UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-04254

Legg Mason Partners Income Trust

(Exact name of registrant as specified in charter)

55 Water Street, New York, NY	10041
(Address of principal executive offices)	(Zip code)

Robert I. Frenkel, Esq.

Legg Mason & Co., LLC

300 First Stamford Place, 4^th Floor

Stamford, CT 06902

(Name and address of agent for service)

Registrant’s telephone number, including area code: (800) 451-2010

Date of fiscal year end: March 31

Date of reporting period: March 31, 2008

ITEM 1. REPORT TO STOCKHOLDERS.

The Annual Report to Stockholders is filed herewith.

ANNUAL REPORT / MARCH 31, 2008

Legg Mason Partners

Intermediate-Term Municipals Fund

Managed by: WESTERN ASSET

INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

Fund objective

The Fund seeks to provide as high a level of income exempt from regular federal income tax* as is consistent with prudent investing.

* Certain investors may be subject to the federal alternative minimum tax, and state and local taxes will apply. Capital gains, if any, are fully taxable. Please consult your personal tax adviser.

What’s inside

Letter from the chairman	I
Fund overview	1
Fund at a glance	6
Fund expenses	7
Fund performance	9
Historical performance	10
Schedule of investments	11
Statement of assets and liabilities	34
Statement of operations	35
Statements of changes in net assets	36
Financial highlights	37
Notes to financial statements	40
Report of independent registered public accounting firm	52
Board approval of management and subadvisory agreements	53
Additional information	58
Important tax information	66

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and Western Asset Management Company (“Western Asset”) is the Fund’s subadviser. LMPFA and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc.

Letter from the chairman

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

Dear Shareholder,

The U.S. economy weakened significantly during the 12-month reporting period ended March 31, 2008. Second quarter 2007 U.S. gross domestic product (“GDP”)ⁱ growth was 3.8%. Third quarter 2007 GDP growth was 4.9%, its strongest showing in four years. However, continued weakness in the housing market, an ongoing credit crunch and soaring oil and food prices then took their toll on the economy. During the fourth quarter of 2007, GDP growth was 0.6%. The U.S. Commerce Department then reported that its advance estimate for first quarter 2008 GDP growth was also a tepid 0.6%. While it was once debated whether or not the U.S. would fall into a recession, it is now generally assumed that a recession is likely, and that it may have already begun. Even areas of the economy that had once been fairly resilient have begun to falter, including the job market. The U.S. Department of Labor reported that payroll employment declined in each of the first three months of 2008 — the longest consecutive monthly decline since early 2003.

Ongoing issues related to the housing and subprime mortgage markets and an abrupt tightening in the credit markets prompted the Federal Reserve Board (“Fed”)ⁱⁱ to take aggressive and, in some cases, unprecedented actions during the reporting period. At its meeting in September 2007, the Fed reduced the federal funds rateⁱⁱⁱ from 5.25% to 4.75%. This marked the first reduction in the federal funds rate since June 2003. The Fed again lowered rates on five more occasions through the end of March 2008. Over this time, the federal funds rate fell to 2.25%. The Fed then reduced rates again on April 30, 2008, after the reporting period ended, to 2.00%. In its statement accompanying the April rate cut, the Fed stated: “Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.”

In addition to lowering short-term interest rates, the Fed took several actions to improve liquidity in the credit markets. In March 2008, the Fed established a new lending program allowing brokerage firms to borrow

Legg Mason Partners Intermediate-Term Municipals Fund I

Letter from the chairman continued

directly from its discount window. The Fed also increased the maximum term for discount window loans from 30 to 90 days. Then, in mid-March, the Fed played a major role in facilitating the purchase of Bear Stearns by JPMorgan Chase.

During the 12-month reporting period, both short- and long-term Treasury yields experienced periods of volatility. This was due, in part, to mixed economic and inflation data, the fallout from the subprime mortgage market crisis and shifting expectations regarding the Fed’s monetary policy. Within the bond market, investors were initially focused on the subprime segment of the mortgage-backed market. These concerns broadened, however, to include a wide range of financial institutions and markets. As a result, other fixed-income instruments also experienced increased price volatility. This turmoil triggered several “flights to quality,” causing Treasury yields to move sharply lower (and their prices higher), while riskier segments of the market saw their yields move higher (and their prices lower).

Overall, during the 12 months ended March 31, 2008, two-year Treasury yields fell from 4.58% to 1.62%. Over the same time, 10-year Treasury yields fell from 4.65% to 3.45%. Short-term yields fell sharply in concert with the Fed’s rate cuts while longer-term yields fell less dramatically due to inflationary concerns, resulting in a steepening of the U.S. yield curve^iv.

The municipal bond market lagged its taxable bond counterparts over the 12 months ended March 31, 2008. Over that period, the Lehman Brothers Municipal Bond Index^v and the Lehman Brothers U.S. Aggregate Index^vi returned 1.90% and 7.67%, respectively. During the reporting period, the municipal market was adversely affected by increased investor risk aversion and fears that an economic recession would negatively impact municipalities, as they would generate less tax revenues. In addition, several large bond insurers experienced rating downgrades due to concerns that they no longer had enough capital to guarantee billions of dollars in debt due to the fallout from the subprime mortgage crisis. Furthermore, the forced selling of municipal securities by hedge funds caused tax-free bond yields to move sharply higher (and their prices lower) in February 2008.

Please read on for a more detailed look at prevailing economic and market conditions during the Fund’s fiscal year and to learn how those conditions have affected Fund performance.

II Legg Mason Partners Intermediate-Term Municipals Fund

Information about your fund

As you may be aware, several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. Affiliates of the Fund’s manager have, in recent years, received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the Fund’s response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The Fund is not in a position to predict the outcome of these requests and investigations.

Important information with regard to recent regulatory developments that may affect the Fund is contained in the Notes to Financial Statements included in this report.

As always, thank you for your confidence in our stewardship of your assets. We look forward to helping you meet your financial goals.

Sincerely,

R. Jay Gerken, CFA

Chairman, President and Chief Executive Officer

April 30, 2008

All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

ⁱ Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time.

ⁱⁱ The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱⁱ The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.

^iv The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities.

^v The Lehman Brothers Municipal Bond Index is a market value weighted index of investment grade municipal bonds with maturities of one year or more.

^vi The Lehman Brothers U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

Legg Mason Partners Intermediate-Term Municipals Fund III

Fund overview

Q. What is the Fund’s investment strategy?

A. The Fund seeks to provide as high a level of income exempt from regular federal income tax as is consistent with prudent investing.

Under normal circumstances, the Fund invests at least 80% of its assets in “municipal securities,” which are debt obligations issued by any of the 50 states and certain other municipal issuers and their political subdivisions, agencies and public authorities. The interest on these securities is excluded from gross income for regular federal income tax purposes. The Fund normally invests in securities that have remaining maturities of 20 years or less, at the time of purchase, and maintains an average effective maturity of between three and 10 years. The Fund invests in municipal securities that are, at the time of purchase, rated investment grade or in unrated securities that we determine to be of equivalent quality. At least two-thirds of the municipal securities must be rated, at the time of purchase, within the three highest investment grade rating categories by a nationally recognized statistical rating organization.

Western Asset Management Company (“Western Asset”), the Fund’s subadviser, utilizes a fixed-income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset’s senior portfolio managers, research analysts and an in-house economist. Under this team approach, management of client fixed-income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization.

Q. What were the overall market conditions during the Fund’s reporting period?

A. During the fiscal year, the U.S. bond market experienced periods of increased volatility. Changing perceptions regarding the economy, inflation and future Federal Reserve Board (“Fed”)ⁱ monetary policy caused bond prices to fluctuate. Two- and 10-year Treasury yields began the reporting period at 4.58% and 4.65%, respectively. Treasury yields then moved sharply higher as incoming economic data improved and inflationary pressures increased. By mid-June 2007, two- and 10-year Treasurys were yielding 5.10% and 5.26%, respectively, and market sentiment was that the Fed’s next move would be to raise interest rates.

However, after their June peaks, Treasury yields moved lower, as concerns regarding the subprime mortgage market and a severe credit crunch triggered a massive “flight to quality.” Investors were drawn to the relative safety of Treasurys, causing their yields to fall and their prices to rise. At the same time, increased investor risk aversion caused other segments of the bond market to falter. As conditions in the credit market worsened in August 2007, central banks around the world took action by injecting approximately

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 1

Fund overview continued

$500 billion of liquidity into the financial system. Additionally, the Fed began lowering the discount rateⁱⁱ and the federal funds rateⁱⁱⁱ in August and September 2007, respectively. While this initially helped ease the credit crunch, continued subprime mortgage write-offs and weak economic data triggered additional flights to quality in November 2007 and the first quarter of 2008. At the end of the reporting period, two- and 10-year Treasury yields had fallen to 1.62% and 3.45%, respectively. While the Fed has attempted to stimulate growth by cutting short-term interest rates six times from September 2007 through March 31, 2008 (from 5.25% to 2.25%), by the end of the reporting period, it was generally assumed that the U.S. was headed for, if not already in, a recession.

Municipal bonds also experienced periods of volatility and significantly lagged their taxable counterparts during the fiscal year. All told, the overall municipal market, as measured by the Lehman Brothers Municipal Bond Index^iv, returned 1.90% during the one-year period ended March 31, 2008. In contrast, the overall taxable bond market, as measured by the Lehman Brothers U.S. Aggregate Index^v, returned 7.67% over the same period. Much of the difference in the returns occurred in February 2008. During that month, the Lehman Brothers Municipal Bond Index fell 4.58%, while the Lehman Brothers U.S. Aggregate Index rose 0.14%. Municipal bond prices fell sharply due to the downgrades of several bond insurers and forced selling of tax-free bonds by highly-leveraged hedge funds.

Q. How did we respond to these changing market conditions?

A. While the Fund’s average duration^vi was shorter than that of its benchmark, we extended duration somewhat during the latter part of the fiscal year as the yield curve^vii steepened. In addition, we opportunistically adjusted the Fund’s duration during times of uncertainty to manage interest rate risk. We also took advantage of wider credit spreads during the later part of the fiscal year. In particular, we used some of our available cash to selectively purchase securities that we felt offered attractive opportunities. Also, in the first quarter of 2008, we somewhat reduced our overweight, relative to the Fund’s benchmark, in pre-refunded^viii securities and reinvested those proceeds into some lower-rated issues that had sold off during the investor flight to quality.

2 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Performance review

For the 12 months ended March 31, 2008, Class A shares of Legg Mason Partners Intermediate-Term Municipals Fund, excluding sales charges, returned 3.48%. The Fund’s new unmanaged benchmark, the Lehman Brothers 1-15 Year Municipal Bond Index^ix, and its former unmanaged benchmark, the Lehman Brothers Municipal Bond Index, returned 4.49% and 1.90%, respectively, for the same period. The Lipper Intermediate Municipal Debt Funds Category Average¹ increased 2.61% over the same time frame.

Certain investors may be subject to the federal alternative minimum tax, and state and local taxes will apply. Capital gains, if any, are fully taxable. Please consult your personal tax or legal adviser.

PERFORMANCE SNAPSHOT AS OF MARCH 31, 2008 (excluding sales charges) (unaudited)
	6 MONTHS	12 MONTHS
Intermediate-Term Municipals Fund — Class A Shares	1.57%	3.48%
Lehman Brothers 1-15 Year Municipal Bond Index	2.62%	4.49%
Lehman Brothers Municipal Bond Index	0.75%	1.90%
Lipper Intermediate Municipal Debt Funds Category Average1	1.39%	2.61%

The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value, investment returns and yields will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/individualinvestors.

Excluding sales charges, Class C shares returned 1.09% and Class I shares returned 1.61% over the six months ended March 31, 2008. Excluding sales charges, Class C shares returned 2.68% over the 12 months ended March 31, 2008. All share class returns assume the reinvestment of all distributions, at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include sales charges that may apply when shares are purchased or the deduction of taxes that a shareholder would pay on Fund distributions.

Performance figures reflect expense reimbursements and/or fee waivers, without which the performance would have been lower.

Performance information for the 12-month period is not provided for Class I shares as this share class commenced operations on September 28, 2007.

The 30-Day SEC Yields for the period ended March 31, 2008 for Class A, C and I shares were 3.94%, 3.41% and 4.15%, respectively. The 30-Day SEC Yield is the average annualized net investment income per share for the 30-day period indicated and is subject to change.

TOTAL ANNUAL OPERATING EXPENSES (unaudited)

As of the Fund’s most current prospectus dated July 27, 2007, the gross total operating expenses for Class A, Class C and Class I shares were 0.77%, 1.38% and 0.62%, respectively.

¹ Lipper, a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the period ended March 31, 2008, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 164 funds for the six-month period and among the 158 funds for the 12-month period in the Fund’s Lipper category, and excluding sales charges.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 3

Fund overview continued

Q. What were the leading contributors to performance?

A. The Fund’s exposure to the intermediate range of the municipal yield curve — namely 2-6 years — enhanced results as this portion of the curve generated the best performance during the fiscal year. The Fund’s yield curve positioning in anticipation of a steepening yield curve was also beneficial as the curve did steepen during the later part of the fiscal year. Elsewhere, relative to the Fund’s benchmark, our shorter average duration was a significant positive factor. Finally, the Fund had an overweight to higher-quality issues, especially pre-refunded securities. This higher-quality emphasis enhanced results as these securities outperformed their lower-rated counterparts as credit spreads widened.

Q. What were the leading detractors from performance?

A. Our existing holdings in the portfolio that were longer than the 2-6 year maturity range detracted from performance, as did some of our lower-rated positions. In particular, our holdings that were guaranteed by weaker bond insurance companies saw their credit spreads widen significantly in response to concerns about the insurers’ capital reserves. Our allocation to the Health Care¹ sector was also a slight negative to overall performance during the reporting period.

Q. Were there any significant changes to the Fund during the reporting period?

A. There were no significant changes during the reporting period.

Thank you for your investment in Legg Mason Partners Intermediate-Term Municipals Fund. As always, we appreciate that you have chosen us to manage your assets, and we remain focused on achieving the Fund’s investment goals.

Sincerely,

Western Asset Management Company

April 15, 2008

Western Asset Management Company is one of the world’s leading investment management firms. Its primary business is managing fixed-income portfolios, an activity the firm has pursued for over 35 years.

¹ Health Care consists of the following industries: Hospitals/Nursing Facilities, Pharmacy Services, Medical Wholesale Drug Distributors, Drug Delivery Systems, Medical Products/Instruments, Medical & Laboratory Testing, Healthcare Cost Containment and Scientific Instruments.

4 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund’s top five sector holdings (as a percentage of net assets) as of March 31, 2008 were: Pre-Refunded/Escrowed to Maturity (37.4%), Hospitals (14.4%), Electric (12.4%), Transportation (8.6%) and Local General Obligation (5.7%). The Fund’s portfolio composition is subject to change at any time.

RISKS: Keep in mind that the Fund’s investments are subject to interest rate and credit risks. As interest rates rise, bond prices fall, reducing the value of the Fund’s share price. 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. Please see the Fund’s prospectus for more information on these and other risks.

All index performance reflects no deduction for fees, expenses or taxes. Please note an investor cannot invest directly in an index.

ⁱ The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments.

ⁱⁱ The discount rate is the interest rate charged by the U.S. Federal Reserve Bank on short-term loans (usually overnight or weekend) to banks.

ⁱⁱⁱ The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day.

^iv The Lehman Brothers Municipal Bond Index is a market value weighted index of investment grade municipal bonds with maturities of one year or more.

^v The Lehman Brothers U.S. Aggregate Index is a broad-based bond index comprised of government, corporate, mortgage- and asset-backed issues, rated investment grade or higher, and having at least one year to maturity.

^vi Duration is the measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows.

^vii The yield curve is the graphical depiction of the relationship between the yield on bonds of the same credit quality but different maturities.

^viii A pre-refunded bond is a bond in which the original security has been replaced by an escrow, usually consisting of treasurys or agencies, which has been structured to pay principal and interest and any call premium, either to a call date (in the case of a pre-refunded bond), or to maturity (in the case of an escrowed to maturity bond).

^ix The Lehman Brothers 1–15 Year Municipal Bond Index is a market value weighted index of investment grade (Baa3/BBB- or higher) fixed-rate municipal bonds with maturities of 1–15 years.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 5

Fund at a glance (unaudited)

INVESTMENT BREAKDOWN (%) As a percent of total investments — March 31, 2008

6 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Fund expenses (unaudited)

Example

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

This example is based on an investment of $1,000 invested on October 1, 2007 and held for the six months ended March 31, 2008.

Actual expenses

The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.

BASED ON ACTUAL TOTAL RETURN1
	ACTUAL TOTAL RETURN WITHOUT SALES CHARGES2		BEGINNING ACCOUNT VALUE		ENDING ACCOUNT VALUE		ANNUALIZED EXPENSE RATIO		EXPENSES PAID DURING THE PERIOD3
Class A	1.57	%	$	1,000.00	$	1,015.70	0.70	%	$	3.53
Class C	1.09			1,000.00		1,010.90	1.34			6.74
Class I	1.61			1,000.00		1,016.10	0.54			2.72

¹ For the six months ended March 31, 2008.

