per cent n/a n/aWestern Asset Diversified Strategic Income Bond Fund 0.60 per cent n/a n/aWestern Asset Global Multi Strategy Fund 0.60 per cent n/a n/aWestern Asset U.S. High Yield Bond Fund 0.65 per cent n/a n/aWestern Asset Emerging Markets Bond Fund 1.00 per cent n/a n/aWestern Asset Global High Yield Bond Fund 0.75 per cent n/a n/aWestern Asset U.S. Short-Term Government Income Fund 0.55 per cent n/a n/aWestern Asset U.S. Adjustable Rate Income Fund 0.60 per cent n/a n/aWestern Asset Inflation Management Fund 0.60 per cent n/a n/aWestern Asset Asian Opportunities Fund 0.60 per cent n/a n/aBrandywine Global Opportunities Bond Fund 0.60 per cent n/a n/aLegg Mason Value Fund 0.85 per cent n/a 0.85 per centLegg Mason Growth Fund 0.70 per cent n/a n/aClearBridge U.S. Appreciation Fund 0.75 per cent n/a n/aClearBridge U.S. Fundamental Value Fund 0.75 per cent n/a n/aClearBridge U.S. Large Cap Growth Fund 0.75 per cent n/a n/aClearBridge U.S. Aggressive Growth Fund 0.80 per cent n/a n/aRoyce U.S. Small Cap Opportunity Fund 1.00 per cent n/a n/aRoyce Smaller Companies Fund 1.00 per cent n/a n/aPCM U.S. Equity Fund 1.00 per cent n/a n/aGC Global Equity Fund 0.85 per cent n/a n/aBatterymarch European Equity Fund 0.85 per cent n/a n/aBatterymarch 130/30 Global Equity Fund 0.90 per cent n/a n/aBatterymarch Pacific Equity Fund 1.00 per cent n/a n/aBatterymarch International Large Cap Fund 0.90 per cent n/a n/aBatterymarch Emerging Markets Equity Fund 0.95 per cent n/a n/a

In the tables above, the expense limits provided for each Fund apply to any of the share classes listed in the relevant column that are offered by the Fund. Not all share classes are offered by

each Fund. The prospectus, as it may be amended or supplemented from time to time, indicates which share classes are offered by each Fund.

The Investment Manager of certain Funds has voluntarily agreed to waive a portion of its fees and/or reimburse each respective Fund for certain expenses so that the total expenses would

not exceed certain voluntary expense limitations established for each respective Fund. The Investment Manager, at its discretion, may revise or discontinue the voluntary waivers and/or

expense reimbursements at any time. For the period ended August 31, 2008, the Investment Manager fees waived were as follows:

Fund Name

Investment

Management Fee

Waived

August 31, 2008

(000’s)

$

Investment

Management Fee

Waived

August 31, 2007

(000’s)

$

Western Asset U.S. Money Market Fund 4 –Western Asset U.S. Core Plus Bond Fund 1 –Western Asset Diversified Strategic Income Bond Fund 1 –Western Asset Inflation Management Fund 22 18PCM U.S. Equity Fund 4 –GC Global Equity Fund – 4

Each Investment Manager shall be responsible for paying the fees and out-of-pocket expenses of the Sub-Investment Managers out of its own investment management fee. Legg Mason

Capital Management, Inc. has entered into separate Distribution Agreements with Legg Mason Investor Services, LLC, Legg Mason Investments (Europe) Limited, Legg Mason Asset

Management (Hong Kong) Limited, Legg Mason International Equities (Singapore) Pte. Limited and Legg Mason Investments (Taiwan) Limited (collectively the ‘‘Distributors’’) under which

Legg Mason Capital Management, Inc. has delegated certain responsibilities associated with marketing and distributing the Legg Mason Value Fund to the Distributors.


214

Notes to Financial Statements – (continued)4. Operating Expenses and Other Related Party Transactions – (continued)

For the Funds for which Legg Mason Investments (Europe) Limited serves as Investment Manager, it has entered into separate distribution agreements with Legg Mason Investor Services,

LLC, Legg Mason Asset Management Hong Kong Limited, Legg Mason International Equities (Singapore) Pte Limited and Legg Mason Investments (Taiwan) Limited under which Legg Mason

Investments (Europe) Limited has delegated to these Distributors certain responsibilities associated with marketing and distributing each of the Funds for which it serves as investment

manager. The distribution agreement with Legg Mason Investments (Taiwan) Limited is a tri-party agreement to which Legg Mason Capital Management, Inc. is also party. In accordance

with Taiwanese law, this agreement is entitled a Master Agent Agreement, pursuant to which Legg Mason Investments (Taiwan) Limited acts as the Master Agent of the Funds in Taiwan.

The delegated functions in the distribution and master agent agreements do not include the Investment Managers’ provision of investment management services to the Funds, but are

limited to marketing and distribution services provided to the Funds and the Company. Under the aforementioned agreements, each Investment Manager shall pay to each Distributor a

portion of its investment management fee as set out in such distribution agreements.

The Company shall also be responsible for the prompt payment or reimbursement to the Investment Manager of any commissions, transfer fees, registration fees, taxes and similar liabilities,

costs and out-of-pocket expenses properly payable or incurred by the Investment Manager.

Shareholder Services Fee

Under the Shareholder Servicing Agreements between Legg Mason Investor Services, LLC, Legg Mason Investments (Europe) Limited, Legg Mason Asset Management Hong Kong Limited,

Legg Mason International Equities (Singapore) Pte Limited and Legg Mason Investments (Taiwan) Limited (the ’’Shareholder Servicing Agent’’) and the Company, each Shareholder Servicing

Agent shall be entitled to receive a shareholder services fee for their services as Shareholder Servicing Agent. The aggregate amount of shareholder services fees paid by the Company shall

be equal to the following:

(i) 0.15 per cent, per annum of the net asset value of the Western Asset U.S. Core Bond Fund, the Western Asset U.S. Core Plus Bond Fund, the Western Asset Euro Core Plus

Bond Fund, the Western Asset Diversified Strategic Income Bond Fund, the Western Asset Global Multi Strategy Fund, the Western Asset U.S. High Yield Bond Fund, the

Western Asset Emerging Markets Bond Fund, the Western Asset Global High Yield Bond Fund, the Western Asset U.S. Short-Term Government Income Fund, the Western

Asset U.S. Adjustable Rate Income Fund, the Western Asset Inflation Management Fund, the Brandywine Global Opportunities Bond Fund, and

(ii) 0.35 per cent, per annum, of the net asset value of, the Legg Mason Value Fund, the Legg Mason Growth Fund, the ClearBridge U.S. Appreciation Fund, the ClearBridge U.S.

Fundamental Value Fund, the ClearBridge U.S. Large Cap Growth Fund, the ClearBridge U.S. Aggressive Growth Fund, the Royce U.S. Small Cap Opportunity Fund, the Royce

Smaller Companies Fund, the PCM U.S. Equity Fund, the GC Global Equity Fund, the Batterymarch European Equity Fund, the Batterymarch Pacific Equity Fund, the

Batterymarch 130/30 Global Equity Fund, the Batterymarch International Large Cap Fund and the Batterymarch Emerging Markets Equity Fund.

Shareholder Service fees are payable on all classes except LM Share Classes, Premier Share Classes, Grandfathered Share Classes, and all share classes offered by the Western Asset U.S.

Money Market Fund.

During the period ended August 31, 2008 the shareholder services fees waived were as follows:

Fund Name

Shareholder Services

Fee Waived

August 31, 2008

(000’s)

$

Shareholder Services

Fee Waived

August 31, 2007

(000’s)

$

Western Asset U.S. Core Plus Bond Fund 6 –Western Asset Diversified Strategic Income Bond Fund 1 –Western Asset Global Multi Strategy Fund 3 –Western Asset Emerging Markets Bond Fund 6 –Western Asset Global High Yield Bond Fund 26 –Western Asset U.S. Short Term Government Income Fund 1 –Western Asset U.S. Adjustable Rate Income Fund 6 –Brandywine Global Opportunities Bond Fund 8 –Legg Mason Value Fund 2 –Legg Mason Growth Fund 1 –ClearBridge U.S. Appreciation Fund 3 –ClearBridge U.S. Fundamental Value Fund 10 –ClearBridge U.S. Large Cap Growth Fund 2 –ClearBridge U.S. Aggressive Growth Fund 15 –Royce U.S. Small Cap Opportunity Fund 8 –Royce Smaller Companies Fund 2 –PCM U.S. Equity Fund 2 –GC Global Equity Fund 61 3Batterymarch European Equity Fund 1 –Batterymarch Pacific Equity Fund 11 –Batterymarch International Large Cap Fund 3 –

The shareholder services fees shall be payable monthly in arrears and shall accrue on each dealing day.

Administrator and Custodian Fees

PNC International Bank Limited (formerly PFPC Bank Limited) acts as Custodian and PNC Global Investment Servicing (Europe) Limited (formerly PFPC International Limited) (‘‘PNC’’) acts as

Administrator to all Funds in the Company. Effective April 23, 2007 for administration, accounting, shareholder, trustee and custodial services, they collectively receive from the Funds a

monthly unitary fee of up to an annual rate of 0.10% of the aggregate average daily net asset value of the Company.

Until April 23, 2007 for administration, accounting, shareholder, trustee and custodial services, they collectively received from the Funds a monthly unitary fee of up to an annual rate of

0.15% of the aggregate average daily net asset value of the Company.

Effective June 8, 2005 to April 23, 2007, PNC voluntarily agreed to waive 0.06% of its monthly unitary fee for the Western Asset U.S. Money Market Fund. For the period ended

August 31, 2008, PNC has voluntarily waived $4,132 of its Unitary fee for the Western Asset U.S. Money Market Fund.

Any waivers in place can be revoked at any time.

Directors’ Remuneration

Directors’ fees accrued over the periods ended August 31, 2008 and 2007 were $36,000 and $22,000 respectively.


215

Notes to Financial Statements – (continued)5. Distributions to Holders of Redeemable Participating Shares

Distributing Share Classes

The letter in parentheses at the end of the name of each Distributing Share Class indicates a particular frequency of dividend declarations and dividend payments, as detailed in the following

table.

Distributing Share Class Designation Frequency of Dividend Declarations Frequency of Dividend Payments

(D) Daily Monthly

(M) Monthly Monthly

(Q) Quarterly Quarterly (March, June, September, December)

(S) Semi-Annually Semi-Annually (March, September)

(A) Annually Annually (March)

For each Distributing Share Class of each Fixed Income Fund (as defined in note 14), at the time of each dividend declaration: (1) net investment income, if any, will be declared as a dividend;

and (2) all, or some portion, of realised and unrealised capital gains net of realised and unrealised capital losses may be, but is not required to be, declared as a dividend.

For each Distributing Share Class of each Equity Fund (as defined in note 14), at the time of each dividend declaration: net investment income, if any, will be declared as a dividend.

For each Shareholder of each Distributing Share Class, distributions will be made in the currency in which the Shareholder subscribed for Shares, unless the Shareholder requests otherwise.

Payments will be made by wire transfer to a Shareholder’s account. Shareholders may elect on the application form whether or not to invest such distributions in additional Shares.

Accumulating Share Classes

With respect to Accumulating Share Classes, it is intended that, in the normal course of business, distributions will not be declared and that any net investment income attributable to each

Accumulating Share Class will be accumulated daily in the respective net asset value per Share of each respective Share Class.

6. Share Capital and Redeemable Participating Shares

Share Capital

The Company was incorporated with an initial share capital of Euro 39,000 represented by 39,000 Subscriber Shares of no par value. All but seven of the Subscriber Shares have been

repurchased by the Company. Shareholders of these seven Subscriber Shares are entitled to attend and vote at all of the meetings of the Company, but are not entitled to participate in the

dividends or net assets of any Fund or of the Company.


The share capital of the Company shall at all times equal the net asset value. The Directors are empowered to issue up to five hundred billion Shares of no par value in the Company at the net

asset value per Share on such terms as they may see fit. There are no rights of pre-emption upon the issue of Shares in the Company.

Each of the Shares entitles the Shareholder to participate equally on a pro rata basis in the dividends, where applicable, and net assets of the Fund in respect of which they are issued, save in

the case of dividends declared prior to becoming a Shareholder.

The proceeds from the issue of Shares shall be applied in the books of the Company to the relevant Fund and shall be used in the acquisition on behalf of the relevant Fund of assets in which

the Fund may invest. The records and accounts of each Fund shall be maintained separately.

Each Fund has difference Shares Classes offered as indicated in the Company’s prospectus. These different Classes of Shares differ principally in terms of their sales charges, fees, rates of

expenses, distribution policy, and currency denomination. Investors are thus able to choose a Share Class that best suits their investment needs, considering the amount of investment and

anticipated holding period.

Each Share Class is designated as a Distributing Share Class or an Accumulating Share Class. Accumulating Share Classes do not distribute net income, net realised or net unrealised capital

gains whereas Distributing Share Classes will distribute at certain intervals, which will vary depending on the letter in parentheses at the end of the name of the Distributing Share Class, as

explained under the Distributions Note 5 above. In addition, the Company has Subscriber Shares outstanding. The Subscriber Shares do not entitle the holders to participate in the assets of

any Fund.

Each Fund may offer Share Classes designated in currencies other than the Base Currency of the Fund. For each such Share Class, unless indicated by ‘‘(Hedged)’’ in the name of the Share

Class, the Investment Manager or Sub-Investment Manager will not employ any techniques to hedge the Share Class’s exposure to changes in exchange rates between the Base Currency of

the Fund and the currency of the Share Class.

Each of the Funds offers LM Share Classes, and certain of the Funds offer Grandfathered Share Classes. LM Share Classes are available only at the discretion of the relevant Distributor. The

Grandfathered Share Classes are available only to unitholders of the funds which are managed by affiliates of the Investment Mangers (‘‘Affiliated Funds’’) except for the Grandfathered

Share Classes of the GC Global Equity Fund, which are available only at the discretion of the relevant Distributor. Following the initial subscription for Shares of the Grandfathered Share

Classes by unitholders of the Affiliated Funds (or, in the case of the GC Global Equity Fund, by investors permitted in the Fund at the discretion of the relevant Distributor), the Grandfathered

Share Classes will be closed to any subsequent subscriptions, both by existing shareholders in the Share Class and by new investors, except that Shares may continue to be acquired through

(1) dividend reinvestments; (2) automatic conversions from a Class B (G) Share Class of a Fund to a Class A (G) Share Class of the same Fund; and (3) exchanges of Shares of the equivalent

Grandfathered Share Class of another Fund.

Galleon Class Shares of Legg Mason Value Fund, which differ from the other Share Classes in terms of minimum subscription level, sales charges and/or rates of expenses, are no longer

being offered for subscription. Existing Galleon Class Shares will be maintained in accordance with and subject to the terms and conditions applicable at the time of purchase.

7. Taxation

The Company will not generally be liable to tax in respect of its income and gains, other than on the occurrence of a chargeable event. Generally a chargeable event arises on any

distribution, redemption, repurchase, cancellation, transfer of shares or on the ending of a ’Relevant Period’, a ’Relevant Period’ being an eight year period beginning with the acquisition of

the shares by the Shareholders and each subsequent period of eight years beginning immediately after the preceding Relevant Period.

A chargeable event does not include:

(i) Any transactions in relation to shares held in a recognised clearing system as designated by order of the Revenue Commissioners of Ireland: or

(ii) An exchange by a shareholder, effected by way of an arms length bargain where no payment is made by the shareholder of shares in a Fund for other shares in a Fund: or

(iii) An exchange of shares arising on a qualifying amalgamation or reconstruction of the Fund with another Fund: or

(iv) Certain exchanges of shares between spouses and former spouse or the occasion of judicial separation and/or divorce.

A chargeable event will not occur in respect of Shareholders who are neither resident nor ordinarily resident in Ireland and who have provided the Fund with a relevant declaration to that

effect.


216

Notes to Financial Statements – (continued)7. Taxation – (continued)

In the absence of an appropriate declaration, the Fund will be liable to Irish Tax on the occurrence of a chargeable event. There were no chargeable events during the period under review.

Capital gains, dividends and interest received may be subject to withholding taxes imposed by the country of origin and such taxes may not be recoverable by the Fund or its shareholders.

8. Cash Note

The cash balances of any Fund are held with PNC International Bank Limited (formerly PFPC Bank Limited). Included in the cash balances are amounts held as collateral for futures and

options contracts for the following Funds:

As atAugust 31, 2008(000’s)

As atFebruary 29, 2008(000’s)

Western Asset Euro Core Bond Fund EUR 134 456

Western Asset Diversified Strategic Bond Fund USD 1,928 1,568

Western Asset Global Multi Strategy Fund USD 3,252 1,517

Western Asset U.S. Adjustable Rate Income Fund USD 130 132

Western Asset Inflation Management Fund USD 6 –

Western Asset Asian Opportunities Fund USD 41 –

9. Commitments and Contingent Liabilities

There were no significant commitments or contingent liabilities at the Balance Sheet date.

10. Soft Commission Arrangements

During the period ended August 31, 2008, Brandywine Global Investment Management, LLC (‘‘Brandywine’’, Sub-Investment Manager for the Brandywine Global Opportunities Bond Fund

for the full period and the GC Global Equity Fund up to 30 June 2008), Global Currents Investment Management, LLC (‘‘Global Currents’’ Sub-Investment Manager for the GC Global Equity

Fund since 1 July 2008), Legg Mason Capital Management, Inc. (‘‘LMCM‘‘, the Investment Manager for the Legg Mason Value Fund and the Sub-Investment Manager for the Legg Mason

Growth Fund), ClearBridge Advisors, LLC (‘‘ClearBridge‘‘, the Sub-Investment Manager for the ClearBridge U.S. Appreciation Fund, the ClearBridge U.S. Fundamental Value Fund, the

ClearBridge U.S. Large Cap Growth Fund, and the ClearBridge U.S. Aggressive Growth Fund) and Royce & Associates, LLC (‘‘Royce‘‘, the Sub-Investment Manager for the Royce U.S. Small

Cap Opportunity Fund and the Royce Smaller Companies Fund) entered into soft commission arrangements with brokers in respect of which certain goods and services used to support the

investment decision process were received. Brandywine, Global Currents, LMCM, ClearBridge, Royce and their respective connected persons do not make direct payments for these services

but do transact business with the brokers on behalf of the Funds for which Brandywine, Global Currents, LMCM, ClearBridge and Royce acts as Investment Manager or Sub-Investment

Manager, and commissions are paid on these transactions. These services assist Brandywine, Global Currents, LMCM, ClearBridge and Royce in carrying out their investment decision-making

responsibilities in respect of the relevant Funds.

Western Asset Management Company and Western Asset Management Company Limited (‘‘Western Asset’’, Sub-Investment Managers for the Western Asset U.S. Money Market Fund,

Western Asset U.S. Core Bond Fund, Western Asset U.S. Core Plus Bond Fund Western Asset Euro Core Plus Bond Fund, Western Asset Diversified Strategic Income Bond Fund, Western

Asset Global Multi Strategy Fund, Western Asset U.S. High Yield Bond Fund, Western Asset Emerging Markets Bond Fund, Western Asset Global High Yield Bond Fund, Western Asset U.S.

Short-Term Government Income Fund, Western Asset U.S. Adjustable Rate Income Fund, Western Asset Inflation Management Fund and the Western Asset Asian Opportunities Fund),

Batterymarch Financial Management, Inc. (‘‘Batterymarch’’, Sub-Investment Manager for the Batterymarch European Equity Fund, the Batterymarch Pacific Equity Fund, the Batterymarch

130/30 Global Equity Fund, the Batterymarch International Large Cap Fund and the Batterymarch Emerging Markets Equity Fund) and Private Capital Management, L.P. (‘‘PCM’’, Sub-

Investment Manager for the PCM U.S. Equity Fund, did not participate in any soft commission arrangements during the period .

11. Exchange Rates

The following exchange rates were used in these financial statements to obtain the equivalent U.S. Dollar and Euro amounts for the respective Funds with U.S. Dollar and Euro based

currencies respectively:

USD Based Funds CountryExchange rates as atAugust 31, 2008

Exchange rates as atFebruary 29, 2008

Argentina 3.0313 3.1605Australia 1.1645 1.0734Brazil 1.6300 1.6911Canada 1.0618 0.9843China 6.8350 –Denmark 5.0838 4.9072Egypt 5.3750 5.4863Euro 0.6816 0.6587Hong Kong 7.8046 7.7813Hungary 161.4805 174.2516Iceland 83.2750 66.0650India 43.9350 40.0150Indonesia 9,150.0000 9,065.0000Israel 3.5832 3.6563Japan 108.8250 103.8900Malaysia 3.3935 3.1945Mexico 10.2828 10.7100New Zealand 1.4287 1.2506Norway 5.4228 5.2136Pakistan 76.2500 n/aPeru n/a 2.8895Philippines 45.9150 40.4650Poland 2.2712 2.3236Russia 24.6489 24.0143Singapore 1.4170 1.3949South Africa 7.6975 7.8397South Korea 1,088.9000 939.0500Sweden 6.4507 6.1661Switzerland 1.1012 1.0417Taiwan 31.5380 30.9150Thailand 34.2400 31.4750Turkey 1.1846 1.2205United Kingdom 0.5486 0.5033


217

Notes to Financial Statements – (continued)11. Exchange Rates – (continued)

EUR Based Funds CountryExchange rates as atAugust 31, 2008

Exchange rates as atFebruary 29, 2008

Australia 1.7096 1.6230Canada n/a 1.4869Denmark 7.4576 7.4507Hungary 236.4500 264.1000Norway 7.9631 7.9188Poland 3.3318 3.5185South Africa n/a 11.7898Sweden 9.4552 9.3665Switzerland 1.6170 1.5846Turkey 1.7793 1.8343United Kingdom 0.8072 0.7632United States 1.4671 1.5181

12. Net Gain/(Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss

Net Gain/(Loss) on financial assets and liabilities at fair value through profit or loss for the period ended August 31, 2008 were as follows:

WesternAsset U.S. MoneyMarket Fundfor theperiod endedAugust 31, 2008(’000$)

WesternAsset U.S. CoreBond Fundfor theperiod endedAugust 31, 2008(’000$)

WesternAsset U.S. CorePlus Bond Fundfor theperiod endedAugust 31, 2008(’000$)

Western AssetEuro Core PlusBond Fundfor theperiod endedAugust 31, 2008(’000E)

Western AssetDiversifiedStrategic IncomeBond Fundfor theperiod endedAugust 31, 2008(’000$)

Net realised gain/(loss) on financial instruments held for trading 93 (1,162) (412) (223) (3,513)

Net unrealised gain/(loss) on financial instruments held for trading – (4,398) (2,401) (450) (1,885)

93 (5,560) (2,813) (673) (5,398)

Western AssetGlobal MultiStrategy Fundfor theperiod endedAugust 31, 2008(’000$)

WesternAsset U.S. HighYield Bond Fundfor theperiod endedAugust 31, 2008(’000$)

Western AssetEmerging MarketsBond Fundfor theperiod endedAugust 31, 2008(’000$)

Western AssetGlobal High YieldBond Fundfor theperiod endedAugust 31, 2008(’000$)

WesternAsset U.S. Short-Term GovernmentIncome Fundfor theperiod endedAugust 31, 2008(’000$)

Net realised gain/(loss) on financial instruments held for trading (10,305) (3,237) (117) (8,262) (759)

Net unrealised gain/(loss) on financial instruments held for trading (22,795) (289) (3,917) 260 (248)

(33,100) (3,526) (4,034) (8,002) (1,007)

WesternAsset U.S.Adjustable RateIncome Fundfor theperiod endedAugust 31, 2008(’000$)

Western AssetInflationManagementFundfor theperiod endedAugust 31, 2008(’000$)

Western AssetAsianOpportunitiesFundfor theperiod endedAugust 31, 2008(’000$)

BrandywineGlobalOpportunitiesBond Fundfor theperiod endedAugust 31, 2008(’000$)

Legg Mason ValueFundfor theperiod endedAugust 31, 2008(’000$)

Net realised gain/(loss) on financial instruments held for trading (592) 110 330 11,834 (122,638)

Net unrealised gain/(loss) on financial instruments held for trading (6,214) (578) (522) (38,084) (2,447)

(6,806) (468) (192) (26,250) (125,085)

Legg MasonGrowth Fundfor theperiod endedAugust 31, 2008(’000$)

ClearBridge U.S.Appreciationfor theperiod endedAugust 31, 2008(’000$)

ClearBridge U.S.FundamentalValue Fundfor theperiod endedAugust 31, 2008(’000$)

ClearBridge U.S.Large Cap GrowthFundfor theperiod endedAugust 31, 2008(’000$)

ClearBridge U.S.AggressiveGrowth Fundfor theperiod endedAugust 31, 2008(’000$)

Net realised gain/(loss) on financial instruments held for trading (7,092) (496) (15,346) (1,280) 1,743

Net unrealised gain/(loss) on financial instruments held for trading (6,076) (301) 5,099 682 (5,307)

(13,168) (797) (10,247) (598) (3,564)


218

Notes to Financial Statements – (continued)12. Net Gain/(Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss – (continued)

Royce U.S. SmallCap OpportunityFundfor theperiod endedAugust 31, 2008(’000$)

Royce SmallerCompanies Fundfor theperiod endedAugust 31, 2008(’000$)

PCM U.S. EquityFundfor theperiod endedAugust 31, 2008(’000$)

GC Global EquityFundfor theperiod endedAugust 31, 2008(’000$)

BatterymarchEuropean EquityFundfor theperiod endedAugust 31, 2008(’000E)

Net realised gain/(loss) on financial instruments held for trading (2,255) 1,081 (7) (2,401) (4,645)

Net unrealised gain/(loss) on financial instruments held for trading 5,572 1,303 (68) (4,755) 633

3,317 2,384 (75) (7,156) (4,012)

BatterymarchPacific EquityFundfor theperiod endedAugust 31, 2008(’000$)

Batterymarch 130/30 Global EquityFundfor theperiod endedAugust 31, 2008(’000$)

BatterymarchInternationalLarge Cap Fundfor theperiod endedAugust 31, 2008(’000$)

BatterymarchEmerging MarketsEquity Fundfor theperiod endedAugust 31, 2008(’000$)

Net realised gain/(loss) on financial instruments held for trading (37,212) (177) (2,960) (2,080)

Net unrealised gain/(loss) on financial instruments held for trading (73,367) (567) (2,270) (11,946)

(110,579) (744) (5,230) (14,026)

Net Gain/(Loss) on financial assets and liabilities at fair value through profit or loss for the period ended August 31, 2007 were as follows:

WesternAsset U.S. MoneyMarket Fundfor theperiod endedAugust 31, 2007(’000$)

WesternAsset U.S. CoreBond Fundfor theperiod endedAugust 31, 2007(’000$)

WesternAsset U.S. CorePlus Bond Fundfor theperiod endedAugust 31, 2007(’000$)

Western AssetEuro Core PlusBond Fundfor theperiod endedAugust 31, 2007(’000E)

Western AssetDiversifiedStrategic IncomeBond Fundfor theperiod endedAugust 31, 2007(’000$)

Net realised gain/(loss) on financial instruments held for trading (1) (1,306) (135) (317) (1,671)

Net unrealised gain/(loss) on financial instruments held for trading – (2,001) (602) (302) (3,430)

(1) (3,307) (737) (619) (5,101)

Western AssetGlobal MultiStrategy Fundfor theperiod endedAugust 31, 2007(’000$)

WesternAsset U.S. HighYield Bond Fundfor theperiod endedAugust 31, 2007(’000$)

