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Investor Day Presentation

Investor Day Presentation

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Legg Mason, Inc.

Investor Day May 13, 2010

Batterymarch • Brandywine Global • ClearBridge Advisors • Legg Mason Capital Management • Legg Mason Global Equities Group Permal • Private Capital Management • Royce & Associates • Western Asset Management

Forward-Looking Statements
This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not statements of facts or guarantees of future performance, and are subject to risks, uncertainties and other factors that may cause actual results to differ materially from those discussed in the statements. For a discussion of these risks and uncertainties, please see “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009 and in the Company’s quarterly reports on Form 10-Q.

Page 1

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 2

Legg Mason Today
• A Diversified Global Asset Management Firm • Headquartered in Baltimore, Maryland • Serving Individual and Institutional Investors for Over a Century • Approximately 3,600 Employees with 33 Offices Around the World • Ticker: LM (NYSE)
As of March 31, 2010:

• Revenue TTM: $2.6B • Shares Outstanding: – Diluted – 162M • Institutional Holdings: 88%

• AUM: $685B • Equity: $5.8B • Market Cap1: $5.5B • Stock Price1: $34.18

1 As of May 12, 2010

Page 3

A Year of Progress
• Significantly improved balance sheet and four quarters of positive results • Continued focus on costs and generated solid cash earnings • Strong investment performance and improved engagement with the affiliates • Delivered growth through distribution and product innovation • Added strategic leadership at a number of the affiliates including investment
expertise, credit and risk management (via bolt-ons and lift-outs)

Page 4

Achieving Diversity & Scale
Total AUM $685B
AUM by Asset Class
AUM by Client Domicile AUM by Asset Class

25% $174B 65% 53% $364B 22% $147B $446B 35% $239B 71% $488B 29% $197B

Fixed Income

Equity

Liquidity

US

Non-US

Institutional

Retail

FY 2010 Gross Revenues $2,635M
41% $1,089M 17% $438M 32% $834M
Data as of March 31, 2010

10% $274M
Equity Liquidity

Page 5

Fixed Income Alternative

Global Presence
As of March 31, 2010
Investment Centers (17)
Toronto Montreal

Distribution Locations (22)

Luxembourg Boston London Stamford New York Paris Philadelphia Wilmington Madrid Baltimore Miami Nassau

Warsaw Frankfurt Tokyo

San Francisco

Cincinnati Naples

Milan Dubai

Hong Kong Taipei

Pasadena

Santiago

Sao Paulo

Singapore Sydney Melbourne

*Global reach includes Legg Mason and its subsidiaries

Page 6

Our Core – A Portfolio of World Class Affiliates
One of the world's leading fixed income managers, as well as one of the largest One of America's leading equity managers recognized for their distinct value investment process A value oriented, small and micro-cap equity manager Equity strategies selecting high-quality companies through rigorous research and analysis Value investing in both equities and fixed income, in both the US and internationally A US, international and global equity manager focusing on quantitative analysis

Fourth largest fundof-hedge-fund manager in the world

Value-focused US equity manager for high net worth investors

A collection of specialty firms dedicated to global equities

Provides discretionary investment services to individuals, trusts and institutions

Page 7

Improving Long-Term Performance
% of Long-Term U.S. Fund Assets beating Lipper Category Average1
10 Yr 75% 80% 47% 70% Mar-09 3 Yr 52% 68% 43% 62% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mar-10

5 Yr

1 Yr

1

As of March 31, 2010, includes open-end, closed-end, and variable annuity funds. Source: Lipper Inc.

Page 8

Legg Mason Tomorrow - Streamlined Business Model
Affiliates Investing Strategic Services
Retail Distribution
Americas International

Retail Distribution Client Value Americas & International Shareholder Value

Capital Allocation Business Development

Page 9

Streamlining Our Business Model - Why it is Attractive
• Independent Investment Affiliates
– Provides environment for optimal investment performance – Protects strong investment culture – Keeps investment teams close to clients – particularly important in institutional market

• Value Added through Retail Distribution & Services
– Important for scale driven businesses – i.e. U.S. retail distribution – Allows for coordinated investment in attractive growth areas – i.e. international markets – These central services provide clear benefits that are valued by affiliates

• Overall Company, Guided by Philosophy of Prudent Capital Management, has
built Balance Sheet Strength – Able to support and protect the affiliate franchise – Fund growth initiatives – organic (e.g. seed / incubation) and acquisitions – Provide attractive return to shareholders

Page 10

Positioned for Long Term Earnings Growth
Enhanced Value through Multiple Sources Transition of Shared Services

• Top line growth from affiliates

marketing to institutional clients supported by retail and instividual distribution globally on retail-based AUM growth and margin improvement

• Shared Services transitioned to
Affiliates and Distribution organizations

• Distribution sharing in revenue • Significant expense reduction • Accretive share repurchase
program – a compelling capital use given our growth prospects

• Better organized to deliver the

customized support our clients require more efficiently and effectively to the client fosters stronger client relationships

• Shared services provided closer

$130M - $150M in projected annualized savings when fully phased-in (fourth quarter FY 2012)
Page 11

Client Driven
Managerial Capitalism (Berle and Means, 1932) Shareholder Value Capitalism (Jensen and Meckling, 1976) Customer-Driven Capitalism (Martin, 2010)

“to acquire and keep customers” - Peter Drucker

Page 12

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 13

Americas Distribution - Overview
Overview: Total AUM: Locations: Centralized Distribution, Marketing, and Product Development Platform for Retail and Instividual Clients $162 Billion Long-Term Assets Offices in Stamford, New York, and Baltimore

AUM by Channel

AUM by Affiliate

AUM by Product
4% 5%

12% 34%

14%

44%

45%

20% 6%

20%
25%

57%

11%

NBD

IAD

Instividual

WAM

CBA

LMCM

Royce

BWG

BFM

Other

Funds

SMA

Sub-Advised

VIT & Collective

Closed End

Page 14

Our Growth Story Began 18 Months Ago
• Brought the science of distribution to the organization • Built new management team • Specified and focused on certain channels • Continuously evaluated product line • Streamlined the organization and improved effectiveness

Performance has turned allowing for greater leverage

Page 15

Innovation and an Expanded Product Base have Diversified Our Product Offerings
Narrow Product Offering
March 2007 AUM

Expanded Product Offering
March 2010 AUM

51%
Flagship Products Emerging Products Flagship Products Emerging Products

32%

68% 49%

Key Drivers

- Flagship Strategies – Core/Core Plus (Western); Appreciation, Large Cap Growth, All/Multi-Cap Growth (ClearBridge);
LM Capital Management Strategies

- Increased gross sales market share in munis (Western Asset) from 1% (Q4 FY07) to 4.3% (Q4 FY10) - Raised over $700M in Large Cap Value sub-advised accounts (Brandywine) - Raised nearly $1 billion in four closed-end funds (Western Asset) since March 2009
Data includes all USD Mutual Fund and SMA AUM

Page 16

Retail: Aggressive Push into New Channels and Firms
FY 2007 Retail Sales
31%
Non-Citi Citi Citi Non-Citi

FY 2010 Retail Sales
45%
(41% FYQ4)

69%

55%
(59% FYQ4)

Over 32,000 new relationships over last 3 years*
Annual New FA Relationships
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 FY 08 FY 09 FY 10 13,085 8,456 10,506

*Excludes new Financial Advisor relationships acquired through product takeovers and excludes
Smith Barney, PFS

