Legg Mason Reports Results for Second Quarter and First Six Months of Fiscal 2008



    
    - Net Income of $177 Million, or $1.23 per Diluted Share for the Second
    Quarter, Up 24% and 23% respectively from Prior Year Quarter -

    - Record Assets Under Management of over $1 Trillion -
    

    BALTIMORE, Oct. 24 /CNW/ -- Legg Mason, Inc. (NYSE:   LM) today reported
its operating results for the second fiscal quarter and six months ended
September 30, 2007.  For the quarter, revenues were $1.17 billion, up 14% from
$1.03 billion in the second quarter of fiscal 2007.  Net income was $177.5
million, or $1.23 per diluted share, up 24% and 23% respectively from $143.7
million, or $1.00 per diluted share, in the second quarter of fiscal 2007.(1)
Cash income was $1.60 per diluted share, up 20% from $1.33 in the
corresponding second quarter of 2007.
    Total Assets Under Management (AUM) increased to a record $1.012
trillion, up 13% from $891.4 billion at September 30, 2006.
    Revenues for the first six months of fiscal 2008 were $2.38 billion, up
15% from the corresponding prior year period ended September 30, 2006.  Net
income was $368.5 million, or $2.55 per diluted share, an increase of 23% from
$299.7 million, or $2.08 per diluted share for the prior year six-month
period.  Cash income was $3.25 per diluted share, up 19% from $2.74 in the
first six months of fiscal 2007.
    The Company repurchased 1.1 million shares of common stock during the
quarter, at an aggregate cost of approximately $94 million.  The Company has
available up to 3.9 million additional shares under its previously announced
share repurchase program.

    
    (1) The September 30, 2006 quarter included approximately $12 million (or
        $0.04 per diluted share) of unanticipated distribution expenses from
        prior periods.
    Comments on the Second Quarter of Fiscal 2008 Results
    
    Raymond A. "Chip" Mason, Chairman and CEO, said, "The second quarter of
fiscal 2008 was demanding, with turbulence throughout most of the quarter,
particularly in the fixed income markets, and, to a lesser extent, in the
equity markets. Our flows in long-term fixed income remained strong, but our
equity flows continued to be difficult. Total flows of several hundred million
are disappointing, to say the least.
    "As you know, we are very focused on investment performance and thus we
are encouraged, although cautious, by the signs of improvement we are seeing.
At the end of the September quarter, 55% of our mutual fund assets rated by
Morningstar were 4 or 5 stars, versus 39% of our mutual fund assets so rated
at the end of June 2006, when we commenced our fund realignment. This is an
important improvement and is the result of focus and discipline among key
managers who are committed to long-term growth.
    "Three of our largest equity managers continue to struggle with outflows
caused primarily by recent underperformance. Having these managers fall below
their long-term performance norms, all at the same time, has been challenging
for us. Some of our recent equity outflows, though, reflect the significant
change in our distribution profile because of the Citigroup transaction, as we
move beyond our traditional channels and towards full open architecture.
Penetration of new distribution platforms is progressing and this continued
effort should position us to reach a much broader group of retail investors
than ever before, to complement our traditionally strong base of institutional
business.
    "We are very pleased to have reached a new milestone of $1 trillion in
global assets under management. The size and quality of our assets under
management remain impressive: our managers are global, diverse and, we
believe, among the best in the industry."
    
    Assets Under Management (AUM) Increased to $1 Trillion
    
    Total AUM increased to a record $1.012 trillion as of September 30, 2007,
up 2% from $992.4 billion as of June 30, 2007, and an increase of 13% from
September 30, 2006.  Net client cash flows were $0.3 billion in the current
quarter. Net client cash flows in long-term fixed income were $11 billion.
Liquidity outflows were $1 billion and there were negative client cash flows
in equity of $9.6 billion.  An expected large retirement plan restructuring,
and the loss of a college savings plan account, resulted in one-time outflows
which contributed over $2 billion of the total equity client cash outflows.
    Average AUM during the quarter were $994.7 billion, compared to $984.9
billion in the first quarter of fiscal 2008 and $870.3 billion in the second
quarter of fiscal 2007.  Assets managed for non-U.S. domiciled clients
represent 33% of total AUM as of September 30, 2007.
    Institutional division assets grew during the quarter primarily at
Western Asset Management and Brandywine Global. Assets at the Wealth
Management and Managed Investments divisions declined primarily as a result of
outflows in key equity products at ClearBridge Advisors, Legg Mason Capital
Management and Private Capital Management.
    Western Asset Management continued to win fixed-income mandates as
investors shifted to bond holdings, reflecting a more conservative approach to
mixed signals from the markets. Across the sector, investors continue to
diversify their U.S. holdings toward a more global allocation.  Brandywine
Global benefited from these market dynamics, winning global fixed-income
mandates.  The Permal Group continued to perform well in the quarter and has
benefited from increased interest in non-US and alternative investment
products, especially fixed-income solutions.
    
