Fiscal First Quarter 2021 Results

Executive Earnings Commentary

July 27, 2020

Important Disclosures

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, 2020 and in

the Company's quarterly reports on Form 10-Q.

Non-GAAP Financial Measures

This presentation includes non-GAAP financial information. This non-GAAP information is in addition to, not a substitute for or superior to, measures of financial performance or liquidity determined in accordance with GAAP.

The Company undertakes no obligation to update the information contained in this presentation to reflect subsequently occurring events or circumstances.

Page 1

Table of Contents

Contents

Page(s)

Highlights

3

Affiliate Flows and Unfunded Wins/Committed Uncalled Capital

4 - 5

Global Distribution

6

Financial Results and AUM

7 - 8

Operating Expenses

9

- 10

Adj. Operating Margin and EPS Roll Forward

11

- 12

Appendix

13

- 23

Page 2

Highlights

Financial Results1

Strategic

Restructuring

Assets Under

Management/

Flows

Global Distribution

Investment

Performance2

Other

  • Net Income of $49.4M, or $0.54 per diluted share
    • Includes strategic restructuring and merger related charges of $30.9M, or $0.24 per diluted share
  • Adjusted Net Income1 of $65.4M, or $0.71 per diluted share
  • Strategic Restructuring
    • Achieved annualized run-rate savings of $104.5M
    • Costs to achieve of $88.4M, $8.0M incurred in current quarter
  • Total AUM of $783.4B
  • Long-termnet outflows of $4.6B
    • Fixed Income outflows of $3.1B
    • Equity outflows of $2.0B
    • Alternative inflows of $0.5B

• Quarterly gross sales of $26.7B

  • Quarterly net sales of $2.2B
  • 68% (3yr) and 67% (5yr) of strategy AUM beat benchmarks
  • 63% (3yr) and 74% (5yr) of long-term US fund assets beat Lipper category averages
  • On May 28, 2020, ClearBridge launched Legg Mason's first exchange-traded fund (ETF) using the semi-transparent technology of Precidian Investments LLC, ActiveShares®. The ClearBridge Focus Value ETF (CFCV) is a series of Legg Mason's ActiveShares® ETF Trust.
  • On July 17, 2020, Franklin Templeton and Legg Mason announced that all conditions to the closing of its merger with Franklin Resources, Inc. have been satisfied and is scheduled to close on July 31, 2020.

Our strategic restructuring efforts reached 104% of our targeted annualized run-rate savings.

  • Cumulative realized savings of $84 million.
  • Total costs to achieve of $88 million significantly below our prior forecasted range.

Page 3

  1. See appendix for GAAP reconciliation.
  2. See appendix for details regarding strategy performance. Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc. Past performance is no guarantee of future results. The information shown above does not reflect the performance of any specific fund. Individual fund performance will differ.

Affiliate Flows and Unfunded Wins/Committed Uncalled Capital

Entity

W

C

C

B

R 2

E

M

R

Q

Ending AUM

Qtr/Qtr % Change

783.4

7%

464.1

5%

144.7

20%

56.2

-1%

63.5

5%

11.1

23%

13.3

-4%

13.8

15%

4.3

13%

10.8

10%

1

Net LT Flows

/

Realizations

1

(4.6) / (0.2)

(0.3)

(1.2)

0.5 / 0.0

(2.9)

(0.1)

0.0 / (0.2)

(0.6)

0.0

(0.1)

Unfunded Wins/

Committed

Uncalled Capital

8.6 / 1.8 6.5 0.5

0.0 / 0.6 0.7 0.0

0.7 / 1.2 0.2 0.0 0.0

  • The pipeline of new opportunities remains healthy across asset classes and strategies.
  • Unfunded wins and committed uncalled capital of $10.4 billion.

1

Realizations represent investment manager-driven distributions primarily related to the sale of assets. Realizations are specific to our alternative

managers and do not include client-driven distributions (e.g. client requested redemptions, liquidations or asset transfers).

2

EnTrust Global reports total assets of $18.2B, which includes ending AUM, ending AUA, committed uncalled capital, and unfunded wins.

