CLEARBRIDGE TACTICAL DIVIDEND INCOME FUND

1Q 2016 Product Commentary CLEARBRIDGE TACTICAL DIVIDEND INCOME FUND Mark McAllister, CFA, and Peter Vanderlee, CFA Portfolio Managers Market overview and outlook Major indices opened the year with losses between 5% and 8% in January amid weak fourth-quarter earnings announcements and downward pressure on oil prices. Earnings season yielded a third straight quarter of aggregate profit declines within the S&P. The Bloomberg commodity index hit its lowest level since 1991 at mid-month, and crude oil prices dipped below $27 per barrel, a more than 25% decline from the end of 2015. Crude prices ultimately recovered to close March above $38 per barrel, 46% above the February low. Meanwhile, the World Bank cut its forecast for global growth from 3.3% to 2.9% for 2016. The Chicago Board Options Exchange Volatility Index, more commonly known as the VIX, spiked 50% above year-end levels before subsiding throughout the second half of the quarter. The S&P 500 Index temporarily dropped below 1800 to hit its lowest level since April 2014. But stocks rallied in late February and into March as investors looked past a terrorist attack in Belgium and traded on the recovery in oil, a weaker dollar, generally positive economic reports, and dovish indications from the Fed. The dollar eased 3.6% against a basket of foreign currencies during March, and it is now down 5.5% from the November high. The 10-Year Treasury yield also fluctuated dramatically, falling as low as 1.66%, then climbing to nearly 2% in early March, and ultimately ending the quarter at 1.73%, approximately 55 bps below year-end rates. Average annual total returns and fund expenses (%) as of March 31, 2016 Class A 3-mo 1-yr 5-yr 10-yr Since Incept. (10/19/90) Gross Net Excluding sales 1.74-12.86 4.28 3.36 6.38 1.83 1.83 charges Including effects -4.09-17.87 3.05 2.75 6.13 - - of maximum sales charges Dow Jones U.S. 9.63 8.87 13.61 7.17 N/A - - Select Dividend Index Performance shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so shares, when redeemed, may be worth more or less than the original cost. Class A shares have a maximum front-end sales charge of 5.75%. Total returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Total return figures are based on the NAV per share applied to shareholder subscriptions and redemptions, which may differ from the NAV per share disclosed in Fund shareholder reports. Performance would have been lower if fees had not been waived in various periods. Returns for less than one year are cumulative. For the most recent month-end information, please visit www.leggmason.com. Gross expenses are the Fund's total annual operating expenses for the share class(es) shown. Net expenses are the Fund's total annual operating expenses for the share classes indicated and would reflect contractual fee waivers and/or reimbursements, where these reductions reduce the Fund's gross expenses. These arrangements cannot be terminated prior to December 31, 2017 without the board s consent. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the numbers shown in the table above. The Gross and Net Expenses listed include 0.69 of Acquired Fund Fees and Expenses (AFFE) that are required to be shown in the Fund s prospectus. AFFE reflects the Fund s pro rata share of fees and expenses relating to its investments in acquired funds; however, AFFE are not incurred directly by the Fund. Therefore, AFFE are not reflected in the Fund s audited financial statements or financial highlights. The Dow Jones U.S. Select Dividend Index consists of 100 of the highest dividendyielding securities (excluding real estate investment trusts, or REITs) in the Dow Jones U.S. Index, a broad-based index representative of the total market for United States equity securities. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

The U.S. GDP growth rate slowed in the fourth quarter as consumers cooled on spending and corporate capital expenditures declined. Initial reports indicated only a 0.7% annualized expansion, though the figure was revised higher to 1.4%, still well below the second quarter s 3.9% expansion rate. Employers in the U.S. added nearly 700K jobs between December and February, and the unemployment rate declined to a post-financial Crisis low of 4.9%. The Consumer Price Index rose 1% or more above its 2015 levels in both January and February, and CPI ex-food and energy came in more than 2% higher than the prior year for both months, showing continued improvement toward the Fed s 2% inflation target. However, it appears the benefits of lower gas prices still have not affected consumer behavior, as retail sales declined modestly in February, and January s gains were revised into negative territory as well. Minutes from the Federal Reserve s December meeting showed that the decision to raise short-term rates was unanimous, but committee members still expressed concern over low inflation, sluggish global growth and the dollar s strength against foreign currencies. The committee held rates steady after the January meeting, but several officials indicated hopes for another rate hike sooner rather than later this year. However, Fed Chair Janet Yellen acknowledged that market turmoil has significantly tightened financial conditions and quashed these hawkish views when she offered a dovish tone several weeks later: Given the risks to the outlook, I consider it appropriate for the committee to proceed cautiously in adjusting policy. At the end of the quarter, the futures market indicated that the odds of another raise do not breach 50% until the December 2016 meeting, whereas just a week prior to Yellen s comments the market pointed to a 54% probability of a raise at the July 2016 meeting. The Dow Jones and S&P 500 indices gained 2.2% and 1.4%, respectively, while the NASDAQ lost 2.4% during the quarter. Within the S&P, only the financials and health care sectors recorded losses, down about 5% each. The top-performing sectors were telecommunication services and utilities, up 16.6% and 15.6%, respectively, while the consumer staples, industrials and energy sectors followed next, returning between 4-6% each. Small-cap stocks underperformed as the Russell 2000 Index shed 1.5% over the quarter, though midcaps outperformed the Russell 1000 Index s 1.2% return by approximately 100 bps. Looking at style, value-oriented stocks topped their growth counterparts as the Russell 1000 Value and Russell 1000 Growth lifted 1.6% and 0.7%, respectively. We continue to be modestly optimistic on the outlook for the U.S. equity market. While there has been some volatility in the market, the U.S. economic expansion continues. We think corporate earnings have the potential to show modest improvement in 2016. We continue to favor companies that have sound or improving balance sheets, and attractive current dividend yields and dividend growth potential. The Alerian MLP Index (AMZ) dropped more than 25% in the first few weeks of the year, but it recovered to close the quarter down only 4.2%, about 550 bps behind the S&P 500. We remain steadfast in our belief that the U.S. renaissance in energy production represents a secular growth opportunity and is attractive for the long-term investor. In our assessment, energy production in the U.S. is in a good position to increase over time. In the short term and the medium term, the rate of growth in energy production has slowed on a month-overmonth basis and has gone negative in oil basins such as the Bakken and Eagle Ford. Our assessment continues to be that the magnitude of the decline on a sequential basis and a yearover-year basis will be modest, although risks to the downside are increasing the longer we stay in this low oil price environment. Excess U.S. production capacity has been reduced, rig count has substantially declined, and capital expenditures in U.S. energy infrastructure have been meaningfully cut back. As a result, U.S. output, especially crude oil, has slowed from peak levels and excess supply continues to be curtailed. With the weakness in the AMZ Index we have seen over the past year, we believe that many MLPs are attractively priced and provide a positive risk-reward profile for the long-term investor. We have fine-tuned the portfolio toward higher-quality energy MLPs which, in our opinion, are in the best position to withstand the downturn in the short term and thrive in the long term. Many of our holdings continue to exhibit resilience in distributions, and in some cases demonstrate continued healthy growth. We have already factored in the reduced growth profile in the short term. In our view, the long-term outlook for owning energy MLPs remains positive. REITs outperformed the broader market this quarter as the MSCI U.S. REIT Index ascended 6.3%, approximately 500 bps ahead of the S&P 500. During the quarter, the single tenant/net lease and self-storage subsectors were the top performers, up 17.8% and 12.2%, respectively, followed by the industrial/warehouse, shopping center, hotel and mall subsectors, up about 7% each. Only the office subsector declined this quarter, down 57 bps. Our outlook for the U.S. REIT market remains modestly positive. Sound operating 2

conditions are helping to support high asset valuations. However, tighter conditions in the real estate debt markets may have a modestly negative impact on real estate asset values going forward, and there has been a gradual increase in the pace of new property development. But capital flows into U.S. real estate continue to be robust, with demand from Chinese investors particularly noticeable recently. With distributions expected to show solid growth this year, we think the U.S. REIT market is reasonably valued at current levels. Fund highlights For the quarter ended March 31, 2016, the ClearBridge Tactical Dividend Income Fund Class A shares had a cumulative return of 1.74%, excluding the effects of sales charges. In comparison, the Fund s unmanaged benchmark, the Dow Jones U.S. Select Dividend Index (DJDVY), gained 9.63%, for the quarter, while the Lipper Equity Income Funds category average increased 2.87% for the same period. During the first quarter, the utilities and financials (including REITs) sectors contributed the most to returns, while the energy (including MLPs) sector was the primary drag on absolute performance. Relative to our benchmark DJDVY Index, overall sector allocation and stock selection drove underperformance. Overweight positions in information technology, energy (including MLPs) and health care, as well as an underweight in utilities, detracted from performance