At a Glance

• Primary Benchmark: Russell 2000® Value Index.
• Universe: Small-capitalization U.S. common stocks.
• To be considered for purchase, stocks typically must fall in the bottom quartile of all the P/E or P/B ratios in our universe, pass through a disciplined fundamental analysis, and exhibit attractive price momentum.
• Our primary focus is to combine the discipline inherent in quantitative analysis with fundamental insights to produce excess returns.
• All stocks are purchased on a capitalization-weighted basis.
• While cash is a residual of the investment process, portfolios are managed with the goal of remaining fully invested at all times.

Objective

Typical Investment Guidelines

Investment Process Summary

Quantitative Screens

• Market capitalizations between 2,000th and 500th largest stock;
• Price-to-earnings or price-to-book ratios in the bottom quartile, and
• Attractive price momentum.

Fundamental Analysis & Elimination

• Checking and adjusting earnings and book value reported in company financial statements in order to select only genuinely undervalued companies;
• For low P/E, eliminating stocks with pre-announced earnings declines, and
• Analyzing financial statements in order to identify and eliminate stocks with severe fundamental deterioration.

Sell Discipline

• P/E and P/B exceeds that of the bottom 40% of the market;
• Market capitalization reaches 25% above our maximum purchase capitalization, or
• Fundamentals or price momentum deteriorate.

Representative Portfolio Characteristics (as of 6/30/2008)*

Top Ten Holdings (as of 6/30/2008)*

* Supplemental Information. Data as of 6/30/2008. R2000V = Russell 2000 Value Index.

Please refer to our GIPS compliant presentation, which includes performance footnotes, fee schedules, index descriptions and disclosures. The data represent the aggregate characteristics of all securities held in the representative portfolio, an actual commission account not subject to taxation. Data is obtained from FactSet and Russell. Small capitalization companies may present risks such as lack of product diversification, potentially insufficient capital resources, and greater exposure to business and economic cycles. It should not be assumed that investments in any top ten holdings listed were or will prove to be profitable. Top ten holdings may no longer be held in client portfolios. The holdings of any particular account may vary based on any investment restrictions applicable to the account. This information is for illustrative purposes only, is subject to change at any time and should not be considered investment advice or a recommendation to buy or sell any particular security. In accordance with Rule 206(4)-1 under the Investment Advisors Act of 1940, upon request, we will furnish you with a list of all recommendations made by Brandywine within the immediately preceding twelve months. There is no guarantee that holding securities with relatively high (or low) price-to-earnings, price-to-book, or price-to-cash flow will cause the portfolio to outperform its benchmark or index.

The Russell 2000^® Value and Russell 2000^® Indexes are trademarks of the Frank Russell Company.

Russel™ is a trademark of the Frank Russell Company.

Representative Sector Weights (as of 6/30/2008)*

* Supplemental Information. Data as of 6/30/2008. R2000V = Russell 2000 Value Index.

The data represent the aggregate characteristics of all securities held in the representative portfolio, an actual commission account not subject to taxation. Data is obtained from FactSet and Russell. Sector weights are included for informational purposes only and should not be perceived as investment recommendations. It should not be assumed that investments in any sectors listed were or will prove to be profitable. The sector weights of any particular account may vary based on any investment restrictions applicable to the account. Small capitalization companies may present risks such as lack of product diversification, potentially insufficient capital resources, and greater exposure to business and economic cycles.

The Russell 2000^® Value and Russell 2000^® Indexes are trademarks of the Frank Russell Company.

Russel™ is a trademark of the Frank Russell Company.

Quarterly Portfolio Manager Commentary (as of 6/30/2008)

You should not assume that investments or strategies discussed in this commentary were or will be profitable, or that the investment decisions Brandywine Global makes in the future will be profitable or equal to the investment performance discussed in this commentary. The data and information presented in a Brandywine Global commentary is believed to be accurate and reliable as of the date recorded. Brandywine Global will not undertake to update the data and information presented at a later date. This commentary may not reflect the current views of the featured speaker and may not reflect current or sudden market activity.