Page 4

Affiliates ordered by contribution to annual pre-tax earnings less noncontrolling interest.

Legg Mason ending AUM includes other entities not shown with ending AUM of $1.6B and LT Flows of $0.1B.

Drivers of Quarterly Long-Term Flows

Equity

Fixed Income

Alternative

Inflow

Drivers

Outflow

Drivers

Unfunded Wins/ Committed

Uncalled Capital

AUM

Flows

AUM

Flows

AUM

Flows

($B)

($B)

($B)

($B)

($B)

($B)

Large Cap

82.7

0.7

Core Plus

106.0

1.9

Real Estate

56.2

0.5

Enhanced Liquidity

7.7

0.5

Real Assets

0.7

0.1

CLO

5.8

0.5

Mid Cap

2.8

(1.3)

Global Opportunistic

30.0

(1.6)

Hedge Funds

10.1

(0.1)

All Cap

24.8

(1.2)

Long Duration

48.2

(1.5)

TIPS

6.7

(1.0)

Global Income

19.5

(0.7)

Macro Opportunities

13.2

(0.5)

Short Duration

8.7

(0.5)

Unfunded Wins ($B)

Unfunded Wins ($B)

Unfunded Wins ($B)

Large Cap

0.2

Core Bond

2.4

Alternative Solutions

1

0.7

Emerging Markets

0.2

Corporate

2.3

Equity International

0.1

Multi-Sector

0.6

Committed Uncalled Capital ($B)

Global Opportunistic

0.5

Alternative Solutions

1

1.2

Emerging Markets

0.4

Real Estate

0.6

Mortgage-Backed Securities

0.3

Total Committed Uncalled

1.8

Intermediate

0.2

Capital

Total Equity

0.8

Total Fixed Income

7.1

Total Alternative

2.5

% of Total Unfunded Wins and

8%

% of Total Unfunded Wins and

68%

% of Total Unfunded Wins and

24%

Committed Uncalled Capital

Committed Uncalled Capital

Committed Uncalled Capital

  • Unfunded wins and committed uncalled capital asset class mix of 68% from fixed income, 24% from alternatives, and 8% from equities.

Page 5

1 Alternative Solutions include strategic partnerships and commingled funds.

Global Distribution Update1

Distribution Highlights

  • Gross sales of $26.7B for F1Q21
    • Down $1.0B or 4% from F4Q20
  • Net Sales of $2.2B for F1Q21
    • Up $7.9B from F4Q20
  • Quarterly global redemption rate of 29%
  • Record gross sales for first half of calendar year

($ Billions)

1

F1Q21

F4Q20

F1Q20

:

Gross Sales

US

$22.8

$23.2

$17.4

Int'l

3.9

4.5

5.0

Total

$26.7

$27.7

$22.4

1

:

Net Sales

US

$2.7

($4.1)

$2.8

Int'l

(0.5)

(1.6)

1.2

Total

$2.2

($5.7)

$4.0

Quarterly Gross and Net Sales Trends ($B)

Total Long-Term Assets by Vehicle ($B)

$35

US Gross Sales

Int. Gross Sales

Net Sales

$30

27.7

26.7

$25

18.9

21.4

22.4

22.4

21.6

4.5

3.9

$20

17.4

17.6

4.0

5.0

4.3

5.1

$15

5.6

4.1

4.0

$10

18.1

23.2

22.8

17.4

17.4

16.5

13.3

13.3

$5

13.6

$0

2.5

4.0

2.6

1.6

2.2

-$5

0.1

(1.4)

-$10

(6.5)

(5.7)

-$15

Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20 Jun 20

$400

% Mix

$334

$362

% Mix

$339

6/20

$302

3/17

$10

$9

$318

$13

4%

$11

$300

$8

$44

$43

12%

3%

$44

$43

$37

$35

10%

14%

$28

$33

$32

$25

8%

$91

25%

$200

$78

$83

$66

$80

22%

$34

9%

$36

$41

$36

$30

12%

$100

$146

40%

$124

41%

$133

$134

$128

$0

3/17

3/18

3/19

3/20

6/20

US Funds

Int'l Funds

US Retail SMA

Int'l SMA

Sub-Advised Other

  • F1Q21 gross sales of $26.7 billion compared to $27.7 billion in F4Q20.
  • Quarterly net sales of $2.2 billion compared to net redemptions of $5.7 billion in F4Q20.
  • Redemption rate of 29% reflected challenging market conditions.
  • Long-termassets increased to $362 billion, largely driven by market appreciation.

