BetaShares Legg Mason Active ETFs

FREQUENTLY ASKED QUESTIONS

BetaShares Legg Mason Equity Income Fund (managed fund) - ASX code: EINC BetaShares Legg Mason Real Income Fund (managed fund) - ASX code: RINC BetaShares Legg Mason Australian Fund (managed fund) - ASX code: BNDS BetaShares Legg Mason Emerging Markets Fund (managed fund) - ASX code: EMMG

WHAT IS AN ACTIVE EXCHANGE TRADED FUND (ACTIVE ETF)? Active ETFs are actively managed funds that trade on the Australian (ASX). Whilst passive ETFs track a benchmark index, Active ETFs use an active investment strategy to help deliver specific performance objectives for investors. Active ETFs have the same legal structure as traditional unlisted managed funds, while additionally providing live intra-day market pricing and liquidity on the ASX. Investors can buy and sell Active ETFs via any stockbroker or online broker as they would a . This provides administrative ease as there is no extra paperwork required to invest. The BetaShares Legg Mason Active ETF series allows investors to easily access Legg Mason’s highly acclaimed and successful investment strategies via a simple ASX trade.

HOW DO THE BETASHARES LEGG MASON ACTIVE ETFS DIFFER FROM OTHER EXCHANGE TRADED FUNDS (ETFS)? The main difference is that our Active ETFs are actively managed (as opposed to passive or rules based ETFs). Active ETFs aim to outperform a benchmark or deliver a targeted outcome tailored to meet an investor’s need (e.g. high and growing income). The more common passive ETFs typically aim to track the performance of a stated benchmark or index. BetaShares Legg Mason Active ETFs are accessible on the ASX with live market prices. In terms of portfolio disclosure, equity based Active ETFs typically disclose their portfolios less often than ETFs. For BetaShares Legg Mason equity Active ETFs, portfolio holdings are provided quarterly. The BetaShares Legg Mason Active ETF provides holdings disclosure on a daily basis. For more details on how Active ETFs differ from other investment structures, see the table below.

BetaShares Legg Mason Active ETFs versus other fund structures

BetaShares Legg Mason Active Passive Exchange Traded Listed Investment Legg Mason unlisted mFunds ETFs Funds (ETFs) Companies (LICs) managed funds Investment Regulated Unit Trust Regulated Unit Trust Company Regulated Unit Trust Regulated Unit Trust structure Approach to Passive, index tracking or Active management Active management Active management investing rules based How to invest Buy or sell on-market via the ASX Buy or sell on-market via Buy or sell on-market via Application or redemption Buy or sell with the manager the ASX the ASX with Legg Mason, either directly, off-market via the directly or via a platform ASX’s settlement service What the - Daily NAV - Daily NAV - Monthly NAV - Top 10 portfolio - Most provide Top 10 portfo- fund manager - iNAV (for EINC, RINC & EMMG) - Full portfolio disclosure - Portfolio holdings do not holdings each month lio holdings with a lag provides to you that updates throughout each daily have to be disclosed trading day - Full portfolio disclosure each quarter for EINC, RINC & EMMG* and daily disclosure for BNDS How liquid is - For the equity Active ETFs, the - Daily liquidity provided by - Trades can only be done - Open-ended structure so - Open-ended structure that the Fund? Fund acts as ‘market maker’ third party market makers on-market with existing Legg Mason issues and re- issues and redeems units providing bids and offers in the - Open-ended structure buyers and sellers. deems units daily as required usually daily market during the trading day means the fund issues and - Closed-ended structure - Not ASX traded - Not ASX traded - For the fixed income Active ETF, redeems units to facilitate means number of shares third party market makers provide trades can only be increased via intra day liquidity for investors rights issues, placements and - Open-ended structure means the dividend reinvestment. fund issues and redeems units to facilitate trades How is the Fund Open-ended so should trade at a Open-ended so should trade Closed-ended so can trade Daily application and Daily entry and exit prices priced? relatively narrow spread to NAV at a relatively narrow spread meaningfully above or below redemption prices provided provided by investment to NAV NAV by Legg Mason based on manager based on underlying underlying investments

