Investment Opportunities in Low-Carbon Companies and Technologies

Mike Dieschbourg CEO & Head of ESG Global Currents Investment Management A Legg Mason Affiliate Global Currents Investment Management

Active All Cap Global Value Equity Investment Style

Signatory of UN Principles for Responsible Investment

Member of UNEP FI

Co-developer of the Global 100 Most Sustainable Corporations in the World

CEO is on International Advisory Board of the Responsible Investment Association Australasia (RIAA) Academy

Signatory of International Corporate Governance Network

Parent company Legg Mason is signatory to Carbon Disclosure Project

Parent company Legg Mason is member of Maplecroft CII Benchmark index

2 Low-carbon Investment Opportunity

Increasing Attention From – Media Sources – Governments

Increasing Interest From – Mainstream Consultants – Mainstream Institutional Investors – Socially Responsible Investors

Government Stimulus Programs

3 Global Sustainability Research Alliance

95%+ ity 95%+ ortun Europe Opp US, Canada 95%+ Japan

y rtunit Oppo

y rtunit Oppo 95%+ Australia, New Zealand, HK, Korea, Singapore

GSRA % Coverage of MSCI All Country World Index

The information provided on this page should not be considered a recommendation to buy or sell securities in a particular region. It should not be assumed that investing in securities from any of the regions discussed above were profitable in the past or will prove to be profitable in the future. 4 Global 100 Most Sustainable Corporations

An annual project initiated by Corporate Knights, the magazine for clean capitalism.

Global 100 team included Legg Mason's Global Currents Investment Management, Inflection Point Capital, and Phoenix Global Advisors LLC.

Aims to highlight the global corporations which have been most proactive in managing environmental, social and governance (ESG) issues.

Launched in 2005, the annual Global 100 is announced each year during the World Economic Forum in Davos.

Source: www.Global100.org 5 Global 100 Council of Experts

Jane Ambachtsheer - Global Head Responsible Investment, Mercer Investment Consulting Aron Cramer - Chief Executive, Business for Social Responsibility Paul Clements-Hunt - Head, UNEP-FI Paul Dickinson - Chief Executive, Carbon Disclosure Project Julie Desjardins - Regular Advisor, Canadian Institute of Chartered Accounting Gordon Hagart - Head of ESG Risk Management, Future Fund Dr. Tessa Hebb - Director Carleton Centre for Community Innovation, Carleton University, Ottawa, Canada Senior Research Associate, Oxford University Centre for the Environment, UK Ernst Ligteringen - Chief Executive, Global Reporting Initiative Jim MacNeill - Director of Environment at OECD in Paris (1978-1984), Secretary General of the World Commission on Environment and Development (Brundtland Commission) Robert A.G. Monks - Founder, Lens Governance Advisors Donald F. Reed - CFA, CIC, Co-founder of the International Society of Financial Analysts, President and Chief Executive Officer of Franklin Templeton Investments Corp Karl-Henrik Robert - Founder, Natural Step Nick Robins - Head of Climate Change Centre, HSBC Bank PLC UK Raj Thamotheram - Director, Responsible Investment (RI), Enhanced AXA Investment Managers Olaf Weber - Chair, Environmental Finance at the University of Waterloo Alan Willis - Regular Advisor, Canadian Institute of Chartered Accounting Ricardo Young - Chairman, Ethos

Source: www.Global100.org 6 Global 100 List 2010

CO2 Company Rank Productivity General Electric Company 1 27878 PG & E Corp. 2 8656 Tnt Nv 3 14575 H & M Hennes & Mauritz Ab 4 65236 Nokia Corporation 5 320536 Siemens Ag 6 32741 Unilever Plc 7 21596 Vodafone Group Plc 8 44047 Smiths Group Plc 9 38047 Geberit 10 26028 Henkel Ag 11 20102 Inditex Sa 12 39934 Procter & Gamble Company 13 12803 Toyota Motor Corp. 14 130187 Westpac Banking Corp. 15 243299 Enbridge Inc 16 3782 Koninklijke Philips Electronics Na 17 32234 Diageo Plc 18 21642 Nippon Yusen Kk 19 1336 Royal Dutch Shell Plc 20 5392 ProLogis 21 347050 Insurance Australia Group 22 136069 Johnson Controls Inc 23 22209 Stockland 24 14442 Encana Corp. 25 2819 Prudential Plc 26 0 Old Mutual Plc 27 0 Adidas Ag 28 246995 Bg Group Plc 29 2638 Groupe Danone 30 41095 Centrica Plc 31 3560 Taylor Wimpey Plc 32 344292 Kesko Oyj 33 84084