² Assumes reinvestment of all distributions, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect fee waivers and/or expense reimbursements. Past performance is no guarantee of future results. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

³ Expenses (net of fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 7

Fund expenses (unaudited)continued

Hypothetical example for comparison purposes

The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.

BASED ON HYPOTHETICAL TOTAL RETURN1
	HYPOTHETICAL ANNUALIZED TOTAL RETURN		BEGINNING ACCOUNT VALUE		ENDING ACCOUNT VALUE		ANNUALIZED EXPENSE RATIO		EXPENSES PAID DURING THE PERIOD2
Class A	5.00	%	$	1,000.00	$	1,021.50	0.70	%	$	3.54
Class C	5.00			1,000.00		1,018.30	1.34			6.76
Class I	5.00			1,000.00		1,022.30	0.54			2.73

¹ For the six months ended March 31, 2008.

² Expenses (net of fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366.

8 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Fund performance (unaudited)

AVERAGE ANNUAL TOTAL RETURNS1
	WITHOUT SALES CHARGES2
	CLASS A		CLASS C		CLASS I
Twelve Months Ended 3/31/08	3.48	%	2.68	%	N/A
Five Years Ended 3/31/08	3.46		2.78		N/A
Ten Years Ended 3/31/08	4.02		N/A		N/A
Inception* through 3/31/08	5.43		3.41		1.61	%
	WITH SALES CHARGES3
	CLASS A		CLASS C		CLASS I
Twelve Months Ended 3/31/08	1.10	%	2.68	%	N/A
Five Years Ended 3/31/08	2.99		2.78		N/A
Ten Years Ended 3/31/08	3.78		N/A		N/A
Inception* through 3/31/08	5.31		3.41		1.61	%
CUMULATIVE TOTAL RETURNS1
	WITHOUT SALES CHARGES2
Class A (3/31/98 through 3/31/08)	48.32%
Class C (Inception* through 3/31/08)	23.45
Class I (Inception* through 3/31/08)	1.61

¹ All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

² Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value and does not reflect the deduction of the applicable sales charge with respect to Class A shares.

³ Assumes reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 2.25%.

^* Inception dates for Class A, C and I shares are November 28, 1988, December 19, 2001 and September 28, 2007, respectively.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 9

Historical performance (unaudited)

VALUE OF $10,000 INVESTED IN CLASS A SHARES OF LEGG MASON PARTNERS INTERMEDIATE-TERM
MUNICIPALS FUND VS. LEHMAN BROTHERS 1-15 YEAR MUNICIPAL BOND INDEX, LEHMAN BROTHERS
MUNICIPAL BOND INDEX AND LIPPER INTERMEDIATE MUNICIPAL DEBT FUNDS CATEGORY AVERAGE† —
March 1998 - March 2008

† Hypothetical illustration of $10,000 invested in Class A shares on March 31, 1998, assuming the deduction of the maximum initial sales charge of 2.25% at the time of investment and reinvestment of all distributions, including returns of capital, if any, at net asset value through March 31, 2008. The Lehman Brothers 1-15 Year Municipal Bond Index is a market value weighted index of investment grade (Baa3/BBB- or higher) fixed-rate municipals bonds with maturities of 1-15 years. The Lehman Brothers Municipal Bond Index is a market value weighted index of investment grade municipal bonds with maturities of one year or more. The Indexes are unmanaged and are not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. The Lipper Intermediate Municipal Debt Funds Category Average is comprised of the Fund’s peer group of mutual funds as of March 31, 2008. The performance of the Fund’s other classes may be greater or less than the Class A shares’ performance indicated on this chart, depending on whether greater or lesser sales charges and fees were incurred by shareholders investing in the other classes.

All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower.

‡ Effective December 1, 2007, the Fund’s benchmark changed from the Lehman Brothers Municipal Bond Index to the Lehman Brothers 1-15 Year Municipal Bond Index. The benchmark was changed to better reflect the composition of the Fund’s portfolio holdings.

10 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Schedule of investments

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
	MUNICIPAL BONDS — 100.2%
		Alabama — 1.6%
$	1,935,000	Clarke & Mobile County, AL, Gas District, Gas Revenue, AMBAC, 5.250% due 1/1/24	$	1,942,875
	7,000,000	Jefferson County, AL, Sewer Revenue, Refunding, 5.250% due 2/1/16(a)		6,728,890
	1,000,000	Marshall County, AL, Health Care Authority Revenue, 6.250% due 1/1/22		1,060,260
	1,000,000	Saraland, AL, GO, MBIA, 5.250% due 1/1/14		1,062,020
		Total Alabama		10,794,045
		Alaska — 0.2%
	1,000,000	Alaska Industrial Development & Export Authority Revenue, Williams Lynxs Alaska Cargo Port LLC, 8.000% due 5/1/23(b)		1,055,730
		American Samoa — 0.1%
	1,000,000	Territory of American Samoa, ACA, 6.000% due 9/1/08		1,007,630
		Arizona — 0.4%
	760,000	Arizona State Health Facilities Authority, Unrefunded Balance, Catholic Healthcare West, 6.125% due 7/1/09(c)		780,398
	1,000,000	Arizona State University, Revenue Bonds, FGIC, 5.500% due 7/1/21(d)		1,107,720
		Maricopa County, AZ, Hospital Revenue:
	55,000	Intercommunity Healthcare, Sun City Project, 8.625% due 1/1/10(c)		58,953
		St. Lukes Medical Center:
	596,000	8.750% due 2/1/10(c)		642,035
	150,000	10.250% due 2/1/11(c)		170,591
	165,000	Maricopa County, AZ, IDA, MFH Revenue, Stanford Court Apartments, 5.750% due 7/1/08(c)		166,617
		Total Arizona		2,926,314
		Arkansas — 0.9%
	315,000	Arkansas Housing Development Agency, Single-Family Mortgage, FHA/VA, 8.375% due 7/1/10(c)		334,861
		Arkansas State Development Finance Authority Hospital Revenue, Washington Regional Medical Center:
	1,500,000	7.000% due 2/1/15(d)		1,621,485
	2,500,000	7.250% due 2/1/20(d)		2,713,575
	245,000	Pulaski County, AR, Hospital Revenue, Arkansas Children’s Hospital, 9.250% due 3/1/10(c)		268,236
	1,000,000	Warren County, AR, Solid Waste Disposal Revenue, Potlatch Corp. Project, 7.000% due 4/1/12(b)		1,046,940
		Total Arkansas		5,985,097
		California — 3.6%
	3,000,000	Barona, CA, Band of Mission Indians, GO, 8.250% due 1/1/20		3,032,190

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 11

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		California — 3.6% continued
$	4,000,000	California Statewide CDA Revenue, St. Joseph Health System, MBIA, 5.125% due 7/1/24	$	4,029,800
		California State:
	6,000,000	Economic Recovery, 5.000% due 7/1/16(a)		6,271,560
	4,245,000	Public Works Board Lease Revenue, Department of Corrections, 5.250% due 9/1/16		4,314,023
	295,000	Los Angeles, CA, COP, Hollywood Presbyterian Medical Center, INDLC, 9.625% due 7/1/13(c)		346,628
	160,000	San Leandro, CA, Hospital Revenue, Vesper Memorial Hospital, 11.500% due 5/1/11(c)		182,648
	495,000	Santa Rosa, CA, Hospital Revenue, Santa Rosa Hospital Memorial Project, 10.300% due 3/1/11(c)		567,290
	3,830,000	Truckee-Donner Recreation & Park District, CA, COP, Community Center Project, AMBAC, 5.000% due 9/1/29		3,707,555
	1,000,000	University of California Revenues, AMBAC, 5.000% due 5/15/13		1,089,720
		Total California		23,541,414
		Colorado — 3.8%
	1,025,000	Colorado Educational & Cultural Facilities Authority Revenue Charter School, Bromley East Project, 7.000% due 9/15/20(d)		1,167,424
	8,925,000	Colorado Health Facilities Authority Revenue, Adventist Health System/Sunbelt Inc., 5.125% due 11/15/28(a)(e)		8,546,580
	465,000	Colorado Health Facilities Authority, Hospital Revenue, Weld County General Hospital Project, 9.375% due 7/1/09(c)		488,204
	5,000,000	Colorado State Board of Governors, University Enterprise System Revenue, FGIC, 5.000% due 3/1/28		5,064,350
		Denver, CO, City & County:
	3,000,000	Excise Tax Revenue, Refunding, FSA, 5.500% due 9/1/14		3,108,270
	1,480,000	Wastewater Revenue, FGIC, 5.250% due 11/1/14		1,602,958
	2,200,000	Longmont, CO, Sales & Use Tax Revenue, 5.750% due 11/15/19(d)		2,384,602
	2,500,000	Northwest Parkway Public Highway Authority, 5.500% due 6/15/16(d)		2,734,675
		Total Colorado		25,097,063
		Connecticut — 1.5%
	5,000,000	Connecticut State, 5.375% due 11/15/19(a)(d)		5,533,250
	2,000,000	Connecticut State Special Obligation Parking Revenue, Bradley International Airport, ACA, 6.375% due 7/1/12(a)(b)		2,055,260
	2,000,000	Connecticut State Special Tax Obligation Revenue, Transportation Infrastructure, FSA, 5.375% due 7/1/16(d)		2,201,300
		Total Connecticut		9,789,810
		Delaware — 0.2%
	1,225,000	Delaware State, GO, Refunding, 5.000% due 1/1/13		1,313,800

See Notes to Financial Statements.

12 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		District of Columbia — 0.2%
$	1,000,000	Metropolitan Washington, DC, Airports Authority, VA General Airport Revenue, Refunding, FGIC, 5.250% due 10/1/12(b)	$	1,030,470
		Florida — 4.2%
	2,900,000	Capital Projects Finance Authority, Florida Student Housing Revenue, Cafra Capital Corp., 7.750% due 8/15/20(d)		3,241,881
		Florida Municipal Loan Council Revenue, MBIA:
	1,790,000	5.250% due 11/1/13		1,920,240
	3,175,000	5.250% due 11/1/16		3,331,369
	1,500,000	Florida State Board of Education Capital Outlay, GO, 5.500% due 1/1/16(d)		1,596,240
	545,000	Gateway Services Community Development District, Florida Special Assessment Revenue, Sun City Center, Fort Myers Project, 5.500% due 5/1/10		527,985
		Hillsborough County, FL:
	1,810,000	EFA Revenue, Refunding, University of Tampa Project, Radian, 5.750% due 4/1/18		1,863,630
	3,500,000	School District Sales Tax Revenue, AMBAC, 5.375% due 10/1/15(d)		3,822,420
		Jacksonville Beach, FL, Utility Revenue:
	1,940,000	7.900% due 10/1/14(c)		2,255,153
	2,145,000	5.000% due 4/1/18		2,188,286
	515,000	Killarney Community Development District Special Assessment Revenue, 5.125% due 5/1/09		504,592
	2,000,000	Orange County, FL, Health Facilities Authority Revenue, Hospital Adventist Health Systems, 6.250% due 11/15/24(d)		2,279,140
	1,470,000	Orlando, FL, Utilities Commission Water & Electric Revenue, 5.250% due 10/1/13(d)		1,596,758
	215,000	Port Saint Lucie, FL, Special Assessment Revenue, 6.375% due 9/1/11		216,099
	230,000	Renaissance Community Development District, Florida Capital Improvement Revenue, 6.250% due 5/1/08		229,809
	1,000,000	Seminole County, FL, Water & Sewer Revenue, Refunding & Improvement, MBIA, 6.000% due 10/1/12		1,095,980
	750,000	Sterling Hill, FL, Community Development District, 5.500% due 11/1/10		745,583
	110,000	Tamarac, FL, Water & Sewer Utilities Revenue, AMBAC, 9.250% due 10/1/10(c)		120,562
	15,000	Waterlefe Community Development District, Florida Capital Improvement Revenue, 6.250% due 5/1/10		15,051
		Total Florida		27,550,778
		Georgia — 2.3%
		Atlanta & Fulton County, GA, Recreational Authority Revenue, Zoo:
	1,770,000	5.000% due 12/1/19		1,893,015

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 13

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Georgia — 2.3% continued
$	1,860,000	5.000% due 12/1/20	$	1,972,511
	1,980,000	East Point, GA, Building Authority Revenue, FSA, zero coupon bond to yield 6.249% due 2/1/20(d)		1,056,904
	1,000,000	Georgia State, GO, 6.250% due 8/1/10		1,089,710
	4,500,000	Main Street Natural Gas Inc., Gas Project Revenue, 5.500% due 9/15/25		4,106,025
	1,000,000	Milledgeville & Baldwin County, GA, Development Authority Revenue, Georgia College & State University Foundation, 5.500% due 9/1/24(d)		1,136,750
	2,415,000	Municipal Electronic Authority Revenue, Combustion Turbine Project, , MBIA, 5.250% due 11/1/19		2,417,319
	660,000	Savannah, GA, Downtown Authority Revenue, Refunding, Chatham County Projects, MBIA, 5.000% due 1/1/19		707,177
	685,000	Savannah, GA, EDA, College of Art and Design Inc. Project, 6.200% due 10/1/09(c)		710,290
		Total Georgia		15,089,701
		Hawaii — 0.7%
		Hawaii State:
		FGIC:
	2,895,000	5.375% due 8/1/15		3,084,594
	1,105,000	5.375% due 8/1/15(d)		1,203,953
	615,000	GO, Unrefunded Balance, MBIA, 5.000% due 5/1/16		664,747
		Total Hawaii		4,953,294
		Illinois — 5.9%
	95,000	Chicago Heights, IL, Single-Family Mortgage Revenue, 7.600% due 5/1/10(c)		100,922
		Chicago, IL:
	1,500,000	FGIC, 6.000% due 1/1/14(d)		1,633,530
	120,000	GO, 5.375% due 1/1/16		129,188
	400,000	GO, Refunding, Emergency Telephone System, FGIC, 5.250% due 1/1/20		432,804
	2,000,000	Metropolitan Water Reclamation District Greater Chicago, Capital Improvement, 5.500% due 12/1/14(d)		2,243,520
	1,500,000	O’Hare International Airport, Second Lien Passenger Facility, AMBAC, 5.500% due 1/1/16		1,578,900
	3,880,000	Project and Refunding, AMBAC, 5.375% due 1/1/16(d)		4,270,522
		Cicero, IL:
	2,415,000	MBIA, 5.625% due 12/1/16		2,660,944
	1,250,000	Tax Increment, XLCA, 5.250% due 1/1/20		1,298,763
	4,010,000	Glendale Heights, IL, Hospital Revenue, Refunding Glendale Heights Project, 7.100% due 12/1/15(a)(c)		4,658,577

See Notes to Financial Statements.

