LMP EQUITY TRUST

497 1 d497.htm LMP EQUITY TRUST LMP EQUITY TRUST

May 31, 2011

Filed under Rule 497(c)
File no. 33-43446

LOGO

Prospectus

Legg Mason

Lifestyle

Funds


	Legg Mason Lifestyle Allocation 85%	Legg Mason Lifestyle Allocation 70%	Legg Mason Lifestyle Allocation 50%	Legg Mason Lifestyle Allocation 30%
Class	Ticker Symbol	Ticker Symbol	Ticker Symbol	Ticker Symbol
A:	SCHAX	SCGRX	SBBAX	SBCPX

B:	SCHBX	SGRBX	SCBBX	SBCBX

C:	SCHCX	SCGCX	SCBCX	SBCLX

FI

R

R1

I:	LANIX	LLAIX	LMEIX	LMGIX

The Securities and Exchange Commission has not approved or disapproved these securities or determined whether this Prospectus is accurate or complete. Any statement to the contrary is a crime.

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


2		Legg Mason Lifestyle Funds


Contents
Legg Mason Lifestyle Allocation 85%			3
Legg Mason Lifestyle Allocation 70%			9
Legg Mason Lifestyle Allocation 50%			15
Legg Mason Lifestyle Allocation 30%			22
More on the funds’ investment strategies, investments and risks			29
More on fund management			53
Choosing a class of shares to buy			55
Comparing the funds’ classes			57
Sales charges			59
More about contingent deferred sales charges			62
Retirement and Institutional Investors—eligible investors			63
Buying shares			66
Exchanging shares			67
Redeeming shares			69
Other things to know about transactions			71
Dividends, distributions and taxes			74
Share price			76
Financial highlights			78
Appendix A			92


Legg Mason Lifestyle Funds			3

Legg Mason Lifestyle Allocation 85%

Investment objective

The fund seeks capital appreciation.

Fees and expenses of the fund

The accompanying table describes the fees and expenses that you may pay if you buy and hold shares of the fund.

You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in funds sold by Legg Mason Investor Services, LLC (“LMIS”), the fund’s distributor. More information about these and other discounts is available from your financial intermediary, in this Prospectus on page 59 under the heading “Sales charges” and in the fund’s statement of additional information (“SAI”) on page 67 under the heading “Sales Charge Waivers and Reductions.”

Effective July 1, 2011, Class B shares will no longer be offered for purchase by new and existing investors. Your financial intermediary may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.


Shareholder fees (paid directly from your investment) (%)
	Class A	Class B	Class C	Class FI	Class R	Class R1	Class I
Maximum sales charge (load) imposed on purchases (as a % of offering price)	5.75	None	None	None	None	None	None
Maximum deferred sales charge (load) (as a % of the lower of net asset value at purchase or redemption) (may be reduced over time)	Generally, none	5.00	1.00	None	None	None	None
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) (%)
	Class A	Class B	Class C	Class FI	Class R	Class R1	Class I
Management fees	None	None	None	None	None	None	None
Distribution and service (12b-1) fees	0.25	1.00	1.00	0.25	0.50	1.00	None
Other expenses	0.48	0.59	0.29¹	0.37²	0.37²	0.37²	0.32
Acquired fund fees and expenses (fees and expenses of underlying funds)	0.80	0.80	0.80	0.80	0.80	0.80	0.80
Total annual fund operating expenses³	1.53	2.39	2.09	1.42	1.67	2.17	1.12
Fees forgone and/or expenses reimbursed⁴	—	(0.04)	—	—	—	—	—
Total annual fund operating expenses after forgoing fees and/or reimbursing expenses⁴	1.53	2.35	2.09	1.42	1.67	2.17	1.12

¹	“Other expenses” have been restated to reflect higher current fees.

²	“Other expenses” for Class FI, Class R and Class R1 shares are estimated for the current fiscal year because no shares of these classes were outstanding during the fund’s last fiscal year.

Total annual fund operating expenses do not correlate with the ratios of expenses to average net assets reported in the financial highlights tables in the Prospectus and in the fund’s shareholder reports, because the ratios in the financial highlights tables reflect the fund’s operating expenses and do not include acquired fund fees and expenses.

⁴

The manager has agreed to forgo fees and/or reimburse operating expenses (other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses) so that total annual operating expenses are not expected to exceed 0.80% for Class A shares, 1.55% for Class B shares, 1.55% for Class C shares, 0.80% for Class FI shares, 1.05% for Class R shares, 1.55% for Class R1 shares and 0.55% for Class I shares. These arrangements cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent. The manager is permitted to recapture amounts forgone or reimbursed to a class during the same fiscal year if the class’ total annual operating expenses have fallen to a level below the limits described above.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes:

You invest $10,000 in the fund for the time periods indicated

Your investment has a 5% return each year and the fund’s operating expenses remain the same

You reinvest all distributions and dividends without a sales charge

The fees and expenses of the underlying Legg Mason-affiliated funds are reflected


4		Legg Mason Lifestyle Funds

Fees and expenses of the fund cont’d

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Number of years you own your shares ($)	1 year	3 years	5 years	10 years
Class A (with or without redemption at end of period)	722	1,031	1,362	2,294
Class B (with redemption at end of period)	738	1,042	1,373	2,511
Class B (without redemption at end of period)	238	742	1,273	2,511
Class C (with redemption at end of period)	312	657	1,128	2,431
Class C (without redemption at end of period)	212	657	1,128	2,431
Class FI (with or without redemption at end of period)	145	450	777	1,703
Class R (with or without redemption at end of period)	170	526	907	1,977
Class R1 (with or without redemption at end of period)	220	679	1,164	2,503
Class I (with or without redemption at end of period)	114	356	617	1,363

Portfolio turnover. The fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the fund’s performance. During the most recent fiscal year, the fund’s portfolio turnover rate was 14% of the average value of its portfolio.

Principal investment strategies

The fund is a fund of funds—it invests in other mutual funds. The fund is managed as an asset allocation program and allocates its assets primarily among Legg Mason-affiliated mutual funds.

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 85% in underlying funds that invest principally in equity securities and 15% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		85%
Fixed Income Funds		15%
Target Range
Equity Funds		80-100%
Fixed Income Funds		0-20%

The underlying funds have a range of investment styles and focuses. The underlying equity funds include large cap and small cap funds, growth- and value-oriented funds and international funds. The underlying fixed income funds include funds that invest in U.S. and non-U.S. issuers, corporate, mortgage-backed and government securities, investment grade securities and securities rated below investment grade (commonly known as “junk bonds”). The underlying fixed income funds invest in securities of varying maturities. The portfolio managers may invest in underlying Legg Mason-affiliated funds that have a limited performance history.

Certain risks

Risk is inherent in all investing. There is no assurance that the fund will meet its investment objective. The value of your investment in the fund, as well as the amount of return you receive on your investment, may fluctuate significantly. You may lose part or all of your investment in the fund or your investment may not perform as well as other similar investments. The following is a summary description of certain risks of investing in the fund.


Legg Mason Lifestyle Funds			5

Affiliated funds risk. The fund’s manager serves as manager of the underlying Legg Mason and Western Asset funds and is affiliated with the manager of the underlying Royce funds. In addition, the fund may invest in certain underlying funds for which the fund’s subadviser serves as adviser. It is possible that a conflict of interest among the fund and the underlying funds could affect how the fund’s manager and subadviser fulfill their fiduciary duties to the fund and the underlying funds. For example, the subadviser may have an incentive to allocate the fund’s assets to those funds for which the fees paid to the manager or subadviser are higher than the fees paid by other underlying funds or to those funds for which the subadviser serves as adviser. However, the fund’s Board of Trustees believes the fund has been structured to mitigate these concerns.

Allocation risk. The fund’s ability to achieve its investment objective depends upon the portfolio managers’ skill in determining the fund’s strategic asset class allocation and in selecting the best mix of underlying funds. The value of your investment may decrease if the portfolio managers’ judgment about the attractiveness, value or market trends affecting a particular asset class, investment style, underlying fund or other issuer is incorrect.

Asset class variation risk. The underlying funds invest principally in the securities constituting their asset class (i.e., equity or fixed income). However, under normal market conditions, an underlying fund may vary the percentage of its assets in these securities (subject to any applicable regulatory requirements). Depending upon the percentage of securities in a particular asset class held by the underlying funds at any given time and the percentage of the fund’s assets invested in various underlying funds, the fund’s actual exposure to the securities in a particular asset class may vary substantially from its Target Allocation for that asset class.

Credit risk. If an issuer or guarantor of a security held by an underlying fund or a counterparty to a financial contract with an underlying fund defaults or is downgraded, or is perceived to be less creditworthy, or if the value of the assets underlying a security declines, the value of your investment will typically decline. Junk bonds have a higher risk of default and are considered speculative.

can increase an underlying fund’s volatility. Derivatives may be difficult to sell, unwind or value, and the counterparty may default on its obligations to an underlying fund. Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation are not yet fully known and may not be for some time. New regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.

Extension risk. If interest rates rise, repayments of fixed income securities may occur more slowly than anticipated by the market. This may drive the prices of these securities down because their interest rates are lower than the current interest rate and they remain outstanding longer.

Foreign investments risk. An underlying fund’s investments in securities of foreign issuers involve greater risk than investments in securities of U.S. issuers. Foreign countries in which an underlying fund may invest may have markets that are less liquid and more volatile than U.S. markets and may suffer from political or economic instability. In some foreign countries, less information is available about issuers and markets because of less rigorous accounting and regulatory standards than in the United States. Currency fluctuations could erase investment gains or add to investment losses. The risks of investing in foreign securities are heightened when investing in issuers in emerging market countries.

Fund of funds risk. Your cost of investing in the fund, as a fund of funds, may be higher than the cost of investing in a mutual fund that only invests directly in individual securities. An underlying fund may change its investment objective or policies without the fund’s approval, which could force the fund to withdraw its investment from such underlying fund at a time that is unfavorable to the fund. In addition, one underlying fund may buy the same securities that another underlying fund sells. Therefore, the fund would indirectly bear the costs of these trades without accomplishing any investment purpose.

Growth and value investing risk. Growth or value securities as a group may be out of favor and underperform the overall equity market while the market concentrates on other types of securities. Growth securities typically are very sensitive to market movements because their market prices tend to reflect future expectations. When it appears those expectations will not be met, the prices of growth securities typically fall. The value approach to investing involves the risk that stocks may remain undervalued. Although the underlying funds do not concentrate their investments in any one industry or industry group, an underlying fund that is growth- or


6		Legg Mason Lifestyle Funds

Certain risks cont’d

value-oriented may, like many growth or value funds, weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries and, indirectly, the fund’s exposure to those factors.

Issuer risk. The value of a security can go up or down more than the market as a whole and can perform differently from the value of the market as a whole, often due to disappointing earnings reports by the issuer, unsuccessful products or services, loss of major customers, major litigation against the issuer or changes in government regulations affecting the issuer or the competitive environment. An underlying fund may experience a substantial or complete loss on an individual security. Historically, the prices of securities of small and medium capitalization companies have generally gone up or down more than those of large capitalization companies, although even large capitalization companies may fall out of favor with investors.

Large capitalization company risk. Large capitalization companies may fall out of favor with investors.

Liquidity risk. Some securities held by an underlying fund may be difficult to sell, or illiquid, particularly during times of market turmoil. Illiquid securities may also be difficult to value. If an underlying fund is forced to sell an illiquid asset to meet redemption requests or other cash needs, the underlying fund may be forced to sell at a loss.

Stock market and interest rate risk. The securities markets are volatile and the market prices of an underlying fund’s securities may decline generally. Securities fluctuate in price based on changes in a company’s financial condition and overall market and economic conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest rates, lack of liquidity in the bond markets or adverse investor sentiment. If the market prices of the securities owned by an underlying fund fall, the value of your investment in the fund will decline. The value of your investment also may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration securities. The recent financial crisis has caused a significant decline in the value and liquidity of many securities. In response to the crisis, the U.S. and other governments and the Federal Reserve and certain foreign central banks have taken steps to support financial markets. The withdrawal of this support could also negatively affect the value and liquidity of certain securities. In addition, legislation recently enacted in the United States calls for changes in many aspects of financial regulation. The impact of the legislation on the markets, and the practical implications for market participants, may not be fully known for some time.

Non-diversification risk. The fund is classified as “non-diversified,” which means it may invest a larger percentage of its assets in a small number of underlying funds than a diversified fund. To the extent the fund invests its assets in fewer underlying funds, the fund will be more susceptible to negative events affecting those funds. The underlying funds in which the fund invests may be either diversified or non-diversified.

Prepayment or call risk. Many issuers have a right to prepay their securities. If interest rates fall, an issuer may exercise this right. If this happens, an underlying fund will be forced to reinvest prepayment proceeds at a time when yields on securities available in the market are lower than the yield on the prepaid security. An underlying fund also may lose any premium it paid on the security.

Risk of increase in expenses. Your actual costs of investing in the fund may be higher than the expenses shown in “Annual fund operating expenses” for a variety of reasons. For example, expense ratios may be higher than those shown if a fee limitation is changed or terminated or if average net assets decrease. Net assets are more likely to decrease and fund expense ratios are more likely to increase when markets are volatile.

Small and medium capitalization company risk. An underlying fund will be exposed to additional risks as a result of its investments in the securities of small and medium capitalization companies. Small and medium capitalization companies may fall out of favor with investors; may have limited product lines, operating histories, markets or financial resources; or may be dependent upon a limited management group. The prices of securities of small and medium capitalization companies generally are more volatile than those of large capitalization companies and are more likely to be adversely affected than large capitalization companies by changes in earnings results and investor expectations or poor economic or market conditions, including those experienced during a recession. Securities of small and medium capitalization companies may underperform large capitalization companies, may be harder to sell at times and at prices the portfolio managers believe appropriate and may offer greater potential for losses.

Valuation risk. The sales price an underlying fund could receive for any particular portfolio investment may differ from the underlying fund’s valuation of the investment, particularly for securities that trade in thin or volatile markets or that are valued using a fair value methodology.

These risks are discussed in more detail later in this Prospectus or in the SAI.


Legg Mason Lifestyle Funds			7

Performance

The accompanying bar chart and table provide some indication of the risks of investing in the fund. The bar chart shows changes in the fund’s performance from year to year for Class A shares. The table shows the average annual total returns of each class of the fund that has been in operation for at least one full calendar year and also compares the fund’s performance with the average annual total returns of an index or other benchmark. The fund also compares its performance to the Barclays Capital U.S. Aggregate Index (an index of fixed income securities) and a composite benchmark, which is a hypothetical representation of the performance of the fund’s major asset classes, consisting of 45% Russell 1000 Index, 20% Russell 2000 Index, 20% MSCI EAFE Index, 10% Barclays Capital U.S. Aggregate Index and 5% Barclays Capital U.S. High Yield—2% Issuer Cap Index (an index where issuer exposure is limited to 2% of the market value of the Barclays Capital U.S. Corporate High Yield Index). The fund makes updated performance information available at the fund’s website, http://www.leggmason.com/individualinvestors/products/mutual-funds/annualized_performance (select share class), or by calling the fund at 1-877-721-1926.

The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future.

Sales charges are not reflected in the accompanying bar chart, and if those charges were included, returns would be less than those shown.


Total returns (before taxes) (%)

		Best quarter (06/30/2009): 18.86 Worst quarter (12/31/2008): (20.25) The year-to-date return as of the most recent calendar quarter, which ended 03/31/11, was 5.41.


Average annual total returns (for periods ended December 31, 2010) (%)
	1 year		5 years		10 years		Since inception		Inception date

Class A
Return before taxes		8.55		0.00		0.60
Return after taxes on distributions		8.18		(0.85)		0.09
Return after taxes on distributions and sale of fund shares		5.56		(0.30)		0.33

Other Classes (Return before taxes only)
Class B		9.58		0.32		0.60
Class C		14.08		0.81		0.69
Class I		15.65		N/A		N/A		23.82		12/16/2008
Russell 3000 Index (reflects no deduction for fees, expenses or taxes)¹		16.93		2.74		2.16
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes)¹		6.54		5.80		5.84
Composite Benchmark (reflects no deduction for fees, expenses or taxes)¹		15.82		3.90		4.12

¹	For Class I shares, for the period from the class’ commencement of operations to December 31, 2010, the average annual total returns of the Russell 3000 Index, the Barclays Capital U.S. Aggregate Index and the composite benchmark were 21.85%, 6.67% and 24.51%, respectively.

The after-tax returns are shown only for Class A shares, are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements, such as 401(k) plans or individual retirement accounts. After-tax returns for classes other than Class A will vary from returns shown for Class A.


8		Legg Mason Lifestyle Funds

Management

Investment manager: Legg Mason Partners Fund Advisor, LLC

Subadviser: Legg Mason Global Asset Allocation, LLC (“LMGAA”)

Portfolio managers: Steven Bleiberg and Andrew Purdy. Mr. Bleiberg (President and Chief Investment Officer of LMGAA) and Mr. Purdy (Portfolio Manager, Asset Allocation Strategies of LMGAA) have been portfolio managers for the fund since 2003 and 2001, respectively.

Purchase and sale of fund shares

You may purchase, redeem or exchange shares of the fund each day the New York Stock Exchange is open, at the fund’s net asset value determined after receipt of your request in good order, subject to any applicable sales charge.

The fund’s initial and subsequent investment minimums generally are as follows:

Investment minimum initial/additional investment ($)

Class A

Class B¹

Class C

Class FI

Class R

Class R1

Class I

General

1,000/50

N/A

Uniform Gifts or Transfers to Minor Accounts

1,000/50

N/A

IRAs

250/50

N/A

SIMPLE IRAs

None/None

N/A

Systematic Investment Plans

50/50

N/A

Clients of Eligible Financial Intermediaries

None/None

N/A

None/None

N/A

None/None

Retirement Plans with omnibus accounts held on the books of the fund

None/None

N/A

None/None

Other Retirement Plans

None/None

N/A

Institutional Investors

1,000/50

N/A

1 million/None

¹	Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your financial intermediary may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.

Your financial intermediary may impose different investment minimums.

For more information about how to purchase, redeem or exchange shares, and to learn which classes of shares are available to you, you should contact your financial intermediary, or, if you hold your shares or plan to purchase shares through the fund, you should contact the fund by phone at 1-877-721-1926 or by mail at Legg Mason Funds, P.O. Box 55214, Boston, MA 02205-8504.

Tax information

The fund’s distributions are taxable as ordinary income or capital gain, except when your investment is through an IRA, 401(k) or other tax-advantaged account.

Payments to broker/dealers and other financial intermediaries

The fund’s related companies may pay broker/dealers or other financial intermediaries (such as a bank) for the sale of fund shares and related services. These payments create a conflict of interest by influencing your broker/dealer or other intermediary or its employees or associated persons to recommend the fund over another investment. Ask your financial adviser or visit your financial intermediary’s website for more information.


Legg Mason Lifestyle Funds			9

Legg Mason Lifestyle Allocation 70%

Investment objective

The fund seeks long-term growth of capital.

Fees and expenses of the fund

The accompanying table describes the fees and expenses that you may pay if you buy and hold shares of the fund.

You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in funds sold by Legg Mason Investor Services, LLC (“LMIS”), the fund’s distributor. More information about these and other discounts is available from your financial intermediary, in this Prospectus on page 59 under the heading “Sales charges” and in the fund’s SAI on page 67 under the heading “Sales Charge Waivers and Reductions.”

Shareholder fees (paid directly from your investment) (%)

Class A

Class B

Class C

Class FI

Class R

Class R1

Class I

Maximum sales charge (load) imposed on purchases
(as a % of offering price)

5.75

None

Maximum deferred sales charge (load) (as a % of the lower of net asset value at purchase or redemption) (may be reduced over time)

Generally,
none

5.00

1.00

None

Annual fund operating expenses (expenses that you pay each year as a percentage of the value of
your investment) (%)

Class A

Class B

Class C

Class FI

Class R

Class R1

Class I

Management fees

None

Distribution and service (12b-1) fees

0.25

1.00

0.25

0.50

1.00

None

Other expenses

0.38

0.49

0.26¹

0.36²

0.31

Acquired fund fees and expenses
(fees and expenses of underlying funds)

0.75

Total annual fund operating expenses³

1.38

2.24

2.01

1.36

1.61

2.11

1.06

¹	“Other expenses” have been restated to reflect higher current fees.

²	“Other expenses” for Class FI, Class R and Class R1 shares are estimated for the current fiscal year because no shares of these classes were outstanding during the fund’s last fiscal year.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes:

You invest $10,000 in the fund for the time periods indicated

Your investment has a 5% return each year and the fund’s operating expenses remain the same

You reinvest all distributions and dividends without a sales charge

The fees and expenses of the underlying Legg Mason-affiliated funds are reflected


10		Legg Mason Lifestyle Funds

Fees and expenses of the fund cont’d

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Number of years you own your shares ($)	1 year	3 years	5 years	10 years
Class A (with or without redemption at end of period)	707	986	1,286	2,136
Class B (with redemption at end of period)	727	1,000	1,299	2,357
Class B (without redemption at end of period)	227	700	1,199	2,357
Class C (with redemption at end of period)	304	632	1,087	2,347
Class C (without redemption at end of period)	204	632	1,087	2,347
Class FI (with or without redemption at end of period)	138	431	745	1,636
Class R (with or without redemption at end of period)	164	508	876	1,911
Class R1 (with or without redemption at end of period)	214	661	1,134	2,442
Class I (with or without redemption at end of period)	108	337	584	1,293

Principal investment strategies

The fund is a fund of funds—it invests in other mutual funds. The fund is managed as an asset allocation program and allocates its assets primarily among Legg Mason-affiliated mutual funds.

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 70% in underlying funds that invest principally in equity securities and 30% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		70%
Fixed Income Funds		30%
Target Range
Equity Funds		60-80%
Fixed Income Funds		20-40%

Certain risks


Legg Mason Lifestyle Funds			11

Asset class variation risk. The underlying funds invest principally in the securities constituting their asset class (i.e., equity or fixed income). However, under normal market conditions, an underlying fund may vary the percentage of its assets in these securities (subject to any applicable regulatory requirements). Depending upon the percentage of securities in a particular asset class held by the underlying funds at any given time and the percentage of the fund’s assets invested in various underlying funds, the fund’s actual exposure to the securities in a particular asset class may vary substantially from its Target Allocation for that asset class.

Derivatives risk. Using derivatives may have a leveraging effect, which may result in a disproportionate increase in an underlying fund’s losses on the investment, and reduce opportunities for gains when market prices, interest rates or the derivative instruments themselves behave in a way not anticipated by the underlying fund. Using derivatives also can increase an underlying fund’s volatility. Derivatives may be difficult to sell, unwind or value, and the counterparty may default on its obligations to an underlying fund. Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation are not yet fully known and may not be for some time. New regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.


12		Legg Mason Lifestyle Funds

Certain risks cont’d

funds, weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries and, indirectly, the fund’s exposure to those factors.

Large capitalization company risk. Large capitalization companies may fall out of favor with investors.

These risks are discussed in more detail later in this Prospectus or in the SAI.