    Comparison to the Second Quarter of Fiscal 2007
    
    Revenues increased 14% from the prior year quarter, reflecting an
increase of 14% in average AUM.  Recurring investment advisory fees increased
16% from the same period last year, due to a higher level of average AUM.  Net
income was $177.5 million, or $1.23 per diluted share, up 24% and 23%
respectively from $143.7 million, or $1.00 per diluted share, in the
corresponding second quarter of fiscal 2007.  Cash income was $231.8 million,
or $1.60 per diluted share, compared to $191.7 million, or $1.33 per diluted
share one year ago.
    Operating expenses were 12% higher than the second quarter of fiscal
2007, primarily reflecting:

    
    -- A $62 million increase in compensation and benefits expenses primarily
       due to incentive accruals on increased revenues at the Company's
       investment managers.
    -- Increased distribution expenses paid to third parties as a result of
       increased revenues that are passed through as a direct cost of selling
       our products.
    -- Increased occupancy expense related to office relocations.
    -- Increased investments in technology and data services infrastructure.
    
    The pre-tax profit margin increased to 24.2% from 23.2% in the second
quarter of fiscal 2007.  The pre-tax profit margin, as adjusted for
distribution and servicing expense, was 33.4%, up from 32.4%.
    
    Consolidated Results for the Fiscal Year to Date
    
    Total revenues for the first six months of fiscal 2008 were $2.4 billion,
up 15% from the prior year period ended September 30, 2006, reflecting an
increase of 14% in the average AUM and a $37.0 million increase in performance
fees.  Net income was $368.5 million, or $2.55 per diluted share, an increase
of 23% from $299.7 million, or $2.08 per diluted share for the prior year
six-month period.  Higher net income was a result of higher AUM and
performance fees, as well as a $13.1 million increase in other non-operating
income and a lower effective state income tax rate. Cash income was $470.6
million, or $3.25 per diluted share, up 19% from $395.6 million, or $2.74 per
diluted share for the prior year period.
    The pre-tax profit margin for the first six months was 24.8% versus 23.8%
for the six months ended September 30, 2006. The pre-tax profit margin, as
adjusted for distribution and servicing expense, was 34.0%, up from 32.9% for
the prior year period.
    
    Comparison to the First Quarter of Fiscal 2008
    
    Revenues declined 3% and net income was 7% lower from the sequential June
2007 quarter, primarily due to a substantial decline in performance fees
earned in the quarter. In addition, the prior quarter included a gain on the
sale of the Company's interest in a joint venture and higher levels of other
non-operating income.  Performance fees continue to add variability to the
Company's revenue and net income and the $30.1 million decline in these fees
reduced diluted earnings per share by approximately $0.06.  Recurring
investment advisory fees were 1% higher due to a higher level of average
assets under management.  Cash income was $231.8 million, or $1.60 per diluted
share, compared to $238.9 million, or $1.65 per diluted share, during the
first quarter of fiscal 2008.
    Operating expenses in the second quarter of fiscal 2008 declined 2%
sequentially, primarily reflecting:

    
    -- A $16 million decline in compensation and benefits expenses primarily
       related to lower incentive accruals due to decreased performance fees.
    -- Lower advertising and marketing expenses during the quarter.
    
    Margins were negatively impacted primarily as a result of lower levels of
performance fees in the current quarter.  The pre-tax profit margin decreased
to 24.2% from 25.3%.  The pre-tax profit margin, as adjusted for distribution
and servicing expense, was 33.4%, down from 34.5%.
    