Page 17

Instividual: Platform and Intermediary Focus
• FY10 Gross Sales by Channel
DCIO Wealth Mgmt 5% Insurance Direct

• FY10 Gross Sales by Affiliate
Western LMCM
8%

CBA

Royce

Other

27%

38%

36%

40%

2%

30%

14%

Instividual Sales Efforts Leading to the Following Results
- 217 product placements added in FY 2010 - 30 products added to Recommended Lists for FY 2010 - $3.2 billion in take-over assets in FY 2010 (62 wins in 29 different strategies)
Page 18

The New Strategy in Americas Distribution has Improved Sales and Productivity While Reducing Costs
Quarterly Gross Sales Trends
$10.0

Expense and Headcount Trend
$200

-6%

400

-14%
300 Headcount

Gross Sales ($B)

$150

$8.0

Expenses ($M)

$100

200

$6.0

-18%
$50

-8%

100

$4.0
08 09 09 08 09 09 08 10 ec ec ar Ju n Se p Ju n Se p ar M D D M

$0
08 09 20 20 20 10

0

FY

FY

Q E

Q E

Q E

Q E

Q E

Q E

Q E

Q E

Expenses

Headcount

Gross Sales Per Wholesaler ($M)
$300 $250 $200 $150 $100 $50 $0 CY 08 CY 09 $157 $178
SMA and Closed-End Funds Open End Mutual Funds

$283 $228 $71 $105

Page 19

FY

Americas Distribution Flows Dramatically Improved From FY09
Gross Sales
53.2 41.9 38.4 40.0 26.2 9.2 9.0 0.2

Redemptions
55.4
26%

Net Flows

40.2 33.1

3.5

477%

(7.1) (13.2)
75% 121%

(29.2) FY 07 FY 08 FY 09 FY 10 Q4 FY10

Page 20

Americas Distribution’s Contribution to Affiliate Growth
Case Study 1: Bringing Permal to retail market through product innovation
Permal Tactical Allocation Fund Sales Growth
$25
Gross Sales ($M)

$22

$22

1,800 1,500
# Tickets

Key Metrics Fund Inception: April 2009 April 2010 AUM: $65M April 2010 Flows: $13M April 2010 # Tickets: 922

$20 $15 $10 $5 $Q1 FY10 Q2 FY10 Gross Sales Q3 FY10 Q4 FY10 # Tickets

1,200 900 $7 $3 600 300 0

Case Study 2: Nearly $1 billion in Closed-End sales
Total Assets Fund Name WA Municipal Defined Opportunities Trust WA Investment Grade Defined Opportunity WA Global Corp. Defined Opportunity WA Mortgage Defined Opportunity ClearBridge Energy MLP Fund Total Symbol MTT IGI GDO DMO CEM $957.3 Raised ($M) $238.0 $210.4 $302.0 $206.9 IPO Date March '09 June '09 November '09 February '10 June '10 (Expected)

Page 21

Going Forward
Focus on the Right Products for the Right Channels

Retail Strategy

• Instividual Strategy – Four Channel Approach – Insurance – Enhance effort in the $1.1
trillion fund sub-advisory market

– Continue focus on Independent
Advisor and National Broker Dealer firms

– DCIO – Expand product offerings; direct
sales effort to large plan sponsors

– Built Business Development Desk – Continue FA segmentation strategy
(Above-the-Line (ATL) Producers)

– Wealth Management and RIA –
Increase shelf space with private banks and broaden product offerings

– Continue leadership position in closedend offerings

– National Broker Dealer – Continue to
grow shelf space by mining researchdriven platforms

– Focus on retirement solutions (target
date and income oriented products) and continue product rationalization

– Offer single best-of-breed client service
organization for the four channels

Page 22

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 23

International Distribution - Overview
Overview: Total AUM: Locations: Centralized Distribution Platform for Retail, Instividual and Selected Institutional Markets $39 Billion Offices in Americas, Asia, Europe, Australia, Japan and Canada

AUM by Location
1% 3% 3% 27%

AUM by Affiliate
2% 3% 4% 4% 4% 34% 7%

AUM by Product

37%

39% 7% 4% 16% Luxembourg Australia Japan Hong Kong United Kingdom

7% 61% 8%

Dublin Canada Singapore

Western Brandywine LMCM

GAA LM Japan Congruix

Batterymarch Esemplia Other

29% Local Funds Sep Accts Cross Border

As of 3/31/10 Page 24

Executive Summary: International
• Continue to build momentum across our key markets, clients and
product areas

– In a challenging year, AUM has grown 35% driven by net sales
and market movement

• Strong opportunity for Legg Mason to expand its business outside of
the US

• To drive growth moving forward we are – Leveraging our existing global footprint and client base – Organically expanding distribution – Launching innovative products – Building our brand – Expanding our Asset Management franchise through targeted
acquisitions

Page 25

Legg Mason International Distribution Overview
EUROPE
LEGG MASON INTERNATIONAL DISTRIBUTION LOCATIONS

AMERICAS

ASIA

London

Madrid

Paris

New York & Miami

Canada

Chile

Hong Kong Singapore

Taiwan

Frankfurt

Milan

Japan

Australia

COUNTRIES OF CLIENT COVERAGE

UK, France, Germany, Spain, Italy, Belgium, Switzerland, Netherlands, Sweden, Norway, Austria, Luxembourg, UAE, and Greece Cross-Border Funds Local Funds (UK)

Mexico, Costa Rica, Panama, Guatemala, Colombia, Venezuela, Brazil, Peru, Chile, Argentina, Uruguay, Cayman Islands, Bermuda, Puerto Rico, Canada, USA and Ecuador Cross-Border Funds Local Funds (Canada)

Hong Kong, Singapore, Taiwan, Australia and Japan

PRODUCTS SOLD

Cross-Border Funds Local Funds (Singapore, Hong Kong, Japan and Australia)

Insurance • Private Banks • Retail Sales • Asset Managers • Fund of Funds • IFAs • Platforms Insurance • Private Banks • Retail Sales • Asset Managers • Fund of Funds • IFAs • Platforms

DISTRIBUTION CHANNELS DISTRIBUTION CHANNELS

Page 26

Recent Results - Long-Term Sales Trends
Quarterly Net Sales $4 $3 $2
$ Billions

YTD Net Sales $4 $3 $2
$ Billions

$1 $(1) $(2) $(3) $(4)
Jun ‘08 Sep ‘08 Dec ‘08 Mar ‘09 Jun ‘09 Sep ‘09 Dec ‘09 Mar ‘10

$1 $$(1) $(2) $(3) $(4) FY 09 FY 10

Subs

Reds

Net Flows

• Subscriptions exceeded redemptions 1.6 times in FY 2010 resulting in net
inflows of $3.7 billion.

