Profile: Legg Mason, Inc. (LM)

Legg Mason, Inc. (Legg Mason), incorporated in 1981, is a global asset management company. Acting through its subsidiaries, the Company provides investment management and related services to institutional and individual clients, Company-sponsored mutual funds and retail separately managed account programs. The Company offers these products and services directly and through various financial intermediaries. The Company operates its business as two divisions: Americas and International. One of its asset managers, Western Asset Management Company, has significant business both within the United States and internationally, and thus is divided between the divisions. Within each division, it provides services through a number of asset managers, each of which is an individual business that generally markets its products and services under its own brand name and, in many cases, distributes retail products and services through a centralized retail distribution network.

Legg Mason’s investment advisory services include discretionary and non-discretionary management of separate investment accounts in numerous investment styles for institutional and individual investors. Its investment products include mutual funds ranging from money market and other liquidity products to fixed income and equity funds managed in a variety of investment styles, other domestic and offshore funds offered to both retail and institutional investors and funds-of-hedge funds. The Company’s subsidiary asset managers primarily earn revenues by charging fees for managing the investment assets of clients. It may also earn performance fees from certain accounts. It generally manages the accounts of its clients pursuant to written investment management or sub-advisory contracts between one of its asset managers and the client (or a financial intermediary acting on behalf of the client). These contracts specify the management fees to be paid to the asset manager and the investment strategy for the account, and are generally terminable by either party on relatively short notice.

The Company conducts its business primarily through 16 asset managers. Its asset managers are individual businesses, each of which generally focuses on a portion of the asset management industry in terms of the types of assets managed (primarily equity or fixed income), the types of products and services offered, the investment styles utilized, the distribution channels used, and the types and geographic locations of its clients. Each asset manager is housed in one or more different subsidiaries, the interest all of which is wholly owned by Legg Mason. Each of its asset managers is operated as a separate business, in many cases with certain administrative and distribution functions being provided by the parent company and other affiliates, that markets its products and services under its own brand name. Legg Mason’s has in place revenue sharing agreements with certain of its asset managers, Barrett Associates, Bartlett & Co., Batterymarch Financial Management, Brandywine Global Asset Management, Legg Mason Capital Management, Permal Group, Private Capital Management, Royce & Associates, and Western Asset Management Company and/or certain of their key officers.

Americas Division

The Company’s Americas division includes the separate account management operations of its United States-based asset managers and its mutual, closed-end and other fund operations, and distribution operations, that are located in the United States. The asset managers in this division provide a range of separate account investment management services to institutional clients, including pension and other retirement plans, corporations, insurance companies, endowments and foundations and governments, and to high- net-worth individuals and families. The division also sponsors and manages various groups of United States mutual funds, including the Legg Mason Partners Funds, the Legg Mason Funds, The Royce Funds and the Western Asset Funds, and provides investment advisory services to a number of retail separately managed account programs.

As of March 31, 2009, Legg Mason’s Americas division managed assets with a value of $446.5 billion and $671.2 billion, respectively. As of March 31, 2009, 71% of the assets managed by this division were fixed income and liquidity assets managed by Western Asset Management. Of the assets managed by the division at March 31, 2009, approximately 51% was in institutional separate accounts, approximately 41% was in funds and approximately 8% was in retail or high net worth separately managed accounts.

The Legg Mason Partners Funds include 114 mutual funds and 20 closed-end funds in the United States, almost all of which are managed by our subsidiary asset managers. The mutual and closed-end funds within the Legg Mason Partners Funds include 57 equity funds (including balanced funds) that invest in a spectrum of equity securities utilizing numerous investment styles, including large-and mid-cap growth funds and international funds. The fixed income and liquidity mutual funds within the Legg Mason Partners Funds include 77 funds that offer a variety of investment strategies and objectives, including income funds, investment grade funds and municipal securities funds. Many of its asset managers provide investment advisory services to the Legg Mason Partners Funds. As of March 31, 2009, the Legg Mason Partners Funds included $143.0 in assets, in their mutual funds and closed-end funds, of which approximately 13% were equity assets, approximately 9% were fixed income assets and approximately 78% were liquidity assets.

