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What's Your Game Plan?

Defensive Strategies		Opportunistic Strategies
If your first priority is to help insulate your investment portfolio from market volatility and cushion returns in down markets. Some asset classes to consider are: Fixed income Municipal bonds The yield spread between municipal bonds and U.S. Treasuries,¹ in effect a measure of the premium that investors seek for holding bonds not guaranteed by the Federal government, remain historically high.² We believe this may be an indication that investors are overreacting to potential credit risks – a sign that munis and corporates could be currently undervalued. Some funds to consider: Legg Mason Partners Managed Municipal Fund Legg Mason Partners Intermediate-Term Municipals Fund Legg Mason Partners and Legg Mason state-specific municipal funds Equities Cautious investors who still want some market participation may want to consider conservatively managed companies with low leverage ratios and strong cash flows, as well as those that regularly pay dividends. Large Cap/Dividend As the table below shows, these stocks have held their value better than their non-dividend paying peers in recent down years.³ We also believe dividends can be an indicator of a company's financial vitality, because they are often associated with strong earnings and cash flow. Please note that dividends represent past performance and there is no guarantee they will continue to be paid. AVERAGE ANNUAL RETURN OF DIVIDEND-PAYING VS. NON-DIVIDEND-PAYING S&P 500 STOCKS IN "DOWN" YEARS YEAR DIVIDEND STOCKS (%) NON-DIVIDEND STOCKS (%) 2008 -39.0 -45.4 2002 -10.9 -30.3 2001 +1.9 -5.4 2000 +17.8 -0.2 1990 -7.6 -29.5 1981 +4.5 -7.5 Source: FactSet. Reflects performance in calendar year. Analysis assigns equal weighting to each stock, regardless of capitalization. Some funds to consider: Legg Mason Partners Appreciation Fund4 Legg Mason Partners Equity Income Builder Fund4 Large Cap/Quality Conservatively managed large cap companies with low leverage ratios and strong cash flow may feel less financial pressure in uncertain economic times. A fund to consider: Legg Mason Partners Large Cap Growth4 Read Our Insights on Defensive Strategies Ask Legg Mason: Is the role of the professional investment manager becoming more important to municipal bond investors? Ask Legg Mason: Why do dividends matter to the defensive equity investor?		If you are focused on the long term and wish to position your portfolio now for an eventual market recovery, and can accept market volatility now as a price for future growth potential. Some asset classes to consider are: Equities Small Caps Historically, small caps have tended to outperform large caps after bear markets.5 The chart below illustrates how this asset class has fared after the three most recent severe bear market bottoms. In general, small caps exhibit greater volatility than large caps – in both rising and falling markets. This may be due to many factors, such as smaller companies being less diversified and more exposed to fluctuations in demand. 1-YEAR CUMULATIVE RETURNS FOLLOWING BEAR MARKET BOTTOMS Source: Morningstar. Small caps are represented by the Russell 2000 Index;6 large caps are represented by the S&P 500 Index.7 Rebounds reflect cumulative % growth from the bottoms of 1982, 1987 and 1992 bear markets (bear markets in which there was a 30+% drop in S&P 500 Index). Investors cannot invest directly in an index. Index returns are not representative of any Legg Mason Product. Some funds to consider: Royce Premier Fund Royce Value Fund Royce Pennsylvania Mutual Fund Royce Micro-Cap Fund Royce Total Return Fund Mid Caps Like small caps, mid caps have historically performed well coming out of a recession. And, investors who recognize the value of diversification often overlook mid caps as a way to broaden a portfolio. A fund to consider: Legg Mason Partners Mid Cap Core Fund Emerging Markets After years of strong growth, this asset class saw dramatic declines last year. With prices dramatically reduced, it's arguable that the stage is set for a comeback. However, the key going forward is to realize that emerging markets countries are a varied lot that may experience the global recession very differently; the key is identifying strong companies within this complex asset class. A fund to consider: Legg Mason Partners Emerging Markets Trust Read Our Insights on Opportunistic Strategies Ask Legg Mason: What can we learn about small-cap stocks by taking a historical look at bear markets...and beyond?

More investing guidance

Learning From the Lessons of Time (interactive feature)
Taking the Long-Term View
Put Time on Your Side
Take Stock in History
Diversification: A Prudent Strategy in Any Market

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Important Fund Risks

LMP Large Cap Growth:
Common stocks are subject to market fluctuations. The Fund may sell securities short. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

Royce Value Fund:
The Fund invests primarily in small- and mid-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund also invests primarily in a limited number of stocks, which may involve considerably more risk than a less concentrated portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. The Fund may invest up to 25% of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments.