Western AssetEmerging MarketsBond Fundfor theperiod endedAugust 31, 2007(’000$)

Western AssetGlobal High YieldBond Fundfor theperiod endedAugust 31, 2007(’000$)

WesternAsset U.S. Short-Term GovernmentIncome Fundfor theperiod endedAugust 31, 2007(’000$)

Net realised gain/(loss) on financial instruments held for trading (1,055) 2,329 (533) (861) (875)

Net unrealised gain/(loss) on financial instruments held for trading (7,405) (7,806) (6,179) (14,947) (148)

(8,460) (5,477) (6,712) (15,808) (1,023)

WesternAsset U.S.Adjustable RateIncome Fundfor theperiod endedAugust 31, 2007(’000$)

Western AssetInflationManagementFundfor theperiod endedAugust 31, 2007(’000$)

BrandywineGlobalOpportunitiesBond Fundfor theperiod endedAugust 31, 2007(’000$)

Legg Mason ValueFundfor theperiod endedAugust 31, 2007(’000$)

Legg MasonGrowth Fundfor theperiod endedAugust 31, 2007(’000$)

Net realised gain/(loss) on financial instruments held for trading (541) (55) (350) 307,445 2,427

Net unrealised gain/(loss) on financial instruments held for trading (1,429) (193) 241 (284,399) 3,043

(1,970) (248) (109) 23,046 5,470


219

Notes to Financial Statements – (continued)12. Net Gain/(Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss – (continued)

ClearBridge U.S.Appreciation Fundfor theperiod endedAugust 31, 2007(’000$)

ClearBridge U.S.FundamentalValue Fundfor theperiod endedAugust 31, 2007(’000$)

ClearBridge U.S.Large Cap GrowthFundfor theperiod endedAugust 31, 2007(’000$)

ClearBridge U.S.AggressiveGrowth Fundfor theperiod endedAugust 31, 2007(’000$)

Royce U.S. SmallCap OpportunityFundfor theperiod endedAugust 31, 2007(’000$)

Net realised gain/(loss) on financial instruments held for trading 40 (776) 1,163 (209) 8,679

Net unrealised gain/(loss) on financial instruments held for trading 757 (9,225) 1,108 (5,529) (11,913)

797 (10,001) 2,271 (5,738) (3,234)

Royce SmallerCompanies Fundfor theperiod endedAugust 31, 2007(’000$)

GC Global EquityFundfor theperiod endedAugust 31, 2007(’000$)

BatterymarchEuropean EquityFundfor theperiod endedAugust 31, 2007(’000E)

BatterymarchPacific EquityFundfor theperiod endedAugust 31, 2007(’000$)

BatterymarchInternationalLarge Cap Fundfor theperiod endedAugust 31, 2007(’000$)

Net realised gain/(loss) on financial instruments held for trading 4,307 – (128) 12,964 (716)

Net unrealised gain/(loss) on financial instruments held for trading (1,088) 58 (1,262) 22,684 25

3,219 58 (1,390) 35,648 (691)

13. Financial Assets and Liabilities at Fair Value through Profit or Loss

Financial assets and financial liabilities held by the Funds as at August 31, 2008 were as follows:

WesternAsset U.S. MoneyMarket Fundas atAugust 31, 2008(’000$)

WesternAsset U.S. CoreBond Fundas atAugust 31, 2008(’000$)

WesternAsset U.S. CorePlus Bond Fundas atAugust 31, 2008(’000$)

Western AssetEuro Core PlusBond Fundas atAugust 31, 2008(’000E)

Western AssetDiversifiedStrategic IncomeBondas atAugust 31, 2008(’000$)

Securities held for trading- held long 4,877,554 51,162 42,247 12,642 88,468

Securities held for trading- held short – – – – –

Derivative assets held for trading – 10,311 43 244 5,189

Derivative liabilities held for trading – (11,158) (31) (343) (3,779)

4,877,554 50,315 42,259 12,543 89,878

Financial assets at fair value through profit or loss

Quoted market prices 4,877,554 50,108 41,498 12,541 87,246

Valuation techniques using market observable inputs – 11,365 792 345 6,410

Valuation techniques using non-market observable inputs – – – – 1

4,877,554 61,473 42,290 12,886 93,657

Financial liabilities at fair value through profit or loss

Quoted market prices – 32 31 15 63

Valuation techniques using market observable inputs – 11,126 – 328 3,716

Valuation techniques using non-market observable inputs – – – – –

– 11,158 31 343 3,779

Net financial assets at fair value through profit or loss 4,877,554 50,315 42,259 12,543 89,878


220

Notes to Financial Statements – (continued)13. Financial Assets and Liabilities at Fair Value through Profit or Loss – (continued)

Western AssetGlobal MultiStrategy Fundas atAugust 31, 2008(’000$)

WesternAsset U.S. HighYield Bond Fundas atAugust 31, 2008(’000$)

Western AssetEmerging MarketsBond Fundas atAugust 31, 2008(’000$)

Western AssetGlobal High YieldBond Fundas atAugust 31, 2008(’000$)

WesternAsset U.S. Short-Term GovernmentIncome Fundas atAugust 31, 2008(’000$)

Securities held for trading- held long 429,059 70,576 117,260 168,010 52,085


Derivative assets held for trading 9,526 44 1,404 – 8

Derivative liabilities held for trading (9,595) (87) (1,442) (10) (36)

428,990 70,533 117,222 168,000 52,057


Quoted market prices 416,550 68,940 117,273 167,306 52,004

Valuation techniques using market observable inputs – 1,662 1,391 673 89

Valuation techniques using non-market observable inputs 22,035 18 – 31 –

438,585 70,620 118,664 168,010 52,093


Quoted market prices 3 – – – 36

Valuation techniques using market observable inputs 9,592 87 1,442 10 –


9,595 87 1,442 10 36

Net financial assets at fair value through profit or loss 428,990 70,533 117,222 168,000 52,057

WesternAsset U.S.Adjustable RateIncome Fundas atAugust 31, 2008(’000$)

Western AssetInflationManagementFundas atAugust 31, 2008(’000$)

Western AssetAsianOpportunitiesFundas atAugust 31, 2008(’000$)

BrandywineGlobalOpportunitiesBond Fundas atAugust 31, 2008(’000$)

Legg Mason ValueFundas atAugust 31, 2008(’000$)



Derivative assets held for trading 65 10 928 5,578 –

Derivative liabilities held for trading (23) (3) (1,400) (2,753) –

58,101 7,542 23,759 532,252 552,566



Valuation techniques using market observable inputs 2,287 10 3,101 5,578 –


58,124 7,545 25,159 535,005 552,566


Quoted market prices 23 3 3 – –

Valuation techniques using market observable inputs – – 1,397 2,753 –


23 3 1,400 2,753 –



221


Legg MasonGrowth Fundas atAugust 31, 2008(’000$)

ClearBridge U.S.Appreciation Fundas atAugust 31, 2008(’000$)

ClearBridge U.S.FundamentalValue Fundas atAugust 31, 2008(’000$)

ClearBridge U.S.Large Cap GrowthFundas atAugust 31, 2008(’000$)

ClearBridge U.S.AggressiveGrowth Fundas atAugust 31, 2008(’000$)



Derivative assets held for trading – – – – –

Derivative liabilities held for trading – – – – –

62,300 30,341 157,453 50,331 180,657



Valuation techniques using market observable inputs – – – – –


62,300 30,341 157,453 50,331 180,657


Quoted market prices – – – – –



– – – – –


Royce U.S. SmallCap OpportunityFundas atAugust 31, 2008(’000$)

Royce SmallerCompanies Fundas atAugust 31, 2008(’000$)

PCM U.S. EquityFundas atAugust 31, 2008(’000$)

GC Global EquityFundas atAugust 31, 2008(’000$)

BatterymarchEuropean EquityFundas atAugust 31, 2008(’000E)

Securities held for trading- held long 69,986 53,624 819 65,392 38,427




69,986 53,624 819 65,392 38,427


Quoted market prices 69,986 53,624 819 – –

Valuation techniques using market observable inputs – – – 65,392 38,427


69,986 53,624 819 65,392 38,427





– – – – –

Net financial assets at fair value through profit or loss 69,986 53,624 819 65,392 38,427


222


BatterymarchPacific EquityFundas atAugust 31, 2008(’000$)

Batterymarch 130/30 Global EquityFundas atAugust 31, 2008(’000$)

BatterymarchInternationalLarge Cap Fundas atAugust 31, 2008(’000$)

BatterymarchEmerging MarketsEquity Fundas atAugust 31, 2008(’000$)

Legg MasonGlobal Funds plcTotal for theyear endedAugust 31, 2008(’000$)

Securities held for trading- held long 389,846 9,048 33,194 73,053 8,319,205

Securities held for trading- held short – (269) – – (269)

Derivative assets held for trading – – – – 33,464

Derivative liabilities held for trading – – – – (30,818)

389,846 8,779 33,194 73,053 8,321,582


Quoted market prices – – – – 7,725,897

Valuation techniques using market observable inputs 387,408 9,048 33,194 72,736 623,969

Valuation techniques using non-market observable inputs 2,438 – – 317 2,805

389,846 9,048 33,194 73,053 8,352,671


Quoted market prices – – – – 485

Valuation techniques using market observable inputs – 269 – – 30,604


– 269 – – 31,089

Net financial assets at fair value through profit or loss 389,846 8,779 33,194 73,053 8,321,582

Financial assets and financial liabilities held by the Funds as at Feburary 29, 2008 were as follows:

WesternAsset U.S. MoneyMarket Fundas atFebruary 29, 2008(’000$)

WesternAsset U.S. CoreBond Fundas atFebruary 29, 2008(’000$)

WesternAsset U.S. CorePlus Bond Fundas atFebruary 29, 2008(’000$)

Western AssetEuro Core PlusBond Fundas atFebruary 29, 2008(’000E)

Western AssetDiversifiedStrategic IncomeBond Fundas atFebruary 29, 2008(’000$)

Securities held for trading- held long 4,695,765 82,611 41,313 14,865 114,983


Derivative assets held for trading – 1,385 190 264 3,173

Derivative liabilities held for trading – (1,233) – (237) (3,212)

4,695,765 82,763 41,503 14,892 114,944


Quoted market prices 4,695,765 80,650 41,503 14,957 115,869

Valuation techniques using market observable inputs – 3,346 – 172 2,287


4,695,765 83,996 41,503 15,129 118,156


Quoted market prices – 338 – 113 894

Valuation techniques using market observable inputs – 895 – 124 2,318


– 1,233 – 237 3,212

Net financial assets at fair value through profit or loss 4,695,765 82,763 41,503 14,892 114,944


223


Western AssetGlobal MultiStrategy Fundas atFebruary 29, 2008(’000$)

WesternAsset U.S. HighYield Bond Fundas atFebruary 29, 2008(’000$)

Western AssetEmerging MarketsBond Fundas atFebruary 29, 2008(’000$)

Western AssetGlobal High YieldBond Fundas atFebruary 29, 2008(’000$)

WesternAsset U.S. Short-Term GovernmentIncome Fundas atFebruary 29, 2008(’000$)



Derivative assets held for trading 6,447 – 60 – 119

Derivative liabilities held for trading (3,644) – (1) (25) (474)

396,566 80,093 134,890 235,624 67,581



Valuation techniques using market observable inputs 25,674 1,102 – 1,344 –

Valuation techniques using non-market observable inputs 1 18 – 31 –

400,210 80,093 134,891 235,649 68,055


Quoted market prices 163 – – 17 474

Valuation techniques using market observable inputs 3,481 – 1 8 –


3,644 – 1 25 474


WesternAsset U.S.Adjustable RateIncome Fundas atFebruary 29, 2008(’000$)

Western AssetInflationManagementFundas atFebruary 29, 2008(’000$)

BrandywineGlobalOpportunitiesBond Fundas atFebruary 29, 2008(’000$)

Legg Mason ValueFundas atFebruary 29, 2008(’000$)

Legg MasonGrowth Fundas atFebruary 29, 2008(’000$)



Derivative assets held for trading 381 2 1,699 – –

Derivative liabilities held for trading (170) (8) (939) – –

88,694 9,115 556,623 898,613 102,431



Valuation techniques using market observable inputs 2,107 – 1,699 – –


88,864 9,123 557,562 898,613 102,431


Quoted market prices 170 1 – – –

Valuation techniques using market observable inputs – 7 939 – –


170 8 939 – –



224


ClearBridge U.S.Appreciation Fundas atFebruary 29, 2008(’000$)

ClearBridge U.S.FundamentalValue Fundas atFebruary 29, 2008(’000$)

ClearBridge U.S.Large Cap GrowthFundas atFebruary 29, 2008(’000$)

ClearBridge U.S.AggressiveGrowth Fundas atFebruary 29, 2008(’000$)

Royce U.S. SmallCap OpportunityFundas atFebruary 29, 2008(’000$)





34,094 210,650 72,100 210,059 83,535





34,094 210,650 72,100 210,059 83,535





– – – – –


Royce SmallerCompanies Fundas atFebruary 29, 2008(’000$)

PCM U.S. EquityFundas atFebruary 29, 2008(’000$)

GC Global EquityFundas atFebruary 29, 2008(’000$)

BatterymarchEuropean EquityFundas atFebruary 29, 2008(’000E)

BatterymarchPacific EquityFundas atFebruary 29, 2008(’000$)

Securities held for trading- held long 50,005 660 71,621 52,869 342,816




50,005 660 71,621 52,869 342,816


Quoted market prices 50,005 660 – – –

Valuation techniques using market observable inputs – – 71,621 52,869 342,571

Valuation techniques using non-market observable inputs – – – – 245

50,005 660 71,621 52,869 342,816





– – – – –

Net financial assets at fair value through profit or loss 50,005 660 71,621 52,869 342,816


225


BatterymarchInternationalLarge Cap Fundas atFebruary 29, 2008(’000$)

Legg MasonGlobal Funds plcTotal forthe year endedFebruary 29, 2008(’000$)

Securities held for trading- held long 46,079 8,725,901

Securities held for trading- held short – –

Derivative assets held for trading – 13,857

Derivative liabilities held for trading – (10,066)

46,079 8,729,692


Quoted market prices – 8,161,111

Valuation techniques using market observable inputs 46,079 578,352

Valuation techniques using non-market observable inputs – 295

46,079 8,739,758


Quoted market prices – 2,229

Valuation techniques using market observable inputs – 7,837

Valuation techniques using non-market observable inputs – –

– 10,066

Net financial assets at fair value through profit or loss 46,079 8,729,692

14. Risk Exposure and Risk Management

Legg Mason, Inc. ("Legg Mason") is one of the world’s largest asset managers with offices in over 15 countries including the U.S., the U.K., France, Germany, Luxembourg, Hong Kong,

Singapore and Australia and houses a selection of investment management businesses, each focusing on their own area of expertise. These specialised investment managers include Western

Asset Management Company, Brandywine Global Investment Management, LLC, Global Currents Investment Management, LLC, Legg Mason Capital Management, Inc., ClearBridge

Advisors, LLC, Private Capital Management, L.P., Batterymarch Financial Management, Inc. and Royce and Associates, LLC – each a wholly-owned subsidiary of Legg Mason.

Legg Mason Investments (Europe) Limited ("LMIE"), a wholly-owned subsidiary of Legg Mason, is the promoter and principal mutual fund distributor for Legg Mason outside North America.

They bring the investment management expertise of their parent company, Legg Mason, to investors across Europe, the Americas, Asia and the Middle East with offices in London, Miami,

Hong Kong, Singapore and Taiwan. They offer a range of proprietary mutual funds that draw upon some of the best investment capabilities within Legg Mason’s subsidiaries.

The Company has appointed LMIE as Investment Manager for each of the Funds of Legg Mason Global Funds plc (with the exception of Legg Mason Value Fund) and Legg Mason Capital

Management, Inc. as Investment Manager of Legg Mason Value Fund (together the ‘‘Investment Managers’’).

The Company has adopted FRS 29 which is effective for accounting periods beginning on or after January 1, 2007. The objective of FRS 29 is to provide information about the Company’s

exposure to material risks and how the Company manages those risks. The Company, in conjunction with the Investment Managers, has determined that its material risks are market risk,

credit risk and liquidity risk. In respect of the use of financial derivative instruments, the risks are counterparty risk, credit risk, increased margin calls and unlimited risk of loss. Further details

of these and other risks are set out below and in the prospectus under "Risk Factors".

The Funds which invest mainly in bond and interest bearing securities include Western Asset U.S. Money Market Fund, Western Asset U.S. Core Bond Fund, Western Asset U.S. Core Plus

Bond Fund, Western Asset Euro Core Plus Bond Fund, Western Asset Diversified Strategic Income Bond Fund, Western Asset Global Multi Strategy Fund, Western Asset U.S. High Yield Bond

Fund, Western Asset Emerging Markets Bond Fund, Western Asset Global High Yield Bond Fund, Western Asset U.S. Short-Term Government Income Fund, Western Asset U.S. Adjustable

Rate Income Fund, Western Asset Inflation Management Fund, Western Asset Asian Opportunities Fund and Brandywine Global Opportunities Bond Fund (together the ‘‘Fixed Income

Funds’’).

The Funds which invest mainly in equities are Legg Mason Value Fund, Legg Mason Growth Fund, ClearBridge U.S. Appreciation Fund, ClearBridge U.S. Fundamental Value Fund,

ClearBridge U.S. Large Cap Growth Fund, ClearBridge U.S. Aggressive Growth Fund, Royce U.S. Small Cap Opportunity Fund, Royce Smaller Companies Fund, PCM U.S. Equity Fund, GC

Global Equity Fund, Batterymarch European Equity Fund, Batterymarch Pacific Equity Fund, Batterymarch 130/30 Global Equity Fund, Batterymarch International Large Cap Fund and

Batterymarch Emerging Markets Equity Fund (together the ‘‘Equity Funds’’).

Market risk includes market price risk, foreign currency risk and interest rate risk.

Market price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The maximum price risk resulting from the

ownership of financial instruments is determined by the fair value of financial instruments. The Sub-Investment Manager may consider the asset allocation of the portfolios in order to

minimise the risk associated with particular countries, industry sectors or securities while continuing to follow each Fund’s investment objectives as outlined in Note 2 to these financial

statements. Risk is an integral part of the investment process. Risk is managed by each Sub-Investment Manager through a careful selection of securities and other financial instruments

within specified limits and investment mandates. Details of each Fund’s investment policy are outlined in Note 2 to these financial statements.

Foreign currency risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate because of changes in the rate of exchange between the currency in which

the financial asset or financial liability is denominated in and the functional currency of the Funds. The value of the investments of a Fund denominated in a currency other than the functional

currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. There is a risk that large exchange rate fluctuations may have a significant impact on the

performance of the Funds.

Where a Fund holds investments in a currency other than that Fund’s functional currency the Sub-Investment Manager may manage foreign currency risk by either hedging foreign currency

into the functional currency of the Fund or alternatively by diversifying investments across multiple currencies using a multi-bank foreign exchange trading network.

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rate. Funds which hold fixed interest rate debt securities and

overdraft positions are exposed to interest rate risk where the value of these securities or loans may fluctuate as a result of a change in interest rates. Holdings in floating and variable rate

securities may also be subject to interest rate risk although to a lesser degree.

The Equity Funds generally do not invest in any interest bearing securities other than cash balances held with the Custodian. Cash assets yield interest income, the level of which will fluctuate

according to the prevailing level of market interest rates. As a result, the Equity Funds are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market

interest rates on its financial assets and liabilities.


226

Notes to Financial Statements – (continued)14. Risk Exposure and Risk Management – (continued)

The Fixed Income Funds invest in interest bearing financial assets and liabilities which expose them to risks associated with the effects of fluctuations in the prevailing levels of market interest

rates on their financial positions and cash flows. The value of investments in fixed-rate interest bearing securities may be subject to price volatility due to changes in interest rates.

Fluctuations in market interest rates will impact upon the level of interest received by a Fund.

An increase in interest rates will generally reduce the value of debt securities that are issued and outstanding, while a decline in interest rates will generally increase the value of debt

securities that are issued and outstanding. The magnitude of these price fluctuations will be greater when the maturity of the outstanding securities is longer. Changes in the value of

securities held by a Fund when interest rates change mean that a Fund’s net asset value per Share can go up or down because of the effect on the value of the Fund’s portfolio of debt

securities.

The relevant Sub-Investment Manager to each Fixed Income Fund monitors the interest-rate environment and evaluates risks on major strategies. Interest rate risk is controlled by monitoring

maturities and duration relative to the Funds’ benchmarks. Techniques such as factor analysis and key rate duration measurement are used to evaluate portfolio risk. Additionally, the Sub-

Investment Manager uses applications that calculate performance returns, performance attribution and Value at Risk ("VaR") statistics for use in benchmark comparisons.

Details of each Fixed Income Fund’s weighted average yield, weighted average years to maturity and an analysis of fixed and non-interest bearing securities are set out in Note 14(b) and 14

(c) below.

The risks involved with investing in Equity Funds include changing economic conditions, industry and company conditions and security selection. Fixed Income Funds are also subject to

interest rate risk, credit risk, maturity risk and market risk. International securities are subject to changing exchange rates, less liquid markets and political and economic instability depending

on the country. For the purpose of efficient portfolio management, the Funds may enter into exchange traded or over-the-counter (‘‘OTC’’) derivatives, including but not limited to, futures,

swaps, forwards, options and warrants and may enter into stock lending agreements.

LMIE, as Investment Manager, has made the decision to delegate all investment management activities to sub-investment managers (see list of Sub-Investment Managers on pages 4 and 5).

Day-to-day risk management of the financial instruments held by the Legg Mason Value Fund is the responsibility of Legg Mason Capital Management, Inc. For each of the other Funds, day-

to-day risk management of the financial instruments (including financial derivative instruments) held by each Fund is the responsibility of the relevant Sub-Investment Manager. Effective

June 3, 2008, Global Currents Investment Management, LLC succeeded Brandywine Global Investment Management, LLC as Sub-Investment Manager of GC Global Equity Fund. The risk

management process was not impacted as a result of this change.

LMIE has established a Committee (the ‘‘Committee’’) to oversee the delegation of investment management responsibilities for all Funds. The Committee is comprised of members who, as a

group, have experience and specialised knowledge in such areas as investment management including equity, fixed income and derivatives; investment analysis and reporting; and

compliance. The Committee, on behalf of the Investment Managers, is responsible for ensuring that the Funds are managed within the terms of the Funds’ investment guidelines and limits

set out in the prospectus and the UCITS Regulations as well as the Sub-Investment Managers’ own internal investment guidelines and limits. The Committee generally meets once a month to

ensure that the Funds are being managed in accordance with these limits and regulatory requirements. The Sub-Investment Managers report to the Committee matters arising in relation to

the monitoring of certain material risks arising from a Fund’s investments in financial instruments.

14.1 Market Risk

VaR is one of many components used by the Sub-Investment Managers of the Fixed Income Funds to measure market risk. VaR can be used to meet the sensitivity analysis requirement of FRS

29. Relative VaR refers to the risk versus the benchmark.

VaR analysis reflects the interdependencies between risk variables, unlike a traditional sensitivity analysis. VaR is an indicator of potential loss with a given probability (defined as the

confidence level) for a given period of time. The Sub-Investment Manager estimates VaR using historical data. The overall market risk for any type of security which the Funds can then invest

in must be reviewed by senior management of the Sub-Investment Manager.

While VaR is widely used in risk management, there are inherent limitations. VaR uses historical data which may not produce accurate predictions of future risk. Another limitation is if the

time period over which data is collected was stable, VaR will produce different results than if the time period was volatile.

Western Asset Management Company calculates a regression-based VaR at a 95% confidence level for a 1 day time horizon using 18 months of historical data. Brandywine Global

Investment Management, LLC calculates a regression-based VaR at a 95% confidence level for a 1 day time horizon using 2 years of historical data.

The Sub-Investment Managers calculate VaR utilising historical return volatility and correlation data. This provides an indicator of the potential change in the current value of the overall

portfolio. The Sub-Investment Managers accomplish this by looking at risk factors such as duration, term, sector, quality, other spread, currency and covariance.

The table below indicates the historical market relative VaR:

Fund August 31, 2008 February 29, 2008

Western Asset U.S. Money Market Fund 0.01% 0.01%

Western Asset U.S. Core Bond Fund 0.10% 0.07%

Western Asset U.S. Core Plus Bond Fund 0.11% 0.05%

Western Asset Euro Core Plus Bond Fund 0.12% 0.08%

Western Asset Diversified Strategic Income Bond Fund 0.26% 0.16%

Western Asset Global Multi Strategy Fund 0.24% 0.19%

Western Asset U.S. High Yield Bond Fund 0.08% 0.06%

Western Asset Emerging Markets Bond Fund 0.55% 0.30%

Western Asset Global High Yield Bond Fund 0.07% 0.06%

Western Asset U.S. Short-Term Government Income Fund 0.23% 0.14%

Western Asset U.S. Adjustable Rate Income Fund 0.26% 0.09%

Western Asset Inflation Management Fund 0.05% 0.04%

Western Asset Asian Opportunities Fund 0.15% N/A

Brandywine Global Opportunities Bond Fund 0.60% 0.48%

(a) Market Price Risk

Each Fund’s market price risk is monitored, but not managed, relative to an index. The indices as at August 31, 2008 and February 29, 2008 are outlined below.

The following table sets out an index for each Equity Fund and quantifies the probable impact to the value of the net asset value for each Fund based on positive and negative movement in

the index, including one year beta for each Fund. Beta is a measure of a Fund’s equity holdings’ volatility in relation to the market or index.


227


14.1 Market Risk – (continued)

(a) Market Price Risk – (continued)

As at August 31, 2008:

Impact on net asset value due to

movement in Index

Fund Index Currency Positive 5%* Negative 5%*

Legg Mason Value Fund S&P 500 Index USD 37,766,324 (37,766,324)

Legg Mason Growth Fund Russell 1000 Growth Index USD 4,144,373 (4,144,373)

ClearBridge U.S. Appreciation Fund S&P 500 Index USD 1,208,545 (1,208,545)

ClearBridge U.S. Fundamental Value Fund Russell 3000 Index USD 6,621,465 (6,621,465)

ClearBridge U.S. Large Cap Growth Fund Russell 1000 Growth Index USD 2,427,224 (2,427,224)

ClearBridge U.S. Aggressive Growth Fund Russell 3000 Growth Index USD 8,132,400 (8,132,400)

Royce U.S. Small Cap Opportunity Fund Russell 2000 Index USD 3,866,165 (3,866,165)

Royce Smaller Companies Fund Russell 2000 Index USD 2,028,720 (2,028,720)

PCM U.S. Equity Fund** Russell 3000 Index USD – –

GC Global Equity Fund MSCI World Net Dividends Index USD 2,952,577 (2,952,577)

Batterymarch European Equity Fund MSCI Europe Net Dividends Index EUR 1,893,344 (1,893,344)

Batterymarch Pacific Equity Fund MSCI AC Asia ex Japan Gross Dividends Index USD 18,996,345 (18,996,345)

Batterymarch 130/30 Global Equity Fund** MSCI World Net Dividends Index USD – –

Batterymarch International Large Cap Fund MSCI EAFE Net Dividends Index USD 1,799,946 (1,799,946)

Batterymarch Emerging Markets Equity Fund** MSCI Emerging Markets Net Dividends Index USD – –

* The most probable outcome is based on a +5% outperformance or -5% underperformance against the actual current year benchmark performance.