Annualized Composite Returns (as of 6/30/2008)

Calendar Year Composite Returns (as of 6/30/2008)

Data as of 6/30/2008. R2000V = Russell 2000 Value Index, R2000 = Russell 2000 Index.

The change in the market value of the Brandywine Global's Diversified Small Cap Select Composite (the "Composite") during 4Q06 is due primarily to the reclassification of an account within this strategy. Organization: Brandywine Global Investment Management, LLC (the "Firm") is a wholly owned, independently operated, subsidiary of Legg Mason, Inc. The Firm has prepared and presented this report in compliance with the Global Investment Performance Standards (GIPS®). For the periods July 1, 2000 through June 30, 2006, the Firm has been verified by Kreischer Miller. A verification includes assessing whether the Firm (1) complied with the composite construction requirements of the GIPS standards on a firm-wide basis, and (2) designed its processes and procedures to calculate and present performance results in compliance with the GIPS standards. A copy of the verification report is available upon request. Disclosed total firm assets represent the total market value of all discretionary and nondiscretionary, fee-paying and non-fee-paying assets under the Firm's management. Composite Description: Diversified Small Cap Value Equity Select Composite (the "Composite") Inception date: October 1, 1998. Creation date: October 1, 1998. The Composite includes all fully discretionary, fee-paying, actively managed accounts with no minimum market value requirement and no investment restrictions. The Composite is primarily invested in domestic equity securities with market capitalizations between the 2000th and the 500th largest stock; Price-to-Earnings or Price-to-Book ratios in the bottom quartile, and attractive price momentum. The portfolios typically hold approximately 175 - 275 securities. Benchmark: The Composite returns are benchmarked to the Russell 2000® Value (Primary) and Russell 2000® Indexes. The Russell 2000 Value Index offers investors access to the small-cap value segment of the U.S. equity universe. The Russell 2000 Value is constructed to provide a barometer of the small-cap value market. The Russell 2000 Index offers investors access to the small-cap segment of the U.S. equity universe and is a measure of the true small-cap opportunity set. The Russell 2000 includes the smallest 2000 securities in the Russell 3000. Performance Calculation: Preliminary data, if so noted, reflects unreconciled data for the most recent reporting period. Portfolios are valued daily on a trade date basis and include dividends and interest as well as all realized and unrealized capital gains and losses. Return calculations at the portfolio level are time-weighted to account for periodic contributions and withdrawals. Performance results are calculated on a before tax, total return basis. Prior to July 1, 2007, portfolios were included in the Composite beginning with the first full quarter of performance through the last full quarter of performance. After July 1, 2007, portfolios are included in the Composite beginning with the first full month of performance through the last full month of performance. Composite returns are reported on quarterly basis. The Composite returns consist of size-weighted portfolio returns using beginning of period values to weight the portfolio returns. Monthly linking of interim performance results is used to calculate quarterly and annual returns. Composite valuations and returns are computed in U.S. Dollars ("USD"). The results are presented in USD or in other currencies (to accommodate overseas investors), the latter by converting monthly USD returns into other currency returns using the appropriate currency exchange rate returns. Gross returns reflect the deduction of trading expenses. Net of fee returns reflect the deduction of trading expenses and the highest investment management fees charged within the composite membership as stated in the fee schedule below. Composite dispersion is calculated using the asset-weighted standard deviation method for all portfolios that were in the Composite for the entire year. Composite dispersion is not presented for periods with five or fewer portfolios. The number of accounts and market values are as of the end of period. Past performance is no guarantee of future results. A complete list describing the Firm's composites as well as any additional information regarding the Firm's policies for calculating and reporting performance results is available upon request. Fee Schedule: Institutional Client Separate Account Management Fee Schedule (minimum investment $15 million): 0.800% on the first $20 million; 0.750% on the next $30 million; 0.700% on the next $50 million; 0.650% on any portion of assets in excess of $100 million. Additional information on the Firm's fee schedule can be found in Form ADV Part II which is available upon request.