14 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Illinois — 5.9% continued
$	2,000,000	Illinois DFA Revenue, Revolving Fund-Master Trust, 5.500% due 9/1/17	$	2,157,880
	2,000,000	Illinois Finance Authority Revenue, FSA, 5.250% due 1/1/22		2,001,500
		Illinois Health Facilities Authority Revenue:
	310,000	Methodist Medical Center of Illinois Project, 9.000% due 10/1/10(c)		337,553
	5,000,000	Order of St. Francis Healthcare System, 6.250% due 11/15/19(a)(d)		5,365,500
	1,140,000	Passavant Memorial Area Hospital, 6.250% due 10/1/17(d)		1,257,272
	5,000,000	Illinois State, GO, First Series, 5.375% due 7/1/19		5,285,600
	2,440,000	Kane County, IL, GO, FGIC, 5.500% due 1/1/15(d)		2,652,280
	725,000	Northern, IL, University Revenue, 10.400% due 4/1/13(d)		790,482
		Total Illinois		38,855,737
		Indiana — 5.5%
	275,000	Indiana Bond Bank, Special Program, AMBAC, 9.750% due 8/1/09(c)		286,850
	3,920,000	Indiana State Toll Road Commission Toll Road Revenue, 9.000% due 1/1/15(c)		4,878,871
	3,000,000	Indianapolis Local Public Improvement Bond Bank, Waterworks Project, 5.500% due 7/1/19(d)		3,316,830
	21,875,000	Indianapolis, IN, Thermal Energy System, Multi-Mode, 5.000% due 10/1/23		21,981,312
	1,000,000	Lawrence Township, IN, Metropolitan School District, First Mortgage, IBC/MBIA, 6.750% due 7/5/13		1,136,840
		Madison County, IN, Hospital Authority Facilities Revenue:
	310,000	Community Hospital of Anderson Project, 9.250% due 1/1/10(c)		334,568
	155,000	St. Johns Hickey Memorial Hospital Project, 9.000% due 12/1/09(c)		165,934
	1,075,000	Mishawaka, IN, School Building Corp., First Mortgage, AMBAC, 5.500% due 7/15/18(d)		1,174,233
	2,000,000	North Manchester, IN, Industrial Revenue, Peabody Retirement Community Project, 7.125% due 7/1/22		1,963,800
	1,105,000	St. Joseph County, IN, Hospital Authority Facilities Revenue, Memorial Hospital South Bend, 9.400% due 6/1/10(c)		1,188,648
		Total Indiana		36,427,886
		Iowa — 1.2%
	3,000,000	Iowa Finance Authority, Health Care Facilities Revenue, Genesis Medical Center, 6.250% due 7/1/20		3,114,540
	2,920,000	Muscatine, IA, Electric Revenue, 9.700% due 1/1/13(c)		3,448,228
	1,085,000	University of Iowa Facilities Corp., Medical Education and Biomed Research Facilities Project, AMBAC, 5.375% due 6/1/18		1,117,116
		Total Iowa		7,679,884

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 15

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Kansas — 0.8%
$	5,000,000	Burlington, KS, Environmental Improvement Revenue, Kansas City Power & Light, FGIC, 5.375% due 9/1/35(e)	$	5,014,100
		Kentucky — 0.8%
	5,000,000	Kentucky Property & Buildings, 5.375% due 10/1/19(a)(d)		5,469,350
		Louisiana — 0.7%
	500,000	East Baton Rouge, LA, Parish Park & Recreation District, GO, FSA, 5.000% due 5/1/20		523,945
	275,000	Lafayette, LA, Public Trust Financing Authority, Single-Family Mortgage Revenue, FHA, 7.200% due 4/1/10(c)		284,982
	1,480,000	Louisiana Local Government Environmental Facilities and Community Development Authority Revenue, AMBAC, Parking Facilities Corp. Garage Project, 5.625% due 10/1/17		1,579,086
	290,000	Louisiana Public Facilities Authority Hospital Revenue, Southern Baptist Hospital Inc. Project, Aetna, 8.000% due 5/15/12(c)		322,373
	1,000,000	Louisiana State University & Agricultural & Mechanical College Board, Refunding, Auxiliary, FSA, 5.250% due 7/1/13		1,103,280
	1,000,000	New Orleans, LA, GO, Refunding, FGIC, 5.500% due 12/1/10		1,033,620
		Total Louisiana		4,847,286
		Maryland — 3.9%
		Anne Arundel County, MD, GO:
	3,000,000	5.375% due 3/1/14(d)		3,285,390
	450,000	Consolidated Solid Waste Projects, 5.300% due 2/1/17(b)		455,405
	1,000,000	Frederick County, MD, GO, Public Facilities, 5.000% due 12/1/15(d)		1,079,500
	2,000,000	Maryland State, State and Local Facilities Loan, 5.500% due 8/1/10		2,146,540
		Maryland State Health & Higher EFA Revenue:
		Carroll County General Hospital:
	400,000	5.125% due 7/1/14		406,444
	535,000	6.000% due 7/1/21		546,572
	1,000,000	Johns Hopkins Hospital, 5.000% due 5/15/11		1,046,300
		Refunding:
		Kennedy Krieger Issue:
	400,000	5.200% due 7/1/09		402,520
	400,000	5.250% due 7/1/10		402,372
	1,000,000	5.125% due 7/1/22		915,110
	500,000	Medstar Health, 5.750% due 8/15/14		534,235
		University of Maryland Medical System:
	1,000,000	5.000% due 7/1/10		1,039,740
	1,000,000	6.000% due 7/1/22(d)		1,112,770
	4,000,000	Washington County Hospital, 6.000% due 1/1/28		4,008,320

See Notes to Financial Statements.

16 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Maryland — 3.9% continued
		Maryland State Transportation Authority:
$	5,000,000	Grant & Revenue Anticipation, Refunding, 5.000% due 3/1/19(a)	$	5,344,450
	1,000,000	Parking Revenue, Baltimore/Washington International Airport, AMBAC, 5.250% due 3/1/12(b)		1,056,300
	1,575,000	Northeast Maryland Waste Disposal Authority, Solid Waste Revenue, AMBAC, 5.500% due 4/1/15(b)		1,695,015
		Total Maryland		25,476,983
		Massachusetts — 2.7%
	495,000	Boston, MA, Water & Sewer Commission Revenue, 10.875% due 1/1/09(c)		528,041
	1,140,000	Massachusetts Rail Connections Inc., Route 128, Parking Garage Revenue, 6.000% due 7/1/13(d)		1,218,261
	485,000	Massachusetts State DFA Revenue, First Mortgage, Edgecombe Project, 6.000% due 7/1/11		491,281
		Massachusetts State HEFA Revenue:
		Caritas Christi Obligation:
	2,000,000	6.500% due 7/1/12		2,097,960
	3,000,000	6.750% due 7/1/16		3,213,060
	1,000,000	Harvard University, 5.000% due 1/15/16		1,025,840
	1,300,000	University of Massachusetts, 5.500% due 10/1/18(d)		1,444,937
	1,080,000	Massachusetts State IFA Revenue, University Commons Nursing, FHA, 6.550% due 8/1/18		1,115,867
	1,260,000	Massachusetts State Port Authority Revenue, 13.000% due 7/1/13(c)		1,611,086
		Massachusetts State:
	2,000,000	GAN, 5.750% due 6/15/15(d)		2,153,380
	1,000,000	GO, Refunding, AMBAC, 5.750% due 8/1/10		1,074,190
	2,000,000	Pittsfield, MA, GO, MBIA, 5.500% due 4/15/17		2,162,680
		Total Massachusetts		18,136,583
		Michigan — 1.7%
	1,165,000	Allen Academy COP, 7.000% due 6/1/15		1,157,753
	1,000,000	Carman-Ainsworth, MI, Community School District GO, FGIC, 5.500% due 5/1/19(d)		1,099,690
	1,775,000	Chippewa Valley, MI, Schools Administration Building, Q-SBLF, 5.500% due 5/1/18(d)		1,951,950
	1,000,000	Michigan State Hospital Finance Authority Revenue, Refunding, Hospital, Sparrow Obligated, 5.000% due 11/15/19		1,027,620
	2,000,000	Michigan State Strategic Fund Limited Obligation Revenue, Refunding, Dow Chemical Project, 4.600% due 6/1/14(e)(f)		2,004,820
	1,000,000	Mount Clemens, MI, Community School District, Q-SBLF, 5.500% due 5/1/16(d)		1,089,510

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 17

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Michigan — 1.7% continued
$	2,000,000	Southfield, MI, Library Building Authority, GO, MBIA, 5.500% due 5/1/24(d)	$	2,129,500
	665,000	Williamston, MI, Community School District, GO, MBIA, Q-SBLF, 6.250% due 5/1/09		692,212
		Total Michigan		11,153,055
		Minnesota — 0.3%
	1,000,000	Minneapolis, MN, Health Care System Revenue, Allina Health Systems, 6.000% due 11/15/18(d)		1,131,160
	1,000,000	Saint Paul, MN, Housing & Redevelopment Authority, Hospital Revenue, Health East Project, ACA/CBI, 5.850% due 11/1/17		1,004,420
		Total Minnesota		2,135,580
		Missouri — 0.7%
	1,000,000	Lees Summit, MO, IDA Health Facilities Revenue, John Knox Village, 5.750% due 8/15/11(c)		1,099,180
	1,500,000	Missouri State Environmental Improvement & Energy Resource Authority, Water Pollution State Revolving Funds Programs, 5.250% due 1/1/16		1,548,960
	680,000	Missouri State Housing Development Community, MFH Revenue, 5.500% due 12/1/15		699,645
	1,000,000	Saint Louis, MO, Airport Revenue, Airport Development Program, MBIA, 5.625% due 7/1/16(d)		1,088,610
		Total Missouri		4,436,395
		Montana — 0.0%
	25,000	Montana State Board of Regents Revenue, MBIA, 10.000% due 11/15/08(c)		26,250
		Nebraska — 0.0%
	10,000	Douglas County, NE, Hospital Authority No. 2, Archbishop Bergan Mercy Hospital, 9.500% due 7/1/10(c)		10,810
		Nevada — 1.2%
	1,185,000	Carson City, NV, Hospital Revenue, Carson-Tahoe Hospital Project, 6.000% due 9/1/14		1,249,997
	2,500,000	Las Vegas New Convention & Visitors Authority Revenue, AMBAC, 6.000% due 7/1/14(d)		2,647,250
		Reno, NV, Hospital Revenue, Renown Regional Medical Center Project:
	1,000,000	5.000% due 6/1/15		1,021,050
	1,000,000	5.000% due 6/1/16		1,016,690
	2,190,000	5.000% due 6/1/17		2,209,075
		Total Nevada		8,144,062
		New Hampshire — 0.7%
		New Hampshire HEFA, University Systems of New Hampshire, AMBAC:
	595,000	5.375% due 7/1/16(d)		653,459

See Notes to Financial Statements.

18 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		New Hampshire — 0.7% continued
$	305,000	5.375% due 7/1/16	$	326,268
		New Hampshire HEFA Revenue, Covenant Health:
	1,770,000	6.500% due 7/1/17(d)		2,007,640
	1,285,000	6.500% due 7/1/17		1,381,580
	455,000	New Hampshire State, GO, Unrefunded Balance, Capital Improvement, 5.125% due 10/1/17		462,931
		Total New Hampshire		4,831,878
		New Jersey — 2.5%
		New Jersey Health Care Facilities Financing Authority Revenue:
		Atlanticare Regional Medical Center:
	1,840,000	5.000% due 7/1/15		1,919,322
	1,350,000	5.000% due 7/1/16		1,400,679
	170,000	Hackensack Hospital, 8.750% due 7/1/09(c)		177,655
	3,000,000	Trinitas Hospital Obligation Group, 7.375% due 7/1/15(d)		3,352,740
	5,350,000	New Jersey State Transportation Trust Fund Authority, Transportation Systems, MBIA, 5.250% due 12/15/14		5,945,080
		New Jersey State Turnpike Authority Revenue:
	220,000	6.750% due 1/1/09(c)		228,092
	245,000	6.000% due 1/1/14(c)		264,813
	3,095,000	Passaic Valley, NJ, Sewage Commissioners Sewer System, AMBAC, 5.625% due 12/1/17		3,255,538
	135,000	Ringwood Boro, NJ, Sewage Authority, 9.875% due 1/1/14(c)		163,469
		Total New Jersey		16,707,388
		New Mexico — 0.4%
	1,100,000	Bernalillo County, NM, Gross Receipts Tax Revenue, AMBAC, 5.250% due 10/1/21		1,192,048
	1,490,000	New Mexico Finance Authority Revenue, Subordinated Lien, Public Project Revolving Fund, MBIA, 5.000% due 6/15/20		1,558,197
		Total New Mexico		2,750,245
		New York — 5.8%
	1,000,000	Albany, NY, IDA, Civic Facility Revenue, Charitable Leadership Project, 6.000% due 7/1/19		1,004,790
	2,150,000	Nassau County, NY, IDA, Continuing Care Retirement, Amsterdam at Harborside, 5.875% due 1/1/18		2,139,551
	1,000,000	New York City, NY, Health & Hospital Corp. Revenue, Health Systems, FSA, 5.500% due 2/15/19		1,061,290
	530,000	New York City, NY, IDA, Special Needs Facilities Pooled Program A-1, 6.100% due 7/1/12		531,309
	1,500,000	New York City, NY, Industrial Development Agency, Revenue, Queens Baseball Stadium, Pilot, AMBAC, 5.000% due 1/1/19		1,594,875

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 19

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		New York — 5.8% continued
		New York State Dormitory Authority Revenue:
$	1,000,000	Columbia University, 5.250% due 7/1/17(d)	$	1,099,890
	5,415,000	FHA New York and Presbyterian Hospital, FSA, 5.240% due 8/15/24		5,604,038
	1,780,000	Marymount Manhattan College, Radian, 6.375% due 7/1/14		1,852,499
	5,000,000	Mental Health Services Facilities, 5.000% due 2/15/18		5,272,850
	2,500,000	School Districts Financing Programs, MBIA, 5.500% due 10/1/17		2,685,825
	1,715,000	State University Educational Facilities, MBIA, 6.000% due 5/15/15(d)		1,865,766
	2,000,000	New York State Thruway Authority, Highway & Bridge, Trust Fund Revenue, AMBAC, 5.000% due 4/1/21		2,103,280
		Tobacco Settlement Financing Corp., New York, Asset-Backed:
	6,000,000	5.500% due 6/1/14(a)		6,115,800
	5,000,000	5.500% due 6/1/16(a)		5,152,450
		Total New York		38,084,213
		North Carolina — 2.8%
	535,000	Asheville, NC, HDC, First Lien Revenue, Asheville Gardens, HUD Section 8, 10.500% due 5/1/11(d)		579,132
	3,000,000	Guilford County, NC, GO, Public Improvement, 5.250% due 10/1/15(d)		3,272,340
	4,000,000	Iredell County, NC, COP, Iredell County School Project, FSA, 5.125% due 6/1/27		4,093,600
	550,000	North Carolina Eastern Municipal Power Agency, Power Systems Revenue, ACA/CBI, 5.650% due 1/1/16		566,863
		North Carolina Municipal Power Agency No. 1, Catawba Electricity Revenue:
	1,720,000	10.500% due 1/1/10(c)		1,882,850
	3,000,000	ACA-CBI, 6.375% due 1/1/13		3,181,170
	5,000,000	MBIA, 5.250% due 1/1/18(a)		5,251,900
		Total North Carolina		18,827,855
		Ohio — 3.4%
	1,750,000	Cleveland, OH, Public Power Systems Revenue, AMBAC, 5.500% due 11/15/15		1,887,603
	1,000,000	Cuyahoga County, OH, Hospital Facilities Revenue, Canton Inc. Project, 6.750% due 1/1/10		1,032,970
	1,860,000	Franklin County, OH, Hospital Revenue, Children Hospital Project, 10.375% due 6/1/13(c)		2,215,316
	305,000	Hamilton County, OH, Sales Tax Revenue, AMBAC, 5.250% due 12/1/18		316,389
	1,240,000	Jackson, OH, Local School District, Stark & Summit Counties, FSA, 5.000% due 12/1/18		1,323,650

See Notes to Financial Statements.

20 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Ohio — 3.4% continued
$	490,000	Lake County, OH, Hospital Improvement Revenue, Lake County Memorial Hospital Project, 8.625% due 11/1/09(c)	$	520,478
	1,410,000	Logan Hocking, OH, Local School District, Construction & Improvement, MBIA, 5.500% due 12/1/16(d)		1,551,860
	2,775,000	Montgomery County, OH, Revenue, Catholic Health Initiatives, 5.500% due 9/1/14(d)		3,026,498
		Ohio State, Water Development Authority Revenue:
	2,210,000	Refunding, Safe Water Service, 9.375% due 12/1/10(c)		2,392,414
	335,000	Safe Water, 9.000% due 12/1/10(c)		348,614
		Ohio State Building Authority:
	3,000,000	5.375% due 10/1/14(d)		3,176,100
	3,600,000	State Facilities-Administration Building Fund, FSA, 5.500% due 10/1/14(d)		3,946,572
	500,000	Ohio State Department of Administrative Services, COP, Administrative Knowledge System, MBIA, 5.000% due 9/1/16		536,780
		Total Ohio		22,275,244
		Oklahoma — 0.7%
		Oklahoma Development Finance Authority Revenue, Refunding, St. John’s Health Systems:
	2,060,000	5.750% due 2/15/18(d)		2,150,805
	690,000	5.750% due 2/15/18		704,614
	1,725,000	Tulsa, OK, Airport Improvement Trust General Revenue, 6.000% due 6/1/14(b)		1,802,194
		Total Oklahoma		4,657,613
		Oregon — 1.4%
	1,000,000	Clackamas County, OR, Hospital Facilities Authority Revenue, Legacy Health System, 5.750% due 5/1/16		1,058,720
		Klamath Falls, OR, Intercommunity Hospital Authority Revenue:
	940,000	Merle West Medical Center, 6.125% due 9/1/22(d)		1,071,252
	560,000	Unrefunded Balance, Merle West Medical Center, 6.125% due 9/1/22		568,316
		Oregon State Department Administrative Services Lottery Revenue:
	3,500,000	5.250% due 4/1/15		3,609,865
	1,375,000	FSA, 5.500% due 4/1/14(d)		1,512,198
	1,470,000	Wasco County, OR, Solid Waste Disposal Revenue, Waste Connections Inc. Project, 7.000% due 3/1/12(b)		1,497,151
		Total Oregon		9,317,502
		Pennsylvania — 8.2%
	3,000,000	Allegheny County, PA, Port Authority Special Revenue, FGIC, 5.500% due 3/1/16		3,153,360
	1,575,000	Carbon County, PA, IDA, Panther Creek Partners Project, 6.650% due 5/1/10(b)		1,594,341

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 21

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Pennsylvania — 8.2% continued
		Central Bucks, PA, School District:
$	2,500,000	FGIC, 5.500% due 5/15/19(d)	$	2,751,450
	1,000,000	GO, FGIC, 5.500% due 5/15/17(d)		1,100,580
	1,070,000	Chester County, PA, School Authority, School Lease Revenue, 5.375% due 6/1/17		1,130,412
	1,750,000	Greater Johnstown, PA, GO, School District, MBIA, 5.375% due 8/1/14		1,878,835
		Pennsylvania State:
	2,000,000	5.750% due 10/1/14(d)		2,125,320
	4,000,000	5.500% due 5/1/15(d)		4,406,880
	2,000,000	Pennsylvania State Department of General Services, COP, FSA, 5.250% due 5/1/16		2,121,520
		Pennsylvania State Higher EFA, Health Services Revenue:
	1,000,000	Allegheny Delaware Valley Obligation Group, MBIA, 6.250% due 1/15/18		1,057,550
	3,330,000	University of Pittsburg Medical Center Health System, 5.600% due 11/15/09		3,477,353
	500,000	Pennsylvania State, IDA, Refunding, Economic Development, AMBAC, 5.500% due 7/1/20		531,390
	1,000,000	Pennsylvania State, Turnpike Commission Oil Franchise Tax Revenue, Subordinated, MBIA, 5.250% due 12/1/16(d)		1,116,860
		Philadelphia, PA:
	2,000,000	GO, FSA, 5.250% due 9/15/18(d)		2,152,500
		School District:
	2,000,000	5.625% due 8/1/18(d)		2,216,640
		FSA:
	2,000,000	5.500% due 2/1/20(d)		2,191,580
	1,865,000	5.500% due 2/1/21(d)		2,043,648
		Philadelphia, PA, Authority for Industrial Development:
	2,000,000	FSA, 5.500% due 10/1/15(d)		2,203,760
	1,000,000	Lease Revenue, FSA, 5.500% due 10/1/19(d)		1,101,880
		Philadelphia, PA, Gas Works Revenue:
	1,675,000	5.500% due 8/1/17(d)		1,831,629
	3,240,000	FSA, 5.500% due 8/1/19(d)		3,542,972
		Philadelphia, PA, Parking Authority Revenue, Parking Revenue, FSA:
	2,000,000	5.625% due 9/1/15		2,087,160
	1,500,000	5.625% due 9/1/19		1,551,435
		Philadelphia, PA, Water and Wastewater Revenue:
	1,000,000	AMBAC-TCRS, AMBAC, 5.625% due 6/15/08		1,006,520

See Notes to Financial Statements.