** One year beta history not available for the Fund.

As at February 29, 2008:


movement in Index

Fund Index Currency Positive 5%* Negative 5%*

Legg Mason Value Fund S&P 500 Index USD 62,076,186 (62,076,186)

Legg Mason Growth Fund Russell 1000 Growth Index USD 7,131,758 (7,131,758)

ClearBridge U.S. Appreciation Fund S&P 500 Index USD 1,346,713 (1,346,713)

ClearBridge U.S. Fundamental Value Fund Russell 3000 Index USD 8,426,000 (8,426,000)

ClearBridge U.S. Large Cap Growth Fund Russell 1000 Growth Index USD 3,785,250 (3,785,250)

ClearBridge U.S. Aggressive Growth Fund Russell 3000 Growth Index USD 8,087,272 (8,087,272)

Royce U.S. Small Cap Opportunity Fund Russell 2000 Index USD 3,880,201 (3,880,201)

Royce Smaller Companies Fund Russell 2000 Index USD 2,059,456 (2,059,456)

PCM U.S. Equity Fund** Russell 3000 Index USD – –

GC Global Equity Fund MSCI World Net Dividends Index USD 3,209,337 (3,209,337)

Batterymarch European Equity Fund MSCI Europe Net Dividends Index EUR 2,646,622 (2,646,622)

Batterymarch Pacific Equity Fund MSCI AC Asia ex Japan Gross Dividends Index USD 17,262,500 (17,262,500)

Batterymarch International Large Cap Fund MSCI EAFE Net Dividends Index USD 2,488,266 (2,488,266)

* The most probable outcome is based on a +5% outperformance or -5% underperformance against the actual current year benchmark performance.

** One year beta history not available for the Fund.

The sensitivity analysis set out above should not be used as an indication of future performance.

The risk to each Fixed Income Fund from market price risk has been incorporated into the calculation of the market VaR (Note 14.1 above), therefore, a sensitivity analysis does not need to

be presented.

(b) Foreign Currency Risk

A portion of the financial assets of the Funds are denominated in currencies other than the U.S. Dollar and Euro (the functional currencies of the Funds) with the effect that the Balance Sheet

and total return can be significantly affected by currency movements.

The Company’s potential largest exposure to foreign currency risk is through the Funds managed by Western Asset Management Company Limited and Western Asset Management

Company (together ‘‘Western’’). Western has a strong bias to hedge all foreign currencies into the functional currency of the Fund’s portfolio. Western will typically leave only a small portion

of the portfolio unhedged, and then only if the outlook strongly suggests that currency risk is attractive. In other portfolios, hedges are implemented whenever a currency is seen to be at risk

of depreciating by more than the cost of the hedge transaction. Western cross-hedges into non-functional currencies only rarely—when permitted by guidelines, under severe limits (typically

less than 5% of the portfolio), and seeking to reflect an exposure relative to the index.

The following table sets out the Funds’ net exposure to foreign currency with the value to be received under foreign currency contracts and the resulting net unhedged amounts invested in

assets in foreign currencies.

Amounts represented below primarily are monetary assets and liabilities except for investments in non-interest bearing securities, which include equities.


228



(b) Foreign Currency Risk – (continued)


Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


United States Dollar $ 4,747,463 $ 130,091 – – – $ (23,003) $ 4,854,551

Total $ 4,747,463 $ 130,091 – – – $ (23,003) $ 4,854,551


United States Dollar $ 33,451 $ 17,404 $ 307 – $ (847) $ (12,306) $ 38,009

Total $ 33,451 $ 17,404 $ 307 – $ (847) $ (12,306) $ 38,009


United States Dollar $ 34,695 $ 7,466 $ 86 – $ 12 $ (8,273) $ 33,986

Total $ 34,695 $ 7,466 $ 86 – $ 12 $ (8,273) $ 33,986


British Pound E 395 E 134 – E 5 – E 77 E 611

Danish Krone 270 – – – – 9 279

Euro 7,087 3,001 – – E (35) 130 10,183

Hungarian Forint 36 – – 1 – 2 39

Norwegian Krone – – – 2 – (360) (358)

Polish Zloty 403 – – 9 – 21 433

Turkish Lira – – – (4) – 4 –

United States Dollar 1,316 – – (76) (1) (2) 1,237

Total E 9,507 E 3,135 – E (63) E (36) E (119) E 12,424


Australian Dollar $ 1,134 – – $ 138 – $ 50 $ 1,322

British Pound 2,052 $ 2,134 – 516 $ 66 652 5,420

Canadian Dollar – – – 8 – – 8

Danish Krone – – – (52) – – (52)

Euro 6,055 7,133 – 835 (312) 564 14,275

Hungarian Forint 2,758 – – 386 – 117 3,261

Japanese Yen – – – (59) – – (59)

Mexican Peso – – – (1) – – (1)

New Zealand Dollar – – – – – 6 6

Norwegian Krone – – – (13) – – (13)

United States Dollar 54,844 7,020 $ 5,338 – (102) (1,212) 65,888

Total $ 66,843 $ 16,287 $ 5,338 $ 1,758 $ (348) $ 177 $ 90,055


229





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Australian Dollar $ 3,967 – – $ 281 – $ 303 $ 4,551

Brazilian Real 8,176 – – – – 150 8,326

British Pound 7,188 $ 18,513 – (1,654) $ 292 2,003 26,342

Canadian Dollar – – – (341) – 18 (323)

Egyptian Pound 7,252 – – – – – 7,252

Euro 27,588 39,231 – 2,981 (202) 4,234 73,832

Hungarian Forint 8,915 – – 922 – 411 10,248

Indian Rupee 3,818 – – – – 43 3,861

Indonesian Rupiah – – – (74) – – (74)

Japanese Yen 7,740 – – (989) – 157 6,908

Malaysian Ringgit – – – (166) – – (166)

Mexican Peso 3,751 – – 26 – 64 3,841


Polish Zloty – – – (58) – – (58)

Russian Ruble 3,902 – – – – 31 3,933

South Korean Won – – – (157) – – (157)

Turkish Lira 10,053 – – (235) – 1,139 10,957

United States Dollar 243,593 14,541 $ 20,831 – (695) 7,760 286,030

Total $ 335,943 $ 72,285 $ 20,831 $ 536 $ (605) $ 16,318 $ 445,308


United States Dollar $ 63,664 $ 6,267 $ 645 – $ (43) $ 3,559 $ 74,092

Total $ 63,664 $ 6,267 $ 645 – $ (43) $ 3,559 $ 74,092


Brazilian Real $ 10,400 – – – – $ 191 $ 10,591

Egyptian Pound 6,884 – – – – 4 6,888

Euro 402 – – – – – 402

Indonesian Rupiah 2,466 – – – – 405 2,871

Malaysian Ringgit 1,932 – – – – 1,670 3,602

Mexican Peso – – – – – 1 1

Russian Ruble 6,940 – – – $ 1,391 139 8,470

Turkish Lira – – – – – 15 15

United States Dollar 86,797 $ 1,439 – – (1,429) 1,672 88,479

Total $ 115,821 $ 1,439 – – $ (38) $ 4,097 $ 121,319


Argentine Peso $ 69 – – – – $ 2 $ 71

Brazilian Real 1,927 – – – – 36 1,963

Egyptian Pound 4,462 – – – – 2 4,464

Indian Rupee – – – $ (10) – – (10)

Indonesian Rupiah 697 – – – – 21 718

Malaysian Ringgit 582 – – – – 236 818

Russian Ruble 2,344 – – – – 59 2,403

United States Dollar 140,104 $ 16,216 $ 1,609 – – 4,182 162,111

Total $ 150,185 $ 16,216 $ 1,609 $ (10) – $ 4,538 $ 172,538


United States Dollar $ 42,073 $ 10,012 – – $ (28) $ (4,035) $ 48,022

Total $ 42,073 $ 10,012 – – $ (28) $ (4,035) $ 48,022


230





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


British Pound – – – – – $ 2 $ 2

Euro – – – – – 53 53

United States Dollar $ 9,523 $ 48,536 – – $ 42 (7,696) 50,405

Total $ 9,523 $ 48,536 – – $ 42 $ (7,641) $ 50,460


British Pound – – – – $ (3) $ 33 $ 30

Euro – – – $ 10 – 6 16

United States Dollar $ 6,739 $ 644 $ 152 – – (266) 7,269

Total $ 6,739 $ 644 $ 152 $ 10 $ (3) $ (227) $ 7,315


Chinese Renminbi – – – $ (4) $ 22 $ 13 $ 31

Euro – – – 11 – – 11

Hong Kong Dollar $ 1,240 – – – 79 21 1,340

Indian Rupee – – – (67) (72) 90 (49)

Indonesian Rupiah 2,822 – – – – (32) 2,790

Japanese Yen – – – 3 – 3 6

Malaysian Ringgit 1,759 – – (1) (12) 12 1,758

Philippine Peso – – – (2) (8) 10 –

Singapore Dollar 2,327 $ 709 – (64) – 45 3,017

South Korean Won – – – (431) 23 (3) (411)

Taiwanese Dollar 4,672 – – 45 – 66 4,783

Thai Baht 2,640 – – 6 – 53 2,699

United States Dollar 7,870 192 – – – 12,311 20,373

Total $ 23,330 $ 901 – $ (504) $ 32 $ 12,589 $ 36,348


Australian Dollar $ 66,402 – – $ 474 – 1717 $ 68,593

British Pound 35,480 – – 1,501 – 763 37,744

Canadian Dollar 22,597 – – 30 – 322 22,949

Danish Krone – – – 15 – – 15

Euro 22,100 – – 1,209 – 853 24,162

Icelandic Krona 10,629 – – – – 669 11,298

Japanese Yen – – – 82 – – 82

Malaysian Ringgit 14,810 – – – – 130 14,940

Mexican Peso 13,274 – – – – 204 13,478

New Zealand Dollar 21,567 – – – – 357 21,924

Polish Zloty 30,651 – – 69 – 1,157 31,877

Singapore Dollar 11,284 – – (596) – 5,314 16,002

South African Rand 17,079 – – – – 1,070 18,149

Swedish Krona 19,244 – – 41 – 588 19,873

United States Dollar 220,160 $ 24,150 – – – 17,856 262,166

Total $ 505,277 $ 24,150 – $ 2,825 – $ 31,000 $ 563,252


United States Dollar – – $ 552,566 – – $ 8,699 $ 561,265

Total – – $ 552,566 – – $ 8,699 $ 561,265


231





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)



Total – – $ 62,300 – – $ 1,201 $ 63,501



Total – – $ 30,341 – – $ 2,477 $ 32,818


Canadian Dollar – – $ 258 – – – $ 258

United States Dollar – – 157,195 – – $ 6,359 163,554

Total – – $ 157,453 – – $ 6,359 $ 163,812


United States Dollar – – $ 50,331 – – $ (217) $ 50,114

Total – – $ 50,331 – – $ (217) $ 50,114


United States Dollar – – $ 180,657 – – $ (602) $ 180,055

Total – – $ 180,657 – – $ (602) $ 180,055


Canadian Dollar – – – – – $ 1 $ 1

Euro – – – – – 5 5

United States Dollar – – $ 69,986 – – 6,020 76,006

Total – – $ 69,986 – – $ 6,026 $ 76,012



Total – – $ 53,624 – – $ 3,822 $ 57,446


United States Dollar – – $ 819 – – $ 50 $ 869

Total – – $ 819 – – $ 50 $ 869


232





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Brazilian Real – – $ 910 – – – $ 910

British Pound – – 5,647 – – $ (124) 5,523

Canadian Dollar – – 1,424 – – – 1,424

Euro – – 16,482 – – 71 16,553

Hong Kong Dollar – – 1,370 – – – 1,370

Japanese Yen – – 3,437 – – – 3,437

Norwegian Krone – – 135 – – (7) 128

Swiss Franc – – 3,430 – – 73 3,503

Taiwanese Dollar – – – – – 34 34

Thai Baht – – 281 – – 7 288

United States Dollar – – 32,276 – – 594 32,870

Total – – $ 65,392 – – $ 648 $ 66,040


British Pound – – E 11,062 – – E (62) E 11,000

Danish Krone – – 446 – – – 446

Euro – – 22,807 – – 118 22,925

Norwegian Krone – – 254 – – – 254

Swedish Krona – – 436 – – – 436

Swiss Franc – – 3,422 – – – 3,422

United States Dollar – – – – – 28 28

Total – – E 38,427 – – E 84 E 38,511


Hong Kong Dollar – – $ 132,117 – – $ (903) $ 131,214

Indian Rupee – – 35,563 – – 1,541 37,104

Indonesian Rupiah – – 12,371 – – – 12,371

Malaysian Ringgit – – 9,215 – – 110 9,325

Pakistani Rupee – – 3,597 – – 150 3,747

Philippine Peso – – 4,562 – – 76 4,638

Singapore Dollar – – 25,444 – – (2,872) 22,572

South Korean Won – – 86,026 – – (5,954) 80,072

Taiwanese Dollar – – 55,174 – – 2,999 58,173

Thai Baht – – 5,323 – – (1,317) 4,006

United States Dollar – – 20,454 – – 25,525 45,979

Total – – $ 389,846 – – $ 19,355 $ 409,201


Australian Dollar $ 25 – $ 297 – – $ 4 $ 301

Brazilian Real – – 45 – – 1 46

British Pound 9 – 388 – – 5 393

Canadian Dollar 52 – 340 – – 65 405

Danish Krone – – 57 – – – 57

Euro (7) – 1,719 – – 1 1,720

Hong Kong Dollar (3) – 28 – – 1 29

Israeli Shekel – – 17 – – – 17

Japanese Yen 1 – 1,028 – – – 1,028


Singapore Dollar 1 – 92 – – 1 93

South Korean Won – – 58 – – – 58

Swedish Krona 1 – 37 – – – 37

Swiss Franc – – 118 – – – 118

United States Dollar 38 – 4,447 – – 380 4,827

Total $ 117 – $ 8,779 – – $ 458 $ 9,237


233





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Australian Dollar – – $ 1,125 – – $ 12 $ 1,137

British Pound – – 6,611 – – 218 6,829

Canadian Dollar – – 905 – – 2 907

Danish Krone – – 666 – – – 666

Euro – – 12,958 – – 77 13,035

Hong Kong Dollar – – 284 – – – 284

Japanese Yen – – 6,275 – – 85 6,360



South African Rand – – 595 – – – 595

South Korean Won – – 499 – – – 499

Swedish Krona – – 175 – – – 175

Swiss Franc – – 2,065 – – 23 2,088

United States Dollar – – 658 – – (252) 406

Total – – $ 33,194 – – $ 166 $ 33,360


Brazilian Real – – $ 4,656 – – $ 15 $ 4,671

Egyptian Pound – – 815 – – – 815

Hong Kong Dollar – – 9,790 – – – 9,790

Hungarian Forint – – 349 – – – 349

Indian Rupee – – 1,704 – – (18) 1,686

Indonesian Rupiah – – 962 – – – 962


Mexican Peso – – 1,435 – – 10 1,445

Pakistani Rupee – – 341 – – 25 366

Philippine Peso – – 379 – – 4 383

Polish Zloty – – 333 – – – 333

Singapore Dollar – – 32 – – – 32

South African Rand – – 6,612 – – 3 6,615

South Korean Won – – 9,382 – – 11 9,393

Taiwanese Dollar – – 5,645 – – 75 5,720

Thai Baht – – 510 – – – 510

Turkish Lira – – 2,007 – – – 2,007


Total – – $ 73,053 – – $ 2,194 $ 75,247


Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


United States Dollar $ 4,595,734 $ 100,031 – – – $ 97,280 $ 4,793,045

Total $ 4,595,734 $ 100,031 – – – $ 97,280 $ 4,793,045


United States Dollar $ 52,323 $ 29,782 $ 506 – $ 152 $ (19,631) $ 63,132

Total $ 52,323 $ 29,782 $ 506 – $ 152 $ (19,631) $ 63,132


234





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


United States Dollar $ 36,948 $ 4,211 $ 154 – $ 190 $ 2,252 $ 43,755

Total $ 36,948 $ 4,211 $ 154 – $ 190 $ 2,252 $ 43,755


Australian Dollar – – – E 2 – – E 2

British Pound E 428 E 146 – 17 E (6) E 66 651

Canadian Dollar – – – – – 1 1

Danish Krone 370 – – – – 10 380

Euro 8,331 3,245 – – 30 900 12,506

Hungarian Forint 32 – – 1 – 1 34

Norwegian Krone 200 – – (3) – 8 205

Polish Zloty 385 – – (10) – 11 386

Swedish Krona – – – 3 – – 3

Turkish Lira 36 – – 1 – 2 39

United States Dollar 1,692 – – 37 (45) (472) 1,212

Total E 11,474 E 3,391 – E 48 E (21) E 527 E 15,419


Australian Dollar $ 2,990 – – $ (167) – $ 41 $ 2,864

British Pound 2,061 $ 573 – (27) $ 363 843 3,813

Canadian Dollar – – – (16) – – (16)

Danish Krone – – – 7 – – 7

Euro 5,804 7,716 – (423) 115 994 14,206

Hungarian Forint 5,321 – – (31) – 307 5,597

Israeli Shekel – – – (19) – – (19)

Japanese Yen – – – 2 – – 2

Mexican Peso 3,473 – – (48) – 50 3,475


Norwegian Krone – – – 3 – – 3

United States Dollar 65,567 10,705 $ 10,772 – 202 (990) 86,256

Total $ 85,216 $ 18,994 $ 10,772 $ (719) $ 680 $ 1,252 $ 116,195


235





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Argentine Peso – $ 1,301 – – – $ 62 $ 1,363

Australian Dollar $ 4,175 – – $ (164) – 196 4,207

Brazilian Real 12,538 – – (194) – 105 12,449

British Pound 6,304 4,423 – (61) $ 1,279 1,224 13,169

Canadian Dollar – – – 77 – 15 92

Egyptian Pound 3,340 – – – – – 3,340

Euro 26,589 43,484 – (1,211) 1,185 2,806 72,853

Hungarian Forint 7,272 – – (20) – 336 7,588

Indian Rupee 8,155 – – – – 84 8,239

Indonesian Rupiah – – – 39 – – 39

Israeli Shekel – – – 44 – 7,711 7,755

Japanese Yen 8,478 – – 578 – 125 9,181

Malaysian Ringgit – – – 23 – – 23

Mexican Peso 10,177 – – (133) – 542 10,586


Philippine Peso – – – 62 – – 62

Polish Zloty – – – 33 – – 33

Russian Ruble 4,036 – – – – 43 4,079

South African Rand – – – (31) – – (31)

South Korean Won – – – 21 – – 21

Turkish Lira 13,767 – – 88 – 1,217 15,072

United States Dollar 219,676 15,912 $ 4,137 – 1,188 8,534 249,447

Total $ 324,507 $ 65,120 $ 4,137 $ (849) $ 3,652 $ 23,005 $ 419,572


United States Dollar $ 71,881 $ 7,403 $ 809 – – $ 1,518 $ 81,611

Total $ 71,881 $ 7,403 $ 809 – – $ 1,518 $ 81,611


Argentine Peso – $ 1,089 – – – $ 23 $ 1,112

Brazilian Real $ 12,659 – – – – 227 12,886

Egyptian Pound 3,938 – – – – 708 4,646

Euro 462 – – – – – 462

Indonesian Rupiah 3,179 – – – – 90 3,269

Malaysian Ringgit 3,666 – – – – – 3,666

Mexican Peso – – – – – 1 1

Russian Ruble 7,215 – – – – 193 7,408

Turkish Lira 1,842 – – – – 165 2,007

United States Dollar 98,869 1,912 – – $ 59 3,698 104,538

Total $ 131,830 $ 3,001 – – $ 59 $ 5,105 $ 139,995


Argentine Peso $ 225 $ 582 – – – $ 24 $ 831

Brazilian Real 3,312 – – – – 60 3,372

Egyptian Pound 4,279 – – – – 2 4,281

Indonesian Rupiah 788 – – $ (8) – 17 797

Malaysian Ringgit 904 – – – – 20 924

Russian Ruble 2,369 – – – – 45 2,414

Turkish Lira 366 – – – – 33 399

United States Dollar 201,206 19,483 $ 2,135 – $ (17) 6,826 229,633

Total $ 213,449 $ 20,065 $ 2,135 $ (8) $ (17) $ 7,027 $ 242,651


236





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


United States Dollar $ 57,358 $ 10,579 – – $ (355) $ (7,880) $ 59,702

Total $ 57,358 $ 10,579 – – $ (355) $ (7,880) $ 59,702


British Pound – – – – – $ 55 $ 55

Euro – – – – – 2 2

United States Dollar $ 9,660 $ 78,823 – – $ 211 (6,267) 82,427

Total $ 9,660 $ 78,823 – – $ 211 $ (6,210) $ 82,484


British Pound – – – – – $ 13 $ 13

Euro – – – $ (7) – 3 (4)

United States Dollar $ 8,315 $ 730 $ 76 – $ 1 (345) 8,777

Total $ 8,315 $ 730 $ 76 $ (7) $ 1 $ (329) $ 8,786


Australian Dollar $ 73,878 – – – – $ 1,968 $ 75,846

British Pound 40,827 – – $ 1,008 – 878 42,713

Canadian Dollar 24,101 – – (23) – 309 24,387

Danish Krone – – – (8) – – (8)

Euro – – – (196) – – (196)

Icelandic Krona 13,473 – – – – (5,836) 7,637

Japanese Yen – – – (228) – – (228)

Malaysian Ringgit 16,056 – – – – 134 16,190

Mexican Peso 12,411 – – – – 180 12,591

New Zealand Dollar 23,664 – – – – 392 24,056

Norwegian Krone 28,770 – – (178) – 1,267 29,859

Polish Zloty 28,839 – – (25) – 600 29,414

Singapore Dollar 41,013 – – 427 – 320 41,760

South African Rand 15,866 – – – – 972 16,838

Swedish Krona 43,969 – – (17) – 488 44,440

United States Dollar 192,996 – – – – 45,152 238,148

Total $ 555,863 – – $ 760 – $ 46,824 $ 603,447


Euro – – – – – $ (15) $ (15)

United States Dollar – – $ 898,613 – – (714) 897,899

Total – – $ 898,613 – – $ (729) $ 897,884


Danish Krone – – $ 1,327 – – – $ 1,327

Euro – – 2,297 – – – 2,297

United States Dollar – – 98,807 – – $ 900 99,707

Total – – $ 102,431 – – $ 900 $ 103,331


United States Dollar – – $ 34,094 – – $ 672 $ 34,766

Total – – $ 34,094 – – $ 672 $ 34,766


237





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Canadian Dollar – – $ 201 – – – $ 201

United States Dollar – – 210,449 – – $ 2,672 213,121

Total – – $ 210,650 – – $ 2,672 $ 213,322



Total – – $ 72,100 – – $ 88 $ 72,188



Total – – $ 210,059 – – $ 763 $ 210,822


Euro – – – – – $ (10) $ (10)

United States Dollar – – $ 83,535 – – 9,255 92,790

Total – – $ 83,535 – – $ 9,245 $ 92,780



Total – – $ 50,005 – – $ 3,924 $ 53,929


United States Dollar – – $ 660 – – $ 287 $ 947

Total – – $ 660 – – $ 287 $ 947


Brazilian Real – – $ 984 – – – $ 984

British Pound – – 7,200 – – $ 18 7,218

Canadian Dollar – – 1,006 – – – 1,006

Euro – – 19,583 – – 7 19,590

Hong Kong Dollar – – 2,584 – – – 2,584

Japanese Yen – – 4,083 – – – 4,083

Swiss Franc – – 3,916 – – – 3,916

Thai Baht – – 1,023 – – – 1,023


Total – – $ 71,621 – – $ 3,221 $ 74,842


British Pound – – E 16,296 – – E (24) E 16,272

Danish Krone – – 1,165 – – – 1,165

Euro – – 29,603 – – 801 30,404

Norwegian Krone – – 1,376 – – – 1,376

Swedish Krona – – 397 – – – 397

Swiss Franc – – 4,032 – – 150 4,182

United States Dollar – – – – – (780) (780)

Total – – E 52,869 – – E 147 E 53,016


238





Currency

Investments in

Fixed Interest

Securities

(000’s)

Investments in

Variable Interest

Securities

(000’s)

Investments in

Non-Interest

Bearing

Securities

(000’s)

Net Forward

Currency

Contracts

(000’s)

Other

Derivatives

(000’s)

Net Other

Assets/

(Liabilities)

(000’s)

Total Net

Asset Value

(000’s)


Hong Kong Dollar – – $ 114,961 – – $ (1,577) $ 113,384

Indian Rupee – – 41,220 – – 178 41,398

Indonesian Rupiah – – 8,147 – – – 8,147


Philippine Peso – – 7,043 – – 11 7,054

Singapore Dollar – – 16,728 – – 49 16,777

South Korean Won – – 77,471 – – (2,546) 74,925

Taiwanese Dollar – – 42,557 – – 1,756 44,313

Thai Baht – – 9,476 – – (158) 9,318


Total – – $ 342,816 – – $ 33,071 $ 375,887


Australian Dollar – – $ 2,112 – – $ (93) $ 2,019

British Pound – – 9,333 – – 36 9,369

Canadian Dollar – – 453 – – 192 645

Danish Krone – – 787 – – – 787

Euro – – 17,392 – – 408 17,800

Hong Kong Dollar – – 430 – – – 430

Japanese Yen – – 8,043 – – 314 8,357

Mexican Peso – – – – – 67 67

New Zealand Dollar – – 226 – – 1 227


Singapore Dollar – – 478 – – – 478

South African Rand – – 546 – – 40 586

South Korean Won – – 1,314 – – 23 1,337

Swedish Krona – – 234 – – – 234

Swiss Franc – – 2,786 – – 5 2,791

United States Dollar – – 1,129 – – (1,214) (85)

Total – – $ 46,079 – – $ (221) $ 45,858

The value noted above for net forward currency contracts represents the unrealised gain/(loss) at period end. Certain Funds have share classes issued in the foreign currencies. Where the

Sub-Investment Manager has entered into the forward currency contracts to hedge the foreign currency share class the net exposure above, should be offset by the net assets of the foreign

currency share class.

The following table sets out a sensitivity analysis in relation to foreign currency risk and its effect on the net asset value of the Equity Funds where foreign currency risk is deemed significant.

A snapshot of the underlying positions for all Funds was taken as at August 31, 2008 and February 29, 2008. Exchange rates were appreciated/depreciated by +/- 5% (given the nature of

the markets that the Funds are invested in a 5% increase/decrease has been applied); the corresponding impact was estimated for all equities, foreign cash and foreign currency settlement

positions. Other net assets (liabilities) are not significant and are assumed unchanged. All other market parameters are also assumed unchanged.


239





movement in foreign exchange rates*

August 31, 2008 February 29, 2008

Fund Currency Positive 5% Negative 5% Positive 5% Negative 5%

GC Global Equity Fund Euro 867,474 (784,857) 1,030,684 (932,524)

Batterymarch European Equity Fund British Pound 582,211 (526,762) 857,684 (776,000)

Batterymarch Pacific Equity Fund Hong Kong Dollar 6,953,526 (6,291,286) 6,050,579 (5,474,333)

South Korean Won 4,527,684 (4,096,476) 4,077,421 (3,689,095)

Taiwanese Dollar 2,903,895 (2,627,333) 2,239,842 (2,026,524)

Batterymarch 130/30 Global Equity Fund Euro 90,474 (81,857) n/a n/a

Japanese Yen 54,105 (48,952) n/a n/a

Batterymarch International Large Cap Fund British Pound 347,947 (314,810) 491,211 (444,429)

Euro 682,000 (617,048) 915,368 (828,190)

Japanese Yen 330,263 (298,810) 423,316 (383,000)

Batterymarch Emerging Markets Equity Fund Hong Kong Dollar 515,263 (466,190) n/a n/a

South Korean Won 493,789 (446,762) n/a n/a

* Analysis is shown where significant foreign currency exposure is held on the Fund. Significant exposure is deemed to be in excess of 10% of net assets. Movements in all foreign currency

exchange rates will have a direct impact on the net asset value. The foreign currency exchange rates as at August 31, 2008 and February 29, 2008 are listed in Note 11 above. This sensitivity

analysis should not be used as a prediction of future performance.