The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that investing in any of the securities addressed on this page were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results. Source: www.global100.org

7 Global 100 List 2010

CO2 Company Rank Productivity

Atlas Copco Ab 34 26047 Bt Group Plc 35 52279 Agilent Technologies Inc 36 42054 L'Oreal S.A. 37 123171 Coca Cola Company 38 6179 Intel Corp. 39 13188 Suncor Energy 40 2551 Novozymes A/s 41 3078 Vestas Windsystems A/S 42 212202 Swisscom 43 398323 Umicore Sa 44 21489 Novo Nordisk A/s 45 41797 Kingfisher Plc 46 43050 GPT Group 47 4228 Starbucks Corp. 48 7768 Sainsbury (j) Plc 49 53583 Sun Life Financial Inc 50 397663 Lafarge Sa 51 266 Glaxosmithkline Plc 52 20115 Bluescope Steel Limited 53 613 The Capita Group Plc 54 104071 Iberdrola Sa 55 927 Origin Energy Limited 56 184 Lonmin Plc 57 1345 Roche Holdings Limited 58 39785 Nexen Inc 59 1953 Credit Agricole Sa 60 2545994 Boral Limited 61 1177 Pearson Plc 62 43838 SCA AB 63 3874 London Stock Exchange Group Plc 64 147742 Transcanada Corp. 65 630 Electrocomponents Plc 66 82921 The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that investing in any of the securities addressed on this page were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results. Source: www.global100.org

8 Global 100 List 2010

CO2 Company Rank Productivity Statoilhydro Asa 67 8129 Toronto-Dominion Bank 68 244577 Baxter International Inc 69 16732 Duke Energy Corp. 70 123 Royal Bank Of Canada 71 255324 Mtr Corporation Limited 72 2066 Sims Metal Management Ltd 73 28277 Abb Limited 74 22294 Trend Micro Inc 75 46989 Omv Ag 76 3131 Swiss Reinsurance Company 77 1345811 Sembcorp Industries Limited 78 25415 SAP AG 79 76007 Smith (ds) Plc 80 4960 City Developments Limited 81 60879 Anglo Platinum Limited 82 1117 Pinnacle West Capital Corp. 83 139 Dassault Systemes Sa 84 935609 Neste Oil Oyj 85 5532 Intesa Sanpaolo 86 301959 STMicroelectronics 87 7179 Telus Corp. 88 28012 F & C Asset Management Plc 89 741837 Tata Steel 90 2932 Samsung Electronics Company Limited 91 7252 Housing Development Finance Corp. Limite 92 451906 Posco 93 377 Banco Bradesco Sa 94 869454 Ricoh Company Limited 95 57194 Petroleo Brasileiro Sa 96 2053 Dexus Property Group 97 3367 Taiwan Semiconductor Manufacturing Compa 98 3189 Natura Cosmeticos Sa 99 0 Sompo Japan Insurance 100 268870 The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that investing in any of the securities addressed on this page were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results. Source: www.global100.org

9 Global 100 Methodology

Analysis for the Global 100 was based on the work of a group of sustainability research providers used to isolate a short list of the top ten percent of sustainability and financial performers from a universe of 3,000 developed and emerging market stocks. These were then ranked by a set of Key Performance Indicators (KPIs) calculated using environmental, social, governance (ESG) and financial data from ASSET4 (a Thomson Reuters business) and The BLOOMBERG PROFESSIONAL® service, with supplemental financial information provided by FactSet Research Systems. Companies were analyzed by region and MSCI Global Industry Classification Standard sectors according to the MSCI All Country World Index (ACWI). To determine the Corporate Knights Global 100 for 2010, the following significant improvements were made:

1. ESG information was obtained from a group of data providers rather than a single data provider. 2. ESG data was integrated with financial data to enhance analysis. 3. Companies were ranked transparently by a set of ten objective sustainability indicators as opposed to a "black-box" approach. 4. A greater number of companies from emerging markets were included in the analysis.