22 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Pennsylvania — 8.2% continued
$	1,000,000	FGIC, 5.250% due 11/1/17	$	1,050,930
	865,000	Pittsburgh, PA, Public Parking Authority, Parking Revenue, St. Francis General Hospital, 6.625% due 10/1/12(c)		946,172
	1,200,000	Reading, PA, GO, AMBAC, 5.875% due 11/15/12		1,343,808
	1,445,000	Southcentral, PA, General Authority Revenue, Hanover Hospital Inc., Radian, 5.500% due 12/1/18		1,494,202
	765,000	West View, PA, Municipal Authority, 9.500% due 11/15/14(c)		962,883
	180,000	Westmoreland County, PA, Municipal Authority, Special Obligation, 9.125% due 7/1/10(c)		188,017
		Total Pennsylvania		54,361,587
		Rhode Island — 0.6%
	1,000,000	Cranston, RI, FGIC, 6.375% due 11/15/14(d)		1,077,580
	1,000,000	Providence, RI, Public Building Authority, General Revenue, MBIA, 5.375% due 12/15/21		1,043,640
	2,000,000	Woonsocket, RI, GO, FGIC, 5.375% due 10/1/20		2,082,780
		Total Rhode Island		4,204,000
		South Carolina — 0.8%
	490,000	Charleston, SC, Waterworks & Sewer Revenue, 10.375% due 1/1/10(c)		535,639
		Greenville County, SC, School District Installment Purchase:
	1,000,000	Refunding, Building Equity Sooner for Tomorrow, 5.875% due 12/1/19(d)		1,138,000
	1,650,000	Revenue, Building Equity Sooner for Tomorrow, 6.000% due 12/1/21(d)		1,886,643
	1,350,000	Revenue, Refunding, Building Equity, 6.000% due 12/1/21(d)		1,546,789
		Total South Carolina		5,107,071
		South Dakota — 0.4%
	2,635,000	Minnehaha County, SD, Limited Tax Certificates, 5.625% due 12/1/19(d)		2,771,862
		Tennessee — 3.7%
	5,000,000	Elizabethton, TN, Health & Educational Facilities Board Revenue, 5.750% due 7/1/23(d)		5,429,450
	140,000	Greeneville, TN, Health & Educational Facilities Board, Hospital Revenue, Southern Adventist Health System, 8.700% due 10/1/09(c)		148,700
		Memphis-Shelby County, TN:
	1,000,000	Airport Authority, Airport Revenue, AMBAC, 6.250% due 3/1/14(b)		1,046,090
	2,000,000	Sports Authority Inc. Revenue, Memphis Arena Project, 5.500% due 11/1/18(d)		2,217,740
		Tennessee Energy Acquisition Corp., Gas Revenue:
	5,000,000	5.250% due 9/1/22		4,773,550

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 23

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Tennessee — 3.7% continued
$	3,000,000	5.000% due 2/1/22	$	2,781,690
	5,000,000	5.250% due 9/1/23		4,714,350
	3,220,000	Tennessee Housing Development Agency, 5.000% due 7/1/23(b)		3,067,919
		Total Tennessee		24,179,489
		Texas — 15.3%
		Austin, TX:
	1,000,000	Convention Enterprises Inc., Convention Center, First Tier, 6.600% due 1/1/21(d)		1,101,050
	2,000,000	Electric Utility System Revenue, Refunding, AMBAC, 5.500% due 11/15/13		2,206,560
	700,000	Bexar County, TX, Housing Finance Corp. MFH Revenue, The Waters at Northern Hill Apartments, MBIA, 5.800% due 8/1/21		691,124
	30,000	Brownsville, TX, Utilities Systems Revenue, AMBAC, 9.400% due 1/1/13(c)		35,213
	1,000,000	Dallas, TX, Area Rapid Transit, Senior Lien, AMBAC, 5.375% due 12/1/17(d)		1,096,280
	8,150,000	Dallas-Fort Worth, TX, International Airport Revenue, MBIA, 5.750% due 11/1/18(b)		8,154,401
	1,280,000	Duncanville, TX, Hospital Authority, Methodist Hospitals of Dallas Project, 9.000% due 1/1/10(c)		1,377,062
		El Paso County, TX, Housing Finance Corp.:
	415,000	La Plaza Apartments, 6.700% due 7/1/20		422,308
		MFH Revenue, American Village Communities:
	1,250,000	6.250% due 12/1/20		1,269,050
	1,000,000	6.250% due 12/1/24		1,012,400
	390,000	Fort Bend, TX, ISD, PSFG, 5.500% due 2/15/16		398,061
	2,000,000	Fort Worth, TX, Water & Sewer Revenue, 5.625% due 2/15/18(d)		2,198,680
	5,000,000	Gulf Coast of Texas, IDA, Solid Waste Disposal Revenue, CITGO Petroleum Corp. Project, 7.500% due 10/1/12(a)(b)(e)(f)		5,409,700
		Harlandale, TX:
	10,000	GO, ISD, Refunding, PSFG, Unrefunded Balance, 6.000% due 8/15/16		10,647
	990,000	ISD, Refunding, PSFG, 6.000% due 8/15/16(d)		1,074,110
		Harris County, TX:
	1,000,000	GO, Capital Appreciation, Refunding, Permanent Improvement, MBIA, zero coupon bond to yield 6.000% due 10/1/17		656,010
		Houston Sports Authority Revenue:
	1,125,000	5.250% due 11/15/16		1,186,200
	3,000,000	MBIA, 5.750% due 11/15/19		3,170,850
		Houston, TX:
	2,300,000	Airport Systems Revenue, 9.500% due 7/1/10(c)		2,495,086

See Notes to Financial Statements.

24 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Texas — 15.3% continued
		FSA:
$	910,000	5.750% due 3/1/18(d)	$	981,644
	90,000	Unrefunded Balance, 5.750% due 3/1/18		94,747
	4,000,000	ISD, Refunding, 5.250% due 2/15/18(a)(d)		4,119,800
		Water & Sewer Systems Revenue, Refunding, Jr. Lien:
	4,545,000	5.750% due 12/1/16(a)(d)		4,932,643
	1,000,000	FSA, 5.500% due 12/1/17		1,071,310
		Midlothian, TX:
	2,570,000	Development Authority Tax, Increment Contact Revenue, 7.875% due 11/15/21(d)		2,958,584
	60,000	ISD, Unrefunded Balance, Refunding, PSF-GTD, zero coupon bond to yield 6.166% due 2/15/17		35,152
		Montgomery, TX, ISD, GO:
	1,230,000	Refunding, PSFG, 5.500% due 2/15/17(d)		1,329,655
	570,000	Unrefunded Balance, Refunding, PSFG, 5.500% due 2/15/17		603,049
	1,230,000	North Forest ISD, ACA, 6.500% due 8/15/17		1,196,335
	18,000,000	North Texas Tollway Authority Revenue, MBIA, 5.125% due 1/1/28		17,987,400
	755,000	Panhandle, TX, Regional Housing Finance, GNMA-Collateralized, 6.500% due 7/20/21		804,324
	15,000,000	SA Energy Acquisition, PFC, TX, Gas Supply Revenue, 5.500% due 8/1/22(a)		14,650,350
	190,000	Southeast Texas HFA, Memorial Hospital System Project, 8.500% due 12/1/08(c)		198,320
		Tarrant County, TX:
		Health Facilities Development Corp., Health System Revenue:
	250,000	Original Discount Issue, FGIC, 5.000% due 9/1/15(c)		267,303
	855,000	Original Issue Discount, FGIC, 5.000% due 9/1/15(c)		919,142
		Health Facilities Development Corp., Hospital Revenue:
	2,000,000	6.625% due 11/15/20(d)		2,233,420
	4,000,000	Baylor Health Care Systems Project, 5.750% due 11/15/19(a)		4,231,720
	60,000	Hospital Authority Revenue, St. Joseph Hospital Project, 8.750% due 2/1/10(c)		64,634
	1,000,000	Texas State, GO, Refunding, 5.125% due 10/1/15		1,018,470
	2,000,000	Texas Technical University Revenue Financing System, MBIA, 5.500% due 8/15/18(d)		2,189,600
	2,000,000	University of Texas Revenue Financing System, 5.375% due 8/15/18(d)		2,171,000
	2,150,000	Waco, TX, Health Facilities Developmental Corp., FHA Mortgage Revenue, Hillcrest Health Systems Project, MBIA, 5.000% due 2/1/20		2,232,925

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 25

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Texas — 15.3% continued
$	1,000,000	Wichita Falls, TX, Water & Sewer Revenue, Priority Lien, AMBAC, 5.375% due 8/1/19(d)	$	1,089,550
		Total Texas		101,345,869
		Utah — 0.9%
		Provo, UT, Electric Revenue:
	760,000	10.125% due 4/1/15(c)		940,614
	10,000	AMBAC, 10.375% due 9/15/15(c)		12,836
	830,000	MBIA, 10.125% due 4/1/15(c)		1,027,249
	1,500,000	Salt Lake County, UT, Hospital Revenue, IHC Health Services Inc., AMBAC, 5.500% due 5/15/13		1,615,560
		Spanish Fork City, UT, Water Revenue:
	240,000	FSA, 5.500% due 6/1/17(d)		265,375
	760,000	Unrefunded Balance, FSA, 5.500% due 6/1/17		816,521
	1,000,000	Utah State Board Regents, Utah State University Hospital, MBIA, 5.500% due 8/1/18(d)		1,093,510
		Total Utah		5,771,665
		Vermont — 0.2%
	1,415,000	Vermont Educational & Health Buildings Financing Agency Revenue, Developmental & Mental Health, 5.500% due 6/15/12		1,417,505
		Virginia — 2.5%
	1,445,000	Chesapeake, VA, GO, Public Improvement, 5.500% due 12/1/17		1,535,760
	1,000,000	Fairfax County, VA, Redevelopment & Housing Authority Lease Revenue, James Lee Community Center, 5.250% due 6/1/19		1,037,020
	1,305,000	Fauquier County, VA, IDA, Hospital Revenue, Fauquier Hospital Foundation Inc., Radian, 5.500% due 10/1/15		1,404,963
	825,000	Harrisonburg, VA, Redevelopment & Housing Authority, MFH Revenue, Greens of Salem Run Project, FSA, 6.000% due 4/1/12(b)		836,740
	750,000	Norton, VA, IDA Hospital Revenue, Norton Community Hospital, ACA, 6.000% due 12/1/22		737,738
		Virginia State Resources Authority:
	5,035,000	Clean Water Reserve, Revolving Fund, 5.400% due 10/1/18(a)(d)		5,415,092
	1,175,000	Infrastructure Revenue, Senior, Pooled Financing Program, 5.000% due 11/1/19		1,270,610
	1,000,000	Revenue, Clean Water Reserve, Revolving Fund, 5.750% due 10/1/13(d)		1,083,930
	3,000,000	York County, VA, IDA, PCR, Virginia Electrical & Power Co., Remarketed 11/8/02, 5.500% due 7/1/09		3,015,570
		Total Virginia		16,337,423
		Washington — 2.8%
	4,000,000	Energy Northwest Washington Electric Revenue, Refunding, Project No. 1, 5.500% due 7/1/14		4,375,520

See Notes to Financial Statements.

26 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Washington — 2.8% continued
$	6,725,000	King County, WA, Public Hospital District, GO, 5.250% due 12/1/28(a)	$	6,745,511
	1,115,000	King County, WA, Sewer Revenue, FGIC, 6.000% due 1/1/10(d)		1,160,013
	2,000,000	Pierce County, WA, School District North 10 Tacoma, FGIC, 5.375% due 12/1/14(d)		2,188,900
		Radford Court Properties, WA, Student Housing Revenue, MBIA:
	1,695,000	6.000% due 6/1/17		1,800,649
	1,000,000	5.375% due 6/1/19		1,037,740
	1,000,000	Washington State, GO, 6.000% due 1/1/11(d)		1,062,160
		Total Washington		18,370,493
		Wisconsin — 2.0%
	4,000,000	Sheboygan, WI, PCR, Wicsconsin Power Convention, FGIC, 5.000% due 9/1/15		4,041,760
	2,000,000	Wisconsin State, 5.500% due 5/1/14(d)		2,173,540
		Wisconsin State HEFA Revenue:
	1,000,000	Agnesian Health Care Inc., 6.000% due 7/1/17		1,039,830
	4,500,000	Prohealth Care Inc. Obligation Group, AMBAC, 5.000% due 8/15/19(a)		4,573,980
	1,500,000	Wheaton Franciscan Services Inc., 6.000% due 8/15/15(d)		1,679,940
		Total Wisconsin		13,509,050
		TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS (Cost — $646,950,449)		662,777,059
	SHORT-TERM INVESTMENTS — 5.3%
		Alaska — 0.0%
	100,000	Valdez, AK, Marine Terminal Revenue, Refunding BP Pipelines Inc. Project, 1.250%, 4/1/08(g)		100,000
		Colorado — 0.2%
		Colorado Educational & Cultural Facilities Authority Revenue:
	300,000	JFMC Facilities Corp., LOC-Bank of America, 1.300%, 4/1/08(g)		300,000
		National Jewish Federation Bond Program:
	300,000	LOC-Bank of America, 1.300%, 4/1/08(g)		300,000
	200,000	LOC-JPMorgan Chase, 1.300%, 4/1/08(g)		200,000
	600,000	LOC-U.S. Bank N.A., 1.300%, 4/1/08(g)		600,000
	100,000	National Jewish Foundation Building, LOC-Bank of America, 1.300%, 4/1/08(g)		100,000
		Total Colorado		1,500,000
		Illinois — 0.9%
	5,600,000	Illinois Housing Development Authority Revenue, Homeowner Mortgage, SPA-State Street Bank & Trust Co., 2.100%, 4/2/08(b)(g)		5,600,000

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 27

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		Kansas — 0.0%
$	200,000	Kansas State Department of Transportation Highway Revenue, Refunding, SPA-Dexia Credit Local & Westdeutsche Landesbank, 1.950%, 4/3/08(g)	$	200,000
		Kentucky — 0.9%
	5,900,000	Christian County Association of County Leasing Trust Lease Program, LOC-U.S. Bank NA, 1.300%, 4/1/08(g)		5,900,000
		Massachusetts — 1.3%
	550,000	Massachusetts State DFA Revenue, Smith College Project, 1.800%, 4/3/08(g)		550,000
		Massachusetts State HEFA:
	200,000	Partners Healthcare Systems, 1.250%, 4/1/08(g)		200,000
	200,000	Pool Loan Program, LOC-Citizens Bank, 2.050%, 4/3/08(g)		200,000
	400,000	Refunding Partners Healthcare System, 1.150%, 4/1/08(g)		400,000
		Massachusetts State HEFA Revenue:
		Amherst College:
	500,000	1.070%, 4/1/08(g)		500,000
	3,500,000	1.850%, 4/3/08(g)		3,500,000
	300,000	1.850%, 4/3/08(g)		300,000
	500,000	Capital Asset Program, LOC-Bank of America, 2.050%, 4/3/08(g)		500,000
	500,000	Partners Healthcare System, 1.150%, 4/1/08(g)		500,000
	300,000	Refunding, Harvard University Project, 0.800%, 4/1/08(g)		300,000
	360,000	Massachusetts State Water Resources Authority, Multi-Modal, Refunding, Subordinated, LOC-Landesbank Hessen-Thuringen, 1.470%, 4/1/08(g)		360,000
		Massachusetts State, GO:
	900,000	Central Artery, SPA-Landesbank Baden-Wuerttenburg, 1.250%, 4/1/08(g)		900,000
	100,000	SPA-Landesbank Hessen-Thuringen, 1.950%, 4/3/08(g)		100,000
		Total Massachusetts		8,310,000
		Michigan — 0.4%
	2,300,000	Michigan State Hospital Finance Authority Revenue, Trinity Health Credit, SPA-Bank of Nova Scotia, 1.250%, 4/1/08(g)		2,300,000
		Missouri — 0.3%
	1,300,000	Kansas City, MO, IDA, Revenue, Ewing Marion Kauffman, 1.300%, 4/1/08(g)		1,300,000
	500,000	University of Missouri, University Revenues, System Facilities, 1.250%, 4/1/08(g)		500,000
		Total Missouri		1,800,000
		New Mexico — 0.0%
	200,000	University of New Mexico, University Revenues, SPA-Westdeutsche Landesbank, 2.200%, 4/2/08(g)		200,000

See Notes to Financial Statements.