1 Assets Under Advisement are included in long-term assets, gross sales and net sales. Net sales equals gross sales Page 6 less redemptions. As of June 30, 2020 the impact of AUA was immaterial.

Financial Highlights First Quarter

Quarters Ended

Financial Results

Jun

Mar

Jun

(Amounts in millions, except per share amounts)

2020

2020

2019

Operating Revenues

$

666.2

$

719.6

$

705.4

Operating Expenses

598.5

553.3

621.4

Operating Income

67.7

166.3

83.9

Operating margin

10.2%

23.1%

11.9%

Adjusted operating margin2

22.1%

25.8%

21.6%

Net Income1

$

49.4

$

64.2

$

45.4

Net Income Per Share - Diluted1

0.54

0.70

0.51

Adjusted Net Income2

65.4

93.2

67.0

Adjusted Earnings Per Share - Diluted2

0.71

1.02

0.75

  • Operating revenues decreased $53 million, or 7% quarter-over-quarter, driven by a decrease in average long-term AUM and lower performance fees.
  • Non-passthrough performance fees of $4.6 million were above forecast.
    • Performance fee-eligible portfolio remains well diversified.
  • Quarterly GAAP and cash tax rates of 20% and 6%, respectively, for the quarter.
  • At June 30, 2020, cash position was $932 million and seed investments totaled $211 million.
  • On July 21, 2020, repaid the outstanding balance on the credit facility of $250 million.

Page 7

  1. Net Income Attributable to Legg Mason, Inc.
  2. See appendix for GAAP reconciliation.

Assets Under Management by Asset Class

$800

9%

42

9%

9%

9%

10%

$600

28%

26%

25%

39

(bps)

39 bps

27%

22%

38 bps

Yield

($B)

37 bps

37 bps

37 bps

Ending AUM

36 bps

36 bps

36 bps

Oeprating Revenue

$400

36

34 bps

55%

56%

$200

33

58%

57%

56%

$0

8%

9%

8%

10%

9%

30

Jun 18

Sep 18

Dec 18

Mar 19

Jun 19

Sep 19

Dec 19

Mar 20

Jun 20

Ending AUM

Liquidity

Fixed Income

Equity

Alternative

Operating Revenue Yield 1

Long-term

$685

$693

$654

$690

$714

$719

$740

$656

$713

Total

$745

$755

$727

$758

$780

$782

$804

$731

$783

  • AUM increased $52.6 billion, or 7%, from the prior quarter due to market appreciation and FX, partially offset by outflows in liquidity and long-term AUM.
  • Operating revenue yield declined reflecting the mix shift from average long-term AUM to liquidity AUM.
  • Average AUM decreased 2% from the prior quarter driven by a decline in equity of 6%, fixed income of 3% and alternatives of 2%, partially offset by an increase in liquidity of 13%.

Page 8

1 Operating revenue yield equals total operating revenues less performance fees divided by average AUM. See appendix for supporting detail by asset class.

Operating Expenses

$ in Millions

$640 $620 $600 $580 $560 $540 $520

$53

($8)

($14) $598

$14

$553

Mar Qtr

Restructuring Costs¹

MTM on Deferred

D&S Expense

Other

Jun Qtr

Comp and Seed Inv

  • Operating expenses increased $45 million on a sequential basis, driven by a $52 million increase in compensation & benefits largely due to gains on investments in deferred compensation plans during the current quarter (compared to losses in the prior quarter).
  • D&S expense declined $8 million largely due to lower average AUM.
  • Other expenses decreased largely due to lower "business as usual" spend related to T&E, advertising, and conferences.

