Liquidity Support:

- The firm took actions to reduce the ABCP, which was held by three, which is the asset backed commercial paper held by three liquidity funds.
- It enhanced the funds liquidity and supported two funds that were rated, and funds in shareholders incurred no loss.
- The cost of support, was $23 million, or 16 cents per share and management will continue to review exposure and will support the funds as appropriate.
- The firm recently announced that it was raising capital, raising $1.250 billion with the sale of 2.5% convertible senior notes, purchased by KKR.
- Part of the proceeds will be used to retire some preferred stock, which were purchased from Citigroup, which was a convertible preferred that converts into 2.5 million shares.

Strategic Insights:

- Management looks forward to having a team of existing and new leaders to confront these challenges and opportunities.
- The firm will be focusing on investing, that is the starting engine of the business and performance is critical as working with affiliates such as risk management will be an important part of delivering those investment results.
- Another theme will be servicing, i.e.delivering the superb service to clients, and working closely with affiliates and also directly where appropriate, such as in the mutual fund business with shareholders.
- The third theme will be marketing, as the firm must do a better job of marketing its capabilities globally, both in the U.S. and on international market.
-The fourth theme is global; as it must pick up the pace of the global expansion, particularly in international markets.

November 9th, the firm filed a Q that acknowledged that it has a $167 billion in liquidity assets and exposure to these SIV holdings of about 6%.

- At year end, the firm updated a reduction in this exposure by using various approaches including a total return swap, taking some securities back that had near term maturity, and buying actually in a small fund, there some securities as well.
- Total liquidity assets have increased to a $168 billion, and the SIV exposure has reduced down to 2.6%, 0.6% are bank sponsored SIVs, virtually all of whom have taken them on to their balance sheets.
- The firm will continue to reduce the exposure through maturities which are occurring and through any other appropriate action that would be to the benefit of the funds, clients, as well as the shareholder.

Business Developments:

- Despite challenging market conditions, the Company’s investment managers continued to expand their business into new markets, to launch new products, to build new distribution relationships and to achieve industry recognition.
- In a significant new initiative, Legg Mason Global Funds are launching in China, through a distribution partnership with Citibank China, as part of the global growth strategy.
- The fund family includes products from Legg Mason Capital Management, Western Asset, Brandywine Global Investment, Royce, and Batterymarch.
- ClearBridge launched a 130/30 value strategy and two concentrated portfolios focused on absolute returns.

Permal launched the Permal Investment Partners (US) and Silk Road funds.

- Western Asset launched two opportunistic products: Levered Loan LLC and the Strategic USD High Yield Portfolio LLC; two strategic products: Investment Grade Long Duration LLC and Non-US Floating Rate High Income Fund LLC; and the SMASh Series Municipal Extended Credit (MEC).
- Legg Mason International Distribution continues to sign new agreements with key partners globally for cross border funds including Hartford, Mass Mutual, ING Morgan Stanley, HSBC and Grand Cathay.
- Legg Mason Capital Management funds will now be offered in fee-based accounts through Merrill Lynch.

Key questions and answers from the third quarter earnings call conducted by Legg Mason Inc. on January 30, 2008.

Craig Siegenthaler (Credit Suisse): What is the notional value of the SIV and the Canadian Asset Backed Commercial Paper and the balance sheet?

Charles J. Daley Jr.: We get marks on these securities everyday. They are market-to-mark that we either derive through by the third party pricing or what were derived by Western using their bottoms up approach. There has been no material change in support in which we provided the same as it was at year end.

Craig Siegenthaler (Credit Suisse): On securities within the total return swap, do you have a planned maturity?

Charles J. Daley Jr.: The total return swap about $450 million of that is scheduled to be repaid before the end of the quarter. So assuming that those maturities occur, the total return swap by the end of March will be reduced to about $440 million.

William Katz (Buckingham Research): What should we expect from the new CEO at this point in time?

Mark R. Fetting: Two key priorities is one, work through these current market conditions which all in the industry are working through, and our shareholders and clients benefit from our scale, our experience in working through them over multiple cycles with clients in as a firm.

Within that also is of course the near term challenges that we are working through, and making progress on whether it\''s the exposure in the money funds or the equity performance issues.

We will continue to manage our earnings with emphasis on efficiency and effectiveness. We have been working pretty hard at restructuring the product line, restructuring the sales team and we think it be helpful just to have some added hands there in leading us through with a team that\''s done a terrific job and enjoying that.

William Katz (Buckingham Research): What are you seeing in terms of asset allocation?