This summary is based on the first quarter fiscal 2008 earnings call conducted by Legg Mason Inc. (LM: chart) on July 24, 2007.

Chairman and CEO: Chip Mason
SVP, Finance: Barry Bilson
Corporate Communications: Mary Athridge

Key Investors Issues

- EPS were $1.32 per share compared to $1.08 per share last year.
- Net income rose to $191 million compared to $156 million a year earlier.
- Operating revenue rose to $1.21 billion from $1.04 billion a year ago.

Second Quarter Highlights

Revenues increased 16% from the same period last year and 6% from the sequential March 2007 quarter.

This reflected a higher level of average assets under management in all asset classes and a substantial increase in performance fees earned by the Permal Group, the company''s funds-of-hedge funds manager.

- Recurring investment advisory fees increased 15% from the same period last year and 4% sequentially with the strongest percentage increase experienced at the Permal Group.
- Net income increased 22% from the same period last year and 11% sequentially, reflecting increased assets under management and a higher level of performance fees.
- Cash income was $238.9 million, or $1.65 per share, compared to $203.8 million, or $1.41 per share, a year ago, and $222.4 million, or $1.54 per share, during the fourth quarter of fiscal 2007.
- Total assets under management increased to a record $992 billion, up 16% from June 30, 2006 and up 2% from $969 billion at March 31, 2007.
- All three business divisions - Managed Investments, Institutional and Wealth Management - had higher assets under management and revenues.

The Permal Group continues to post strong risk-adjusted performance and exceptional growth, with strong flows in key global markets, in particular Europe and the Middle East.

- Western Asset Management increased assets by $7 billion despite a challenging fixed income market.
- Brandywine Global Investment Management has experienced consistent flows in both equity and fixed income products.
- Royce & Associates, primarily known for its small cap management, and Batterymarch Financial Management had strong growth and performance.

Offsetting these positive trends was an increased amount of equity outflows.

Relative underperformance in some of largest equity products continues to have a negative impact, a situation that is of concern, and one that the company monitors closely in conjunction with managers. While the company believes progress is being made, further improvement in performance will be critical to reverse this trend.

The company continues to believe that multi-manager business model, diversity and scale will serve as strong competitive advantages going forward. First, model allows each investment manager to focus their attention and resources on their investment process and client relationships. Second, the company has a diverse client base and investment capabilities. Highly regarded managers provide strong participation in almost every key asset class, and, with relatively little overlap in investment styles, the company has diversification and balance in business. The company has broad distribution capabilities in the Americas and throughout Europe and Asia that provide the scale to grow revenues cost-effectively with existing resources

Total assets under management increased to $992.4 billion as of June 30, 2007, up 2% from $968.5 billion as of March 31, 2007 and an increase of 16% from June 30, 2006.

- Equity assets under management benefited from generally favorable market conditions and strong results in small cap and emerging markets equities.
- Net client cash flows were $2 billion and were comprised of positive net client cash flows in fixed income of $8 billion and liquidity of $1 billion, which were largely offset by negative client cash flows in equity of $7 billion.
- Average assets under management were $984.9 billion, compared to $958.9 billion in the fourth quarter of fiscal 2007 and $862.2 billion in the first quarter of fiscal 2007.
- All three business divisions experienced increased assets under management. Assets managed for non-U.S. domiciled clients are 34% of total assets under management as of June 30, 2007.

- At June 30, 2007, Legg Mason''s cash position was $1.2 billion.
- Long-term debt was $1.1 billion.
- Stockholders'' equity was $6.8 billion.
- The ratio of total debt to equity was 16%.

Revenues increased 6% from the sequential March 31, 2007 quarter, reflecting a higher level of average assets under management and a 45% increase in performance fees.

- The increase in performance fees was driven primarily by the Permal Group and also by Legg Mason International Equities.
- Other non-operating income increased $9.8 million, primarily due to a gain on the sale of the company''s interest in a joint venture and market gains on assets held in deferred compensation plans and firm investments.
- Operating expenses rose 5% sequentially, primarily reflecting:

- A $41 million increase in compensation and benefits expenses primarily at the company''s investment managers related to incentive accruals on increased revenues, including performance fees.
- Distribution expenses paid to third parties as a result of increased distribution revenues that are passed through as a direct cost of selling products.
- Increased occupancy expense as continued office relocations have resulted in short-term duplicative occupancy costs.
- Increased advertising and marketing expenses as a result of the rebranding of domestic retail distribution business.
- The pre-tax profit margin increased to 25.3% from 24%. The pre-tax profit margin, as adjusted for distribution and servicing expense, was 34.5%, up from 33.3%.