    Business Developments
    
    The Company's investment managers continue to extend their strategies
into new product lines, and also to develop alpha-oriented and alternative
offerings, in order to meet clients' increasing demand for new sources of
performance that work in complex market conditions and provide long-term
growth opportunities:

    
    -- Royce & Associates recently expanded its leading suite of small cap
       equity products to include a global small cap offering, meeting
       investors' desire for non-U.S. strategies.
    -- Western Asset Management's pipeline looks strong with approximately 30%
       in non-US product.
    -- During the quarter, the Permal Group continues to have growth in assets
       from client flows and market appreciation and has most recently seen
       strong demand in its global fixed-income alternative strategies.
    -- Three different alternatives products will be in the market before
       year-end.  To complement its existing institutional separate account
       offering, Batterymarch Financial Management is launching a 130/30 long-
       short strategy fund. A market neutral strategy is being developed by
       our emerging markets equity manager, Legg Mason International Equities.
       Finally, ClearBridge Advisors has also created a 130/30 strategy that
       utilizes its fundamental research approach.
    
    Our important efforts in the domestic retail market are progressing as we
pursue a strong capability in new, expanded distribution among National Broker
Dealers (NBD) and independent advisors, along with our existing institutional
channels. Since January, there are over 4,100 new NBD financial advisors who
are using us to manage money for their clients and we enjoyed our single best
month for new advisors using our products in August. We are also doing
business with over 3,800 new independent advisors since January 2007.
Importantly, at the same time, our Institutional business is up 24% on a gross
basis since the beginning of the calendar year.
    Outside the U.S., our business in markets as diverse as Japan and Poland
continues to experience AUM growth for the fiscal year to date. Our Japan
business has grown its AUM by 24% in the past 6 months, and was recently rated
#1 in Overall Assessment and Service & Support by a major Japanese rating
agency. We have more than tripled our equity AUM in Poland over the past 12
months. Successes in the Americas, Europe and Asia are encouraging signs for
future growth.
    
    Balance Sheet
    
    At September 30, 2007, Legg Mason's cash position was $1.4 billion; long-
term debt was $1.0 billion; and stockholders' equity was $6.8 billion.  The
ratio of total debt to equity was 15%.
    
    Use of Supplemental Non-GAAP Financial Information
    Cash Income
    
    As supplemental information, we are providing a performance measure that
is based on a methodology other than generally accepted accounting principles
("non-GAAP") for "cash income" that management uses as a benchmark in
evaluating and comparing the period-to-period operating performance of Legg
Mason, Inc. and its subsidiaries.  We define "cash income" as net income, plus
amortization and deferred taxes related to intangible assets.  We believe that
cash income provides a good representation of our operating performance
adjusted for non-cash acquisition related items and it facilitates comparison
of our results to the results of other asset management firms that have not
engaged in significant acquisitions.  We also believe that cash income is an
important metric in estimating the value of an asset management business. In
considering acquisitions, we often calculate a target firm's cash earnings as
a metric in estimating its value.  This measure is provided in addition to net
income, but is not a substitute for net income and may not be comparable to
non-GAAP performance measures, including measures of cash earnings or cash
income, of other companies.  Further, cash income is not a liquidity measure
and should not be used in place of cash flow measures determined under GAAP.
Legg Mason considers cash income to be useful to investors because it is an
important metric in measuring the economic performance of asset management
companies, as an indicator of value and because it facilitates comparisons of
Legg Mason's operating results with the results of other asset management
firms that have not engaged in significant acquisitions.
    In calculating cash income, we add the impact of the pre-tax amortization
of intangible assets from acquisitions, such as management contracts, to net
income to reflect the fact that this non-cash expense does not represent an
actual decline in the value of the intangible assets.   Deferred taxes on
intangible assets, including goodwill, represent actual tax benefits that are
not realized under GAAP absent an impairment charge or the disposition of the
related business.  Because we actually receive these tax benefits, we add them
to income in the calculation of cash income.  Should a disposition or
impairment charge occur, its impact on cash income may distort actual changes
in the operating performance or value of our firm.  Accordingly, we monitor
changes in intangible assets and goodwill and the related impact on cash
income to ensure appropriate explanations accompany disclosures of cash
income.
    Although depreciation and amortization on fixed assets are non-cash
expenses, we do not add these charges in calculating cash income because these
charges are related to assets that will ultimately require replacement.
    