• Compared to FY 2009 subscriptions increased 77% • Five consecutive quarters of positive net flows
Represents subscriptions, redemptions and net flows by Legg Mason’s centralized International distribution operations

Page 27

Strategy / Areas of Focus
Global Mutual Fund Market
% Change from 1Q09 to 3Q09 27.1% 30.9% 42.0% 29.6% 17.0% 23.2%


CAGR2 2008-2013E 5.4% 7.3% 14.9%** 9.2%*** 5.9% 6.3%

Legg Mason is underweight in retail fund assets in international markets Long term growth rates remain compelling in the international market relative to the US Europe remains the largest non-US fund market Asia and Latin America represent significant, but longer term, expansion potential High bank deposits reflect significant potential for flows into the fund market – in 2009 bank deposits outside of the US were $50 trillion versus $10 trillion in the US1

Region

AUM (3Q09) $7,465,328 $2,583,491 $1,395,855 $11,444,674 $10,832,363 $22,376,482

• • • •

Europe Asia/Pacific (Asia ex Japan, Australia, Japan) Locations UK, France, Americas (ex US) Germany, Italy and Spain (ex US) Total International United States Global Total

1 2

Source: Source: Strategic Insight (Europe $14 trillion, Japan $12 trillion, China $9 trillion, Other $15 trillion) Cerulli Data 3 Source: ICI Data **Canada, Mexico, Brazil and Chile. *** Average of Europe, Asia-Pacific and Americas (ex-US). We anticipate growth rates to be reset.

Page 28

International: Growth Strategy
International Asset Management
Global Fixed Income • US Equities • Emerging Market Equities

• Expand our Asset Management franchise

Sales Management EUROPE
Cross-Border Funds Local Funds (UK)

AMERICAS Offshore
Cross-Border Funds Local Funds (Canada)

ASIA AUSTRALIA
Cross-Border Funds Local Funds (Singapore, Hong Kong, Japan and Australia)

• Leverage our existing global footprint and
client base

• Organically expand distribution • Innovative product solutions to fit distribution
channels and markets

Distribution Channels
Insurance • Private Banks • Retail Distributors • Fund of Funds • IFAs • Platforms • Institutional

• Build brand through campaign activity

Client Service Product Marketing
Page 29

Case Study
Legg Mason Brazilian Government Bond Fund

• Background
– Legg Mason Japan and Western Asset Management collaborated to
create a Brazilian Government bond fund managed by Western in September 2008

• Competitive position
– The Fund targeted Japanese retail investors who are bullish on the
long-term outlook for the Brazilian economy, credibility and currency

• Market launch
– The Fund launched at the end of October 2008 against a very difficult
market backdrop that saw the Brazilian Real depreciate against the Yen

• Current status
– After a slow start, the Fund had passed the $100M asset mark by April
2009 and had $1.4B of AUM at the end of March 2010
Page 30

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 31

Investing With & In Affiliates
Deploy LM’s capital to help fuel Affiliate growth and add investment talent / capabilities
• Seed Capital Investment – Incubation of products with significant growth potential – Launch differentiated products that leverage Affiliates’ investment

capabilities and LM distribution – Total seed capital balance of approximately $250 million as of March 31, 2010 – Provided approximately $150 million of new seed capital investment to our Affiliates in the past 12 months

• Bolt-On Acquisitions and Lift-Out Opportunities – Add investment talent and capabilities – Broaden investment and management team depth – Access new markets / channels / products – Remain disciplined on price – Financial key is the ability to deliver AUM and enhance growth
Page 32

Added Strategic Leadership at Affiliates

• All Cap Equity Manager (7) – Acquired Wyper Capital
Management for Royce in March 2010 – Brings additional global investment expertise – Product set includes both funds and institutional accounts

• London – Investment expertise (1) – Credit (1) • Pasadena – Credit (2) – Risk Management (1) • New York – Insurance Asset Management expertise (1)

• Institutional Marketing (1)
Note: (#) represents the number of professionals added Page 33

• High Yield Investment Management (2)

Acquisition Strategy
• Enhance organic growth by acquiring best-in-class managers (targeted
acquisitions) and investment capabilities (bolt-ons)

• Our multi-manager model is a competitive advantage • Remain disciplined on price and accretive transactions (GAAP and cash) • Focus on enhancing balance and diversity and leverage our distribution
platform

• Primary product gap today is core International / European equity • Actively pursuing a targeted pipeline

Ultimate goal is shareholder value creation

Page 34

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 35

Why Are We Streamlining Our Business?
• The status quo is no longer an option...
– A stronger LM benefits clients, affiliates, shareholders and employees

• We evaluated multiple alternatives to improve LM operating construct...
– Conditioned upon supporting our multi-manager model – Ability to achieve meaningful margin improvement

• We’ve made a collaborative decision to sharpen the focus of LM around affiliate
investing and strategic corporate services, specifically providing for… – Affiliates to assume all responsibility for investment management support activities – Streamlining corporate to focus on value added strategic services, including
distribution and capital allocation

– An increased sharing of revenue through growth in retail based AUM

Page 36

How Do Our Key Constituencies Benefit?
• Clients
– Investment-centric support brought closer to the clients – A “look-through” to stronger parent

• Affiliates
– Increased control over client facing operational and investment management activities – Increased availability of capital to invest in business development – A stronger parent company and currency

• Shareholders
– Growth – Margin improvement

• Employees
– All employees benefit from a stronger and more focused LM

Page 37

What Are We Streamlining?
• Focusing LM Corporate on:
– Services directly related to Parent Company activity – Critical control services…financial, regulatory, human resources – Verifiable value-added opportunities for affiliate franchise growth

• Affiliates assume control of:
– Operations & Technology applications and processes – Portfolio accounting – Trading / settlement – Performance reporting – Fee billing – Certain other activities within Finance, Human Resources, and Legal & Compliance

Page 38

How Will We Create Shareholder Value?
Three approaches to increasing shareholder value, totaling $130M-$150M 1. Eliminate and streamline activities in Corporate and Distribution Business Units…$50M 2. Transfer of / Charge for activities, headcount, and costs to Affiliates…$75M 3. Phase in of increased sharing of retail revenue, based on new AUM…$15M

Achievement of all projected savings and margin improvements, as well as amount of restructuring and transition related costs, will be affected by many factors, including market conditions and other factors affecting the financial results of Legg Mason and the affiliates and the rate of assets under management growth. Actual results may differ materially from projected amounts.

Page 39

When Will Streamlining Occur?
• We expect the following to occur over the next 12-18 months:
– Plan announcement / employee notification completed by 05/10/10 – Detailed transition schedules by 06/30/10 – Completion of Shared Services transition projected by 06/30/11 – Clean-up / LM Corporate transition projected by 12/31/11 – Consolidate Baltimore operations at Harbor East by 03/31/12

Page 40

Financial Impact of Streamlined Business Model
• Cost of Shared Services will be absorbed by the affiliates and revenue sharing from
AUM generated by Americas Distribution will benefit shareholders by approximately $130M - $150M annually, when fully phased in

• Have announced corporate staff reductions of approximately 350 positions
– Additional voluntary terminations, transfers to affiliates, and adjustments as a result of
further business reviews are expected over time

• Expect $190M - $210M in restructuring and transition costs over the next 18 months
– Affiliate transitional support…$75M – Transition costs for up to18 month resource retention…$50M – Severance and accelerated benefits…$45M – Other…$30M

• Expect 6-8% of margin improvement when fully implemented
Achievement of all projected savings and margin improvements, as well as amount of restructuring and transition related costs, will be affected by many factors, including market conditions and other factors affecting the financial results of Legg Mason and the affiliates and the rate of assets under management growth. Actual results may differ materially from projected amounts.