Page 9

1 Restructuring costs includes strategic restructuring costs of $8.0M and merger related costs of $22.9M in the current quarter and strategic restructuring costs of $3.7M and merger related costs of $13.3M in the prior quarter.

Compensation and Benefits

% of

1

% of

1

$

Jun Qtr

Net Rev.

Mar Qtr

Net Rev.

Change

Salary, incentives and benefits

$

324.5

57%

$

323.9

53%

$

0.6

Restructuring Costs

2

1.9

0%

4.6

0%

(2.7)

MTM on deferred comp and seed inv

20.0

4%

(32.5)

(5%)

52.5

Comp and benefits (ex pass through fees)

346.4

61%

296.0

48%

50.4

Clarion pass through performance fees

6.8

8.3

(1.5)

Total Compensation and Benefits

$

353.2

$

304.3

$

48.9

  • Salary, incentives, and benefits increased from the prior quarter largely due to seasonal accelerated deferred compensation and the compensation impact of lower non-compensation expenses at revenue-share affiliates, partially offset by the compensation impact of lower net revenue.
  • Quarterly compensation ratio of 57%, up from the prior quarter.

Page 10

  1. Net Revenue is equal to Adjusted Operating Revenues. See appendix for GAAP reconciliation.
  2. Includes strategic restructuring costs, merger related costs, and affiliate charges.

Adjusted Operating Margin

$800

35%

30%

Op Margin

AUM ($B)

$700

26.5%

25%

24.5%

25.0%

25.8%

23.0%

22.1%

21.6%

22.1%

20%

$600

20.4%

Average

15%

Adjusted

$500

10%

5%

$400

0%

Jun 18 Sep 18 Dec 18 Mar 19

Jun 19 Sep 19 Dec 19 Mar 20 Jun 20

Avg AUM

Adjusted Operating Margin

  • Adjusted operating margin for the quarter decreased 3.7% primarily due to lower net revenue, driven by lower long-term average AUM and non-pass through performance fees, and higher seasonal compensation, partially offset by lower "business as usual" spend including T&E, advertising and conferences.

Page 11

See appendix for GAAP reconciliation.

First Quarter

Adjusted Earnings Per Share Roll Forward

GAAP

EPS $0.70

GAAP

EPS $0.54

EPS

$1.10

$1.02

$0.22

$1.00

$0.90

$0.80

$0.70

$0.60

$0.50

$0.10

$0.07

$0.03

$0.03 $0.71

Mar Qtr

Lower Net

Seasonal Comp

BAU Spend

Interest

Tax

Jun Qtr

Adj EPS

Revenue

Adj EPS

  • GAAP EPS decreased $0.16 to $0.54 largely due to lower net revenue, higher strategic restructuring and merger related charges, and seasonal compensation, partially offset by gains on investments not offset by compensation and hedges (compared to losses in the prior quarter), lower GAAP tax rate, and lower
    "business as usual" spend.
  • Adjusted EPS declined $0.31 from lower net revenue, seasonal compensation, higher net interest expenses, and a higher adjusted tax rate, partially offset by lower "business as usual" spend.

Page 12

See appendix for GAAP reconciliation.

Appendix

Appendix - Asset & Revenue Diversification

Fixed

Equity

Alternative

Liquidity

Total AUM

Operating

Income

Revenue

AUM by

Domicile:

US

67%

89%

86%

52%

73%

78%

Non US

33%

11%

14%

48%

27%

22%

Total AUM

57%

25%

9%

9%

100%

Operating

42%

38%

16%

4%

100%

Revenue

Asset data as of June 30, 2020 and operating revenue data for the quarter ended June 30, 2020.