    A reconciliation of net income to non-GAAP cash income is presented below.
    Pre-Tax Profit Margin Adjusted for Distribution and Servicing Expense
    
    We believe that pre-tax profit margin adjusted for distribution and
servicing expense is a useful measure of our performance because it indicates
what our margins would have been without the distribution revenues that are
passed through to third parties as a direct cost of selling our products, and
thus shows the effect of these revenues on our margins. This measure is
provided in addition to the Company's pre-tax profit margin calculated under
GAAP, but is not a substitute for calculations of margin under GAAP and may
not be comparable to non-GAAP performance measures, including measures of
adjusted margins, of other companies. A reconciliation of consolidated pre-tax
profit margin, as adjusted, to pre-tax profit margin under GAAP, is presented
below.
    
    Conference Call to Discuss Results
    
    A conference call to discuss the Company's results, hosted by Mr. Mason,
will be held at 8:30 a.m., E.D.T. today. The call will be open to the general
public. Interested participants should access the call by dialing
1-866-206-6900 (or for international calls 1-703-639-1110) at least 10 minutes
prior to the scheduled start to ensure connection.
    A replay or transcript of the live broadcast will be available on the
Legg Mason web site, in the investor relations section, or by dialing
1-888-266-2081 (or for international calls 1-703-925-2533), access Pin Number
1155504, after completion of the call.
    
    About Legg Mason
    
    Legg Mason is a global asset management firm, with over $1 trillion in
assets under management as of September 30, 2007.  The Company provides active
asset management in many major investment centers throughout the world. Legg
Mason is headquartered in Baltimore, Maryland, and its common stock is listed
on the New York Stock Exchange (symbol: LM).
    This release contains forward-looking statements subject to risks,
uncertainties and other factors that may cause actual results to differ
materially. For a discussion of these risks and uncertainties, see "Risk
Factors" in Legg Mason's Annual Report on Form 10-K for the fiscal year ended
March 31, 2007.



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
           (Dollar amounts in thousands, except per share amounts)
                                 (Unaudited)
    

    
                            Quarters Ended                   % Change
                                                      Sept. 2007   Sept. 2007
                                                     Compared to  Compared to
                   Sept. 2007  June 2007  Sept. 2006   June 2007   Sept. 2006
    

    Operating Revenues:

    
    Investment advisory fees:
    Separate
     accounts      $376,003   $380,977    $350,814      (1.3)%       7.2%
    Funds           590,746    577,285     480,937       2.3        22.8
    Performance
     fees            24,285     54,349      23,687     (55.3)        2.5
    Distribution
     and service
     fees           177,421    183,498     169,836      (3.3)        4.5
    Other             3,896      9,859       5,411     (60.5)      (28.0)
      Total
       operating
       revenues   1,172,351  1,205,968   1,030,685      (2.8)       13.7
    

    
    Operating Expenses:
    Compensation
     and
     benefits       430,231    446,010     368,260      (3.5)       16.8
    Distribution
     and
     servicing      321,108    321,506     294,267      (0.1)        9.1
    Communications
     and
     technology      47,747     47,348      41,721       0.8        14.4
    Occupancy        31,533     30,693      22,117       2.7        42.6
    Amortization
     of intangible
     assets          14,375     15,055      17,328      (4.5)      (17.0)
    Other            48,939     53,193      51,976      (8.0)       (5.8)
      Total
       operating
       expenses     893,933    913,805     795,669      (2.2)       12.3
    

    
    Operating
     Income         278,418    292,163     235,016      (4.7)       18.5
    

    
    Other Income (Expense)
    Interest
     income          18,154     16,491      16,047      10.1        13.1
    Interest
     expense        (16,627)   (17,144)    (18,680)     (3.0)      (11.0)
    Other             4,252     14,060       6,359     (69.8)      (33.1)
      Total other
       income
       (expense)      5,779     13,407       3,726     (56.9)       55.1
    

    
    Income from
     Operations
     before Income
     Tax Provision
     and Minority
     Interests      284,197    305,570     238,742      (7.0)       19.0
    

    
    Income tax
     provision      106,574    114,590      95,019      (7.0)       12.2
    

    
    Income from
     Operations
     before Minority
     Interests      177,623    190,980     143,723      (7.0)       23.6
    

    
    Minority
     interests,
     net of tax        (159)        35         (47)      n/m         n/m
    

    Net Income     $177,464   $191,015    $143,676      (7.1)       23.5

    n/m - not meaningful



    
                        LEGG MASON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 (Amounts in thousands, except per share amounts)
                                   (Unaudited)
                                   (continued)
    