28 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
FACE AMOUNT		SECURITY	VALUE
		New York — 0.6%
$	250,000	New York City, NY, TFA, NYC Recovery, Subordinated, Credit Enhanced by Bayerische Landesbanken, 1.800%, 4/2/08(g)	$	250,000
		New York City, NY, TFA, NYC Recovery Project Revenue, Subordinated:
	1,200,000	LIQ-Dexia, 1.150%, 4/1/08(g)		1,200,000
	300,000	SPA-Royal Bank of Canada, 1.220%, 4/1/08(g)		300,000
	1,980,000	New York, NY, GO, Subordinated, LOC-JPMorgan Chase, 1.010%, 4/1/08(g)		1,980,000
		Total New York		3,730,000
		Oregon — 0.1%
		Oregon State, GO, Veterans Welfare, SPA-Dexia Credit Local:
	300,000	1.250%, 4/1/08(g)		300,000
	200,000	1.250%, 4/1/08(g)		200,000
		Total Oregon		500,000
		Pennsylvania — 0.1%
	400,000	Delaware County, PA, IDA Airport Facilities Revenue, Dates United Parcel Service Project, 1.070%, 4/1/08(g)		400,000
	500,000	Pittsburgh, PA, Water & Sewer Authority System Revenue, Refunding, First Lien, FSA, SPA-JPMorgan Chase, 1.750%, 4/3/08(g)		500,000
		Total Pennsylvania		900,000
		Texas — 0.3%
	500,000	Harris County, TX, IDC, PCR, Exxon Project, 0.860%, 4/1/08(g)		500,000
	1,500,000	Texas Water Development Board Revenue, Refunding, Subordinated Lien A, SPA-JP Morgan Chase Bank, 1.250%, 4/1/08(g)		1,500,000
		Total Texas		2,000,000
		Utah — 0.1%
	800,000	Weber County, UT, Hospital Revenue, IHC Health Services, SPA-Landesbank Hessen-Thuringen, 1.300%, 4/1/08(g)		800,000
		Washington — 0.1%
	775,000	Washington State Health Care Facilities Authority Revenue, Empire Health Services, LOC-U.S. Bank N.A., 1.950%, 4/2/08(g)		775,000
		TOTAL SHORT-TERM INVESTMENTS (Cost — $34,615,000)		34,615,000
		TOTAL INVESTMENTS — 105.5% (Cost — $681,565,449#)		697,392,059
		Liabilities in Excess of Other Assets — (5.5)%		(36,144,149	)
		TOTAL NET ASSETS — 100.0%	$	661,247,910

^(a) All or a portion of this security is segregated for open futures contracts and extended settlements.

^(b) Income from this issue is considered a preference item for purposes of calculating the alternative minimum tax (“AMT”).

^(c) Bonds are escrowed to maturity by government securities and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings.

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 29

Schedule of investments continued

March 31, 2008

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND

^(d) Pre-Refunded bonds are escrowed with U.S. government obligations and/or U.S. government agency securities and are considered by the manager to be triple-A rated even if issuer has not applied for new ratings.

^(e) Variable rate security. Interest rate disclosed is that which is in effect at March 31, 2008.

^(f) Maturity date shown represents the mandatory tender date.

^(g) Variable rate demand obligations have a demand feature under which the Fund can tender them back to the issuer on no more than 7 days notice. Date shown is the date of the next interest rate change.

# Aggregate cost for federal income tax purposes is $681,588,158.

  Abbreviations used in this schedule:

ACA — American Capital Assurance

AMBAC — Ambac Assurance Corporation — Insured Bonds

CBI — Certificate of Bond Insurance

CDA — Community Development Authority

COP — Certificate of Participation

DFA — Development Finance Agency

EDA — Economic Development Authority

EFA — Educational Facilities Authority

FGIC — Financial Guaranty Insurance Company — Insured Bonds

FHA — Federal Housing Administration

FSA — Financial Security Assurance — Insured Bonds

GAN — Grant Anticipation Notes

GNMA — Government National Mortgage Association

GO — General Obligation

GTD — Guaranteed

HDC — Housing Development Corporation

HEFA — Health & Educational Facilities Authority

HFA — Housing Finance Authority

HUD — Housing and Urban Development

IBC — Insured Bond Certificates

IDA — Industrial Development Authority

IDC — Industrial Development Corporation

IFA — Industrial Finance Agency

INDLC — Industrial Indemnity Company

ISD — Independent School District

LIQ — Liquidity Facility

LOC — Letter of Credit

MBIA — Municipal Bond Investors Assurance Corporation — Insured Bonds

MFH — Multi-Family Housing

PCR — Pollution Control Revenue

PFC — Public Facilities Corporation

PSF — Permanent School Fund

PSFG — Permanent School Fund Guaranty

Q-SBLF — Qualified School Board Loan Fund

Radian — Radian Assets Assurance

SPA — Standby Bond Purchase Agreement

TCRS — Transferable Custodial Receipts

TFA — Transitional Finance Authority

VA — Veterans Administration

XLCA — XL Capital Assurance Inc.

See Notes to Financial Statements.

30 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND
SUMMARY OF INVESTMENTS BY INDUSTRY*
Pre-Refunded/Escrowed to Maturity	35.5	%
Hospitals	13.6
Electric	11.7
Transportation	8.2
Local General Obligation	5.4
Leasing	4.7
Water & Sewer	3.5
Education	3.3
Public Facilities	2.7
State General Obligation	2.3
Special Tax	2.0
Industrial Development	2.0
Housing	1.3
Resource Recovery	1.2
Housing: Multi-Family	0.8
Finance	0.8
General Obligation	0.5
Miscellaneous	0.4
Pollution Control	0.1
	100.0	%

* As a percentage of total investments. Please note that Fund holdings are as of March 31, 2008 and are subject to change.

RATINGS TABLE† (unaudited)
S&P/Moody’s/Fitch‡
AAA/Aaa	55.7	%
AA/Aa	21.9
A	11.9
BBB/Baa	5.4
BB/Ba	0.7
CCC/Caa	0.2
NR	4.2
	100.0	%

† As a percentage of total investments.

‡ S&P primary rating; Moody’s secondary, then Fitch.

See pages 32 and 33 for definitions of ratings.

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 31

Bond ratings (unaudited)

The definitions of the applicable rating symbols are set forth below:

Standard & Poor’s Ratings Service (“Standard & Poor’s”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.

AAA — Bonds rated “AAA” have the highest rating assigned by Standard & Poor’s. Capacity to pay interest and repay principal is extremely strong.

AA — Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree.

A — Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

BBB — Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.

BB, B, CCC, CC and C — Bonds rated “BB”, “B”, “CCC”, “CC” and “C” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents the lowest degree of speculation and “C” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

D — Bonds rated “D” are in default and payment of interest and/or repayment of principal is in arrears.

Moody’s Investors Service (“Moody’s”) — Numerical modifiers 1, 2 and 3 may be applied to each generic rating from “Aa” to “Caa,” where 1 is the highest and 3 the lowest ranking within its generic category.

Aaa — Bonds rated “Aaa” are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as “gilt edge.” Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes can be visualized as most unlikely to impair the fundamentally strong position of such issues.

Aa — Bonds rated “Aa” are judged to be of high quality by all standards. Together with the “Aaa” group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in “Aaa” securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in “Aaa” securities.

A — Bonds rated “A” possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment some time in the future.

Baa — Bonds rated “Baa” are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.

Ba — Bonds rated “Ba” are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and therefore not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class.

32 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

B — Bonds rated “B” generally lack characteristics of desirable investments. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.

Caa — Bonds rated “Caa” are of poor standing. These may be in default, or present elements of danger may exist with respect to principal or interest.

Ca — Bonds rated “Ca” represent obligations which are speculative in a high degree. Such issues are often in default or have other marked short-comings.

C — Bonds rated “C” are the lowest class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing.

Fitch Ratings Service (“Fitch”) — Ratings from “AA” to “CCC” may be modified by the addition of a plus (+) or minus (–) sign to show relative standings within the major rating categories.

AAA — Bonds rated “AAA” have the highest rating assigned by Fitch. Capacity to pay interest and repay principal is extremely strong.

AA — Bonds rated “AA” have a very strong capacity to pay interest and repay principal and differ from the highest rated issues only in a small degree.

A — Bonds rated “A” have a strong capacity to pay interest and repay principal although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories.

BBB — Bonds rated “BBB” are regarded as having an adequate capacity to pay interest and repay principal. Whereas they normally exhibit adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for bonds in this category than in higher rated categories.

BB, B, CCC and CC — Bonds rated “BB”, “B”, “CCC” and “CC” are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. “BB” represents a lower degree of speculation than “B”, and “CC” the highest degree of speculation. While such bonds will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.

NR — Indicates that the bond is not rated by Standard & Poor’s, Moody’s or Fitch.

Short-term security ratings (unaudited)

SP-1 — Standard & Poor’s highest rating indicating very strong or strong capacity to pay principal and interest; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.

A-1 — Standard & Poor’s highest commercial paper and variable-rate demand obligation (VRDO) rating indicating that the degree of safety regarding timely payment is either overwhelming or very strong; those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign.

VMIG 1 — Moody’s highest rating for issues having a demand feature — VRDO.

MIG1 — Moody’s highest rating for short-term municipal obligations.

P-1 — Moody’s highest rating for commercial paper and for VRDO prior to the advent of the VMIG 1 rating.

F1 — Fitch’s highest rating indicating the strongest capacity for timely payment of financial commitments; those issues determined to possess overwhelming strong credit feature are denoted with a plus (+) sign.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 33

Statement of assets and liabilities

March 31, 2008

ASSETS:
Investments, at value (Cost — $681,565,449)	$	697,392,059
Interest receivable		9,505,793
Receivable for securities sold		3,410,642
Receivable for Fund shares sold		3,407,628
Prepaid expenses		3,825
Other assets		28,745
Total Assets		713,748,692
LIABILITIES:
Payable for securities purchased		49,576,080
Payable for Fund shares repurchased		1,359,290
Distributions payable		750,744
Investment management fee payable		277,492
Distribution fees payable		184,617
Payable to broker — variation margin on open futures contracts		138,203
Due to custodian		78,441
Trustees’ fees payable		12,143
Deferred compensation payable		11,086
Accrued expenses		112,686
Total Liabilities		52,500,782
TOTAL NET ASSETS	$	661,247,910
NET ASSETS:
Par value (Note 6)	$	1,047
Paid-in capital in excess of par value		689,971,952
Undistributed net investment income		209,347
Accumulated net realized loss on investments and futures contracts		(42,958,163	)
Net unrealized appreciation on investments and futures contracts		14,023,727
TOTAL NET ASSETS	$	661,247,910
Shares Outstanding:
Class A		72,814,721
Class C		31,672,779
Class I		172,356
Net Asset Value:
Class A (and redemption price)		$6.32
Class C (and redemption price)		$6.32
Class I (and redemption price)		$6.32
Maximum Public Offering Price Per Share:
Class A (based on maximum initial sales charge of 2.25%)		$6.47

See Notes to Financial Statements.

34 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Statement of operations

For the Year Ended March 31, 2008

INVESTMENT INCOME:
Interest	$	31,652,960
EXPENSES:
Investment management fee (Note 2)		3,322,003
Distribution fees (Notes 2 and 4)		2,248,848
Registration fees		144,818
Shareholder reports (Note 4)		97,824
Transfer agent fees (Note 4)		81,069
Legal fees		66,573
Audit and tax		58,682
Insurance		15,092
Trustees’ fees		12,986
Custody fees		8,492
Miscellaneous expenses		4,204
Total Expenses		6,060,591
Less: Fee waivers and/or expense reimbursements (Note 4)		(10,265	)
Fees paid indirectly (Note 1)		(2,780	)
Net Expenses		6,047,546
NET INVESTMENT INCOME		25,605,414
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FUTURES CONTRACTS (NOTES 1 AND 3):
Net Realized Gain (Loss) From:
Investment transactions		(1,495,828	)
Futures contracts		2,799,290
Net Realized Gain		1,303,462
Change in Net Unrealized Appreciation/Depreciation From:
Investments		(4,546,983	)
Futures contracts		(2,154,451	)
Change in Net Unrealized Appreciation/Depreciation		(6,701,434	)
Net Loss on Investments and Futures Contracts		(5,397,972	)
INCREASE IN NET ASSETS FROM OPERATIONS	$	20,207,442

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 35

Statements of changes in net assets

FOR THE YEARS ENDED MARCH 31,	2008			2007
OPERATIONS:
Net investment income	$	25,605,414		$	26,630,794
Net realized gain		1,303,462			1,904,747
Change in net unrealized appreciation/depreciation		(6,701,434	)		905,131
Increase in Net Assets From Operations		20,207,442			29,440,672
DISTRIBUTIONS TO SHAREHOLDERS FROM (NOTES 1 AND 5):
Net investment income		(25,602,692	)		(26,616,937	)
Decrease in Net Assets From Distributions to Shareholders		(25,602,692	)		(26,616,937	)
FUND SHARE TRANSACTIONS (NOTE 6):
Net proceeds from sale of shares		154,891,039			308,489,669
Reinvestment of distributions		15,936,227			16,117,530
Cost of shares repurchased		(245,201,389	)		(327,068,134	)
Net assets of shares issued in connection with merger (Note 7)		—			57,908,405
Increase (Decrease) in Net Assets From Fund Share Transactions		(74,374,123	)		55,447,470
INCREASE (DECREASE) IN NET ASSETS		(79,769,373	)		58,271,205
NET ASSETS:
Beginning of year		741,017,283			682,746,078
End of year*	$	661,247,910		$	741,017,283
* Includes undistributed net investment income of:		$209,347			$214,700

See Notes to Financial Statements.

36 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Financial highlights

FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH YEAR ENDED MARCH 31:
CLASS A SHARES1	2008			2007			2006			2005			2004
NET ASSET VALUE, BEGINNING OF YEAR	$	6.36		$	6.33		$	6.42		$	6.59		$	6.57
INCOME (LOSS) FROM OPERATIONS:
Net investment income		0.26			0.26			0.26			0.28			0.29
Net realized and unrealized gain (loss)		(0.04	)		0.03			(0.09	)		(0.17	)		0.01
Total income from operations		0.22			0.29			0.17			0.11			0.30
LESS DISTRIBUTIONS FROM:
Net investment income		(0.26	)		(0.26	)		(0.26	)		(0.28	)		(0.28	)
Total distributions		(0.26	)		(0.26	)		(0.26	)		(0.28	)		(0.28	)
NET ASSET VALUE, END OF YEAR	$	6.32		$	6.36		$	6.33		$	6.42		$	6.59
Total return2		3.48	%		4.70	%		2.78	%		1.68	%		4.67	%
NET ASSETS, END OF YEAR (MILLIONS)		$460			$495			$404			$403			$376
RATIOS TO AVERAGE NET ASSETS:
Gross expenses		0.72	%		0.78	%3		0.76	%		0.76	%		0.74	%
Gross expenses, excluding interest expense		0.72			0.70	3		0.70			0.70			0.70
Net expenses		0.72	4,5		0.76	3,5,6		0.76	5,6		0.75	5,6		0.74	6
Net expenses, excluding interest expense		0.72			0.68	3,5,6		0.70	5,6		0.69	5,6		0.70	6
Net investment income		4.05			4.12			4.05			4.31			4.36
PORTFOLIO TURNOVER RATE		36	%		19	%		11	%		19	%		27	%

¹ Per share amounts have been calculated using the average shares method.

² Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³ Included in the expense ratios are certain non-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would have been 0.77% and 0.75% including interest expense and 0.69% and 0.67% excluding interest expense, respectively.

⁴ There was no impact to the expense ratio as a result of fees paid indirectly.