Page 14

Appendix - Operating Revenue Yield by Asset Class1

Yield (bps)

Jun 18

Sep 18

Dec 18

Mar 19

Jun 19

Sep 19

Dec 19

Mar 20

Jun 20

Alternative

63

61

59

60

60

58

58

58

56

Equity

61

60

59

58

58

57

56

58

55

Fixed Income

28

27

27

27

26

26

26

26

25

Liquidity

13

14

13

14

14

14

14

14

15

1 Operating revenue yield equals total operating revenues less performance fees divided by average AUM.

Page 15

Appendix - First Quarter Adjusted EBITDA1 Roll Forward

Cash Provided

By (Used In)

Operating

Activities,

GAAP

Mar 20 Qtr

$183.5

Jun 20 Qtr

($211.5)

$ in Millions

$250

$16.0

$115.3

$207.5

$200

$150

($29.4)

$100

$78.8

$50

$0

Mar 20 Qtr

Q4 Items

Net Change in Adjusted EBITDA

Q1 Items

Jun 20 Qtr

  • Adjusted EBITDA decreased primarily due to realized losses on investments in the current period as compared to realized gains on investments in the prior period and lower net revenue, partially offset by lower "business as usual" spend.
  • F4Q20 and F1Q21 items include strategic restructuring costs, merger related costs and affiliate charges ultimately settled in cash.

Page 16

1 See page 22 for GAAP reconciliation.

Appendix - Investment Performance

% of Strategy AUM beating Benchmark1

87%

10 Yr88%

85%

84%

5 Yr

71%

67%

83%

3 Yr

34%

68%

75%

1 Yr

33%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun 19

Mar 20

Jun 20

  1. Yr
  1. Yr
  1. Yr
  1. Yr
  • of Long-Term U.S. Fund Assets beating Lipper Category Average2

68%

71%

69%

72%

73%

74%

66%

61%

63%

72%

60%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jun 19

Mar 20

Jun 20

1

See last page for details regarding strategy performance.

2

Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc.

Page 17

Past performance is no guarantee of future results. The information shown above does not reflect the performance of

any specific fund. Individual fund performance will differ.

Appendix - Additional Investment Performance Detail

% of Strategy AUM Beating Benchmark1

June 30, 2020

March 31, 2020

June 30, 2019

1-Year

3-Year

5-Year

1-Year

3-Year

5-Year

1-Year

3-Year

5-Year

Total (includes liquidity)

57%

68%

67%

33%

34%

71%

75%

83%

84%

Equity:

Large cap

17%

24%

13%

21%

21%

56%

60%

49%

65%

Small cap

67%

73%

80%

77%

64%

69%

74%

68%

40%

Total Equity (includes other equity)

62%

62%

70%

68%

58%

65%

61%

56%

48%

Fixed Income:

US taxable

74%

99%

95%

6%

9%

90%

97%

99%

95%

US tax-exempt

0%

0%

0%

0%

0%

0%

0%

100%

100%

Global taxable

45%

35%

50%

30%

33%

35%

45%

92%

86%

Total Fixed Income

62%

76%

78%

13%

15%

69%

77%

97%

92%

Total Alternative2

78%

90%

79%

93%

93%

90%

98%

84%

98%

  1. See last page for details regarding strategy performance. Past performance is no guarantee of future results. The information shown above does not reflect the performance of any specific fund. Individual fund performance will differ.
  2. Alternative assets include AUM managed by Clarion Partners and RARE Infrastructure totaling three funds.

Page 18

Appendix - Additional Investment Performance Detail

% of Long-Term U.S. Fund Assets beating Lipper Category Average1

June 30, 2020

March 31, 2020

June 30, 2019

1-Year3-Year

5-Year

1-Year

3-Year

5-Year

1-Year

3-Year

5-Year

Total (excludes liquidity)

59%

63%

74%

60%

61%

73%

72%

66%

72%

Equity:

Large cap

27%

39%

70%

40%

41%

75%

70%

42%

70%

Small cap

79%

73%

80%

70%

65%

71%

75%

76%

76%

Total Equity (includes other equity)

41%

48%

72%

47%

47%

72%

72%

51%

72%

Fixed Income:

US taxable

88%

92%

92%

86%

88%

92%

93%

95%

91%

US tax-exempt

16%

8%

6%

10%

6%

5%

10%

28%

24%

Global taxable

53%

48%

43%

45%

42%

38%

41%

76%

32%

Total Fixed Income

75%

76%

76%

70%

71%

73%

73%

81%

73%

Total Alternative2

77%

77%

N/A

58%

100%

N/A

18%

24%

0%

1

Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc. Past performance is no guarantee of

future results. The information shown above does not reflect the performance of any specific fund. Individual fund

performance will differ.