Legg Mason Lifestyle Funds			13

Performance

The accompanying bar chart and table provide some indication of the risks of investing in the fund. The bar chart shows changes in the fund’s performance from year to year for Class A shares. The table shows the average annual total returns of each class of the fund that has been in operation for at least one full calendar year and also compares the fund’s performance with the average annual total returns of an index or other benchmark. The fund also compares its performance to the Barclays Capital U.S. Aggregate Index (an index of fixed income securities) and a composite benchmark, which is a hypothetical representation of the performance of the fund’s major asset classes, consisting of 40% Russell 1000 Index, 15% Russell 2000 Index, 15% MSCI EAFE Index, 25% Barclays Capital U.S. Aggregate Index and 5% Barclays Capital U.S. High Yield—2% Issuer Cap Index (an index where issuer exposure is limited to 2% of the market value of the Barclays Capital U.S. Corporate High Yield Index). The fund makes updated performance information available at the fund’s website, http://www.leggmason.com/individualinvestors/products/mutual-funds/annualized_performance (select share class), or by calling the fund at 1-877-721-1926.

The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future.

Sales charges are not reflected in the accompanying bar chart, and if those charges were included, returns would be less than those shown.


Total returns (before taxes) (%)

		Best quarter (06/30/2009): 17.88 Worst quarter (12/31/2008): (18.03) The year-to-date return as of the most recent calendar quarter, which ended 03/31/11, was 4.82.


Average annual total returns (for periods ended December 31, 2010) (%)
	1 year		5 years		10 years		Since inception		Inception date

Class A
Return before taxes		7.79		1.23		1.27
Return after taxes on distributions		7.18		0.48		0.51
Return after taxes on distributions and sale of fund shares		5.06		0.59		0.64

Other Classes (Return before taxes only)
Class B		8.89		1.50		1.24
Class C		13.25		1.98		1.32
Class I		14.77		N/A		N/A		(0.60)		10/02/2007
Russell 3000 Index (reflects no deduction for fees, expenses or taxes)¹		16.93		2.74		2.16
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes)¹		6.54		5.80		5.84
Composite Benchmark (reflects no deduction for fees, expenses or taxes)¹		14.45		4.44		4.53

¹	For Class I shares, for the period from the class’ commencement of operations to December 31, 2010, the average annual total returns of the Russell 3000 Index, the Barclays Capital U.S. Aggregate Index and the composite benchmark were (3.32)%, 6.32% and 0.05%, respectively.


14		Legg Mason Lifestyle Funds

Management

Investment manager: Legg Mason Partners Fund Advisor, LLC

Subadviser: Legg Mason Global Asset Allocation, LLC (“LMGAA”)

Purchase and sale of fund shares

The fund’s initial and subsequent investment minimums generally are as follows:

Investment minimum initial/additional investment ($)

Class A

Class B¹

Class C

Class FI

Class R

Class R1

Class I

General

1,000/50

N/A

Uniform Gifts or Transfers to Minor Accounts

1,000/50

N/A

IRAs

250/50

N/A

SIMPLE IRAs

None/None

N/A

Systematic Investment Plans

50/50

N/A

Clients of Eligible Financial Intermediaries

None/None

N/A

None/None

N/A

None/None

Retirement Plans with omnibus accounts held on the books of the fund

None/None

N/A

None/None

Other Retirement Plans

None/None

N/A

Institutional Investors

1,000/50

N/A

1 million/None

¹	Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your financial intermediary may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.

Your financial intermediary may impose different investment minimums.

Tax information

The fund’s distributions are taxable as ordinary income or capital gain, except when your investment is through an IRA, 401(k) or other tax-advantaged account.

Payments to broker/dealers and other financial intermediaries


Legg Mason Lifestyle Funds			15

Legg Mason Lifestyle Allocation 50%

Investment objective

The fund seeks balance of growth of capital and income.

Fees and expenses of the fund

The accompanying table describes the fees and expenses that you may pay if you buy and hold shares of the fund.

You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in funds sold by Legg Mason Investor Services, LLC (“LMIS”), the fund’s distributor. More information about these and other discounts is available from your financial intermediary, in this Prospectus on page 59 under the heading “Sales charges” and in the fund’s SAI on page 67 under the heading “Sales Charge Waivers and Reductions.”

Shareholder fees (paid directly from your investment) (%)

Class A

Class B

Class C

Class FI

Class R

Class R1

Class I

Maximum sales charge (load) imposed on purchases
(as a % of offering price)

5.75

None

Maximum deferred sales charge (load) (as a % of the lower of net asset value at purchase or redemption) (may be reduced over time)

Generally,
none

5.00

1.00

None

Annual fund operating expenses (expenses that you pay each year as a percentage of the value of
your investment) (%)

Class A

Class B

Class C

Class FI

Class R

Class R1

Class I

Management fees

None

Distribution and service (12b-1) fees

0.25

1.00

0.25

0.50

1.00

None

Other expenses

0.29

0.43

0.29¹

0.53²

0.48²

Acquired fund fees and expenses (fees and expenses of underlying funds)

0.69

Total annual fund operating expenses³

1.23

2.12

1.98

1.47

1.72

2.22

1.17

¹	“Other expenses” have been restated to reflect higher current fees.

²	“Other expenses” for Class FI, Class R, Class R1 and Class I shares are estimated for the current fiscal year because no shares of these classes were outstanding during the fund’s last fiscal year.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes:

You invest $10,000 in the fund for the time periods indicated

Your investment has a 5% return each year and the fund’s operating expenses remain the same

You reinvest all distributions and dividends without a sales charge

The fees and expenses of the underlying Legg Mason-affiliated funds are reflected


16		Legg Mason Lifestyle Funds

Fees and expenses of the fund cont’d

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Number of years you own your shares ($)	1 year	3 years	5 years	10 years
Class A (with or without redemption at end of period)	693	943	1,212	1,978
Class B (with redemption at end of period)	715	964	1,239	2,224
Class B (without redemption at end of period)	215	664	1,139	2,224
Class C (with redemption at end of period)	301	623	1,071	2,315
Class C (without redemption at end of period)	201	623	1,071	2,315
Class FI (with or without redemption at end of period)	150	465	803	1,757
Class R (with or without redemption at end of period)	175	542	934	2,030
Class R1 (with or without redemption at end of period)	225	694	1,189	2,553
Class I (with or without redemption at end of period)	119	372	644	1,420

Principal investment strategies

The fund is a fund of funds—it invests in other mutual funds. The fund is managed as an asset allocation program and allocates its assets primarily among Legg Mason-affiliated mutual funds.

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 50% in underlying funds that invest principally in equity securities and 50% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		50%
Fixed Income Funds		50%
Target Range
Equity Funds		40-60%
Fixed Income Funds		40-60%

Certain risks


Legg Mason Lifestyle Funds			17


18		Legg Mason Lifestyle Funds

Certain risks cont’d

securities typically fall. The value approach to investing involves the risk that stocks may remain undervalued. Although the underlying funds do not concentrate their investments in any one industry or industry group, an underlying fund that is growth- or value-oriented may, like many growth or value funds, weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries and, indirectly, the fund’s exposure to those factors.

Large capitalization company risk. Large capitalization companies may fall out of favor with investors.


Legg Mason Lifestyle Funds			19

capitalization companies, may be harder to sell at times and at prices the portfolio managers believe appropriate and may offer greater potential for losses.

These risks are discussed in more detail later in this Prospectus or in the SAI.


20		Legg Mason Lifestyle Funds

Performance

The accompanying bar chart and table provide some indication of the risks of investing in the fund. The bar chart shows changes in the fund’s performance from year to year for Class A shares. The table shows the average annual total returns of each class of the fund that has been in operation for at least one full calendar year and also compares the fund’s performance with the average annual total returns of an index or other benchmark. The fund also compares its performance to the Barclays Capital U.S. Aggregate Index (an index of fixed income securities) and a composite benchmark, which is a hypothetical representation of the performance of the fund’s major asset classes, consisting of 28% Russell 1000 Index, 12% Russell 2000 Index, 10% MSCI EAFE Index, 43% Barclays Capital U.S. Aggregate Index and 7% Barclays Capital U.S. High Yield—2% Issuer Cap Index (an index where issuer exposure is limited to 2% of the market value of the Barclays Capital U.S. Corporate High Yield Index). The fund makes updated performance information available at the fund’s website, http://www.leggmason.com/individualinvestors/products/mutual-funds/annualized_performance (select share class), or by calling the fund at 1-877-721-1926.

The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future.

Sales charges are not reflected in the accompanying bar chart, and if those charges were included, returns would be less than those shown.


Total returns (before taxes) (%)

		Best quarter (06/30/2009): 16.49 Worst quarter (12/31/2008): (14.64) The year-to-date return as of the most recent calendar quarter, which ended 03/31/11, was 4.01.


Average annual total returns (for periods ended December 31, 2010) (%)
	1 year		5 years		10 years

Class A
Return before taxes		7.32		2.59		3.08
Return after taxes on distributions		6.30		1.27		1.84
Return after taxes on distributions and sale of fund shares		4.72		1.50		1.93

Other Classes (Return before taxes only)
Class B		8.10		2.81		3.06
Class C		12.50		3.26		3.07
Russell 1000 Index (reflects no deduction for fees, expenses or taxes)		16.10		2.59		1.83
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes)		6.54		5.80		5.84
Composite Benchmark (reflects no deduction for fees, expenses or taxes)		12.87		5.17		5.24


Legg Mason Lifestyle Funds			21

Management

Investment manager: Legg Mason Partners Fund Advisor, LLC

Subadviser: Legg Mason Global Asset Allocation, LLC (“LMGAA”)

Purchase and sale of fund shares

The fund’s initial and subsequent investment minimums generally are as follows:

Investment minimum initial/additional investment ($)

Class A

Class B¹

Class C

Class FI

Class R

Class R1

Class I

General

1,000/50

N/A

Uniform Gifts or Transfers to Minor Accounts

1,000/50

N/A

IRAs

250/50

N/A

SIMPLE IRAs

None/None

N/A

Systematic Investment Plans

50/50

N/A

Clients of Eligible Financial Intermediaries

None/None

N/A

None/None

N/A

None/None

Retirement Plans with omnibus accounts held on the books of the fund

None/None

N/A

None/None

Other Retirement Plans

None/None

N/A

Institutional Investors

1,000/50

N/A

1 million/None

¹	Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your financial intermediary may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.

Your financial intermediary may impose different investment minimums.

Tax information

The fund’s distributions are taxable as ordinary income or capital gain, except when your investment is through an IRA, 401(k) or other tax-advantaged account.

Payments to broker/dealers and other financial intermediaries


22		Legg Mason Lifestyle Funds

Legg Mason Lifestyle Allocation 30%

Investment objective

The fund seeks income as a primary objective and long-term growth of capital as a secondary objective.

Fees and expenses of the fund

The accompanying table describes the fees and expenses that you may pay if you buy and hold shares of the fund.

You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $25,000 in funds sold by Legg Mason Investor Services, LLC (“LMIS”), the fund’s distributor. More information about these and other discounts is available from your financial intermediary, in this Prospectus on page 59 under the heading “Sales charges” and in the fund’s SAI on page 67 under the heading “Sales Charge Waivers and Reductions.”


Shareholder fees (paid directly from your investment) (%)
	Class A	Class B	Class C	Class FI	Class R	Class R1	Class I
Maximum sales charge (load) imposed on purchases (as a % of offering price)	4.25	None	None	None	None	None	None
Maximum deferred sales charge (load) (as a % of the lower of net asset value at purchase or redemption) (may be reduced over time)	Generally, none	4.50	1.00	None	None	None	None
Annual fund operating expenses (expenses that you pay each year as a percentage of the value of your investment) (%)
	Class A	Class B	Class C	Class FI	Class R	Class R1	Class I
Management fees	None	None	None	None	None	None	None
Distribution and service (12b-1) fees	0.25	0.75	0.70	0.25	0.50	1.00	None
Other expenses	0.30	0.44	0.47¹	0.57²	0.57²	0.57²	0.52²
Acquired fund fees and expenses (fees and expenses of underlying funds)	0.63	0.63	0.63	0.63	0.63	0.63	0.63
Total annual fund operating expenses³	1.18	1.82	1.80	1.45	1.70	2.20	1.15
Fees forgone and/or expenses reimbursed⁴	—	—	—	(0.02)	(0.02)	(0.02)	—
Total annual fund operating expenses after forgoing fees and/or reimbursing expenses⁴	1.18	1.82	1.80	1.43	1.68	2.18	1.15

¹	“Other expenses” have been restated to reflect higher current fees.

²	“Other expenses” for Class FI, Class R, Class R1 and Class I shares are estimated for the current fiscal year because no shares of these classes were outstanding during the fund’s last fiscal year.

⁴

The manager has agreed to forgo fees and/or reimburse operating expenses (other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses) so that total annual operating expenses are not expected to exceed 0.80% for Class A shares, 1.30% for Class B shares, 1.25% for Class C shares, 0.80% for Class FI shares, 1.05% for Class R shares, 1.55% for Class R1 shares and 0.55% for Class I shares. These arrangements cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent. The manager is permitted to recapture amounts forgone or reimbursed to a class during the same fiscal year if the class’ total annual operating expenses have fallen to a level below the limits described above.

Example

This example is intended to help you compare the cost of investing in the fund with the cost of investing in other mutual funds. The example assumes:

You invest $10,000 in the fund for the time periods indicated

Your investment has a 5% return each year and the fund’s operating expenses remain the same

You reinvest all distributions and dividends without a sales charge

The fees and expenses of the underlying Legg Mason-affiliated funds are reflected


Legg Mason Lifestyle Funds			23

Fees and expenses of the fund cont’d

Although your actual costs may be higher or lower, based on these assumptions your costs would be:


Number of years you own your shares ($)	1 year	3 years	5 years	10 years
Class A (with or without redemption at end of period)	540	784	1,047	1,796
Class B (with redemption at end of period)	635	873	1,086	1,969
Class B (without redemption at end of period)	185	573	986	1,969
Class C (with redemption at end of period)	283	569	980	2,126
Class C (without redemption at end of period)	183	569	980	2,126
Class FI (with or without redemption at end of period)	146	457	791	1,734
Class R (with or without redemption at end of period)	171	534	922	2,007
Class R1 (with or without redemption at end of period)	221	686	1,177	2,531
Class I (with or without redemption at end of period)	117	365	632	1,398

Principal investment strategies

The fund is a fund of funds—it invests in other mutual funds. The fund is managed as an asset allocation program and allocates its assets primarily among Legg Mason-affiliated mutual funds.

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 30% in underlying funds that invest principally in equity securities and 70% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		30%
Fixed Income Funds		70%
Target Range
Equity Funds		20-40%
Fixed Income Funds		60-80%

Certain risks


24		Legg Mason Lifestyle Funds

Certain risks cont’d


Legg Mason Lifestyle Funds			25

undervalued. Although the underlying funds do not concentrate their investments in any one industry or industry group, an underlying fund that is growth- or value-oriented may, like many growth or value funds, weight its investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries and, indirectly, the fund’s exposure to those factors.

Large capitalization company risk. Large capitalization companies may fall out of favor with investors.


26		Legg Mason Lifestyle Funds

Certain risks cont’d

These risks are discussed in more detail later in this Prospectus or in the SAI.


Legg Mason Lifestyle Funds			27

Performance

The accompanying bar chart and table provide some indication of the risks of investing in the fund. The bar chart shows changes in the fund’s performance from year to year for Class A shares. The table shows the average annual total returns of each class of the fund that has been in operation for at least one full calendar year and also compares the fund’s performance with the average annual total returns of an index or other benchmark. The fund also compares its performance to the Russell 1000 Index and a composite benchmark, which is a hypothetical representation of the performance of the fund’s major asset classes, consisting of 17% Russell 1000 Index, 7% Russell 2000 Index, 6% MSCI EAFE Index, 60% Barclays Capital U.S. Aggregate Index (an index of fixed income securities) and 10% Barclays Capital U.S. High Yield—2% Issuer Cap Index (an index where issuer exposure is limited to 2% of the market value of the Barclays Capital U.S. Corporate High Yield Index). The fund makes updated performance information available at the fund’s website, http://www.leggmason.com/individualinvestors/products/mutual-funds/annualized_performance (select share class), or by calling the fund at 1-877-721-1926.

The fund’s past performance (before and after taxes) is not necessarily an indication of how the fund will perform in the future.

Sales charges are not reflected in the accompanying bar chart, and if those charges were included, returns would be less than those shown.


Total returns (before taxes) (%)

		Best quarter (06/30/2009): 14.92 Worst quarter (12/31/2008): (11.42) The year-to-date return as of the most recent calendar quarter, which ended 03/31/11, was 3.18.


Average annual total returns (for periods ended December 31, 2010) (%)
	1 year		5 years		10 years

Class A
Return before taxes		7.50		3.44		3.97
Return after taxes on distributions		6.27		1.94		2.48
Return after taxes on distributions and sale of fund shares		4.84		2.02		2.47

Other Classes (Return before taxes only)
Class B		7.28		3.60		3.97
Class C		11.03		3.95		3.97
Barclays Capital U.S. Aggregate Index (reflects no deduction for fees, expenses or taxes)		6.54		5.80		5.84
Russell 1000 Index (reflects no deduction for fees, expenses or taxes)		16.10		2.59		1.83
Composite Benchmark (reflects no deduction for fees, expenses or taxes)		10.92		5.74		5.77


28		Legg Mason Lifestyle Funds

Management

Investment manager: Legg Mason Partners Fund Advisor, LLC

Subadviser: Legg Mason Global Asset Allocation, LLC (“LMGAA”)

Purchase and sale of fund shares

The fund’s initial and subsequent investment minimums generally are as follows:

Investment minimum initial/additional investment ($)

Class A

Class B¹

Class C

Class FI

Class R

Class R1

Class I

General

1,000/50

N/A

Uniform Gifts or Transfers to Minor Accounts

1,000/50

N/A

IRAs

250/50

N/A

SIMPLE IRAs

None/None

N/A

Systematic Investment Plans

50/50

N/A

Clients of Eligible Financial Intermediaries

None/None

N/A

None/None

N/A

None/None

Retirement Plans with omnibus accounts held on the books of the fund

None/None

N/A

None/None

Other Retirement Plans

None/None

N/A

Institutional Investors

1,000/50

N/A

1 million/None

¹	Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your financial intermediary may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.

Your financial intermediary may impose different investment minimums.

Tax information

The fund’s distributions are taxable as ordinary income or capital gain, except when your investment is through an IRA, 401(k) or other tax-advantaged account.

Payments to broker/dealers and other financial intermediaries


Legg Mason Lifestyle Funds			29

More on the funds’ investment strategies, investments and risks

Legg Mason Lifestyle Allocation 85%

Investment objective

The fund seeks capital appreciation.

Principal investment strategies

The fund is a fund of funds—it invests in other mutual funds. The fund is managed as an asset allocation program and allocates its assets primarily among Legg Mason-affiliated mutual funds. The underlying funds’ investment objectives and their principal investment strategies are described below under “Underlying funds.”


Target Allocation
Equity Funds		85%
Fixed Income Funds		15%
Target Range
Equity Funds		80-100%
Fixed Income Funds		0-20%

The fund may invest in any of the underlying funds listed in the table below. The Target Range in the table shows the percentage range of the fund’s assets that may be invested in the underlying funds at any time. The fund is not expected to be invested in all of the underlying funds at any time. The subadviser may change the fund’s allocations among the underlying funds, the percentage invested in a particular underlying fund and add and delete underlying funds, from time to time and without prior notice to shareholders. The subadviser may also vary the allocation between equity funds and fixed income funds within the Target Range without prior notice to shareholders.

For purposes of the fund’s Target Allocation and Target Ranges between equity funds and fixed income funds, the Legg Mason Strategic Real Return Fund will be classified as an equity fund with respect to 50% of the fund’s investment and a fixed income fund with respect to the remaining 50% of the fund’s investment.


30		Legg Mason Lifestyle Funds

More on the funds’ investment strategies, investments and risks cont’d


Underlying funds in which Allocation 85% may invest
		Target Range
Legg Mason Batterymarch U.S. Large Cap Equity Fund		0-30%
Legg Mason BW Diversified Large Cap Value Fund		0-20%
Legg Mason Capital Management Disciplined Equity Research Fund		0-20%
Legg Mason Capital Management Growth Trust, Inc.		0-20%
Legg Mason Capital Management Opportunity Trust		0-20%
Legg Mason ClearBridge Aggressive Growth Fund		0-20%
Legg Mason ClearBridge Appreciation Fund		0-20%
Legg Mason ClearBridge Equity Income Builder Fund		0-20%
Legg Mason ClearBridge Fundamental All Cap Value Fund		0-20%
Legg Mason ClearBridge Large Cap Growth Fund		0-20%
Legg Mason ClearBridge Large Cap Value Fund		0-20%
Legg Mason Capital Management Value Trust, Inc.		0-20%
Legg Mason Batterymarch International Equity Trust		0-15%
Legg Mason Global Currents International All Cap Opportunity Fund		0-15%
Legg Mason ClearBridge Mid Cap Core Fund		0-15%
Legg Mason ClearBridge Small Cap Growth Fund		0-15%
Legg Mason ClearBridge Small Cap Value Fund		0-15%
Legg Mason Capital Management Special Investment Trust, Inc.		0-15%
Royce Special Equity Fund		0-15%
Royce Total Return Fund		0-15%
Royce Value Fund		0-15%
Legg Mason Batterymarch Emerging Markets Trust		0-10%
Legg Mason Esemplia Emerging Markets Equity Fund		0-10%
Legg Mason BW Absolute Return Opportunities Fund		0-15%
Legg Mason BW International Opportunities Bond Fund		0-15%
Western Asset Inflation Indexed Plus Bond Portfolio		0-20%
Western Asset Absolute Return Portfolio		0-15%
Western Asset Core Plus Bond Portfolio		0-15%
Legg Mason Strategic Real Return Fund		0-10%
Western Asset High Yield Portfolio		0-10%

The fund invests in classes of shares of the underlying funds that are offered only to institutional and other eligible investors, such as the fund, at net asset value with no initial or contingent deferred sales charges and with generally lower expenses than other share classes. For underlying funds in the Legg Mason and Western Asset families of funds, the fund purchases Class IS shares if the underlying fund offers Class IS shares, or Class I shares. The fund invests in the Institutional or Institutional Select Class of shares of the underlying funds in the Royce family of funds.

Summary performance information for the underlying funds appears in Appendix A.

The fund’s investment objective and investment strategies may be changed without shareholder approval.


Legg Mason Lifestyle Funds			31

Legg Mason Lifestyle Allocation 70%

Investment objective

The fund seeks long-term growth of capital.

