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Syniverse Holdings ................. M16

T 3M .................................... 48Target ................................ 23Time Warner ......................... 23TJX ................................. 48Tri-Continental Corp. ............. M50

U Union Pacific ......................... 48United Parcel Service ................ 48

V Viacom ............................... 32

W Wal-Mart ........................... 23,48Walt Disney ........................ 32,48WCI Communities .................... 32Williams Cos. ........................ 48

Index to Companies

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14 B A R R O N ' S April 16, 2007

WHEN LEGG MASON SWAPPED ITS RETAIL BROKERAGE UN-it for Citigroup’s mutual-fund business at the end of 2005,there were supposed to be synergies galore.

The firm’s high-profile funds, including Legg MasonValue Trust (ticker: LMVTX), run by superstar Bill Miller,would be sold via the Smith Barney brokerage network. Thebrokers wouldn’t have to worry about conflicts involving

selling in-house funds, and Legg (LM) would have access to a powerfuldistribution network.

So far at least, that synergy hasn’t materialized as Legg had hoped itwould. The main reason: Many of Legg’s biggest equity funds are slumping,even though it has a strong lineup of veteran managers with good long-termrecords. Besides Miller, the roster includes Legg Mason Aggressive Growth(SHRAX), run by Richard A. Freeman; Legg Mason Partners Appreciation(SHAPX), whose co-manager is Harry D. “Hersh” Cohen; Legg MasonPartners Large Cap Growth (SBLGX), run by Alan Blake, and Legg MasonPartners Fundamental Value (SHFVX), helmed by John Goode and PeterHable. Except for Miller’s fund, all of these portfolios were formerly part ofCitigroup Asset Management.

In most cases, the subpar performance has led to net cash outflows, nodoubt pressuring fee income and margins. It’s also a classic example ofinvestors with short memories. “The problem is the investors, not the man-agers,” asserts Harold Evensky, a financial planner in Coral Gables, Fla.“People have unrealistic expectations.”

Legg Mason doesn’t seem too worried. “We look at numbers over thelonger term,” says Mary Athridge, a company spokesperson. “As long as theyare sticking with their process, we support them.”

Aggressive Growth, which Freeman has run for more than20 years, has experienced a few hiccups lately. Its one-yearreturn of 5.1% trails the S&P 500 by nearly 10 percentagepoints, placing it in the bottom 30% of its Morningstar peer

group. However, Freeman’s 10-year annual return of 14.33% bests the S&P500’s by more than six percentage points and ranks at the very top ofMorningstar’s large-cap growth category. Over five years, the fund is in thetop 20%. Last year, Aggressive Growth had net inflows of $135 million,according to Financial Research Corp.

But the Appreciation fund is in the bottom half of its peer group, based onone-, three- and five-year returns, although its 10-year annual result of 8.26%is slightly ahead of the S&P 500’s, placing it in the top 30%. In 2006, it had netoutflows of nearly $580 million, while in this year’s first two months, it swungto a small net inflow.

Similarly, Fundamental Value has a strong 10-year annual return of 9.47%,but its more recent returns aren’t nearly as strong. The fund’s net outflow lastyear was nearly $430 million.

“Longer-term, I would characterize it as a bump in the road,” says JeffPtak,” a Morningstar analyst. “These are proven managers. The success oftheir strategies has been borne out over suitably long periods of time.”

On a brighter note, Legg Mason Opportunity (LMNOX), a mid-cap fundwith strong recent results run by Miller, had a net inflow of $982 million lastyear, aided by the Smith Barney sales force. That’s synergy with a capital S. n

by Lawrence C. Strauss

Cash Track,page M44

Fund of Information

Scoreboard: Energy Funds Show SparkzU.S. diversified equity funds gained an average 0.33% in the week ended Thursday, reportsLipper. In the same span, the broad market edged up 0.29% in that span, small-cap growthfunds gained 0.51%, and mid-cap growth funds returned 0.55%. Up, too, were natural-resource funds, by 2.32%; health/biotech, by 0.83%; and gold funds, by 0.66%.