    
                              Quarters Ended                  % Change
                                                       Sept. 2007  Sept. 2007
                                                      Compared to  Compared to
                     Sept. 2007  June 2007  Sept. 2006  June 2007  Sept. 2006
    Net income per
     share:
      Basic             $1.25      $1.34      $1.02       (6.7)%     22.5%
      Diluted           $1.23      $1.32      $1.00       (6.8)      23.0
    

    
    Weighted average
     number of shares
     outstanding:
      Basic           142,427    142,107    141,229
      Diluted         144,627    144,778    144,231
    

    n/m - not meaningful



    
                        LEGG MASON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
             (Dollar amounts in thousands, except per share amounts)
                                   (Unaudited)
    

    
                                         For the Six Months Ended
                                     September 2007  September 2006  % Change
    Operating Revenues:
      Investment advisory fees:
        Separate accounts                 $756,980      $702,268       7.8 %
        Funds                            1,168,031       966,379      20.9
        Performance fees                    78,634        41,628      88.9
      Distribution and service fees        360,919       349,418       3.3
      Other                                 13,755         9,212      49.3
        Total operating revenues         2,378,319     2,068,905      15.0
    

    
    Operating Expenses:
      Compensation and benefits            876,241       747,842      17.2
      Distribution and servicing           642,614       574,818      11.8
      Communications and technology         95,095        80,160      18.6
      Occupancy                             62,226        44,280      40.5
      Amortization of intangible assets     29,430        34,359     (14.3)
      Other                                102,132        94,996       7.5
        Total operating expenses         1,807,738     1,576,455      14.7
    

    Operating Income                       570,581       492,450      15.9

    
    Other Income (Expense)
      Interest income                       34,645        28,918      19.8
      Interest expense                     (33,771)      (34,860)     (3.1)
      Other                                 18,312         5,217     251.0
        Total other income (expense)        19,186          (725)      n/m
    

    
    Income from Operations before
      Income Tax Provision and Minority
       Interests                           589,767       491,725      19.9
    

    Income tax provision                 221,164       191,914      15.2

    
    Income from Operations
      before Minority Interests            368,603       299,811      22.9
    

    Minority interests, net of tax          (124)         (100)     24.0

    Net Income                            $368,479      $299,711      22.9

    n/m - not meaningful



    
                        LEGG MASON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 (Amounts in thousands, except per share amounts)
                                   (Unaudited)
                                   (continued)
    

    
                                         For the Six Months Ended
                                     September 2007  September 2006  % Change
    Net income per share:
      Basic                                  $2.59         $2.13      21.6 %
      Diluted                                $2.55         $2.08      22.6
    

    
    Weighted average number of
      shares outstanding:
        Basic                              142,255       140,728
        Diluted                            144,705       144,208
    

    n/m - not meaningful



    
                        LEGG MASON, INC. AND SUBSIDIARIES
                                SUPPLEMENTAL DATA
    

    
                           RECONCILIATION OF NET INCOME
                             TO NON-GAAP CASH INCOME
             (Dollar amounts in thousands, except per share amounts)
                                   (Unaudited)
    

    
                              Quarters Ended                  % Change
                                                       Sept. 2007  Sept. 2007
                                                      Compared to  Compared to
                    Sept. 2007  June 2007  Sept. 2006  June 2007   Sept. 2006
    

    Net Income       $177,464    $191,015    $143,676     (7.1)%      23.5 %

    
      Amortization of
       intangible
       assets          14,375      15,055      17,328     (4.5)      (17.0)
      Deferred income
       taxes on
       intangible
       assets          39,957      32,783      30,742     21.9        30.0
    

    Cash Income      $231,796    $238,853    $191,746     (3.0)       20.9

    
    Net Income per
     Diluted Share      $1.23       $1.32       $1.00     (6.8)       23.0
    

    
      Amortization of
       intangible
       assets            0.10        0.10        0.12        -       (16.7)
      Deferred income
       taxes on
       intangible
       assets            0.27        0.23        0.21     17.4        28.6
    

    
    Cash Income per
     Diluted Share      $1.60       $1.65       $1.33     (3.0)       20.3
    