Principal investment strategies

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 70% in underlying funds that invest principally in equity securities and 30% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		70%
Fixed Income Funds		30%
Target Range
Equity Funds		60-80%
Fixed Income Funds		20-40%


32		Legg Mason Lifestyle Funds

More on the funds’ investment strategies, investments and risks cont’d


Underlying funds in which Allocation 70% may invest
		Target Range
Legg Mason Batterymarch U.S. Large Cap Equity Fund		0-25%
Legg Mason BW Diversified Large Cap Value Fund		0-20%
Legg Mason Capital Management Disciplined Equity Research Fund		0-20%
Legg Mason Capital Management Growth Trust, Inc.		0-20%
Legg Mason Capital Management Opportunity Trust		0-20%
Legg Mason ClearBridge Aggressive Growth Fund		0-20%
Legg Mason ClearBridge Appreciation Fund		0-20%
Legg Mason ClearBridge Fundamental All Cap Value Fund		0-20%
Legg Mason ClearBridge Large Cap Growth Fund		0-20%
Legg Mason ClearBridge Large Cap Value Fund		0-20%
Legg Mason Capital Management Value Trust, Inc.		0-20%
Legg Mason Batterymarch International Equity Trust		0-15%
Legg Mason ClearBridge Equity Income Builder Fund		0-15%
Legg Mason Global Currents International All Cap Opportunity Fund		0-15%
Legg Mason ClearBridge Mid Cap Core Fund		0-15%
Legg Mason ClearBridge Small Cap Growth Fund		0-15%
Legg Mason Capital Management Special Investment Trust, Inc.		0-15%
Royce Total Return Fund		0-15%
Royce Value Fund		0-15%
Legg Mason ClearBridge Small Cap Value Fund		0-10%
Royce Special Equity Fund		0-10%
Legg Mason Batterymarch Emerging Markets Trust		0-10%
Legg Mason Esemplia Emerging Markets Equity Fund		0-10%
Legg Mason BW Absolute Return Opportunities Fund		0-15%
Legg Mason BW International Opportunities Bond Fund		0-20%
Western Asset Absolute Return Portfolio		0-20%
Western Asset Core Plus Bond Portfolio		0-20%
Legg Mason Strategic Real Return Fund		0-10%
Western Asset High Yield Portfolio		0-10%
Western Asset Inflation Indexed Plus Bond Portfolio		0-10%

Summary performance information for the underlying funds appears in Appendix A.

The fund’s investment objective and investment strategies may be changed without shareholder approval.


Legg Mason Lifestyle Funds			33

Legg Mason Lifestyle Allocation 50%

Investment objective

The fund seeks balance of growth of capital and income.

Principal investment strategies

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 50% in underlying funds that invest principally in equity securities and 50% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		50%
Fixed Income Funds		50%
Target Range
Equity Funds		40-60%
Fixed Income Funds		40-60%


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Underlying funds in which Allocation 50% may invest
		Target Range
Legg Mason Batterymarch U.S. Large Cap Equity Fund		0-25%
Legg Mason BW Diversified Large Cap Value Fund		0-15%
Legg Mason Capital Management Disciplined Equity Research Fund		0-15%
Legg Mason Capital Management Growth Trust, Inc.		0-15%
Legg Mason Capital Management Opportunity Trust		0-15%
Legg Mason ClearBridge Aggressive Growth Fund		0-15%
Legg Mason ClearBridge Appreciation Fund		0-15%
Legg Mason ClearBridge Equity Income Builder Fund		0-15%
Legg Mason ClearBridge Fundamental All Cap Value Fund		0-15%
Legg Mason ClearBridge Large Cap Growth Fund		0-15%
Legg Mason ClearBridge Large Cap Value Fund		0-15%
Legg Mason Capital Management Special Investment Trust, Inc.		0-15%
Legg Mason Capital Management Value Trust, Inc.		0-15%
Legg Mason Batterymarch International Equity Trust		0-10%
Legg Mason Global Currents International All Cap Opportunity Fund		0-10%
Legg Mason ClearBridge Mid Cap Core Fund		0-10%
Legg Mason ClearBridge Small Cap Growth Fund		0-10%
Legg Mason ClearBridge Small Cap Value Fund		0-10%
Royce Special Equity Fund		0-10%
Royce Total Return Fund		0-10%
Royce Value Fund		0-10%
Western Asset Core Plus Bond Portfolio		20-40%
Legg Mason BW International Opportunities Bond Fund		0-25%
Legg Mason BW Absolute Return Opportunities Fund		0-20%
Western Asset Absolute Return Portfolio		0-20%
Western Asset Inflation Indexed Plus Bond Portfolio		0-20%
Western Asset High Yield Portfolio		0-15%
Legg Mason Strategic Real Return Fund		0-10%

Summary performance information for the underlying funds appears in Appendix A.

The fund’s investment objective and investment strategies may be changed without shareholder approval.


Legg Mason Lifestyle Funds			35

Legg Mason Lifestyle Allocation 30%

Investment objective

The fund seeks income as a primary objective and long-term growth of capital as a secondary objective.

Principal investment strategies

The fund organizes its investments in underlying funds into two main asset classes: the stock class (equity securities of all types) and the fixed income class (fixed income securities of all types). The fund seeks to maintain a Target Allocation (that is, its percentage allocation between equity-oriented funds and fixed income-oriented funds) of 30% in underlying funds that invest principally in equity securities and 70% in underlying funds that invest principally in fixed income securities. The fund may make tactical changes in its allocation within a specified range (the Target Range) around that Target Allocation, based on the portfolio managers’ outlook for asset classes and market and economic trends.


Target Allocation
Equity Funds		30%
Fixed Income Funds		70%
Target Range
Equity Funds		20-40%
Fixed Income Funds		60-80%


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Underlying funds in which Allocation 30% may invest
		Target Range
Legg Mason BW Diversified Large Cap Value Fund		0-15%
Legg Mason Capital Management Disciplined Equity Research Fund		0-15%
Legg Mason Capital Management Growth Trust, Inc.		0-15%
Legg Mason Capital Management Opportunity Trust		0-15%
Legg Mason ClearBridge Aggressive Growth Fund		0-15%
Legg Mason ClearBridge Appreciation Fund		0-15%
Legg Mason ClearBridge Equity Income Builder Fund		0-15%
Legg Mason ClearBridge Fundamental All Cap Value Fund		0-15%
Legg Mason ClearBridge Large Cap Growth Fund		0-15%
Legg Mason ClearBridge Large Cap Value Fund		0-15%
Legg Mason Batterymarch U.S. Large Cap Equity Fund		0-15%
Legg Mason Capital Management Special Investment Trust, Inc.		0-15%
Legg Mason Capital Management Value Trust, Inc.		0-15%
Legg Mason Batterymarch International Equity Trust		0-10%
Legg Mason Global Currents International All Cap Opportunity Fund		0-10%
Legg Mason ClearBridge Mid Cap Core Fund		0-10%
Legg Mason ClearBridge Small Cap Growth Fund		0-10%
Legg Mason ClearBridge Small Cap Value Fund		0-10%
Royce Special Equity Fund		0-10%
Royce Total Return Fund		0-10%
Royce Value Fund		0-10%
Western Asset Core Plus Bond Portfolio		35-55%
Legg Mason BW International Opportunities Bond Fund		0-25%
Legg Mason BW Absolute Return Opportunities Fund		0-20%
Western Asset Absolute Return Portfolio		0-20%
Western Asset Inflation Indexed Plus Bond Portfolio		0-20%
Western Asset High Yield Portfolio		0-15%
Legg Mason Strategic Real Return Fund		0-10%

Summary performance information for the underlying funds appears in Appendix A.

The fund’s investment objective and investment strategies may be changed without shareholder approval.


Legg Mason Lifestyle Funds			37

Underlying funds

The following is a description of the investment objectives and principal investment strategies of the underlying funds in which the funds may invest. Each of the underlying funds is managed by the funds’ investment manager or an affiliate of the funds’ investment manager. The investment manager for each of the Legg Mason Funds and Western Asset Funds is Legg Mason Partners Fund Advisor, LLC (“LMPFA” or the “manager”). The investment manager for each of the Royce Funds is Royce & Associates, LLC.


Underlying fund		Investment objectives and principal investment strategies
U.S. Equity
Legg Mason BW Diversified Large Cap Value Fund		Seeks long-term capital appreciation. The fund normally invests at least 80% of its net assets in equity securities of large cap companies. Large cap companies are those companies with market capitalizations similar to companies in the Russell 1000 Index. The fund invests primarily in equity securities that, in the investment adviser’s opinion, are undervalued or out of favor. The investment adviser invests in securities that meet its value criteria, based on both quantitative and fundamental analysis. The fund expects to hold approximately 150-250 stocks under normal market conditions. The fund may invest in foreign equity securities, either directly or through depositary receipts.
Legg Mason Capital Management Disciplined Equity Research Fund		Seeks long-term capital appreciation. The fund will invest at least 80% of its net assets in equity securities. The fund invests primarily in securities that, in the opinion of the portfolio managers, offer the potential for capital growth. The portfolio managers utilize a long-term, fundamental, valuation-based investment process to make investment decisions for the fund. Through a disciplined application of this research-intensive process, the portfolio managers will seek to generate returns for the fund in excess of the Russell 1000 Index by purchasing securities at large discounts to the portfolio managers’ assessment of their intrinsic value. While it is expected that the majority of the fund’s assets will be invested in equity securities issued by companies in the Russell 1000 Index, the fund may invest in securities issued by companies of any size and by foreign companies. It is expected that under normal circumstances, the fund will have broad exposure to a variety of market sectors. The fund may invest up to 20% of its total assets in long-term debt securities, including up to 10% of its total assets that may be invested in debt securities rated below BBB/Baa, commonly known as “junk bonds” and unrated securities judged by the portfolio managers to be of equivalent quality. The fund also may invest in derivatives.
Legg Mason Capital Management Growth Trust, Inc.		Seeks long-term growth of capital. The fund invests primarily in common stocks that, in the adviser’s opinion, appear to offer above average growth potential and trade at a significant discount to the adviser’s assessment of their intrinsic value. Any income realized will be incidental to the fund’s objective. Under normal circumstances, the adviser expects to invest in a limited number of companies. The adviser currently anticipates that the fund will not invest more than 25% of its total assets in foreign securities. The fund may invest in convertible securities.
Legg Mason Capital Management Opportunity Trust		Seeks long-term growth of capital. The fund invests in securities, derivatives and other financial instruments that, in the adviser’s opinion, offer the opportunity for long-term growth of capital. The adviser exercises a flexible strategy in the selection of investments, not limited by investment style or asset class. The fund may invest in the common stock of U.S. and foreign issuers and in other U.S. and foreign securities. The fund may engage to a substantial degree in short sales of securities and other instruments. The fund may also borrow money for investment purposes, in amounts up to 10% of the fund’s net assets, a practice known as “leveraging.” Although the adviser considers ratings in determining whether securities convertible into common stock or debt securities are appropriate investments for the fund, such securities may include investments rated below investment grade, commonly known as “junk” bonds, and unrated securities.
Legg Mason ClearBridge Aggressive Growth Fund		Seeks capital appreciation. The fund invests primarily in common stocks of companies that the portfolio managers believe are experiencing, or will experience, growth in earnings exceeding the average rate of earnings growth of the companies which comprise the S&P 500 Index. The fund may invest in the securities of large, well-known companies offering prospects of long-term earnings growth. However, because higher earnings growth rates are often achieved by small to medium capitalization companies, a significant portion of the fund’s assets may be invested in the securities of such companies. The fund may invest up to 25% of its net assets in foreign securities. The fund also may invest in derivatives and engage in short sales.
Legg Mason ClearBridge Appreciation Fund		Seeks long-term appreciation of shareholders’ capital. The fund invests primarily in equity securities of U.S. companies. The fund typically invests in medium and large capitalization companies, but may also invest in small capitalization companies. The fund may invest up to 20% of its net assets in the securities of foreign issuers. The fund also may invest in derivatives and engage in short sales.


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Underlying fund		Investment objectives and principal investment strategies
Legg Mason ClearBridge Equity Income Builder Fund		The fund primarily seeks a high level of current income and secondarily seeks long-term capital appreciation. Under normal circumstances, the fund will invest at least 80% of its net assets in equity securities or other investments with similar economic characteristics. A significant portion of the fund’s portfolio will consist of equity securities that pay dividends. The fund may invest up to 50% of its net assets in equity securities of foreign issuers. The foreign issuers in which the fund may invest include issuers that are organized outside the United States and conduct their operations in the United States and other countries (commonly known as “multinational companies”) and other foreign issuers with market capitalizations generally of at least $10 billion. The fund may invest in issuers of any size. The fund may invest up to 20% of its assets in fixed income securities of any quality, including lower-rated, high-yielding debt securities. The fund may also invest in derivatives and engage in short sales.
Legg Mason ClearBridge Fundamental All Cap Value Fund		Seeks long-term capital growth. Current income is a secondary consideration. The fund invests primarily in common stocks and common stock equivalents of companies the portfolio managers believe are undervalued in the marketplace. While the portfolio managers select investments primarily for their capital appreciation potential, secondary consideration is given to a company’s dividend record and the potential for an improved dividend return. The fund invests in securities of large, well-known companies but may also invest a significant portion of its assets in securities of small to medium capitalization companies when the portfolio managers believe smaller companies offer more attractive value opportunities. The fund may invest up to 25% of its assets in securities of foreign issuers. The fund may engage in short sales and invest in derivatives.
Legg Mason ClearBridge Large Cap Growth Fund		Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of the value of its net assets in equity securities of U.S. companies with large market capitalizations. Large capitalization companies are those companies with market capitalizations similar to companies in the Russell 1000 Index. The fund may invest up to 10% of its assets in securities of foreign issuers directly or in the form of depositary receipts. The fund may engage in short sales.
Legg Mason ClearBridge Large Cap Value Fund		Seeks long-term growth of capital. Current income is a secondary objective. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities of companies with large market capitalizations. Large capitalization companies are those companies with market capitalization similar to companies in the Russell 1000 Index. The fund may invest up to 20% of its net assets in securities of foreign issuers. The fund may invest in various types of fixed-income securities, including from time to time up to 5% of its assets in non-convertible debt securities rated below investment grade or, if unrated, of equivalent quality as determined by the portfolio managers. Certain of the fixed income securities in which the fund may invest may be distressed debt securities. The fund may engage in short sales and invest in derivatives.
Legg Mason ClearBridge Mid Cap Core Fund		Seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets in equities of medium capitalization companies. Medium capitalization companies are defined as those companies whose market capitalization values are in the range of the market capitalization values of the constituents of the S&P MidCap 400 Index or the Russell Midcap Index, as determined from time to time. The fund may invest up to 20% of its assets in equity securities of companies other than medium capitalization companies. The fund may invest up to 25% of its net assets in securities of foreign issuers. The fund may engage in short sales and invest in derivatives.
Legg Mason ClearBridge Small Cap Growth Fund		Seeks long-term growth of capital. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities of companies with small market capitalizations and related investments. For the purposes of this 80% policy, small capitalization companies are companies with market capitalization values not exceeding (i) $3 billion or (ii) the highest month-end market capitalization value of any stock in the Russell 2000 Index for the previous 12 months, whichever is greater. The fund may invest up to 20% of its net assets in equity securities of companies that are not considered to be small capitalization companies. The fund also may invest in derivatives and engage in short sales.
Legg Mason ClearBridge Small Cap Value Fund		The fund seeks long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowing for investment purposes, in common stocks and other equity securities of small capitalization U.S. companies. Small capitalization companies are those companies whose market capitalizations at the time of investment do not exceed (i) $3 billion or (ii) the highest month-end market capitalization value of any stock in the Russell 2000 Index for the previous 12 months, whichever is greater. The fund may invest up to 20% of its net assets in shares of companies with larger market capitalizations. The fund may invest up to 10% of its assets in foreign issuers. The fund also may invest in derivatives and engage in short sales.
Legg Mason Batterymarch U.S. Large Cap Equity Fund		Seeks long-term capital appreciation. Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowing for investment purposes, in U.S. equity securities or other investments with similar economic characteristics of large capitalization companies. Large capitalization companies are those companies with market capitalizations similar to companies in the Russell 1000 Index. The fund has exposure to growth and value equities of large capitalization companies. The fund will seek to produce returns that exceed those of the Russell 1000 Index over a full market cycle (typically three to five years). The fund also may invest in derivatives.


Legg Mason Lifestyle Funds			39


Underlying fund		Investment objectives and principal investment strategies
Legg Mason Capital Management Special Investment Trust, Inc.		Seeks capital appreciation. The fund invests primarily in equity securities and securities convertible into equity securities. While the fund may invest a portion of its assets in companies of any size, the portfolio manager expects that under normal circumstances, the fund will invest the majority of its total assets in the securities of companies in the mid-cap market capitalization range or in “special situations,” at the time of purchase. Market capitalization is not a factor when determining whether companies are involved in “special situations.” The portfolio manager defines special situations as companies undergoing unusual or possibly one-time developments that, in the opinion of the portfolio manager, make them attractive for investment. The fund will not invest more than 20% of its total assets in securities of companies involved in actual or anticipated reorganizations or restructurings in connection with an actual or potential bankruptcy. The fund may also invest in debt securities, including securities involved in special situations. The fund may invest up to 35% of its total assets in debt securities rated below investment grade (BBB/Baa), commonly known as “junk bonds” and unrated securities judged by the adviser to be below investment grade.
Legg Mason Capital Management Value Trust, Inc.		Seeks long-term growth of capital. The fund invests primarily in equity securities that, in the portfolio managers’ opinion, offer the potential for capital growth. The portfolio managers follow a value discipline in selecting securities, and therefore seek to purchase securities at large discounts to the portfolio managers’ assessment of their intrinsic value. The fund generally invests in companies with market capitalizations greater than $5 billion, but may invest in companies of any size. The fund may invest up to 25% of its total assets in long-term debt securities. Up to 10% of its total assets may be invested in debt securities rated below investment grade (BBB/Baa), commonly known as “junk bonds” and unrated securities judged by the adviser to be below investment grade.
Royce Special Equity Fund		Seeks long-term growth of capital. The fund invests primarily in the equity securities of small-cap and micro-cap companies, those with market capitalizations up to $2.5 billion. The portfolio manager applies an intensive value approach, which attempts to combine classic value analysis, the identification of good businesses and accounting cynicism. Normally, the fund invests at least 80% of its net assets in equity securities. At least 65% of these securities will be issued by companies with stock market capitalizations up to $2.5 billion at the time of investment. Although the fund normally focuses on the securities of U.S. companies, it may invest up to 5% of its assets in foreign securities.
Royce Total Return Fund		Seeks both long-term growth of capital and current income. The fund invests primarily in dividend-paying securities of small-cap and micro-cap companies that the adviser believes are trading significantly below the adviser’s estimate of their current worth. Of the more than 4,400 small-cap and micro-cap companies, more than 1,000 currently pay dividends. Investing in such securities may tend to stabilize the volatility inherent in the prices of small-cap and micro-cap securities. Normally, the fund invests at least 65% of its net assets in equity securities. At least 90% of these securities will produce dividend or interest income to the fund, and at least 65% will be issued by companies with stock market capitalizations up to $2.5 billion at the time of investment. Although the fund normally focuses on the securities of U.S. companies, it may invest up to 25% of its net assets in foreign securities.
Royce Value Fund		Seeks long-term growth of capital. The fund invests primarily in the equity securities of small-cap and mid-cap companies with stock market capitalizations from $500 million to $5 billion, that the adviser believes are trading significantly below its estimate of their current worth. The fund generally invests in securities of companies that the adviser believes have excellent business strengths, high internal rates of return and low leverage. Normally, the fund invests at least 80% of its net assets in equity securities of such small-cap and/or mid-cap companies. Although the fund normally focuses on the securities of U.S. companies, it may invest up to 25% of its net assets in foreign securities.
International Equity
Legg Mason Batterymarch International Equity Trust		Seeks maximum long-term total return. The adviser currently intends to invest substantially all of the fund’s assets in non-U.S. equity securities. The primary focus of the adviser is value added through stock selection, with a secondary focus on region and sector allocation. The fund may invest up to 35% of its total assets in securities of emerging market issuers. The fund may invest in debt securities to a limited extent.
Legg Mason Global Currents International All Cap Opportunity Fund		Seeks total return on its assets from growth of capital and income. Under normal circumstances, the fund invests at least 80% of the value of its net assets in a diversified portfolio of equity securities of foreign companies and invests substantially all of its assets outside the United States. The fund may invest in equity securities of small, medium and large capitalization issuers. The fund may invest in equity securities of foreign companies either directly or through depositary receipts representing an interest in those securities. Under normal circumstances, the fund may invest up to 20% of the value of its net assets in debt securities of U.S. and foreign corporate and governmental issuers, including up to 10% of the value of its net assets in debt securities rated below investment grade. The fund may invest in all types of debt securities of any maturity or credit quality.


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Underlying fund		Investment objectives and principal investment strategies
Legg Mason Strategic Real Return Fund		Seeks to provide an attractive long-term real return, defined as total return reduced by the impact of inflation. In seeking to meet its investment goal, the fund implements a tactical asset allocation program overseen by its adviser. The fund allocates its assets among five investment “sleeves” which the adviser believes are generally complementary to each other, with the following target allocations of the fund’s net assets: (i) Inflation-Linked Debt Securities (40%); (ii) Equity Securities (20%); (iii) Commodity-Linked Securities (20%); (iv) REITs (10%); and (v) Tactical Strategy (10%). The composition and asset allocation of the fund’s investment portfolio will vary over time, based on the adviser’s overall allocation decisions, and may be changed without shareholder approval. Asset allocation decisions are based primarily on the adviser’s evaluation of future consumer price trends and the relative attractiveness of the asset classes in which the fund invests. These evaluations are based on modeling processes that assign probabilities to different inflation scenarios. The modeling processes take into account several factors, including quantitative analysis, qualitative inputs and risk management guidelines. The fund also may invest in derivatives.
Emerging Market Equity
Legg Mason Batterymarch Emerging Markets Trust		Seeks long-term capital appreciation. The fund’s adviser, under normal circumstances, will invest substantially all of the fund’s net assets in equity securities and convertible securities of emerging market issuers. The fund intends to invest in Asia, Latin America, the Indian Subcontinent, Southern and Eastern Europe, the Middle East and Africa, although it might not invest in all these markets at all times and might not invest in any particular market when it deems investment in that country or region to be inadvisable. The fund is not limited in the amount of its total assets that may be denominated in a single currency or invested in securities of issuers located in a single country. The fund may invest in debt securities to a limited extent.
Legg Mason Esemplia Emerging Markets Equity Fund		Seeks to provide long-term capital growth. Under normal circumstances, the fund invests at least 80% of its net assets in equity securities of companies domiciled in, or whose securities are traded in the stock markets of, emerging market nations, as well as other securities whose values are based on such equity securities. The fund considers emerging market nations to include countries that, at the time the fund makes an investment, are categorized by the World Bank and its affiliates as “low income” or “middle income,” are included in the MSCI Emerging Markets Index or are believed by the portfolio manager to have similar characteristics to emerging market nations. Generally, the fund invests in a number of different countries. Normally, the fund invests in companies in at least eight foreign markets and does not invest more than 25% of its assets in any one country. The fund invests across a range of industries. The fund may invest in securities of small, medium and large capitalization issuers.
High Yield Fixed Income
Western Asset High Yield Portfolio		Seeks to maximize total return, consistent with prudent investment management. Under normal market conditions, the fund will invest at least 80% of its net assets in U.S. dollar denominated debt or fixed income securities that are rated below investment grade at the time of purchase by one or more NRSROs or are of a comparable quality as determined by the adviser. Securities rated below investment grade are commonly known as “junk bonds” or “high yield securities.” The fund may invest up to 20% of its total assets in non-U.S. dollar denominated non-U.S. securities. The fund may also invest in derivatives.