Source: BetaShares & Legg Mason. *Within two months of quarter-end 1 BetaShares Legg Mason Active ETFs - FAQ 2

HOW DO THE BETASHARES LEGG MASON ACTIVE ETFS DIFFER FROM THE UNLISTED LEGG MASON MANAGED FUNDS? BetaShares Legg Mason Active ETFs are very similar to Legg Mason’s existing unlisted managed funds as they have the same, or very similar, investment strategies, underlying investment portfolios and distribution frequency. The major difference is that the Legg Mason Active ETFs launched in partnership with BetaShares are available to trade via the ASX whereas the existing unlisted managed funds are not.

WHAT ARE THE ASX TICKER CODES FOR THE BETASHARES LEGG MASON ACTIVE ETFS? Each Active ETF has a unique ticker code for easy identification when trading: • Equity Income Fund – EINC • Real Income Fund – RINC • Australian Bond Fund - BNDS • Emerging Markets Fund - EMMG

DO THESE ACTIVE ETFS HAVE LIVE INTRADAY PRICING? Yes, the Active ETFs have continuous market-based pricing, just like shares. As such, investors can buy and sell units in real time during the trading day.

HOW DO YOU SEEK TO ENSURE THERE IS LIQUIDITY WITHIN THE BETASHARES LEGG MASON ACTIVE ETFS? For the equity Active ETFs, the Fund acts as a ‘market maker’ to provide liquidity for investors during the trading day. This means the Fund provides bids and offers in the market, generally at a tight spread to the (NAV). For the fixed income active ETF, third party market makers (brokers) provide intra day liquidity for investors. For more information on how the market making mechanism works, contact BetaShares. The BetaShares Legg Mason Active ETFs are open-ended so they are quite different to other common listed structures like closed-ended Listed Investment Companies (LICs). Being open-ended enables units in the Active ETF to be created and redeemed each trading day to stay in line with investor demand and allows trading to occur generally with a tight spread to the NAV. The combination of market making and an open-ended structure should help ensure there is adequate liquidity and that each Fund generally trades at or around its NAV.

I UNDERSTAND THAT PASSIVE ETFS ARE LOW-COST BUT HOW DO ACTIVE ETFS COMPARE? Active ETF pricing varies by investment strategy, asset class and issuer. Overall, they tend to be more expensive than a passive or rules based approach, reflecting the resources required to help these funds meet their excess return objectives. That said, the BetaShares Legg Mason Active ETFs are competitively priced, with EINC and RINC currently charging management fees of 0.85% p.a., BNDS currently charging 0.42% p.a. and EMMG currently charging 1.00% p.a.

HOW DO THE COSTS DIFFER FROM LEGG MASON’S EXISTING UNLISTED MANAGED FUNDS? RINC, EINC, EMMG and BNDS management fees are identical to the equivalent existing unlisted fund. In addition to these management fees, investors will incur fees from their stockbroker or online trading platform when buying and selling units of the relevant Fund. Note these fees are charged by the stockbroker and not by the Fund. Investors also bear the bid-offer spread when buying and selling the Fund on the share market and this is equally applicable for an unlisted fund.