    For the Six Months Ended

    Sept. 2007  Sept. 2006     % Change

    Net Income       $368,479    $299,711        22.9 %

    
      Amortization of
       intangible
       assets          29,430      34,359       (14.3)
      Deferred income
       taxes on
       intangible
       assets          72,740      61,481        18.3
    

    Cash Income      $470,649    $395,551        19.0

    
    Net Income per
     Diluted Share      $2.55       $2.08        22.6
    

    
      Amortization of
       intangible
       assets            0.20        0.24       (16.7)
      Deferred income
       taxes on
       intangible
       assets            0.50        0.42        19.0
    

    
    Cash Income per
     Diluted Share      $3.25       $2.74        18.6
    



    
                        LEGG MASON, INC. AND SUBSIDIARIES
                                SUPPLEMENTAL DATA
    

    
                              PRE-TAX PROFIT MARGIN
                 ADJUSTED FOR DISTRIBUTION AND SERVICING EXPENSE
             (Dollar amounts in thousands, except per share amounts)
                                   (Unaudited)
    

    
                              Quarters Ended                   % Change
                                                        Sept. 2007  Sept. 2007
                                                       Compared to Compared to
                     Sept. 2007  June 2007  Sept. 2006  June 2007   Sept. 2006
    

    
    Operating
     Revenues,
     GAAP basis      $1,172,351  $1,205,968  $1,030,685    (2.8)%    13.7 %
    

    
     Less:
      Distribution
       and servicing
       expense          321,108     321,506     294,267    (0.1)      9.1
    

    
    Operating
     Revenues, as
     adjusted          $851,243    $884,462    $736,418    (3.8)     15.6
    

    
    Income from
     Operations
     before Income
     Tax Provision
     and Minority
     Interests         $284,197    $305,570    $238,742    (7.0)     19.0
    

    
    Pre-tax profit
     margin, GAAP
     basis                 24.2 %      25.3 %      23.2 %
    Pre-tax profit
     margin, as
     adjusted              33.4        34.5        32.4
    


    
                   For the Six Months Ended
                 September 2007 September 2006    % Change
    

    
    Operating
     Revenues,
     GAAP basis      $2,378,319  $2,068,905        15.0 %
    

    
     Less:
      Distribution
      and servicing
      expense           642,614     574,818        11.8
    

    
    Operating
     Revenues, as
     adjusted        $1,735,705  $1,494,087        16.2
    

    
    Income from
     Operations
     before Income
     Tax Provision
     and Minority
     Interests         $589,767    $491,725        19.9
    

    
    Pre-tax profit
     margin, GAAP
     basis                 24.8 %      23.8 %
    Pre-tax profit
     margin, as
     adjusted              34.0        32.9
    



    LEGG MASON, INC. AND SUBSIDIARIES

    
                             ASSETS UNDER MANAGEMENT
                           (Dollar amounts in billions)
                                   (Unaudited)
    

    
                                                 Quarters Ended
                                     Sept.    June    March    Dec.    Sept.
                                     2007     2007     2007    2006    2006
    By asset class:
      Equity                       $343.9    $352.3   $338.0  $337.1   $315.6
      Fixed Income                  506.0     479.2    470.9   460.0    440.8
      Liquidity                     161.7     160.9    159.6   147.7    135.0
        Total                    $1,011.6    $992.4   $968.5  $944.8   $891.4
    

    
    By asset class (average):
      Equity                       $341.6    $349.3   $338.5  $328.5   $310.7
      Fixed Income                  492.2     475.9    465.0   453.0    431.4
      Liquidity                     160.9     159.7    155.4   143.5    128.2
        Total                      $994.7    $984.9   $958.9  $925.0   $870.3
    

    
    By client domicile:
      US                           $675.7    $659.9   $644.5  $631.4   $595.0
      Non-US                        335.9     332.5    324.0   313.4    296.4
        Total                    $1,011.6    $992.4   $968.5  $944.8   $891.4
    

    
    By division:
      Managed Investments          $411.4    $414.2   $403.2  $384.8   $355.7
      Institutional                 530.3     506.8    496.3   492.1    471.4
      Wealth Management              69.9      71.4     69.0    67.9     64.3
        Total                    $1,011.6    $992.4   $968.5  $944.8   $891.4
    



    LEGG MASON, INC. AND SUBSIDIARIES

    
                   COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT
                           (Dollar amounts in billions)
                                   (Unaudited)
    