The Legg Mason Funds consist of 14 mutual funds, all of which are managed by the Company’s subsidiary asset managers. Of these funds, eight invest primarily in domestic equity securities; two invest primarily in international equity securities; three invest primarily in domestic taxable or tax-exempt fixed income securities, and one invests primarily in global fixed income securities. Investment objectives for the Legg Mason Funds range from capital appreciation to current income.

Equity investment strategies may emphasize large-cap, mid-cap or small-cap investing. In addition to Legg Mason Capital Management and the joint venture, Legg Mason’s other asset managers that manage Legg Mason Funds are Western Asset Management Company (two funds), Legg Mason Investment Counsel (one fund), Batterymarch Financial Management (three funds) and Brandywine Global Investment Management (three funds). As of March 31, 2009, the Legg Mason Funds included $7.4 billion in assets, of which approximately 91% were equity assets and approximately 9% were fixed income assets.

The Royce Funds consist of 26 mutual funds and three closed-end funds, most of which invest primarily in smaller company stocks. Each of these funds seeks long-term appreciation of capital using a value approach. The funds differ in their approaches to investing in small or micro-cap companies and the universe of securities from which they can select. As of March 31, 2009, The Royce Funds included $17.5 billion in assets, substantially all of which were equity assets. The Royce Funds are primarily distributed through non-affiliated fund supermarkets, non-affiliated wrap programs, and direct distribution. In addition, two of the portfolios in The Royce Funds are distributed only through insurance companies.

The Company’s mutual funds business also includes the Western Asset Funds, a family of nine mutual funds that are marketed primarily to institutional investors and retirement plans primarily through its institutional funds marketing group. Western Asset Management Company manages these funds under the supervision of Western Asset's investment committee. The funds primarily invest in fixed income securities. As of March 31, 2009 the Western Asset Funds included $13.3 billion in assets.

The Company is a provider of asset management services to retail separately managed account products, such as wrap programs. Although it has sold a majority of the portion of the business of Legg Mason Private Portfolio Group, which provides implementation and overlay services to retail separately managed account programs, it asset managers continue to provide asset management advisory services to most of the programs that were serviced by this business. These programs allow securities brokers or other financial intermediaries to offer their clients the opportunity to choose from a number of asset management services pursuing different investment strategies provided by one or more asset managers, and generally charge an all-inclusive fee that covers asset management, trade execution, asset allocation and custodial and administrative services. Legg Mason provides investment management services to a number of retail separately managed account programs. Its retail separately managed account services are distributed through programs sponsored by Citigroup's distributors, as well as other financial institutions.

International Division

The Company’s International division includes the separate account management operations of its asset managers that are based outside the United States, its non-United States-domiciled fund operations and its international distribution operations. The asset managers in this division provide a range of separate account investment management services primarily to institutional clients and provide asset management services to the funds that it sponsors. This division also contains its funds-of-hedge funds business, which sponsors and manages funds that invest in numerous hedge funds. In addition, the division sponsors equity, fixed income, liquidity and balanced funds that are domiciled and distributed in countries worldwide. As of March 31, 2009, its International division managed assets with a value of $185.9 billion. Approximately 84% of the assets managed by the division, as of March 31, 2009, were in fixed income or liquidity accounts managed by Western Asset and approximately 10% were in funds-of-hedge funds managed by Permal.

The Company’s International division manages, supports and distributes numerous funds across an array of global fixed income, liquidity and equity investment strategies. These funds include a range of cross border funds that are domiciled in Ireland and Luxembourg, and are available for sale in a number of countries across Asia, Europe and Latin America. These funds also include local fund ranges that are available for distribution in the United Kingdom, Australia, Japan, Singapore, Poland, Hong Kong and Canada. All of its international funds are distributed and serviced by Legg Mason's international distribution group. Its international funds include equity, fixed income, liquidity and balanced funds that are primarily managed or sub-advised by Batterymarch Financial Management, Brandywine Global, ClearBridge, Congruix, Esemplia, Global Currents, Legg Mason Capital Management, Private Capital Management, Royce & Associates and Western Asset Management. In aggregate, it sponsors and manages more than 200 of these international funds, which, as of March 31, 2009, had an aggregate of approximately $53.2 billion in assets.