Page 41

Experience Executing Cost Save Initiatives
($ in millions)

$700

$629
$600 $500 $164 $400 $300 $200 $100 $0
FY'09 - Gross (1) FY'09 - Net
Direct Distribution

$94

$555
$94 $164

$493
$75 $129 $129 $114

$430
$75

$358 $280
$114

$371 $297 $289 $226 $244 $166

Current - Gross

Current - Net

Proforma Gross
Affiliate Allocations

Proforma - Net

Corporate

Net costs of Distribution reflects sharing of revenues from Legg Mason Distribution
1) Q1 FY’09 breakout estimated based on current allocations

Page 42

When Will Streamlining Occur?
$ in millions

Period FY '11 (7/1/10-3/31/11) FY '12 Run Rate Q4 FY '12

Charges for Restructuring, Cost Saves Distribution Estimated Transition, & Service Sharing of Total and Bridge Transition Revenue Impact ($120) (80) $60 90 125 $5 10 15 ($55) 20 140

Achievement of all projected savings and margin improvements, as well as amount of restructuring and transition related costs, will be affected by many factors, including market conditions and other factors affecting the financial results of Legg Mason and the affiliates and the rate of assets under management growth. Actual results may differ materially from projected amounts.

Page 43

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 44

Significantly Improved Balance Sheet
$ in millions

$4,000 $3,000 $2,000 $1,000 $0
Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10

Unrestricted Cash Debt Total Cash

Ratio (x)

20 15 10 5 0
Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10

Interest Coverage Gross Leverage Net Leverage

Note: Fiscal quarter end

Page 45

Operating Revenues and Expenses
$800
$ in millions

$700

-31%
$600

$500

-36%
$400
Includes impact of previous cost cutting initiatives

+15% +10%

$300

$200 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10

Operating Revenues, as adjusted
Note: See Appendix for GAAP reconciliation Fiscal quarter end

Operating Expenses, as adjusted

Page 46

Cash Income Per Share, as Adjusted

$1.50
$1.17 $0.99

$1.00
$0.61 $0.59 $0.69 $0.57

$0.50

$0.00

($0.50)

($1.00) ($5.50)
($5.23)

($5.50) ($1.50)
Q1 '09 Q2 '09

($5.37)

Q3 '09

Q4 '09

Q1 '10

Q2 '10

Q3 '10

Q4 '10

Cash Income, as adjusted
Note: See Appendix for GAAP reconciliation

Page 47

The Importance of Cash Earnings
Selected Peers (≥$2bn Market Capitalization)
GAAP P/E¹
60.0x 52x 50.0x 50.0x 60.0x

Cash P/E¹

40.0x

40.0x

30.0x 25x 24x 23x 21x 20.0x 20x 20x 19x 18x 16x 15x

30.0x 22x 20.0x

21x

20x

19x 17x 17x 16x 16x 14x 14x 12x

10.0x

10.0x

0.0x A B C D LM E F G H I J

0.0x C D B E A F H G J I LM

Companies include: AB, AMG,BEN, BLK, EV, FII, IVZ, JNS, TROW, & WDR Source: Company filings; Capital IQ; Market data as of 11-May-2010 1 Based on Q1 2010 annualized EPS.

Page 48

Operating Margin, as Adjusted
FY09: 24% FY10: 21%

$1,000

60% 50%

AUM ($B)

$800

40% 30%
30.0% 29.1%

$600
20.9% 20.4% 21.0% 17.9% 23.2%

20% 10% 0%
Jun '08 Sep '08 Dec '08 Mar '09 Jun '09 Sep '09 Dec '09 Mar '10

8.2%

$400

AUM

Operating Margin, as Adjusted

• Highest operating margin, as adjusted in 6 quarters
Note: See Appendix for GAAP reconciliation

Page 49

Op Margin, as Adj

$1B Board Authorized Repurchase & Raised Dividend
• Have historically maintained a conservative approach to capital management and
intend to continue that philosophy which has served us extremely well

• In recognition of improved financial results, strong balance sheet and substantial
excess cash, the Board has authorized a stock repurchase of up to $1B

• Intend to deploy a portion of the $1B in excess cash currently on the balance
sheet, as well as cash flows over the next several years to execute up to $1B in stock repurchase – Initial repurchase of $300M by Sep 30, 2010 – Additional $100M by fiscal year end 2011

• Execution of the plan and timing will be revised as needed based on market and
company performance, and may be scaled back or accelerated based on actual cash flows and capital needs

• Declared a $0.04 per share dividend, a $0.01 per share or 33% increase from
prior quarter

Page 50

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 51

Western Asset Management - Highlights
Overview: Business: One of the world’s leading and largest fixed income managers Singular focus on active global fixed income management; Deep expertise spanning both taxable and tax-exempt portfolios Pasadena, California-based subsidiary founded in 1971; Offices in New York, London, Tokyo, Singapore, Hong Kong, Melbourne, and São Paulo with 906 associates including 121 investment professionals

Location(s):

Philosophy:

Team approach to portfolio management combines the unique insights of dedicated country and sector specialists; Long-term value-oriented focus; $478.2 billion in assets under management (03/31/10) Jim Hirschmann, CEO Steve Walsh, CIO

Financial: Management:

Page 52

Western Asset Management Performance
Largest Strategies
Composite Performance vs. Benchmark

Composite Name

AUM ($B) $ 95.4

1-Yr 18.30

3-Yr (1.12)

5-Yr (0.15)

10-Yr 0.94

• Overall performance of key strategies continues to
strengthen

U.S. Core + U.S. Core Full 1

• U.S. Core strategies (Core/Core Full) continue to
perform very well

Global Sovereign 2

$ $

49.1 24.2

1.15 6.39

0.19 (0.83)

0.22 (0.13)

0.52 0.18

Credit3

• U.S. Long Duration strategy beating the benchmark
across multiple periods, with very strong one year results

U.S. Municipal 4

$ $

20.5 17.9

(1.16) 16.18

0.01 0.12

0.02 0.46

0.05 1.14

U.S. Long Duration 5

• Global Sovereign strategy also above benchmark
(1, 3, 5 and 10-Yr periods)
1. Supplem ental perform ance of the "U.S. Core + U.S. Core Full" s trategy is repres ented by a com bination of the following com pos ites : US Core IG F&O and US Core Full BIG F&O. 2. Perform ance of the "Global Sovereign" s trategy is repres ented by the Global Sovereign USD Unhedged com pos ite 3. Supplem ental perform ance of the "Credit" s trategy is a com bination of the following com pos ites : U.S. Corporate, U.S. High Yield , U.S. Bank Loan and Em erging Markets Benchm ark: As s et weighted. 4. Perform ance of the "U.S. Municipal" s trategy is repres ented by the U.S. Municipal Interm ediate com pos ite 5. Perform ance of the "U.S. Long Duration" s trategy is repres ented by the U.S. Long Duration Governm ent/Credit Full Dis cretion com pos ite

Benchmarks: U.S. Core + U.S. Core Full – BarCap Agg; Global Sovereign – Citi WGBI USD; Credit – asset weighted benchmark; U.S. Municipal – BarCap Muni 1-10 Blend; U.S. Long Duration – proprietary blended benchmark. As of 3/31/10 Sources: (Relative Performance) – Lipper, Inc. and Morningstar, Inc. AUM and composite performance vs. benchmark provided by Western Asset

Page 53

Western Asset Management Strategic Priorities

Continue to Expand the Business
– Customized Solutions – Insurance Business – Long Duration / LDI – Inflation-Linked – Local Currency Emerging
Markets

Develop New Product Initiatives
– Alternative-like Products
- Absolute Return - Commodities - Infrastructure