The risk to each Fixed Income Fund from foreign currency exposure has been incorporated into the calculation of the market VaR (Note 14.1 above), therefore, a sensitivity analysis does not

need to be presented.

(c) Interest Rate Risk

A sensitivity analysis has not been prepared as the majority of the Equity Funds’ assets are not interest bearing assets and therefore the risk is not sufficiently material.

As at August 31, 2008 and February 29, 2008, all of the cash held by the Funds are held with the Custodian earning a margin over Libor.

The analysis of fixed, variable and non-interest bearing securities is disclosed in Note 14.1(b) above.

The weighted average yield and weighted average years to maturity of each Fund on its fixed rate instruments per currency as at August 31, 2008 are as follows:


Currency

Weighted

Average Yield

Weighted Average

Years to Maturity


United States Dollar 2.73% 0.14






British Pound 6.77% 7.05

Danish Krone 6.15% 33.02

Euro 5.03% 11.10

Hungarian Forint 6.53% 4.14

Polish Zloty 5.90% 8.79



Australian Dollar 6.04% 2.78


Euro 9.78% 8.18




240



(c) Interest Rate Risk – (continued)


Currency

Weighted

Average Yield

Weighted Average

Years to Maturity



Brazilian Real 10.64% 2.23


Egyptian Pound 10.33% 0.42

Euro 8.89% 8.50


Indian Rupee 8.53% 1.74

Japanese Yen 1.99% 16.41

Mexican Peso 8.80% 4.79

Russian Ruble 7.96% 1.59

Turkish Lira 15.26% 2.38







Euro 31.19% 40.75

Indonesian Rupiah 12.18% 20.26

Malaysian Ringgit 3.60% 0.17




Argentine Peso 15.46% 27.23














Hong Kong Dollar 2.80% 14.44



Singapore Dollar 3.70% 11.16

Taiwanese Dollar 2.04% 4.87

Thai Baht 4.26% 4.52





Canadian Dollar 5.54% 2.74

Euro 4.49% 30.09

Icelandic Krona 11.59% 0.47



New Zealand Dollar 7.27% 6.31



South African Rand 12.30% 1.99

Swedish Krona 4.02% 1.25



241




The weighted average yield and weighted average years to maturity of each Fund on its fixed rate instruments per currency as at February 29, 2008 are as follows:


Currency

Weighted

Average Yield

Weighted Average

Years to Maturity









Danish Krone 4.46% 30.52

Euro 4.74% 9.29


Norwegian Krone 4.79% 7.19







Euro 9.67% 7.46









Euro 8.91% 7.47


Indian Rupee 7.82% 2.26

Japanese Yen 2.23% 23.15










Euro 28.10% 41.25







Argentine Peso 13.83% 27.73













242





Currency

Weighted

Average Yield

Weighted Average

Years to Maturity






Canadian Dollar 5.28% 3.01

Icelandic Krona 11.52% 0.97



New Zealand Dollar 7.37% 6.80

Norwegian Krone 5.47% 1.20



South African Rand 12.11% 2.50

Swedish Krona 4.04% 1.72


Western Asset U.S. Money Market Fund invests in short-term securities and the maturity profile for this Fund is set out in the table below:


Fixed Rate Securities

VariableInterest(000’s)

$

Less than1 month(000’s)

$

1-3months(000’s)

$

3 months-1 year(000’s)

$

Non-interestbearing(000’s)

$

Total(000’s)

$

Assets

Financial assets at fair value through profit or loss 130,091 1,902,355 2,537,797 307,311 – 4,877,554

Other receivables and assets – – – – 16,353 16,353

Total Assets 130,091 1,902,355 2,537,797 307,311 16,353 4,893,907

Liabilities

Accrued expenses and other liabilities – (39,356) – – – (39,356)

Total Liabilities – (39,356) – – – (39,356)

Total interest sensitivity gap 130,091 1,862,999 2,537,797 307,311 16,353 4,854,551

At February 29, 2008:

Fixed Rate Securities

VariableInterest(000’s)

$

Less than1 month(000’s)

$

1-3months(000’s)

$

3 months-1 year(000’s)

$

Non-interestbearing(000’s)

$

Total(000’s)

$

Assets

Financial assets at fair value through profit or loss 100,031 1,502,552 1,913,415 1,179,767 – 4,695,765

Other receivables and assets – – – – 205,893 205,893

Total Assets 100,031 1,502,552 1,913,415 1,179,767 205,893 4,901,658

Liabilities

Accrued expenses and other liabilities – (108,613) – – – (108,613)

Total Liabilities – (108,613) – – – (108,613)

Total interest sensitivity gap 100,031 1,393,939 1,913,415 1,179,767 205,893 4,793,045

(d) Other Price Risk – Fair Value of Financial Assets and Financial Liabilities

In addition to the Committee, LMIE has established a Valuation Committee to oversee the implementation of the valuation policies and procedures adopted by the Board. The Valuation

Committee, including the Chairperson, is comprised of no fewer than four members and no more than ten members, each of whom is appointed by LMIE. Representatives of Legg Mason

Legal and Compliance will serve the Valuation Committee in an advisory capacity. The Valuation Committee meets on a monthly basis to review all securities which are manually priced,

broker priced, matrix priced, fair valued, illiquid or stale. A Valuation Committee meeting, however, may be called at any time to consider any question or issue that falls under their

procedures. Valuation Committee meetings can be in person, or via email or other writing.


243



(d) Other Price Risk – Fair Value of Financial Assets and Financial Liabilities – (continued)

Some Funds entered into derivative products during the period. The value of derivative securities is based on certain underlying stocks or bonds, interest rates, currencies or indices and

includes futures, options, options on futures and swap agreements. Derivative securities may be hard to sell at an advantageous price or time and are sensitive to changes in the underlying

security, interest rate, currency or index. Therefore, derivatives can be highly volatile and could result in a loss to the Fund. Refer to Note 15 for details of open forward foreign currency

contracts as at August 31, 2008 and February 29, 2008. Refer to the respective Funds’ Portfolio of Investments for details of other open derivative positions as at August 31, 2008.

Fair Value Estimation

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the Balance Sheet date. The

quoted market price used for financial assets held by the Company is the current bid price. The quoted market price used for financial liabilities held by the Company is the current ask price.

When a ‘‘readily available market quotation’’ for a security is not available, the Company employs ‘‘fair value’’ methodologies to price securities. As a general principle, fair value is the price

that the Fund might reasonably expect to receive upon a current sale. The fair valuation process requires the Valuation Committee to make a determination in good faith as to the value of a

particular security or group of securities depending on the particular facts and circumstances involved.

Circumstances in which a market quotation is not readily available may include, trading suspensions prior to the close of the relevant market; events that unexpectedly close entire markets

such as natural disasters, power blackouts, or similar major events; market holidays; or volume of trading in a security.

When determining the fair value of a security, the Valuation Committee may consider all relevant methods, including but not limited to any one or all of the following pricing methods:

(i) A multiple of earnings;

(ii) A discount from market of a similar freely traded security;

(iii) A discounted cash-flow analysis;

(iv) The book value or a multiple thereof;

(v) A risk premium/yield analysis;

(vi) Yield to maturity; or

(vii) Fundamental investment analysis.

The Valuation Committee reviews the appropriateness and accuracy of the methods used in fair valuing securities on a monthly basis including a comparison of fair values against the last

market price and the next available market price, such as the next-day opening price.

Securities which are fair valued by the Sub-Investment Manager at August 31, 2008 are noted on the Portfolio of Investments on pages 8 to 120.

In the event a price is not available from a Pricing Service, the Administrator or the Sub-Investment Manager may obtain one or more quotes from approved broker-dealers.

Matrix pricing is used for Funds when the Administrator or Sub-Investment Manager is unable to obtain one or more broker-dealer quotes for a security for which there is no price available

from a Pricing Service. Matrix pricing estimates a U.S. dollar-denominated security’s current market value by using the most recent quote received from a broker-dealer and adjusting the

price by the change in the yield of the U.S. treasury security most similar in duration to the security being valued.

The following tables set out the value of securities for each Fund which have been priced using single broker, dual broker, fair valued by the Valuation Committee and securities which have

been matrix priced as at August 31, 2008 and February 29, 2008:

As at August 31, 2008 Currency

Dual

Broker

Priced

(000’s)

Single

Broker

Priced

(000’s)

Fair Valued by

Valuation

Committee

(000’s)

Matrix

Priced

(000’s)

Western Asset U.S. Core Bond Fund USD 703 689 – 1,131

Western Asset U.S. Core Plus Bond Fund USD 343 577 – 792

Western Asset Euro Core Plus Bond Fund EUR – 101 – 101

Western Asset Diversified Strategic Income Bond Fund USD 336 6,359 1 1,332

Western Asset Global Multi Strategy Fund USD 1,068 32,948 – 13,185

Western Asset U.S. High Yield Bond Fund USD 775 843 18 1,618

Western Asset Emerging Markets Bond Fund USD – 4,272 – –

Western Asset Global High Yield Bond Fund USD 607 649 31 673

Western Asset U.S. Short-Term Government Income Fund USD 89 – – 89

Western Asset U.S. Adjustable Rate Income Fund USD 2,287 562 – 2,287

Western Asset Asian Opportunities Fund USD – 2,467 – 2,173

Batterymarch Pacific Equity Fund USD – – 2,438 –

Batterymarch Emerging Markets Equity Fund USD – – 317 –


244



(d) Other Price Risk – Fair Value of Financial Assets and Financial Liabilities – (continued)

As at February 29, 2008 Currency

Dual

Broker

Priced

(000’s)

Single

Broker

Priced

(000’s)

Fair Valued by

Valuation

Committee

(000’s)

Matrix

Priced

(000’s)

Western Asset U.S. Core Bond Fund USD 534 2,201 – 2,469

Western Asset U.S. Core Plus Bond Fund USD 264 – – –

Western Asset Diversified Strategic Income Bond Fund USD 101 11,433 – 436

Western Asset Global Multi Strategy Fund USD 1,129 25,882 1 22,330

Western Asset U.S. High Yield Bond Fund USD 864 238 18 1,102

Western Asset Emerging Markets Bond Fund USD – 462 – (1)

Western Asset Global High Yield Bond Fund USD 726 709 31 1,344

Western Asset U.S. Adjustable Rate Income Fund USD 2,107 949 – 2,107

Batterymarch Pacific Equity Fund USD – – 245 –

In certain circumstances the Company employs ITG factor pricing to the valuation of securities. The trigger for applying the ITG factor pricing to the Funds investing in international equities is

determined by significant movement in the Russell 1000 Index. ITG calculates a factor to be applied to the closing price to determine a fair value price. Where the ITG factor pricing is applied

the Administrator monitors the variance to the following day’s open market price.

As at August 31, 2008 ITG factor pricing applies to all securities in the GC Global Equity Fund, Batterymarch European Equity Fund, Batterymarch Pacific Equity Fund, Batterymarch 130/30

Global Equity Fund, Batterymarch International Large Cap Fund and Batterymarch Emerging Markets Equity Fund. As at February 29, 2008 ITG factor pricing applies to all securities in the GC

Global Equity Fund, Batterymarch European Equity Fund, Batterymarch Pacific Equity Fund and Batterymarch International Large Cap Fund.

14.2 Credit Risk

Credit risk is the risk that a counterparty to or issuer of a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Funds. The Company will be

exposed to credit risk on parties with whom it trades and will also bear the risk of settlement default. The Sub-Investment Manager minimises concentrations of credit risk by undertaking

transactions with a large number of customers and counter-parties on recognised and reputable exchanges. All transactions in listed securities are settled/paid for upon delivery using

approved brokers. The risk of default is considered minimal, as delivery of securities sold is only made once the broker has received payment. Payment is made on a purchase once the

securities have been received by the broker. The trade will fail if either party fails to meet its obligation.

The Funds will be exposed to credit risk on the counterparties with which it trades in relation to options, forward contracts and other derivative financial instruments that are not traded on a

Recognised Exchange. Such instruments are not afforded the same protections as may apply to participants trading futures or options on organised exchanges, such as the performance

guarantee of an exchange clearing house. The Funds will be subject to the possibility of the insolvency, bankruptcy or default of a counterparty with which the Funds trade such instruments,

which could result in substantial losses to the relevant Funds.

The Company is exposed to a credit risk on the OTC counterparties with whom it trades, that these counterparties may not perform their obligations and that settlement of transactions may

not occur. All OTC counterparties must meet the following criteria as set out in the UCITS regulations namely:

(i) A credit institution in accordance with sub-paragraphs 1.4 (i), (ii) or (iii) of UCITS Notice 9, or an investment firm authorised in accordance with the Markets in Financial

Instruments Directive in an EEA Member State, or is an entity subject to regulation as a Consolidated Supervised Entity by the Securities and Exchange Commission, or

(ii) Have a minimum credit rating of A2 or equivalent, or in the opinion of the Investment Manager, an implied credit minimum rating of A2 or equivalent.

Exposures to individual counterparties are limited to 10% of net asset value in the case of (i) above and 5% of net asset value in the case of (ii) above.

Transactions involving derivative financial instruments are usually with counterparties with whom the Company has signed master netting agreements. Master netting agreements provide

for the net settlement of contracts with the same counterparty in the event of default. The credit risk associated with derivative financial assets subject to a master netting arrangement is

eliminated only to the extent that financial liabilities due to the same counterparty will be settled after the assets are realised.

Transactions resulting in large unrealised gains to a Fund may require a Fund to hold collateral received from a broker. In these instances, the credit risk to the Fund is reduced by the value of

the collateral held.

For efficient portfolio management purposes, each Fund may enter into stock lending agreements subject to the conditions and limits set out in the Financial Regulator Notices.

Until the expiry of the stock lending transaction, collateral obtained under such contracts or transactions:

(i) must be marked to market daily;

(ii) must equal or exceed, in value, at all times the value of the amount invested or securities loaned;

(iii) must be transferred to the trustee, or its agent; and

(iv) must be immediately available to the scheme, without recourse to the counterparty, in the event of a default by that entity.

The Company monitors its risk by monitoring the credit quality and financial positions of the counterparties the Funds use. The Funds may only trade with approved counterparties. Each Sub-

Investment Manager monitors its list of counterparties on an on-going basis.

Credit risk is controlled through diversified use of counterparties and issuers, and through minimum security ratings and average portfolio ratings. The Sub-Investment Manager may set

portfolio limits and may invest based on internal parameters with mutually agreed limits set at a Fund’s inception, including issue and issuer limitations, credit minimums, and an average

credit quality, and the account is monitored on an ongoing basis to ensure it continues to meet these parameters. Rigorous independent analysis of all credit securities before purchase,

including financial modeling, scenario analysis, and monitoring changes in risk profile may also be performed. Generally no more than 5% of the portfolio may be invested in any single

corporate issuer at the time of purchase.

Each Sub-Investment Manager reviews Funds’ holdings against minimum allowable credit ratings (as applicable) and reports exceptions to the Committee and the Board of Directors. The

Valuation Committee meets at least monthly and whenever the circumstances so require to review and deliberate on valuation concerns including credit. The Sub-Investment Manager

provides risk analysis to the Board and the Committee on a semi-annual basis.


245


14.2 Credit Risk – (continued)

Substantially all of the cash and securities held by the Funds are held via PNC International Bank Limited (formerly PFPC Bank Limited) (the ‘‘Bank’’). Bankruptcy or insolvency by the Bank may

cause the Funds’ rights with respect to the cash held by the Bank to be delayed or limited. The credit rating of the Bank is highly rated by prominent rating agencies. If the credit quality or

financial position of the Bank deteriorates significantly the Sub-Investment Manager will move the cash holdings to another bank. Any securities placed as collateral are disclosed on the

Portfolios of Investments. Cash placed as collateral is disclosed in Note 8.

As at August 31, 2008, balances due from brokers and other receivables were exposed to credit risk. The total amount of financial assets exposed to credit risk approximates to their carrying

value in the Balance Sheet (excluding equities).

The tables below set out a summary of the credit exposure based on credit ratings of the debt securities held in the Fixed Income Funds.

Western Asset

U.S. Money Market Fund

Western Asset

U.S. Core Bond Fund

Western Asset

U.S. Core Plus Bond Fund

Western Asset

Euro Core Plus Bond Fund

Rating Aug-08 Feb-08 Rating Aug-08 Feb-08 Rating Aug-08 Feb-08 Rating Aug-08 Feb-08

AAA 76.87% 3.91% AAA 62.86% 75.41% AAA 56.52% 33.50% AAA 42.72% 51.59%

AA 0.44% 0.75% AA 5.95% 2.58% AA 10.45% 14.00% AA 5.63% 3.86%

A 22.31% 94.51% A 8.69% 4.89% A 8.11% 21.13% A 28.81% 23.94%

Not Rated 0.38% 0.83% BBB 16.98% 13.51% BBB 13.45% 23.53% BBB 15.80% 10.53%

BB & Below 5.52% 3.61% BB 5.63% 2.83% BB & Below 7.04% 10.08%

B & Below 5.84% 5.01%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Western Asset

Diversified Strategic

Income Bond Fund

Western Asset

Global Multi Strategy Fund

Western Asset

U.S. High Yield Bond Fund

Western Asset

Emerging Markets Bond Fund


AAA 42.28% 41.88% AAA 28.96% 28.79% A 1.55% 0.96% AAA 0.02% 0.01%

AA 0.97% 1.02% AA 1.07% 0.38% BBB 2.45% 1.50% A 4.30% 6.46%

A 6.55% 6.86% A 11.00% 10.06% BB 21.19% 16.83% BBB 44.35% 33.94%

BBB 15.93% 15.99% BBB 16.54% 13.50% B 54.02% 56.25% BB 39.61% 48.07%

BB 9.79% 6.57% BB 17.88% 22.49% CCC & Below 20.79% 24.35% B 11.07% 10.95%

B 20.81% 22.73% B 20.25% 18.32% Not Rated – 0.11% CCC & Below 0.65% 0.57%

CCC & Below 3.67% 4.95% CCC & Below 4.30% 6.46%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Western Asset

Global High Yield Bond Fund

Western Asset

U.S. Short-Term


Western Asset

U.S. Adjustable Rate

Income Fund

Western Asset

Inflation Management Fund


AAA – 1.45% AAA 100.00% 100.00% AAA 92.90% 96.00% AAA 86.59% 89.60%

A 2.28% 1.57% AA 4.92% 2.96% AA 0.60% 5.11%

BBB 6.32% 5.56% A 1.00% 1.04% A 9.22% 3.17%

BB 24.66% 24.80% BBB 0.45% – BBB & Below 3.59% 2.12%

B 47.45% 45.25% BB 0.73% –

CCC & Below 19.29% 21.11%

Not Rated – 0.26%

100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

Western Asset

Asian Opportunities Fund *

Brandywine

Global Opportunities

Bond Fund

Rating Aug-08 Rating Aug-08 Feb-08

AAA 8.56% AAA 49.34% 71.46%

AA 26.54% AA 4.93% 4.72%

A 29.46% A 20.35% 14.59%

BBB 18.96% BBB 7.45% 3.97%

BB 13.88% Not Rated 17.93% 5.26%

B 1.17%

CCC & Below 0.41%

Not Rated 1.02%

100.00% 100.00% 100.00%

* Information for February 29, 2008 is not available as this Fund had not yet commenced operations.


246


14.3 Liquidity Risk

The Company’s prospectus provides for daily creation and cancellation of shares and it is therefore exposed to the liquidity risk of meeting shareholder redemptions at any time. The

Company invests the majority of its assets in investments that are traded in an active market and can be readily disposed of; it invests only a limited proportion of its assets in investments not

actively traded on a recognised stock exchange or regulated market.

The Administrator monitors subscription and redemption volumes and notifies the Sub-Investment Manager of significant movements and unusual trends as appropriate. The Company can

limit redemptions, if redemption requests on any dealing day (as defined in the prospectus) exceed 10 per cent of the shares in issue in respect of any Fund. The Company may defer the

excess redemption requests to subsequent dealing days and shall redeem such shares rateably.

The Company has the ability to borrow in the short-term to ensure settlement. In accordance with the UCITS Regulations a Fund may not borrow money except as follows:

(a) a Fund may acquire foreign currency by means of a "back-to-back" loan; and

(b) a Fund may borrow:

(i) up to 10 per cent of its net asset value provided that such borrowing is on a temporary basis; and

(ii) up to 10 per cent of its net asset value provided that the borrowing is to make possible the acquisition of real property required for the purpose of its business; provided

that such borrowing referred to in subparagraph b(i) and (ii) may not in total exceed 15 per cent of the borrower’s assets.

One of the responsibilities of the Valuation Committee is to review and deliberate on valuation concerns, including illiquid securities. The Company may from time to time invest in derivative

contracts traded over the counter, which are not traded in an organised public market and may be illiquid. As a result, the Company may not be able to liquidate quickly its investments in

these instruments at an amount close to their fair value in order to meet its liquidity requirements or to respond to specific events such as deterioration in the creditworthiness of any

particular issuer.

Details of residual contractual maturities of financial liabilities for each Fund are outlined below:

WesternAsset U.S. MoneyMarket Fundas atAugust 31, 2008(000’s)

WesternAsset U.S. CoreBond Fundas atAugust 31, 2008(000’s)

WesternAsset U.S. CorePlus Bond Fundas atAugust 31, 2008(000’s)

Western AssetEuro Core PlusBond Fundas atAugust 31, 2008(000’s)

Western AssetDiversifiedStrategic IncomeBond Fundas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ - $ – $ – E 59 $ –

Amounts due to broker – – 30 – –

Payable for investments purchased 31,975 17,230 16,014 446 7,652

Investments – – – – –

Options at fair value – 4 – – –

Swap contracts at fair value – 11,122 – 21 487

Unrealised depreciation on forward foreign currency contracts – – – – –

Unrealised depreciation on futures contracts – – 8 14 17

Distributions payable to holders of Redeemable Participating Shares 2,825 48 27 11 113

Investment Management fees payable 2,164 15 19 5 50

Administrator and Custodian fees payable 437 3 3 1 8

Shareholder service fees payable – 5 – 1 7

Distribution fees payable 439 21 28 8 61

Transfer agent fees payable 5 – – – –

Payable for Redeemable Participating Shares sold 245 47 5 393 132

Redeemable Participating Shares 4,854,551 38,009 33,986 12,424 90,055

1 – 3 months

Options at fair value – – – – –

Unrealised depreciation on forward foreign currency contracts – – – 307 3,226

Unrealised depreciation on futures contracts – – – – –

3 months – 1 year

Options at fair value – 6 18 – –


Unrealised depreciation on futures contracts – 26 5 1 46

Accrued expenses and other liabilities 1,266 29 28 15 136

> 1 year

Options at fair value – – – – 3


Total Financial Liabilities $ 4,893,907 $ 66,565 $ 50,171 E 13,706 $ 101,993


247


14.3 Liquidity Risk – (continued)

Western AssetGlobal MultiStrategy Fundas atAugust 31, 2008(000’s)

WesternAsset U.S. HighYield Bond Fundas atAugust 31, 2008(000’s)

Western AssetEmerging MarketsBond Fundas atAugust 31, 2008(000’s)

Western AssetGlobal High YieldBond Fundas atAugust 31, 2008(000’s)

WesternAsset U.S. Short-Term GovernmentIncome Fundas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – $ – $ –

Amounts due to broker 109 – 13 – –

Payable for investments purchased 1,001 34 1,334 152 9,408



Swap contracts at fair value 1,321 55 1,442 – –

Unrealised depreciation on forward foreign currency contracts – – – 10 –


Distributions payable to holders of Redeemable Participating Shares 725 161 85 112 48

Investment Management fees payable 226 41 90 116 23


Shareholder service fees payable 51 4 4 7 –


Transfer agent fees payable – – – – –


Redeemable Participating Shares 445,308 74,092 121,319 172,538 48,022

1 – 3 months


Unrealised depreciation on forward foreign currency contracts 8,260 – – – –


3 months – 1 year



Unrealised depreciation on futures contracts 3 – – – 36

Accrued expenses and other liabilities 128 41 66 79 33

> 1 year

Options at fair value 11 – – – –


Total Financial Liabilities $ 458,141 $ 74,587 $ 124,712 $ 173,609 $ 57,668


248



WesternAsset U.S.Adjustable RateIncome Fundas atAugust 31, 2008(000’s)

Western AssetInflationManagementFundas atAugust 31, 2008(000’s)

Western AssetAsianOpportunitiesFundas atAugust 31, 2008(000’s)

BrandywineGlobalOpportunitiesBond Fundas atAugust 31, 2008(000’s)

Legg Mason ValueFundas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – $ – $ –

Amounts due to broker 43 – – – –

Payable for investments purchased 10,328 383 – 39,712 714



Swap contracts at fair value – – 803 – –

Unrealised depreciation on forward foreign currency contracts – – 209 – –

Unrealised depreciation on futures contracts – 3 – – –

Distributions payable to holders of Redeemable Participating Shares 17 – – – –

Investment Management fees payable 27 – 1 301 426


Shareholder service fees payable – – – 75 171


Transfer agent fees payable – – – – 84

Payable for Redeemable Participating Shares sold 186 18 – 1,651 1,160


1 – 3 months


Unrealised depreciation on forward foreign currency contracts – – 347 2,753 –


3 months – 1 year



Unrealised depreciation on futures contracts 20 – 3 – –


> 1 year


Unrealised depreciation on futures contracts 3 – – – –



249



Legg MasonGrowth Fundas atAugust 31, 2008(000’s)

ClearBridge U.S.Appreciation Fundas atAugust 31, 2008(000’s)

ClearBridge U.S.FundamentalValue Fundas atAugust 31, 2008(000’s)

ClearBridge U.S.Large Cap GrowthFundas atAugust 31, 2008(000’s)

ClearBridge U.S.AggressiveGrowth Fundas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – $ – $ 344

Amounts due to broker – – – – –

Payable for investments purchased 1,257 – 1,238 – –



Swap contracts at fair value – – – – –



Distributions payable to holders of Redeemable Participating Shares – – – – –



Shareholder service fees payable 17 1 7 1 13





1 – 3 months




3 months – 1 year





> 1 year





250



Royce U.S. SmallCap OpportunityFundas atAugust 31, 2008(000’s)

Royce SmallerCompanies Fundas atAugust 31, 2008(000’s)

PCM U.S. EquityFundas atAugust 31, 2008(000’s)

GC Global EquityFundas atAugust 31, 2008(000’s)

BatterymarchEuropean EquityFundas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – $ 156 E -


Payable for investments purchased 212 – – 171 669







Investment Management fees payable 107 46 – 50 27

Administrator and Custodian fees payable 6 5 – 6 7

Shareholder service fees payable 23 12 – 19 6

Distribution fees payable – 32 1 29 24


Payable for Redeemable Participating Shares sold 137 231 – – 148

Redeemable Participating Shares 76,012 57,446 869 66,040 38,511

1 – 3 months




3 months – 1 year





> 1 year



Total Financial Liabilities $ 76,585 $ 57,798 $ 882 $ 66,544 E 39,426


251



BatterymarchPacific EquityFundas atAugust 31, 2008(000’s)

Batterymarch 130/30 Global EquityFundas atAugust 31, 2008(000’s)

BatterymarchInternationalLarge Cap Fundas atAugust 31, 2008(000’s)

BatterymarchEmerging MarketsEquity Fundas atAugust 31, 2008(000’s)

Legg MasonGlobal Funds plcas atAugust 31, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ 81 $ – $ 668

Amounts due to broker – – – – 195

Payable for investments purchased 14,423 289 455 334 155,953

Investments – 269 – – 269


Swap contracts at fair value – – – – 15,261

Unrealised depreciation on forward foreign currency contracts – – – – 219

Unrealised depreciation on futures contracts – – – – 49

Distributions payable to holders of Redeemable Participating Shares – – – – 4,179

Investment Management fees payable 373 10 27 62 4,551


Shareholder service fees payable 126 3 1 15 573

Distribution fees payable 204 4 28 21 2,317

Transfer agent fees payable – – – – 89

Payable for Redeemable Participating Shares sold 160 – 100 – 7,737

Redeemable Participating Shares 409,201 9,237 33,360 75,247 8,388,958

1 – 3 months –


Unrealised depreciation on forward foreign currency contracts – – – – 15,034


3 months – 1 year –


Unrealised depreciation on forward foreign currency contracts – – – – 38


Accrued expenses and other liabilities 175 14 22 19 3,464

> 1 year –



Total Financial Liabilities $ 424,699 $ 9,827 $ 34,077 $ 75,704 $ 8,600,512


252



WesternAsset U.S. MoneyMarket Fundas atFebruary 29, 2008(000’s)

WesternAsset U.S. CoreBond Fundas atFebruary 29, 2008(000’s)

WesternAsset U.S. CorePlus Bond Fundas atFebruary 29, 2008(000’s)

Western AssetEuro Core PlusBond Fundas atFebruary 29, 2008(000’s)

Western AssetDiversifiedStrategic IncomeBond Fundas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – E - $ 259

Amounts due to broker – 353 190 – –

Payable for investments purchased – 32,367 282 1,948 5,179


Swap contracts at fair value – 877 – – 414


Unrealised depreciation on futures contracts – 60 – 22 342

Distributions payable to holders of Redeemable Participating Shares 3,873 52 30 14 132

Investment Management fees payable 2,005 24 19 7 65





Payable for Redeemable Participating Shares sold 101,131 62 285 15 814

Redeemable Participating Shares 4,793,045 63,132 43,755 15,419 116,195

1 – 3 months


Unrealised depreciation on forward foreign currency contracts – – – 124 1,904

3 months – 1 year

Options at fair value – – – 54 10

Unrealised depreciation on futures contracts – 278 – 37 505


> 1 year


Total Financial Liabilities $ 4,901,658 $ 97,311 $ 44,646 E 17,675 $ 126,031


253



Western AssetGlobal MultiStrategy Fundas atFebruary 29, 2008(000’s)

WesternAsset U.S. HighYield Bond Fundas atFebruary 29, 2008(000’s)

Western AssetEmerging MarketsBond Fundas atFebruary 29, 2008(000’s)

Western AssetGlobal High YieldBond Fundas atFebruary 29, 2008(000’s)

WesternAsset U.S. Short-Term GovernmentIncome Fundas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ 107 $ 24 $ – $ –

Amounts due to broker 841 – 60 8 270

Payable for investments purchased 1,105 148 – 368 23,491


Swap contracts at fair value 781 – 1 – –

Unrealised depreciation on forward foreign currency contracts – – – 8 –

Unrealised depreciation on futures contracts – – – 9 95

Distributions payable to holders of Redeemable Participating Shares 618 144 76 111 45



Shareholder service fees payable 51 4 3 2 –



Payable for Redeemable Participating Shares sold 160 82 628 1,468 633


1 – 3 months


Unrealised depreciation on forward foreign currency contracts 2,700 – – – –

3 months – 1 year


Unrealised depreciation on futures contracts 38 – – 8 376


> 1 year




254



WesternAsset U.S.Adjustable RateIncome Fundas atFebruary 29, 2008(000’s)

Western AssetInflationManagementFundas atFebruary 29, 2008(000’s)

BrandywineGlobalOpportunitiesBond Fundas atFebruary 29, 2008(000’s)

Legg Mason ValueFundas atFebruary 29, 2008(000’s)

Legg MasonGrowth Fundas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – $ – $ –

Amounts due to broker 211 1 – – –

Payable for investments purchased 25,862 1,108 15,405 – –




Unrealised depreciation on futures contracts 69 1 – – –

Distributions payable to holders of Redeemable Participating Shares 29 – – – –



Shareholder service fees payable – – 74 305 31


Transfer agent fees payable – – – 85 –

Payable for Redeemable Participating Shares sold 466 2 545 6,850 507


1 – 3 months


Unrealised depreciation on forward foreign currency contracts – 7 721 – –

3 months – 1 year


Unrealised depreciation on futures contracts 101 – – – –


> 1 year



ClearBridge U.S.Appreciation Fundas atFebruary 29, 2008(000’s)

ClearBridge U.S.FundamentalValue Fundas atFebruary 29, 2008(000’s)

ClearBridge U.S.Large Cap GrowthFundas atFebruary 29, 2008(000’s)

ClearBridge U.S.AggressiveGrowth Fundas atFebruary 29, 2008(000’s)

Royce U.S. SmallCap OpportunityFundas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ 395 $ – $ –


Payable for investments purchased 58 – – – 94











Payable for Redeemable Participating Shares sold 198 835 95 813 5,258


1 – 3 months



3 months – 1 year




> 1 year




255



Royce SmallerCompanies Fundas atFebruary 29, 2008(000’s)

PCM U.S. EquityFundas atFebruary 29, 2008(000’s)

GC Global EquityFundas atFebruary 29, 2008(000’s)

BatterymarchEuropean EquityFundas atFebruary 29, 2008(000’s)

BatterymarchPacific EquityFundas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ – $ – $ – E - $ 631


Payable for investments purchased 516 30 – 340 7,633







Administrator and Custodian fees payable 4 – 6 5 31

Shareholder service fees payable 11 – 2 11 84



Payable for Redeemable Participating Shares sold 125 – – 821 602

Redeemable Participating Shares 53,929 947 74,842 53,016 375,887

1 – 3 months



3 months – 1 year




> 1 year


Total Financial Liabilities $ 54,688 $ 1,005 $ 74,941 E 54,313 $ 385,600

BatterymarchInternationalLarge Cap Fundas atFebruary 29, 2008(000’s)

Legg MasonGlobal Funds plcas atFebruary 29, 2008(000’s)

Liabilities

Less than 1 month

Cash overdraft $ 977 $ 2,393

Amounts due to broker – 1,934

Payable for investments purchased 338 117,457



Unrealised depreciation on forward foreign currency contracts – 226

Unrealised depreciation on futures contracts – 609

Distributions payable to holders of Redeemable Participating Shares – 5,131

Investment Management fees payable 36 4,702

Administrator and Custodian fees payable 4 755

Shareholder service fees payable – 648

Distribution fees payable 38 2,724

Transfer agent fees payable – 85

Payable for Redeemable Participating Shares sold 336 123,164

Redeemable Participating Shares 45,858 8,934,822

1 – 3 months


Unrealised depreciation on forward foreign currency contracts – 5,520

3 months – 1 year


Unrealised depreciation on futures contracts – 1,363

Accrued expenses and other liabilities 33 2,795

> 1 year


Total Financial Liabilities $ 47,620 $ 9,206,676


256

Notes to Financial Statements – (continued)15. Forward Contracts (in 000’s)

The forward contracts outstanding at August 31, 2008 and February 29, 2008 are as follows:

Western Asset Euro Core Plus Bond Fund (as of August 31, 2008)

Expiration Date

Contracts to Receive UnrealisedAppreciation/

(Depreciation) ofContractsLocal Currency Value in EUR

InExchangefor EUR

11/5/2008 AUD 34 E 19 E 20 E (1)

11/5/2008 AUD 1,065 620 649 (29)

11/5/2008 AUD 357 208 217 (9)

11/5/2008 AUD 322 187 196 (9)

11/5/2008 GBP 442 549 557 (8)

11/5/2008 NOK 2,197 276 271 5

11/5/2008 SEK 2,620 277 277 –

11/5/2008 USD 150 102 97 5

11/5/2008 USD 1,068 731 681 50

11/5/2008 USD 1,088 744 693 51

11/5/2008 USD 1,109 759 700 59

11/5/2008 USD 150 103 100 3

E 117

Expiration Date

Contracts to Deliver UnrealisedAppreciation/


InExchangefor EUR

11/5/2008 AUD 1,776 E 1,034 E 1,081 E 47

11/5/2008 GBP 312 387 393 6

11/5/2008 GBP 100 124 125 1

11/5/2008 GBP 533 662 669 7

11/5/2008 HUF 8,982 38 39 1

11/5/2008 NOK 1,851 232 229 (3)

11/5/2008 PLN 1,317 394 403 9

11/5/2008 TRY 69 39 35 (4)

11/5/2008 USD 2,179 1,490 1,388 (102)

11/5/2008 USD 1,481 1,013 939 (74)

11/5/2008 USD 548 375 346 (29)

11/5/2008 USD 739 506 467 (39)

E (180)

Unrealised Appreciation of Forward Foreign Currency Contracts 244

Unrealised Depreciation of Forward Foreign Currency Contracts (307)

Net Unrealised Depreciation of Forward Foreign Currency Contracts E (63)

Abbreviations:


GBP - British Pound


NOK - Norwegian Krone

PLN - Polish Zloty

SEK - Swedish Krona

TRY - Turkish Lira


Western Asset Diversified Strategic Income Bond Fund (as of August 31, 2008)

Expiration Date


(Depreciation) ofContractsLocal Currency

Value inUSD

InExchangefor USD

11/5/2008 AUD 1,149 $ 981 $ 1,095 $ (114)

11/5/2008 AUD 1,050 896 1,012 (116)

11/5/2008 AUD 500 427 442 (15)

11/5/2008 CAD 8,000 7,542 7,961 (419)

11/5/2008 CAD 2,467 2,324 2,438 (114)

11/5/2008 DKK 45,449 8,938 9,647 (709)

11/5/2008 EUR 475 697 746 (49)

11/5/2008 EUR 40 58 63 (5)

11/5/2008 EUR 30 44 47 (3)


257

Notes to Financial Statements – (continued)15. Forward Contracts (in 000’s) – (continued)

Western Asset Diversified Strategic Income Bond Fund (as of August 31, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 EUR 8 11 12 (1)

11/5/2008 EUR 3,480 5,105 5,516 (411)

11/5/2008 EUR 4,094 6,006 6,487 (481)

11/5/2008 EUR 280 411 435 (24)

11/5/2008 EUR 409 600 635 (35)

11/5/2008 EUR 9 13 13 –

11/5/2008 GBP 802 1,455 1,584 (129)

11/5/2008 GBP 482 874 953 (79)

11/5/2008 HUF 82,323 507 548 (41)

11/5/2008 HUF 82,329 507 547 (40)

11/5/2008 HUF 147,319 908 916 (8)

11/5/2008 JPY 1,030,580 9,534 9,759 (225)

11/5/2008 JPY 225,887 2,090 2,110 (20)

11/5/2008 MXN 8,436 812 820 (8)

11/5/2008 NOK 14,932 2,742 2,922 (180)

$ (3,226)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 AUD 268 $ 229 $ 256 $ 27

11/5/2008 AUD 600 512 574 62

11/5/2008 AUD 2,729 2,331 2,624 293

11/5/2008 CAD 6,537 6,162 6,517 355

11/5/2008 CAD 700 660 697 37

11/5/2008 CAD 3,208 3,025 3,172 147

11/5/2008 DKK 15,593 3,065 3,310 245

11/5/2008 DKK 15,203 2,990 3,213 223

11/5/2008 DKK 4,286 843 899 56

11/5/2008 DKK 10,220 2,010 2,143 133

11/5/2008 EUR 5 7 8 1

11/5/2008 EUR 96 141 151 10

11/5/2008 EUR 201 295 318 23

11/5/2008 EUR 6,157 9,031 9,705 674

11/5/2008 EUR 6,922 10,154 10,870 716

11/5/2008 EUR 3,947 5,790 6,196 406

11/5/2008 EUR 150 220 235 15

11/5/2008 GBP 712 1,292 1,408 116

11/5/2008 GBP 1,239 2,248 2,451 203

11/5/2008 GBP 232 420 461 41

11/5/2008 GBP 974 1,768 1,938 170

11/5/2008 GBP 1,121 2,034 2,230 196

11/5/2008 HUF 551,222 3,396 3,763 367

11/5/2008 HUF 218,936 1,349 1,457 108

11/5/2008 JPY 836,595 7,739 7,922 183

11/5/2008 JPY 48,920 453 456 3


258


Western Asset Diversified Strategic Income Bond Fund (as of August 31, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 MXN 6,780 653 660 7

11/5/2008 NOK 15,027 2,759 2,926 167

$ 4,984

Unrealised Appreciation of Forward Foreign Currency Contracts 4,984

Unrealised Depreciation of Forward Foreign Currency Contracts (3,226)

Net Unrealised Appreciation of Forward Foreign Currency Contracts $ 1,758

Abbreviations:


CAD - Canadian Dollar

DKK - Danish Krone

EUR - Euro

GBP - British Pound


JPY - Japanese Yen

MXN - Mexican Peso


Western Asset Global Multi Strategy Fund (as of August 31, 2008)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 AUD 762 $ 650 $ 734 $ (84)

11/5/2008 AUD 2,490 2,127 2,200 (73)

11/5/2008 CAD 10,109 9,530 10,079 (549)

11/5/2008 CAD 800 754 791 (37)

11/5/2008 EUR 3,904 5,727 6,188 (461)

11/5/2008 EUR 183 268 290 (22)

11/5/2008 EUR 21 31 33 (2)

11/5/2008 EUR 27 40 42 (2)

11/5/2008 EUR 85 125 132 (7)

11/5/2008 EUR 488 716 773 (57)

11/5/2008 EUR 1,001 1,468 1,586 (118)

11/5/2008 EUR 1,580 2,318 2,481 (163)

11/5/2008 EUR 51 74 79 (5)

11/5/2008 EUR 30 44 47 (3)

11/5/2008 EUR 90 132 138 (6)

11/5/2008 EUR 12 17 17 –

11/5/2008 EUR 100 147 147 –

11/5/2008 EUR 23 34 34 –

11/5/2008 EUR 3,030 4,445 4,490 (45)

11/5/2008 EUR 2,991 4,387 4,387 –

11/5/2008 EUR 3,060 4,489 4,504 (15)

11/5/2008 GBP 342 620 671 (51)

11/5/2008 GBP 66 120 130 (10)

11/5/2008 GBP 24,419 44,315 48,581 (4,266)

11/5/2008 GBP 4 6 7 (1)

11/5/2008 GBP 184 335 365 (30)

11/5/2008 GBP 944 1,714 1,866 (152)

11/5/2008 GBP 108 195 204 (9)

11/5/2008 GBP 320 581 594 (13)

11/5/2008 GBP 392 711 727 (16)

11/5/2008 GBP 68 124 127 (3)

11/5/2008 GBP 3 5 6 (1)

11/5/2008 GBP 1,449 2,630 2,681 (51)

11/5/2008 GBP 52 94 95 (1)

11/5/2008 JPY 2,652,875 24,542 25,122 (580)

11/5/2008 JPY 1,296,869 11,997 12,249 (252)

11/5/2008 JPY 1,082,233 10,012 10,180 (168)

11/5/2008 JPY 1,011,269 9,355 9,481 (126)


259


Western Asset Global Multi Strategy Fund (as of August 31, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 JPY 1,097,793 10,156 10,279 (123)

11/5/2008 PLN 1,411 619 678 (59)

11/5/2008 TRY 5,433 4,464 4,430 34

11/5/2008 TRY 1,625 1,335 1,301 34

11/12//08 IDR 48,859,600 5,277 5,351 (74)

11/12//08 KRW 2,470,450 2,268 2,425 (157)

11/12//08 MYR 16,251 4,794 4,960 (166)

$ (7,890)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 AUD 1,128 $ 984 $ 1,079 $ 115

11/5/2008 AUD 3,000 2,562 2,885 323

11/5/2008 CAD 4,200 3,960 4,183 223

11/5/2008 CAD 470 443 464 21

11/5/2008 EUR 236 346 369 23

11/5/2008 EUR 2,162 3,171 3,423 252

11/5/2008 EUR 11,575 16,980 18,247 1,267

11/5/2008 EUR 21,070 30,908 33,077 2,169

11/5/2008 EUR 2,900 4,254 4,430 176

11/5/2008 EUR – – – –

11/5/2008 EUR 2 2 2 –

11/5/2008 EUR 50 73 73 –

11/5/2008 GBP 2,115 3,839 4,188 349

11/5/2008 GBP 196 355 386 31

11/5/2008 GBP 48 87 95 8

11/5/2008 GBP 260 472 516 44

11/5/2008 GBP 48 86 95 9

11/5/2008 GBP 2 4 4 –

11/5/2008 GBP 1 2 2 –

11/5/2008 GBP 6,549 11,885 12,949 1,064

11/5/2008 GBP 417 757 825 68

11/5/2008 GBP 2,097 3,806 4,170 364

11/5/2008 GBP 5,775 10,481 11,490 1,009

11/5/2008 GBP 148 269 272 3

11/5/2008 GBP 3 6 6 –

11/5/2008 GBP 19 34 35 1

11/5/2008 HUF 1,383,627 8,523 9,445 922

11/5/2008 JPY 392,424 3,630 3,716 86

11/5/2008 JPY 1,946,418 18,006 18,181 175

11/5/2008 MXN 24,766 2,383 2,409 26

11/5/2008 TRY 12,844 10,553 10,292 (261)


260


Western Asset Global Multi Strategy Fund (as of August 31, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 TRY 5,390 4,428 4,387 (41)

11/12/2008 IDR 24,877,570 2,687 2,687 –

$ 8,426



Net Unrealised Appreciation of Forward Foreign Currency Contracts $ 536

Abbreviations:



EUR - Euro

GBP - British Pound



JPY - Japanese Yen

KRW - South Korean Won

MXN - Mexican Peso


PLN - Polish Zloty

TRY - Turkish Lira

Western Asset Global High Yield Bond Fund (as of August 31, 2008)

Expiration Date



Value inUSD

InExchangefor USD

16/09/08 INR 8,175 $ 185 $ 190 $ (5)

16/09/08 INR 6,500 148 150 (2)

16/09/08 INR 9,750 222 225 (3)

(10)

Net Unrealised Depreciation of Forward Foreign Currency Contracts $ (10)

Abbreviations:

INR - Indian Rupee

Western Asset Inflation Management Fund (as of August 31, 2008)

Expiration Date



Value inUSD

InExchangefor USD

11/5/2008 EUR 120 $ 176 $ 186 $ 10


Abbreviations:

EUR - Euro

Western Asset Asian Opportunities Fund (as of August 31, 2008)

Expiration Date



Value inUSD

InExchangefor USD

9/8/2008 KRW 2,200,000 $ 2,020 $ 2,158 $ (138)

9/16/2008 CNY 13,713 2,006 2,000 6

9/16/2008 SGD 400 283 290 (7)

9/16/2008 SGD 400 283 290 (7)

9/22/2008 INR 80,000 1,817 1,860 (43)

9/22/2008 SGD 1,250 885 885 –

9/24/2008 CNY 10,313 1,509 1,520 (11)


261


Western Asset Asian Opportunities Fund (as of August 31, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

9/29/2008 MYR 2,237 659 660 (1)

10/22/2008 KRW 3,000,000 2,754 2,950 (196)

10/27/2008 KRW 1,500,000 1,377 1,474 (97)

11/3/2008 INR 38,000 859 882 (23)

11/3/2008 PHP 12,400 269 281 (12)

11/3/2008 SGD 600 425 440 (15)

11/4/2008 THB 10,000 292 298 (6)

12/16/2008 SGD 2,000 1,421 1,459 (38)

$ (588)

Expiration Date



Value inUSD

InExchangefor USD

9/16/2008 EUR 189 $ 279 $ 290 $ 11

9/16/2008 JPY 31,116 287 290 3

9/22/2008 THB 30,034 876 885 9

9/24/2008 THB 6,756 197 200 3

11/3/2008 PHP 12,400 269 279 10

11/3/2008 TWD 40,000 1,269 1,313 44

11/26/2008 SGD 950 674 678 4

$ 84


Unrealised Depreciation of Forward Foreign Currency Contracts (594)


Brandywine Global Opportunities Bond Fund (as of August 31, 2008)

Expiration Date

Contracts to Receive UnrealisedAppreciation/Depreciation of

ContractsLocal CurrencyValue inUSD

InExchangefor USD

10/23/2008 EUR 246 $ 361 $ 391 $ (30)

10/23/2008 EUR 772 1,134 1,227 (93)

10/23/2008 EUR 226 332 359 (27)

10/23/2008 EUR 3,870 5,680 6,145 (465)

10/23/2008 EUR 211 309 334 (25)

10/23/2008 EUR 2,636 3,870 4,165 (295)

10/24/2008 SGD 1,054 747 780 (33)

10/24/2008 SGD 201 143 149 (6)

10/24/2008 SGD 7,849 5,563 5,811 (248)

10/24/2008 SGD 225 160 167 (7)

10/24/2008 SGD 202 144 150 (6)

10/24/2008 SGD 337 239 250 (11)

10/24/2008 SGD 5,470 3,877 4,050 (173)

10/24/2008 SGD 3,634 2,576 2,688 (112)

11/17/2008 GBP 7,467 13,540 13,765 (225)

11/17/2008 GBP 5,123 9,289 9,511 (222)

11/17/2008 GBP 436 791 812 (21)

11/17/2008 GBP 145 264 272 (8)

11/17/2008 GBP 10,204 18,503 19,104 (601)


262


Brandywine Global Opportunities Bond Fund (as of August 31, 2008) – (continued)

Expiration Date

Contracts to Receive UnrealisedAppreciation/Depreciation of


InExchangefor USD

11/17/2008 GBP 161 292 302 (10)

11/17/2008 GBP 232 421 439 (18)

$ (2,636)

Expiration Date



Value inUSD

InExchangefor USD

9/18/2008 EUR 454 $ 668 $ 713 $ 45

9/18/2008 EUR 14,138 20,793 22,176 1,383

9/22/2008 GBP 16,792 30,574 32,787 2,213

9/22/2008 GBP 1,305 2,376 2,593 217

10/23/2008 CAD 390 368 391 23

10/23/2008 GBP 615 1,117 1,227 110

10/23/2008 JPY 650,000 6,009 6,145 136

10/23/2008 PLN 730 321 359 38

10/23/2008 SEK 1,990 308 334 26

10/24/2008 CAD 252 238 250 12

10/24/2008 DKK 708 139 149 10

10/24/2008 EUR 3,697 5,427 5,811 384

10/24/2008 GBP 394 715 780 65

10/24/2008 JPY 431,811 3,992 4,050 58

10/24/2008 PLN 345 152 167 15

10/24/2008 SEK 903 140 150 10

11/10/2008 AUD 6,442 5,499 5,673 174

11/10/2008 AUD 6,328 5,402 5,701 299

11/17/2008 CAD 867 817 812 (5)

11/17/2008 DKK 1,510 297 302 5

11/17/2008 EUR 12,804 18,772 19,104 332

11/17/2008 JPY 1,499,105 13,877 13,765 (112)

11/17/2008 PLN 964 423 439 16

11/17/2008 SEK 1,708 265 272 7

$ 5,461



Net Unrealised Appreciation of Forward Foreign Currency Contracts $ 2,825

Abbreviations:



DKK - Danish Krone

EUR - Euro

GBP - British Pound

JPY - Japanese Yen

PLN - Polish Zloty

SEK - Swedish Krona


Western Asset Euro Core Plus Bond Fund (as of February 29, 2008)

Expiration Date



InExchangefor EUR

5/7/2008 AUD 357 E 219 E 213 E 6

5/7/2008 AUD 34 21 20 1

5/7/2008 AUD 1,147 703 685 18

5/7/2008 AUD 322 197 192 5

5/7/2008 GBP 110 144 148 (4)

5/7/2008 GBP 332 434 446 (12)

5/7/2008 NOK 1,567 197 194 3


263


Western Asset Euro Core Plus Bond Fund (as of February 29, 2008) – (continued)

Expiration Date



InExchangefor EUR

5/7/2008 PLN 135 38 37 1

5/7/2008 SEK 2,000 213 211 2

5/7/2008 USD 140 92 95 (3)

5/7/2008 USD 996 658 677 (19)

5/7/2008 USD 1,088 718 739 (21)

5/7/2008 USD 1,068 705 725 (20)

5/7/2008 USD 80 53 53 –

E (43)

Expiration Date

Contracts to Deliver UnrealisedAppreciation/Depreciation of

ContractsLocal Currency Value in EUR

InExchangefor EUR

5/7/2008 AUD 1,776 E 1,087 E 1,059 E (28)

5/7/2008 GBP 312 408 419 11

5/7/2008 GBP 533 697 715 18

5/7/2008 GBP 100 130 134 4

5/7/2008 HUF 8,982 34 35 1

5/7/2008 NOK 2,851 360 354 (6)

5/7/2008 PLN 150 43 42 (1)

5/7/2008 PLN 1,302 369 359 (10)

5/7/2008 SEK 2,000 213 214 1

5/7/2008 TRY 69 37 38 1

5/7/2008 USD 2,060 1,360 1,399 39

5/7/2008 USD 1,821 1,202 1,236 34

5/7/2008 USD 1,056 697 717 20

5/7/2008 USD 348 230 236 6

5/7/2008 USD 200 132 133 1

E 91


Unrealised Appreciation of Forward Foreign Currency Contracts (124)

Net Unrealised Appreciation of Forward Foreign Currency Contracts E 48

Abbreviations:


GBP - British Pound



PLN - Polish Zloty

SEK - Swedish Krona

TRY - Turkish Lira


Western Asset Diversified Strategic Income Bond Fund (as of February 29, 2008)

Expiration Date



Value inUSD

InExchangefor USD

5/7/2008 AUD 1,149 $ 1,065 $ 1,010 $ 55

5/7/2008 AUD 1,050 973 924 49

5/7/2008 CAD 8,000 8,157 8,001 156

5/7/2008 CAD 2,467 2,515 2,457 58

5/7/2008 DKK 45,449 9,238 8,979 259

5/7/2008 EUR 1,016 1,538 1,500 38

5/7/2008 EUR 1,396 2,113 2,057 56

5/7/2008 EUR 2,401 3,637 3,537 100

5/7/2008 EUR 3,667 5,554 5,397 157

5/7/2008 GBP 802 1,587 1,584 3

5/7/2008 GBP 267 529 528 1

5/7/2008 GBP 482 953 951 2


264


Western Asset Diversified Strategic Income Bond Fund (as of February 29, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

5/7/2008 GBP 288 571 570 1

5/7/2008 HUF 150,425 857 852 5

5/7/2008 ILS 4,765 1,298 1,321 (23)

5/7/2008 ILS 3,332 907 917 (10)

5/7/2008 JPY 245,200 2,365 2,316 49

5/7/2008 JPY 225,887 2,179 2,130 49

5/7/2008 MXN 8,436 780 770 10

5/7/2008 NOK 14,932 2,847 2,724 123

$ 1,138

Expiration Date



Value inUSD

InExchangefor USD

3/3/08 HUF 26,520 $ 153 $ 153 $ –

5/7/08 AUD 268 248 235 (13)