⁵ Reflects fee waivers and/or expense reimbursements.

⁶ As a result of a voluntary expense limitation prior to March 16, 2007, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets of Class A shares did not exceed 0.85%.

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 37

Financial highlights continued

FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH YEAR ENDED MARCH 31:
CLASS C SHARES1	2008			2007			2006			2005			2004
NET ASSET VALUE, BEGINNING OF YEAR	$	6.37		$	6.34		$	6.43		$	6.60		$	6.58
INCOME (LOSS) FROM OPERATIONS:
Net investment income		0.22			0.22			0.22			0.24			0.25
Net realized and unrealized gain (loss)		(0.05	)		0.03			(0.09	)		(0.17	)		0.01
Total income from operations		0.17			0.25			0.13			0.07			0.26
LESS DISTRIBUTIONS FROM:
Net investment income		(0.22	)		(0.22	)		(0.22	)		(0.24	)		(0.24	)
Total distributions		(0.22	)		(0.22	)		(0.22	)		(0.24	)		(0.24	)
NET ASSET VALUE, END OF YEAR	$	6.32		$	6.37		$	6.34		$	6.43		$	6.60
Total return2		2.68	%		4.06	%		2.15	%		1.05	%		4.02	%
NET ASSETS, END OF YEAR (MILLIONS)		$200			$246			$254			$327			$351
RATIOS TO AVERAGE NET ASSETS:
Gross expenses		1.33	%		1.39	%3		1.39	%		1.39	%		1.34	%
Gross expenses, excluding interest expense		N/A			1.31	3		1.33			1.33			1.30
Net expenses		1.33	4		1.38	3,5,6		1.39	5,6		1.38	5,6		1.34	6
Net expenses, excluding interest expense		N/A			1.30	3,5,6		1.33	5,6		1.32	5,6		1.30	6
Net investment income		3.43			3.50			3.41			3.68			3.75
PORTFOLIO TURNOVER RATE		36	%		19	%		11	%		19	%		27	%

¹ Per share amounts have been calculated using the average shares method.

² Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results.

³ Included in the expense ratios are certain non-recurring restructuring (and reorganization, if applicable) fees that were incurred by the Fund during the period. Without these fees, the gross and net expense ratios would have been 1.38% and 1.37% including interest expense and 1.30% and 1.29% excluding interest expense, respectively.

⁴ There was no impact to the expense ratio as a result of fees paid indirectly.

⁵ Reflects fee waivers and/or expense reimbursements.

⁶ As a result of a voluntary expense limitation prior to March 16, 2007, the ratio of expenses, other than interest, brokerage, taxes and extraordinary expenses, to average net assets of Class C shares did not exceed 1.45%.

See Notes to Financial Statements.

38 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

FOR A SHARE OF EACH CLASS OF BENEFICIAL INTEREST OUTSTANDING THROUGHOUT EACH YEAR ENDED MARCH 31, UNLESS OTHERWISE NOTED:
CLASS I SHARES1	20082
NET ASSET VALUE, BEGINNING OF PERIOD	$	6.35
INCOME (LOSS) FROM OPERATIONS:
Net investment income		0.13
Net realized and unrealized loss		(0.03	)
Total income from operations		0.10
LESS DISTRIBUTIONS FROM:
Net investment income		(0.13	)
Total distributions		(0.13	)
NET ASSET VALUE, END OF PERIOD	$	6.32
Total return3		1.61	%
NET ASSETS, END OF PERIOD (000s)		$1
RATIOS TO AVERAGE NET ASSETS:
Gross expenses4		0.54	%
Net expenses4,5		0.54
Net investment income4		4.05
PORTFOLIO TURNOVER RATE		36	%

¹ Per share amounts have been calculated using the average shares method.

² For the period September 28, 2007 (inception date) to March 31, 2008.

³ Performance figures may reflect fee waivers and/or expense reimbursements. In the absence of fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized.

⁴ Annualized.

⁵ There was no impact to the expense ratio as a result of fees paid indirectly.

See Notes to Financial Statements.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 39

Notes to financial statements

1. Organization and significant accounting policies

Legg Mason Partners Intermediate-Term Municipals Fund (the “Fund”) is a separate diversified investment series of Legg Mason Partners Income Trust (the “Trust”). The Trust, a Maryland business trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. Prior to April 16, 2007, the Fund was a separate diversified investment fund of Legg Mason Partners Municipal Funds, a Massachusetts business trust, registered under the 1940 Act, as an open-end management investment company.

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

(a) Investment valuation. Securities are valued at the mean between the last quoted bid and asked prices provided by an independent pricing service that are based on transactions in municipal obligations, quotations from municipal bond dealers, market transactions in comparable securities and various other relationships between securities. When prices are not readily available, or are determined not to reflect fair value, the Fund may value these securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Trustees. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

(b) Financial futures contracts. The Fund may enter into financial futures contracts to hedge against the economic impact of adverse changes in the market value of portfolio securities due to changes in interest rates, as a substitution for buying or selling securities or as a cash flow management technique. Upon entering into a financial futures contract, the Fund is required to deposit cash or securities as initial margin, equal to a certain percentage of the contract amount (initial margin deposit). Additional securities are also segregated up to the current market value of the financial futures contracts. Subsequent payments, known as “variation margin,” are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying financial instruments. The Fund recognizes an unrealized gain or loss equal to the fluctuation in the value. When the financial futures contracts are closed, a realized gain or loss is recognized equal to the difference between the proceeds from (or cost of) the closing transactions and the Fund’s basis in the contracts.

The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying financial instruments. In addition,

40 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

investing in financial futures contracts involves the risk that the Fund could lose more than the initial margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(c) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Fund’s policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.

(d) Distributions to shareholders. Distributions from net investment income on the shares of the Fund are declared each business day to shareholders of record, and are paid monthly. The Fund intends to satisfy conditions that will enable interest from municipal securities, which is exempt from federal and certain state income taxes, to retain such tax-exempt status when distributed to the shareholders of the Fund. Distributions of net realized gains, if any, are taxable and are declared at least annually. Distributions are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(e) Class accounting. Investment income, common expenses and realized/unrealized gain (loss) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that class.

(f) Fees paid indirectly. The Fund’s custody fees are reduced according to a fee arrangement, which provides for a reduction based on the level of cash deposited with the custodian by the Fund. The amount is shown as a reduction of expenses on the Statement of Operations.

(g) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute substantially all of its taxable income and net realized gains, if any, to shareholders each year. Therefore, no federal income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on federal income tax returns for all open tax years and has concluded that as of March 31, 2008, no provision for income tax would be required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 41

Notes to financial statements continued

(h) Reclassification. GAAP requires that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications have been made:

	UNDISTRIBUTED NET INVESTMENT INCOME			ACCUMULATED NET REALIZED LOSS		PAID-IN CAPITAL
(a)		—		$	6,479,841	$	(6,479,841	)
(b)	$	(8,075	)		8,075		—

^(a) Reclassifications are primarily due to the expiration of a capital loss carryover.

^(b) Reclassifications are primarily due to differences between book and tax accretion of market discount on fixed income securities.

2. Investment management agreement and other transactions with affiliates

Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and Western Asset Management Company (“Western Asset”) is the Fund’s subadviser. LMPFA and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).

Under the investment management agreement, the Fund pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.50% of the Fund’s average daily net assets.

LMPFA provides administrative and certain oversight services to the Fund. LMPFA delegates to the subadviser the day-to-day portfolio management of the Fund. For its services, LMPFA pays Western Asset 70% of the net management fee it receives from the Fund.

Effective December 1, 2007, Legg Mason Investor Services (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason serves as the Fund’s sole and exclusive distributor. Prior to December 1, 2007, Citigroup Global Markets Inc. (“CGM”) and LMIS served as co-distributors of the Fund.

There is a maximum initial sales charge of 2.25% for Class A shares. In certain cases, Class A shares have a 0.50% contingent deferred sales charge (“CDSC”), which applies if redemption occurs within one year from purchase payment. This CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of Class A shares, equal of exceed $500,000 in the aggregate. These purchases do not incur an initial sales charge.

For the year ended March 31, 2008, LMIS and its affiliates received sales charges of approximately $17,000 on sales of the Fund’s Class A shares. In addition, for the year ended March 31, 2008, CDSCs paid to LMIS and its affiliates were approximately:

	CLASS A		CLASS C
CDSCs	$	7,000	$	1,000

42 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

The Fund had adopted an unfunded, non-qualified deferred compensation plan (the “Plan”) which allowed non-interested trustees (“Trustees”) to defer the receipt of all or a portion of the trustees’ fees earned until a later date specified by the Trustees. The deferred balances are reported in the Statement of Operations under Trustees’ fees and are considered a general obligation of the Fund and any payments made pursuant to the Plan will be made from the Fund’s general assets. The Plan was terminated effective January 1, 2006. This change will have no effect on fees previously deferred. As of March 31, 2008, the Fund had accrued $11,086 as deferred compensation payable.

Certain officers and one Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.

3. Investments

During the year ended March 31, 2008, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:

Purchases	$	235,553,186
Sales		290,713,187

At March 31, 2008, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:

Gross unrealized appreciation	$	21,586,352
Gross unrealized depreciation		(5,782,451	)
Net unrealized appreciation	$	15,803,901

At March 31, 2008, the Fund had the following open futures contracts:

	NUMBER OF CONTRACTS	EXPIRATION DATE	BASIS VALUE		MARKET VALUE		UNREALIZED LOSS
Contracts to sell:
U.S. Treasury 10 Year Notes	454	6/08	$	52,490,537	$	54,004,719	$	(1,514,182	)
U.S. Treasury Bonds	93	6/08		10,759,408		11,048,109		(288,701	)
Net unrealized loss on open futures contracts							$	(1,802,883	)

4. Class specific expenses

The Fund has adopted a Rule 12b-1 distribution plan and under that plan the Fund pays a service fee with respect to its Class A and C shares calculated at the annual rate of 0.15% of the average daily net assets of each respective class. The Fund also pays a distribution fee with respect to its Class C shares calculated at the annual rate of 0.60% of the average daily net assets of Class C shares. Distribution fees are accrued daily and paid monthly.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 43

Notes to financial statements continued

For the year ended March 31, 2008, class specific expenses were as follows:

	DISTRIBUTION FEES		TRANSFER AGENT FEES		SHAREHOLDER REPORTS EXPENSES
Class A1	$	682,834	$	42,557	$	59,126
Class C		1,566,014		38,492		38,687
Class I2		—		20		11
Total	$	2,248,848	$	81,069	$	97,824

¹ LMIS and CGM have agreed to reimburse the Fund for any amount which exceeds the payments made by the Fund with respect to the Distribution Plan for Class A shares over the cumulative unreimbursed amounts spent by LMIS and CGM in performing their services under the distribution plan. During the year ended March 31, 2008, LMIS and CGM reimbursed $10,265 to the Fund.

² For the period September 28, 2007 (inception date) to March 31, 2008.

5. Distributions to shareholders by class

	YEAR ENDED MARCH 31, 2008		YEAR ENDED MARCH 31, 2007
Net Investment Income:
Class A	$	18,430,790	$	17,096,118
Class B1		—		111,069
Class C		7,156,329		8,665,442
Class I2		15,573		—
Class O1		—		744,308
Total	$	25,602,692	$	26,616,937

¹ On March 16, 2007, Class B and Class O shares were converted to Class A shares.

² For the period September 28, 2007 (inception date) to March 31, 2008.

6. Shares of beneficial interest

At March 31, 2008, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Fund has the ability to issue multiple classes of shares. Each share of a class represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares. Prior to April 16, 2007, the Fund had an unlimited number of shares of beneficial interest authorized with a par value of $0.001 per share.

44 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Transactions in shares of each class were as follows:

	YEAR ENDED MARCH 31, 2008					YEAR ENDED MARCH 31, 2007
	SHARES		AMOUNT			SHARES		AMOUNT
Class A
Shares sold	14,705,839		$	93,528,963		30,785,385		$	195,890,995
Shares issued on reinvestment	1,777,718			11,268,040		1,570,380			9,984,084
Shares repurchased	(21,515,841	)		(136,468,438	)	(27,450,874	)		(174,374,735	)
Shares issued with merger (Note 7)	—			—		9,079,942			57,908,405
Net increase (decrease)	(5,032,284	)	$	(31,671,435	)	13,984,833		$	89,408,749
Class B1
Shares sold	—			—		42,267		$	268,721
Shares issued on reinvestment	—			—		6,895			43,784
Shares repurchased	—			—		(680,980	)		(4,336,540	)
Net decrease	—			—		(631,818	)	$	(4,024,035	)
Class C
Shares sold	9,469,094		$	60,274,326		17,604,032		$	112,198,553
Shares issued on reinvestment	734,191			4,657,315		888,487			5,655,441
Shares repurchased	(17,143,479	)		(108,732,951	)	(19,879,726	)		(126,524,168	)
Net decrease	(6,940,194	)	$	(43,801,310	)	(1,387,207	)	$	(8,670,174	)
Class I2
Shares sold	170,642		$	1,087,750		—			—
Shares issued on reinvestment	1,714			10,872		—			—
Net increase	172,356		$	1,098,622		—			—
Class O1
Shares sold	—			—		20,610		$	131,400
Shares issued on reinvestment	—			—		68,214			434,221
Shares repurchased	—			—		(3,419,990	)		(21,832,691	)
Net decrease	—			—		(3,331,166	)	$	(21,267,070	)

¹ On March 16, 2007, Class B and Class O shares were converted to Class A shares.

² For the period September 28, 2007 (inception date) to March 31, 2008.

7. Transfer of net assets

On March 16, 2007, the Fund acquired the assets and certain liabilities of Legg Mason Tax-Free Intermediate Term Income Fund (the “Acquired Fund”), pursuant to a plan of reorganization approved by the Acquired Fund

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 45

Notes to financial statements continued

shareholders on January 16, 2007. Total shares issued by the Fund and total net assets of the Acquired Fund and the Fund on the date of the transfer were as follows:

ACQUIRED FUND	SHARES ISSUED BY THE FUND	TOTAL NET ASSETS OF ACQUIRED FUND		TOTAL NET ASSETS OF THE FUND
Legg Mason Tax-Free Intermediate Term Income Fund	9,079,942	$	57,908,405	$	691,936,405

The total net assets of the Acquired Fund before acquisition included unrealized appreciation of $2,136,788 and accumulated net realized loss of $726,065. Total net assets of the Fund immediately after the transfer were $749,844,810. The transaction was structured to qualify as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.

8. Income tax information and distributions to shareholders

Subsequent to the fiscal year end, the Fund has made the following distributions:

RECORD DATE PAYABLE DATE		CLASS A		CLASS C		CLASS I
Daily 4/30/2008	$	0.021434	$	0.018213	$	0.022263

The tax character of distributions paid during the fiscal years ended March 31, were as follows:

	2008		2007
Distribution Paid From:
Tax-Exempt Income	$	25,602,692	$	26,616,937

As of March 31, 2008, the components of accumulated earnings on a tax basis were as follows:

Undistributed tax-exempt income — net	$	262,681
Capital loss carryforward*		(40,588,976	)
Other book/tax temporary differences(a)		(2,399,812	)
Unrealized appreciation/(depreciation)(b)		14,001,018
Total accumulated earnings/(losses) — net	$	(28,725,089	)

* During the taxable year ended March 31, 2008, the Fund utilized $3,245,090 of its capital loss carryover available from prior years. As of March 31, 2008, the Fund had the following net capital loss carryforwards remaining:

46 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

YEAR OF EXPIRATION		AMOUNT
3/31/2009	$	(5,514,817	)
3/31/2010		(214,462	)
3/31/2011		(5,555,681	)
3/31/2012		(2,928,764	)
3/31/2013		(21,780,086	)
3/31/2014		(4,311,329	)
3/31/2015		(283,837	)
	$	(40,588,976	)

These amounts will be available to offset any future taxable capital gains.

^(a) Other book/tax temporary differences are attributable primarily to the realization for tax purposes of unrealized losses on certain futures contracts, the deferral of post-October capital losses for tax purposes, and book/tax differences in the timing of the deductibility of various expenses.

^(b) The difference between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and the difference between book & tax accretion methods for market discount on fixed income securities.

9. Regulatory matters

On May 31, 2005, the Securities and Exchange Commission (“SEC”) issued an order in connection with the settlement of an administrative proceeding against Smith Barney Fund Management, LLC (“SBFM”), a wholly-owned subsidiary of Legg Mason and the then investment adviser or manager to the Fund, and CGM, a former distributor of the Fund, relating to the appointment of an affiliated transfer agent for the Smith Barney family of mutual funds, including the Fund (the “Affected Funds”).