Reinvest

– Talent – IT & Ops – Risk Management

– Advisory Services

– Retail Channel

Page 54

Batterymarch - Highlights
Overview: A global equity manager who pioneered the use of quantitative techniques to model the disciplines of experienced fundamental investors Offers an array of US, global, international and merging markets equity portfolios for clients around the world using a collaborative team-driven approach Boston-based subsidiary of Legg Mason, Inc., founded in 1969; 95 associates including 24 investment professionals

Business:

Location: Philosophy: Bottom-up, model driven process combines the power and efficiency of quantitative tools with the wisdom and experience of fundamental investors $20.9 billion in AUM; ~ 28% of assets are managed for clients outside the US (03/31/10) CEO: Bill Elcock, President/CFO: Fran Tracy; CIO: Tom Linkas; Director, Global Marketing: Dan Kelly

Financial:

Management:

Page 55

Batterymarch Performance
Largest Strategies
Performance vs Benchmark AUM ($B) $6.9 $3.7 $3.0 $1.9 $1.8
(1)

Composite Name Global Emerging Mkt U.S. Large Cap - Rus. Global Equity International Equity Intl. Small Cap

Six Months Mar-10 3.53 0.00 1.13 1.64 2.62

2009 3.18 (3.84) (7.35) (8.72) (11.37)

Calendar Year 2008 2007 (3.94) 0.34 (2.44) (2.40) (1.70) 9.07 2.03 0.15 (1.25) (0.89)

2006 2.41 (0.67) 1.11 0.53 4.69

• Underperformance in March, April 2009
impacted positive longer-term returns • Markets are returning to fundamentals; models are returning to pre-crisis performance patterns • Short-term outperformance reflects trends

Composite Name Global Emerging Mkt U.S. Large Cap - Rus. Global Equity International Equity Intl. Small Cap

AUM ($B) $6.9 $3.7 $3.0 $1.9 $1.8

(1)

Composite Performance vs. Benchmark 1-Yr 3-Yr 5-Yr 10-Yr 11.57 (6.30) (6.72) (5.65) (6.79) (0.36) (0.74) (3.17) (2.83) (3.12) 1.58 (0.10) (0.56) (1.34) (0.14) 1.51 0.75 1.34 0.50 -

SI 2.86 1.35 0.98 (0.40) 1.03

(1) AUM includes assets not in marketed composites Benchmarks: Global EM – MSCI EM; U.S. Large Cap Rus. – Russell 1000; Intl Equity – MSCI EAFE; Intl Small Cap – S&P Developed ex U.S. Small Cap; Global Equity – MSCI World As of 3/31/10 Sources (Relative Performance and AUM) – Lipper, Inc. and Batterymarch

Page 56

Batterymarch Strategic Priorities

Product and Strategy
– Focus on expanding
existing non-U.S. products (e.g. global emerging markets, Asia ex-Japan, International small-cap)

Sales and Distribution
– Focus on key prospect
areas including Sovereign Wealth Funds, China, Middle East and Southeast Asia

Investment and Talent Management
– Continue to add depth to
all areas of the business

– Insure investment
capabilities to meet specific client needs

Page 57

Royce - Highlights
Overview: One of the industry's most experienced and highly respected small-cap value investment managers
Equity advisor specializing in smallercompany portfolios managed with a disciplined value approach for the long-term time horizon

Business:

Location:

New York based subsidiary founded in 1972 with 112 associates including 35 investment professionals

Philosophy:

Bottom-up stock selection process with an emphasis on risk management

Financial: Management:

$33.9 billion in assets under management (3/31/10) President/Co-CIO – Chuck Royce; Co-CIO – W. Whitney George; COO – John Diederich

Page 58

Royce Performance
Largest Funds

• Recovery from the March 2009 bottom
has been dramatic • As of 3/31/10, five of largest Royce Funds have out-performed their benchmark over longer periods of time
Fund Name Premier Pennsylvania Mutual Total Return Low Priced Stock Value Plus AUM ($B) $5.8 $5.5 $4.3 $3.7 $3.3

Fund Performance vs. Benchmark 1-Yr 3-Yr 5-Yr 10-Yr (3.57) 2.19 (8.76) 11.19 (3.89) 6.75 1.97 1.43 4.11 (0.98) 5.12 1.46 0.29 4.16 1.89 7.39 6.45 5.54 6.77 -

Benchmark: Russell 2000 As of 3/31/10 Source (Relative Performance) – Morningstar, Inc.

Fund

Average Annual Total Returns % as of 3/31/2010 1 Year 5 Year 10 Year/Since Inception (Date) Premier (Invmt) 59.19 8.48 11.07 PA Mutual (Invmt) 64.95 4.82 10.13 Total Return (Invmt) 54.00 3.65 9.22 Low-Priced Stock (Svc) 73.95 7.52 10.45 Value Plus (Svc) 58.87 5.25 12.95 (6/14/01)

Annual Operating Expenses (%) Gross Net 1.16 1.16 0.91 0.91 1.19 1.19 1.60 1.49 1.48 1.48

Important Performance and Expense Information - All performance information reflects past performance, is presented on a total return basis and reflects the reinvestment of distributions. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate, so that shares may be worth more or less than their original cost when redeemed. Investment and Service Class shares redeemed within 180 days of purchase may be subject to a 1% redemption fee payable to the Fund. Current performance may be higher or lower than performance quoted. Current month-end performance may be obtained at www.roycefunds.com. Gross operating expenses reflect each Fund's gross total annual operating expenses, including management fees, any 12b-1 distribution and service fees, other expenses, and any applicable acquired fund fees and expenses. Net annual operating expenses reflect contractual fee waivers and/or reimbursements. All expense information is reported as of the Fund's prospectus dated May 1, 2009. Royce & Associates has contractually agreed to waive fees and/or reimburse expenses to the extent necessary to maintain the net direct annual operating expense ratio for Royce Low-Priced Stock Fund (Service Class) at or below 1.49% through 4/30/11.

Page 59

Royce Strategic Priorities
Continue to Deliver on Core Mission
– Consistency of process and
message

New Product Expansion
– SMid and Mid-Cap Funds

Broaden Institutional / RIA Visibility
– Expanding team, expertise,
and coverage

started over past three years cap funds started two-three years ago – Morningstar 3-year performance is key started in 2009

– Focus on absolute and riskadjusted returns

– Global and international small-

– Work with intermediaries for
proper platform placement and dissemination of Fund materials and white papers

– Two new multi-cap products

– Continual improvement of
marketing materials

– Adding senior global
investment talent (Wyper bolton)

Page 60

Legg Mason Capital Management - Highlights
Overview: One of America's leading equity managers recognized for its distinct culture and valuation-driven investment process Baltimore-based subsidiary of Legg Mason, Inc., established in 1982 with 82 employees, including 46 investment professionals

Location(s):

Philosophy:

Market inefficiencies can best be exploited through the consistent execution of a long-term, fundamental, valuation-based investment strategy $17.9 billion in assets under management (3/31/10) CIO – Bill Miller CEO – Jennifer Murphy

Competitive Strategy Analysis

Financial: Management:

Idea Generation

Financial & Managerial Assessment

Decision Making

Valuation Analysis

Page 61

LM Capital Management Performance

• All LMCM funds outperformed significantly in year ended March 31, 2010 • 4 LMCM funds were named “Category Kings” by the Wall Street Journal for one year returns as of March 31, 2010 • Value Trust has outperformed in 74% of rolling three year periods and 81% of rolling five year periods since inception

Largest Strategies
Composite Name Value Equity Opportunity Growth Equity Mid Cap All Cap AUM ($B) $6.8 $2.2 $1.8 $1.6 $0.5 Composite Performance vs. Benchmark 1-Yr 3-Yr 5-Yr 10-Yr 20.36 88.15 7.77 38.65 30.48 (8.85) (5.68) (10.66) (1.03) (6.26) (6.46) (1.13) (6.88) (0.94) (5.90) (0.51) 5.45 4.03 0.81 (0.04)

Benchmarks: Value – S&P 500; Opportunity – S&P 500; Growth – Russell 1000 Growth; Mid Cap – Russell Mid Cap; All Cap – Russell 3000 As of 3/31/10; Source (Relative Performance) – Lipper, Inc Category Kings, The Wall Street Journal, April 5, 2010.