Legg Mason Lifestyle Funds			41


Underlying fund		Investment objectives and principal investment strategies
U.S. Core Fixed Income
Legg Mason BW Absolute Return Opportunities Fund		Seeks to generate positive returns that are independent of market cycles. Under normal market conditions, the fund seeks to meet its investment objective through strategic investments in domestic and foreign fixed income securities and currencies. The fund will initiate long and short exposures by investing across bond sectors, including sovereign debt and corporate bonds; currencies; and derivative instruments. Short exposure will be established primarily through the use of derivatives, including currency forwards, interest rate swaps and futures. The portfolio managers endeavor to outperform the return of the 3-month U.S. Treasury Bill by 300 basis points on a rolling 12-month basis (although there can be no assurance this rate of return will be achieved). Long investments are typically concentrated in sovereign debt or currencies of 6 to 12 countries, or corporate debt of issuers in those countries that the portfolio managers believe offer the most attractive absolute return opportunities. Short positions are typically established in interest rates or currencies that the portfolio managers believe are overvalued, will fall in value and can potentially generate absolute returns. The fund may invest a significant portion of its assets in a particular geographic region or country, including emerging market countries. The portfolio managers intend to maintain an average weighted portfolio quality of A- or better. The fund will invest in both investment grade and below investment grade securities and currencies of developed and emerging countries. The weighted average effective duration of the fund’s portfolio, including derivatives, is expected to range from -5 to +5 years. The fund’s use of derivatives may be extensive.
Legg Mason Strategic Real Return Fund		Seeks to provide an attractive long-term real return, defined as total return reduced by the impact of inflation. In seeking to meet its investment goal, the fund implements a tactical asset allocation program overseen by its adviser. The fund allocates its assets among five investment “sleeves” which the adviser believes are generally complementary to each other, with the following target allocations of the fund’s net assets: (i) Inflation-Linked Debt Securities (40%); (ii) Equity Securities (20%); (iii) Commodity-Linked Securities (20%); (iv) REITs (10%); and (v) Tactical Strategy (10%). The composition and asset allocation of the fund’s investment portfolio will vary over time, based on the adviser’s overall allocation decisions, and may be changed without shareholder approval. Asset allocation decisions are based primarily on the adviser’s evaluation of future consumer price trends and the relative attractiveness of the asset classes in which the fund invests. These evaluations are based on modeling processes that assign probabilities to different inflation scenarios. The modeling processes take into account several factors, including quantitative analysis, qualitative inputs and risk management guidelines. The fund also may invest in derivatives.
Western Asset Absolute Return Portfolio		Seeks to maximize long-term total return. The fund has a flexible investment strategy and will invest in a variety of securities and instruments and use a variety of investment techniques in pursuing its objective. Under normal market conditions, the fund will invest at least 50% of its net assets in debt and fixed-income securities rated at least Baa or BBB at the time of purchase by one or more NRSROs or unrated securities of comparable quality at the time of purchase (as determined by the fund’s advisers). The fund may invest no more than 50% of its net assets in non-U.S. dollar denominated securities and no more than 25% of its net assets in un-hedged non-U.S. dollar denominated securities. The fund may invest no more than 25% of its net assets in non-U.S. dollar denominated securities rated below investment grade and no more than 25% of its net assets in non-U.S. issuers rated below investment grade. Securities rated below investment grade are commonly known as “junk bonds” or “high yield securities.” The fund also may invest in derivatives.
Western Asset Core Plus Bond Portfolio		Seeks to maximize total return, consistent with prudent investment management and liquidity needs, by investing to obtain an average duration specified below: The fund invests in a portfolio of fixed-income securities of various maturities and, under normal market conditions, will invest at least 80% of its net assets in debt and fixed-income securities. Although the fund may invest in debt and fixed income securities of any maturity, under normal market conditions the target dollar-weighted average effective duration of the fund is expected to range within 30% of the average duration of the domestic bond market as a whole as measured by the adviser (generally, this range is 2.5-7 years). The fund may invest up to 25% of its total assets in the securities of non-U.S. issuers and up to 20% of total assets in non-U.S. dollar denominated securities. The fund may invest up to 20% of its assets in debt securities rated below investment grade (i.e., not rated at least Baa/BBB by one or more NRSROs or unrated securities of comparable quality). Securities rated below investment grade are commonly known as “junk bonds” or “high yield securities.” The fund also may invest in derivatives.
Western Asset Inflation Indexed Plus Bond Portfolio		Seeks to maximize total return, consistent with preservation of capital. Under normal conditions, the fund invests at least 80% of its net assets in inflation-indexed fixed income securities and at least 70% of its net assets in U.S. Treasury Inflation Protected Securities. The fund invests in fixed income securities of any maturity; however, the fund’s target dollar-weighted average effective duration is expected to range within 3 years of that of its benchmark, the Barclays Capital U.S. TIPS Index. Therefore, the range within which the dollar-weighted average effective duration of the fund is expected to fluctuate is 6-12 years although this may vary. The fund intends to sell protection in connection with credit default swaps relating to corporate debt securities. It is currently expected that the notional amount of the credit default swaps will not exceed 40% of the fund’s net assets, although such exposure may exceed 40% from time to time. Although the fund is expected to maintain a dollar-weighted average credit quality of at least A/A, it may invest up to 30% of its net assets in securities rated below AAA/Aaa.


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Underlying fund		Investment objectives and principal investment strategies
International Fixed Income
Legg Mason BW International Opportunities Bond Fund		Seeks to maximize total return consisting of income and capital appreciation. The fund will normally invest its total assets primarily in debt and fixed income securities of issuers located in developed countries. The fund invests in the sovereign debt and currencies of countries in the Citigroup World Government Bond Index ex-U.S. In addition, under normal circumstances, the fund will invest at least 80% of its net assets in debt securities. The fund may invest up to 25% of its net assets in convertible debt securities. Normally the fund holds a portfolio of debt securities of issuers located in a minimum of six countries. The fund invests in both investment grade and below investment grade securities, and invests less than 35% of its total assets in below investment grade securities (commonly known as “junk bonds”). The fund maintains an average weighted portfolio quality of A or better. The average weighted duration of the fund’s portfolio ranges from 1 to 10 years but for individual markets may be greater or lesser depending on the prospects for lower interest rates and the potential for capital gains. The fund may also invest in derivatives.

More on the investments of the underlying funds

By owning shares of underlying funds, the fund invests indirectly, in varying degrees, in fixed income and equity securities of U.S. and non-U.S. issuers. The following summarizes the principal types of securities and instruments in which the underlying funds may invest and techniques they may pursue in seeking to achieve their investment objectives.

Equity investments

Subject to its particular investment policies, an underlying fund may invest in all types of equity securities. Equity securities include exchange-traded and over-the-counter (OTC) common and preferred stocks, warrants and rights, securities convertible into common stocks, and securities of other investment companies and of real estate investment trusts.

Fixed income investments

Subject to its particular investment policies, an underlying fund may invest in all types of fixed income securities. Fixed income securities represent obligations of corporations, governments and other entities to repay money borrowed. Fixed income securities are commonly referred to as “debt,” “debt obligations,” “bonds” or “notes.” The issuer of the fixed income security usually pays a fixed, variable or floating rate of interest, and repays the amount borrowed, usually at the maturity of the security. Some fixed income securities, however, do not pay current interest but are sold at a discount from their face values. Other fixed income securities may make periodic payments of interest and/or principal. Some fixed income securities are partially or fully secured by collateral supporting the payment of interest and principal.

Foreign investments

Certain underlying funds may invest in the securities of foreign issuers, including emerging market issuers, either directly or through depositary receipts.

Sovereign debt

Certain underlying funds may invest in sovereign debt, including emerging market sovereign debt. Sovereign debt securities include fixed income securities issued or guaranteed by governments, their agencies and instrumentalities, and issued by supranational entities such as the World Bank or the European Union.

High yield, lower quality securities

Certain underlying funds may invest in debt securities rated below investment grade by a recognized rating agency or unrated securities determined by the underlying fund’s adviser to be of equivalent quality. These securities are commonly referred to as “junk bonds.”

Exchange-traded funds

Certain underlying funds may invest in shares of open-end mutual funds or unit investment trusts that are traded on a stock exchange, called exchange-traded funds (“ETFs”). Typically, an ETF seeks to track the


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performance of an index, such as the S&P 500 Index or the NASDAQ-100 Index, by holding in its portfolio either the same securities that comprise the index or a representative sample of the index. Investing in an ETF gives an underlying fund exposure to the securities comprising the index on which the ETF is based and the underlying fund will gain or lose value depending on the performance of the index.

Mortgage-backed and asset-backed securities

Certain underlying funds may invest in mortgage-backed and asset-backed securities. Mortgage-backed securities represent direct or indirect participations in, or are collateralized by and payable from, mortgage loans secured by real property. Asset-backed securities represent participations in, or are secured by and payable from, assets such as installment sales or loan contracts, leases, credit card receivables and other categories of receivables.

Inflation-indexed securities

Certain underlying funds may invest in inflation-indexed securities. Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. There are two common structures. The U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the index-based accruals as part of a semiannual coupon. Inflation-indexed securities in which the underlying funds invest may be issued in any country.

Repurchase agreements

The underlying funds may enter into repurchase agreements for cash management purposes. A repurchase agreement is a transaction in which the seller of a security commits itself at the time of the sale to repurchase that security from the buyer at a mutually agreed upon time and price. An underlying fund will enter into repurchase agreements only with dealers, domestic banks or recognized financial institutions that are deemed creditworthy. The value of the securities underlying the repurchase agreement is monitored at the time the transaction is entered into and at all times during the term of the repurchase agreement to ensure that the value of the securities always exceeds the repurchase price.

Reverse repurchase agreements and other borrowings

Certain underlying funds may borrow by entering into reverse repurchase agreements or other borrowing transactions. In a reverse repurchase agreement, an underlying fund sells securities to a counterparty, in return for cash, and the underlying fund agrees to repurchase the securities at a later date and for a higher price, representing the cost to the underlying fund for the money borrowed.

Borrowing may make the value of an investment in an underlying fund more volatile and increase the underlying fund’s overall investment exposure. An underlying fund may be required to liquidate portfolio securities at a time when it would be disadvantageous to do so in order to make payments with respect to any borrowings. Interest on any borrowings will be a fund expense and will reduce the value of the underlying fund’s shares.

Cash management

The underlying funds may hold cash pending investment, and may invest in money market instruments for cash management purposes. The amount of assets an underlying fund may hold for cash management purposes will depend on market conditions and the need to meet expected redemption requests.

Defensive investing

The underlying funds may depart from their principal investment strategies in response to adverse market, economic or political conditions by taking temporary defensive positions in any type of money market instruments, short-term debt securities or cash without regard to any percentage limitations. Although the subadviser and the advisers of the underlying funds have the ability to take defensive positions, they may choose not to do so for a variety of reasons, even during volatile market conditions.


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Derivatives and hedging techniques

Certain underlying funds may, but need not, use derivative contracts. Derivatives are financial instruments whose value depends upon, or is derived from, the value of an asset, such as one or more underlying investments, indexes or currencies. An underlying fund may engage in a variety of transactions using derivatives, such as futures and options on U.S. and non-U.S. securities, indexes or currencies, options on these futures, forward foreign currency contracts and swaps, including interest rate, currency and credit default swaps. Derivatives may be used by the underlying funds for any of the following purposes:

As a hedging technique in an attempt to manage risk in the underlying fund’s portfolio

As a substitute for buying or selling securities

For certain underlying funds, as a means of enhancing returns

As a cash flow management technique

A derivative contract will obligate or entitle an underlying fund to deliver or receive an asset or cash payment based on the change in value of one or more investments, indexes or currencies. When an underlying fund enters into derivatives transactions, it may be required to segregate assets or enter into offsetting positions, in accordance with applicable regulations. Such segregation is not a hedging technique and will not limit the underlying fund’s exposure to loss. The underlying fund will, therefore, have investment risk with respect to both the derivative itself and the assets that have been segregated to offset the underlying fund’s derivative exposure. If such segregated assets represent a large portion of the underlying fund’s portfolio, portfolio management may be affected as covered positions may have to be reduced if it becomes necessary for the underlying fund to reduce the amount of segregated assets in order to meet redemptions or other obligations.

Certain underlying funds may from time to time sell protection on debt securities by entering into credit default swaps. In these transactions, an underlying fund is generally required to pay the par (or other agreed-upon) value of a referenced debt security to the counterparty in the event of a default on or downgrade of the debt security and/or a similar credit event. In return, an underlying fund receives from the counterparty a periodic stream of payments over the term of the contract. If no default occurs, an underlying fund keeps the stream of payments and has no payment obligations. As the seller, an underlying fund would effectively add leverage to its portfolio because, in addition to its net assets, the fund would be subject to investment exposure on the par (or other agreed-upon) value it had undertaken to pay. Credit default swaps may also be structured based on an index or the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, a particular number of defaults within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation).

Commodity-linked instruments

Certain underlying funds may invest in a combination of commodity-linked instruments that provide exposure to the investment returns of the commodities markets, without investing directly in physical commodities. These instruments include master limited partnerships (“MLPs”), structured notes, bonds, debentures and derivatives, including swaps, forwards, futures and options. Commodities are assets that have tangible properties, such as oil, metals and agricultural products.

Real estate investment trusts (REITs)

Certain underlying funds may invest in pooled investment vehicles that invest primarily in income-producing real estate or real estate-related loans or interests, called real estate investment trusts or REITs. REITs can generally be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs, which invest the majority of their assets directly in real property, derive their income primarily from rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs, which invest the majority of their assets in real estate mortgages, derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both equity REITs and mortgage REITs.


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Master limited partnerships (MLPs)

Certain underlying funds may invest in master limited partnerships. MLPs generally engage in natural resources based activities such as the exploration, development, mining, production, processing, refining, transportation, storage and certain marketing of mineral or other natural resources.

Structured notes

Certain underlying funds may invest in structured notes. Structured notes are specially designed derivative debt instruments. The terms of the instrument may be “structured” by the purchaser and the issuer of the note. Payments of principal or interest on these notes may be linked to the value of an index (such as a currency or securities index), an individual security or a commodity. The value of these notes will normally rise or fall in response to the changes in the performance of the underlying security, index or commodity.

Short sales

Certain underlying funds may sell securities short. A short sale is a transaction in which an underlying fund sells securities it does not own in anticipation of a decline in the market price of the securities.

Securities lending

Consistent with applicable regulatory requirements, certain underlying funds may lend portfolio securities to brokers, dealers and other financial organizations meeting capital and other credit requirements in order to earn income. The loans are continuously secured by cash or liquid securities equal to no less than the market value, determined daily, of the securities loaned.

Portfolio turnover

Certain underlying funds may engage in active and frequent trading of their portfolio securities.

Portfolio rebalancing

Underlying funds may experience relatively large redemptions or investments due to a rebalancing of a fund’s investments. The impact of rebalancing is likely to be greater when the funds own, redeem or invest in a substantial portion of an underlying fund. In the event of such redemptions or subscriptions, an underlying fund could be required to sell securities or to invest cash at a time when it is not advantageous to do so. In addition, another fund may be affected by such redemptions or subscriptions if it also holds shares of the same underlying fund.

Non-publicly traded and illiquid securities

Certain underlying funds may invest in non-publicly traded and illiquid securities.

Other investments

Each fund reserves the right in certain circumstances to invest directly in the types of investments held by the underlying funds.

Each fund may also enter into futures contracts on securities or related options on futures contracts on securities that are traded on a domestic or foreign exchange or in the OTC market, and may also engage in transactions in options on securities, which may include the writing of covered put options and covered call options, the purchase of put and call options and the entry into closing transactions.

To the extent a fund invests directly in these instruments, it is subject to the same risks as an underlying fund when it invests in these instruments.

Each fund and underlying fund may also use other strategies and invest in other investments that are described, along with their risks, in the SAI. Moreover, the funds and the underlying funds might not use all of the strategies and techniques or invest in all of the types of securities described in this Prospectus or in the SAI.


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Selection process

The portfolio managers periodically adjust the allocation of each fund’s assets among different Legg Mason-affiliated funds depending upon the portfolio managers’ outlook for the equity and fixed income markets in general, particular sectors of such markets and the performance outlook for the underlying funds. The portfolio managers may invest in underlying Legg Mason-affiliated funds that have a limited performance history. In assessing the equity and fixed income markets, the portfolio managers consider a broad range of market and economic trends and quantitative factors.

Risks of investments in the underlying funds

Asset class variation risk. The underlying funds invest principally in the securities constituting their asset class (i.e., equity or fixed income). However, under normal market conditions, an underlying fund may vary the percentage of its assets in these securities, subject to any applicable regulatory requirements. Depending upon the percentage of securities in a particular asset class held by the underlying funds at any given time, and the percentage of each fund’s assets invested in various underlying funds, each fund’s actual exposure to the securities in a particular asset class may vary substantially from its Target Allocation for that asset class.

Issuer risk. The value of a security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. The value of a company’s securities may deteriorate because of a variety of factors, including disappointing earnings reports by the issuer, unsuccessful products or services, loss of major customers, major litigation against the issuer or changes in government regulations affecting the issuer or the competitive environment.

Large capitalization company risk. Large capitalization companies may fall out of favor with investors.

Small and medium capitalization company risk. An underlying fund will be exposed to additional risks as a result of its investments in the securities of small and medium capitalization companies. Small and medium capitalization companies may fall out of favor with investors, may have limited product lines, operating histories, markets or financial resources, or may be dependent upon a limited management group. The prices of securities of small and medium capitalization companies generally are more volatile than those of large capitalization companies and are more likely to be adversely affected than large capitalization companies by changes in earnings results and investor expectations or poor economic or market conditions, including those experienced during a recession. Securities of small and medium capitalization companies may underperform large capitalization companies, may be harder to sell at times and at prices an underlying fund’s portfolio managers believe appropriate and may offer greater potential for losses.

Liquidity risk. Liquidity risk exists when particular investments are difficult to sell. Although most of an underlying fund’s investments must be liquid at the time of investment, investments may become illiquid after purchase by an underlying fund, particularly during periods of market turmoil. When an underlying fund holds illiquid investments, its investments may be harder to value, especially in changing markets, and if the underlying fund is forced to sell these investments to meet redemption requests or for other cash needs, an underlying fund may suffer a loss. In addition, when there is illiquidity in the market for certain investments, securities, an underlying fund, due to limitations on illiquid investments, may be unable to achieve its desired level of exposure to a certain sector.

Growth and value investing risk. Growth or value securities as a group may be out of favor and underperform the overall equity market while the market concentrates on other types of securities. Growth securities typically are very sensitive to market movements because their market prices tend to reflect future expectations. When it appears those expectations will not be met, the prices of growth securities typically fall. Growth securities may also be more volatile than other investments because they often do not pay dividends. The value approach to investing involves the risk that value securities may remain undervalued.

Although the underlying funds do not concentrate their investments in any one industry or industry group, an underlying fund that is growth- or value-oriented may, like many growth or value funds, weight its


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investments toward certain industries, thus increasing its exposure to factors adversely affecting issuers within those industries and, indirectly, each fund’s exposure to those factors.

Stock market and interest rate risk. The securities markets are volatile and the market prices of each underlying fund’s securities may decline generally. Securities fluctuate in price based on changes in a company’s financial condition and overall market and economic conditions, such as real or perceived adverse economic or political conditions, inflation, changes in interest or currency rates, lack of liquidity in the bond markets or adverse investor sentiment. Changes in market conditions will not have the same impact on all types of securities. The value of a security may also fall due to specific conditions that affect a particular sector of the securities market or a particular issuer. If the market prices of the securities owned by an underlying fund fall, the value of each fund’s investment in that underlying fund will decline.

When interest rates rise, the value of fixed income securities generally falls. A change in interest rates will not have the same impact on all fixed income securities. Generally, the longer the maturity or duration of a fixed income security, the greater the impact of a rise in interest rates on the security’s value. In addition, different interest rate measures (such as short- and long-term interest rates and U.S. and foreign interest rates), or interest rates on different types of securities or securities of different issuers, may not necessarily change in the same amount or in the same direction.

Certain fixed income securities pay interest at variable or floating rates. Variable rate securities tend to reset at specified intervals, while floating rate securities may reset whenever there is a change in a specified index rate. In most cases, these reset provisions reduce the impact of changes in market interest rates on the value of the security. However, some securities do not track the underlying index directly, but reset based on formulas that may produce a leveraging effect; others may also provide for interest payments that vary inversely with market rates. The market prices of these securities may fluctuate significantly when interest rates change.

Credit risk. If an obligor (such as the issuer itself or a party offering credit enhancement) for a security held by an underlying fund fails to pay, otherwise defaults, is perceived to be less creditworthy, becomes insolvent or files for bankruptcy or a security’s credit rating is downgraded or the credit quality or value of any underlying assets declines, the value of a fund’s investment in the underlying fund could decline. If an underlying fund enters into financial contracts (such as certain derivatives, repurchase agreements, reverse repurchase agreements, and when-issued, delayed delivery and forward commitment transactions), the underlying fund will be subject to the credit risk presented by the counterparty. In addition, an underlying fund may incur expenses to protect its interest in securities experiencing these events. Credit risk is broadly gauged by the credit ratings of the securities in which an underlying fund invests. However, ratings are only the opinions of the companies issuing them and are not guarantees as to quality. Securities rated in the lowest category of investment grade (Baa/BBB) may possess certain speculative characteristics.

An underlying fund is subject to greater levels of credit risk to the extent it invests in below investment grade debt securities (that is, securities rated below Baa/BBB or unrated securities of comparable quality), or “junk bonds.” These securities have a higher risk of issuer default, because, among other reasons, issuers of junk bonds often have more debt in relation to total capitalization than issuers of investment grade securities. These securities are considered speculative, tend to be less liquid and are more difficult to value than higher rated securities and may involve major risk of exposure to adverse conditions and negative sentiments. These securities may be in default or in danger of default as to principal and interest. Unrated securities of comparable quality share these risks.

Prepayment or call risk. Many fixed income securities give the issuer the option to repay or call the security prior to its maturity date. Issuers often exercise this right when interest rates fall. Accordingly, if an underlying fund holds a fixed income security subject to prepayment or call risk, it may not benefit fully from the increase in value that other fixed income securities generally experience when interest rates fall. Upon prepayment of the security, the underlying fund would also be forced to reinvest the proceeds at then current yields, which would be lower than the yield of the security that was paid off. In addition, if the


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underlying fund purchases a fixed income security at a premium (at a price that exceeds its stated par or principal value), the underlying fund may lose the amount of the premium paid in the event of prepayment.

Extension risk. When interest rates rise, repayments of fixed income securities, particularly asset- and mortgage-backed securities, may occur more slowly than anticipated, extending the effective duration of these fixed income securities and locking in below market interest rates. This may cause an underlying fund’s share price to be more volatile.

Foreign investments risk. An underlying fund’s investments in securities of foreign issuers involve greater risk than investments in securities of U.S. issuers. Foreign countries in which an underlying fund may invest may have markets that are less liquid and more volatile than markets in the United States, may suffer from political or economic instability and may experience negative government actions, such as currency controls or seizures of private businesses or property. In some foreign countries, less information is available about issuers and markets because of less rigorous accounting and regulatory standards than in the United States. Foreign withholdings may reduce an underlying fund’s returns. Currency fluctuations could erase investment gains or add to investment losses. Because the value of a depositary receipt is dependent upon the market price of an underlying foreign security, depositary receipts are subject to most of the risks associated with investing in foreign securities directly.