The SEC order found that SBFM and CGM willfully violated Section 206(1) of the Investment Advisers Act of 1940, as amended, and the rules promulgated thereunder (the “Advisers Act”). Specifically, the order found that SBFM and CGM knowingly or recklessly failed to disclose to the boards of the Affected Funds in 1999 when proposing a new transfer agent arrangement with an affiliated transfer agent that: First Data Investors Services Group (“First Data”), the Affected Funds’ then-existing transfer agent, had offered to continue as transfer agent and do the same work for substantially less money than before; and that Citigroup Asset Management (“CAM”), the Citigroup business unit that, at the time, included the Affected Funds’ investment manager and other investment advisory companies, had entered into a side letter with First Data under which CAM agreed to recommend the appointment of First Data as sub-transfer agent to the affiliated transfer agent in exchange, among other things, for a guarantee by First Data of specified amounts of asset management and investment banking fees to CAM and CGM. The order also found that SBFM and CGM willfully violated Section 206(2) of the Advisers Act by virtue of the omissions discussed above and other misrepresentations and omissions in the materials provided to the Affected Funds’ boards, including the failure to make clear that the affiliated transfer agent would earn a high profit for performing limited functions while First Data continued to perform almost all

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 47

Notes to financial statements continued

of the transfer agent functions, and the suggestion that the proposed arrangement was in the Affected Funds’ best interests and that no viable alternatives existed.

SBFM and CGM do not admit or deny any wrongdoing or liability. The settlement does not establish wrongdoing or liability for purposes of any other proceeding. The SEC censured SBFM and CGM and ordered them to cease and desist from violations of Sections 206(1) and 206(2) of the Advisers Act. The order required Citigroup to pay $208.1 million, including $109 million in disgorgement of profits, $19.1 million in interest, and a civil money penalty of $80 million. Approximately $24.4 million has already been paid to the Affected Funds, primarily through fee waivers. The remaining $183.7 million, including the penalty, has been paid to the U.S. Treasury and will be distributed pursuant to a plan submitted for the approval of the SEC. At this time, there is no certainty as to how the above-described proceeds of the settlement will be distributed, to whom such distributions will be made, the methodology by which such distributions will be allocated, and when such distributions will be made. The order also required that transfer agency fees received from the Affected Funds since December 1, 2004, less certain expenses, be placed in escrow and provided that a portion of such fees might be subsequently distributed in accordance with the terms of the order. On April 3, 2006, an aggregate amount of approximately $9 million held in escrow was distributed to the Affected Funds.

The order required SBFM to recommend a new transfer agent contract to the Affected Funds’ boards within 180 days of the entry of the order; if a Citigroup affiliate submitted a proposal to serve as transfer agent or sub-transfer agent, SBFM and CGM would have been required, at their expense, to engage an independent monitor to oversee a competitive bidding process. On November 21, 2005, and within the specified timeframe, the Affected Funds’ boards selected a new transfer agent for the Affected Funds. No Citigroup affiliate submitted a proposal to serve as transfer agent. Under the order, SBFM also must comply with an amended version of a vendor policy that Citigroup instituted in August 2004. Although there can be no assurance, the manager does not believe that this matter will have a material adverse effect on the Affected Funds.

On December 1, 2005, Citigroup completed the sale of substantially all of its global asset management business, including SBFM, to Legg Mason.

10. Legal matters

Beginning in June 2004, class action lawsuits alleging violations of the federal securities laws were filed against CGM, a former distributor of the Fund, and other affiliated funds (collectively, the “Funds”) and a number of its then affiliates, including SBFM and Salomon Brothers Asset Management Inc. (“SBAM”), which were then investment adviser or manager to certain of the

48 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Funds (the “Managers”), substantially all of the mutual funds then managed by the Managers (the “Defendant Funds”), and Board members of the Defendant Funds (collectively, the “Defendants”). The complaints alleged, among other things, that CGM created various undisclosed incentives for its brokers to sell Smith Barney and Salomon Brothers funds. In addition, according to the complaints, the Managers caused the Defendant Funds to pay excessive brokerage commissions to CGM for steering clients towards proprietary funds. The complaints also alleged that the Defendants breached their fiduciary duty to the Defendant Funds by improperly charging Rule 12b-1 fees and by drawing on fund assets to make undisclosed payments of soft dollars and excessive brokerage commissions. The complaints also alleged that the Defendant Funds failed to adequately disclose certain of the allegedly wrongful conduct. The complaints sought injunctive relief and compensatory and punitive damages, rescission of the Defendant Funds’ contracts with the Managers, recovery of all fees paid to the Managers pursuant to such contracts and an award of attorneys’ fees and litigation expenses.

On December 15, 2004, a consolidated amended complaint (the “Complaint”) was filed alleging substantially similar causes of action. On May 27, 2005, all of the Defendants filed motions to dismiss the Complaint. On July 26, 2006, the court issued a decision and order (1) finding that plaintiffs lacked standing to sue on behalf of the shareholders of the Funds in which none of the plaintiffs had invested and dismissing those Funds from the case (although stating that they could be brought back into the case if standing as to them could be established), and (2) other than one stayed claim, dismissing all of the causes of action against the remaining Defendants, with prejudice, except for the cause of action under Section 36(b) of the 1940 Act, which the court granted plaintiffs leave to repeal as a derivative claim.

On October 16, 2006, plaintiffs filed their Second Consolidated Amended Complaint (“Second Amended Complaint”) which alleges derivative claims on behalf of nine funds identified in the Second Amended Complaint, under Section 36(b) of the 1940 Act, against CAM, SBAM and SBFM as investment advisers to the identified funds, as well as CGM as a distributor for the identified funds (collectively, the “Second Amended Complaint Defendants”). The Fund was not identified in the Second Amended Complaint. The Second Amended Complaint alleges no claims against any of the funds or any of their Board Members. Under Section 36(b), the Second Amended Complaint alleges similar facts and seeks similar relief against the Second Amended Complaint Defendants as the Complaint.

On December 3, 2007, the court granted the Defendants’ motion to dismiss, with prejudice. On January 2, 2008, the plaintiffs filed a notice of appeal to the Second Circuit Court of Appeals.

Additional lawsuits arising out of these circumstances and presenting similar allegations and requests for relief may be filed in the future.

*  *  *

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 49

Notes to financial statements continued

Beginning in August 2005, five class action lawsuits alleging violations of federal securities laws and state law were filed against CGM and SBFM, (collectively, the “Defendants”) based on the May 31, 2005 settlement order issued against the Defendants by the SEC as described in Note 9. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the investment manager for the Smith Barney family of funds, rescission of the funds’ management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys’ fees and litigation expenses. The five actions were subsequently consolidated, and a consolidated complaint was filed.

On September 26, 2007, the United States District Court for the Southern District of New York issued an order dismissing the consolidated complaint, and judgment was later entered. An appeal has been filed and is pending before the U.S. Court of Appeals for the Second Circuit.

11. Other matters

On or about May 30, 2006, John Halebian, a purported shareholder of Citi^SM New York Tax Free Reserves, a series of Legg Mason Partners Money Market Trust, formerly a series of CitiFunds Trust III (the “Subject Trust”), filed a complaint in the United States District Court for the Southern District of New York against the independent trustees of the Subject Trust (Elliott J. Berv, Donald M. Carlton, A. Benton Cocanougher, Mark T. Finn, Stephen Randolph Gross, Diana R. Harrington, Susan B. Kerley, Alan G. Merten and R. Richardson Pettit).

The Subject Trust is also named in the complaint as a nominal defendant. The complaint alleges both derivative claims on behalf of the Subject Trust and class claims on behalf of a putative class of shareholders of the Subject Trust in connection with the 2005 sale of Citigroup’s asset management business to Legg Mason and the related approval of new investment advisory agreements by the trustees and shareholders. In the derivative claim, the plaintiff alleges, among other things, that the independent trustees breached their fiduciary duty to the Subject Trust and its shareholders by failing to negotiate lower fees or seek competing bids from other qualified investment advisers in connection with Citigroup’s sale to Legg Mason. In the claims brought on behalf of the putative class of shareholders, the plaintiff alleges that the independent trustees violated the proxy solicitation requirements of the 1940 Act, and breached their fiduciary duty to shareholders, by virtue of the voting procedures, including “echo voting,” used to obtain approval of the new investment advisory agreements and statements made in a proxy statement regarding those voting procedures. The plaintiff alleges that the proxy statement was misleading because it failed to disclose that the voting procedures violated the 1940 Act. The relief sought includes an award of damages, rescission of the advisory agreement, and an award of costs and attorney fees.

50 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

In advance of filing the complaint, Mr. Halebian’s lawyers made written demand for relief on the Board of the Subject Trust, and the Board’s independent trustees formed a demand review committee to investigate the matters raised in the demand, and subsequently in the complaint, and recommend a course of action to the Board. The committee, after a thorough review, determined that the independent trustees did not breach their fiduciary duties as alleged by Mr. Halebian, and that the action demanded by Mr. Halebian would not be in the best interests of the Subject Trust. The Board of the Subject Trust (the trustee who is an “interested person” of the Subject Trust, within the meaning of the 1940 Act, having recused himself from the matter), after receiving and considering the committee’s report and based upon the findings of the committee, subsequently also determined and, adopting the recommendation of the committee, directed counsel to move to dismiss Mr. Halebian’s complaint. A motion to dismiss was filed on October 23, 2006. Opposition papers were filed on or about December 7, 2006. The complaint was dismissed on July 31, 2007. Mr. Halebian has filed an appeal in the U.S. Court of Appeals for the Second Circuit. The appeal is pending.

12. Recent accounting pronouncement

On September 20, 2006, the Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management has determined that there is no material impact to the Fund’s valuation policies as a result of adopting FAS 157. The Fund will implement the disclosure requirements beginning with its June 30, 2008 Form N-Q.

*  *  *

In March 2008, FASB issued the Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.

Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report 51

Report of independent registered public accounting firm

The Board of Trustees and Shareholders

Legg Mason Partners Income Trust:

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Legg Mason Partners Intermediate-Term Municipals Fund, a series of Legg Mason Partners Income Trust, as of March 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Legg Mason Partners Intermediate-Term Municipals Fund as of March 31, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.

New York, New York

May 23, 2008

52 Legg Mason Partners Intermediate-Term Municipals Fund 2008 Annual Report

Board approval of management and subadvisory agreements (unaudited)

At a meeting of the Board of Trustees of Legg Mason Partners Income Trust (the “Trust”) held on November 12-13, 2007, the Board, including the Board members who are not considered to be “interested persons” of the Trust (the “Independent Board Members”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the management agreement (the “Management Agreement”) between the Trust and Legg Mason Partners Fund Advisor, LLC (the “Manager”) with respect to the Legg Mason Partners Intermediate-Term Municipals Fund, a series of the Trust (the “Fund”), and the sub-advisory agreement (the “Sub-Advisory Agreement”) between the Manager and Western Asset Management Company (the “Subadviser”), an affiliate of the Manager, with respect to the Fund.

Background

The Board received information in advance of the meeting from the Manager to assist it in its consideration of the Management Agreement and the Sub-Advisory Agreement and was given the opportunity to ask questions and request additional information from management. The Board received and considered a variety of information about the Manager, the Subadviser and the Fund’s distributor (and any distributors affiliated with the Fund during the past two years), as well as the management, sub-advisory and distribution arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The presentation made to the Board encompassed the Fund and all funds for which the Board has responsibility. The discussion below covers both the advisory and the administrative functions being rendered by the Manager, both of which functions are encompassed by the Management Agreement, as well as the advisory functions rendered by the Subadviser pursuant to the Sub-Advisory Agreement.

Board approval of management agreement and sub-advisory agreement

The Independent Board Members were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Board Members received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Management Agreement and the Sub-Advisory Agreement. The Independent Board Members also discussed the proposed continuation of the Management Agreement and the Sub-Advisory Agreement in private sessions with their independent legal counsel at which no representatives of the Manager were present. In approving the Management Agreement and Sub-Advisory Agreement, the Board, including the Independent Board Members, considered a variety of factors, including those factors discussed below. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management

Legg Mason Partners Intermediate-Term Municipals Fund 53

Board approval of management and subadvisory agreements (unaudited)continued

Agreement and the Sub-Advisory Agreement, and each Board Member attributed different weight to the various factors.

Nature, extent and quality of the services under the management agreement and sub-advisory agreement

The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Subadviser under the Management Agreement and the Sub-Advisory Agreement, respectively, during the past two years. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and the Subadviser took into account the Board’s knowledge and familiarity gained as Board members of funds in the Legg Mason Partners fund complex, including the scope and quality of the investment management and other capabilities of the Manager and the Subadviser, and the quality of the Manager’s administrative and other services. The Board observed that the scope of services provided by the Manager and the Subadviser had expanded over time as a result of regulatory and other developments, including maintaining and monitoring their own and the Fund’s expanded compliance programs. The Board reviewed information received from the Manager and the Subadviser regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act.

The Board reviewed the qualifications, backgrounds and responsibilities of the Fund’s senior personnel and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the degree to which the Manager implemented organizational changes to improve investment results and the services provided to the Legg Mason Partners fund complex. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources available to Legg Mason, Inc., the parent organization of the Manager and the Subadviser.

The Board considered the division of responsibilities between the Manager and the Subadviser and the oversight provided by the Manager. The Board also considered the Manager’s and the Subadviser’s brokerage policies and practices. In addition, management also reported to the Board on, among other things, its business plans, organizational changes and portfolio manager compensation plan.

The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided) under the Management Agreement and the Sub-Advisory Agreement were satisfactory.

54 Legg Mason Partners Intermediate-Term Municipals Fund

Fund performance

The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark.

The information comparing the Fund’s performance to that of its Performance Universe, consisting of all retail and institutional funds classified as intermediate municipal debt funds by Lipper, showed, among other data, that the Fund’s performance for the 1-, 3- and 5-year periods ended June 30, 2007 was above the median.

Based on its review, which included careful consideration of all of the factors noted above, the Board concluded that the Fund’s performance was satisfactory.

Management fees and expense ratios

The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management and sub-advisory services provided by the Manager and the Subadviser. In addition, the Board noted that the compensation paid to the Subadviser is paid directly by the Manager, not the Fund, and, accordingly, that the retention of the Subadviser does not increase the fees or expenses otherwise incurred by the Fund’s shareholders.

Additionally, the Board received and considered information comparing the Contractual Management Fees and the actual fees paid (after taking waivers and reimbursements into account) (the “Actual Management Fee”), and the Fund’s overall expenses with those of funds in both the relevant expense group and a broader group of funds, each selected and provided by Lipper. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund, including, where applicable, separate accounts.

The Manager reviewed with the Board the differences in scope of services provided to the Fund and to these other clients, noting that the Fund is provided with administrative services, office facilities, Fund officers (including the Fund’s chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund service providers. The Board considered the fee comparisons in light of the differences required to manage these different types of accounts. The Board also considered and discussed information about the Subadviser’s fees, including the amount of the management fees retained

Legg Mason Partners Intermediate-Term Municipals Fund 55

Board approval of management and subadvisory agreements (unaudited)continued

by the Manager after payment of the subadvisory fee. The Board also received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes.

Management also discussed with the Board the Fund’s distribution arrangements. The Board was provided with information concerning revenues received by and certain expenses incurred by distributors affiliated with the Fund during the past two years and how the amounts received by the distributors were paid during that period.

The information comparing the Fund’s Contractual and Actual Management Fees as well as its actual total expense ratio to its Expense Group, consisting of a group of retail front-end load funds (including the Fund) classified as intermediate debt funds and chosen by Lipper to be comparable to the Fund, showed that the Fund’s Contractual Management Fee and Actual Management Fee were below the median. The Board noted that the Fund’s actual total expense ratio was below the median.

Taking all of the above into consideration, the Board determined that the management fee and the subadvisory fees for the Fund were reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement and the Sub-Advisory Agreement.

Manager profitability

The Board received and considered an analysis of the profitability of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason Partners fund complex as a whole. In addition, the Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data, as well as a report from an outside consultant that had reviewed the methodologies. The profitability of the Manager and its affiliates was considered by the Board not excessive in light of the nature, extent and quality of the services provided to the Fund and the type of fund.

Economies of scale

The Board received and discussed information concerning whether the Manager realizes economies of scale as the Fund’s assets grow. The Board noted that the Fund’s Contractual Management Fee is approximately equivalent to the asset-weighted average of management fees paid by the funds in the Expense Group at all asset levels and that the Actual Management Fee is below the median of the Expense Group. The Board also considered the effect of the Fund’s growth and size on its performance and fees, noting that if the Fund’s assets increase over time, certain expenses, such as fees for Board members, auditors and legal fees, become a smaller percentage of overall assets. The Board also considered the fact that the Manager pays the subadvisory fee out of the management fee.

56 Legg Mason Partners Intermediate-Term Municipals Fund

The Board determined that the management fee structure for the Fund was reasonable.

Other benefits to the manager and the subadviser

The Board considered other benefits received by the Manager, the Subadviser and their affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.

In light of the costs of providing investment management and other services to the Fund and the ongoing commitment of the Manager and the Subadviser to the Fund, the Board considered that the ancillary benefits that the Manager and its affiliates received were reasonable.

* * *

In light of all of the foregoing, the Board determined that the continuation of each of the Management Agreement and Sub-Advisory Agreement would be in the best interests of the Fund’s shareholders and approved the continuation of such agreements for another year.

