Western Asset Var Global High Yield Bond

Objective And Strategy

Objective
To maximize total return.

Strategy
The fund invests primarily in high yield fixed income securities issued by U.S. and foreign companies and foreign governments and their agencies and instrumentalities. Under normal market conditions, the fund invests at least 80% of its assets in high yield bonds. Under normal circumstances, the fund will be invested in at least three countries (one of which may be the United States). The fund may invest without limit in foreign securities denominated either in U.S. dollars or foreign currencies and may invest up to 35% of its assets in sovereign debt issued by emerging market governmental issuers. Instead of, and/or in addition to, investing directly in particular securities, the fund may use instruments such as derivatives and synthetic instruments that are intended to provide economic exposure to the securities of the issuer or to be used as a hedging technique.
Tax Inefficient Fund

Principal Risks

* This portfolio is subject to the risks of investing in low-grade corporate bonds that have a higher default risk, less liquidity and greater sensitivity to changes in the economy than investment-grade bonds. High-yield bonds are rated lower because there is a greater risk associated with the issuer's ability to pay principal and interest.

* This portfolio can leverage or use leveraged instruments or derivatives. Portfolios that use leverage, that is, borrow money, are subject to the risk that the cost of borrowing money to leverage will exceed the returns for the securities purchased or that the securities purchased may actually go down in value. Thus, the portfolio's net asset value can decrease more quickly than if the portfolio had not borrowed. Portfolios that use leveraged instruments or derivatives such as futures, options and swap agreements, may expose the portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The more a portfolio invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.

* The Fund could lose money if the issuer of a debt security is unable to meet its financial obligations or goes bankrupt. This fund may invest in securities rated below investment grade or "junk bonds." Junk bonds may be sensitive to economic changes, political changes, or adverse developments specific to a company.

* This fund has a risk of prepayment and extension. A mortgage backed bond, unlike other bonds can be hurt when interest rates fall because homeowners refinance and prepay principal. Receiving increasing prepayments in a falling interest rate environment cause the average maturity of the portfolio to shorten, reducing its potential for price gains. It requires the fund to reinvest at lower interest rates, which reduced the portfolio's total return and yield, and may cause certain bond prices to fall below the level the fund paid for them, resulting in a capital loss.

* Generally, a security is liquid if the Portfolio is able to sell the security at a fair price within a reasonable time. Liquidity is generally related to the market trading volume for a particular security.

* Sovereign debt securities are subject to the risk that a government entity may delay or refuse to pay interest or repay principal on its sovereign debt.

* Rising interest rates will generally cause the prices of bonds and other debt securities to fall. Longer maturity debt securities may be subject to greater price fluctuations than shorter maturity debt securities. In addition, falling interest rates may cause an issuer to redeem, call or refinance a debt security before its stated maturity, which may result in the fund having to reinvest the process in lower yielding securities.