5/7/08 AUD 4,723 4,378 4,149 (229)

5/7/08 AUD 600 556 527 (29)

5/7/08 CAD 3,208 3,271 3,209 (62)

5/7/08 CAD 6,537 6,665 6,514 (151)

5/7/08 CAD 700 714 697 (17)

5/7/08 DKK 4,286 872 848 (24)

5/7/08 DKK 15,593 3,169 3,083 (86)

5/7/08 DKK 15,203 3,090 3,006 (84)

5/7/08 DKK 10,220 2,077 2,019 (58)

5/7/08 EUR 300 454 450 (4)

5/7/08 EUR 80 121 118 (3)

5/7/08 EUR 100 152 148 (4)

5/7/08 EUR 690 1,045 1,017 (28)

5/7/08 EUR 150 227 221 (6)

5/7/08 EUR 6,157 9,324 9,067 (257)

5/7/08 EUR 3,727 5,644 5,488 (156)

5/7/08 EUR 6,922 10,483 10,189 (294)

5/7/08 EUR 500 757 735 (22)

5/7/08 GBP 400 792 775 (17)

5/7/08 GBP 1,121 2,218 2,212 (6)

5/7/08 GBP 1,095 2,167 2,161 (6)

5/7/08 GBP 1,239 2,452 2,447 (5)

5/7/08 HUF 713,837 4,065 4,038 (27)

5/7/08 HUF 218,936 1,247 1,238 (9)

5/7/08 ILS 8,098 2,206 2,220 14

5/7/08 JPY 253,564 2,446 2,395 (51)

5/7/08 JPY 191,259 1,845 1,800 (45)

5/7/08 MXN 44,587 4,125 4,067 (58)

5/7/08 NOK 15,027 2,866 2,746 (120)

$ (1,857)




Abbreviations:



DKK - Danish Krone

EUR - Euro

GBP - British Pound


ILS - Israeli Shekel

JPY - Japanese Yen

MXN - Mexican Peso



265


Western Asset Global Multi Strategy Fund (as of February 29, 2008)

Expiration Date



Value inUSD

InExchangefor USD

5/7/08 AUD 762 $ 705 $ 670 $ 35

5/7/08 CAD 800 815 799 16

5/7/08 CAD 7,469 7,615 7,443 172

5/7/08 EUR 52 79 77 2

5/7/08 EUR 135 204 197 7

5/7/08 EUR 462 700 675 25

5/7/08 EUR 4,815 7,292 7,092 200

5/7/08 EUR 930 1,409 1,369 40

5/7/08 EUR 488 739 718 21

5/7/08 GBP 253 501 500 1

5/7/08 GBP 1,344 2,661 2,656 5

5/7/08 JPY 1,097,793 10,590 10,377 213

5/7/08 JPY 436,905 4,215 4,128 87

5/7/08 JPY 351,168 3,387 3,316 71

5/7/08 JPY 842,336 8,125 7,953 172

5/7/08 JPY 1,011,269 9,755 9,541 214

5/7/08 JPY 1,082,233 10,439 10,196 243

5/7/08 PLN 1,411 606 573 33

5/7/08 TRY 1,288 1,041 1,058 (17)

5/7/08 ZAR 2,963 376 407 (31)

5/14/08 IDR 19,380,500 2,112 2,073 39

5/14/08 KRW 2,470,450 2,629 2,608 21

5/14/08 MYR 6,557 2,050 2,027 23

5/14/08 PHP 181,396 4,455 4,393 62

$ 1,654

Expiration Date



Value inUSD

InExchangefor USD

5/7/2008 AUD 3,000 $ 2,781 $ 2,636 $ (145)

5/7/2008 AUD 1,128 1,046 992 (54)

5/7/2008 CAD 470 479 468 (11)

5/7/2008 CAD 4,200 4,282 4,182 (100)

5/7/2008 EUR 800 1,212 1,201 (11)

5/7/2008 EUR 250 379 371 (8)

5/7/2008 EUR 100 152 148 (4)

5/7/2008 EUR 2,162 3,274 3,187 (87)

5/7/2008 EUR 718 1,088 1,058 (30)

5/7/2008 EUR 11,375 17,228 16,752 (476)

5/7/2008 EUR 17,991 27,248 26,493 (755)

5/7/2008 EUR 2,800 4,241 4,116 (125)

5/7/2008 EUR 200 303 293 (10)

5/7/2008 GBP 1,000 1,979 1,937 (42)

5/7/2008 GBP 1,300 2,573 2,566 (7)

5/7/2008 GBP 417 826 824 (2)

5/7/2008 GBP 2,115 4,187 4,179 (8)

5/7/2008 GBP 672 1,330 1,328 (2)

5/7/2008 GBP 1,699 3,362 3,357 (5)

5/7/2008 GBP 350 693 692 (1)

5/7/2008 HUF 538,231 3,065 3,045 (20)

5/7/2008 ILS 24,942 6,793 6,837 44

5/7/2008 JPY 1,946,418 18,775 18,353 (422)

5/7/2008 MXN 101,869 9,426 9,293 (133)


266


Western Asset Global Multi Strategy Fund (as of February 29, 2008) – (continued)

Expiration Date



Value inUSD

InExchangefor USD

5/7/2008 TRY 8,881 7,178 7,283 105

5/14/2008 BRL 8,159 4,787 4,593 (194)

$ (2,503)




Abbreviations:




EUR - Euro

GBP - British Pound



ILS - Israeli Shekel

JPY - Japanese Yen

KRW - South Korean Won

MXN - Mexican Peso


PHP - Philippine Peso

PLN - Polish Zloty

TRY - Turkish Lira

ZAR - South African Rand

Western Asset Global High Yield Bond Fund (as of February 29, 2008)

Expiration Date



Value inUSD

InExchangefor USD

3/17/2008 INR 14,675 $ 367 $ 372 $ (5)

3/17/2008 INR 4,898 122 124 (1)

3/17/2008 INR 4,852 121 123 (2)

$ (8)


Abbreviations:

INR - Indian Rupee

Western Asset Inflation Management Fund (as of February 29, 2008)

Expiration Date

Contracts to Deliver UnrealisedAppreciation/Depreciation of


InExchangefor USD

5/7/2008 EUR 120 $ 182 $ 175 $ (7)

$ (7)

Net Unrealised Depreciation of Forward Foreign Currency Contracts

Abbreviations:

EUR - Euro


267


Brandywine Global Opportunities Bond Fund (as of February 29, 2008)

Expiration Date



Value inUSD

InExchangefor USD

4/24/2008 EUR 1,760 $ 2,667 $ 2,573 $ 94

4/24/2008 EUR 118 179 173 6

4/24/2008 EUR 94 143 138 5

4/24/2008 EUR 95 143 138 5

4/24/2008 EUR 375 569 548 21

4/24/2008 EUR 1,241 1,880 1,810 70

4/25/2008 SGD 3,903 2,806 2,731 75

4/25/2008 SGD 8,048 5,787 5,607 180

4/25/2008 SGD 5,544 3,986 3,862 124

4/25/2008 SGD 198 143 138 5

4/25/2008 SGD 198 143 138 5

4/25/2008 SGD 1,179 848 822 26

4/25/2008 SGD 370 266 258 8

4/25/2008 SGD 198 142 138 4

5/16/2008 GBP 935 1,849 1,808 41

5/16/2008 GBP 26 52 51 1

5/16/2008 GBP 86 170 168 2

5/16/2008 GBP 31 62 61 1

5/16/2008 GBP 1,386 2,742 2,702 40

5/16/2008 GBP 1,946 3,849 3,793 56

5/16/2008 GBP 40 79 78 1

$ 770

Expiration Date

Contracts to Deliver UnrealisedAppreciation(/Depreciation)of ContractsLocal Currency

Value inUSD

InExchangefor USD

3/20/2008 GBP 1,469 $ 2,918 $ 2,878 $ (40)

3/20/2008 GBP 17,647 35,056 35,985 929

3/28/2008 NOK 28,720 5,495 5,317 (178)

4/24/2008 CAD 177 181 173 (8)

4/24/2008 GBP 280 555 548 (7)

4/24/2008 JPY 272,846 2,630 2,573 (57)

4/24/2008 PLN 343 148 138 (10)

4/24/2008 SEK 898 145 138 (7)

4/25/2008 CAD 266 271 258 (13)

4/25/2008 DKK 708 144 138 (6)

4/25/2008 EUR 3,863 5,854 5,607 (247)

4/25/2008 GBP 423 838 822 (16)

4/25/2008 JPY 411,833 3,971 3,863 (108)

4/25/2008 PLN 345 148 138 (10)

4/25/2008 SEK 903 146 138 (8)

5/16/2008 CAD 167 170 168 (2)

5/16/2008 DKK 312 63 61 (2)

5/16/2008 EUR 2,604 3,943 3,793 (150)

5/16/2008 JPY 286,525 2,765 2,702 (63)


268


Brandywine Global Opportunities Bond Fund (as of February 29, 2008) – (continued)

Expiration Date

Contracts to Deliver UnrealisedAppreciation(/Depreciation)of ContractsLocal Currency

Value inUSD

InExchangefor USD

5/16/2008 PLN 194 83 78 (5)

5/16/2008 SEK 328 53 51 (2)

$ (10)


Unrealised Appreciation of Forward Foreign Currency Contracts (939)


Abbreviations:


DKK - Danish Krone

EUR - Euro

GBP - British Pound

JPY - Japanese Yen


PLN - Polish Zloty

SEK - Swedish Krona


16. Significant Events

On April 28, 2008, Batterymarch Emerging Markets Equity Fund commenced trading.

On June 12, 2008, Western Asset Asian Opportunities Fund commenced trading.

On June 27, 2008, Batterymarch 130/30 Global Equity Fund commenced trading.

On August 18, 2008, the Memorandum and Articles of Association for the Company was amended by special resolution of the shareholders. The amendments included amending Article 15

(d) by making the following changes and additions to the lists of regulated markets in which the Funds may invest:

(a) replacing the words ‘‘Stock Exchange of Singapore’’ with ‘‘Singapore Exchange Limited’’;

(b) replacing the words ‘‘Kuala Lumpur Stock Exchange’’ with ‘‘Bursa Malaysia Berhad’’;

(c) adding the following to the list of stock exchanges and markets in which investments may be made: the Bond Electronic Exchange (Thailand), Securities Trading Center, Hanoi,

the primary dealer system in the Philippines regulated by the Bureau of the Treasury, the primary dealer system in Singapore regulated by the Monetary Authority of Singapore

and the principal dealer system in Malaysia regulated by Bank Negara Malaysia; and

(d) adding the following to the list of stock exchanges and markets in which investments in financial derivatives may be made: the Korea Stock Exchange.

On June 3, 2008, Global Currents Investment Management, LLC was appointed sub-investment manager to the GC Global Equity Fund and the GC Global SRI Equity Fund, replacing

Brandywine Global Investment Management, LLC.

17. Segregated Liability

The Company is an umbrella fund with segregated liability between its Funds. As such, as a matter of Irish law, the assets of a Fund will not be exposed to the liabilities of the Company’s

other Funds. Notwithstanding the foregoing there can be no assurance that, should an action be brought against the Company in the court of another jurisdiction, the segregated nature of

the Funds would necessarily be upheld.


269

Notes to Financial Statements – (continued)

18. Amendments to Prospectus

An updated prospectus was filed with the Financial Regulator on April 21, 2008 and this principally provided for the following amendments:

. The creation of eight new Funds, namely the Western Asset Euro Absolute Return Bond Fund, Western Asset Asian Bond Fund, Western Asset Asian Opportunities Fund, LM

Strategic European Equity Fund, GC Global SRI Equity Fund, Batterymarch 130/30 Global Equity Fund, LMIE China Fund, and LMIE Japan Equity Fund (collectively the ‘‘New

Funds’’).

. The appointment of the following investment managers to the newly created Funds: Legg Mason Investments (Europe) Limited has been appointed investment manager of all of

the New Funds; Western Asset Management Company Limited and Western Asset Management Company have been appointed sub-investment managers to the Western Asset

Euro Absolute Return Bond Fund, Western Asset Asian Bond Fund and Western Asset Asian Opportunities Fund; Western Asset Management Company Pte. Ltd has been

appointed sub-investment manager to the Western Asset Asian Bond Fund and Western Asset Asian Opportunities Fund;

. Brandywine Global Investment Management, LLC has been appointed sub-investment manager to the GC Global SRI Equity Fund; Batterymarch Financial Management, Inc. has

been appointed sub-investment manager to the Batterymarch 130/30 Global Equity Fund; Legg Mason International Equities Limited and Legg Mason Asset Management Hong

Kong Limited have been appointed sub-investment managers to the LMIE China Fund; Legg Mason International Equities (Singapore) Pte. Limited has been appointed sub-

investment manager to the LMIE Japan Equity Fund. On June 3, 2008, Global Currents Investment Management, LLC was appointed sub-investment manager to the GC Global

Equity Fund and the GC Global SRI Equity Fund, replacing Brandywine Global Investment Management, LLC.

. The change of name of four of the existing Funds of the Company: Western Asset Investment Grade Total Return Bond Fund is now Western Asset U.S. Core Plus Bond Fund;

Western Asset Euro Core Bond Fund is now Western Asset Euro Core Plus Bond Fund; Royce 100 Equity Fund is now Royce Smaller Companies Fund; and Brandywine Global

Equity Fund is now GC Global Equity Fund.

. The change of name of Legg Mason Investments (Hong Kong) Limited to Legg Mason Asset Management Hong Kong Limited.

. The decrease in the minimum initial and subsequent investment amount for certain of the share classes.

. The re-wording of certain investment objectives and changes in investment policies of certain of the Funds.

. The decrease in the investment management and shareholder servicing fees in relation to certain of the Premier Class Shares offered by certain of the Funds.

. The change in the determination of the net asset value from 9.00pm Greenwich Mean Time to 4.00pm in New York (Eastern Time).

19. Subsequent Events

Subsequent to the reporting period, turmoil due to the continuing credit crisis caused the financial markets to deteriorate. This led to certain regulatory and corporate events, which

impacted certain investments of the Funds.

On September 7, 2008, the United States Federal Housing Agency placed Fannie Mae and Freddie Mac into conservatorship. As of August 31, 2008, certain Funds had significant percentage

of its portfolio invested in securities issued by these entities. The value of the Fund’s holdings in securities issued by these entities has not been adversely impacted.

On September 15, 2008, Lehman Brothers Holdings Inc. (‘‘Lehman Brothers’’) filed for Chapter 11 bankruptcy. As of August 31, 2008, certain Funds had credit exposure to Lehman

Brothers. The value of the Fund’s holdings in securities issued by Lehman Brothers has been adversely impacted; however, the impact on the net assets of the Funds is not material.

Certain Funds also hold other securities which have been adversely impacted by the current market crisis, however, the impact on the net assets of these Funds is not material.

The LMIE Japan Equity Fund was launched and commenced to trade October 2, 2008.

There have been no other material significant events impacting the Company subsequent to the period end.

20. Prior Period Comparatives

Certain comparative figures have been reclassified to achieve consistency with presentation in the current period.

21. Approval of the Report

The Board of Directors approved the Semi-Annual Report on October 29, 2008.


270

Financial Information – Total Expense Ratios (TER)

Ratio of Total OperatingExpenses in CU(1) to averageFund daily net assets in CU(1)(2)For the Six Month Period EndedAugust 31, 2008**

Western Asset U.S. Money Market Fund Class A US$ Accumulating 0.75

Class A US$ Distributing (D) 0.77

Class B US$ Accumulating 1.20

Class B US$ Distributing (D) 1.22

Class C US$ Accumulating 1.45

Class C US$ Distributing (D) 1.48

Class A (G) US$ Accumulating 0.77

Class A (G) US$ Distributing (D) 0.78

Class B (G) US$ Accumulating 0.77

Class B (G) US$ Distributing (D) 0.77

Class L (G) US$ Accumulating 0.78

Class L (G) US$ Distributing (D) 0.77

Western Asset U.S. Core Bond Fund Class A US$ Accumulating 1.25






Western Asset U.S. Core Plus Bond Fund Class A US$ Accumulating 1.45












Western Asset Euro Core Plus Bond Fund Class A US$ Distributing (D) 1.53

Class A Euro Distributing (D) 1.53



Western Asset Diversified Strategic Income Fund Class A US$ Accumulating 1.40


Class A US$ Distributing (M) 1.40

Class A Euro Accumulating (Hedged) 1.73

Class A Euro Distributing (M) (Hedged) 1.40











Western Asset Global Multi Strategy Fund Class A US$ Accumulating 1.40




Class A Euro Distributing (M) (Hedged) 1.45

Class A GBP Distributing (M) (Hedged) 1.45





Premier Class US$ Distributing (D) 0.59

Premier Class GBP Distributing (M) (Hedged) 0.58


271

Financial Information – Total Expense Ratios (TER) – (continued)

Ratio of Total Operating

Expenses in CU(1) to average

Fund daily net assets in CU(1)(2)

For the Six Month Period Ended

August 31, 2008**

Western Asset U.S. High Yield Bond Fund Class A US$ Accumulating 1.45






LM Class US$ Distributing (M) 0.15







Western Asset Emerging Markets Bond Fund Class A US$ Accumulating 1.80













Western Asset Global High Yield Bond Fund Class A US$ Accumulating 1.55













Western Asset U.S. Short-Term Government Income Fund Class A US$ Accumulating 1.35












Western Asset U.S. Adjustable Rate Income Fund Class A US$ Accumulating 1.40












272






August 31, 2008**

Western Asset Inflation Management Fund Class A US$ Accumulating 1.40

Class A US$ Distributing (A) 1.40


Class B US$ Distributing (A) 1.65


Class C US$ Distributing (A) 1.90


Class A (G) US$ Distributing (A) 1.00


Class B (G) US$ Distributing (A) 1.50


Class L (G) US$ Distributing (A) 1.50

Western Asset Asian Opportunities Fund Class A US$ Accumulating 1.26


Class A Euro Accumulating 1.62

Class A Euro Distributing (M) 1.62





Premier Class US$ Accumulating 0.93

Premier Class US$ Distributing (D) 0.87

LM Class US$ Accumulating 0.31

Brandywine Global Opportunities Bond Fund Class A US$ Accumulating 1.40

Class A US$ Distributing (S) 1.42


Class A GBP Distributing (S) (Hedged) 1.44

Class A SGD Accumulating (Hedged) 1.40


Class B US$ Distributing (S) 1.67


Class C US$ Distributing (S) 1.92

Legg Mason Value Fund Class A US$ Accumulating 1.88



Class A SGD Accumulating 1.85






Galleon Class 1.05

Legg Mason Growth Fund Class A US$ Accumulating 1.70








Clearbridge U.S. Appreciation Fund Class A US$ Accumulating 1.75











273






August 31, 2008**

Clearbridge U.S. Fundamental Value Fund Class A US$ Accumulating 1.75









Clearbridge U.S. Large Cap Growth Fund Class A US$ Accumulating 1.75










Clearbridge U.S. Aggressive Growth Fund Class A US$ Accumulating 1.80









Royce U.S. Small Cap Opportunity Fund Class A US$ Accumulating 2.00







Royce Smaller Companies Fund Class A US$ Accumulating 2.00









PCM U.S. Equity Fund Class A US$ Accumulating 2.00



Class A Euro Distributing (A) 2.00





GC Global Equity Fund Class A US$ Distributing (A) 1.88



Class A US$ Accumulating 1.85




274






August 31, 2008**

Batterymarch European Equity Fund Class A US$ Accumulating 1.85










Batterymarch Pacific Equity Fund Class A US$ Accumulating 2.00







Batterymarch 130/30 Global Equity Fund Class A US$ Accumulating 2.73









Premier Class US$ Distributing (A) 1.53

Premier Class Euro Accumulating 1.54

Batterymarch International Large Cap Fund Class A US$ Accumulating 1.90









Batterymarch Emerging Markets Equity Fund Class A US$ Accumulating 2.00



Class A GBP Distributing (A) 1.98





Premier Class Euro Accumulating 1.79


LM Class US$ Distributing (A) 0.20

(1) CU = Currency units in the Fund’s accounting currency.

(2) The method of calculation of the Total Expense Ratio (TER) is described on the website of the Swiss Fund Association (SFA) (www.sfa.ch).

** Annualised.


275

Financial Information – Portfolio Turnover Rate (PTR)

Ratio of 1 (1) less Total 2 (2) to average Funddaily net assets in CU (3)For the period ended August 31, 2008

Ratio of 1 (1) less Total 2 (2) to average Funddaily net assets in CU (3)For the year ended February 29, 2008

Western Asset U.S. Money Market Fund 30.26% 27.53%

Western Asset U.S. Core Bond Fund 52.82% 151.81%

Western Asset U.S. Core Plus Bond Fund 68.71% 29.10%

Western Asset Euro Core Plus Bond Fund 2.78% 2.79%

Western Asset Diversified Strategic Income Bond Fund 3.55% 7.38%

Western Asset Global Multi Strategy Fund 11.89% 11.20%

Western Asset U.S. High Yield Bond Fund 5.49% 5.01%

Western Asset Emerging Markets Bond Fund 4.16% 4.82%

Western Asset Global High Yield Bond Fund 9.32% 10.47%

Western Asset U.S. Short-Term Government Income Fund 64.80% 75.48%

Western Asset U.S. Adjustable Rate Income Fund 12.54% 13.25%

Western Asset Inflation Management Fund 2.70% 1.52%

Western Asset Asian Opportunities Fund 2.59% –

Brandywine Global Opportunities Bond Fund 1.08% 1.37%

Legg Mason Value Fund 0.36% 0.03%

Legg Mason Growth Fund 1.10% 1.10%

ClearBridge U.S. Appreciation Fund 0.56% 0.56%

ClearBridge U.S. Fundamental Value Fund 0.37% 0.35%

ClearBridge U.S. Large Cap Growth Fund 0.34% 0.24%

ClearBridge U.S. Aggressive Growth Fund (0.26)% (0.37)%

Royce U.S. Small Cap Opportunity Fund 0.25% 0.21%

Royce Smaller Companies Fund 0.78% 1.00%

PCM U.S. Equity Fund 0.08% (0.24)%

GC Global Equity Fund 1.42% 1.16%

Batterymarch European Equity Fund 1.54% 1.76%

Batterymarch Pacific Equity Fund 1.07% 0.73%

Batterymarch 130/30 Global Equity Fund 1.88% –

Batterymarch International Large Cap Fund 1.71% 1.60%

Batterymarch Emerging Markets Fund 0.26% –

The method of calculation of the Portfolio Turnover Rates (PTR) is describted on the website of the Swiss Fund Association (SFA) (www.sfa.ch)

(1) Total 1 = Purchase of securities + sale of securities

(2) Total 2= Net absolute value of daily Subscription of shares + daily redemption of shares

(3) CU= Currency unitis in the Fund’s accounting currency.


276

In accordance with the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2003 (as amended), a statement of largest changes in the

composition of the Portfolio of Investments during the reporting period is provided to ensure that shareholders can identify changes in the investments held by each Fund. These are defined

as the aggregate purchases and sales of an investment (including maturities but excluding repurchase agreements, overnight discount notes and time deposits, which are employed chiefly as

a means of seeking to ensure efficient portfolio management) exceeding 1.00% of the total value of purchases and sales for the period. At a minimum the largest twenty purchases and sales

are listed. If a Fund entered into less than twenty purchases or sales during the reporting period, then all transactions are presented.