The process was carried out with two fundamental limitations of corporate sustainability research in mind:

1. A lack of ESG data persists despite the growing importance of sustainability to the corporate world. 2. No single sustainability research provider is currently able to provide a total picture of global corporate sustainability due to coverage gaps and methodological biases.

Source: www.Global100.org 10 Global 100 Methodology, continued

The First Step The Global Sustainability Research Alliance (one of the world's largest and most comprehensive ESG research platforms), isolated the top ten percent of sustainability and financial performers from a universe of 3000 developed and emerging market stocks. The top ten per cent list comprised of 300 company names was then turned over to Corporate Knights Research Group and Inflection Point Capital Management for further analysis. The Second Step The second level of analysis was completed using a proprietary 5-Factor Model developed by Dr. Matthew Kiernan and the IPCM team. This model represents an advance upon existing sustainability analytical models in two respects. First, the 5-Factor Model adopts a more explicit focus on the quality of a company's strategic management capabilities. Second, the model expands previous working definitions of corporate sustainability by extending traditional ESG factors to include elements such as a company's capacity for innovation and its ability to respond to changing competitive forces. The model was applied using ten equally-weighted environment, social, and governance (ESG) Key Performance Indicators (KPIs) and a Transparency Indicator. The KPIs were developed by Corporate Knights Research Group (CKRG), a signatory to the United National Principles for Responsible Investment (UNPRI), with support from Inflection Point Capital Management, and input from the Global 100 Council of Experts comprised of thought leaders at the interface of sustainability and finance. The KPIs (for which a 70 per cent average threshold of data availability was achieved) were used to rank companies within industries. The top-ranked companies in each sector, paying attention to weightings of the MSCI ACWI, comprise the final Global 100.

Source: www.Global100.org 11 Global 100 Corporate Bond Methodology

Index Description

A suite of global corporate bond indexes consisting of only issuers ranked as the G-400 or G-100 best Environmental, Social and Governmental (ESG). The G-400 and G-100 Global Corporate Bond Indexes include only the top 400 and 100 global companies based upon the Environmental, Social and Governmental (ESG) performance criteria of the ESG research network of Global Sustainability Research Alliance (GSRA). These Global ESG Corporate Bond Indexes includes only the top 100 and 400 companies ranked for ESG performance, drawn from the largest thousand publicly traded companies in the world. From that top ranked universe, only companies issuing investment grade debt meeting specific liquidity criteria were selected for these indexes. Index Portfolio Only the largest issue(s) of each issuer are chosen for each maturity cell. There are three distinct maturity cells: 1.01 - 5.00 years, 5.01 - 10.00 years, 10.01 - 30.00 + years. Each index may have one, two or three maturity cells depending on its term structure. There are three distinct term structure indexes: the Short index (1.01 - 5.00 years) has one maturity cell, the Intermediate index (5.01 - 10.00 years) has two maturity cells and the Master (1.01 - 30.00 + years) has three maturity cells. Each index has all issues greater than 1.00 years. Each issue must be investment grade by either Moody's and S&P. Excluded from the index are issues with less than 3 years call protection and floaters.

Source: Global Sustainability Research Alliance 12 GSRA/ASRA ’s Approach to ESG Research Integration and Analysis

GSRA is an independent ESG research integration and financial technology platform which aggregates non-financial analysis from a network of specialized global research providers

GSRA utilizes a common technology platform as an engine to integrate ESG factors into the mainstream portfolio management process

GSRA currently integrates ESG research from Europe, the Americas and Asia and continues to actively expand the research provider network

Through this network GSRA obtains ESG ratings, sub-score analysis and time series data from one or more providers for around 6000 global companies

Approximately 70% of the GSRA Focus List of investable companies is currently covered by one or more ESG rating(s)

The GSRA Focus List is actively monitored for changes in ESG composite or sub-factor ratings. This process identifies potential positive and negative alpha factors for further review. T he results are integrated into the portfolio management process

Source: Global Sustainability Research Alliance 13 GSRA ESG & Financial Mapping in One Platform

Source: Global Sustainability Research Alliance. The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that investing in any of the security transactions or holdings discussed were profitable in the past or will 14 prove to be profitable in the future. Past performance is no guarantee of future results Global 100 Performance Equity and Fixed Income

Global 100 Equity Portfolio by GSRA Period 1/1/2005 - 12/31/2009 Global 100 Equity MSCI World Difference Annualized Return 4.51% 2.01% 2.50%

