Key questions and answers from the second quarter earnings call conducted by Legg Mason Inc. on October 24, 2007.

Tom Gallagher (Credit Suisse): Despite the fact that long credit trade has not worked out in the short term, the credit story is still resonating clients on the sales side?

Chip Mason: Western has done their usual good job of getting in front of their clients, reminding them how they run money and what they have done. All of their long-term portfolios remain intact.

Tom Gallagher (Credit Suisse): Can you comment on the change in the distribution relationship with Citi?

Chip Mason: Smith Barney was anxious to make sure they had some form of an exclusive arrangement with the Value Trust. The parameters of that were widened giving us a broader ability to distribute the product on a much wider base. The retention issue is a Smith Barney issue, not ours. It does open up new areas for us to sell the funds, though.

William Katz (Buckingham Research): What is happening in the liquidity business?

Chip Mason: This is a newer business to us, and we were a tiny player up until the Citi acquisition. We are still on learning curves on this. We are not out broadly on a marketing basis in the business other than through the Citibank channel.

William Katz (Buckingham Research): On the institutional business, what is the pipeline like?

Barry Bilson: The current pipeline is strong, maybe not at an all-time high but well above the average relative to last year.

Robert Lee (KBW): In Smith Barney and Citi, where are you are seeing the real outflows?

Chip Mason: We have troughed the outflows on the mutual funds side. The numbers do appear on the mutual funds side to have settled in a pattern that it feats to grow. In the separate account area, the SMA, those flows have continued and might be up a bit.

In the Smith Barney product, you see a wider outflow on the product that they had because they are purchasing more of the newer products that are coming in. So you are not getting incoming flows.

As the SMA platforms broaden and they have more new people on the platform, the platform that was Smith Barney’s which is now Clearbridge is not getting the preferred flows that they did before.

Robert Lee (KBW): On Permal, what was the size of the contingent payment coming up?

Chip Mason: It is $240 million and is paid between November 1 and November 30.

Cynthia Mayer (Merrill Lynch): Any update on the search for an international equity firm?

Chip Mason: We are underweighted on the international equity side and are going to continue our quest on the equity side. It is part of our long-term plan to be moving in that direction. Brandywine has over $10 billion in international equity product and their bond funds which are now $25 billion to $30 billion are in that direction.

Prashant Bhatia (Citigroup): What are you seeing from the new advisory relationships?

Chip Mason: These are brokers and we do this on a 12-month cycle, i.e. if somebody does not put a ticket in for 12 months they go off the list. But every time a broker drops a ticket in a 12-month cycle they have used our product and we record that as a new advisor.

Prashant Bhatia (Citigroup): Those new tickets are for what type of product?