The risks of investing in foreign securities are heightened when investing in issuers in emerging market countries. Emerging markets securities are often particularly sensitive to market movements because their market prices tend to reflect future expectations. When it appears those expectations will not be met, the prices of these securities typically fall. In a changing and developing market, an underlying fund’s adviser may have difficulty selling the underlying fund’s portfolio securities in acceptable amounts or at acceptable prices.

Commodities risk. An underlying fund’s investment in commodity-linked instruments may subject the underlying fund to greater volatility than investments in traditional securities. The value of commodity-linked instruments may be affected by changes in overall market movements, commodity index volatility, prolonged or intense speculation by investors, changes in interest rates or factors affecting a particular industry or commodity, such as drought, floods, other weather phenomena, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.

Portfolio selection risk. The value of your investment may decrease if an underlying fund’s portfolio managers’ judgment about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements is incorrect.

Inflation-indexed securities risk. The value of inflation-indexed fixed income securities generally fluctuates in response to changes in real interest rates, which are in turn tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-indexed securities. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed securities. Although the principal value of inflation-indexed securities declines in periods of deflation, holders at maturity receive no less than the par value of the security. However, if an underlying fund purchases inflation-indexed securities in the secondary market whose principal values have been adjusted upward due to inflation since issuance, it may experience a loss if there is a subsequent period of deflation. If inflation is lower than expected during the period an underlying fund holds an inflation-indexed security, the underlying fund may earn less on the security than on a conventional bond.

If real interest rates rise (i.e., if interest rates rise for reasons other than inflation, for example, due to changes in currency exchange rates), the value of inflation-indexed securities held by an underlying fund will decline. Moreover, because the principal amount of inflation-indexed securities would be adjusted downward during a period of deflation, an underlying fund will be subject to deflation risk with respect to its investments in these securities. Inflation-indexed securities are tied to indices that are calculated based on rates of inflation for prior periods.

REITs risk. Investments in REITs expose an underlying fund to risks similar to investing directly in real estate. The value of these underlying investments may be affected by changes in the value of the underlying real


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estate, the quality of the property management, the creditworthiness of the issuer of the investments, and changes in property taxes, interest rates and the real estate regulatory environment. Investments in REITs are also affected by general economic conditions.

ETF risk. Investing in an ETF will give an underlying fund exposure to the securities comprising the index on which the ETF is based and will expose the underlying fund to risks similar to those of investing directly in those securities. An underlying fund may invest in “short ETFs,” which carry additional risks because they may invest in a variety of derivatives and may engage in short sales. Unlike shares of typical mutual funds or unit investment trusts, shares of ETFs are traded on an exchange and may trade throughout a trading day. ETFs are bought and sold based on market values and not at net asset value and, therefore, may trade at either a premium or discount to net asset value. However, the trading prices of index-based ETFs tend to closely track the actual net asset value of the underlying portfolios. An underlying fund will generally gain or lose value on holdings of an ETF consistent with the performance of the index on which the ETF is based. An underlying fund will pay brokerage commissions in connection with the purchase and sale of shares of ETFs. ETFs that invest in commodities may be, or may become, subject to regulatory trading limits that could hurt the value of their securities.

MLP risk. The value of an investment in an MLP may be directly affected by the prices of natural resources commodity prices. The volatility and interrelationships of commodity prices can also indirectly affect certain MLPs due to the potential impact on the volume of commodities transported, processed, stored or distributed. An underlying fund’s investment in an MLP may be adversely affected by market perceptions that the performance and distributions or dividends of MLPs are directly tied to commodity prices.

Convertible securities risk. Convertible securities are subject both to the stock market risk associated with equity securities and to the credit and interest rate risks associated with fixed income securities. When the market price of the equity security underlying a convertible security decreases, the convertible security tends to trade on the basis of its yield and other fixed income characteristics. As the market price of the equity security underlying a convertible security rises, the convertible security tends to trade on the basis of its equity conversion features.

Recent market events risk. The equity and debt capital markets in the United States and internationally have experienced unprecedented volatility. This financial crisis has caused a significant decline in the value and liquidity of many securities. This environment could make identifying investment risks and opportunities especially difficult for the subadviser. These market conditions may continue or get worse. In response to the crisis, the U.S. and other governments and the Federal Reserve and certain foreign central banks have taken steps to support financial markets. The withdrawal of this support could also negatively affect the value and liquidity of certain securities. In addition, legislation recently enacted in the United States calls for changes in many aspects of financial regulation. The impact of the legislation on the markets, and the practical implications for market participants, may not be fully known for some time.

Portfolio turnover risk. Active and frequent trading may lead to the realization and distribution to shareholders of higher short-term capital gains, which would increase their tax liability. Frequent trading also increases transaction costs, which could detract from an underlying fund’s performance.

Sovereign debt risk. Sovereign government and supranational debt involves many of the risks of foreign and emerging market investments as well as the risk of debt moratorium, repudiation or renegotiation, and an underlying fund may be unable to enforce its rights against the issuers.

Derivatives risk. Using derivatives, especially for non-hedging purposes, may involve greater risks to an underlying fund than investing directly in securities, particularly as these instruments may be very complex and may not behave in the manner anticipated. Certain derivatives transactions may have a leveraging effect on an underlying fund. Even a small investment in derivative contracts can have a significant impact on an underlying fund’s stock market, interest rate or currency exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. An underlying fund may not fully benefit from or may lose money on


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derivatives if changes in their value do not correspond as anticipated to changes in the value of the underlying fund’s holdings. Using derivatives may increase volatility, which is the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. Holdings of derivatives also can make an underlying fund less liquid and harder to value, especially in declining markets. Derivatives are subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation.

Recent legislation calls for new regulation of the derivatives markets. The extent and impact of the regulation are not yet fully known and may not be for some time. New regulation of derivatives may make them more costly, may limit their availability, or may otherwise adversely affect their value or performance.

Risks associated with the use of derivatives are magnified to the extent that a large portion of the underlying fund’s assets are committed to derivatives in general or are invested in just one or a few types of derivatives.

Structured notes are subject to interest rate risk and are also subject to credit risk with respect both to the borrower and to the issuer of the underlying investment. If the underlying investment or index does not perform as anticipated, the investment might pay less interest than the stated coupon payment or repay less principal upon maturity. The terms of structured notes may provide that in certain circumstances no principal is due at maturity, which may result in a complete loss of invested capital. Structured notes may be more volatile, less liquid and more difficult to accurately price than less complex securities and instruments or more traditional debt securities.

In times of market turmoil or abrupt change, many investors and market makers may hesitate to purchase complex instruments or even quote prices for them, which may make valuation difficult and/or drive down the price.

Credit default swaps risk. Credit default swap contracts, a type of derivative instrument, involve special risks and may result in losses to an underlying fund. Credit default swaps may in some cases be illiquid, and they increase credit risk since the underlying fund has exposure to both the issuer of the referenced obligation and the counterparty to the credit default swap.

The absence of a central exchange or market for swap transactions could lead, in some instances, to difficulties in trading and valuation, especially in the event of market disruptions. Recent legislation, noted above, will require most swaps to be executed through a centralized exchange or regulated facility and be cleared through a regulated clearinghouse. The swap market could be disrupted or limited as a result of this legislation, which could adversely affect an underlying fund. Moreover, the establishment of a centralized exchange or market for swap transactions may not result in swaps being easier to trade or value.

Portfolio rebalancing risk. Underlying funds may experience relatively large redemptions or investments due to a rebalancing of each fund’s investments. In such event, an underlying fund may be required to sell securities or to invest cash at a time when it is not advantageous to do so. Rebalancing may increase brokerage and/or other transaction costs of an underlying fund, increase the fund’s expenses or result in the fund’s becoming too small to be economically viable. Rebalancing may also adversely affect an underlying fund’s performance and thus each fund’s performance. The impact of rebalancing is likely to be greater when the funds own, redeem or invest in a substantial portion of an underlying fund.

The funds’ subadviser will seek to cooperate with the advisers of the underlying funds to minimize any adverse impact on the underlying funds. The advisers of the underlying funds may take such actions as they deem appropriate to minimize such adverse impact, considering the potential benefits of such investments to the underlying fund and consistent with their obligations to the underlying funds. Such actions may delay the rebalancing of each fund’s investments in the event of significant market or other events that may require more rapid action.

Repurchase agreements risk. Repurchase agreements could involve certain risks in the event of default or insolvency of the seller, including losses and possible delays or restrictions upon an underlying fund’s


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ability to dispose of the underlying securities. To the extent that, in the meantime, the value of the securities that the underlying fund has purchased has decreased, the fund could experience a loss.

Reverse repurchase agreements and leveraging risk. An underlying fund may take on leveraging risk by, among other things, engaging in derivative transactions or reverse repurchase agreements. When an underlying fund engages in transactions that have a leveraging effect on its portfolio, the value of the underlying fund will be more volatile and all other risks tend to be compounded. This is because leverage generally magnifies the effect of any increase or decrease in the value of the underlying fund’s underlying assets or creates investment risk with respect to a larger pool of assets than the underlying fund would otherwise have. Engaging in such transactions may cause the underlying fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations or meet segregation requirements.

Short sales risk. A short sale of a security involves the risk that instead of declining, the price of the security sold short will rise. If the price of the security sold short increases between the time of the short sale and the time an underlying fund replaces the borrowed security, the underlying fund will realize a loss. The short sale of securities involves the possibility of a theoretically unlimited loss since there is a theoretically unlimited potential for the market price of the security sold short to increase.

Securities lending risk. Lending securities involves the risk of possible delay in receiving additional collateral, delay in recovery of the securities when the loan is called or possible loss of collateral should the borrower fail financially. An underlying fund could also lose money if its short-term investment of the cash collateral declines in value over the period of the loan.

Cash management and defensive investing risk. The value of the investments held by the underlying funds for cash management or defensive investing purposes may be affected by changing interest rates and by changes in credit ratings of the investments. If an underlying fund holds cash uninvested, it will be subject to the credit risk of the depository institution holding the cash. If a significant amount of an underlying fund’s assets are used for cash management or defensive investing purposes, it will be more difficult for the fund to achieve its objective.

Non-diversification risk. Each fund is classified as “non-diversified,” which means it may invest a larger percentage of its assets in a small number of underlying funds than a diversified fund. To the extent each fund invests its assets in fewer underlying funds, the fund will be more susceptible to negative events affecting those funds. The underlying funds in which the funds invest may be either diversified or non-diversified.

Risk of increase in expenses. Your actual costs of investing in each fund may be higher than the expenses shown in “Annual fund operating expenses” for a variety of reasons. For example, expense ratios may be higher than those shown if a fee limitation is changed or terminated or if average net assets decrease. Net assets are more likely to decrease and fund expense ratios are more likely to increase when markets are volatile.

Valuation risk. Many factors may influence the price at which an underlying fund could sell any particular portfolio investment. The sales price may well differ — higher or lower — from an underlying fund’s last valuation, and such differences could be significant, particularly for illiquid securities and securities that trade in relatively thin markets and/or markets that experience extreme volatility. If market conditions make it difficult to value some investments, an underlying fund may value these investments using more subjective methods, such as fair value methodologies. Investors who purchase or redeem fund shares on days when an underlying fund is holding fair-valued securities may receive a greater or lesser number of shares, or greater or lower redemption proceeds, than they would have received if the underlying fund had not fair-valued the security or had used a different valuation methodology. The value of foreign securities and currencies may be materially affected by events after the close of the market on which they are valued, but before the underlying fund determines its net asset value.


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Please note that there are other factors that could adversely affect your investment and that could prevent a fund from achieving its investment objective. More information about risks appears in the SAI. Before investing, you should carefully consider the risks that you will assume.

Portfolio holdings

A description of the funds’ policies and procedures with respect to the disclosure of their portfolio holdings is available in the SAI. Each fund posts its complete portfolio holdings at http://www.leggmason.com/individualinvestors/prospectuses (click on the name of the fund) on a quarterly basis. Each fund intends to post its complete portfolio holdings 14 calendar days following the quarter-end. Each fund intends to post partial information concerning the fund’s portfolio holdings (such as top 10 holdings or sector breakdowns, for example) on the Legg Mason funds’ website on a monthly basis. Each fund intends to post this partial information 10 business days following each month-end. Such information will remain available until the next month’s or quarter’s holdings are posted.


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More on fund management cont’d

forgone or reimbursed to a class during the same fiscal year if the class’ total annual operating expenses have fallen to a level below the limit described above. In no case will the manager recapture any amount that would result, on any particular business day of the fund, in the class’ total annual operating expenses exceeding the applicable limits described above or any other lower limit then in effect.

Distribution

LMIS, a wholly-owned broker/dealer subsidiary of Legg Mason, serves as each fund’s sole and exclusive distributor.

Each fund has adopted a Rule 12b-1 shareholder services and distribution plan. Under the plans, each fund (except Allocation 30%) pays distribution and/or service fees based on annualized percentages of average daily net assets, of up to 0.25% for Class A shares; up to 1.00% for Class B shares; up to 1.00% for Class C shares; up to 0.25% for Class FI shares; up to 0.50% for Class R shares; and up to 1.00% for Class R1 shares. Allocation 30% pays distribution and/or service fees based on annualized percentages of average daily net assets, of up to 0.25% for Class A shares; up to 0.75% for Class B shares; up to 0.70% for Class C shares; up to 0.25% for Class FI shares; up to 0.50% for Class R shares; and up to 1.00% for Class R1 shares. These fees are an ongoing expense and, over time, will increase the cost of your investment and may cost you more than other types of sales charges. Class I shares are not subject to distribution and/or service fees under the plans.

In addition, the distributor, the manager and/or their affiliates make payments for distribution, shareholder servicing, marketing and promotional activities and related expenses out of their profits and other available sources, including profits from their relationships with the funds. These payments are not reflected as additional expenses in the fee table contained in this Prospectus. The recipients of these payments may include a fund’s distributor and affiliates of the manager, as well as non-affiliated broker/dealers, insurance companies, financial institutions and other financial intermediaries through which investors may purchase shares of the fund, including your financial intermediary. The total amount of these payments is substantial, may be substantial to any given recipient and may exceed the costs and expenses incurred by the recipient for any fund-related marketing or shareholder servicing activities. The payments described in this paragraph are often referred to as “revenue sharing payments.” Revenue sharing arrangements are separately negotiated.

Revenue sharing payments create an incentive for an intermediary or its employees or associated persons to recommend or sell shares of a fund to you. Contact your financial intermediary for details about revenue sharing payments it receives or may receive. Revenue sharing payments, as well as payments under the shareholder services and distribution plan (where applicable), also benefit the manager, the distributor and their affiliates to the extent the payments result in more assets being invested in the fund on which fees are being charged.

Possible conflicts of interest

The funds’ manager serves as manager of the underlying Legg Mason and Western Asset funds and is affiliated with the manager of the underlying Royce funds. In addition, each fund may invest in certain underlying funds for which the funds’ subadviser serves as adviser. Furthermore, the funds’ Board serves in a similar position for certain underlying Legg Mason equity funds, and certain of the funds’ officers serve in similar positions for the underlying Legg Mason and Western Asset funds. Thus, if the interests of the funds and the underlying funds were ever to diverge, it is possible that a conflict of interest could affect how the Board and officers of the funds fulfill their fiduciary duties to the funds and the underlying funds. For example, the subadviser may have an incentive to allocate the funds’ assets to those funds for which it serves as adviser and receives advisory fees. The funds’ Board believes that the funds have been structured to avoid these concerns. However, a situation could occur where proper action for the funds could be adverse to the interests of an underlying fund, or the reverse. If such situation were to arise, the funds’ Board and officers, the affected underlying funds and LMPFA would carefully analyze the situation and take all steps they believe reasonable to mitigate, and where possible eliminate, the potential conflict. Moreover, the funds have adopted limitations on aggregate investments in the underlying funds to reduce conflicts. The manager and the subadviser engage in close and continuous monitoring to avoid, insofar as is possible, these concerns.


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Choosing a class of shares to buy

Individual investors can generally invest in Class A, Class B and Class C shares. Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your Service Agent (as defined below), however, may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment. Individual investors who held Class I shares prior to November 20, 2006 may continue to invest in Class I shares.

Retirement Plan and Institutional Investors and Clients of Eligible Financial Intermediaries should refer to “Retirement and Institutional Investors – eligible investors” below for a description of the classes available to them. Each class has different sales charges and expenses, allowing you to choose a class that may be appropriate for you.

When choosing which class of shares to buy, you should consider:

How much you plan to invest

How long you expect to own the shares

The expenses paid by each class detailed in the fee table and example at the front of this Prospectus

Whether you qualify for any reduction or waiver of sales charges

Availability of share classes

If you are choosing between Class A and Class B shares, it will in almost all cases be the more economical choice for you to purchase Class A shares if you plan to purchase shares in an amount of $100,000 or more (whether in a single purchase or through aggregation of eligible holdings). This is because of the reduced sales charge available on larger investments of Class A shares and the lower ongoing expenses of Class A shares compared to Class B shares.

If you intend to invest for only a few years, the effect of Class B contingent deferred sales charges on redemptions made within five years of purchase, as well as the effect of higher expenses of that class, might make an investment in Class C shares more appropriate. There is no initial sales charge on Class C shares, and the contingent deferred sales charge does not apply to shares redeemed one year or more after purchase.

However, if you plan to invest a large amount and/or your investment horizon is five years or more, Class C shares might not be as advantageous as Class A shares. The annual distribution and/or service fees on Class C shares may cost you more over the longer term than the front-end sales charge you would have paid for larger purchases of Class A shares.

Each class of shares is authorized to pay fees for recordkeeping services to Service Agents. As a result, operating expenses of classes that incur new or additional recordkeeping fees may increase over time.

You may buy shares:

Through banks, brokers, dealers, insurance companies, investment advisers, financial consultants or advisers, mutual fund supermarkets and other financial intermediaries that have entered into an agreement with the distributor to sell shares of the fund (each called a “Service Agent”)

Directly from the fund

Your Service Agent may provide shareholder services that differ from the services provided by other Service Agents. Services provided by your Service Agent may vary by class. You should ask your Service Agent to explain the shareholder services it provides for each class and the compensation it receives in connection with each class. Remember that your Service Agent may receive different compensation depending on the share class in which you invest.

Your Service Agent may not offer all classes of shares. You should contact your Service Agent for further information.


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Choosing a class of shares to buy cont’d

More information about the funds’ classes of shares is available through the Legg Mason funds’ website. You’ll find detailed information about sales charges and ways you can qualify for reduced or waived sales charges, including:

The front-end sales charges that apply to the purchase of Class A shares

The contingent deferred sales charges that apply to the redemption of Class B shares, Class C shares and certain Class A shares (redeemed within one year)

Who qualifies for lower sales charges on Class A shares

Who qualifies for a sales load waiver

To visit the website, go to http://www.leggmason.com/individualinvestors/products, and click on the name of a fund in the dropdown menu.


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Comparing the funds’ classes

The following table compares key features of the funds’ classes. You should review the fee table and example for each fund at the front of this Prospectus carefully before choosing your share class. Your Service Agent can help you choose a class that may be appropriate for you. Please contact your Service Agent regarding the availability of Class B, Class FI, Class R or Class R1 shares. You may be required to provide appropriate documentation confirming your eligibility to invest in Class FI, Class R or Class R1 shares. Your Service Agent may receive different compensation depending upon which class you choose.


	Key features	Initial sales charge	Contingent deferred sales charge	Annual distribution and/or service fees	Exchange privilege¹
Class A	Ÿ Initial sales charge Ÿ You may qualify for reduction or waiver of initial sales charge Ÿ Generally lower annual expenses than Class B and Class C	Up to 5.75% (for Allocation 85%, Allocation 70% and Allocation 50%); up to 4.25% (for Allocation 30%); reduced or waived for large purchases and certain investors. No charge for purchases of $1 million or more	1.00% on purchases of $1 million or more if you redeem within 1 year of purchase; waived for certain investors	0.25% of average daily net assets	Class A shares of funds sold by the distributor
Class B	Ÿ No initial sales charge Ÿ Contingent deferred sales charge declines over time Ÿ Converts to Class A after approximately 8 years Ÿ Generally higher annual expenses than Class A	None	Up to 5.00% charged when you redeem shares of Allocation 85%, Allocation 70% or Allocation 50%; up to 4.50% charged when you redeem shares of Allocation 30%. This charge is reduced over time and there is no contingent deferred sales charge after 5 years; waived for certain investors	1.00% of average daily net assets (for Allocation 85%, Allocation 70% and Allocation 50%); 0.75% of average daily net assets (for Allocation 30%)	Class B shares of funds sold by the distributor
Class C	Ÿ No initial sales charge Ÿ Contingent deferred sales charge for only 1 year Ÿ Does not convert to Class A Ÿ Generally higher annual expenses than Class A	None	1.00% if you redeem within 1 year of purchase; waived for certain investors	1.00% of average daily net assets (for Allocation 85%, Allocation 70% and Allocation 50%); 0.70% of average daily net assets (for Allocation 30%)	Class C shares of funds sold by the distributor
Class FI	Ÿ No initial or contingent deferred sales charge Ÿ Only offered to Clients of Eligible Financial Intermediaries and eligible Retirement Plans	None	None	0.25% of average daily net assets	Class FI shares of funds sold by the distributor


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Comparing the funds’ classes cont’d


	Key features	Initial sales charge	Contingent deferred sales charge	Annual distribution and/or service fees	Exchange privilege¹
Class R	Ÿ No initial or contingent deferred sales charge Ÿ Only offered to eligible Retirement Plans with omnibus accounts held on the books of the fund	None	None	0.50% of average daily net assets	Class R shares of funds sold by the distributor
Class R1	Ÿ No initial or contingent deferred sales charge Ÿ Only offered to eligible Retirement Plans with omnibus accounts held on the books of the fund Ÿ Generally higher annual expenses than Class R	None	None	1.00% of average daily net assets	Class R1 shares of funds sold by the distributor
Class I	Ÿ No initial or contingent deferred sales charge Ÿ Only offered to institutional and other eligible investors Ÿ Generally lower annual expenses than all classes	None	None	None	Class I shares of funds sold by the distributor

¹	Ask your Service Agent about the funds available for exchange.


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Sales charges

Class A shares

You buy Class A shares at the offering price, which is the net asset value plus a sales charge. You pay a lower rate as the size of your investment increases to certain levels called breakpoints. You do not pay a sales charge on a fund’s distributions or dividends that you reinvest in additional Class A shares.

The table below shows the rate of sales charge you pay, depending on the amount you purchase. It also shows the amount of broker/dealer compensation that will be paid out of the sales charge if you buy shares from a Service Agent. For Class A shares sold by the distributor, the distributor will receive the sales charge imposed on purchases of Class A shares (or any contingent deferred sales charge paid on redemptions) and will retain the full amount of such sales charge. Service Agents will receive a distribution and/or service fee payable on Class A shares at an annual rate of up to 0.25% of the average daily net assets represented by the Class A shares serviced by them.