Page 19

2

Alternative assets include AUM managed by Clarion Partners and RARE Infrastructure totaling three funds.

Appendix - GAAP Reconciliation

Adjusted income1

Quarters Ended

June

March

June

($ millions)

2019

2020

2020

Net Income (Loss) Attributable to Legg Mason, Inc.

$

45.4

$

64.2

$

49.4

Plus (less):

Restructuring costs:

Strategic restructuring and merger related charges

32.9

17.0

31.0

Affiliate charges

1.2

0.7

0.5

Amortization of intangible assets

5.4

5.6

5.5

Gains and losses on seed and other investments

not offset by compensation or hedges

(6.4)

12.6

(8.1)

Acquisition and transition-related costs

-

-

0.6

Contingent consideration fair value adjustments

(1.2)

0.3

-

2

:

Income tax adjustments

Impacts of non-GAAP adjustments

(8.6)

(9.7)

(8.3)

Other tax items

(1.7)

2.5

(5.2)

Adjusted Net Income

$

67.0

$

93.2

$

65.4

Net Income (Loss) Per Diluted Share Attributable to

Legg Mason, Inc. Shareholders

$

0.51

$

0.70

$

0.54

Plus (less), net of tax impacts:

Restructuring costs:

Strategic restructuring and merger related charges

0.27

0.14

0.24

Affiliate charges

0.01

-

-

Amortization of intangible assets

0.04

0.05

0.04

Gains and losses on seed and other investments

not offset by compensation or hedges

(0.05)

0.10

(0.06)

Acquisition and transition-related costs

-

-

0.01

Contingent consideration fair value adjustments

(0.01)

-

-

Other tax items

(0.02)

0.03

(0.06)

Adjusted Earnings per Diluted Share

$

0.75

$

1.02

$

0.71

1 See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release.

Page 20

2

The non-GAAP effective tax rates for the quarters ended June 30,2019, March 31, 2020 and June 30, 2020 were

27.0%, 24.6% and 28.0%, respectively.

Appendix - GAAP Reconciliation

Adjusted Operating Margin1

($ millions)

Jun 18

Sep 18

Dec 18

Mar 19

Jun 19

Sep 19

Dec 19

Mar 20

Jun 20

Operating Revenues, GAAP basis

$

747.9

$

758.4

$

704.3

$

692.6

$

705.4

$

743.3

$

753.9

$

719.6

$

666.2

Plus (less):

Pass through performance fees

(12.6)

(24.0)

(7.4)

(5.0)

(1.0)

(21.9)

(10.7)

(8.3)

(6.8)

Operating revenues eliminated upon

consolidation of investment vehicles

0.2

0.1

0.2

0.2

0.1

0.1

0.1

-

0.1

Distribution and servicing fees

(79.2)

(79.1)

(72.2)

(72.5)

(69.9)

(67.1)

(67.6)

(65.8)

(59.9)

Investment advisory fees

(37.4)

(35.4)

(36.6)

(26.8)

(34.0)

(37.1)

(36.7)

(34.0)

(31.6)

Adjusted Operating Revenues

$

618.9

$

620.0

$

588.3

$

588.5

$

600.6

$

617.3

$

639.0

$

611.5

$

568.0

Operating Income (Loss), GAAP basis

$

125.7

$

135.7

$

(236.4)

$

78.1

$

83.9

$

125.0

$

130.0

$

166.3

$

67.7

Plus (less):

Restructuring costs:

Strategic restructuring and

merger related charges

2.8

5.6

5.9

9.4

32.9

19.7

20.9

17.0

30.9

Affiliate charges

-

-

-

9.3

1.2

0.2

0.2

0.7

0.6

Amortization of intangible assets

6.2

6.1

6.1

6.0

5.5

5.4

6.0

5.6

5.5

Gains (losses) on deferred compensation

and seed investments, net

1.3

4.0

(10.8)

16.0

7.0

2.9

12.0

(32.5)

20.0

Acquisition and transition-related costs

1.4

-

-

1.2

-

-

-

-

0.6

Impairment of intangible assets

-

-

365.2

-

-

-

-

-

-

Contingent consideration fair value adjustments

0.4

0.1

-

-

(1.2)

-

-

0.2

-

Charges related to significant

regulatory matters

4.0

0.2

-

-

-

-

-

-

-

Operating income (loss) of consolidated investment

vehicles, net

0.6

0.4

0.3

0.3

0.3

1.3

0.2

0.2

-

Adjusted Operating Income

$

142.4

$

152.1

$

130.3

$

120.3

$

129.6

$

154.5

$

169.3

$

157.5

$

125.3

Operating Margin, GAAP basis

16.8%

17.9%

(33.6%)

11.3%

11.9%

16.8%

17.2%

23.1%

10.2%

Adjusted Operating Margin

23.0%

24.5%

22.1%

20.4%

21.6%

25.0%

26.5%

25.8%

22.1%

Page 21

1

See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release.

Appendix - GAAP Reconciliation

Adjusted EBITDA1

Quarters Ended

June

March

June

2019

2020

2020

($ millions)

Cash provided by (used in) operating activities, GAAP basis

$

(187.6)

$

183.5

$

(211.5)

Plus (less):

Interest expense, net of accretion and amortization

of debt discounts and premiums

$

28.3

$

26.6

$

28.2

Current tax expense (benefit)

$

(4.2)

$

0.2

$

4.9

Net change in assets and liabilities

$

303.1

$

(43.4)

$

378.2

Net change in assets and liabilities

of consolidated investment vehicles

$

(13.0)

$

31.1

$

(101.3)

Net income attributable to noncontrolling interests

$

(16.2)

$

(11.2)

$

(5.7)

Net gains (losses) and earnings on investments

$

6.7

$

19.5

$

(11.8)

Net gains (losses) on consolidated investment vehicles

$

9.6

$

1.3

$

(2.2)

Other

$

(0.3)

$

(0.1)

$

-

Adjusted EBITDA

$

126.4

$

207.5

$

78.8

Page 22

1

See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release.

Appendix - Strategy Performance

For purposes of investment performance comparisons, strategies are an aggregation of discretionary portfolios (separate accounts, investment funds, and other products) into a single group that represents a particular investment objective. In the case of separate accounts, the investment performance of the account is based upon the performance of the strategy to which the account has been assigned. Each of our asset managers has its own specific guidelines for including portfolios in their strategies. For those managers which manage both separate accounts and investment funds in the same strategy, the performance comparison for all of the assets is based upon the performance of the separate account.

Approximately 88% of total AUM is included in strategy AUM as of June 30, 2020, although not all strategies have three, five, and ten year histories. Total strategy AUM includes liquidity assets. Certain assets are not included in reported performance comparisons. These include: accounts that are not managed in accordance with the guidelines outlined above; accounts in strategies not marketed to potential clients; accounts that have not yet been assigned to a strategy; and certain smaller products at some of our affiliates.

Past performance is not indicative of future results. For AUM included in institutional and retail separate accounts and investment funds managed in the same strategy as separate accounts, performance comparisons are based on gross-of-fee performance. For investment funds which are not managed in a separate account format, performance comparisons are based on net-of-fee performance. Funds-of-hedge funds generally do not have specified benchmarks. For purposes of this comparison, performance of those products is net-of-fees, and is compared to the relevant HFRX index. These performance comparisons do not reflect the actual performance of any specific separate account or investment fund; individual separate account and investment fund performance may differ. The information in this presentation is provided solely for use in connection with this presentation, and is not directed toward existing or potential clients of Legg Mason.

Page 23

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Legg Mason Inc. published this content on 27 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 July 2020 12:15:04 UTC