ESG Corporate Bond Indexes by GSRA and ALM Research Period 12/31/2005 - 5/31/2010 Global 100 Bond Index ML Global Corporate Bond Index Difference Annualized Return 8.31% 4.38% 3.93%

Global 100 Portfolio and ESG Corporate Bond Index are hypothetical model portfolios and are not actively managed. This data does not represent actual trading activity and may not reflect the impact that material economic and market factors might have on Global Currents' decision making process, if Global Currents were actually managing a client account. The MSCI World Index, The ML Corporate bond index, and the Global 100 Bond index are unmanaged and not available for direct investment. .Past performance is no guarantee of future results. Source: Global Sustainability Research Alliance

15 Environmental Technology Benchmark

Average Portfolio Weight 12/31/2008 – 12/31/2009

Custom GICS Sector FTSE MSCI Difference Environmental World Opportunities

Industrials 54.42 10.55 43.87 Materials 14.16 6.84 7.31 Information Technology 7.11 11.43 -4.32 Consumer Discretionary 3.59 9.25 -5.66 Utilities 17.05 5.00 12.05 Health Care 1.94 10.81 -8.87 Consumer Staples 1.55 10.54 -8.99 Energy 0.16 11.56 -11.40 Financials 0.03 19.29 -19.26

The information provided on this page should not be considered a recommendation to buy or sell securities in a particular sector or industry. It should not be assumed that investing in any of the sectors or industries discussed were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results. Data is obtained from FactSet (©2010, FactSet Research Systems Inc.) and is believed to be reliable and accurate. FactSet provides financial information 16 on securities and market indexes worldwide. Indexes are unmanaged and not available for direct investment. Low-carbon Industries

Cost savings from energy efficiency in a wide range of industries

– Building materials • Insulation • Glass • Construction

– Capital Goods • Electrical Power • Electrical Controls • Semiconductors • LED Lighting

– Information Technology • Virtualization, Cloud Computing, Data Center Efficiency

– Transportation • High mileage vehicles, trains, engines, batteries, suppliers

– Denso Corp. – Toray Industries – JGC Corp. – Murata Manufacturing Co. Ltd. – Kyocera Corp.. – Ibiden Co. Ltd – Miura Co. Ltd. – Organo Corp. – Daifuku Co. Ltd. – Sembcorp Industries Ltd. – NGK Insulators Ltd. – Fanuc – SIG – ZhongDe Waste Technology

The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that investing in any of the securities discussed were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results 18 Climate Change Leaders

High Impact – Climate change leaders in the most carbon intensive industries

Low Impact – Climate change leaders in the least carbon-intensive industries

Solutions – Climate change solutions companies

5 High-Impact Low-Impact Solutions 0

9 09 09

Outperformance vs Sector vs Outperformance 009 /200 /20 /20 /2 /2009 /2009 /2009 /2009 /2010 /2010 /2010 /2010 /2010 9 26 24 21 18 16 13 11 08 05 05 01 30 05/01/2009 05/2 06/ 07/ 08/ 09/ 10/ 11/ 12/ 01/ 02/ 03/ 04/ 04/ -5

-10

-15

Past performance does not guarantee future results. Source: Global Currents & Goldman Sachs Research 20 GSRA Analyzing Differences Among ESG Research Providers

The Venn diagram below represents the scope of coverage from three primary sources of ESG research

The bar chart below suggests a potential bias toward bottom ranked versus top ranked companies for this insample ESG research universe

We also note a significant amount of variation in ratings for the same company across providers

Distribution of Ratings

# 3 20% overlap

# 2 Research Provider Research # 1

0% 5% 10% 15% 20% 25% 30% 35%

Bottom ranked companies Top ranked companies

Source: Global Sustainability Research Alliance 21 ASRA Key Performance Indicators

Waste Pay Equity Leadership Sustainability Leadership Energy Productivity CO2 Productivity Water Productivity Productivity (Highest Paid Diversity (% of (Presence of Board Company Name SEDOL ISIN COUNTRY_FULL_NAME (US$MM Sales/GJ of(US$MM Sales/Metric(US$MM Sales/Litre of (US$MM Officer/Avg. Women on Sustainability Committee & Energy) Ton of CO2) Water) Sales/Metric Ton Employee Pay, 3- Board) Board Member Involvement) of Waste) yr avg.)