WHAT DISCLOSURE IS PROVIDED FOR EACH BETASHARES LEGG MASON ACTIVE ETF? • Product Disclosure Statement (PDS). • Daily NAV, published prior to the market open. • Indicative NAV (iNAV) updated regularly and published during the ASX trading day (for EINC, RINC and EMMG). • Quarterly disclosure of portfolio holdings (including name and portfolio weight) within two months of the end of each quarter for EINC, RINC and EMMG and daily disclosure for BNDS. • Monthly and annual fund performance information. • Monthly redemption information for each Fund. • Distribution information. BetaShares Legg Mason Active ETFs - FAQ 3

WILL THE PERFORMANCE OF THE ACTIVE ETFS AND THE EXISTING UNLISTED FUNDS BE SIGNIFICANTLY DIFFERENT? The performance of the Active ETFs should closely follow the equivalent existing unlisted Legg Mason fund, as they have the same (or very similar) investment strategies, investment processes and underlying portfolios. There may, however, be small differences due to: • each Active ETF either acting as market maker, or using a third party market maker; • differences in the size and timing of cash flows into the Active ETFs compared to the existing unlisted managed funds.

WHAT ARE THE RISKS OF THE BETASHARES LEGG MASON ACTIVE ETFS? Please consult the relevant PDS for each BetaShares Legg Mason Active ETF for specific risk disclosures. Although each Active ETF should generally trade at or around its NAV, there is a risk that the trading price of units on the ASX may differ from the underlying NAV. This risk is common to all securities traded on the share market. However, the BetaShares Legg Mason Active ETFs are open ended and either act as market maker or use a third party market maker, so each Fund will aim to provide bids and offers in the market at a tight spread to its NAV.

WHY WERE THESE SPECIFIC FUNDS CHOSEN BY BETASHARES AND LEGG MASON OUT OF THE RANGE OF FUNDS IN THE LEGG MASON STABLE? The initial range of BetaShares Legg Mason Active ETFs were chosen based upon several factors including (but not limited to): track record of the affiliate managers, proven demand for each strategy, high levels of independent endorsement, asset allocation, ability to generate income and prospective interest from a broad variety of client segments (SMSFs, self-directed investors, financial advisers and stockbrokers).

CONTACT US FOR MORE INFORMATION ON BETASHARES LEGG MASON ACTIVE ETFS Legg Mason

leggmason.com.au/active-etfs

1800 679 541 [email protected]

BetaShares Capital Ltd (ABN 78 139 566 868 AFSL 341181) (BetaShares) is the issuer and responsible entity of the BetaShares Legg Mason Equity Income Fund (managed fund) (ARSN 621 856 406), the BetaShares Legg Mason Real Income Fund (managed fund) (ARSN 621 862 619), the BetaShares Legg Mason Australian Bond Fund (managed fund) (ARSN 608 058 493) and the BetaShares Legg Mason Emerging Markets Fund (managed fund) (ARSN 629 322 247) (Funds). BetaShares has appointed Legg Mason Asset Management Australia Ltd (ABN 76 004 835 849 AFSL 240827) (Legg Mason Australia) as investment manager for the Funds. Legg Mason Australia is part of the Global Legg Mason Inc. group. Martin Currie Australia, a division within Legg Mason Australia, provides the services for the BetaShares Legg Mason Equity Income Fund and the BetaShares Legg Mason Real Income Fund. Western Asset Australia, a division within Legg Mason Australia, provides the investment management services for the BetaShares Legg Mason Australian Bond Fund. Martin Currie Investment Management Limited, an affiliate of Legg Mason Australia provides the investment management services for the BetaShares Legg Mason Emerging Markets Fund. Any reference to ‘Legg Mason Australia’, ‘Martin Currie’ or ‘Western Asset’ is a reference to Legg Mason Asset Management Australia Limited. Before making an investment decision you should read the Product Disclosure Statement (PDS) for the Funds carefully and consider, with or without the assistance of a financial advisor, whether such an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. The PDSs are available and can be obtained by contacting BetaShares on 1300 487 577 or Legg Mason Australia on 1800 679 541 or at www.betashares.com.au or www. leggmason.com.au. This information does not take into account the investment objectives, financial objectives or particular needs of any particular person. Neither BetaShares, Legg Mason Australia, nor any of their related parties guarantees any performance or the return of capital invested. Past performance is not necessarily indicative of future performance. Investments are subject to risks, including, but not limited to, possible delays in payments and loss of income or capital invested.