Portfolio Team

Henry F. Otto
Managing Director & Portfolio Manager

Henry is the founder and co-lead portfolio manager of the Diversified Value Equity strategies. Prior to joining Brandywine Global in 1988, he was with Dimensional Fund Advisors, Inc., where he managed and traded small cap portfolios and developed computer systems to structure portfolios and analyze performance (1984-1987), and the Chicago Board of Trade as a financial economist developing financial-based futures and options (1982-1984). He earned both an M.B.A. in Finance and Economics and a B.A. in Economics from the University of Chicago. Henry is a member of the firm's Executive Board.

Steven M. Tonkovich
Managing Director & Portfolio Manager

Steve is co-lead portfolio manager of the Diversified Value Equity strategies. He plays an integral role in the team's continual refinement of the Diversified Value Equity investment process and the firm's ongoing research into value investing. Prior to joining the firm in 1989, he was with the Wharton School of the University of Pennsylvania as a research analyst in the Finance Department (1987-1989); Booz Allen Hamilton, Inc. as a research assistant (summer of 1988), and the Moore School of Electrical Engineering of the University of Pennsylvania as a research assistant (1986-1987). Steve earned a B.S.E in Finance and Regional Science from the Wharton School. He is a member of the firm's Executive Board.

Michelle K. Fields, CFA
Portfolio Manager

Michelle is a portfolio manager and securities analyst on the Diversified Value Equity team. She contributes to the quantitative and fundamental analysis of securities for the Diversified Value Equity portfolios by consistently applying Brandywine Global's disciplined exclusionary process and is the lead portfolio manager for the Diversified Mid Cap Value strategy. Michelle joined the firm in 1995. She is a CFA charterholder and earned an M.B.A. in Finance and a B.S. in Finance from the University of Delaware, graduating cum laude.

Joseph J. Kirby
Portfolio Manager

Joe is a portfolio manager and securities analyst on the Diversified Value Equity team. He contributes to the quantitative and fundamental analysis of securities for the Diversified Value Equity portfolios by consistently applying Brandywine Global's disciplined exclusionary process and has lead oversight of the Diversified Large Cap Value strategy and shared oversight of the Diversified Large Cap Value Extended Equity - 130/30 strategy. He has been a member of the Diversified Value Equity team since joining Brandywine Global in 1995. Previously he was with CoreStates Financial Corporation as an auditor (1992-1994). Joe earned a B.S. in Finance from DeSales University.

David Clipper
Research Analyst

Dave is a securities analyst on the Diversified Value Equity team, providing quantitative and fundamental analysis and support for Diversified Small, Select, Mid and Large Cap Value portfolios. He joined Brandywine Global as a product specialist in 2004 and has been a member of the Diversified Value Equity team since the first quarter of 2006. Prior to joining Brandywine Global, Dave was a trader for Orion Financial (2003-2004) and had spent 13 years in the field of psychology before making the career shift toward finance. He earned an M.B.A. in Finance from the University of Pittsburgh, holds a Master's degree from the University of California at Berkeley, and a B.A. from Penn State University.

David A. Tattersall
Equity Head Trader

Dave is the head trader for Brandywine Global's equity portfolios. Prior to being appointed to this position in March 2007, he served as lead equity trader for the firm's Diversified Value Equity portfolios in addition to providing support to the Absolute Value Equity portfolio teams. Dave's previous experience with the firm includes serving as joint trader for the International Value Equity portfolios, primary trader for the Wealth Management Group channel, and backup trader for Absolute Value Equity and Large Cap Value Equity portfolios. He joined the firm in 2000, bringing with him 15 years of industry experience. Previously, Dave was with OTA Limited Partnership, a full-service institutional broker/dealer, as a financial analyst/trader (1989-2000); First Federal Savings Bank as a senior accountant (1987-1989), and Beneficial Mortgage Corporation as the loan accounting manager (1985-1987). Dave earned a B.A. in Accounting from Pennsylvania State University.