	Allocation 85%, Allocation 70% and Allocation 50%					Allocation 30%
Amount of Investment	Sales charge as % of offering price		Sales charge as % of net amount invested		Broker/dealer commission as % of offering price	Sales charge as % of offering price		Sales charge as % of net amount invested		Broker/dealer commission as % of offering price
Less than $25,000		5.75		6.10	5.00		4.25		4.44	4.00
$25,000 but less than $50,000		5.00		5.26	4.25		4.25		4.44	4.00
$50,000 but less than $100,000		4.50		4.71	3.75		4.25		4.44	4.00
$100,000 but less than $250,000		3.50		3.63	2.75		3.50		3.63	3.00
$250,000 but less than $500,000		2.50		2.56	2.00		2.50		2.56	2.00
$500,000 but less than $750,000		2.00		2.04	1.60		2.00		2.04	1.60
$750,000 but less than $1 million		1.50		1.52	1.20		1.50		1.52	1.20
$1 million or more¹		-0-		-0-	up to 1.00		-0-		-0-	up to 1.00

The distributor may pay a commission of up to 1.00% to a Service Agent for purchase amounts of $1 million or more. In such cases, starting in the thirteenth month after purchase, the Service Agent will also receive an annual distribution and/or service fee of up to 0.25% of the average daily net assets represented by the Class A shares held by its clients. Prior to the thirteenth month, the distributor will retain this fee. Where the Service Agent does not receive the payment of this commission, the Service Agent will instead receive the annual distribution and/or service fee starting immediately after purchase. Please contact your Service Agent for more information.

Investments of $1,000,000 or more

You do not pay an initial sales charge when you buy $1,000,000 or more of Class A shares. However, if you redeem these Class A shares within one year of purchase, you will pay a contingent deferred sales charge of 1.00%.

Qualifying for a reduced Class A sales charge

There are several ways you can combine multiple purchases of Class A shares of funds sold by the distributor to take advantage of the breakpoints in the sales charge schedule. In order to take advantage of reductions in sales charges that may be available to you when you purchase fund shares, you must inform your Service Agent or the fund if you are eligible for a letter of intent or a right of accumulation and if you own shares of other funds that are eligible to be aggregated with your purchases. Certain records, such as account statements, may be necessary in order to verify your eligibility for a reduced sales charge.

Accumulation Privilege – allows you to combine the current value of Class A shares of a fund with other shares of funds sold by the distributor that are owned by:

you or

your spouse, and children under the age of 21

with the dollar amount of your next purchase of Class A shares for purposes of calculating the initial sales charges.

If you hold fund shares in accounts at two or more Service Agents, please contact your Service Agents to determine which shares may be combined.


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Sales charges cont’d

Shares of money market funds sold by the distributor acquired by exchange from other funds offered with a sales charge may be combined. Please contact your Service Agent for additional information.

Certain trustees and fiduciaries may be entitled to combine accounts in determining their sales charge.

Letter of Intent – allows you to purchase Class A shares of funds sold by the distributor over a 13-month period and pay the same sales charge, if any, as if all shares had been purchased at once. At the time you enter into the letter of intent, you select your asset goal amount. Generally, purchases of shares of funds sold by the distributor that are purchased during the 13-month period by:

you or

your spouse, and children under the age of 21

are eligible for inclusion under the letter of intent, based on the public offering price at the time of the purchase and any capital appreciation on those shares. In addition, you can include toward your asset goal amount the current value of any eligible holdings.

If you hold shares of funds sold by the distributor in accounts at two or more Service Agents, please contact your Service Agents to determine which shares may be credited toward your letter of intent asset goal.

Shares of money market funds sold by the distributor acquired by exchange from other funds offered with a sales charge may be credited toward your letter of intent asset goal. Please contact your Service Agent for additional information.

If you do not meet your asset goal amount, shares in the amount of any sales charges due, based on the amount of your actual purchases, will be redeemed from your account.

Waivers for certain Class A investors

Class A initial sales charges are waived for certain types of investors, including:

Employees of Service Agents

Investors who redeemed Class A shares of a fund sold by the distributor in the past 60 days, if the investor’s Service Agent is notified

Directors and officers of any Legg Mason-sponsored fund

Employees of Legg Mason and its subsidiaries

Investors investing through certain Retirement Plans

If you qualify for a waiver of the Class A initial sales charge, you must notify your Service Agent or the fund at 1-877-721-1926 at the time of purchase and provide sufficient information at the time of purchase to permit verification that the purchase qualifies for the initial sales charge waiver.

If you want to learn about additional waivers of Class A initial sales charges, contact your Service Agent, consult the SAI or visit the Legg Mason funds’ website, http://www.leggmason.com/individualinvestors/products, and click on the name of the fund in the dropdown menu.

Class B shares

You buy Class B shares at net asset value with no initial sales charge. However, if you redeem your Class B shares within five years of your purchase payment, you will pay a contingent deferred sales charge. The contingent deferred sales charge decreases as the number of years since your purchase payment increases. Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your Service Agent, however, may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.


Year after Purchase	1st			2nd			3rd			4th			5th			6th through 8th

Contingent deferred sales charge for:
Allocation 85%, Allocation 70% and Allocation 50%		5.00	%		4.00	%		3.00	%		2.00	%		1.00	%		0%
Allocation 30%		4.50	%		4.00	%		3.00	%		2.00	%		1.00	%		0%


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LMIS generally will pay Service Agents selling Class B shares a commission of up to 4.00% of the purchase price of the Class B shares they sell. LMIS will retain the contingent deferred sales charges. The funds (except for Allocation 30%) pay a distribution and/or service fee of up to 1.00% of such fund’s average daily net assets represented by Class B shares. Allocation 30% pays a distribution and/or service fee of up to 0.75% of such fund’s average daily net assets represented by Class B shares. Service Agents receive an annual distribution and/or service fee of up to 0.25% of the average daily net assets represented by the Class B shares serviced by them.

Class B conversion

After approximately 8 years, Class B shares automatically convert into Class A shares. This helps you because Class A shares have lower annual expenses. Your Class B shares will convert to Class A shares as follows:


Shares issued: at initial purchase	Shares issued: on reinvestment of dividends and distributions	Shares issued: upon exchange from another fund sold by LMIS
Approximately 8 years after the date of purchase	In same proportion as the number of Class B shares converting is to total Class B shares you own (excluding shares issued as dividends)	On the date the shares originally acquired would have converted into Class A shares

Class C shares

You buy Class C shares at net asset value with no sales charge. However, if you redeem your Class C shares within one year of your purchase, you will pay a contingent deferred sales charge of 1.00%.

LMIS generally will pay Service Agents selling Class C shares a commission of up to 1.00% (in the case of Allocation 85%, Allocation 70% and Allocation 50%) or 0.75% (in the case of Allocation 30%) of the purchase price of the Class C shares they sell. LMIS will retain the contingent deferred sales charges and an annual distribution and/or service fee of up to 1.00% (in the case of Allocation 85%, Allocation 70% and Allocation 50%) and up to 0.70% (in the case of Allocation 30%) of the average daily net assets represented by the Class C shares serviced by these Service Agents until the thirteenth month after purchase. Starting in the thirteenth month after purchase, these Service Agents will receive an annual distribution and/or service fee of up to 1.00% (in the case of Allocation 85%, Allocation 70% and Allocation 50%) or up to 0.70% (in the case of Allocation 30%) of the average daily net assets represented by the Class C shares serviced by them.

Class FI, Class R and Class R1 shares

You buy Class FI, Class R and Class R1 shares at net asset value with no initial sales charge and no contingent deferred sales charge when redeemed.

Service Agents receive an annual distribution and/or service fee of up to 0.25% of the average daily net assets represented by Class FI shares serviced by them, up to 0.50% of the average daily net assets represented by Class R shares serviced by them and up to 1.00% of the average daily net assets represented by Class R1 shares serviced by them.

Class I shares

You buy Class I shares at net asset value with no initial sales charge and no contingent deferred sales charge when redeemed.

Class I shares are not subject to any distribution and/or service fees.


62		Legg Mason Lifestyle Funds

More about contingent deferred sales charges

The contingent deferred sales charge is based on the net asset value at the time of purchase or redemption, whichever is less, and therefore you do not pay a sales charge on amounts representing appreciation or depreciation.

In addition, you do not pay a contingent deferred sales charge:

When you exchange shares for shares of another fund sold by the distributor

On shares representing reinvested distributions and dividends

On shares no longer subject to the contingent deferred sales charge

Each time you place a request to redeem shares, a fund will first redeem any shares in your account that are not subject to a contingent deferred sales charge and then redeem the shares in your account that have been held the longest.

If you redeem shares of a fund sold by the distributor and pay a contingent deferred sales charge, you may, under certain circumstances, reinvest all or part of the redemption proceeds within 60 days and receive pro rata credit for any contingent deferred sales charge imposed on the prior redemption. Please contact your Service Agent for additional information.

The distributor receives contingent deferred sales charges as partial compensation for its expenses in selling shares, including the payment of compensation to your Service Agent.

Contingent deferred sales charge waivers

The contingent deferred sales charge for each share class will generally be waived:

On payments made through certain systematic withdrawal plans

On certain distributions from a Retirement Plan

For Retirement Plans with omnibus accounts held on the books of the fund

For involuntary redemptions of small account balances

For 12 months following the death or disability of a shareholder

If you want to learn more about additional waivers of contingent deferred sales charges, contact your Service Agent, consult the SAI or visit the Legg Mason funds’ website, http://www.leggmason.com/individualinvestors/products, and click on the name of a fund in the dropdown menu.


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Retirement and Institutional Investors — eligible investors

General — eligible investors

Effective July 1, 2011, Class B shares will be closed to new purchases by new and existing investors. Your Service Agent, however, may no longer offer Class B shares as of an earlier date. Class B shares will continue to be available for incoming exchanges and for dividend reinvestment.

Retirement Plans

“Retirement Plans” include 401(k) plans, 457 plans, employer-sponsored 403(b) plans, profit-sharing plans, non-qualified deferred compensation plans and other similar employer-sponsored retirement plans. Retirement Plans do not include individual retirement vehicles, such as traditional and Roth individual retirement accounts, Coverdell education savings accounts, individual 403(b)(7) custodial accounts, Keogh plans, SEPs, SARSEPs, SIMPLE IRAs or similar accounts.

Retirement Plans with omnibus accounts held on the books of a fund can generally invest in Class C, Class FI, Class R, Class R1 and Class I shares.

Although Retirement Plans with omnibus accounts held on the books of a fund are not subject to minimum initial investment requirements for any of these share classes, certain investment minimums may be imposed by a financial intermediary. The distributor may impose certain additional requirements. Please contact your Service Agent for more information.

Class A and Class B shares are no longer offered through Service Agents for Retirement Plans with omnibus accounts held on the books of a fund, with limited exceptions. Class A shares will cease to be available to new Retirement Plan investors through a Service Agent if the Service Agent makes Class FI shares available. Class C shares will cease to be available to new Retirement Plan investors through a Service Agent if the Service Agent makes Class R1 shares available. Please see below for additional information.

Other Retirement Plans

“Other Retirement Plans” include Retirement Plans investing through brokerage accounts and also include certain Retirement Plans with direct relationships to a fund that are neither Institutional Investors nor investing through omnibus accounts. Individual retirement vehicles, such as IRAs, may also choose between these share classes. Other Retirement Plans and individual retirement vehicles are treated like individual investors for purposes of determining sales charges and any applicable sales charge reductions or waivers.

Other Retirement Plan investors can generally invest in Class A and Class C shares. Class B shares are available only as described above under “General—eligible investors.”

Clients of Eligible Financial Intermediaries

“Clients of Eligible Financial Intermediaries” are investors who invest in a fund through financial intermediaries that (i) charge such investors an ongoing fee for advisory, investment, consulting or similar services, or (ii) have entered into an agreement with the distributor to offer Class I shares through a no-load network or platform (“Eligible Investment Programs”). Such investors may include pension and profit sharing plans, other employee benefit trusts, endowments, foundations and corporations. Eligible Investment Programs may also include college savings vehicles such as Section 529 plans. The financial intermediary may impose separate investment minimums.

Clients of Eligible Financial Intermediaries may generally invest in Class A, Class FI or Class I shares.

Institutional Investors

“Institutional Investors” may include corporations, banks, trust companies, insurance companies, investment companies, foundations, endowments, defined benefit plans and other similar entities. The distributor or the financial intermediary may impose additional eligibility requirements or criteria to determine if an investor, including the types of investors listed above, qualifies as an Institutional Investor.


64		Legg Mason Lifestyle Funds

Retirement and Institutional Investors — eligible investors cont’d

Institutional Investors may invest in Class I shares if they meet the $1,000,000 minimum initial investment requirement. Institutional Investors may also invest in Class A and Class C shares, which have different investment minimums, fees and expenses. Class B shares are available only as described above under “General—eligible investors.”

Class A and Class B shares — Retirement Plans

Class A and Class B shares are no longer offered through Service Agents to Retirement Plans with omnibus accounts held on the books of a fund. Certain existing programs for current and prospective Retirement Plan investors sponsored by financial intermediaries also remain eligible to purchase Class A shares. Under these programs, the initial sales charge and contingent deferred sales charge for Class A shares are waived where:

Such Retirement Plan’s recordkeeper offers only load-waived shares

Fund shares are held on the books of a fund through an omnibus account, and

The Retirement Plan has more than 100 participants or has total assets exceeding $1 million

LMIS does not pay Service Agents selling Class A shares to Retirement Plans with a direct omnibus relationship with a fund a commission on the purchase price of Class A shares sold by them. However, for certain Retirement Plans that are permitted to purchase shares at net asset value, LMIS may pay Service Agents commissions of up to 1.00% of the purchase price of the Class A shares that are purchased with regular ongoing plan contributions. Please contact your Service Agent for more information.

Class C shares — Retirement Plans

Retirement Plans with omnibus accounts held on the books of a fund may buy Class C shares at net asset value without paying a contingent deferred sales charge. LMIS does not pay Service Agents selling Class C shares to Retirement Plans with omnibus accounts held on the books of a fund a commission on the purchase price of Class C shares sold by them. Instead, immediately after purchase, LMIS may pay these Service Agents an annual distribution and/or service fee of up to 1.00% of the average daily net assets represented by the Class C shares serviced by them.

Certain Retirement Plan programs with exchange features in effect prior to November 20, 2006, as approved by LMIS, will remain eligible for exchange from Class C shares to Class A shares in accordance with the program terms. Please see the SAI for more details.

Class FI shares

Class FI shares are offered only to investors who invest in a fund through certain financial intermediaries and Retirement Plan programs.

Class R shares

Class R shares are offered only to Retirement Plans with accounts held on the books of a fund (either at the plan level or at the level of the financial intermediary).

Class R1 shares

Class R1 shares are offered only to Retirement Plans with accounts held on the books of a fund (either at the plan level or at the level of the financial intermediary).

Class I shares

Class I shares are offered only to Institutional Investors who meet the $1,000,000 minimum initial investment requirement, Clients of Eligible Financial Intermediaries and other investors authorized by LMIS. Certain waivers of these requirements for individuals associated with a fund, Legg Mason or its affiliates are discussed in the SAI.


Legg Mason Lifestyle Funds			65

Other considerations

Plan sponsors, plan fiduciaries and other financial intermediaries may choose to impose qualification requirements that differ from the funds’ share class eligibility standards. In certain cases this could result in the selection of a share class with higher distribution and/or service fees than otherwise would have been charged. The funds are not responsible for, and have no control over, the decision of any plan sponsor, plan fiduciary or financial intermediary to impose such differing requirements. Please consult with your plan sponsor, plan fiduciary or financial intermediary for more information about available share classes.

Your Service Agent may not offer all share classes. Please contact your Service Agent for additional details.


66		Legg Mason Lifestyle Funds

Buying shares


Generally		You may buy shares at their net asset value next determined after receipt by your Service Agent or the transfer agent of your purchase request in good order, plus any applicable sales charge. You must provide the following information for your order to be processed: Ÿ Name of fund being bought Ÿ Class of shares being bought Ÿ Dollar amount or number of shares being bought Ÿ Account number (if existing account)
Through a Service Agent		You should contact your Service Agent to open a brokerage account and make arrangements to buy shares. Your Service Agent may charge an annual account maintenance fee.
Through the funds		Investors should contact the funds at 1-877-721-1926 to open an account and make arrangements to buy shares. For initial purchases, complete and send your account application to the funds at the following address: Legg Mason Funds P.O. Box 55214 Boston, Massachusetts 02205-8504 Subsequent purchases should be sent to the same address. Enclose a check to pay for the shares. For more information, please call the funds between 8:00 a.m. and 5:30 p.m. (Eastern time).
Through a systematic investment plan		You may authorize your Service Agent or the transfer agent to transfer funds automatically from (i) a regular bank account, (ii) cash held in a brokerage account with a Service Agent or (iii) certain money market funds, in order to buy shares on a regular basis. Ÿ Amounts transferred must meet the applicable minimums (see “Purchase and sale of fund shares”) Ÿ Amounts may be transferred monthly, every alternate month, quarterly, semi-annually or annually Ÿ If you do not have sufficient funds in your account on a transfer date, your Service Agent, Funds Investor Services or Institutional Shareholder Services may charge you a fee For more information, please contact your Service Agent or the funds or consult the SAI.


Legg Mason Lifestyle Funds			67

Exchanging shares


Generally		You may exchange shares of a fund for the same class of shares of other funds sold by the distributor on any day that both the fund and the fund into which you are exchanging are open for business.
Legg Mason offers a distinctive family of funds tailored to help meet the varying needs of large and small investors		You may exchange shares at their net asset value next determined after receipt by your Service Agent or the transfer agent of your exchange request in good order. Ÿ If you bought shares through a Service Agent, contact your Service Agent to learn which funds your Service Agent makes available to you for exchanges Ÿ If you bought shares directly from a fund, contact the fund at 1-877-721-1926 to learn which funds are available to you for exchanges Ÿ Not all funds offer all classes Ÿ Funds that offer Class B shares will continue to make them available for incoming exchanges after July 1, 2011 Ÿ Some funds are offered only in a limited number of states. Your Service Agent, Funds Investor Services or Institutional Shareholder Services will provide information about the funds offered in your state Ÿ Generally, an exchange between funds is considered a sale and generally results in a capital gain or loss for federal income tax purposes, unless you are investing through an IRA, 401(k) or other tax-advantaged account. An exchange between classes of shares of the same fund normally is not taxable for federal income tax purposes. You should talk to your tax adviser before making an exchange Always be sure to read the prospectus of the fund into which you are exchanging shares
Investment minimums, sales charges and other requirements		Ÿ In most instances, your shares will not be subject to an initial sales charge or a contingent deferred sales charge at the time of the exchange Ÿ Your contingent deferred sales charge (if any) will continue to be measured from the date of your original purchase of shares subject to a contingent deferred sales charge, and you will be subject to the contingent deferred sales charge of the fund that you originally purchased Ÿ You will generally be required to meet the minimum investment requirement for the class of shares of the fund into which your exchange is made (except in the case of systematic exchange plans) Ÿ Your exchange will also be subject to any other requirements of the fund into which you are exchanging shares Ÿ If you hold share certificates, you must deliver the certificates, endorsed for transfer or with signed stock powers, to the transfer agent or your Service Agent before the exchange is effective Ÿ The funds may suspend or terminate your exchange privilege if you engage in a pattern of excessive exchanges
By telephone		Contact your Service Agent or, if you hold shares directly with a fund, call the fund at 1-877-721-1926 between 8:00 a.m. and 5:30 p.m. (Eastern time) for information. Exchanges are priced at the net asset value next determined. Telephone exchanges may be made only between accounts that have identical registrations and may be made on any day the New York Stock Exchange (“NYSE”) is open.
By mail		Contact your Service Agent or, if you hold shares directly with a fund, write to the fund at the following address: Legg Mason Funds P.O. Box 55214 Boston, Massachusetts 02205-8504


68		Legg Mason Lifestyle Funds

Exchanging shares cont’d

Through a systematic exchange plan

You may be permitted to schedule automatic exchanges of shares of a fund for shares of other funds available for exchange. All requirements for exchanging shares described above apply to these exchanges. In addition:

Ÿ Exchanges may be made monthly, every alternate month, quarterly, semi-annually or annually

Ÿ Each exchange must meet the applicable investment minimums for systematic investment plans (see “Purchase and sale of fund shares”)

For more information, please contact your Service Agent or the funds or consult the SAI.


Legg Mason Lifestyle Funds			69

Redeeming shares


Generally		You may redeem shares at their net asset value next determined after receipt by your Service Agent or the transfer agent of your redemption request in good order, less any applicable contingent deferred sales charge. If you hold share certificates, you must deliver the certificates endorsed for transfer or with signed stock powers with a signature guarantee to the transfer agent or your Service Agent before you may redeem. If the shares are held by a fiduciary or corporation, partnership or similar entity, other documents may be required.
Redemption proceeds		Your redemption proceeds normally will be sent within 3 business days after your request is received in good order, but in any event within 7 days, except that your proceeds may be delayed for up to 10 days if your share purchase was made by check. Your redemption proceeds may be delayed, or your right to receive redemption proceeds suspended, if the NYSE is closed (other than on weekends or holidays) or trading is restricted, if an emergency exists, or otherwise as permitted by order of the SEC. If you have a brokerage account with a Service Agent, your redemption proceeds will be sent to your Service Agent. Your redemption proceeds can be sent by check to your address of record or by wire or electronic transfer (ACH) to a bank account designated by you. To change the bank account designated to receive wire or electronic transfers, you will be required to deliver a new written authorization and may be asked to provide other documents. You may be charged a fee on a wire or an electronic transfer (ACH). In other cases, unless you direct otherwise, your proceeds will be paid by check mailed to your address of record. Each fund reserves the right to pay redemption proceeds by giving you shares of underlying funds. The shares that you receive will be valued at the net asset value per share of the class of the underlying fund held by the fund on the day of the redemption. If you later decide to redeem the underlying fund shares, those shares will be redeemed at the next-determined net asset value per share of the class of the underlying fund that you hold, which may be more or less than the value on the date of your redemption from the fund.
By mail		Contact your Service Agent or, if you hold shares directly with a fund, write to the fund at the following address: Legg Mason Funds P.O. Box 55214 Boston, Massachusetts 02205-8504 Your written request must provide the following: Ÿ The fund name, the class of shares being redeemed and your account number Ÿ The dollar amount or number of shares being redeemed Ÿ Signature of each owner exactly as the account is registered Ÿ Signature guarantees, as applicable (see “Other things to know about transactions”)
By telephone		If your account application permits, you may be eligible to redeem shares by telephone. Contact your Service Agent or, if you hold shares directly with a fund, call the fund at 1-877-721-1926 between 8:00 a.m. and 5:30 p.m. (Eastern time) for more information. Please have the following information ready when you call: Ÿ Name of fund being redeemed Ÿ Class of shares being redeemed Ÿ Account number


70		Legg Mason Lifestyle Funds

Redeeming shares cont’d

Automatic cash
withdrawal plans

You may be permitted to schedule automatic redemptions of a portion of your shares. To qualify, you must own shares of a fund with a value of at least $10,000 ($5,000 for Retirement Plan accounts) and each automatic redemption must be at least $50.

The following conditions apply:

Ÿ Your shares must not be represented by certificates

Ÿ Redemptions may be made monthly, every alternate month, quarterly, semi-annually or annually

Ÿ If your shares are subject to a contingent deferred sales charge, the charge will be required to be paid upon redemption. However, the charge will be waived if your automatic redemptions are equal to or less than 2% per month of your account balance on the date the redemptions commence, up to a maximum of 12% in one year

Ÿ You must elect to have all dividends and distributions reinvested

For more information, please contact your Service Agent or the funds or consult the SAI.


