During the fourth quarter we established a position in Praxair.

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1 4Q 2017 Product Commentary CLEARBRIDGE DIVIDEND STRATEGY FUND Michael Clarfeld, CFA, Scott Glasser and Peter Vanderlee, CFA Portfolio Managers Average annual total returns and fund expenses (%) as of December 31, 2017 Class A 3-mo 1-yr 5-yr 10-yr Excluding sales charges Including effects of maximum sales charges Since Incept. (11/06/92) Gross Net S&P 500 Index N/A - - Performance shown represents past performance and 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 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, 2019 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. S&P 500 Index is an unmanaged index of common stock performance. Key takeaways This was another wonderful year for dividend increases, and we continue to expect dividends to rise in line with corporate earnings. Following the strong performance in 2017, the stock market is pricing in the rise in corporate earnings that will come from corporate tax cuts. We believe the stock market can handle a moderate increase in inflation and interest rates. Market overview and outlook Holy Cow! Phil Rizzuto, Hall of Fame Yankee shortstop and later a beloved announcer, used that phrase to express amazement. We can t think of a better one for this year. What a year it was on so many fronts! It would be disingenuous to comment on financial markets of 2017 without a mention of President Trump, who dominated headlines. Daniel Henninger of the Wall Street Journal gave a good description. He referred to the past year as having a parallel presidency. One president made harmful and spiteful tweets, and picked feuds that left observers shaking their heads. The other president was adamant about stimulating the economy. Whether it has been hopes for tax cuts, which have now materialized, or the effects of prolonged monetary stimulus coupled with ultra-low interest rates courtesy of Janet Yellen, the economy is doing better than it had for many years. Unemployment is at a 17-year low, consumer confidence has remained high, and spending by individuals and corporations has begun to tick up. Corporate earnings continue to rise and INVESTMENT PRODUCTS: NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE

2 cuts in corporate taxes promise sharp rises in One can argue forever about the causes of the market s strength, but the reality cannot be denied. A year ago, we were mildly positive on stocks, but did not expect the relentless upward march we saw in We believed the ultra-low interest rates would prevent any major declines, but as the fiasco over attempts to repeal Obamacare unfolded, we thought that the dramatic polarization and fighting in Washington would preclude successful legislation toward a tax bill. Some thoughts on the tax bill just signed it is far from the promise of tax simplification; the complexity is beyond comprehension. It does give almost everyone some cut in taxes, the exception being high-wage earners in high-tax states. It does not close loopholes. It will likely put a damper on home prices in many areas. Workers with children get some benefits. Corporate taxes for many companies will come down a lot, and incentives to invest in plant and equipment should kick in. It can potentially help jobs and wages, but that is not certain. Overseas profits can be brought back at favorable rates, a move that has been an obvious need for many years. This bill is neither a windfall for the wealthy nor a panacea for the working poor. It does put a few more dollars in family finances because of the higher standard deduction. However, payroll taxes, unaddressed in this legislation, remain the highest tax on most workers. This bill does nothing to address the single biggest social issue we see, which is income and wealth inequality. Following the strong performance in 2017, the stock market is pricing in the rise in corporate earnings that will come from corporate tax cuts. The markets are further supported by an overall expansion in economies in virtually all major countries. Business is good. We don t see the giddiness sometimes associated with long bull markets, so the psychology is not yet creating excessive risk, which is a positive. Interest rates have aided and abetted stock prices, and now, economic revival. Since the Great Recession of 2008, inflation has been contained by an excess workforce and more recently the Amazon effect on prices. The Internet has had a deflationary effect on many things. If employment continues to grow and wages indeed rise, there could be some upward pressure on inflation. We believe the stock market can handle a moderate increase in inflation and interest rates. The Federal Reserve is likely to maintain a slow pace of rate increases. earnings. While there are many positive factors supporting valuation (earnings growth, interest rates, consumer confidence, etc.), the sad fact is there are no asset classes that are not expensively priced. Pension funds and endowments are struggling to meet long-term needs without taking on excessive risk. Stocks, while at full valuations, remain attractive relative to other assets, and they should benefit from the corporate tax cuts. There are still risk factors that could affect markets. We reiterate our opposition to trade wars with Latin America and China. And tax cuts on top of an economy that is already functioning at a high rate carry the risk of overheating. Fund highlights For the quarter ended December 31, 2017, the ClearBridge Dividend Strategy Fund Class A shares had a cumulative return of 5.69%, excluding the effects of sales charges. In comparison, the Fund s unmanaged benchmark, the S&P 500 Index, returned 6.64% and the Lipper Equity Income Funds category average gained 5.45% for the same period. On an absolute basis, the Fund had gains in 10 of the sectors in which it was invested for the quarter (out of 11 sectors total). The main contributors to performance came from the information technology (IT), financials and consumer staples sectors. The energy sector was the sole detractor. On a relative basis, overall stock selection and sector allocation contributed negatively to performance for the quarter. In particular, stock selection in the energy, consumer discretionary and financials sectors detracted from relative results, as did an underweight to IT and the Fund s cash position. On the positive side, stock selection in the IT, utilities and industrials sectors and an underweight to the health care sector contributed to relative performance. On an individual stock basis, positions in Home Depot, Microsoft, Texas Instruments, Wal-Mart and Union Pacific were the greatest contributors to absolute returns in the fourth quarter. The largest detractors included Time Warner, Merck, Enbridge, Blackstone and Schlumberger. During the fourth quarter we established a position in Praxair. This was another wonderful year for dividend increases, and we continue to expect dividends to rise in line with corporate 2