MAJOR PURCHASES COST

(in 000’s)

Automatic Data Processing, Inc., 2.060% due 8/12/2008 139,992


BP Capital Markets, 2.030% due 6/25/2008 122,523

Deutsche Bank AG NY, 2.700% due 11/3/2008 100,000

Lloyds TSB Bank PLC, 2.600% due 10/6/2008 100,000

Nestle Capital Corp., 2.000% due 6/19/2008 99,994





General Electric Capital Corp., 2.060% due 8/25/2008 99,983






Deutsche Bank AG, 2.000% due 6/24/2008 79,996

Deutsche Bank NY, 2.720% due 8/1/2008 75,000



MAJOR SALES PROCEEDS

(in 000’s)



BP Capital Markets, 2.030% due 6/25/2008 122,530












Deutsche Bank AG, 2.000% due 6/24/2008 80,000



Lloyds TSB Bank PLC, 2.300% due 5/30/2008 75,000





(in 000’s)

FNMA, 30 Year July TBA, 5.000% due 7/15/2038 15,140

FNMA, 30 Year May TBA, zero coupon due 5/15/2038 13,621

FNMA, 30 Year June TBA, 5.000% due 6/15/2038 13,549

FNMA, 30 Year April TBA, zero coupon due 4/15/2038 12,119

FNMA, 30 Year August TBA, zero coupon due 8/15/2038 10,282

FNMA, 30 Year September TBA, 5.000% due 9/15/2038 10,175





FNMA, 30 Year March TBA, zero coupon due 3/15/2038 3,192

U.S. Treasury Note, 2.875% due 4/30/2013 2,957


FNCL, 30 Year May TBA, zero coupon due 5/15/2038 2,801



FNMA, 15 Year June TBA, zero coupon due 6/15/2023 2,036

FNMA, 15 Year July TBA, zero coupon due 7/15/2023 2,024


FNMA, 15 Year September TBA, zero coupon due 9/15/2023 1,993

FHLMC, 15 Year May TBA, zero coupon due 5/15/2023 1,913

FGLMC, 15 Year June TBA, 5.000% due 6/15/2023 1,908

FHLMC, 15 Year April TBA, zero coupon due 4/15/2023 1,907


FHLMC Corp., 15 Year August TBA, zero coupon due 8/15/2023 1,869

FHLMC Gold, 15 Year September TBA, 5.000% due 9/15/2023 1,859

FNMA, 5.000% due 5/1/2038 1,735


(in 000’s)






FNMA, 30 Year March TBA, 5.000% due 3/15/2038 9,031









FHLMC Gold, Pool #G03696, 5.500% due 1/1/2038 3,012









FHLMC, 15 Year April TBA, zero coupon due 4/15/2023 1,917

FHLMC, 15 Year May TBA, zero coupon due 5/15/2023 1,912

FHLMC Corp., 15 Year March TBA, 5.000% due 3/15/2022 1,910

FGLMC, 15 Year June TBA, 5.000% due 6/15/2023 1,889


FHLMC Corp., 15 Year August TBA, zero coupon due 8/15/2023 1,863



(in 000’s)

FHLB, zero coupon due 6/30/2008 11,898




(in 000’s)





Statement of Major Portfolio Changes

277

Western Asset U.S. Core Plus Bond Fund – (continued)


(in 000’s)








































(in 000’s)







FHLB, due 5/19/2008 7,000































U.S. Treasury bond, 8.125% due 8/15/2019 4,442



(in 000’s)

FNMA, 30 Year July TBA, 5.500% due 7/15/2038 697


FNMA, 30 Year April TBA, zero coupon due 4/15/2038 589

FNMA, 30 Year June TBA, 5.500% due 6/15/2038 585

FNCL, 30 Year May TBA, 5.500% due 5/15/2038 576

FNMA, 30 Year August TBA, zero coupon due 8/15/2038 437

FNMA, 30 Year September TBA, 5.500% due 9/15/2038 434

France Government Bond OAT, 4.000% due 4/25/2055 365


FNMA, 30 Year May TBA, zero coupon due 5/15/2038 314

Realkredit Danmark A/S, 6.000% due 10/1/2041 275

Bundesrepublik Deutschland, Series 04, 3.750% due 01/04/2015 186

FNMA, 5.000% due 4/1/2038 183

FNMA, 30 Year April TBA, 5.000% due 4/15/2038 128

FNMA, 5.500% due 6/1/2038 127

FNMA, 5.000% due 5/1/2038 123

Banca Intesa, 5.750% due 5/28/2018 100

Merrill Lynch & Co., Inc., 6.750% due 5/21/2013 100

Bundesrepublik Deutschland, 4.000% due 1/4/2018 91

HSH Nordbank AG, 4.634% due 2/14/2017 86


(in 000’s)



FNMA, 30 Year March TBA, 5.500% due 3/15/2038 590

FNCL, 30 Year May TBA, zero coupon due 5/1/2038 587






Realkredit Danmark A/S, Series 23D, 4.000% due 10/1/2038 365




France Government Bond OAT, 3.750% due 4/25/2017 292

Norway Government Bond, 5.000% due 5/15/2015 206




FNMA, 5.000% due 4/1/2038 180


FNMA, 5.500% due 6/1/2038 124


Statement of Major Portfolio Changes – (continued)

278

Western Asset Euro Core Plus Bond Fund – (continued)


(in 000’s)

FNMA, 5.000% due 5/1/2038 120

Bundesrepublik Deutschland, 4.000% due 1/4/2018 91

Bundesobligation, Series 145, 3.500% due 10/9/2009 85

HSH Nordbank AG, 4.375% due 2/14/2017 85



(in 000’s)







FNMA, 30 Year October TBA, 5.000% due 10/15/2038 2,481

Hungary Government Bond, Series 12/C, 6.000% due 10/24/2012 997

FNMA, 5.000% due 4/1/2038 793

FNMA, 5.000% due 5/1/2038 792

FNMA, 5.000% due 6/1/2035 605

FHLB Discount Notes, due 3/31/2008 600

Swedebank, 5.750% perpetual 557

Danske Bank A/S, 5.684% perpetual 549

Alliance & Leicester PLC, 6.250% due 9/27/2010 536

HSBC Capital Funding LP, 8.208% perpetual 509

France Government Bond Oat Principal Strip, due 10/25/2032 419

Wind Acquisition Finance S.A., 9.750% due 12/1/2015 369

FNMA, 5.000% due 4/1/2038 297

Nordic Telephone Co. Holdings ApS, 9.513% due 5/1/2016 283


(in 000’s)


Legg Mason U.S. High Yield Fund, Class M 5,217

FNMA, 30 Year April TBA, 5.000% due 4/15/2038 4,856



Mexican Bonos, Series MI10, 8.000% due 12/19/2013 3,507

Hungary Government Bond, Series 09/C, 7.000% due 6/24/2009 3,464




FNMA, Pool #888030, 5.500% due 12/1/2036 1,998

Ford Motor Credit Co. LLC, 7.375% due 10/28/2009 1,876

Queensland Treasury Corp., Series 11G, 6.000% due 6/14/2011 1,833


FNMA, Pool #871010, 5.000% due 12/1/2036 926

FNMA, Pool #906722, 5.000% due 1/1/2037 924

FNMA, Pool #906238, 5.000% due 1/1/2037 918

Hungary Government Bond, Series 14/C, 5.500% due 2/12/2014 913

FNMA, 5.000% due 4/1/2038 786

FNMA, 5.000% due 5/1/2038 785

FNMA, Pool #885418, 6.000% due 6/1/2036 647



(in 000’s)


FNMA, 6.500% due 1/1/2038 10,608

FHLMC Corp., 5.000% due 3/1/2038 10,234

FNMA, 5.000% due 4/1/2038 7,662

FNMA, 5.000% due 4/1/2035 6,439

U.S. Treasury Inflationary Index Bond, 3.875% due 4/15/2029 4,275

Mexican Bonos, 9.000% due 6/20/2013 3,672

Japan Finance Corp. for Municipal Enterprises, 1.350% due

11/26/2013

3,559

France Government Bond Oat Principal Strip, due 10/25/2032 2,837

Egypt Treasury Bill, due 4/14/2009 2,665

TNK-BP Finance S.A., 7.875% due 3/13/2018 2,649

BNP Paribas, 5.954% Perpetual 2,579

ING Groep NV, 5.140% Perpetual 2,401

Danske Bank A/S, 5.684% Perpetual 2,391

Unicredito Italiano Capital Trust IV, 5.396% Perpetual 2,371

Swedebank, 5.750% Perpetual 2,353

Alliance & Leicester PLC, 6.250% due 9/27/2010 2,297

Brazil Notas do Tesouro Nacional, Series F, 9.810% due 1/1/2012 2,108

Morgan Stanley, 6.625% due 4/1/2018 1,874

Republic of Venezuela, 5.750% due 2/26/2016 1,736

HSBC Capital Funding LP, 8.208% Perpetual 1,697

Development Bank of Japan, 1.750% due 3/17/2017 1,679

European Investment Bank, 1.400% due 6/20/2017 1,665

Credit Agricole S.A., 5.136% Perpetual 1,509

McDonald’s Corp., 5.350% due 3/01/2018 1,314


(in 000’s)

Bank of Ireland PLC, 1.850% due 6/26/2008 9,694

Nationwide Building Society, 5.940% due 6/19/2008 8,437


Bank of Nova Scotia, 5.700% due 4/28/2008 6,934

Bank of Scotland PLC, 5.950% due 6/27/2008 6,550

Allied Irish Bank PLC, 5.950% due 6/27/2008 6,550

Svenska Handelsbank, 5.680% due 4/4/2008 6,293


Royal Bank of Scotland, 5.630% due 5/6/2008 4,350

Bank of Scotland, 5.720% due 6/6/2008 4,350

Republic of Brazil, zero coupon due 1/2/2009 4,348

U.S. Treasury Bond, 4.750% due 2/15/2037 4,314

Banco Bilbao Vizcaya Argentaria, 5.945% due 6/18/2008 4,220


Japan Finance Corp. for Municipal Enterprises, 1.350% due

11/26/2013

3,388

Indian Government Bond Linked Note, 8.070% due 6/11/2010 3,154

Dexia Bank Belgium, 5.680% due 5/6/2008 2,750

Republic of Brazil, zero coupon due 7/1/2008 2,592

GNMA, Pool #659661, 6.500% due 9/15/2036 2,236

Kreditanstalt fuer Wiederaufbau, 2.050% due 2/16/2026 1,789

Pemex Project Funding Master Trust, 6.625% due 6/15/2035 1,779

Kreditanstalt fuer Wiederaufbau, 2.600% due 6/20/2037 1,775

ISS Holdings A/S, 8.875% due 5/15/2016 1,246



279



(in 000’s)


Sandridge Energy, Inc., 8.000% due 6/1/2018 740

Intelsat Jackson Holdings Ltd., 9.500% due 6/15/2016 698

Lehman Brothers Holdings, Inc. 650

DRS Technologies, Inc., 6.625% due 2/1/2016 543

Visteon Corp., 12.250% due 12/31/2016 526

American International Group, Inc., 8.175% due 5/15/2048 510

SLM Corp., 8.450% due 6/15/2018 510

Sprint Capital Corp., 6.875% due 11/15/2028 448

Abitibi-Consolidated Co. of Canada, 15.500% due 7/15/2010 415

Abitibi-Consolidated Co. of Canada, 13.750% due 4/1/2011 411

Education Management LLC/Education Management Corp.,

10.250% due 6/1/2016

344

Citigroup, Inc., 8.400% due 4/29/2049 330

Berry Plastics Holding Corp., 10.250% due 3/1/2016 310

Affinion Group, Inc., 11.500% due 10/15/2015 305

CRC Health Corp., 10.750% due 2/1/2016 304

Charter Communications Operating LLC / Charter Communications

Operating Capital, 10.875% due 9/15/2014

298

K Hovnanian Enterprises, Inc., 11.500% due 5/1/2013 297

Nortek Holdings, Inc., 10.000% due 12/1/2013 297

Georgia Gulf Corp., 10.750% due 10/15/2016 296

Verso Paper Holdings LLC & Verso Paper, Inc., 11.375% due

8/1/2016

286

Atlas Pipeline Partners LP, 8.750% due 6/15/2018 280

CSC Holdings, Inc., 8.500% due 6/15/2015 250

Horizon Lines, Inc., 4.250% due 8/15/2012 234

Parallel Petroleum Corp., 10.250% due 8/1/2014 228

ACE Hardware Corp., 9.125% due 6/1/2016 226

Chesapeake Energy Corp., 7.250% due 12/15/2018 220

Noranda Aluminium Holding Corp., 8.578% due 11/15/2014 218

Realogy Corp., 11.000% due 4/15/2014 207

Virgin Media Finance PLC, 8.750% due 4/15/2014 204

BE Aerospace, Inc., 8.500% due 7/1/2018 200


(in 000’s)

Visteon Corp., 8.250% due 8/1/2010 825

Mirant North America LLC, 7.375% due 12/31/2013 799


Freeport-McMoRan Copper & Gold, Inc., 8.375% due 4/1/2017 720

Windstream Corp., 8.625% due 8/1/2016 713

DRS Technologies, Inc., 6.875% due 11/1/2013 560

GMAC LLC, 6.875% due 8/28/2012 539

NRG Energy, Inc., 7.375% due 2/1/2016 530

DaVita, Inc., 7.250% due 3/15/2015 520

Graphic Packaging International Corp., 9.500% due 8/15/2013 492

Ford Motor Credit Co. LLC, 9.875% due 8/10/2011 486

General Motors Corp., 8.375% due 7/15/2033 428

Orion Power Holdings, Inc., 12.000% due 5/1/2010 423

Williams Cos., Inc., 7.875% due 9/1/2021 416

Tube City IMS Corp., 9.750% due 2/1/2015 387

Plastipak Holdings, Inc., 8.500% due 12/15/2015 380

Neiman-Marcus Group, Inc., 10.375% due 10/15/2015 363

GMAC LLC, 8.000% due 11/1/2031 360

Service Corp. International, 7.875% due 2/1/2013 353

Bank of Scotland PLC, 5.950% due 6/27/2008 350

Allied Irish Bank PLC, 5.950% due 6/27/2008 350

Intelsat Jackson Holdings Ltd., 11.250% due 6/15/2016 337

Delhaize America, Inc., 9.000% due 4/15/2031 327

DAE Aviation Holdings, Inc., 11.250% due 8/1/2015 316



LyondellBasell Industries AF SCA, 8.375% due 8/15/2015 305

Ford Motor Credit Co. LLC, 7.127% due 1/13/2012 291



(in 000’s)

Bank Negara Malaysia Monetary Notes, zero coupon due 8/28/2008 3,188

Egypt Treasury Bills, zero coupon due 4/28/2009 2,802

Evraz Group S.A., 8.875% due 4/24/2013 2,724

RSHB Capital S.A. for OJSC Russian Agricultural Bank, 6.299% due

5/15/2017

2,274


1/14/2014

2,070

Vedanta Resources PLC, 8.750% due 1/15/2014 1,950

KazMunaiGaz Finance Sub BV, 8.375% due 7/2/2013 1,930

True Move Co. Ltd., 10.750% due 12/16/2013 1,825

ATF Capital BV, 9.250% due 2/21/2014 1,046

Bank Negara Malaysia Monetary Notes, due 11/13/2008 1,012

Argentina Bonos, Series VII, 7.000% due 9/12/2013 799

Brazilian Government International Bond, 7.125%due 1/20/2037 767

Bank Negara Monetary Note, due 7/31/2008 738


5/29/2018

542

Bank Negara Malaysia Monetary Notes, zero coupon due 11/25/2008 390




Odebrecht Finance Ltd., 7.500% due 10/18/2017 281

Bank Negara Malaysia Monetary Notes-Islamic, zero coupon due

10/28/2008

236


(in 000’s)



Mexico Government International Bond, 8.125% due 12/30/2019 2,934

Brazil Notas do Tesouro Nacional, Series F, 9.810% due 7/ 1/2010 2,586

True Move Co. Ltd., 10.750% due 12/16/2013 2,316


5/15/2017

2,291

Gaz Capital S.A., 8.625% due 4/28/2034 2,092

Brazilian Government International Bond, 7.125% due 1/20/2037 2,012

Brazilian Government International Bond, Series B, 8.875% due

4/15/2024

1,987


5/16/2013

1,936

Turkey Government Bond, 14.000% due 1/19/2011 1,814

Mexico Government International Bond, 6.050% due 1/11/2040 1,709

Freeport-McMoRan Copper & Gold, Inc., 8.375% due 4/1/2017 1,530

Russia Government International Bond, 11.000% due 7/24/2018 1,263

ATF Capital BV, 9.250% due 2/21/2014 1,080

Argentina Government International Bond, 5.830% due 12/31/2033 867

Turkey Government International Bond, 11.000% due 1/14/2013 842

Abbey National Treasury Services PLC, 2.150% due 7/30/2008 800

Colombia Government International Bond, 7.375% due 9/18/2037 759

Bank Negara Monetary Note, due 7/31/2008 720

Brazilian Government International Bond, 8.750% due 2/ 4/2025 657

Republic of Venezuela, 5.750% due 2/26/2016 654


5/15/2017

553



280



(in 000’s)


FHLB, due 6/30/2008 3,099

Chesapeake Energy Corp., 7.250% due 12/15/2018 1,775

Lehman Brothers Holdings, Inc. 1,740

Sandridge Energy, Inc., 8.000% due 6/1/2018 1,660

Neiman-Marcus Group, Inc., 10.375% due 10/15/2015 1,595

Intelsat Jackson Holdings Ltd., 9.500% due 6/15/2016 1,556

Axtel SAB de CV, 7.625% due 2/1/2017 1,318

Abitibi-Consolidated Co. of Canada, 15.500% due 7/15/2010 1,186

Visteon Corp., 12.250% due 12/31/2016 1,174

American International Group, Inc., 8.175% due 5/15/2048 1,140

Abitibi-Consolidated Co. of Canada, 13.750% due 4/1/2011 1,133

SLM Corp., 8.450% due 6/15/2018 1,127

Sprint Capital Corp., 6.875% due 11/15/2028 993

DirecTV Holdings LLC/DirecTV Financing Co., 7.625% due 5/15/2016 980

DAE Aviation Holdings, Inc., 11.250% due 8/1/2015 979

Virgin Media, Inc., 6.500% due 11/15/2016 813

K Hovnanian Enterprises, Inc., 11.500% due 5/1/2013 773

Affinion Group, Inc., 11.500% due 10/15/2015 750

CRC Health Corp., 10.750% due 2/1/2016 683


Atlas Pipeline Partners LP, 8.750% due 6/15/2018 640

Verso Paper Holdings LLC & Verso Paper, Inc., 11.375% due

8/1/2016

631


1/14/2014

630

GTL Trade Finance, Inc., 7.250% due 10/20/2017 616

Dollar General Corp., 10.625% due 7/15/2015 615

Education Management LLC/Education Management Corp.,

10.250% due 6/1/2016

607

Residential Capital LLC, 8.125% due 11/21/2008 570



(in 000’s)

FHLB, due 6/30/2008 3,100

Freeport-McMoRan Copper & Gold, Inc., 8.375% due 4/1/2017 2,997


Energy Future Holdings Corp., 11.250% due 11/1/2017 2,946

Neiman-Marcus Group, Inc., 10.375% due 10/15/2015 2,354

GMAC LLC, 6.875% due 8/28/2012 2,157

Visteon Corp., 8.250% due 8/1/2010 2,155

El Paso Corp., 7.875% due 6/15/2012 2,146

Belden & Blake Corp., 8.750% due 7/15/2012 2,103

Lehman Brothers Holdings, Inc. 2,064

Williams Cos., Inc., 7.875% due 9/1/2021 1,845


Edison Mission Energy, 7.625% due 5/15/2027 1,695

The Hertz Corp., 10.500% due 1/1/2016 1,631

Brazil Notas do Tesouro Nacional, Series F, 9.810% due 7/1/2010 1,496

Constellation Brands, Inc., 8.375% due 12/15/2014 1,407

CSC Holdings, Inc., 8.125% due 8/15/2009 1,389

Axtel SAB de CV, 7.625% due 2/1/2017 1,331

DaVita, Inc., 7.250% due 3/15/2015 1,263


Williams Cos., Inc., 7.625% due 7/15/2019 1,198

Tube City IMS Corp., 9.750% due 2/1/2015 1,180

Western Asset U.S. Short–Term Government Income Fund


(in 000’s)




FHLB Discount Notes, zero coupon due 3/31/2008 6,799







FNMA, 5.000% due 4/1/2038 3,509







GNMA, 30 Year August TBA, zero coupon due 8/15/2038 953

FNMA, 5.500% due 7/1/2023 944

FNMA, 5.500% due 1/1/2023 938


(in 000’s)





FHLB Discount Notes, zero coupon due 3/31/2008 6,800






FNMA, 5.000% due 4/1/2038 3,518








GNMA, zero coupon due 4/15/2038 1,373




(in 000’s)








(in 000’s)









281

Western Asset U.S. Adjustable Rate Income Fund – (continued)


(in 000’s)







FNMA, 30 Year April TBA, 5.000% due 4/15/2038 1,842

FNMA, 30 Year October TBA, 5.000% due 10/15/2038 954

FHLMC Corp. 581

FNMA, 6.500% due 11/1/2037 415

FNMA, 30 Year March TBA, zero coupon due 3/15/2038 412


First Horizon Alternative Mortgage Securities, 2.831% due

2/25/2037

140

FNMA Discount Notes, due 12/15/2008 81


(in 000’s)







Bank of Scotland PLC, 5.950% due 6/27/2008 2,000


Deutsche Bank, 1.990% due 5/9/2008 1,700

Bear Stearns Asset Backed Securities Trust, Series 2003-AC5,

Class A3, 3.199% due 10/25/2033

1,539

FNMA, Pool #545024, 6.659% due 9/1/2030 1,516

FNMA, Pool #323521, 6.751% due 7/1/2026 1,367

FNMA, Pool #653859, 5.741% due 8/1/2032 1,054

FNMA, Pool #735641, 5.323% due 5/1/2042 991

FNMA, 30 Year September TBA, zero coupon due 9/15/2038 956

FHLMC Non Gold, Pool #846899, 6.891% due 8/1/2030 906

GNMA, Pool #81200, 6.000% due 1/20/2035 887

FNMA, Pool #713961, 4.225% due 4/1/2033 847

Alliance & Leicester PLC, 5.780% due 4/28/2008 800

FHLMC Non Gold, Pool #780923, 6.934% due 10/1/2033 781



(in 000’s)

U.S. Treasury Inflationary Index Bond, 2.000% due 1/15/2026 481

United States Treasury Inflation Indexed Bonds, 1.875% due

7/15/2013

305


1/15/2011

293


7/15/2015

228


1/15/2017

226

FHLMC Corp., 6.000% due 4/1/2037 203

FHLMC Corp., 30 Year March TBA, zero coupon due 3/15/2038 203













FNMA, 6.000% due 8/1/2036 103


FNMA, 30 Year April TBA, 5.000% due 4/15/2038 97

FHLMC Corp. 90

FNMA 74


(in 000’s)

U.S. Treasury Inflationary Index Bond, 0.875% due 4/15/2010 1,065

U.S. Treasury Inflationary Index Note, 2.000% due 1/15/2016 731




FHLMC Corp., 6.000% due 4/1/2037 203

FHLMC Corp., zero coupon due 3/15/2038 203














FNMA, 6.000% due 8/1/2036 102




(in 000’s)

Taiwan Government Bond, 2.000% due 7/20/2013 4,810

Northern Trust Corp., 1.800% due 9/2/2008 3,502


FHLB, 1.900% due 8/22/2008 3,500

State Street Corp., 1.813% due 9/5/2008 3,500

UBS AG, 2.170% due 9/2/2008 3,500

Thailand Government Bond, 4.250% due 3/13/2013 2,627

Bank Negara Malaysia Monetary Notes-Islamic, due 9/4/2008 1,839

Singapore Government Bond, 4.000% due 9/1/2018 1,638


(in 000’s)


FHLB, 1.900% due 8/22/2008 3,500

Bank Negara Malaysia Monetary Notes-Islamic, due 9/4/2008 1,527





282

Western Asset Asian Opportunities Fund – (continued)


(in 000’s)

National Agricultural Cooperative Federation, 5.700% due 7/1/2013 1,532


Hong Kong Government Bond, 2.710% due 2/20/2023 1,127


Aviva PLC, due 9/10/2008 999

Toyota Finance Australia, due 10/20/2008 997

Swedish Housing Finance, due 10/22/2008 996

Indonesia Treasury Bond, 9.500% due 6/15/2015 995

Toyota Motor Finance BV, due 11/17/2008 994

Fonterra Co-Operative Group Ltd., due 11/24/2008 993


Temasek Financial I Ltd., 4.500% due 9/21/2015 955


OCBC Capital Corp., 5.100% due 8/29/2049 705

Singapore Government Bond, 3.500% due 3/1/2027 469



(in 000’s)

FHLMC Gold, 30 Year September TBA, 5.000% due 9/15/2038 27,067

France Government Bond OAT, 4.000% due 10/25/2038 23,135

Mexican Bonos, 7.750% due 12/14/2017 13,316


GS Mortgage Securities Corp., 5.960% due 8/27/2037 11,337

Poland Government Bond, Series 1017, 5.250% due 10/25/2017 11,311

RBSGC Mortgage Pass through Certificates, 6.000% due 6/25/2037 8,249

JPMorgan Alternative Loan Trust, 6.000% due 12/25/2036 7,917

Time Warner Cable, Inc., 7.300% due 7/1/2038 7,398

Wells Fargo Mortgage Backed Securities Trust, 6.000% due

8/25/2037

7,026

AT&T, Inc., 6.400% due 5/15/2038 6,898

Amgen, Inc., 6.900% due 6/1/2038 6,165

GSAA Trust, 5.995% due 3/25/2046 5,778

Countrywide Alternative Loan Trust, 6.500% due 9/25/2037 5,407

JPMorgan Alternative Loan Trust, 6.000% due 11/25/2036 5,290

RBSGC Mortgage Pass through Certificates, 5.500% due 11/25/2035 5,090

Queensland Treasury Corp., Series 15G, 6.000% due 10/14/2015 4,858

Deutsche Mortgage Securities, Inc., 5.650% due 9/28/2036 4,830

Deutsche Mortgage Securities, Inc., 5.650% due 8/28/2036 4,730

Sweden Government Bond, Series 1048, 4.000% due 12/1/2009 4,647

Master Resecuritization Trust, 6.000% due 6/27/2036 4,618

Countrywide Home Loan Mortgage Pass through Trust, 5.750% due

7/25/2037

4,291

Oracle Corp., 6.500% due 4/15/2038 4,193

GlaxoSmithKline Capital, Inc., 6.375% due 5/15/2038 4,187

Bristol-Myers Squibb Co., 6.125% due 5/1/2038 3,713

Berkshire Hathaway 05/15/18, 5.400% due 5/15/2018 3,056

New South Wales Treasury Bills, Series 17RG, 5.500% due 3/1/2017 2,965

United Kingdom Gilt, 4.000% due 9/7/2016 2,569

Countrywide Alternative Loan Trust, 5.750% due 8/25/2037 2,488

New Zealand Government Bond, Series 415, 6.000% due 4/15/2015 2,479


(in 000’s)

FHLMC, zero coupon due 6/13/2008 67,898

Norway Government Bond, 5.500% due 5/15/2009 30,319

Sweden Government Bond, Series 1048, 4.000% due 12/ 1/2009 27,854

FNMA Discount Notes, zero coupon due 7/9/2008 27,736


Mexican Bonos, Series MI10, 8.000% due 12/19/2013 12,700

New South Wales Treasury Corp., Series 12RG, 6.000% due

5/1/2012

10,978



United Kingdom Gilt, 4.750% due 9/7/2015 4,554

U.S. Treasury Bond, 6.500% due 11/15/2026 3,877

New South Wales Treasury Bills, Series 17RG, 5.500% due 3/ 1/2017 2,356


Canadian Treasury Bill, zero coupon due 9/4/2008 2,084

New Zealand Government Bond, Series 415, 6.000% due 4/15/2015 1,728

Sweden Government Bond, Series 1040, 6.500% due 5/ 5/2008 1,112

Verizon Communications, Inc., 6.900% due 4/15/2038 946

Bank Negara Malaysia Monetary Notes�Islamic, Series 0307, 3.067%

due 5/22/2008

385



(in 000’s)

Citigroup, Inc. 6,724

American International Group, Inc. 6,567

FHLMC Corp. 5,421

Merrill Lynch & Co., Inc. 4,658

General Electric Co. 4,083

Google, Inc., Class A 2,669

Nucor Corp. 2,393

Wachovia Corp. 2,275

eBay, Inc. 2,249

Eastman Kodak Co. 2,043

CA, Inc. 1,862


(in 000’s)

Qwest Communications International, Inc. 22,874

JPMorgan Chase & Co. 22,035

Amazon.Com, Inc. 20,816

Sprint Nextel Corp. 17,650

Pfizer, Inc. 16,138

Yahoo!, Inc. 15,471

Expedia, Inc. 15,042

The AES Corp. 8,840

General Motors Corp. 8,331

Pulte Homes, Inc. 7,084

Sears Holdings Corp. 6,726



283

Legg Mason Value Fund – (continued)


(in 000’s)

Hewlett-Packard Co. 1,858

International Business Machines Corp. 1,630

Sears Holdings Corp. 1,440

Cisco Systems, Inc. 1,357

Amgen, Inc. 1,306

The AES Corp. 1,288

Electronic Arts, Inc. 1,149

Yahoo!, Inc. 1,081

Capital One Financial Corp. 1,064

UnitedHealth Group, Inc. 1,059

Bear Stearns Cos., Inc. 925

Time Warner, Inc. 823

NYSE Euronext 747

Texas Instruments, Inc. 693


(in 000’s)

eBay, Inc. 6,421

UnitedHealth Group, Inc. 6,378

Wachovia Corp. 6,221


Aetna, Inc. 5,935

Ryland Group, Inc. 5,875

Nucor Corp. 5,820

Centex Corp. 5,679



Eastman Kodak Co. 4,987



Time Warner, Inc. 4,254

CA, Inc. 4,160




Best Buy Co., Inc. 3,401

Amgen, Inc. 3,286

JC Penney Co., Inc. 3,152

Capital One Financial Corp. 3,089

FHLMC Corp. 3,034

Texas Instruments, Inc. 2,903



(in 000’s)

Reliant Energy, Inc. 3,177

FHLMC Corp. 2,279

American Express Co. 2,231


EMC Corp. 1,998

XTO Energy, Inc. 1,973



Nokia OYJ, ADR 1,834

Halliburton Co. 1,721

Nabors Industries Ltd. 1,716

Caterpillar, Inc. 1,390

Kraft Foods, Inc., Class A 1,305


General Cable Corp. 603

Thomas & Betts Corp. 453

Quanta Services, Inc. 356

The Shaw Group, Inc. 333

Cisco Systems, Inc. 280

Qualcomm, Inc. 177


(in 000’s)