Legg Mason Lifestyle Funds			71

Other things to know about transactions

When you buy, exchange or redeem shares, your request must be in good order. This means you have provided the following information, without which your request may not be processed:

Name of the fund

Your account number

In the case of a purchase (including a purchase as part of an exchange transaction), the class of shares being bought

In the case of an exchange or redemption, the class of shares being exchanged or redeemed (if you own more than one class)

Dollar amount or number of shares being bought, exchanged or redeemed

In certain circumstances, the signature of each owner exactly as the account is registered (see “Redeeming shares”)

The funds generally will not permit non-resident aliens with non-U.S. addresses to establish accounts. U.S. citizens with APO/FPO addresses or addresses in the United States (including its territories) and resident aliens with U.S. addresses are permitted to establish accounts with a fund. Subject to the requirements of local law, U.S. citizens residing in foreign countries are permitted to establish accounts with the funds.

In certain circumstances, such as during periods of market volatility, severe weather and emergencies, shareholders may experience difficulties placing exchange or redemption orders by telephone. In that case, shareholders should consider using a fund’s other exchange and redemption procedures described under “Exchanging shares” and “Redeeming shares.”

The transfer agent or the funds will employ reasonable procedures to confirm that any telephone exchange or redemption request is genuine, which may include recording calls, asking the caller to provide certain personal identification information, sending you a written confirmation or requiring other confirmation procedures from time to time. If these procedures are followed, neither the funds nor its agents will bear any liability for these transactions.

The funds have the right to:

Suspend the offering of shares

Waive or change minimum initial and additional investment amounts

Reject any purchase or exchange order

Change, revoke or suspend the exchange privilege

Suspend telephone transactions

Suspend or postpone redemptions of shares on any day when trading on the NYSE is restricted or as otherwise permitted by the SEC

Close your account after a period of inactivity, as determined by state law, and transfer your shares to the appropriate state

Signature guarantees

To be in good order, your redemption request must include a signature guarantee if you:

Are redeeming shares with the proceeds going to an address or bank not currently on file

Are sending signed share certificates or stock powers to the transfer agent

Instruct the transfer agent to mail the check to an address different from the one on your account registration

Changed your account registration or your address within 30 days

Want the check paid to someone other than the account owner(s)

Are transferring the redemption proceeds to an account with a different registration

You can obtain a signature guarantee from most banks, dealers, brokers, credit unions and federal savings and loan institutions, but not from a notary public.


72		Legg Mason Lifestyle Funds

Other things to know about transactions cont’d

Anti-money laundering

Federal anti-money laundering regulations require all financial institutions to obtain, verify and record information that identifies each person who opens an account. When you sign your account application, you may be asked to provide additional information in order for a fund to verify your identity in accordance with these regulations. Accounts may be restricted and/or closed, and the monies withheld, pending verification of this information or as otherwise required under these and other federal regulations.

Small account balances/Mandatory redemptions

The funds reserve the right to ask you to bring your account up to a minimum investment amount determined by your Service Agent if the aggregate value of the fund shares in your account is less than $500 for any reason (including solely due to declines in net asset value and/or failure to invest at least $500 within a reasonable period). You will be notified in writing and will have 60 days to make an additional investment to bring your account value up to the required level. If you choose not to do so within this 60-day period, a fund may close your account and send you the redemption proceeds. If your account is closed, you will not be eligible to have your account reinstated without imposition of any sales charges that may apply to your new purchase. The funds may, with prior notice, change the minimum size of accounts subject to mandatory redemption, which may vary by class, or implement fees for small accounts.

Subject to applicable law, the funds may, with prior notice, adopt other policies from time to time requiring mandatory redemption of shares in certain circumstances.

For more information, please contact your Service Agent or the funds or consult the SAI.

Frequent trading of fund shares

Frequent purchases and redemptions of fund shares may interfere with the efficient management of the funds, increase fund transaction costs, and have a negative effect on the funds’ long-term shareholders. For example, in order to handle large flows of cash into and out of a fund, the portfolio managers may need to allocate more assets to cash or other short-term investments or sell securities, rather than maintaining full investment in securities selected to achieve the fund’s investment objective. Frequent trading may cause a fund to sell securities at less favorable prices. Transaction costs, such as brokerage commissions and market spreads, can detract from a fund’s performance. In addition, the return received by long-term shareholders may be reduced when trades by other shareholders are made in an effort to take advantage of certain pricing discrepancies, when, for example, it is believed that a fund’s share price, which is determined at the close of the NYSE on each trading day, does not accurately reflect the value of the fund’s investments. Funds investing in foreign securities have been particularly susceptible to this form of arbitrage, but other funds could also be affected.

Because of the potential harm to funds sold by the funds’ distributor and their long-term shareholders, the Board has approved policies and procedures that are intended to detect and discourage excessive trading and market timing abuses through the use of various surveillance techniques. Under these policies and procedures, a fund may limit additional exchanges or purchases of fund shares by shareholders who are believed by the manager to be engaged in these abusive trading activities in the fund or in other funds sold by the distributor. In the event that an exchange or purchase request is rejected, the shareholder may nonetheless redeem its shares. The intent of the policies and procedures is not to inhibit legitimate strategies, such as asset allocation, dollar cost averaging, or similar activities that may nonetheless result in frequent trading of fund shares.

Under the funds’ policies and procedures, the funds reserve the right to restrict or reject purchases of shares (including exchanges) without prior notice whenever a pattern of excessive trading by a shareholder is detected in funds sold by the distributor. A committee established by the manager administers the policy. The policy provides that the committee may take action, which may include using its best efforts to restrict a shareholder’s trading privileges in funds sold by the distributor, if that shareholder has engaged in one or more “Round Trips” across all funds sold by the distributor. However, the committee has the discretion to determine that action is not necessary if it is determined that the pattern of trading is not abusive or harmful. In making such a determination, the committee will consider, among other things, the nature of the shareholder’s account, the reason for the frequent trading, the amount of trading and the particular funds in


Legg Mason Lifestyle Funds			73

which the trading has occurred. Additionally, the committee has the discretion to make inquiries or to take any action against a shareholder whose trading appears inconsistent with the frequent trading policy, regardless of the number of Round Trips. Examples of the types of actions the committee may take include heightened surveillance of a shareholder account, providing a written warning letter to an account holder, restricting the shareholder from purchasing additional shares in a fund altogether or imposing other restrictions (such as requiring purchase orders to be submitted by mail) that would deter the shareholder from trading frequently in the funds. The committee will generally follow a system of progressive deterrence, although it is not required to do so.

A “Round Trip” is defined as a purchase (including subscriptions and exchanges) into a fund sold by the distributor followed by a sale (including redemptions and exchanges) of the same or a similar number of shares out of that fund within 30 days of such purchase. Purchases and sales of a fund’s shares pursuant to an automatic investment plan or similar program for periodic transactions are not considered in determining Round Trips. These policies and procedures do not apply to money market funds sold by the distributor.

The policies apply to any account, whether a direct account or accounts with financial intermediaries such as investment advisers, broker/dealers or retirement plan administrators, commonly called omnibus accounts, where the intermediary holds fund shares for a number of its customers in one account. A fund’s ability to monitor trading in omnibus accounts may, however, be severely limited due to the lack of access to an individual investor’s trading activity when orders are placed through these types of accounts. There may also be operational and technological limitations on the ability of a fund’s service providers to identify or terminate frequent trading activity within the various types of omnibus accounts. The distributor has entered into agreements with intermediaries requiring the intermediaries to, among other things, help identify frequent trading activity and prohibit further purchases or exchanges by a shareholder identified as having engaged in frequent trading.

The funds have also adopted policies and procedures to prevent the selective release of information about the funds’ holdings, as such information may be used for market-timing and similar abusive practices.

The funds’ policies provide for ongoing assessment of the effectiveness of current policies and surveillance tools, and the Board reserves the right to modify these or adopt additional policies and restrictions in the future. Shareholders should be aware, however, that any surveillance techniques currently employed by the funds or other techniques that may be adopted in the future may not be effective, particularly where the trading takes place through certain types of omnibus accounts. Furthermore, a fund may not apply its policies consistently or uniformly, resulting in the risk that some shareholders may be able to engage in frequent trading while others will bear the costs and effects of that trading.

Although the funds will attempt to monitor shareholder transactions for certain patterns of frequent trading activity, there can be no assurance that all such trading activity can be identified, prevented or terminated. Monitoring of shareholder transactions may only occur for shareholder transactions that exceed a certain transaction amount threshold, which may change from time to time. The funds reserve the right to refuse any client or reject any purchase order for shares (including exchanges) for any reason.

Share certificates

The funds do not issue share certificates. If you currently hold share certificates of a fund, the certificates will continue to be honored. If you would like to return your share certificates to the fund and hold your shares in uncertificated form, please contact your Service Agent or the funds.

Record ownership

If you hold shares through a Service Agent, your Service Agent may establish and maintain your account and be the shareholder of record. In the event that a fund holds a shareholder meeting, your Service Agent, as record holder, will vote your shares in accordance with your instructions. If you do not give your Service Agent voting instructions, your Service Agent, under certain circumstances, may nonetheless be entitled to vote your shares.


74		Legg Mason Lifestyle Funds

Dividends, distributions and taxes

Dividends and distributions

Each fund generally makes capital gain distributions, if any, typically once or twice a year.

The funds generally pay dividends, if any, as follows:


Fund		Income dividend distributions
Allocation 85%		Annually
Allocation 70%		Annually
Allocation 50%		Quarterly
Allocation 30%		Quarterly

Each fund may pay additional distributions and dividends at other times if necessary for the fund to avoid a federal tax. Unless otherwise directed, capital gain distributions and dividends are reinvested in additional fund shares of the same class that you hold. You do not pay a sales charge on reinvested distributions or dividends. Alternatively, you can instruct your Service Agent, Funds Investor Services or Institutional Shareholder Services to have your distributions and/or dividends paid in cash. You can change your choice at any time to be effective as of the next distribution or dividend.

If you own Class A or Class C shares and hold your shares directly with a fund, you may instruct the fund to have your distributions and/or dividends invested in Class A or Class C shares, respectively, of another fund sold by the distributor, subject to the following conditions:

You have a minimum account balance of $10,000

The fund is available for sale in your state

To change your election to reinvest your dividends and distributions in shares of another fund, you must notify the fund at least three days before the next distribution is to be paid.

Please contact your Service Agent or the funds to discuss what options are available to you for receiving your dividends and distributions.

Taxes

The following discussion is very general and does not address investors subject to special rules, such as investors who hold shares in the funds through an IRA, 401(k) or other tax-advantaged account. Because each shareholder’s circumstances are different and special tax rules may apply, you should consult your tax adviser about your investment in a fund.

In general, unless your shares are held in a qualified retirement plan, IRA or other tax deferred arrangement, redeeming shares, exchanging shares and receiving dividends and distributions (whether in cash or additional shares) are all taxable events. An exchange between classes of shares of the same fund normally is not taxable for federal income tax purposes.

The following table summarizes the tax status to you of certain transactions related to the funds.


Transaction		Federal Income Tax Status
Redemption or exchange of shares		Usually capital gain or loss; long-term only if shares owned more than one year
Long-term capital gain distributions		Long-term capital gain
Dividends		Ordinary income, potentially taxable for individuals at long-term capital gain rates

Distributions attributable to short-term capital gains are treated as dividends, taxable as ordinary income. Taxable dividends and long-term capital gain distributions are taxable whether received in cash or reinvested in fund shares. Maximum long-term capital gain income tax rates, currently at 15%, are scheduled to rise to 20% in 2013. In addition, beginning in 2013, an additional 3.8% Medicare contribution tax will apply to all net investment income including dividends, interest and net capital gain, for individuals exceeding certain income thresholds. Although dividends (including dividends from short-term capital gains) are generally taxable as ordinary income, for taxable years beginning before January 1, 2013, individual shareholders who satisfy certain holding period and other requirements are taxed on such dividends at long-term capital gain rates to the extent the dividends are attributable to “qualified dividend


Legg Mason Lifestyle Funds			75

income” received by the funds. “Qualified dividend income” generally consists of dividends received from U.S. corporations (other than dividends from tax-exempt organizations and certain dividends from real estate investment trusts and regulated investment companies) and certain foreign corporations. Long-term capital gain distributions are taxable to you as long-term capital gain regardless of how long you have owned your shares. You may want to avoid buying shares when a fund is about to declare a long-term capital gain distribution or a dividend because it will be taxable to you even though it may actually be a return of a portion of your investment.

A dividend declared by a fund in October, November or December and paid during January of the following year will, in certain circumstances, be treated as paid in December for tax purposes.

After the end of each year, your Service Agent or the fund will provide you with information about the distributions and dividends you received and any redemptions of shares during the previous year. If you do not provide a fund with your correct taxpayer identification number and any required certifications, you may be subject to back-up withholding on your distributions, dividends and redemption proceeds. Because each shareholder’s circumstances are different and special tax rules may apply, you should consult your tax adviser about your investment in the funds.

The above discussion is applicable to shareholders who are U.S. persons. If you are a non-U.S. person, please consult your own tax adviser with respect to the U.S. tax consequences to you of an investment in a fund.


76		Legg Mason Lifestyle Funds

Share price

You may buy, exchange or redeem shares at their net asset value next determined after receipt of your request in good order, adjusted for any applicable sales charge. Each fund’s net asset value per share is the value of its assets minus its liabilities divided by the number of shares outstanding. Net asset value is calculated separately for each class of shares.

Each fund calculates its net asset value every day the NYSE is open. Each fund generally values its securities and other assets and calculates its net asset value as of the close of regular trading on the NYSE, normally at 4:00 p.m. (Eastern time). If the NYSE closes at another time, the funds will calculate its net asset value as of the actual closing time. The NYSE is closed on certain holidays listed in the SAI.

In order to buy, redeem or exchange shares at a certain day’s price, you must place your order with your Service Agent or the transfer agent before the NYSE closes on that day. If the NYSE closes early on that day, you must place your order prior to the actual closing time. It is the responsibility of the Service Agent to transmit all orders to buy, exchange or redeem shares to the transfer agent on a timely basis.

Valuation of each fund’s securities and other assets is performed in accordance with procedures approved by the Board. These procedures delegate most valuation functions to the manager, which, in turn, uses independent third party pricing services approved by the funds’ Board.

Investments in underlying funds are valued at the net asset value per share of the class of the underlying fund held by a fund as determined on each business day. The prospectuses for the underlying funds describe how an underlying fund values its securities, the circumstances under which the underlying funds will use fair value pricing and the effects of fair value pricing. The following generally describes how each fund and the underlying funds in the Legg Mason funds complex value their securities:

Equity securities and certain derivative instruments that are traded on an exchange are valued at the closing price or, if that price is unavailable or deemed by the manager not representative of market value, the last sale price. Where a security is traded on more than one exchange (as is often the case overseas), the security is generally valued at the price on the exchange considered by the manager to be the primary exchange. In the case of securities not traded on an exchange, or if exchange prices are not otherwise available, the prices are typically determined by independent third party pricing services that use a variety of techniques and methodologies.

The valuations for fixed income securities and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of fair valuation techniques and methodologies. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value.

The valuations of securities traded on foreign markets and certain fixed income securities will generally be based on prices determined as of the earlier closing time of the markets on which they primarily trade, unless a significant event has occurred. When a fund holds securities or other assets that are denominated in a foreign currency, the fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern time). Each fund uses a fair value model developed by an independent third party pricing service to value foreign equity securities on days when a certain percentage change in the value of a domestic equity security index suggests that the closing prices on foreign exchanges may no longer represent the value of those securities at the time of closing of the NYSE. Foreign markets are open for trading on weekends and other days when the funds do not price their shares. Therefore, the value of a fund’s shares may change on days when you will not be able to purchase or redeem the fund’s shares.

For investments in exchange-traded funds, the market price is usually the closing sale or official closing price on that exchange.

If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers. When such prices or quotations are not available, or when the manager believes that they are unreliable, the manager may price securities using fair value procedures approved by the Board. These procedures permit, among other things, the use of a matrix, formula or other method that takes into consideration market indices, yield curves and other specific adjustments to determine fair value. Fair value of a security is the amount as determined by the


Legg Mason Lifestyle Funds			77

manager in good faith, that a fund might reasonably expect to receive upon a current sale of the security. Each fund may also use fair value procedures if the manager determines that a significant event has occurred between the time at which a market price is determined and the time at which a fund’s net asset value is calculated.

Many factors may influence the price at which a fund could sell any particular portfolio investment. The sales price may well differ—higher or lower—from the fund’s last valuation, and such differences could be significant, particularly for securities that trade in relatively thin markets and/or markets that experience extreme volatility. Moreover, valuing securities using fair value methodologies involves greater reliance on judgment than valuing securities based on market quotations. A fund that uses fair value methodologies may value those securities higher or lower than another fund using market quotations or its own fair value methodologies to price the same securities. There can be no assurance that a fund could obtain the value assigned to a security if it were to sell the security at approximately the time at which the fund determines its net asset value. Investors who purchase or redeem fund shares on days when a fund is holding fair-valued securities may receive a greater or lesser number of shares, or higher or lower redemption proceeds, than they would have received if the fund had not fair-valued the security or had used a different methodology.


78		Legg Mason Lifestyle Funds

Financial highlights

The financial highlights tables are intended to help you understand the performance of each fund’s classes for the periods shown. No financial highlights are presented for Class FI, Class R or Class R1 shares of any fund because no Class FI, Class R or Class R1 shares were outstanding for the periods shown. No financial highlights are presented for Class I shares of Allocation 50% and Allocation 30% because no Class I shares were outstanding for the periods shown. The returns for Class FI, Class R, Class R1 and Class I shares will differ from those of the other classes to the extent that their expenses differ. Certain information reflects financial results for a single share. Total return represents the rate that a shareholder would have earned (or lost) on a fund share assuming reinvestment of all dividends and distributions. The information in the following tables has been derived from the funds’ and the predecessor funds’ financial statements which have been audited by KPMG LLP, an independent registered public accounting firm, whose report, along with each fund’s financial statements, is included in the Annual Report (available upon request). The financial information shown below for periods prior to April 16, 2007 is that of the funds’ predecessors.

Legg Mason Lifestyle Allocation 85%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class A Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$11.02			$8.26			$15.00			$16.52			$15.36
Income (loss) from operations:
Net investment income³		0.12			0.17			0.20			0.23			0.06
Net realized and unrealized gain (loss)		2.19			2.77			(5.57)			(0.89)			1.14
Total income (loss) from operations		2.31			2.94			(5.37)			(0.66)			1.20
Less distributions from:
Net investment income		(0.13)			(0.18)			(0.18)			(0.20)			(0.04)
Net realized gains		—			—			(1.19)			(0.66)			—
Total distributions		(0.13)			(0.18)			(1.37)			(0.86)			(0.04)
Net asset value, end of year		$13.20			$11.02			$8.26			$15.00			$16.52
Total return⁴		20.97	%⁵		35.53	%		(37.58)	%		(4.41)	%		7.82	%
Net assets, end of year (000s)		$495,922			$424,907			$317,256			$492,744			$491,940
Ratios to average net assets:
Gross expenses⁶		0.73	%		0.79	%		0.79	%		0.85	%⁷		0.90	%⁸
Net expenses^6,9,10		0.73			0.77	¹¹		0.73	¹¹		0.78	^7,11		0.81	^8,11
Net investment income³		1.02			1.66			1.64			1.37			0.37
Portfolio turnover rate		14	%		15	%		41	%		15	%		79	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

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

⁵	The total return reflects a payment received due to the settlement of investment litigations. Absent this payment, the total return would have been 20.79%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 0.85% and 0.77%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 0.80%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			79

Legg Mason Lifestyle Allocation 85%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class B Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.44			$7.83			$14.32			$15.80			$14.76
Income (loss) from operations:
Net investment income (loss)³		0.02			0.08			0.09			0.09			(0.06)
Net realized and unrealized gain (loss)		2.07			2.62			(5.28)			(0.82)			1.10
Proceeds from settlement of a regulatory matter		0.03			—			—			—			—
Total income (loss) from operations		2.12			2.70			(5.19)			(0.73)			1.04
Less distributions from:
Net investment income		(0.06)			(0.09)			(0.11)			(0.09)			—
Net realized gains		—			—			(1.19)			(0.66)			—
Total distributions		(0.06)			(0.09)			(1.30)			(0.75)			—
Net asset value, end of year		$12.50			$10.44			$7.83			$14.32			$15.80
Total return⁴		20.29	%⁵		34.45	%		(38.07)	%		(5.06)	%		7.05	%
Net assets, end of year (000s)		$88,768			$84,327			$70,232			$127,665			$159,423
Ratios to average net assets:
Gross expenses⁶		1.59	%		1.62	%		1.63	%		1.67	%⁷		1.67	%⁸
Net expenses^6,9,10,11		1.55			1.51			1.52			1.51	⁷		1.53	⁸
Net investment income (loss)³		0.16			0.87			0.79			0.55			(0.39)
Portfolio turnover rate		14	%		15	%		41	%		15	%		79	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

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

⁵	The total return reflects payments received due to the settlement of a regulatory matter and investment litigations. Absent these payments, the total return would have been 19.81%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.63% and 1.49%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class B shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


80		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 85%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class C Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.55			$7.92			$14.46			$15.94			$14.87
Income (loss) from operations:
Net investment income (loss)³		0.05			0.11			0.13			0.12			(0.03)
Net realized and unrealized gain (loss)		2.10			2.65			(5.34)			(0.82)			1.10
Proceeds from settlement of a regulatory matter		0.06			—			—			—			—
Total income (loss) from operations		2.21			2.76			(5.21)			(0.70)			1.07
Less distributions from:
Net investment income		(0.12)			(0.13)			(0.14)			(0.12)			—
Net realized gains		—			—			(1.19)			(0.66)			—
Total distributions		(0.12)			(0.13)			(1.33)			(0.78)			—
Net asset value, end of year		$12.64			$10.55			$7.92			$14.46			$15.94
Total return⁴		20.96	%⁵		34.84	%		(37.85)	%		(4.82)	%		7.20	%
Net assets, end of year (000s)		$14,142			$12,733			$11,147			$23,879			$29,079
Ratios to average net assets:
Gross expenses⁶		1.27	%		1.18	%		1.15	%		1.29	%⁷		1.37	%⁸
Net expenses^6,9,10		1.27			1.18			1.15			1.29	⁷		1.34	^8,11
Net investment income (loss)³		0.45			1.18			1.08			0.75			(0.19)
Portfolio turnover rate		14	%		15	%		41	%		15	%		79	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects payments received due to the settlement of a regulatory matter and investment litigations. Absent these payments, the total return would have been 20.20%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.32% and 1.30%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			81

Legg Mason Lifestyle Allocation 85%


For a share of each class of beneficial interest outstanding throughout each year ended January 31, unless otherwise noted:
Class I Shares¹	2011			2010			2009²
Net asset value, beginning of year		$10.99			$8.26			$8.82
Income (loss) from operations:
Net investment income³		0.22			0.28			0.09
Net realized and unrealized gain (loss)		2.14			2.69			(0.47)
Total income (loss) from operations		2.36			2.97			(0.38)
Less distributions from:
Net investment income		(0.19)			(0.24)			(0.18)
Total distributions		(0.19)			(0.24)			(0.18)
Net asset value, end of year		$13.16			$10.99			$8.26
Total return⁴		21.51	%⁵		35.87	%		(4.37)	%
Net assets, end of year (000s)		$213			$8			$1
Ratios to average net assets:
Gross expenses⁶		0.32	%		0.80	%		5.84	%⁷
Net expenses^6,8,9^,10		0.27			0.25			0.53	⁷
Net investment income³		1.82			2.69			8.99	⁷
Portfolio turnover rate		14	%		15	%		41	%

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

²	For the period December 16, 2008 (inception date) to January 31, 2009.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, 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.