as the former sectors lagged the index while the latter outperformed. Meanwhile, negative stock selection in the energy sector (including MLPs) also hurt relative performance. During the quarter we initiated a position in Enbridge Energy Partners LP (EEP) and Genesis Energy LP (GEL). Meanwhile, we exited several positions in financials: Och-Ziff Capital Management Group LLC (OZM), Ares Management LP (ARES), Apollo Global Management LLC (APO) and KKR & Co. LP (KKR). The REITs BioMed Realty Trust (BMR) and Inland Real Estate (IRC) were purchased by private equity firms. We also sold out of a number of MLPs and energy stocks: Delek Logistics Partners LP (DKL), Crestwood Equity Partners LP (CEQP), JP Energy Partners LP (JPEP), Enable Midstream Partners LP (ENBL), EnLink Midstream LLC (ENLC), DCP Midstream Partners LP (DPM), Summit Midstream Partners LP (SMLP), Energy Transfer Equity LP (ETE), Cypress Energy Partners (CELP), ONEOK (OKE), Tallgrass Energy Partners (TEGP), Transocean Partners LLC (RIGP), Enviva Partners LP (EVA) and Williams Partners LP (WPZ). In addition, Targa Resources (TRGP) acquired its LP unit, Targa Resources Partners LP (NGLS), and we fully exited the Targa position. Finally, we swapped our 5.799% convertible preferred position in NextEra Energy (NEE) for the company s most recent issue, which offers a higher yield (6.371% at par value) and a longer cash flow stream, converting in 2018. Top contributors The leading individual contributors to Fund performance for the quarter included: Telecom leaders Verizon (VZ) and AT&T (T), along with 6.5% convertible preferred shares of Exelon (EXC), contributed to performance as investors flocked to defensive stocks with meaningful yields during the quarter s volatility. Brookfield Renewable Energy Partners LP (BEP) recovered the bulk of their 2015 losses this quarter as management boosted the distribution 7.2% and offered positive commentary on wind and hydro generation so far in 2016. EPR Properties (EPR) shares posted a strong first quarter after management reported solid fourth-quarter results, maintained its full year 2016 guidance, and provided bullish commentary on the growth prospects for their education and recreation segments. Bottom contributors The bottom individual contributors to Fund performance for the quarter included: Och-Ziff Capital Management Group LLC (OZM) shares dropped after management reported a disappointing quarter and halted the dividend. We subsequently exited our position. Williams Partners LP (WPZ), Energy Transfer Equity LP (ETE), EnLink Midstream LLC (ENLC) and MPLX LP (MPLX), all energy MLPs, detracted during the quarter as continued volatility in oil prices weighed on the energy universe. Though crude prices have recovered from their recent lows, conditions remain volatile with current oil prices at unsustainable levels, in our opinion. In an effort to reduce our exposure to this nearterm volatility, we exited our position in all of these companies except for MLPX, where we see upside from the company s recent acquisition of MarkWest Energy Partners LP (MWE). 3

Holdings Top holdings - energy MLPs (%) Energy Transfer Partners LP 3.1 Enterprise Products Partners LP 2.5 Enbridge Energy Partners LP 1.8 MPLX LP MLP 1.3 WORLD POINT TERMINALS LP MLP U 1.1 Top holdings - REITs (%) Starwood Property Trust Inc 1.9 EPR Properties 1.6 Equity Residential 1.4 SIMON PROPERTY GROUP INC 1.4 Annaly Capital Management, Inc. 1.1 Top holdings - Equities (%) Lockheed Martin Corp 3.4 Kimberly-Clark Co 3.1 Verizon Communications Inc. 2.5 AT&T Inc. 2.5 Microsoft Corp 2.5 Sector Allocation Sector allocation (%) Energy - MLPs 19.6 Financials - REITs 17.5 Financials - Other 11.3 Information Technology 11.0 Health Care 9.4 Utilities 7.8 Industrials 6.3 Telecommunication Services 6.1 Consumer Staples 3.9 Consumer Discretionary 3.0 Energy - Other 2.5 Cash 0.9 Materials 0.7 Percentages are based on total portfolio as of quarter end and are subject to change at any time. For informational purposes only and not to be considered a recommendation to purchase or sell any security. 4

Definitions and additional terms Please note that an investor cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges. Category Average Returns source: Lipper Inc. Past performance is no guarantee of future results. Lipper returns are based on the three-month period ended March 31, 2016, and they are calculated among 547 funds in the Lipper Equity Income peer group, including reinvestment of dividends and capital gains, if any, and excluding sales charges. Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships (MLPs) that provides investors with an unbiased, comprehensive benchmark for this emerging asset class. The index is calculated using a float-adjusted, capitalization-weighted methodology. The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes. Bps a basis point is one one-hundredth of one percent (1/100% or 0.01%). Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. Convertible securities are bonds or preferred stocks that can be converted into a preset number of shares of common stocks after a predetermined date. Dow Jones Industrial Average (DJIA) is an unmanaged index composed of 30 bluechip stocks, each with annual sales exceeding $7 billion. The DJIA is price-weighted, reflects large-cap companies representative of U.S. industry, and it historically has moved in tandem with other major market indexes such as the S&P 500. Federal Reserve Board ("Fed") is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices, and a sustainable pattern of international trade and payments. Gross Domestic Product (GDP) is an economic statistic that measures the market value of all final goods and services produced within a country in a given period of time. Master Limited Partnership (MLP) is a type of limited partnership that is publicly traded. MSCI US REIT Index is a market capitalization-weighted index comprising equity Real Estate Investment Trusts (REITs) that are included in the MSCI U.S. Investable Market 2500 Index, with the exception of specialty equity REITs that do not generate a majority of their revenue and income from real estate rental and leasing operations. The index represents approximately 85% of the U.S. REIT universe. NASDAQ Composite Index is a market-capitalization-weighted index that is designed to represent the performance of NASDAQ securities, and it includes over 3,000 stocks. Real estate investment trusts (REITs) invest in real estate or loans secured by real estate and issue shares in such investments, which can be illiquid. Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. (A priceto-book ratio is the price of a stock compared with the difference between a company s assets and liabilities.) Russell 1000 Value Index is an unmanaged index of those companies in the large-cap Russell 1000 Index chosen for their value orientation. Russell 2000 Index is comprised of the 2,000 smallest companies in the Russell 3000 Index. S&P 500 Index is a capitalization-weighted, composite index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Treasury Yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations (bonds, notes and bills). VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge." The World Bank is an international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement. 5

Brandywine Global ClearBridge Investments Martin Currie Permal QS Investors RARE Infrastructure Royce & Associates Western Asset leggmasonfunds.com 1-800-822-5544 Youtube.com/leggmason linkedin.com/company/legg-mason @leggmason Legg Mason is a leading global investment company committed to helping clients reach their financial goals through long-term, actively managed investment strategies. A broad mix of equities, fixed income, alternatives and cash strategies invested worldwide A diverse family of specialized investment managers, each with its own independent approach to research and analysis Over a century of experience in identifying opportunities and delivering astute investment solutions to clients What should I know before investing? Equity securities are subject to price fluctuation and possible loss of principal. Short selling is a speculative strategy. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The manager s investment style may become out of favor and/or the manager s selection process may prove incorrect, which may have a negative impact on the Fund s performance. Real estate investment trusts (REITs) are closely linked to the performance of the real estate markets. REITs are subject to illiquidity, credit and interest rate risks, and risks associated with small- and mid-cap investments. Investments in MLP securities are subject to unique risks, including the risks of MLPs and the energy sector, including the risks of declines in energy and commodity prices, decreases in energy demand, adverse weather conditions, natural or other disasters, changes in government regulation, and changes in tax laws. Dividends may fluctuate, and a company may reduce or eliminate its dividend at any time. Diversification does not guarantee a profit or protect against a loss. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. Active management does not ensure gains or protect against market declines. The views expressed are those of the portfolio managers as of the date indicated, are subject to change, and may differ from the views of other portfolio managers or the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. All data referenced are from sources deemed to be reliable but cannot be guaranteed. Discussions of individual securities are intended to inform shareholders as to the basis (in whole or in part) for previously made decisions by a portfolio manager to buy, sell or hold a security in a portfolio. References to specific securities are not intended and should not be relied upon as the basis for anyone to buy, sell or hold any security. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional. Portfolio holdings and sector allocations may not be representative of the portfolio manager's current or future investment and are subject to change at any time. ClearBridge Investments, LLC and Legg Mason Investor Services, LLC are subsidiaries of Legg Mason, Inc. 2016 Legg Mason Investor Services, LLC. Member FINRA, SIPC. 610228 CBAX107129 D11768 FN1610041 4/16 BEFORE INVESTING, CAREFULLY CONSIDER A FUND S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. YOU CAN FIND THIS AND OTHER INFORMATION IN EACH PROSPECTUS, AND SUMMARY PROSPECTUS, IF AVAILABLE, AT WWW.LEGGMASONFUNDS.COM. PLEASE READ THE PROSPECTUS CAREFULLY. 6