    
                                                  Quarters Ended
                                       Sept.   June   March    Dec.    Sept.
                                       2007    2007    2007    2006    2006
    Beginning of period               $992.4  $968.5  $944.8  $891.4  $854.7
    Net client cash flows                0.3     1.7    13.6    23.0    14.1
    Market performance and other        18.9    23.5    10.4    30.9    22.6
    Acquisitions (Dispositions), net     -      (1.3)   (0.3)   (0.5)    -
    End of period                   $1,011.6  $992.4  $968.5  $944.8  $891.4
    


    
    BY DIVISION
                                                  Quarters Ended
    Managed Investments                Sept.    June   March    Dec.   Sept.
                                       2007     2007    2007    2006    2006
      Beginning of period             $414.2  $403.2  $384.8  $355.7  $338.1
      Net client cash flows             (8.8)   (3.3)   10.2    14.5     8.4
      Market performance and other       6.0    14.3     8.2    14.7     9.2
      Acquisitions (Dispositions), net   -       -       -      (0.1)    -
      End of period                   $411.4  $414.2  $403.2  $384.8  $355.7
    

    
    Institutional
      Beginning of period             $506.8  $496.3  $492.1  $471.4  $452.0
      Net client cash flows              9.9     4.6     2.7     8.9     7.6
      Market performance and other      13.6     5.9     1.5    12.2    11.8
      Acquisitions (Dispositions), net   -       -       -      (0.4)    -
      End of period                   $530.3  $506.8  $496.3  $492.1  $471.4
    

    
    Wealth Management
      Beginning of period              $71.4   $69.0   $67.9   $64.3   $64.6
      Net client cash flows             (0.8)    0.4     0.7    (0.4)   (1.9)
      Market performance and other      (0.7)    3.3     0.7     4.0     1.6
      Acquisitions (Dispositions), net   -      (1.3)   (0.3)    -       -
      End of period                    $69.9   $71.4   $69.0   $67.9   $64.3
    



    LEGG MASON, INC. AND SUBSIDIARIES

    
                   COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT
                           (Dollar amounts in billions)
                                   (Unaudited)
    

    
                                            For the             For the
                                      Six Months Ended   Twelve Months Ended
                                  Sept. 2007 Sept. 2006 Sept. 2007  Sept. 2006
    Beginning of period               $968.5     $867.6     $891.4     $418.5
    Net client cash flows                1.9        7.6       38.6       12.9
    Market performance and other        42.5       16.2       83.7       38.5
    Acquisitions (Dispositions), net    (1.3)       -         (2.1)     421.5
    End of period                   $1,011.6     $891.4   $1,011.6     $891.4
    

    
    BY DIVISION
                                         For the                For the
                                     Six Months Ended    Twelve Months Ended
    Managed Investments           Sept. 2007 Sept. 2006 Sept. 2007 Sept. 2006
      Beginning of period             $403.2     $356.5     $355.7      $77.0
      Net client cash flows            (12.1)      (1.2)      12.7      (12.8)
      Market performance and other      20.3        0.4       43.1       14.4
      Acquisitions (Dispositions), net   -          -         (0.1)     277.1
      End of period                   $411.4     $355.7     $411.4     $355.7
    

    
    Institutional
      Beginning of period             $496.3     $444.8     $471.4     $291.6
      Net client cash flows             14.4       10.1       26.0       27.4
      Market performance and other      19.6       16.5       33.3       20.9
      Acquisitions (Dispositions), net   -          -         (0.4)     131.5
      End of period                   $530.3     $471.4     $530.3     $471.4
    

    
    Wealth Management
      Beginning of period              $69.0      $66.3      $64.3      $49.9
      Net client cash flows             (0.4)      (1.3)      (0.1)      (1.7)
      Market performance and other       2.6       (0.7)       7.3        3.2
      Acquisitions (Dispositions), net  (1.3)       -         (1.6)      12.9
      End of period                    $69.9      $64.3      $69.9      $64.3
    

    
    Note:  Immaterial differences may result from the rounding of quarterly
           amounts.
    




For further information:

For further information: Investor Relations, F. Barry Bilson, 
+1-410-539-0000, or Media, Mary Athridge, +1-410-454-4421, both of Legg Mason,
 Inc. Web Site: http://www.leggmason.com

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LEGG MASON, INC.

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