Legg Mason Partners Intermediate-Term Municipals Fund 57

Additional Information (unaudited)

Information about Trustees and Officers

The business and affairs of the Legg Mason Partners Intermediate-Term Municipals Fund (the “Fund”) are managed under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers is set forth below. The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request by calling Legg Mason Partners Shareholder Services at 1-800-451-2010.

NON-INTERESTED TRUSTEES:
ELLIOTT J. BERV c/o R. Jay Gerken, CFA, Legg Mason & Co., LLC (“Legg Mason”) 620 Eighth Avenue, New York, NY 10018
Birth year	1943
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1989
Principal occupation(s) during past five years	President and Chief Executive Officer, Catalyst (consulting) (since 1984); Formerly, Chief Executive Officer, Rocket City Enterprises (media) (from 2000 to 2005)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	Board Member, American Identity Corp. (doing business as Morpheus Technologies) (biometric information management) (since 2001); Director, Lapoint Industries (industrial filter company) (since 2002); Director, Alzheimer’s Association (New England Chapter) (since 1998)
A. BENTON COCANOUGHER c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1938
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1991
Principal occupation(s) during past five years	Dean Emeritus and Professor, Texas A&M University (since 2004); Formerly, Interim Chancellor, Texas A&M University System (from 2003 to 2004); Formerly, Special Advisor to the President, Texas A&M University (from 2002 to 2003)
Number of portfolios in fund complex overseen by Trustee	68
Other board member- ships Held by Trustee	None

58 Legg Mason Partners Intermediate-Term Municipals Fund

JANE F. DASHER c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1949
Position(s) held with Fund1	Trustee
Term of Office1 and length of time served2	Since 1999
Principal occupation(s) during past five years	Chief Financial Officer, Korsant Partners, LLC (a family investment company)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None
MARK T. FINN c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1943
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1989
Principal occupation(s) during past five years	Adjunct Professor, College of William & Mary (since 2002); Principal/Member Balvan Partners (investment management) (since 2002); Chairman, Chief Executive Officer and Owner, Vantage Consulting Group, Inc. (investment management) (since 1988)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None
RAINER GREEVEN c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1936
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1994
Principal occupation(s) during past five years	Attorney, Rainer Greeven PC; President and Director, 62nd Street East Corporation (real estate) (since 2002)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None

Legg Mason Partners Intermediate-Term Municipals Fund 59

Additional information (unaudited) continued

Information about Trustees and Officers

STEPHEN R. GROSS c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1947
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1986
Principal occupation(s) during past five years	Chairman, HLB Gross Collins, PC (accounting and consulting firm) (since 1979); Treasurer, Coventry Limited, Inc. (Senior Living Facilities) (since 1985); Formerly, Managing Director, Fountainhead Ventures, LLC (technology accelerator) (from 1998 to 2003)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	Director, Andersen Calhoun (assisted living) (since 1987); Formerly, Director ebank Financial Services, Inc. (from 1999 to 2004)
RICHARD E. HANSON, Jr. c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1941
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1985
Principal occupation(s) during past five years	Retired; Formerly, Headmaster, The New Atlanta Jewish Community High School, Atlanta, Georgia (from 1996 to 2000)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None
DIANA R. HARRINGTON c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1940
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1992
Principal occupation(s) during past five years	Professor, Babson College (since 1992)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None

60 Legg Mason Partners Intermediate-Term Municipals Fund

SUSAN M. HEILBRON c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1945
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1994
Principal occupation(s) during past five years	Independent Consultant (since 2001)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None
SUSAN B. KERLEY c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1951
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1992
Principal Occupation(s) during past five years	Investment Consulting Partner, Strategic Management Advisors, LLC (investment consulting) (since 1990)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	Chairman since 2005 and Trustee since 2000, Eclipse Funds (3 funds); Chairman since 2005 and Director since 1990, Eclipse Funds Inc. (23 funds); Chairman and Director, ICAP Funds, Inc. (4 funds) (since 2006); Chairman and Trustee, The MainStay Funds (21 funds) (since June 2007); and Chairman and Director, MainStay VP Series Fund, Inc. (24 funds) (since June 2007)
ALAN G. MERTEN c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1941
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1990
Principal occupation(s) during past five years	President, George Mason University (since 1996)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	Director of Cardinal Financial Corp. (since 2006); Trustee, First Potomac Realty Trust (since 2005); Formerly, Director, Xybernaut Corporation (information technology) (from 2004 to 2006); Formerly Director, Digital Net Holdings, Inc. (from 2003 to 2004); Formerly, Director Comshare, Inc. (information technology) (from 1985 to 2003)

Legg Mason Partners Intermediate-Term Municipals Fund 61

Additional information (unaudited) continued

Information about Trustees and Officers

R. RICHARDSON PETTIT c/o R. Jay Gerken, CFA, Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1942
Position(s) held with Fund1	Trustee
Term of office1 and length of time served2	Since 1990
Principal occupation(s) during past five years	Formerly, Duncan Professor of Finance, University of Houston (from 1977 to 2006)
Number of portfolios in fund complex over- seen by Trustee	68
Other board memberships held by Trustee	None
INTERESTED TRUSTEE:
R. JAY GERKEN, CFA3 Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1951
Position(s) held with Fund1	Trustee, President, Chairman and Chief Executive Officer
Term of office1 and length of time served2	Since 2002
Principal occupation(s) during past five years	Managing Director of Legg Mason; Chairman of the Board and Trustee of 151 Funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) and its affiliates; President of LMPFA (since 2006); Chairman, President and Chief Executive Officer of certain mutual funds associated with Legg Mason or its affiliates; Formerly, Chairman, Smith Barney Fund Management LLC (“SBFM”) and Citi Fund Management Inc. (“CFM”) (from 2002 to 2005); Formerly, Chairman, President and Chief Executive Officer of Travelers Investment Adviser, Inc. (from 2002 to 2005)
Number of portfolios in fund complex overseen by Trustee	138
Other board memberships held by Trustee	Trustee, Consulting Group Capital Market Funds (from 2002 to 2006)

62 Legg Mason Partners Intermediate-Term Municipals Fund

OFFICERS:
FRANCES M. GUGGINO Legg Mason, 55 Water Street, New York, NY 10041
Birth year	1957
Position(s) held with Fund1	Chief Financial Officer and Treasurer
Term of office1 and length of time served2	Since 2004
Principal occupation(s) during past five years	Director of Legg Mason; Chief Financial Officer and Treasurer of certain mutual funds associated with Legg Mason; Formerly, Controller of certain mutual funds associated with Legg Mason or its predecessors (from 1999 to 2004)
TED P. BECKER Legg Mason, 620 Eighth Avenue, New York, NY 10018
Birth year	1951
Position(s) held with Fund1	Chief Compliance Officer
Term of office1 and length of time served2	Since 2006
Principal occupation(s) during past five years	Director of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of LMPFA (since 2006); Managing Director of Compliance at Legg Mason (since 2005); Chief Compliance Officer with certain mutual funds associated with Legg Mason, LMPFA and certain affiliates (since 2006); Formerly, Managing Director of Compliance at Legg Mason or its predecessor (from 2002 to 2005)
JOHN CHIOTA Legg Mason, 300 First Stamford Place, Stamford, CT 06902
Birth year	1968
Position(s) held with Fund1	Chief Anti-Money Laundering Compliance Officer
Term of office1 and length of time served2	Since 2006
Principal occupation(s) during past five years	Vice President of Legg Mason or its predecessor (since 2004); Chief Anti-Money Laundering Compliance Officer with certain mutual funds associated with Legg Mason or its affiliates (since 2006); Prior to August 2004, Chief AML Compliance Officer with TD Waterhouse

Legg Mason Partners Intermediate-Term Municipals Fund 63

Additional information (unaudited) continued

Information about Trustees and Officers

ROBERT I. FRENKEL Legg Mason, 300 First Stamford Place, Stamford, CT 06902
Birth year	1954
Position(s) held with Fund1	Secretary and Chief Legal Officer
Term of office1 and length of time served2	Since 2003
Principal occupation(s) during past five years	Managing Director and General Counsel of Global Mutual Funds for Legg Mason and its predecessor (since 1994); Secretary and Chief Legal Officer of mutual funds associated with Legg Mason (since 2003); Formerly, Secretary of CFM (from 2001 to 2004)
Number of portfolios in Fund complex over- seen by Trustee	N/A
Other board memberships held by Trustee	N/A
THOMAS C. MANDIA Legg Mason, 300 First Stamford Place, Stamford, CT 06902
Birth year	1962
Position(s) held with Fund1	Assistant Secretary
Term of office1 and length of time served2	Since 2000
Principal occupation(s) during past five years	Managing Director and Deputy General Counsel of Legg Mason (since 2005); Managing Director and Deputy General Counsel for CAM (from 1992 to 2005); Assistant Secretary of certain mutual funds associated with Legg Mason
Number of portfolios in Fund complex over- seen by Trustee	N/A
Other board memberships held by Trustee	N/A
DAVID CASTANO Legg Mason, 55 Water Street, New York, NY 10041
Birth year	1971
Position(s) held with Fund1	Controller
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during past five years	Controller of certain mutual funds associated with Legg Mason (since 2007); Formerly, Assistant Treasurer of Lord Abbett mutual funds (from 2004 to 2006); Supervisor at UBS Global Asset Management (from 2003 to 2004); Accounting Manager at Citigroup Asset Management (prior to 2003)
Number of portfolios in Fund complex over- seen by Trustee	N/A
Other board memberships held by Trustee	N/A

64 Legg Mason Partners Intermediate-Term Municipals Fund

MATTHEW PLASTINA Legg Mason, 55 Water Street, New York, NY 10041
Birth year	1970
Position(s) held with Fund1	Controller
Term of office1 and length of time served2	Since 2007
Principal occupation(s) during past five years	Assistant Vice President of Legg Mason or its predecessor (since 1999); Controller of certain mutual funds associated with Legg Mason (since 2007); Formerly, Assistant Controller of certain mutual funds associated with Legg Mason (from 2002 to 2007)
Number of portfolios in fund complex over- seen by Trustee	N/A
Other board memberships Held by Trustee	N/A

¹ Each Trustee and Officer serves until his or her successor has been duly elected and qualified or until his or her earlier death, resignation, retirement or removal.

² Indicates the earliest year in which the Trustee or Officer became a Board Member or Officer, as applicable, for a fund in the Legg Mason Partners fund complex.

³ Mr. Gerken is an “interested person” of the Fund as defined in 1940 Act, because Mr. Gerken is an officer of LMPFA and certain of its affiliates.

Legg Mason Partners Intermediate-Term Municipals Fund 65

Important tax information (unaudited)

All of the net investment income distributions paid monthly by the Fund during the taxable year ended March 31, 2008, qualify as tax-exempt interest dividends for Federal income tax purposes.

Please retain this information for your records.

66 Legg Mason Partners Intermediate-Term Municipals Fund

Legg Mason Partners

Intermediate-Term Municipals Fund

Trustees   Elliott J. Berv A. Beaton Cocanougher Jane F. Dasher Mark T. Finn R. Jay Gerken, CFA
Chairman Rainer Greeven Stephen R. Gross Richard E. Hanson, Jr. Diana R. Harrington Susan M. Heilbron Susan B. Kerley Alan G. Merten R. Richardson Pettit   Investment manager   Legg Mason Partners Fund Advisor, LLC   Subadviser   Western Asset Management Company Distributor   Legg Mason Investor Services, LLC   Custodian   State Street Bank and Trust Company   Transfer agent   PFPC Inc. 4400 Computer Drive Westborough, Massachusetts 01581   Independent registered public accounting firm   KPMG LLP 345 Park Avenue New York, New York 10154

Legg Mason Partners Intermediate-Term Municipals Fund

The Fund is a separate investment series of the Legg Mason Partners Income Trust, a Maryland business trust.

LEGG MASON PARTNERS INTERMEDIATE-TERM MUNICIPALS FUND

Legg Mason Partners Funds

55 Water Street

New York, New York 10041

The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call Legg Mason Partners Shareholder Services at 1-800-451-2010.

Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling 1-800-451-2010, (2) on the Fund’s website at www.leggmason.com/individualinvestors and (3) on the SEC’s website at www.sec.gov.

This report is submitted for the general information of the shareholders of Legg Mason Partners Intermediate-Term Municipals Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.

Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.

www.leggmason.com/individualinvestors

© 2008 Legg Mason Investor Services, LLC

Member FINRA, SIPC

BUILT TO WIN^SM

At Legg Mason, we’ve assembled a collection of experienced investment management firms and empowered each of them with the tools, the resources and, most importantly, the independence to pursue the strategies they know best.

• Each was purposefully chosen for their commitment to investment excellence.

• Each is focused on specific investment styles and asset classes.

• Each exhibits thought leadership in their chosen area of focus.

Together, we’ve built a powerful portfolio of solutions for financial advisors and their clients. And it has made us a world leader in money management.*

* Ranked ninth-largest investment manager in 2007, based on 12/31/06 assets under management, according to Pensions & Investments, May 2007.

www.leggmason.com/individualinvestors

© 2008 Legg Mason Investor Services, LLC Member FINRA, SIPC

FD2305 5/08     SR08-562

NOT PART OF THE ANNUAL REPORT

ITEM 2. CODE OF ETHICS.

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

The Board of Trustees of the registrant has determined that Stephen R. Gross the Chairman of the Board’s Audit Committee and Jane F. Dasher, possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as “audit committee financial experts,” and have designated Mr. Gross and Ms. Dasher as the Audit Committee’s financial experts. Mr. Gross and Ms. Dasher are “independent” Trustees pursuant to paragraph (a) (2) of Item 3 to Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES

a) Audit Fees. The aggregate fees billed in the last two fiscal years ending March 31, 2007 and March 31, 2008 (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $78,200 in 2007 and $82,800 in 2008.

b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in 2007 and $46,943 in 2008. These services consisted of procedures performed in connection with the Re-domiciliation of the various reviews of Prospectus supplements, and consent issuances related to the N-1A filings for the Legg Mason Partners Income Trust, also included were services consisting of audit procedures performed related to Tender Options Bonds and billings to reflect newly Board Approved 2007 Post Merger Audit Fees.

In addition, there were no Audit-Related Fees billed in the Reporting Period for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Legg Mason Partners Income Trust (“service affiliates”), that were reasonably related to the performance of the annual audit of the service affiliates. Accordingly, there were no such fees that required pre-approval by the Audit Committee for the Reporting Periods (prior to July 6, 2003 services provided by the Auditor were not required to be pre-approved).

(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by PwC and KPMG for tax compliance, tax advice and tax planning ("Tax Services") were $9,800 in 2007, and $12,100 in 2008. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.

There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.

d) All Other Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements, other than the services reported in paragraphs (a) through (c) of this Item for the Legg Mason Partners Income Trust were $0 in 2007 and $13,700 in 2008. These services consisted of procedures performed in connection with the mergers of the Legg Mason Partners Funds for the following date of March 2, 2007 and March 16, 2007.

All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisor, LLC (“LMFPA”), and any entity controlling, controlled by or under common control with LMFPA that provided ongoing services to Legg Mason Partners Income Trust requiring pre-approval by the Audit Committee in the Reporting Period.

(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.

(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee July implement policies and procedures by which such services are approved other than by the full Committee.

The Committee shall not approve non-audit services that the Committee believes July impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services July not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.

Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.

(2) For the Legg Mason Partners Income Trust, the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 0% for 2007 and 2008; Tax Fees were 100% and 0% for 2007 and 2008; and Other Fees were 100% and 0% for 2007 and 2008.

(f) N/A

(g) Non-audit fees billed by the Auditor for services rendered to Legg Mason Partners Income Trust, LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Legg Mason Partners Income Trust during the reporting period were $0 in 2008.

(h) Yes. Legg Mason Partners Income Trust’s Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Accountant's independence. All services provided by the Auditor to the Legg Mason Partners Income Trustor to Service Affiliates, which were required to be pre-approved, were pre-approved as required.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

a) The entire board of directors is acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act .The Audit Committee consists of the following Board members:

Elliott J. Berv

A. Benton Cocanougher

Jane F. Dasher

Mark T. Finn

Rainer N. K. Greeven

Stephen R. Gross

Richard E. Hanson, Jr.

Diana R. Harrington

Susan M. Heilbron

Susan B. Kerley

Alan G. Merten

R. Richardson Pettit

b) Not applicable

ITEM 6. SCHEDULE OF INVESTMENTS.

Included herein under Item 1.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 9. PURCHASES OF INCOME SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

ITEM 12. EXHIBITS.

(a) (1) Not applicable.

Exhibit 99.CODE ETH

(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.CERT

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.

Exhibit 99.906CERT

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.

Legg Mason Partners Income Trust
By:	/s/ R. Jay Gerken
	(R. Jay Gerken)
	Chief Executive Officer of Legg Mason Partners Income Trust

Date: June 2, 2008

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:	/s/ R. Jay Gerken
	(R. Jay Gerken)
	Chief Executive Officer of Legg Mason Partners Income Trust
Date: June 2, 2008
By:	/s/ Frances M. Guggino
	(Frances M. Guggino)
	Chief Financial Officer of Legg Mason Partners Income Trust
Date: June 2, 2008