One Week Year-to-Date

U.S. STOCK FUNDS 0.33% 4.15%U.S. BOND FUNDS – 0.08 1.60TOP SECTOR / Natural Resources Funds 2.32 11.11BOTTOM SECTOR / Real Estate Funds – 1.37 3.31

THE WEEK'S TOP 10Fund Investment Objective One Week Year-to-Date

Pope USX China A China Region 4.58% 10.09%ProFunds OE S&D US Inv Natural Resources 4.37 16.07ProShares Ult Oil & Gas Natural Resources 4.12 NADirexion Cmdty Bl 2x Inv Spec Dvsfd Equity 3.93 19.73Frontier Microcap Small Cap Core 3.65 13.07streetTRACKS S&P OG EP Natural Resources 3.52 13.42ProShares UlS Rl Est DSB 3.51 NAFidelity Adv Korea A Pacific ex Japan 3.51 11.38PowerShares Dyn Oil Natural Resources 3.44 11.88Dreyfus Prem Gr Ch A China Region 3.37 17.81

THE WEEK'S BOTTOM 10Fund Investment Objective One Week Year-to-Date

ProShares UlS OIl Gas DSB – 3.97% NAProShares Ult Rl Est Real Estate – 3.35 NADirexion EM Br 2x Inv Emerging Markets – 3.10 – 14.63ProFunds UltraSht EM Inv DSB – 2.99 – 13.55ProFunds RE Ult-Sect Inv Real Estate – 2.55 1.22ProShares UlS Semicond DSB – 2.38 NAB2B Internet HOLDRS Tr Technology – 2.27 – 2.27PIMCO RE Rl Rtn Inst Real Estate – 2.21 3.65FBR Sm Cap Financial Finl Services – 2.11 – 8.57SEI Inst Real Estate A Real Estate – 2.04 3.07

THE LARGEST 10Net Assets 3-Year* 1-Week YTD

Fund (billions) Investment Objective Return Return Return

American Funds Gro A $85.087 Multi Cap Growth 11.78% 0.59% 3.86%American Funds ICA A 74.191 Large Cap Value 10.89 0.15 2.79Vanguard 500 Index Inv 70.353 S&P 500 Funds 10.14 0.29 2.58Fidelity Contrafund 68.713 Multi Cap Growth 13.28 0.23 3.38Dodge & Cox Stock 68.489 Large Cap Value 15.05 0.89 4.34American Funds CIB A 68.387 MTAG 15.25 0.27 4.46American Funds Wsh A 68.272 Large Cap Value 10.32 0.14 2.47American Funds CWGI A 66.846 GMLV 18.84 0.66 5.30American Funds Inc A 63.539 MTAG 12.54 0.17 3.49PIMCO Tot Rtn Inst 62.602 Intmd Inv Grade 3.84 – 0.48 1.20

*Annualized. Through Thursday. Source: Lipper

Legg’s Missing Synergy

Fund Scope: Mid-Caps Snap Up Smartly on Yearz Mid-cap value funds are up 16.72% in the past year, on average, says Reuters’ fund-tracker Lip-per, versus the S&P 500’s total return of 14.45%. These funds have a three-year annual gain of14.93%. One strong performer has been Phoenix Mid-Cap Value, up 28.91% over 12 months.

Assets 1 Year 3 YearFund Name/Manager Phone Number Load (millions) Return Return*

Fidelity Lw-Prcd Stk 800-544-8544 None $39,609.2 13.90% 15.21%Joel TillinghastLord Abbett MC Val A 800-821-5129 5.75 6,926.5 18.54 14.20Von Der Linde/HansenFidelity Lvrgd Co Stk 800-544-8544 None 5,713.1 19.94 21.11Thomas SovieroJanus Mid Cap Val Inv 800-525-3713 None 5,628.5 17.54 14.55Robert H. PerkinsVanguard Sel Value Inv 800-662-7447 None 5,054.2 23.20 16.77Team ManagedFranklin Val Bal A 800-632-2301 5.75 4,735.8 13.71 17.48Team ManagedGoldman Mid Cp Val A 800-526-7384 5.50 4,263.9 17.82 17.37Team ManagedJP Morgan MC Val A 800-480-4111 5.25 3,662.1 16.39 14.82Simon/Playford/FuH&W Mid Cap Value I 866-493-8637 None 3,485.7 14.58 16.39Team ManagediShares Russ MCV Idx 800-474-2737 None 3,409.2 19.96 19.11O'Connor/Leung

*Annualized. All data through Thursday. Source: Lipper

April 16, 2007 B A R R O N ' S 39