Yamaha Corp. 6642387 JP3942600002 JAPAN 2937.08962 40320.9 2243.069 285095.444 0.000 0.250 Lotte Shopping Company Limited B0WGPZ5 KR7023530009UTH KOREA SO Shimao Property Holdings B16YNS1 KYG810431042G HONG KON Canon Marketing Japan Inc 6172453 JP3243600008 JAPAN 0.000 0.250 Hakuhodo Dy Holdings Inc B05LZ02 JP3766550002 JAPAN Sega Sammy Holdings B02RK08 JP3419050004 JAPAN 2341.58254665.175 9552.990 31374.955 Takara Holdings Inc. 6870382 JP3459600007 JAPAN Brambles Limited B1FJ0C0 AU000000BXB1 AUSTRALIA0 2500.00 28571.429 0.222 0.250 Csl Limited 6185495 AU000000CSL8 AUSTRALIA 1818.6788.331 2146 1631.428 272020.736 Dainippon Sumitomo Pharma 6250865 JP3495000006 JAPAN05.669 13 28598.199 1713.144 242888.400 0.000 0.000 Lawson Inc 6266914 JP3982100004 JAPAN 3575.970 Hitachi High-Technologies Corp. 6642804 JP3678800008APAN J Stanley Electric Co. Ltd. 6841106 JP3399400005 JAPAN287.731 35 5393.886 528489.047 Uni Charm Corporation 6911485 JP3951600000 JAPAN Sims Metal Management Ltd B0LCW75 AU000000SGM7IA AUSTRAL 3446.422 28277.157 14567.558 5977.410 0.000 1.000 Kinden Corporation 6492924 JP3263000006 JAPAN Belle International B1WJ4X2 KYG097021045 HONG KONG Olympus Corp. 6658801 JP3201200007 JAPAN 4882.577615 86270. 3917.641 1266338.444 Ngk Insulators Limited 6619507 JP3695200000 JAPAN691 1564. 5600.965 2014.938 188878.198 Smc Corporation 6763965 JP3162600005 JAPAN Techtronic Industries Company Limited B0190C713440 HK06690 HONG KONG Philippine Long Distance Telephone Compa6685661 PH7182521093 PHILIPPINES Toto Limited 6897466 JP3596200000 JAPAN 0.000 0.250 Ngk Spark Plug Company Limited 6619604 JP3738600000PAN JA 1403.405 14373.095 1355.269 105155.467 Shionogi Limited 6804682 JP3347200002 JAPAN 854.3243.455 1703 960.334 249013.104 Downer Edi 6465573 AU000000DOW2 AUSTRALIA 9707.666 Kikkoman Corporation 6490809 JP3240400006 JAPAN1 1634.69 20521.476 384.228 46659.670 0.000 0.250

The information provided on this page should not be considered a recommendation to buy or sell any particular security. It should not be assumed that any of the securities discussed were profitable in the past or will prove to be profitable in the future. Past performance is no guarantee of future results. Source: Global Sustainability Research Alliance. 22 An invitation to join us on our mission to mainstream ESG research, knowledge & technology

초 대 장

Mike Dieschbourg [email protected]

23 Disclosures

The securities, sectors, industries, countries and regions discussed herein should not be perceived as investment recommendations. It should not be assumed that an investment in any security, sector, industry, country or region discussed was or will prove to be profitable. If utilized, there is no guarantee that holding securities with high ESG ratings, low-carbon footprint, relatively high (or low) price-to-earnings, price-to-cash flow or price-to-book ratios will cause the portfolio to outperform its benchmark or index. There may be additional risks associated with international investments. International securities and ADRs may be subject to market/currency fluctuations, investment risks, and other risks involving foreign economic, political, monetary, taxation, auditing and/or legal factors. International investing may not be suitable for everyone. Indices are unmanaged and not available for direct investment. This information should not be considered a solicitation or an offer to provide any Global Currents Investment Management, LLC service in any jurisdiction where it would be unlawful to do so under the laws of that jurisdiction. The views expressed represent the opinions of Global Currents and are not intended as a forecast or guarantee of future results. Global Currents undertakes no obligation to update or revise any information, opinions or forward-looking statements should they change. The information contained herein has been prepared from sources believed to be reliable, but is not guaranteed by Global Currents as to its accuracy or completeness. This information does not constitute, and under no circumstances is to be construed as, investment advice or recommendations and should not be used as the sole basis for any investment decision.