Qualcomm, Inc. 6,285


Nokia OYJ, ADR 3,341

XM Satellite Radio Holdings, Inc., Class A 3,189

Quanta Services, Inc. 3,100

Yahoo!, Inc. 2,695

The Shaw Group, Inc. 2,520

Kraft Foods, Inc., Class A 2,445



The Nasdaq OMX Group 1,999

eBay, Inc. 1,984

Cadbury Schweppes PLC, ADR 1,947

Caterpillar, Inc. 1,922

Veolia Environnement 1,801

American Express Co. 1,489

Vestas Wind Systems A/S 1,411



FedEx Corp. 1,309


FHLMC Corp. 1,013

Citigroup, Inc. 971

Texas Instruments, Inc. 789

Red Hat, Inc. 786

Thomas & Betts Corp. 750

General Cable Corp. 721



(in 000’s)

El Paso Corp. 496

SPDR Gold Trust 294

Amazon.Com, Inc. 266

AT&T, Inc. 242

NVIDIA Corp. 238

The Goldman Sachs Group, Inc. 234

NRG Energy, Inc. 202


(in 000’s)

General Electric Co. 755

SPDR Gold Trust 428

Nabors Industries Ltd. 353

International Business Machines Corp. 346

EnCana Corp. 302

Exxon Mobil Corp. 288

Pfizer, Inc. 278



284

ClearBridge U.S. Appreciation Fund – (continued)


(in 000’s)

Google, Inc., Class A 191

Tyco International Ltd. 187

Apple Computer, Inc. 183

Novartis AG, ADR 183

Merrill Lynch & Co., Inc. 171

Freeport-McMoran Copper & Gold, Inc., Class B 169

Schering-Plough Corp. 166

McDermott International, Inc. 144

Comcast Corp., Class A 135

Exxon Mobil Corp. 134

Visa, Inc. 114

eBay, Inc. 111

Cablevision Systems Corp., Class A 108

The Bank of New York Mellon Corp. 107

Home Depot, Inc. 105

Yahoo!, Inc. 103

Celanese Corp. 102

JPMorgan Chase & Co. 100

Diamond Offshore Drilling, Inc. 79

The Travelers Cos, Inc. 73

Radian Group, Inc. 70

Kimberly-Clark Corp. 70

Medtronic, Inc. 69

PPG Industries, Inc. 67

FHLMC Corp. 64

Corning, Inc. 63

Cadbury Schweppes PLC 63

Staples, Inc. 60

UnitedHealth Group, Inc. 59


(in 000’s)

Biogen Idec, Inc. 269

American Express Co. 265

Weatherford International Ltd. 256

The Goldman Sachs Group, Inc. 244

Valero Energy Corp. 233

Genentech, Inc. 231

American International Group, Inc. 214

Wyeth Corp. 191

Visa, Inc. 166

Monsanto Co. 165


Eli Lilly & Co. 142

Abbott Laboratories 132

Berkshire Hathaway, Inc., Class A 131

EMC Corp. 126


MEMC Electronic Materials, Inc. 118

McDermott International, Inc. 112


Hudson City Bancorp, Inc. 109

Apple, Inc. 108

Raytheon Co. 101

General Mills, Inc. 89



(in 000’s)

United Parcel Service, Inc., Class B 3,654

Merck & Co, Inc. 2,726

Annaly Capital Management, Inc. 2,515

Novartis AG, ADR 2,450

eBay, Inc. 2,327

Chubb Corp. 2,289

Comerica, Inc. 1,700

McDermott International, Inc. 1,660

El Paso Corp. 1,658

Halliburton Co. 1,604


Home Depot, Inc. 1,211

Barrick Gold Corp. 1,194


Bank of America Corp. 1,154

BP PLC, ADR 1,150

Williams-Sonoma, Inc. 1,031

Eli Lilly & Co. 1,014


Novellus Systems, Inc. 752

Visa, Inc. 669

Wyeth Corp. 624



Foundry Networks, Inc. 511

Lawson Software, Inc. 505

AnnTaylor Stores Corp. 503

AirTran Holdings, Inc. 477


Greenhill & Co., Inc. 425


(in 000’s)

News Corp., Class B 5,059

Annaly Capital Management, Inc. 4,369

Pfizer, Inc. 4,347

Bank of America Corp. 4,073

Raytheon Co. 3,773

Alcoa, Inc. 3,561

GlaxoSmithKline PLC, ADR 3,453

Interpublic Group Cos, Inc. 3,319

Eli Lilly & Co. 3,260

Kimberly-Clark Corp. 3,227

Williams Cos., Inc. 2,990

The Dow Chemical Co. 2,806

Honeywell International, Inc. 2,800

Agilent Technologies, Inc. 2,161

Bentley Pharmaceuticals, Inc. 2,067

Abbott Laboratories 1,940

Hartford Financial Services Group, Inc. 1,863

State Street Corp. 1,757

Vodafone Group PLC, ADR 1,576

Wal�Mart Stores, Inc. 1,564


The Walt Disney Co. 1,525

BJ Services Co. 1,509

Microsoft Corp. 1,482

Johnson & Johnson 1,371

Forest Laboratories, Inc. 1,367

Chubb Corp. 1,306

The Gap, Inc. 1,279

Visa, Inc., Class A 1,262

VeriSign, Inc. 1,234

Wyeth Corp. 1,227



285

ClearBridge U.S. Fundamental Value Fund – (continued)


(in 000’s)




BP PLC, ADR 1,102



(in 000’s)


NVIDIA Corp. 921

Sears Holdings Corp. 917



PepsiCo, Inc. 305

Akamai Technologies, Inc. 236

The Nasdaq OMX Group 158



Johnson & Johnson 40

Amgen, Inc. 36

The Walt Disney Co. 31


Microsoft Corp. 16

Procter & Gamble Co. 13

Home Depot, Inc. 11

Vertex Pharmaceuticals, Inc. 8

Qualcomm, Inc. 0


(in 000’s)

WM Wrigley Jr Co. 3,184

Genentech, Inc. 2,520


Yahoo!, Inc. 1,816


Amgen, Inc. 1,098

IAC/InterActive Corp. 1,029

Intel Corp. 822

eBay, Inc. 815

Procter & Gamble Co. 739

Medtronic, Inc. 702

Electronic Arts, Inc. 669

Akamai Technologies, Inc. 656

Red Hat, Inc. 638

Berkshire Hathaway, Inc., Class A 635


The Coca�Cola Co. 584


Qualcomm, Inc. 579


Harman International Industries, Inc. 504

The Nasdaq OMX Group 493



Johnson & Johnson 437

Home Depot, Inc. 382


Microsoft Corp. 362

PepsiCo, Inc. 348


Vertex Pharmaceuticals, Inc. 295

Sears Holdings Corp. 281



(in 000’s)

Millennium Pharmaceuticals, Inc. 4,646

Micron Technology, Inc. 2,762

Johnson & Johnson 2,561

Genzyme Corp. 1,980

Anadarko Petroleum Corp. 1,658

Cabot Microelectronics Corp. 1,576

Core Laboratories NV 1,126

Biogen Idec, Inc. 1,033


Amgen, Inc. 922


Teradyne, Inc. 748

Cirrus Logic, Inc. 543

Viacom, Inc., Class B 323

National Oilwell Varco, Inc. 318

RF Micro Devices, Inc. 279

CIT Group, Inc. 219

Comcast Corp., Class A 214

Quantum Corp. 138

Micromet, Inc. 62



286



(in 000’s)

Carpenter Technology Corp. 494

Genesco, Inc. 471

Cash America International, Inc. 468

Liz Claiborne, Inc. 406

Novellus Systems, Inc. 402

CIT Group, Inc. 358

The Andersons, Inc. 357

Wright Medical Group, Inc. 345

Infospace, Inc. 333

RTI International Metals, Inc. 330

Hurco Cos, Inc. 316

Solutia, Inc. 312

Loral Space & Communications, Inc. 292

Texas Capital Banshares, Inc. 283

Varian, Inc. 280

Dorel Industries, Inc., Class B 275

Century Aluminum Co. 273

Angiodynamics, Inc. 270

Mentor Graphics Corp. 268

KBW Regional Banking ETF 264

Penford Corp. 263

Swift Energy Co. 260

Fidelity National Financial, Inc., Class A 251

Pengrowth Energy Trust 234

AirTran Holdings, Inc. 231

Cabela’s, Inc. 228

Greatbatch, Inc. 227

Horace Mann Educators Corp. 217

Griffon Corp. 217

Valueclick, Inc. 203

Toll Brothers, Inc. 202

GSI Group, Inc. 200

Bebe Stores, Inc. 199

Cambrex Corp. 183


(in 000’s)

Walter Industries, Inc. 1,225

CIRCOR International, Inc. 776

The Childrens Place Retail Stores, Inc. 738

Landry’s Restaurants, Inc. 706

Wright Medical Group, Inc. 583

Analogic Corp. 568

The Warnaco Group, Inc. 564

Esterline Technologies Corp. 548

Gardner Denver, Inc. 544

Radyne Corp. 535

Century Aluminum Co. 449

Cash America International, Inc. 398

Mack-Cali Realty Corp. 375

Hanesbrands, Inc. 372

LifePoint Hospitals, Inc. 368

Commercial Metals Co. 359

PharMerica Corp. 353

Swift Energy Co. 343

Avid Technology, Inc. 336

Mentor Graphics Corp. 332



(in 000’s)

Sigma Designs, Inc. 744

Fossil, Inc. 717

Industrias Bachoco SAB de CV 686

HEICO Corp., Class A 561

Major Drilling Group International 553

Ceradyne, Inc. 529

Drew Industries, Inc. 470

Lundin Mining Corp. 450

Thor Industries, Inc. 449

Apogee Enterprises, Inc. 448

Men’s Wearhouse, Inc. 444

Global Industries Ltd. 436

Stifel Financial Corp. 426

Silvercorp Metals, Inc. 417

Carpenter Technology Corp. 407

Lam Research Corp. 399

Technitrol, Inc. 352

Gammon Gold, Inc. 345

Silver Standard Resources, Inc. 333


SRA International, Inc., Class A 285

Greenhill & Co., Inc. 283

Brown & Brown, Inc. 280

Wolverine World Wide, Inc. 280

Varian Semiconductor Equipment Associates, Inc. 279

Williams-Sonoma, Inc. 275

Sims Group Ltd. 273

Evercore Partners, Inc., Class A 271


(in 000’s)


Schnitzer Steel Industries, Inc., Class A 683

Westlake Chemical Corp. 597

CARBO Ceramics, Inc. 528

Copart, Inc. 515

Alpharma, Inc., Class A 444

Trican Well Service Ltd. 426

Corinthian Colleges, Inc. 419

CRA International, Inc. 412

Sanderson Farms, Inc. 410

Kaydon Corp. 397

eResearch Technology, Inc. 386

Graco, Inc. 378

Perot Systems Corp., Class A 365

Unit Corp. 353

Endo Pharmaceuticals Holdings, Inc. 350

Quanex Building Products Corp. 329

Ensign Energy Services, Inc. 328

Oil States International, Inc. 327


ICU Medical, Inc. 307

Pason Systems, Inc., Class A 306

Woodward Governor Co. 290

Agnico-Eagle Mines Ltd. 278

Applied Industrial Technologies, Inc. 273

Reliance Steel & Aluminum Co. 267

Technitrol, Inc. 256

Calfrac Well Services Ltd. 255



287

Royce Smaller Companies Fund – (continued)


(in 000’s)


Columbia Sportswear Co. 262

KKR Financial Holdings LLC 257

Randgold Resources Ltd., ADR 254

PAN American Silver Corp. 253

Fronteer Development Group, Inc. 244

Schnitzer Steel Industries, Inc., Class A 239

Haynes International, Inc. 237

Columbus McKinnon Corp. 231

Netgear, Inc. 227

Denison Mines Corp. 218

Lincoln Electric Holdings, Inc. 207

AM Castle & Co. 191

Unit Corp. 188

Cimarex Energy Co. 187


(in 000’s)

Gentex Corp. 251

Ritchie Bros Auctioneers, Inc. 251

Cimarex Energy Co. 246

Global Industries Ltd. 239

Hilb Rogal & Hobbs Co. 235

MSC Industrial Direct Co., Class A 234

Evercore Partners, Inc., Class A 227

Carlisle Cos, Inc. 226

Sims Group Ltd. 214

RPC, Inc. 211

Gammon Gold, Inc. 210

ManTech International Corp., Class A 204

Tesco Corp. 184

Fair Isaac Corp. 177

National Instruments Corp. 172



(in 000’s)

CA, Inc. 25,867

Oppenheimer Holdings, Inc. 21,524

Symantec Corp. 18,954

Sotheby’s 18,728

International Game Technology 15,862

Xerox Corp. 14,879

First Citizens BancShares, Inc. 14,600

Royal Caribbean Cruises Ltd. 13,518

Mine Safety Appliances Co. 12,621

Webster Financial Corp. 10,588

Provident New York Bancorp 10,406

Sterling Financial Corp. 10,247

Trustco Bank Corp. 9,742

OceanFirst Financial Corp. 9,612

Avid Technology, Inc. 9,608

Berkshire Hills Bancorp, Inc. 9,520

Herman Miller, Inc. 9,320

Boyd Gaming Corp. 7,954

AutoNation, Inc. 7,659

Northern Trust Corp. 6,922

MGM Mirage 4,877

Raymond James Financial, Inc. 4,759

Motorola, Inc. 3,824

Sprint Nextel Corp. 2,866


(in 000’s)

Xerox Corp. 21,341

Webster Financial Corp. 14,653

Provident Financial Services, Inc. 4,344



(in 000’s)

Sumitomo Mitsui Financial Group, Inc. 1,488

Intel Corp. 1,247

Mizuho Financial Group, Inc. 1,146

Tyson Foods, Inc. 1,124

U.S. Bancorp 1,086

Mylan, Inc. 1,029

Novartis AG 984

Sara Lee Corp. 931

BNP Paribas 897

Bank of America Corp. 865

Ryanair Holdings PLC, ADR 771

Maidenform Brands, Inc. 745

Alcoa, Inc. 736

Synthes, Inc. 728

General Electric Co. 728

HSBC Holdings PLC 714

Marsh & McLennan Cos, Inc. 704


Hcc Insurance Holdings, Inc. 675


(in 000’s)

Nestle S.A. 2,065


Arch Coal, Inc. 1,373

GlaxoSmithKline PLC 1,352

3M Co. 1,226

Lonza Group AG 1,134

Teva Pharmaceutical Industries Ltd., ADR 1,103

Cheung Kong Holdings Ltd. 1,096

Peabody Energy Corp. 1,034

Telecom Italia S.p.A. 1,009

Pfizer, Inc. 988

Bunge Ltd. 970

Nitto Denko Corp. 876

Bangkok Bank PCL, NVDR 847

Square Enix Co. Ltd. 789

Fresenius Medical Care AG & Co. KGaA 759

Bombardier, Inc., Class B 572

Vodafone Group PLC 566

Vivendi Universal S.A. 562



288

GC Global Equity Fund – (continued)


(in 000’s)

Amgen, Inc. 673

Ensign Energy Services, Inc. 669

Telefonica S.A. 662

Medtronic, Inc. 659

SLM Corp. 635

SBI Holdings, Inc. 601

Nobel Biocare Holding AG 563

UBS AG 528

Barclays PLC 527

OM Group, Inc. 378

Fortis Bank NY 378

Societe Generale 366

Gold Fields Ltd., ADR 361

Acerinox S.A. 361

Trina Solar Ltd., ADR 355

Ratchaburi Electricity Generating Holding PCL 344

Punch Taverns PLC 336

Teekay Corp. 335

Enterprise Inns PLC 329

Stada Arzneimittel AG 329


(in 000’s)

Oracle Corp. 517

Nipponkoa Insurance Co. Ltd. 502

Anheuser-Busch Cos, Inc. 479

Technip S.A. 460

ACE Ltd. 449

Wyeth Corp. 400

Sanofi-Aventis S.A. 339

France Telecom S.A. 324

Clorox Co. 262



(in 000’s)

Standard Chartered PLC 505

Unilever NV 410

GlaxoSmithKline PLC 404

BNP Paribas 391

DaimlerChrysler AG 388

Royal Bank of Scotland Group PLC 381

Severn Trent PLC 364

Volkswagen AG 354


Novartis AG 323

Carlsberg A/S 317

Swedbank AB, Class A 292

SAP AG 291

Intesa Sanpaolo S.p.A. 278


Barclays PLC 245

Portugal Telecom SGPS S.A. 230

UniCredit S.p.A. 228

SES S.A. 226

Carrefour S.A. 215

Tesco PLC 202

Standard Life PLC 197

Banco Bilbao Vizcaya Argentaria S.A. 192

OPAP S.A. 191

PSP Swiss Property AG 191

Grupo Catalana Occidente S.A. 189

Belgacom S.A. 185

Lloyds TSB Group PLC 170

Inmarsat PLC 166

Thales S.A. 166

IMI PLC 164

Carillion PLC 163

Mapfre S.A. 163

Mobistar S.A. 156

AXA S.A. 155

Royal KPN NV 155

Intermediate Capital Group PLC, Series CW08 149

Drax Group PLC 143

Yit�Yhtyma OYJ 142

Lonza Group AG 141

Nordea Bank AB 136

United Utilities PLC 132

MAJOR SALES

(000’s)

PROCEEDS

(in 000’s)

Carlsberg A/S, Class B 751


Siemens AG 644

Roche Holding AG 536

Neuf Cegetel 470

BNP Paribas 458

Telenor ASA 449

Coca-Cola Hellenic Bottling Co. S.A. 448

Vivendi Universal S.A. 444

British American Tobacco PLC 437

Intesa Sanpaolo S.p.A. 435

Volkswagen AG 406



Unilever NV 377

France Telecom S.A. 375

Deutsche Telekom AG 360

Sligro Food Group NV 350

ArcelorMittal 350

Standard Chartered PLC 350

BP PLC 336

Cable & Wireless PLC 331


Agricultural Bank of Greece 312

Diageo PLC 295

GKN PLC 275

Scottish & Southern Energy PLC 265

ABB Ltd. 258

John Wood Group PLC 253

Royal KPN NV 252

E.ON AG 249

Cie Generale de Geophysique-Veritas 235

Reckitt Benckiser Group PLC 235

MTU Aero Engines Holding AG 233

UniCredit S.p.A. 231

Stada Arzneimittel AG 230

Barclays PLC 230



289

Batterymarch European Equity Fund – (continued)


(in 000’s)

BP PLC 132

Logicacmg PLC 131

Nestle S.A. 127

Telekom Austria AG 127

BHP Billiton PLC 122



(in 000’s)

Samsung Fire & Marine Insurance Co. Ltd. 11,834

China Mobile Ltd. 8,616

Shinhan Financial Group Co. Ltd. 8,178

Taiwan Semiconductor Manufacturing Co. Ltd., ADR 6,421

China Merchants Bank Co. Ltd., Class H 6,346

Chunghwa Telecom Co. Ltd. 5,790

Fauji Fertilizer Co. Ltd. 5,544

Reliance Industries Ltd. 5,335

Taiwan Semiconductor Manufacturing Co. Ltd. 5,303

First Financial Holding Co. Ltd. 5,169

CJ Home Shopping 5,116

Industrial & Commercial Bank of China, Class H 4,818

Korea Gas Corp. 4,751

High Tech Computer Corp. 4,589

Samsung Electronics Co. Ltd. 4,523

Formosa Plastics Corp. 4,461

Lenovo Group Ltd. 4,304

China Life Insurance Co. Ltd. 4,299

Singapore Telecommunications Ltd. 4,139

Quanta Computer, Inc. 4,134

POSCO 4,032

KT&G Corp. 3,975

China Construction Bank Corp., Class H 3,914

Dongkuk Steel Mill Co. Ltd. 3,774

PTT PCL 3,750

LG Display Co. Ltd. 3,718

TSRC Corp. 3,495


(in 000’s)


KT&G Corp. 4,231

MegaStudy Co. Ltd. 3,963

Asia Cement Corp. 3,924

Digi.Com Bhd 3,663

Total Access Communication PCL 3,655


Bumiputra-Commerce Holdings Bhd 3,495

KT Corp. 3,422

Taiwan Cement Corp. 3,370

Kerry Properties Ltd. 3,187

Hyundai Development Co. 3,130

Hyundai Marine & Fire Insurance Co. Ltd. 3,117

Formosa Plastics Corp. 3,064


LG Household & Health Care Ltd. 2,963

Swire Pacific Ltd., Class A 2,937

Seah Besteel Corp. 2,825

Manila Water Co., Inc. 2,659

HTC Corp. 2,589

Bank of India 2,491

BEC World PCL 2,425

Li Ning Co. Ltd. 2,393


Hong Kong Exchanges & Clearing Ltd. 2,323

SFA Engineering Corp. 2,312

Jindal Steel & Power Ltd. 2,253

Cheung Kong Holdings Ltd. 2,242

From30 Co. Ltd. 2,239

Hyundai Heavy Industries 2,207

Kasikornbank PCL 2,153

Anhui Conch Cement Co. Ltd., Class H 2,062

Shinsegae Co. Ltd. 2,033

Steel Authority of India Ltd. 2,012

China Everbright Ltd. 2,001

Reliance Petroleum Ltd. 1,980

Denway Motors Ltd. 1,904

Shanghai Zhenhua Port Machinery Co. Ltd., Class B 1,874

Hang Lung Group Ltd. 1,849



(in 000’s)




Banco Santander S.A. 143,715

Rio Tinto PLC 142,857

E.ON AG 140,682

Telefonica S.A. 139,872

Oracle Corp. 133,362

HSBC Holdings PLC 130,242

Total S.A. 128,422

Bayer AG 125,662

Mitsubishi Corp. 123,389

Schering-Plough Corp. 116,147

Dell, Inc. 108,751


(in 000’s)

Vodafone Group PLC 73,279

Union Fenosa S.A. 66,582

Shionogi & Co. Ltd. 65,425

Metro AG 62,308

Comcast Corp., Class A 60,194

KDDI Corp. 59,188

Henkel KGaA 58,857

Aetna, Inc. 58,779

Pacific Basin Shipping Ltd. 57,721

Pride International, Inc. 56,997

Thermo Fisher Scientific, Inc. 54,307

Fiat S.p.A. 53,468

HSBC Holdings PLC 52,897

Singapore Telecommunications Ltd. 51,452



290

Batterymarch 130/30 Global Equity Fund – (continued)


(in 000’s)

Corning, Inc. 106,743

RWE AG 105,938

Xstrata PLC 104,218

BASF AG 97,074

Occidental Petroleum Corp. 96,440

Matsushita Electric Industrial Co. Ltd. 87,773


(in 000’s)

Invensys PLC 51,002

Corning, Inc. 50,487

OMV AG 49,223

Hongkong Land Holdings Ltd. 48,346

Eaton Corp. 48,109

Amb Property Corp. 47,192

Hannover Rueckversicherung AG 46,671

Parker Hannifin Corp. 45,955

Canadian Natural Resources Ltd. 44,503

Hanesbrands, Inc. 43,965

Drax Group PLC 43,717

Muenchener Rueckversicherungs AG 43,355

Apache Corp. 42,081

SYSCO Corp. 41,685

Oilexco, Inc. 40,563

Terex Corp. 38,893

Suzuken Co. Ltd. 38,795

Total S.A. 38,254

Tognum AG 37,793

Freeport-McMoRan Copper & Gold, Inc., Class B 37,437

The Sumitomo Trust & Banking Co. Ltd. 37,223

Autoliv, Inc. 34,591

Sony Corp. 33,707

Petro-Canada Corp. 33,371

Singapore Exchange Ltd. 32,546

Imperial Tobacco Group PLC 31,968

CSM 31,059

News Corp. Ltd., Class A 30,578

IOI Corp. Bhd 30,204

The Hiroshima Bank Ltd. 29,694

Xstrata PLC 29,524

Biogen Idec, Inc. 28,711

Woolworths Ltd. 28,484

Singapore Press Holdings Ltd. 28,211

Getinge AB 28,097

Computershare Ltd. 27,745

Chubb Corp. 27,735

Bilfinger Berger AG 27,141



(in 000’s)



Royal Bank of Scotland Group PLC 425

Novartis AG 376

Mitsubishi UFJ Financial Group, Inc. 362


Toyota Motor Corp. 331

Tesco PLC 305

Carlsberg A/S 298

AstraZeneca PLC 284

Nintendo Co. Ltd. 277


Barclays PLC 239

Alfresa Holdings Corp. 230

SAP AG 227

DaimlerChrysler AG 226

ING Groep NV 223

Hokuhoku Financial Group, Inc. 221

Nippon Electric Glass Co. Ltd. 218


Nippon Telegraph & Telephone Corp. 217


(in 000’s)

Toyota Motor Corp. 673

Carlsberg A/S, Class B 561



Keppel Corp. Ltd. 438

Roche Holding AG 426


Siemens AG 391

Deutsche Postbank AG 337

Deutsche Telekom AG 329

Takeda Pharmaceutical Co. Ltd. 314

Tesco PLC 296


Sony Corp. 283

BP PLC 279

Sistema JSFC, GDR 279

Daimler AG 277

Mitsubishi UFJ Financial Group, Inc. 273

BNP Paribas 270

Shin-Etsu Chemical Co. Ltd. 266

Nintendo Co. Ltd. 264

GS Engineering & Construction Corp. 264

ArcelorMittal 260



291

Batterymarch International Large Cap Fund – (continued)


(in 000’s)

Sumitomo Mitsui Financial Group, Inc. 216

Telefonica S.A. 212

Canon, Inc. 200

Tokyo Gas Co. Ltd. 200



(in 000’s)

Petroleo Brasileiro S.A., ADR 3,952,142

Gazprom OAO, ADR 3,893,822

Cia Vale do Rio Doce, ADR 3,126,234

China Mobile Ltd. 2,497,266

iShares MSCI Taiwan Index Fund 2,448,110

Samsung Electronics Co. Ltd. 2,317,122

America Movil SAB de CV, ADR 1,946,982

Industrial & Commercial Bank of China, Class H 1,573,875

Reliance Industries Ltd. 1,512,230

Sasol Ltd. 1,507,140

Samsung Fire & Marine Insurance Co. Ltd. 1,035,948

MTN Group Ltd. 1,020,137

China Construction Bank Corp., Class H 1,010,141

Unibanco – Uniao De Bancos Brasileiros S.A. 994,813

Mobile Telesystems OJSC, ADR 992,901

Shinhan Financial Group Co. Ltd. 943,198


Lukoil International Finance BV 806,432

Lenovo Group Ltd. 806,136

China Steel Corp. 800,904


(in 000’s)

iShares MSCI Taiwan Index Fund 2,381,380

Ipath MSCI India Index 489,231

Telefonos de Mexico SAB de CV, ADR 468,419

Turkiye Garanti Bankasi A/S 426,162



China Vanke Co. Ltd. 362,907

Kasikornbank PCL 343,737

Kumho Industrial Co. Ltd. 333,592

Ranbaxy Laboratories Ltd. 325,756


Akbank TAS 311,376


Impala Platinum Holdings Ltd. 270,528

MegaStudy Co. Ltd. 247,603

State Bank of India Ltd. 245,774

SFA Engineering Corp. 231,256

Angang Steel Co. Ltd., Class H 228,290

Asia Cement Corp. 210,378

Banpu PCL 209,384

MMC Norilsk Nickel 202,947

Banpu PCL 182,342

Brasil Telecom S.A. 178,156

Ayala Land, Inc., Class B 150,433

Cia De Saneamento Basico Do Estado De Sao Paulo 145,124

Shougang Concord International Enterprises Co. Ltd. 144,706

Coca-Cola Femsa SAB de CV 127,291

Grupo Aeroportuario Del Pacifico S.A. de CV 127,104

Fomento Economico Mexicano SAB de CV, ADR 124,294



legg mason global funds plc semi-annual report (unaudited) · semi-annual report (unaudited) for...

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