3 Top contributors The leading individual contributors to Fund performance for the quarter included: Home Depot (HD), in the consumer discretionary sector, is the largest home center retailer in the U.S. The strong housing market and continued solid execution by the company boosted Home Depot s third-quarter results. Microsoft (MSFT), in the IT sector, is the largest software company in the world and the maker of Windows and Office 365; their Azure unit is the second-largest cloud provider. Microsoft continues to generate excellent earnings per share growth, and it has strong momentum in cloud services. Texas Instruments (TXN), in the IT sector, is a global semiconductor company that designs and supplies analog technologies, digital signal processing and microcontroller semiconductors. The company reported an earnings beat in the third quarter, with revenue and margins all beating estimates. Texas Instruments is a beneficiary of tax reform, given its status as a nearly full tax payer. In addition, the semiconductor cycle continues to hit new highs. Bottom contributors In terms of individual stocks, the leading detractors to Fund performance for the quarter included: Time Warner (TWX), in the consumer discretionary sector, is one of the leading global media franchises, with such iconic brands as HBO, CNN and Warner Brothers. Shares declined amid Department of Justice efforts to block a proposed acquisition of Time Warner by AT&T. Merck (MRK), in the health care sector, is a large pharmaceutical company. Stiff competition from generics is a headwind for drug company growth. In our opinion, Merck has the best pipeline of the major drug companies, and we anticipate good results from two Keytruda studies due out in Enbridge (ENB), in the energy sector, is a multinational energy transportation company focusing on energy transportation, distribution and generation. Enbridge saw its shares decline modestly on weaker-than-expected third-quarter earnings and investor caution regarding the company s financing needs, given its large backlog of growth projects. Enbridge partially addressed these funding concerns with a $1.5 billion (Canadian dollars) common equity offering and a $500 million preferred equity offering in December. 3

4 Top 10 equity holdings (%) Berkshire Hathaway Inc 4.1 Microsoft Corp 2.7 Home Depot Inc/The 2.7 Alphabet Inc 2.5 Texas Instruments Inc 2.4 Nestle SA 2.4 Union Pacific Corp 2.3 Procter & Gamble Co/The 2.2 Blackstone Group LP/The 2.2 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 December 31, 2017, and they are calculated among 575 funds in the Lipper Equity Income peer group, including reinvestment of dividends and capital gains, if any, and excluding sales charges. 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. The S&P 500 Index is an unmanaged index of common stock performance. 3M Co 2.2 Sector allocation (%) Financials 18.0 Consumer Staples 15.8 Information Technology 13.3 Industrials 9.9 Consumer Discretionary 9.7 Energy 6.6 Materials 6.4 Health Care 6.3 Utilities 5.2 Real Estate 3.8 Telecommunication Services 2.2 Cash/Other 2.9 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

5 Brandywine Global Clarion Partners Legg Mason is a leading global investment company committed to helping clients reach their financial goals through long-term, actively managed investment strategies. ClearBridge Investments EnTrustPermal Martin Currie QS Investors RARE Infrastructure Royce & Associates 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 Western Asset leggmasonfunds.com Youtube.com/leggmason What should I know before investing? Equity securities are subject to price fluctuation and possible loss of principal. 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. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. 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. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. Dividends may fluctuate and a company may reduce or eliminate its dividend at any time. Fixed income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, a forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. 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 Legg Mason Investor Services, LLC. Member FINRA, SIPC CBAX D8165 1/18 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 PLEASE READ THE PROSPECTUS CAREFULLY. 5