Page 62

LM Capital Management Strategic Priorities
Perform and Position to Win New Clients – Continuous
improvement of investment process

Expand Investment Capabilities – Build-out of global
research capabilities

Broaden Product Offerings − Successful Opportunity
UCITS fund launch

– Global PM search – Seed portfolios

− Research fund launch
slated for Summer 2010

– Strong focus on client
service and sales, in the US and globally

− More new products
planned in late 2010

Page 63

ClearBridge Advisors - Highlights
Overview: A diverse, equity-focused investment manager with multiple strategies that cover the equity market capitalizations and most styles; Investment team benefits from a 45-year legacy and experience in managing over many market cycles Offices in New York and San Francisco with 130 associates including 51 investment professionals
Portfolio Monitoring & Market Intelligence

Location(s):

Philosophy:

Financial: Management:

$54.4 billion in assets under management (03/31/10) CEO – Peter Sundman; CIO – Hersh Cohen; COO – Terrence Murphy

Stock Selection PORTFOLIO Portfolio Construction

Risk Manageme nt Compliance

Portfolio Management

Performance Analytics Investment Committee

Page 64

Por tfol Mar io Mon ket it Inte oring a llige n nce d

Our equity strategies all start with the same fundamental principle: the key to long term success is selecting high-quality companies through rigorous research and analysis

Fundamental Research

Investment Universe Portfolio Specific Investment Process

Trading

& g rin ce ito en on ig M ell io nt ol t I rtf ke Po Mar

ClearBridge Advisors Performance

Largest Strategies

• Continued strong long term performance
– 79% of Funds beating Lipper average over 10 year period • Underperformance is shorter term due to quality bias in products versus lower quality stock rally • 3 year performance continues to improve
Composite Name Large Cap Growth All Cap Value Aggressive Growth Appreciation Multi Cap Growth AUM ($B) $8.4 $7.8 $7.4 $6.8 $6.5 Composite Performance vs. Benchmark 1-Yr 3-Yr 5-Yr 10-Yr (3.75) 3.59 5.97 (7.21) 20.44 1.92 0.48 (2.81) 4.42 1.61 0.60 0.62 (0.74) 2.21 3.05 3.84 2.55 5.07 3.96 9.76

Benchmarks: Large Cap Growth – Russell 1000 Growth; All Cap Value – Russell 3000; Aggressive Growth – Russell 3000 Growth; Appreciation – S&P 500; Multi Cap Grw – Russell 3000 Growth As of 3/31/10 Sources (Relative Performance) – Lipper, Inc.

Page 65

ClearBridge Advisors Strategic Priorities

Drive Retail Sales
– Expand distribution channels to
broaden sales effort

Broaden Institutional Sales
– Expand sales talent, expertise and
coverage

Deliver Investment Performance
– Continue to expand research
talent

– Provide innovative products and
solutions for clients to promote strategies and brand awareness

– Continue to strengthen
consultant relationships (e.g., endowments, family office)

– Execute risk management
controls to balance upside potential & downside exposure

– Selectively utilize press opportunities – Target niche client sectors

– Acquire strategic capabilities
through lift-outs/bolt-ons

Page 66

Brandywine - Highlights
Overview: Pioneers in the field of value investing in both equities and fixed income, internationally and domestically; Brandywine Global provides innovation and expertise in today’s global marketplace. Offers an array of equity, fixed income and balanced portfolios that invest in U.S., international and global markets Philadelphia-based subsidiary of Legg Mason, Inc. founded in 1986 with offices in San Francisco, London and Singapore with 140 associates including 57 investment professionals
Country Allocation

Business:

Location(s):

Philosophy:

Combines rigorous, teamoriented research and a disciplined investment process to exploit opportunities $30.4 billion in assets under management (03/31/10) Chairman of Executive Board: David Hoffman

Financial: Management:

Your real-interest rate portfolio

Currency Decision

Sector/ Credit Decision

Duration Decision

Page 67

Brandywine Performance

Largest Strategies

• Global Fixed Income recovering strongly • Number of smaller strategies reaching
maturity have excellent track records

Composite Name Gbl. Op. Fixed Income Fndl. Large Cap Value Global FI Invt. Grade Intl. FI Invt. Grade Div. Large Cap Value

AUM ($B) $5.7 $3.8 $1.9 $1.0 $0.9

Composite Performance vs. Benchmark 1-Yr 3-Yr 5-Yr 10-Yr 21.29 2.04 19.35 7.29 (4.65) 0.51 (0.13) 1.45 0.07 4.08 2.04 0.28 1.51 0.64 2.82 4.02 2.17 3.39 2.88 3.72

Benchmarks: Global Opp. Fixed Inc. – Citigroup WBGI; Fundamental LCVE – Russell 1000 Value; Global FI IG – Citigroup WGBI; International FI IG – Citigroup non-US WGBI; Div. LCV – Russell 1000 Value Performance as of 3/31/10; eVestment Ranks as of 12/31/09 Sources: Relative Performance – Lipper, Inc. and Morningstar, Inc.; Composite Percentiles – eVestment

Page 68

Brandywine Strategic Priorities

Investment Management
– Continue to focus on
producing industry-leading investment products with an objective of excellent returns

Institutional Growth & Client Service
– Continue distribution focus
on Europe, Asia and Africa through relocation and expansion of sales teams

Retail Growth & Client Service
– Expand retail presence by
launching funds using existing institutional strategies and explore new sub-advised relationships

– Deepen relationship with
U.S. consultants and state and local pension managers

Page 69

Permal - Highlights
Overview: One of the oldest and largest alternative asset management firms with over 35 years of experience Business: Provides flexible investment opportunities in directional and absolute return strategies across global financial markets and using multiple investment formats including separately managed accounts Location: New York-based subsidiary of Legg Mason, Inc. with offices in London, Singapore, Dubai, Paris, Boston, Hong Kong and Nassau, 190 associates including 40 investment professionals Philosophy: Disciplined investment and monitoring process with an integrated risk management function $17.4 billion in assets under management (03/31/10)
Manager Search & Due Diligence
– – –
Access to managers and ideas Extensive manager relationships Disciplined process Qualitative & Quantitative assessment Minimize idiosyncratic risk Operational due diligence

Portfolio Construction & Asset Allocation
– – – –
Assemble optimal mix of managers & strategies Analysis, discipline and experience Top-down analysis Strategy allocation Bottom-up analysis Manager allocation

Risk Management & Monitoring
– – – –

Financial: Management:

Manager monitoring Portfolio monitoring Business risk monitoring Risk Committee Reviews

CEO – Isaac Souede (25 yrs) CIO – James Hodge (23 yrs) Deputy CIO - Rob Kaplan (14 yrs) – EVP & COO - Tom DeLitto (20 yrs) –

Page 70

Permal Performance
ROBUST LONG-TERM PERFORMANCE WITH LOWER RISK IN A VARIETY OF PRODUCT FORMATS
Performance Profiles Investment Formats
– Absolute Return and Directional Funds – Customized Separately Managed Accounts – Buy-side Special Purpose Funds Platform – 63 separately managed accounts with fund managers – Permal-Managed Tactical Funds

Past performance is not indicative of future results. See the important information page for risks and performance. All fund returns shown in this presentation are net of pro-forma 1.25% management fee.