⁵	The total return reflects a payment received due to the settlement of investment litigations. Absent this payment, the total return would have been 21.33%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	Annualized.

⁸

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

⁹	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹⁰	Reflects fee waivers and/or expense reimbursements.


82		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 70%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class A Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$11.02			$8.35			$12.96			$13.52			$12.73
Income (loss) from operations:
Net investment income³		0.19			0.26			0.27			0.32			0.18
Net realized and unrealized gain (loss)		1.90			2.67			(4.59)			(0.59)			0.81
Total income (loss) from operations		2.09			2.93			(4.32)			(0.27)			0.99
Less distributions from:
Net investment income		(0.21)			(0.26)			(0.29)			(0.29)			(0.20)
Total distributions		(0.21)			(0.26)			(0.29)			(0.29)			(0.20)
Net asset value, end of year		$12.90			$11.02			$8.35			$12.96			$13.52
Total return⁴		19.00	%⁵		35.13	%		(33.50)	%		(2.10)	%		7.77	%
Net assets, end of year (000s)		$393,408			$350,121			$270,592			$413,780			$411,242
Ratios to average net assets:
Gross expenses⁶		0.63	%		0.70	%		0.64	%		0.76	%⁷		0.81	%⁸
Net expenses^6,9^,10		0.63			0.70			0.64	¹¹		0.75	^7,11		0.79	^8,11
Net investment income³		1.59			2.61			2.43			2.33			1.44
Portfolio turnover rate		17	%		17	%		31	%		16	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects a payment received due to the settlement of investment litigations. Absent this payment, the total return would have been 18.82%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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%, respectively.

⁹

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			83

Legg Mason Lifestyle Allocation 70%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class B Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$11.19			$8.46			$13.12			$13.67			$12.87
Income (loss) from operations:
Net investment income³		0.08			0.18			0.18			0.20			0.08
Net realized and unrealized gain (loss)		1.91			2.71			(4.63)			(0.57)			0.81
Proceeds from settlement of a regulatory matter		0.05			—			—			—			—
Total income (loss) from operations		2.04			2.89			(4.45)			(0.37)			0.89
Less distributions from:
Net investment income		(0.13)			(0.16)			(0.21)			(0.18)			(0.09)
Total distributions		(0.13)			(0.16)			(0.21)			(0.18)			(0.09)
Net asset value, end of year		$13.10			$11.19			$8.46			$13.12			$13.67
Total return⁴		18.29	%⁵		34.17	%		(34.06)	%		(2.78)	%		6.92	%
Net assets, end of year (000s)		$69,294			$68,651			$59,592			$107,908			$137,020
Ratios to average net assets:
Gross expenses⁶		1.49	%		1.58	%		1.47	%		1.57	%⁷		1.60	%⁸
Net expenses^6,9,10,11		1.48			1.52			1.46			1.51	⁷		1.54	⁸
Net investment income³		0.71			1.75			1.54			1.46			0.64
Portfolio turnover rate		17	%		17	%		31	%		16	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects payments received due to the settlement of a regulatory matter and investment litigations. Absent these payments, the total return would have been 17.66%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.56% and 1.51%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class B shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


84		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 70%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class C Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$11.19			$8.47			$13.12			$13.69			$12.89
Income (loss) from operations:
Net investment income³		0.12			0.21			0.22			0.24			0.11
Net realized and unrealized gain (loss)		1.91			2.72			(4.63)			(0.60)			0.81
Proceeds from settlement of a regulatory matter		0.05			—			—			—			—
Total income (loss) from operations		2.08			2.93			(4.41)			(0.36)			0.92
Less distributions from:
Net investment income		(0.17)			(0.21)			(0.24)			(0.21)			(0.12)
Total distributions		(0.17)			(0.21)			(0.24)			(0.21)			(0.12)
Net asset value, end of year		$13.10			$11.19			$8.47			$13.12			$13.69
Total return⁴		18.67	%⁵		34.55	%		(33.76)	%		(2.68)	%		7.15	%
Net assets, end of year (000s)		$18,060			$17,028			$15,232			$28,324			$29,502
Ratios to average net assets:
Gross expenses⁶		1.24	%		1.17	%		1.11	%		1.30	%⁷		1.35	%⁸
Net expenses^6,9,10		1.24			1.17			1.11			1.30	⁷		1.32	^8,11
Net investment income³		0.97			2.08			1.88			1.74			0.88
Portfolio turnover rate		17	%		17	%		31	%		16	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects payments received due to the settlement of a regulatory matter and investment litigations. Absent these payments, the total return would have been 18.03%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.32% and 1.29%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			85

Legg Mason Lifestyle Allocation 70%


For a share of each class of beneficial interest outstanding throughout each year ended January 31, unless otherwise noted:
Class I Shares¹	2011			2010			2009			2008²
Net asset value, beginning of year		$11.00			$8.33			$12.94			$14.26
Income (loss) from operations:
Net investment income³		0.26			0.29			0.29			0.23
Net realized and unrealized gain (loss)		1.84			2.67			(4.60)			(1.22)
Total income (loss) from operations		2.10			2.96			(4.31)			(0.99)
Less distributions from:
Net investment income		(0.25)			(0.29)			(0.30)			(0.33)
Total distributions		(0.25)			(0.29)			(0.30)			(0.33)
Net asset value, end of year		$12.85			$11.00			$8.33			$12.94
Total return⁴		19.19	%⁵		35.58	%		(33.47)	%		(7.05)	%
Net assets, end of year (000s)		$204			$43			$25			$28
Ratios to average net assets:
Gross expenses⁶		0.31	%		0.48	%		0.93	%		0.66	%^7,8
Net expenses^6,9,10,11		0.31			0.44			0.55			0.46	^7,8
Net investment income³		2.18			2.92			2.63			5.15	⁷
Portfolio turnover rate		17	%		17	%		31	%		16	%

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

²	For the period October 2, 2007 (inception date) to January 31, 2008.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects a payment received due to the settlement of investment litigations. Absent this payment, the total return would have been 19.01%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	Annualized.

⁸	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


86		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 50%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class A Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.55			$8.20			$12.10			$12.90			$12.26
Income (loss) from operations:
Net investment income³		0.28			0.38			0.37			0.41			0.29
Net realized and unrealized gain (loss)		1.45			2.38			(3.57)			(0.45)			0.66
Total income (loss) from operations		1.73			2.76			(3.20)			(0.04)			0.95
Less distributions from:
Net investment income		(0.31)			(0.41)			(0.34)			(0.39)			(0.31)
Net realized gains		—			—			(0.36)			(0.37)			—
Total distributions		(0.31)			(0.41)			(0.70)			(0.76)			(0.31)
Net asset value, end of year		$11.97			$10.55			$8.20			$12.10			$12.90
Total return⁴		16.59	%		34.37	%		(27.69)	%		(0.48)	%		7.85	%
Net assets, end of year (000s)		$249,807			$222,590			$172,244			$249,747			$245,674
Ratios to average net assets:
Gross expenses⁵		0.54	%		0.60	%		0.56	%		0.68	%⁶		0.72	%⁷
Net expenses^5,8,9		0.54			0.59	¹⁰		0.56			0.68	⁶		0.70	^7,10
Net investment income³		2.49			3.96			3.57			3.19			2.37
Portfolio turnover rate		21	%		22	%		32	%		19	%		86	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	Does not include expenses of the underlying funds in which the fund invests.

⁶	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁷	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 0.68% and 0.67%, respectively.

⁸

⁹	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹⁰	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			87

Legg Mason Lifestyle Allocation 50%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class B Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.84			$8.41			$12.40			$13.20			$12.54
Income (loss) from operations:
Net investment income³		0.18			0.29			0.29			0.30			0.19
Net realized and unrealized gain (loss)		1.49			2.46			(3.67)			(0.45)			0.68
Proceeds from settlement of a regulatory matter		0.02			—			—			—			—
Total income (loss) from operations		1.69			2.75			(3.38)			(0.15)			0.87
Less distributions from:
Net investment income		(0.23)			(0.32)			(0.25)			(0.28)			(0.21)
Net realized gains		—			—			(0.36)			(0.37)			—
Total distributions		(0.23)			(0.32)			(0.61)			(0.65)			(0.21)
Net asset value, end of year		$12.30			$10.84			$8.41			$12.40			$13.20
Total return⁴		15.72	%⁵		33.27	%		(28.35)	%		(1.27)	%		7.00	%
Net assets, end of year (000s)		$40,926			$41,369			$36,012			$60,243			$75,776
Ratios to average net assets:
Gross expenses⁶		1.43	%		1.50	%		1.40	%		1.52	%⁷		1.52	%⁸
Net expenses^6,9,10		1.43			1.48	¹¹		1.40			1.51	^7,11		1.48	^8,11
Net investment income³		1.57			3.03			2.67			2.29			1.53
Portfolio turnover rate		21	%		22	%		32	%		19	%		86	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects a payment received due to the settlement of a regulatory matter. Absent this payment, the total return would have been 15.54%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.49% and 1.46%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class B shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


88		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 50%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class C Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.87			$8.44			$12.43			$13.23			$12.57
Income (loss) from operations:
Net investment income³		0.20			0.32			0.31			0.33			0.22
Net realized and unrealized gain (loss)		1.48			2.46			(3.67)			(0.45)			0.67
Proceeds from settlement of a regulatory matter		0.05			—			—			—			—
Total income (loss) from operations		1.73			2.78			(3.36)			(0.12)			0.89
Less distributions from:
Net investment income		(0.27)			(0.35)			(0.27)			(0.31)			(0.23)
Net realized gains		—			—			(0.36)			(0.37)			—
Total distributions		(0.27)			(0.35)			(0.63)			(0.68)			(0.23)
Net asset value, end of year		$12.33			$10.87			$8.44			$12.43			$13.23
Total return⁴		16.13	%⁵		33.54	%		(28.09)	%		(1.07)	%		7.15	%
Net assets, end of year (000s)		$13,194			$13,701			$12,103			$23,946			$26,921
Ratios to average net assets:
Gross expenses⁶		1.27	%		1.20	%		1.14	%		1.29	%⁷		1.34	%⁸
Net expenses^6,9,10		1.27			1.20			1.14			1.29	⁷		1.31	^8,11
Net investment income³		1.73			3.30			2.84			2.52			1.73
Portfolio turnover rate		21	%		22	%		32	%		19	%		86	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects a payment received due to the settlement of a regulatory matter. Absent this payment, the total return would have been 15.66%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸	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 1.31% and 1.28%, respectively.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.55%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			89

Legg Mason Lifestyle Allocation 30%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class A Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.60			$8.40			$11.44			$11.81			$11.48
Income (loss) from operations:
Net investment income³		0.41			0.52			0.47			0.49			0.37
Net realized and unrealized gain (loss)		0.97			2.20			(3.01)			(0.38)			0.34
Total income (loss) from operations		1.38			2.72			(2.54)			0.11			0.71
Less distributions from:
Net investment income		(0.37)			(0.52)			(0.50)			(0.48)			(0.38)
Total distributions		(0.37)			(0.52)			(0.50)			(0.48)			(0.38)
Net asset value, end of year		$11.61			$10.60			$8.40			$11.44			$11.81
Total return⁴		13.22	%		32.98	%		(22.69)	%		0.84	%		6.31	%
Net assets, end of year (000s)		$126,222			$80,223			$63,539			$85,817			$80,005
Ratios to average net assets:
Gross expenses⁵		0.57	%⁶		0.63	%		0.62	%		0.75	%⁷		0.75	%⁶
Net expenses^5,8,9		0.57	⁶		0.63			0.62	¹⁰		0.73	^7,10		0.73	^6,10
Net investment income³		3.66			5.41			4.63			4.17			3.23
Portfolio turnover rate		32	%		26	%		37	%		17	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	Does not include expenses of the underlying funds in which the fund invests.

⁶

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 both have been 0.55% for the year ended January 31, 2011 and 0.72% and 0.71%, respectively, for the year ended January 31, 2007.

⁷	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁸

⁹	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹⁰	Reflects fee waivers and/or expense reimbursements.


90		Legg Mason Lifestyle Funds

Financial highlights cont’d

Legg Mason Lifestyle Allocation 30%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class B Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.78			$8.54			$11.62			$11.98			$11.65
Income (loss) from operations:
Net investment income³		0.34			0.46			0.42			0.42			0.31
Net realized and unrealized gain (loss)		1.00			2.23			(3.06)			(0.37)			0.34
Proceeds from settlement of a regulatory matter		0.01			—			—			—			—
Total income (loss) from operations		1.35			2.69			(2.64)			0.05			0.65
Less distributions from:
Net investment income		(0.31)			(0.45)			(0.44)			(0.41)			(0.32)
Total distributions		(0.31)			(0.45)			(0.44)			(0.41)			(0.32)
Net asset value, end of year		$11.82			$10.78			$8.54			$11.62			$11.98
Total return⁴		12.69	%⁵		32.09	%		(23.11)	%		0.37	%		5.65	%
Net assets, end of year (000s)		$18,075			$13,528			$11,881			$18,078			$22,559
Ratios to average net assets:
Gross expenses⁶		1.21	%⁷		1.28	%		1.16	%		1.33	%⁸		1.28	%⁷
Net expenses^6,9,10		1.21	⁷		1.27	¹¹		1.16	¹¹		1.29	^8,11		1.25	^7,11
Net investment income³		2.99			4.73			4.03			3.53			2.67
Portfolio turnover rate		32	%		26	%		37	%		17	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds. .

⁴

⁵	The total return reflects a payment received due to the settlement of a regulatory matter. Absent this payment, the total return would have been 12.59%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷

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 both have been 1.19% for the year ended January 31, 2011 and 1.25% and 1.23%, respectively, for the year ended January 31, 2007.

⁸	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class B shares did not exceed 1.30%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


Legg Mason Lifestyle Funds			91

Legg Mason Lifestyle Allocation 30%


For a share of each class of beneficial interest outstanding throughout each year ended January 31:
Class C Shares¹	2011			2010			2009			2008²			2007²
Net asset value, beginning of year		$10.76			$8.52			$11.60			$11.97			$11.63
Income (loss) from operations:
Net investment income³		0.34			0.48			0.43			0.44			0.32
Net realized and unrealized gain (loss)		1.00			2.23			(3.05)			(0.39)			0.34
Proceeds from settlement of a regulatory matter		0.04			—			—			—			—
Total income (loss) from operations		1.38			2.71			(2.62)			0.05			0.66
Less distributions from:
Net investment income		(0.34)			(0.47)			(0.46)			(0.42)			(0.32)
Total distributions		(0.34)			(0.47)			(0.46)			(0.42)			(0.32)
Net asset value, end of year		$11.80			$10.76			$8.52			$11.60			$11.97
Total return⁴		13.05	%⁵		32.37	%		(22.99)	%		0.38	%		5.80	%
Net assets, end of year (000s)		$5,416			$3,585			$2,842			$5,412			$5,849
Ratios to average net assets:
Gross expenses⁶		1.17	%⁷		1.16	%		0.97	%		1.17	%⁸		1.25	%⁷
Net expenses^6,9,10		1.17	^7,11		1.15	¹¹		0.97			1.17	⁸		1.22	^7,11
Net investment income³		3.02			4.92			4.11			3.68			2.72
Portfolio turnover rate		32	%		26	%		37	%		17	%		92	%

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

²	For a share of capital stock outstanding prior to April 16, 2007.

³	Net investment income (loss) per share and net investment income (loss) ratio to average net assets may include short-term capital gain distributions from underlying funds.

⁴

⁵	The total return reflects a payment received due to the settlement of a regulatory matter. Absent this payment, the total return would have been 12.66%.

⁶	Does not include expenses of the underlying funds in which the fund invests.

⁷

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 both have been 1.15% for the year ended January 31, 2011 and 1.22% and 1.20%, respectively, for the year ended January 31, 2007.

⁸	The gross and net expense ratios include interest expense. Excluding interest expense both ratios would not have changed.

⁹

As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.25%. This expense limitation arrangement cannot be terminated prior to December 31, 2012 without the Board of Trustees’ consent.

¹⁰	The impact of compensating balance arrangements, if any, was less than 0.01%.

¹¹	Reflects fee waivers and/or expense reimbursements.


92		Legg Mason Lifestyle Funds

Appendix A

The performance information below relates to underlying Legg Mason-affiliated funds in which the funds may invest. The percentage of a fund’s assets that may be invested in any particular underlying fund is limited. An underlying fund’s past performance is not necessarily an indication of how the underlying fund will perform in the future. Certain underlying funds may have a limited or no performance history.

This performance information is presented with respect to an underlying fund’s Class IS or I (or equivalent) shares.


Average annual total returns (for the periods ended December 31, 2010) (%)
	1 year	5 years	10 years	Since inception	Inception date¹
Legg Mason Global Currents International All Cap Opportunity Fund	11.25%	N/A	N/A	0.26%	08/04/08
Legg Mason BW Absolute Return Opportunities Fund	N/A	N/A	N/A	N/A	02/26/11
Legg Mason BW Diversified Large Cap Value Fund	N/A	N/A	N/A	13.60%	09/07/10
Legg Mason Batterymarch Emerging Markets Trust	18.59%	N/A	N/A	5.79%	08/29/08
Legg Mason Batterymarch International Equity Trust	9.37%	N/A	N/A	(5.38)%	08/04/08
Legg Mason Batterymarch U.S. Large Cap Equity Fund	14.43%	N/A	N/A	(2.15)%	04/30/08
Legg Mason Capital Management Disciplined Equity Research Fund	N/A	N/A	N/A	25.62%	06/30/10
Legg Mason Capital Management Growth Trust, Inc.	14.03%	(5.13)%	N/A	(2.09)%	03/04/04
Legg Mason Capital Management Opportunity Trust	17.75%	(2.81)%	4.83%	N/A	06/26/00
Legg Mason Capital Management Special Investment Trust, Inc.	20.27%	1.27%	7.07%	N/A	12/01/94
Legg Mason Capital Management Value Trust, Inc.	7.71%	(6.90)%	(0.88)%	N/A	12/01/94
Legg Mason ClearBridge Aggressive Growth Fund	24.48%	N/A	N/A	5.24%	08/04/08
Legg Mason ClearBridge Appreciation Fund	12.82%	N/A	N/A	3.12%	08/04/08
Legg Mason ClearBridge Equity Income Builder Fund	12.39%	1.75%	4.06%	N/A	02/07/96
Legg Mason ClearBridge Fundamental All Cap Value Fund	16.25%	N/A	N/A	3.66%	08/04/08
Legg Mason ClearBridge Large Cap Growth Fund	9.44%	1.47%	0.96%	N/A	10/15/97
Legg Mason ClearBridge Large Cap Value Fund	9.57%	1.50%	2.35%	N/A	05/29/58
Legg Mason ClearBridge Mid Cap Core Fund	22.71%	N/A	N/A	6.67%	08/04/08
Legg Mason ClearBridge Small Cap Growth Fund	25.91%	N/A	N/A	5.87%	08/04/08
Legg Mason ClearBridge Small Cap Value Fund	25.40%	3.26%	N/A	10.57%	04/14/03
Legg Mason Esemplia Emerging Markets Equity Fund	15.60%	12.30%	N/A	15.10%	01/03/05
Legg Mason BW International Opportunities Bond Fund	7.21%	N/A	N/A	7.51%	12/28/09
Legg Mason Strategic Real Return Fund	N/A	N/A	N/A	11.99%	02/26/10
Royce Special Equity Fund	19.69%	8.15%	N/A	9.20%	05/01/98
Royce Total Return Fund	23.65%	4.82%	N/A	10.80%	12/15/93
Royce Value Fund	25.52%	N/A	N/A	6.65%	06/14/01
Western Asset Absolute Return Portfolio	8.15%	N/A	N/A	10.38%	08/04/08
Western Asset Core Plus Bond Portfolio	12.10%	N/A	N/A	13.26%	08/04/08
Western Asset High Yield Portfolio	16.32%	N/A	N/A	12.50%	08/04/08
Western Asset Inflation Indexed Plus Bond Portfolio	5.72%	N/A	N/A	8.57%	12/18/08

¹	The inception date shown is the inception date of the class of shares of the underlying fund in which a fund may invest.

Legg Mason Funds Privacy and Security Notice

Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds

This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end funds. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.

The Type of Nonpublic Personal Information the Funds Collect About You

The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:

Personal information included on applications or other forms;

Account balances, transactions, and mutual fund holdings and positions;

Online account access user IDs, passwords, security challenge question responses; and

Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.).

How the Funds Use Nonpublic Personal Information About You

The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law. The Funds may disclose information about you to:

Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or comply with obligations to government regulators;

Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform marketing services solely for the Funds;

The Funds’ representatives such as legal counsel, accountants and auditors; and

Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust.

Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.

The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.

Keeping you Informed of the Funds’ Privacy and Security Practices

The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.

Legg Mason Funds Privacy and Security Notice cont’d

The Funds’ Security Practices

The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.

Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.

In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, or if you have questions about the Funds’ privacy practices, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Funds at 877-721-1926.

[This page is not part of the Prospectus.]

Legg Mason

Lifestyle Funds

Legg Mason Lifestyle Allocation 85%

Legg Mason Lifestyle Allocation 70%

Legg Mason Lifestyle Allocation 50%

Legg Mason Lifestyle Allocation 30%

You may visit the funds’ website, http://www.leggmason.com/individualinvestors/prospectuses, for a free copy of a Prospectus, Statement of Additional Information (“SAI”) or an Annual or Semi-Annual Report.

Shareholder reports Additional information about the funds’ investments is available in the funds’ Annual and Semi-Annual Reports to shareholders. In the funds’ Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected each fund’s performance during its last fiscal year.

A fund sends only one report to a household if more than one account has the same last name and same address. Contact your Service Agent or the funds if you do not want this policy to apply to you.

Statement of additional information The SAI provides more detailed information about each fund and is incorporated by reference into (is legally a part of) this Prospectus.

You can make inquiries about the funds or obtain shareholder reports or the SAI (without charge) by contacting your Service Agent, or by calling the funds at 1-877-721-1926 or by writing to a fund at 55 Water Street, New York, New York 10041.

Information about each fund (including the SAI) can be reviewed and copied at the Securities and Exchange Commission’s (the “SEC”) Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. Reports and other information about the funds are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. Copies of this information may be obtained for a duplicating fee by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549.

If someone makes a statement about a fund that is not in this Prospectus, you should not rely upon that information. Neither the funds nor the distributor are offering to sell shares of a fund to any person to whom the funds may not lawfully sell their shares.

(Investment Company Act

file no. 811-06444)

FD01083ST 05/11