Royce Micro-Cap Fund:
The Fund invests primarily in micro-cap stocks, which may involve considerably more risk than investing in larger-cap stocks. The Fund may invest up to 25% of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments.

Royce Total Return Fund:
The Fund invests primarily in small- and micro-cap stocks, which may involve considerably more risk than investing in larger-cap stocks (Please see "Primary Risks for Fund Investors" in the prospectus). The Fund may invest up to 25% of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments (Please see "Investing Foreign Securities" in the prospectus).

Royce Premier Fund:
The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks The Fund also invests primarily in a limited number of stocks, which may involve considerably more risk than a less concentrated portfolio because a decline in the value of any one of these stocks would cause the Fund's overall value to decline to a greater degree. (Please see "Primary Risks for Fund Investors" in the prospectus). The Fund may invest up to 25% of its net assets in foreign securities, which may involve political, economic, currency and other risks not encountered in U.S. investments (Please see "Investing in Foreign Securities" in the prospectus).

LMP High Income Fund:
Investments in bonds are subject to interest rate and credit risks. As interest rates rise, bond prices fall, reducing the value of the Fund's share price. High-yield bonds are rated below investment-grade and carry more risk than higher rated securities. Foreign securities are subject to certain risks of overseas investing, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance.

LMP Equity Income Builder Fund:
Stock prices are subject to market fluctuations. The Fund may invest in small- and mid-cap companies that may involve a higher degree of risk and volatility than investments in large-cap companies. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on fund performance. Foreign securities are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. Funds that invest in securities related to the real estate industry are subject to the risks of real estate markets, including fluctuating property values, changes in interest rates and other mortgage-related risks. In addition, investment in Funds that concentrate their investments in one sector or industry may involve greater risk than more broadly diversified funds. The Fund is not diversified, which means that it is permitted to invest a higher percentage of its assets in any one issuer than a diversified fund. This may magnify the Fund's losses from events affecting a particular issuer. As interest rates rise, bond prices fall, reducing the value of your investment. High yield bonds are subject to additional risks such as the increased risk of default and greater volatility because of the lower credit quality of the issues. Convertible securities are subject to the market risks of stocks as well as the risks of debt securities. These risks include interest rate risk and credit risk. The Fund may sell securities short. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

LMP Appreciation Fund:
Stocks of small- and mid-cap companies involve a higher degree of risk and volatility than stocks of large cap companies. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The Fund may sell securities short. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

LMP Managed Municipals Fund:
Bonds are subject to interest rate and credit risks. As interest rates rise, bond prices fall, reducing the value of the Fund's share price. Lower-rated, higher-yielding bonds are subject to greater credit risk, including the risk of default, than higher-rated obligations. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance.

LMP Mid Cap Core Fund:
Investments in mid-cap stocks may involve a higher degree of risk and volatility than large-cap stocks. Compared to large-cap companies, medium-sized companies are more likely to have more limited product lines, capital resources and management depth, and experience sharper swings in market values. The Fund may use derivatives, such as options or futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on the Fund's performance. The Fund may sell securities short. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

LMP Emerging Markets Fund:
Foreign stocks are subject to certain risks of overseas investing not associated with domestic investing. These risks include currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuation. These risks are magnified in emerging markets or to the extent that the Fund invests significantly in any country or region. Furthermore, emerging market securities are often particularly sensitive to market movements because their market prices tend to reflect future expectations. Investors could lose money if the currency in which a security is priced declines in value relative to the U.S. dollar. Emerging market securities may be particularly susceptible to governmental or non-governmental actions resulting in expropriations of assets, confiscatory taxation, and limitations on the use or transfer of assets by the fund or the issuers of securities. The Fund may invest in small- and mid-cap companies that may involve a higher degree of risk and volatility than investments in large-cap companies.

Investors should consider a fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about a fund. To obtain a free prospectus, please view the product specific page on this Web site and click on the prospectus link. An investor should read the prospectus carefully before investing.

All investments involve risk, including possible loss of principal.
Diversification does not assure a profit or protect against market loss.

1 U.S. Treasuries are negotiable U.S. Government debt obligations, backed by its full faith and credit. Treasuries are issued by the U.S. government in order to pay for government projects. Interest earned on Treasuries is exempt from state and local taxes.
2 Bloomberg, 3/09.
3 FactSet, 3/09.
4 A managed account may also be available.
5 Morningstar.
6 The Russell 2000 Index is an unmanaged, capitalization-weighted index of domestic small-cap stocks. It measures the performance of the 2000 smallest publicly traded U.S. companies in the Russell 3000 Index.
7 The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks.