Legg Mason : 3Q FY 2020 Earnings Presentation

Fiscal Third Quarter 2020 Review

Joseph A. Sullivan

Chairman & Chief Executive Officer

Peter H. Nachtwey

Chief Financial Officer

January 29, 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, 2019 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

Company Highlights

Financial Results1

Strategic

Restructuring

Assets Under

Management/

Flows

Global Distribution

Investment

Performance2

Business

Developments/

Other

• Net Income of $74.8M, or $0.83 per diluted share
• • Includes restructuring charges of $21.2M, or $0.17 per diluted share
• Adjusted Net Income1 of $93.2M, or $1.03 per diluted share
• Strategic Restructuring
• • Projected annual expense savings of $100M or more, achieved $20.5M in current quarter
  • Estimated costs to achieve of $125M to $135M, $18.5M incurred in current quarter
• Total AUM of $803.5B

• Long-term net outflows of $1.6B

• • Equity outflows of $4.8B
  • Fixed Income inflows of $1.7B
  • Alternative inflows of $1.5B
• Quarterly gross sales of $21.6B
• Quarterly net sales of $1.6B
• 79% (3yr) and 83% (5yr) of strategy AUM beat benchmarks
• 65% (3yr) and 76% (5yr) of long-term US fund assets beat Lipper category averages
• Brandywine Global, ClearBridge Investments and Western Asset were all recognized by Pensions & Investments (P&I) in their Best Places to Work in Investment Management survey for 2019.
• Western Asset Management's mutual funds in Hong Kong, Singapore and Taiwan, were winners of the 2019 BENCHMARK Quantitative Top Fund of the Year Awards.
• During the quarter-ended December 31, 2019, Virtus Investment Partners, Inc., Fred Alger Management, LLC and IndexIQ, a New York Life Investments Company, each entered into agreement to license Precidian Investments LLC ActiveShares® structure, bringing the total number of licensees to 14.

Page 2

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.

Third Quarter Overview - Affiliate Diversification ($ billions)

Entity	Ending AUM	Qtr/Qtr % Change
	803.5	3%

1		/
Net LT Flows
Realizations	1
(1.6) / (0.6)

Unfunded Wins/

Committed

Uncalled Capital

4.8 / 2.4

W

C

C

B

R 2

E

R

M

Q

456.3	2%	3.2	2.0
154.2	5%	(3.7)	0.7
54.8	2%	1.3 / (0.4)	0.0 / 1.0
74.0	2%	(2.3)	0.7
13.7	4%	(0.5)	0.0
14.6	-1%	(0.2) / (0.2)	0.9 / 1.4
4.9	18%	0.4	0.0
17.2	9%	0.5	0.4
12.4	4%	(0.2)	0.1

	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 $17.7B, which includes ending AUM, ending AUA, committed uncalled capital, and unfunded wins
	Affiliates ordered by contribution to annual pre-tax earnings less noncontrolling interest
Page 3	Legg Mason ending AUM includes other entities not shown with ending AUM of $1.4B and LT Flows of ($0.1B)

Drivers of Quarterly Long-Term Flows

Inflow Drivers

Outflow

Drivers

Unfunded Wins/ Committed Uncalled Capital

	Equity		Fixed Income			Alternative
		AUM	Flows		AUM	Flows			AUM	Flows
		($B) ($B)		($B)	($B)			($B) ($B)
Emerging Markets	3.7	0.7	Core Bond	43.9	3.2	Real Estate	54.8	1.3
Equity Income	27.0	0.2	Core Plus	114.1	3.1	Infrastructure	4.9	0.4
				Non-Traditional Bond	14.2	0.6

Large Cap	84.1	(3.2)	Global Opportunistic	33.1	(1.4)	Hedge Funds	11.3	(0.2)
All Cap	30.0	(1.1)	TIPS	7.8	(1.2)
Small Cap	23.9	(0.5)	Long Duration	46.9	(0.9)
Balanced Equity	10.9	(0.2)	Corporate	34.0	(0.9)
Absolute Return	3.1	(0.2)	High Yield	9.3	(0.6)
Unfunded Wins ($B)			Unfunded Wins ($B)			Unfunded Wins ($B)
Emerging Markets	0.4		Corporate	1.0		Alternative Solutions1	0.9
Large Cap	0.4		Multi-Sector Bond	0.5
Custom / MDA	0.4		Core Bond	0.4		Committed Uncalled Capital ($B)
			Global Income	0.2		Alternative Solutions1	1.4
			Municipal	0.1		Real Estate	1.0
			Global Opportunistic	0.1		Total Committed Uncalled	2.4
			High Yield	0.1		Capital
Total Equity	1.3		Total Fixed Income	2.6		Total Alternative	3.3
% of Total Unfunded Wins and	18%		% of Total Unfunded Wins and	36%		% of Total Unfunded Wins and	46%
Committed Uncalled Capital		Committed Uncalled Capital		Committed Uncalled Capital

Page 4

1 Alternative Solutions include strategic partnerships and commingled funds

Global Distribution Update1

Distribution Highlights

• Gross sales of $21.6B for F3Q20
• • Down from F2Q20
  • Up $4.0B from F3Q19
• Net sales of $1.6B for F3Q20
• • Down $1.0B from F2Q20
  • Up $8.1B from F3Q19
• Quarterly global redemption rate at 22%

Quarterly Gross and Net Sales Trends ($B)

($ Billions)		F3Q20	F2Q20	F3Q19
	1	:
Gross Sales
US		$16.5	$18.1	$13.6
Int'l		5.1	4.3	4.0
Total		$21.6	$22.4	$17.6
1	:
Net Sales
US		$0.2	$2.5	($5.4)
Int'l		1.4	0.1	(1.1)
Total		$1.6	$2.6	($6.5)

Total Long-Term Assets by Vehicle ($B)

	% Mix:
	12/19
% Mix:
3%
3/17
12%
3%	10%
14%
8%	25%
22%	10%
12%

41%

40%

1 Assets Under Advisement are included in long-term assets, gross sales and net sales. Net sales equals gross sales Page 5 less redemptions. As of December 31, 2019 the impact of AUA was immaterial

Financial Highlights Third Quarter FY 2020

• Net income of $74.8M, or $0.83 per diluted share
• Adjusted net income1 of $93.2M, or $1.03 per diluted share
• Average AUM of $791.7B, up $11.9B
• • Average long-term AUM increased $13.1B from the prior quarter
• Operating revenues of $753.9M, increased $10.6M from the prior quarter
• • Increase is largely due to higher non-pass through performance fees and higher average long-term AUM, partially offset by lower pass through performance fees
• Operating expenses of $623.9M, increased $5.6M from the prior quarter
• • Increase is largely due to gains on deferred compensation and seed investments, higher

compensation on increased revenues driven by higher non-pass through performance fees and higher average long-term AUM, partially offset by lower compensation on lower

pass through performance fees

• Operating income of $130.0M and operating margin of 17.2%, compared to operating income of $125.0M and operating margin of 16.8% in the prior quarter
• Adjusted operating margin1 of 26.5% compared to 25.0% in the prior quarter
• Effective GAAP tax rate of 27.0%2 and cash tax rate of 6.0%

Page 6

1. See appendix for GAAP reconciliation
2. Includes the impact of Consolidated Investment Vehicles (CIVs) of (0.4%)

Assets Under Management by Asset Class

	$800
	$600
($B)
AUMEnding	$400
	$200

$0

Ending AUM

9%
		9%
39 bps	39 bps
27%	38 bps	25%
38 bps		37 bps	37 bps

55% 56%

10%				10%
Dec 17	Mar 18	Jun 18	Sep 18	Dec 18	Mar 19
	Liquidity	Fixed Income	Equity	Alternative	Total

9%	9%
26%	27%
37 bps
36 bps	36 bps

	57%	56%
	8%	8%
Jun 19	Sep 19	Dec 19
Operating Revenue Yield	1

42

39

36

33

30

Oeprating Revenue Yield (bps)

Long-term	$694	$691	$685	$693	$654	$690	$714	$719	$740
Total	$767	$754	$745	$755	$727	$758	$780	$782	$804

• AUM increased $21.7B or 3% from the prior quarter

−	Market appreciation of $20.9B	− Long-term outflows of $1.6B
−	Positive FX of $3.0B	− Realizations of $0.6B

Page 7

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

• Other expenses increased largely due to higher "business as usual" expenses related to technology consulting, conferences and T&E

Page 8

1 Restructuring costs includes strategic restructuring costs of $18.5M and other costs of $2.4M in the current quarter and includes strategic restructuring costs of $15.9M and other costs of $3.8M in the prior quarter. See page 12 for more information on the strategic restructuring.

Compensation and Benefits

		% of			% of			$
	Dec Qtr Net Rev.	1	Sep Qtr Net Rev.	1	Change
Salary, incentives and benefits	$ 341.9	54%	$ 338.2	55%	$	3.7
Strategic restructuring costs	10.2	1%		14.4	2%			(4.2)
Affiliate charges	0.2	0%		0.3	0%			(0.1)
MTM on deferred comp and seed inv	12.0	2%		2.9	1%			9.1
Comp and benefits (ex pass through fees)	364.3	57%		355.8	58%			8.5
Clarion pass through performance fees	10.7			21.9				(11.2)
Total Compensation and Benefits	$ 375.0			$ 377.7			$	(2.7)

• Salary, incentives, and benefits increased from the prior quarter largely due to higher incentives on higher net revenues, partially offset by increased savings from the strategic restructuring

Page 9

1 Net Revenue is equal to Adjusted Operating Revenues. See appendix for GAAP reconciliation

Adjusted Operating Margin

	$800										35%
											30%
AUM ($B)	$700	27.4%								26.5%	25%	Op Margin
							25.0%
		24.4%		24.5%
		23.0%
				22.1%		21.6%			20%
$600						20.4%
Average										15%	Adjusted
$500										10%
											5%
	$400										0%
		Dec 17	Mar 18	Jun 18	Sep 18	Dec 18	Mar 19	Jun 19	Sep 19	Dec 19
				Avg AUM	Adjusted Operating Margin

• Dec '19 quarter adjusted operating margin increased 1.5% primarily due to higher net revenues and higher savings from the strategic restructuring, partially offset by higher
  "business as usual" expenses

Page 10	Note: Adjusted operating margin revises our previously disclosed operating margin, as adjusted, prior periods have
been restated. See appendix for GAAP reconciliation

Third Quarter

Adjusted Earnings Per Share Roll Forward

GAAP

EPS $0.74

GAAP

EPS $0.83

EPS

$1.10		$0.04	($0.02)
		($0.02)	$0.02	$1.03
	$0.06
$1.00
$0.95
$0.90
$0.80
$0.70
$0.60
$0.50
Sep Qtr	Higher Net	Savings	Tech	T&E/Conferences	Tax	Dec Qtr
Adj EPS	Revenue			& Other		Adj EPS

• Q3 GAAP EPS increased $0.09 to $0.83 largely due to higher net revenue, higher savings from the strategic restructuring and gains on deferred compensation and seed investments, partially offset by higher "business as usual" expenses

Page 11

See appendix for GAAP reconciliation

Savings and Charges Related to Strategic Restructuring1

• Expect saves of $100M or more and costs to achieve of $125M - $135M
• Realized run rate saves of 81% at the end of F3Q20
• Projected run rate saves of over 90% at the end of FY20

		Actual			Projected
($ in Millions)	F1Q20	F2Q20	F3Q20	F4Q20	FY20	FY21
Incremental Saves Realized ($)	$10	$15	$20	$22	$67	$30+
Cumulative Saves Realized ($)	$14	$29	$49	$71	$71	$100+
Compensation	$5	$12	$23	$34	$34	$50
Communications & Technology	$1	$3	$5	$7	$7	$10
Occupancy	-	$1	$1	$1	$1	$5
Other	$8	$13	$20	$29	$29	$35
Run Rate Saves Realized (%)	41%	58%	81%	90%+	90%+	100%
Costs to Achieve ($)
Incremental Costs to Achieve	$33	$16	$18	$14	$80-$85	$35-$40
Cumulative Costs to Achieve	$42	$58	$76	$90	$90-$95	$125-$135

1	Strategic restructuring commenced effective January 1, 2019. F4Q19 savings of $4M and costs to achieve of $9M
Page 12

Thinking Independently, Together

Appendix

Appendix - Debt and Leverage - Leverage Reduction to <2.0X

Debt Maturities1

• Total debt of $2.0B as of 12/31/2019
• Deleveraging through EBITDA growth, debt repayment, and cash build

$600		$550
$500		500
	$450
$400
$300	$250	$250
$200
$100
$-

4.5x

4.0x

3.5x

3.0x

2.5x

2.0x

1.5x

1.0x

FY25	FY26		FY44	FY56	FY57
		Senior Notes		Jr Subordinated Notes

Issued $1.2B in debt in calendar year 2016 to fund Clarion, ETG & RARE acquisitions

Leverage Ratio2

Jul19 debt

paydown

1.91X

Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar 18 Jun 18 Sep 18 Dec18 Mar19 Jun19 Sep19 Dec19

Notes:

1. $500M of available borrowing capacity under our undrawn revolving credit facility, which expires in Dec 2020
2. Uses street methodology: consensus EBITDA from CAP IQ divided by net debt (gross debt less cash)

Page 15

Appendix - Asset & Revenue Diversification

	Fixed	Equity	Alternative		Liquidity		Total AUM		Operating
	Income				Revenue
AUM by
Domicile:
US	65%	88%	86%	43%		71%		75%
Non US	35%	12%	14%	57%		29%		25%

Total AUM	56%	27%	9%	8%	100%
Operating	41%	41%	15%		3%		100%
Revenue

Asset data as of December 31, 2019 and operating revenue data for the quarter ended December 31, 2019

Page 16

Appendix - Operating Revenue Yield by Asset Class1

Yield (bps)

	Dec 17	Mar 18	Jun 18	Sep 18	Dec 18	Mar 19	Jun 19	Sep 19	Dec 19
Alternative	64	65	63	61	59	60	60	58	58
Equity	61	61	61	60	59	58	58	57	56
Fixed Income	27	28	28	27	27	27	26	26	26
Liquidity	14	14	13	14	13	14	14	14	14

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

Page 17

Appendix - Third Quarter Adjusted EBITDA1 Roll Forward

Cash Provided

By (Used In)

Operating

Activities,

GAAP

Sep 19 Qtr

$229.3

Dec 19 Qtr

$335.4

$ in Millions

$200
$180		$16.0	($3.2)	($16.3)
$160	$157.3				$153.8
$140
$120
$100
$80
$60
$40
$20
$0
		Sep 19 Qtr	Q2 Items	Net Change in Adjusted EBITDA	Q3 Items	Dec 19 Qtr

• Adjusted EBITDA decreased primarily due to higher realized losses on investments in the current period, partially offset by higher operating income
• Q2 and Q3 items are restructuring and affiliate charges ultimately settled in cash

Page 18

1 See page 28 for GAAP reconciliation

Appendix - Significant Tax Benefit

$3.1B of Future Income Sheltered

		FY20
	Projected
50%	Tax Rates 1
40%
30%	27.0%
20%
10%		6.0%
0%	GAAP Tax Rate	Cash Tax Rate

Projected

Tax Benefit

$3.1B

$0.8B

•	Projected GAAP tax range of 26% to 28%	• Tax benefit from amortizable intangible assets
•	The cash tax rate is expected to be below 10% for	from acquisitions
	the next four to five years

1 Excludes the impact of discrete tax items

Page 19

Appendix - Investment Performance

% of Strategy AUM beating Benchmark1

													83%
10 Yr												84%
													84%
												78%
5 Yr												82%
													83%
													85%
3 Yr											79%
												79%
									41%
1 Yr											75%
												78%
0%	10%	20%	30%	40%	50%	60%	70%	80%	90%	100%
							Dec 18	Sep 19	Dec 19

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

65%

10 Yr64%

68%

71%

5 Yr71%

76%

69%

3 Yr66%

65%

								43%
1 Yr									70%
										62%
0%	10%	20%	30%	40%	50%	60%	70%	80%	90%	100%
						Dec 18	Sep 19	Dec 19

	1	See last page for details regarding strategy performance
	2	Includes open-end,closed-end, and variable annuity funds. Source: Lipper Inc.
Page 20	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

	December 31, 2019	September 30, 2019	December 31, 2018
	1-Year	3-Year	5-Year	1-Year	3-Year	5-Year	1-Year	3-Year	5-Year
Total (includes liquidity)	78%	79%	83%	75%	79%	82%	41%	80%	73%
Equity:
Large cap	18%	21%	52%	62%	25%	67%	57%	57%	33%
Small cap	54%	68%	64%	81%	67%	55%	65%	79%	37%
Total Equity (includes other equity)	61%	56%	60%	66%	56%	54%	56%	57%	36%
Fixed Income:
US taxable	97%	100%	99%	90%	100%	95%	23%	95%	85%
US tax-exempt	100%	100%	100%	100%	100%	100%	0%	100%	100%
Global taxable	98%	99%	84%	41%	92%	78%	12%	70%	72%
Total Fixed Income	97%	99%	94%	75%	97%	90%	19%	88%	81%
Total Alternative2	99%	95%	98%	97%	88%	98%	75%	73%	93%

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 21

Appendix - Additional Investment Performance Detail

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

	December 31, 2019	September 30, 2019	December 31, 2018
	1-Year3-Year	5-Year	1-Year	3-Year	5-Year	1-Year	3-Year	5-Year
Total (excludes liquidity)	62%	65%	76%	70%	66%	71%	43%	69%	71%
Equity:
Large cap	39%	40%	72%	73%	41%	72%	61%	61%	63%
Small cap	52%	62%	72%	45%	80%	60%	73%	93%	55%
Total Equity (includes other equity)	45%	49%	72%	66%	54%	69%	62%	63%	59%
Fixed Income:
US taxable	92%	95%	95%	92%	95%	90%	28%	91%	90%
US tax-exempt	13%	12%	30%	12%	37%	28%	19%	25%	56%
Global taxable	80%	85%	45%	48%	35%	33%	23%	62%	81%
Total Fixed Income	78%	80%	79%	74%	78%	73%	26%	75%	83%
Total Alternative2	0%	100%	N/A	49%	0%	N/A	30%	0%	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 22	2	Alternative assets include AUM managed by Clarion Partners and RARE Infrastructure totaling three funds

Appendix - GAAP Reconciliation

Adjusted income1

						Quarters Ended
				December			September			December
		($ millions)		2018			2019			2019
		Net Income (Loss) Attributable to Legg Mason, Inc.	$	(216.9)	$	67.1	$	74.8
		Plus (less):
		Restructuring costs:
		Strategic restructuring and other corporate initiatives		5.9			19.7			20.9
		Affiliate charges		-			0.2			0.2
		Amortization of intangible assets		6.1			5.4			6.0
		Gains and losses on seed and other investments
		not offset by compensation or hedges		(4.3)			-			(4.8)
		Impairments of intangible assets		365.2			-			-
		Income tax adjustments2:
		Impacts of non-GAAP adjustments		(94.6)			(7.0)			(6.0)
		Other tax items		14.9			0.2			2.1
		Adjusted Net Income	$	76.3	$	85.6	$	93.2
		Net Income (Loss) Per Diluted Share Attributable to
		Legg Mason, Inc. Shareholders	$	(2.55)	$	0.74	$	0.83
		Plus (less), net of tax impacts:
		Restructuring costs:
		Strategic restructuring and other corporate initiatives		0.05			0.16			0.17
		Affiliate charges		-			-			-
		Amortization of intangible assets		0.05			0.05			0.05
		Gains and losses on seed and other investments
		not offset by compensation or hedges		(0.04)			-			(0.04)
		Impairments of intangible assets		3.17			-			-
		Other tax items		0.18			-			0.02
		Adjusted Earnings per Diluted Share	$	0.86	$	0.95	$	1.03
	1 See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release
Page 23	2	The non-GAAP effective tax rates for the quarters ended December 31,2019, September 30, 2019 and December 31,
	2018 were 25.9%, 27.3% and 18.5%, respectively.

Appendix - GAAP Reconciliation

Adjusted Operating Margin1

Quarters Ended

($ millions)		Dec 17		Mar 18
Operating Revenues, GAAP basis	$	793.1	$	785.1	$
Plus (less):
Pass through performance fees		(10.0)		(13.5)
Operating revenues eliminated upon
consolidation of investment vehicles		0.3		0.2
Distribution and servicing expense excluding
consolidated investment vehicles		(124.1)		(119.3)
Adjusted Operating Revenues	$	659.3	$	652.5	$
Operating Income (Loss), GAAP basis	$	(27.3)	$	99.7	$
Plus (less):
Restructuring costs:
Strategic restructuring and other
corporate initiatives		-		2.2
Affiliate charges		-		-
Amortization of intangible assets		6.1		6.1
Gains (losses) on deferred compensation
and seed investments, net		4.3		(2.2)
Acquisition and transition-related costs		1.3		1.8
Impairment of intangible assets		195.0		-
Contingent consideration fair value adjustments		0.7		(15.5)
Charges related to significant
regulatory matters		-		67.0
Operating income (loss) of consolidated investment
vehicles, net		0.7		(0.1)
Adjusted Operating Income	$	180.8	$	159.0	$
Operating Margin, GAAP basis		(3.4%)		12.7%
Adjusted Operating Margin		27.4%		24.4%

Jun 18		Sep 18		Dec 18		Mar 19		Jun 19		Sep 19		Dec 19
747.9	$	758.4	$	704.3	$	692.6	$	705.4	$	743.3	$	753.9
(12.6)		(24.0)		(7.4)		(5.0)		(1.0)		(21.9)		(10.7)
0.2		0.1		0.2		0.2		0.1		0.1		0.1
(116.6)		(114.5)		(108.8)		(99.3)		(103.9)		(104.2)		(104.3)
618.9	$	620.0	$	588.3	$	588.5	$	600.6	$	617.3	$	639.0
125.7	$	135.7	$	(236.4)	$	78.1	$	83.9	$	125.0	$	130.0
2.8		5.6		5.9		9.4		32.9		19.7		20.9
-		-		-		9.3		1.2		0.2		0.2
6.2		6.1		6.1		6.0		5.5		5.4		6.0
1.3		4.0		(10.8)		16.0		7.0		2.9		12.0
1.4		-		-		1.2		-		-		-
-		-		365.2		-		-		-		-
0.4		0.1		-		-		(1.2)		-		-
4.0		0.2		-		-		-		-		-
0.6		0.4		0.3		0.3		0.3		1.3		0.2
142.4	$	152.1	$	130.3	$	120.3	$	129.6	$	154.5	$	169.3
16.8%		17.9%		(33.6%)		11.3%		11.9%		16.8%		17.2%
23.0%		24.5%		22.1%		20.4%		21.6%		25.0%		26.5%

Page 24	1	See explanations for Use of Supplemental Data as Non-GAAP Financials information in earnings release

Appendix - Reconciliation of GAAP Basis Operating Results to Non-GAAP Operating Results for the Quarter Ended December 31, 2019

(Amounts in thousands, except per share amounts)

Investment Advisory Fees:

Separate Accounts

Funds

Performance Fees

Distribution and Service Fees

Other

Reconciliation of GAAP Basis Total Operating

Revenues to Adjusted Operating Revenues (a)

Operating Expenses:

Compensation and Benefits

Distribution and Servicing

Communications and Technology

Occupancy

Amortization of Intangible Assets

Impairment of Intangible Assets

Contingent Consideration Adjustments

Other

Total Operating Expenses

Reconciliation of GAAP Basis Operating

Income to Adjusted Operating Income (b)

Other Non-Operating Income (Expense)

Interest Income

Interest Expense

Other Income, Net

Other Non-Operating Income (Expense) of

Consolidated Investment Vehicles

Total Other Non-Operating

Income (Expense)

Net Income (Loss) Before Income

Tax Provision

Income Tax Provision

Net Income (Loss)

Less: Net Income (Loss) Attributable to

Non-Controlling Interests

Reconciliation of GAAP Basis Net Income (Loss) Attributable to Legg Mason, Inc. to Adjusted Net Income

Reconciliation of GAAP Basis Net Income

Per Diluted Share Attribuatble to Legg Mason,

Inc. Shareholders to Adjusted Earnings Per

Diluted Share2

Reconciliation of GAAP Basis Operating Margin to Adjusted Operating Margin [(b)/(a)]

						Gains/Losses on
				CIV Eliminations,		Deferred
			D&S Expense and	Compensation and	Amortization of		Restructuring Costs
				Pass-Through	Seed Investments,		Intangible	Strategic and						Other Income		Non-GAAP
GAAP Basis		Performance Fees		Net		Assets		Other	Affiliate Charges		Tax Adjustments			Basis
$	266,609	$	-	$	-	$	-	$	-	$	-		$	-	$	266,609
	378,995			61		-		-		-		-				-			379,056
	39,407			(10,733)		-		-		-		-				-			28,674
	67,634			(104,341)		-		-		-		-				-			(36,707)
	1,269			-		-		-		-		-				-			1,269
	753,914			(115,013)		-		-		-		-				-			638,901
	375,033			(10,733)		(12,022)		-		(10,192)		(237)				-			341,849
	104,363			(104,363)		-		-		-		-				-			-
	57,101			-		-		-		(837)		-				-			56,264
	32,490			-		-		-		(5,930)		-				-			26,560
	6,004			-		-		(6,004)		-		-				-			-
	-			-		-		-		-		-				-			-
	-			-		-		-		-		-				-			-
	48,929			(89)		-		-		(3,961)		-				-			44,879
	623,920			(115,185)		(12,022)		(6,004)		(20,920)		(237)				-			469,552
	129,994			172		12,022		6,004		20,920		237				-			169,349
	2,882			-		-		-		-		-				-			2,882
	(27,032)			-		-		-		-		-				-			(27,032)
	18,009			(1,160)		(16,849)		-		-		-				-			-
	814			(814)		-		-		-		-				-			-
	(5,327)			(1,974)		(16,849)		-		-		-				-			(24,150)
	124,667			(1,802)		(4,827)		6,004		20,920		237				-			145,199
	33,664			-		(1,307)		1,624		5,649		64				(2,100)			37,594
	91,003			(1,802)		(3,520)		4,380		15,271		173				2,100			107,605
	16,228			(1,802)		-		-		-		-				-			14,426
$	74,775			-	$	(3,520)	$	4,380	$	15,271	$	173		$	2,100	$	93,179
$	0.83	$	-	$	(0.04)	$	0.05	$	0.17	$	-		$	0.02	$	1.03
	17.2%																		26.5%

Page 25	1.	See explanations for Use of Supplemental Non-GAAP Financial Information in earnings release
2.	Diluted weighted average common shares outstanding were 87,165,000 which excluded participating shares of 2,935,000

Appendix - Reconciliation of GAAP Basis Operating Results to Non-GAAP Operating Results for the Quarter Ended September 30, 2019

(Amounts in thousands, except per share amounts)

						Gains/Losses on
				CIV Eliminations,		Deferred
				D&S Expense and	Compensation and	Amortization of		Restructuring Costs
					Pass-Through	Seed Investments,		Intangible	Strategic and						Other Income		Non-GAAP
	GAAP Basis		Performance Fees		Net		Assets		Other	Affiliate Charges		Tax Adjustments			Basis
Operating Revenues:
Investment Advisory Fees:
Separate Accounts	$	264,438	$	-	$	-	$	-	$	-	$	-		$	-	$	264,438
Funds		375,765			156		-		-		-		-				-	$	375,921
Performance Fees		34,869			(21,914)		-		-		-		-				-	$	12,955
Distribution and Service Fees		67,064			(104,199)		-		-		-		-				-	$	(37,135)
Other		1,128			-		-		-		-		-				-	$	1,128
Reconciliation of GAAP Basis Total Operating
Revenues to Adjusted Operating Revenues (a)		743,264			(125,957)		-		-		-		-				-			617,307
Operating Expenses:
Compensation and Benefits		377,727			(21,914)		(2,910)		-		(14,422)		(237)				-	$	338,244
Distribution and Servicing		105,099			(105,099)		-		-		-		-				-	$	-
Communications and Technology		53,953			-		-		-		(448)		-				-	$	53,505
Occupancy		26,809			-		-		-		-		-				-	$	26,809
Amortization of Intangible Assets		5,442			-		-		(5,442)		-		-				-	$	-
Contingent Consideration Adjustments		-			-		-		-		-		-				-	$	-
Other		49,257			(242)		-		-		(4,796)		-				-	$	44,219
Total Operating Expenses		618,287			(127,255)		(2,910)		(5,442)		(19,666)		(237)				-			462,777
Reconciliation of GAAP Basis Operating
Income to Adjusted Operating Income (b)		124,977			(1,298)		(2,910)		(5,442)		(19,666)		(237)				-			154,530
Other Non-Operating Income (Expense)
Interest Income		2,652			-		-		-		-		-				-	$	2,652
Interest Expense		(27,331)			-		-		-		-		-				-	$	(27,331)
Other Income, Net		458			2,503		(2,961)		-		-		-				-	$	-
Other Non-Operating Income (Expense) of
Consolidated Investment Vehicles		4,529			(4,529)		-		-		-		-				-	$	-
Total Other Non-Operating
Income (Expense)		(19,692)			(2,026)		(2,961)		-		-		-				-	$	(24,679)
Net Income (Loss) Before Income
Tax Provision		105,285			(728)		(51)		5,442		19,666		237				-	$	129,851
Income Tax Provision		28,754			-		(14)		1,497		5,406		65				(220)			35,488
Net Income (Loss)		76,531			(728)		(37)		3,945		14,260		172				220			94,363
Less: Net Income (Loss) Attributable to
Non-Controlling Interests		9,448			(728)		-		-		-		-				-			8,720
Reconciliation of GAAP Basis Net Income
(Loss) Attributable to Legg Mason, Inc. to
Adjusted Net Income	$	67,083	$	-	$	(37)	$	3,945	$	14,260	$	172		$	220	$	85,643
Reconciliation of GAAP Basis Net Income
Per Diluted Share Attribuatble to Legg Mason,
Inc. Shareholders to Adjusted Earnings Per
Diluted Share2	$	0.74	$	-	$	-	$	0.05	$	0.16	$	-		$	-	$	0.95
Reconciliation of GAAP Basis Operating Margin
to Adjusted Operating Margin [(b)/(a)]		16.8%																		25.0%

Page 26	1.	See explanations for Use of Supplemental Non-GAAP Financial Information in earnings release
2.	Diluted weighted average common shares outstanding were 87,127,000 which excluded participating shares of 3,104,000

Appendix - Reconciliation of GAAP Basis Operating Results to Non-GAAP Operating Results for the Quarter Ended December 31, 2018

(Amounts in thousands, except per share amounts)

						Gains/Losses on
				CIV Eliminations,		Deferred
			D&S Expense and	Compensation and	Amortization of	Impairment of		Restructuring Costs
				Pass-Through	Seed Investments,		Intangible		Intangible	Strategic and				Other Income	Non-GAAP
	GAAP Basis	Performance Fees		Net		Assets		Assets		Other	Affiliate Charges	Tax Adjustments		Basis
Investment Advisory Fees:
Separate Accounts	$	256,657	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	256,657
Funds		361,173		141		-		-		-		-		-		-		361,314
Performance Fees		12,619		(7,436)		-		-		-		-		-		-		5,183
Distribution and Service Fees		72,185		(108,757)		-		-		-		-		-		-		(36,572)
Other		1,688		-		-		-		-		-		-		-		1,688
Reconciliation of GAAP Basis Total Operating
Revenues to Adjusted Operating Revenues (a)		704,322		(116,052)		-		-		-		-		-		-		588,270
Operating Expenses:
Compensation and Benefits		316,876		(7,436)		10,826		-		-		-		-		-		320,266
Distribution and Servicing		108,842		(108,842)		-		-		-		-		-		-		-
Communications and Technology		56,664		-		-		-		-		(72)		-		-		56,592
Occupancy		24,077		-		-		-		-		-		-		-		24,077
Amortization of Intangible Assets		6,089		-		-		(6,089)		-		-		-		-		-
Impairment of Intangible Assets		365,200		-		-		-		(365,200)		-		-		-		-
Contingent Consideration Adjustments		-		-		-		-		-		-		-		-		-
Other		63,001		(117)		-		-		-		(5,809)		-		-		57,075
Total Operating Expenses		940,749		(116,395)		10,826		(6,089)		(365,200)		(5,881)		-		-		458,010
Reconciliation of GAAP Basis Operating
Income to Adjusted Operating Income (b)		(236,427)		343		(10,826)		6,089		365,200		5,881		-		-		130,260
Other Non-Operating Income (Expense)
Interest Income		3,126		-		-		-		-		-		-		-		3,126
Interest Expense		(28,770)		-		-		-		-		-		-		-		(28,770)
Other Income, Net		(7,042)		530		6,512		-		-		-		-		-		-
Other Non-Operating Income (Expense) of
Consolidated Investment Vehicles		2,369		(2,369)		-		-		-		-		-		-		-
Total Other Non-Operating
Income (Expense)		(30,317)		(1,839)		6,512		-		-		-		-		-		(25,644)
Net Income (Loss) Before Income
Tax Provision		(266,744)		(1,496)		(4,314)		6,089		365,200		5,881		-		-		104,616
Income Tax Provision		(60,354)		-		(1,121)		1,583		92,577		1,529		-		(14,856)		19,358
Net Income (Loss)		(206,390)		(1,496)		(3,193)		4,506		272,623		4,352		-		14,856		85,258
Less: Net Income (Loss) Attributable to
Non-Controlling Interests		10,498		(1,496)		-		-		-		-		-		-		9,002
Reconciliation of GAAP Basis Net Income
(Loss) Attributable to Legg Mason, Inc. to
Adjusted Net Income	$	(216,888)		-	$	(3,193)	$	4,506	$	272,623	$	4,352	$	-	$	14,856	$	76,256
Reconciliation of GAAP Basis Net Income
Per Diluted Share Attribuatble to Legg Mason,
Inc. Shareholders to Adjusted Earnings Per
Diluted Share2	$	(2.55)	$	-	$	(0.04)	$	0.05	$	3.17	$	0.05	$	-	$	0.18	$	0.86
Reconciliation of GAAP Basis Operating Margin
to Adjusted Operating Margin [(b)/(a)]		-33.6%																22.1%

Page 27	1.	See explanations for Use of Supplemental Non-GAAP Financial Information in earnings release
2.	Diluted weighted average common shares outstanding were 85,537,000 which excluded participating shares of 3,156,000

Appendix - GAAP Reconciliation

Adjusted EBITDA1

			Quarters Ended
		December		September		December
		2018		2019		2019
($ millions)
Cash provided by (used in) operating activities, GAAP basis	$	256.6	$	229.3	$	335.4
Plus (less):
Interest expense, net of accretion and amortization
of debt discounts and premiums		28.3		26.9		26.7
Current tax expense (benefit)		(1.2)		6.9		6.1
Net change in assets and liabilities		(170.4)		(111.2)		(153.9)
Net change in assest and liabilities
of consolidated investment vehicles		60.1		8.1		(45.6)
Net income attributable to noncontrolling interests		(10.5)		(9.4)		(16.2)
Net gains (losses) and earnings on investments		21.4		2.3		0.7
Net gains (losses) on consolidated investment vehicles		2.4		4.5		0.8
Other		(0.1)		(0.1)		(0.2)
Adjusted EBITDA	$	186.6	$	157.3	$	153.8

Page 28	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.

Effective July 1, 2019, comparative benchmarks for certain strategies were added to measure relative performance where a stated benchmark was not previously provided. For comparative purposes, where applicable prior periods have been updated to reflect the relative returns using these comparative benchmarks.

Approximately 87% of total AUM is included in strategy AUM as of December 31, 2019, 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 29