Page 71

Permal Strategic Priorities

Protect the Core Business
– New assets through new
intermediaries and new products

Grow Institutional Market
– Increase the number of – Build presence and
consultant relationships penetration of Endowment & Foundation segment U.S. and sovereign wealth funds globally institutionally outside the U.S.

Leverage Core Competencies & Relationships
– Customized Separately Managed Accounts – Special Purpose Funds Buyside Platform – Permal-Managed Tactical Funds

– Systematic “high touch”

calling / visitation program with top-distribution partners

– Local market alliances – Strengthen separate account
capabilities

– Focus on public funds in

– Establish brand

Page 72 Page 72

Agenda
• Legg Mason Welcome & Overview – Mark Fetting • Centralized Growth Drivers – Americas Retail Distribution – Dave Odenath – International Distribution – Ron Dewhurst – Investing With & In Affiliates – Jeff Nattans • Streamlined Business Model – Overview of Initiatives – Joe Sullivan – Financial Update – Charles “CJ” Daley, Jr. • Update on Affiliate Performance – Western – Jim Hirschmann – Batterymarch – Bill Elcock – Royce – Chuck Royce – LMCM – Bill Miller – ClearBridge – Peter Sundman – Brandywine – David Hoffman – Permal – Isaac Souede • Closing Comments – Mark Fetting
Page 73

Closing Comments
• Streamlining our business model from a position of strength
– Affiliates gaining momentum on solid investment results – Retail and quasi-retail distribution in the Americas and International delivering value
and adding to growth outlook in a meaningful way

– Shared service transition puts service delivery closer to the clients where it can be
managed more effectively

– In total, we expect these initiatives will significantly reduce cost structure and drive
material margin improvement

• Prospects for growth in shareholder value as result of these initiatives make
repurchasing our own shares a compelling use for some of our excess cash investment in and with our affiliates

• Current capital position and strong capital generation will allow for continued

Page 74

Appendix

Batterymarch • Brandywine Global • ClearBridge Advisors • Legg Mason Capital Management • Legg Mason Global Equities Group Permal • Private Capital Management • Royce & Associates • Western Asset Management

Appendix - Biographies
• Mark R. Fetting – Chairman and CEO – 30 years of industry experience – 10 years with Legg Mason – Appointed President and CEO in January 2008; Chairman
December 2008

– Previously, Prudential Financial; Greenwich Associates;
T. Rowe Price

• Charles J. “CJ” Daley, Jr. – CFO and Treasurer – 25 years of financial services industry experience – 22 years with Legg Mason – Named CFO in 2001

Page 76

Appendix - Biographies
• Ronald R. Dewhurst – Head of International Asset Management – 35 years of industry experience – Joined Legg Mason in February 2008 – Served as the CEO of IOOF, an investment management company in
Australia from 2003-2007

– Previously Head of Americas, J.P. Morgan Fleming Asset Management • Jeffrey A. Nattans – Head of Specialized Managers – 18 years of industry experience – 4 years with Legg Mason – Previously a Vice President in Goldman Sachs Investment Banking
Division

Page 77

Appendix - Biographies
• David R. Odenath – Head of the Americas – 30 years of industry experience – Joined Legg Mason in September 2008 – Served most recently as President of Prudential Annuities and CoHead of International Retirement, previously President Prudential Investments

• Joseph A. Sullivan – Chief Administrative Officer – 30 years of industry experience – Joined Legg Mason in September 2008 – Previously with Stifel Nicolaus and responsible for fixed income
capital markets from 2005-2008; Legg Mason Wood Walker same capacity from 1993-2005

Page 78

Appendix - Biographies
• William L. Elcock – CEO, Batterymarch – 27 years of investment experience – Joined Batterymarch in 1984, named CEO in 2002 – Manages the firm’s business operations with overall responsibility
for all major investment management decisions – Prior to Batterymarch, worked at Bank of New England

• James W. Hirschmann – CEO, Western Asset Management – 24 years of industry experience – Joined Western Asset in 1989 – Named CEO in 1999

Page 79

Appendix - Biographies
• David F. Hoffman, CFA – Chairman of the Executive Board, Brandywine – Joined Brandywine Global in 1995 – Co-lead Portfolio Manager for the firm’s Global Fixed Income and
related strategies

• Bill Miller, CFA – Chairman and CIO, Legg Mason Capital Management – Joined Legg Mason in 1981 – Served as Director of Research until 1985 – Co-managed the Legg Mason Value Trust with Ernie Kiehne from its
inception in 1982

Page 80

Appendix - Biographies
• Charles M. Royce – President/Co-CIO, Royce & Associates – 47 years of investment experience – 37 years as a smaller company value portfolio manager – Has been President and Co-Chief Investment Officer of Royce and
Associates, LLC and President of the Royce Funds since 1972 – Serves as portfolio manager or co-portfolio manager on more than 10 Royce Funds

• Isaac Souede – CEO, Permal – Has served as Director of Permal Group Inc. since April 1987 and is
currently Chairman and CEO – Serves as Director of the Steinhardt Fund as well as other funds within the Permal Family of Funds

Page 81

Appendix - Biographies
• Peter E. Sundman – CEO, ClearBridge Advisors – Joined ClearBridge Advisors in 2009 – Previously served as Chairman and CEO of the Neuberger Funds at
Neuberger Investment Management, Inc. (formerly the asset management arm of Lehman Brothers)

– Served on the ICI Board of Governors from 2001- 2009

Page 82

Appendix – GAAP Reconciliation
Cash Income, as adjusted
($ millions, except per share amounts)

Net Income (Loss) attributable to Legg Mason, Inc. Plus: Amortization of intangible assets Deferred income taxes on intangible assets Deferred income taxes on impairment charges (1) Imputed interest on convertible debt Cash Income (Loss) Plus (Less): (2) Net money market fund support (gains) losses Impairment charges (2) Net loss on sale of SIV securities Cash Income (Loss), as adjusted

Quarters Ended Mar 10 Dec 09 Mar 09 $ 63.6 $ 44.9 $ (330.2) 5.7 33.1 8.9 111.3 $ 111.3 $ 5.8 33.9 8.6 93.2 93.2 8.0 35.4 (70.3) 8.3 (348.8) 367.4 82.9 (843.0) $ (741.5)

Twelve Months Ended Mar 10 Mar 09 $ 204.4 $ (1,967.9) 22.8 136.2 34.4 397.8 (16.5) $ 381.3 36.5 142.5 (444.6) 32.3 (2,201.2) 1,376.6 1,307.9 (1,674.7) $ (1,191.4)

Net Income (Loss) per Diluted Share attributable to Legg Mason, Inc. common shareholders Plus: Amortization of intangible assets Deferred income taxes on intangible assets Deferred income taxes on impairment charges (1) Imputed interest on convertible debt Cash Income (Loss) per Diluted Share Plus (Less): (2) Net money market fund support (gains) losses Impairment charges Net loss on sale of SIV securities(2) Cash Income (Loss) per Diluted Share, as adjusted
1

$

0.39 0.04 0.20 0.06 0.69 -

$

0.28 0.03 0.21 0.05 0.57 -

$

(2.33) 0.06 0.25 (0.50) 0.06 (2.46) 2.59 0.59

$

1.32 0.14 0.88 0.22 2.56 (0.11) -

$

(13.99) 0.26 1.01 (3.16) 0.23 (15.65) 9.79 9.30

$

0.69

$

0.57

$

(5.95) (5.23)

$

2.45

$

(11.91) (8.47)

Effective April 1, 2009, Legg Mason was reguired by accounting literature to retroactively impute (non-cash) interest expense on convertible debt

using an effective interest rate that would have been attributable to nonconvertible debt at the original date of issuance. This adjustment also includes the
2

Page 83

actual tax benefits relating to the convertible debt that are not recognized for GAAP purposes. Includes related adjustments to operating expenses, if applicable, and income tax provision (benefit).

Appendix – GAAP Reconciliation
Operating Margins
($ millions)

Jun 08 $ 1,054.0 $ 307.8 $ 746.2 $ 228.9 $

Sep 08 966.1 $ 278.9 687.2 $

Dec 08

Quarters Ended Mar 09 Jun 09 617.2 $ 180.6 436.6 $ (45.3) $ 613.1 $ 172.5 440.6 $ 58.3 $

Sep 09 659.9 $ 174.4 485.5 $ 77.9 $

Dec 09

Mar 10

Operating Revenues, GAAP basis Less: Distribution and servicing expenses Operating Revenues, as adjusted

720.0 $ 202.5 517.5 $

690.5 $ 671.4 177.7 167.4

512.8 $ 504.0 79.2 $ 105.8

$ Operating Income (Loss) Add (Less): Gains (losses) on deferred compensation and seed investments Impairment charges Operating Income, as adjusted Operating margin, GAAP basis Operating margin, as adjusted $

220.2 $ (1,073.0) $

(5.1) 223.8 $ 21.7% 30.0%

(19.9) 200.3 $ 22.8% 29.1%

(44.0) 1,225.1 108.1 $ -149.0% 20.9%

(1.9) 82.9 35.7 $ -7.3% 8.2%

31.4 89.7 $ 9.5% 20.4%

24.1 102.0 $ 11.8% 21.0%

12.6 -

11.2 -

91.8 $ 117.0 11.5% 17.9% 15.8% 23.2%

Page 84

Appendix – GAAP Reconciliation
Operating Margins

($ millions)

Operating Revenues, GAAP basis Less: Distribution and servicing expenses Operating Revenues, as adjusted Operating Income (Loss) Add (Less): Gains (losses) on deferred compensation and seed investments Impairment charges Operating Income, as adjusted Operating margin, GAAP basis Operating margin, as adjusted

FY 07 $ 4,343.7 1,196.0 $ 3,147.7 $ 1,028.3

FY 08 $ 4,634.1 1,274.0 $ 3,360.1 $ 1,050.2

FY 09 $ 3,357.4 970.0 $ 2,387.4

FY 10 $ 2,634.9 691.9 $ 1,943.0 321.2

$ (669.2) $

13.7 $ 1,042.0 23.7% 33.1%

(8.8) (71.0) 151.0 1,308.0 $ 1,192.4 $ 567.8 $ 22.7% 35.5% -19.9% 23.8%

79.3 400.5 12.2% 20.6%

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Appendix – GAAP Reconciliation
($ in millions)
Q4 '08 Operating Revenues, GAAP basis Less: Distribution & Servicing Expense Operating Revenues, as adjusted $1,069 305 $764 Q1 '09 $1,054 308 $746 Q2 '09 $966 279 $687 Q3 '09 $720 203 $518 Q4 '09 $617 181 $437 Q1 '10 $613 173 $441 Q2 '10 $660 174 $485 Q3 '10 $691 178 $513 Q4 '10 $671 167 $504

Operating Expenses, GAAP basis Less: Distribution & Servicing Expense Lease Losses Intangible Impairment Operating Expenses, as ajdusted

$932 305 151 $475

$825 308 $517

$746 279 $467

$1,793 203 36 1,225 $329

$663 181 38 83 $361

$555 173 $382

$582 174 $408

$611 178 28 $405

$566 167 $398

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IMPORTANT NOTES
The foregoing information about Legg Mason, Inc. is part of a presentation about the company to financial professionals and other market participants. This information is designed to enhance these persons’ understanding of the company, which offers investment management products and services only through its various subsidiaries. Any information about these products and services is not intended to be an offer or solicitation to investors. All investment products or services are managed by one or more of the company’s subsidiaries only, and only such subsidiaries or other authorized persons may make offers or solicitations to investors regarding such products or services in accordance with applicable policies and requirements, including eligibility and other criteria. Past investment performance does not guarantee future results and the investment return and principal value of an investment will fluctuate so that, when an investment is sold, it may be worth more or less than original cost. Current performance may be lower or higher than the performance information noted above. Information about current performance may be obtained from the company’s subsidiaries or other authorized persons. Investors should read the relevant disclosure documents carefully before investing. Lipper Inc. is a nationally recognized organization that ranks the performance of mutual funds. In compiling its results, each fund is ranked within a universe of funds similar in portfolio characteristics and capitalizations as defined by Lipper Inc. and based on average annual total returns assuming reinvestment of dividends and capital gains, distributions, at net asset value and the deduction of all fund expenses. Rankings do not include the effect of a fund’s sales charges and results would have been less favorable had sales charges been included. A high Lipper ranking does not necessarily imply that a fund achieved positive results for the period.

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Important Information - Permal:
Past performance is not a guide to future results. Performance is for Class A shares, reflects the reinvestment of dividends and is net of Fund level fees/expenses but not sales charges which will reduce returns. All fund returns shown in this presentation are net of pro-forma 1.25% management fee. The actual management fee may be higher. Performance for each strategy does not include fees at the Permal Fund level. Performance may be volatile and the NAV will fluctuate. Investors may not receive the full amount invested upon redemption. Indexes listed do not represent benchmarks for the Funds, but allow for comparison of a Fund’s performance to an index. An investor cannot invest directly in an index. Index performance does not reflect fees and expenses. Hedge funds are speculative and involve Risk. Fund of fund risks include dependence on the performance of underlying managers, Permal’s ability to allocate assets and expenses at Permal and underlying fund. Risks of underlying hedge funds include, among others, leverage, options, derivatives, distressed securities, futures, and short sales, and investments in illiquid, emerging and developed market securities or specific sectors. Exchange rate fluctuations may affect returns. Allocations and holdings are subject to change. There is no assurance that the Fund’s objective will be attained. This material is not an offer or a solicitation to subscribe for any Fund, and is not investment advice. Sales of shares are made on the basis of the offering circular only and cannot be offered in any jurisdiction in which such offer is not authorized. The Fund is not for public sale in the US or to US persons and its sale is restricted in certain other jurisdictions. There are restrictions on transferring shares. Investment in the Fund may not be suitable for all investors; investors should consider risks and other information in the offering circular and consult their professional advisers regarding suitability, legal, tax and economic consequences of an investment.

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