This summary is based on the third quarter fiscal 2008 earnings call conducted by Legg Mason Inc. (LM: chart) on January 30, 2008.

Management:

- Chairman and Outgoing President and CEO: Raymond A. Mason
- Incoming President and CEO: Mark R. Fetting
- Sr. VP: F. Barry Bilson
- CFO, Sr. VP and Treasurer: Charles J. Daley Jr.
- Sr. VP, Head of Corporate Marketing and Communications: Timothy F. Munoz

Key Investors Issues

- Net income dropped to $154.6 million or $1.07 a share from $174.6 million or $1.21 a share in the prior year.
- Revenues increased 5% from $1.13 billion in the prior year to $1.19 billion.
- Assets under management were $998.5 billion, a decrease of about 1%.

Year to Date Highlights:

- Revenues were $3.6 billion, up 11% from the comparable period in fiscal 2007.
- Net income was $523.1 million, or $3.62 per diluted share, a 10% increase from the prior period.
- Performance fees increased by 24%, to $129.5 million.

Third Quarter Highlights

Revenues increased 5% from $1.13 billion in the prior year to $1.19 billion, reflecting an increase of 10% in average AUM, principally in fixed income and liquidity assets.

- Performance fees declined 19%, to $50.8 million, reflecting lower levels earned at several of the investment managers.
- Operating expenses declined 3% from the prior year quarter and absent the ABCP related compensation adjustment, operating expenses would have increased 3%, largely due to higher distribution and servicing costs related to increased AUM, and higher compensation costs related to increased revenues.
- Non-operating expense increased $109.4 million, driven by $91 million of unrealized losses and other costs related to the support of the liquidity funds.

Net income dropped to $154.6 million or $1.07 a share from $174.6 million or $1.21 a share in the prior year after adjusting for the liquidity charge of $23 million or 16 cents a share.

- Assets under management were $998.5 billion, a decrease of about 1%, $13 billion from the prior period, which was $1.012 trillion, with $4 billion of that was market depreciation, and $9.1 billion was outflows.
- Fixed income had inflows of $2 billion, liquidity was basically unchanged of $500 million, but the equity outflows were $10.6 billion and these continue to be affected by relative underperformance in several of the key products.
- The equity outflows continue to be an area of focus and there are several products and managers that continue to perform well.

There were net client cash outflows of $9.1 billion and market depreciation of $4.0 billion.

- Average AUM was $1.014 trillion, compared to $925.0 billion the prior year, as equity products represented 32% of AUM, fixed income represented 52% and liquidity represented 16%.
- By business division, 53% of total AUM was in Institutional, 40% in Managed Investments and 7% in Wealth Management.
- The Institutional division’s assets grew during the quarter, primarily at Western Asset and Brandywine Global Investment.
- Managed Investment assets declined moderately in the quarter primarily as a result of market depreciation and outflows in key equity products at ClearBridge Advisors and Legg Mason Capital Management.
- Wealth Management assets declined slightly, with continued outflows at Private Capital Management partially offset by positive flows at Permal.

Market Overview:

- The global credit prices continued throughout the quarter as volatility of the equity markets, remained constant and continued throughout the quarter.
- The U.S. dollar declined to record levels during the quarter, $1.50 of euro versus the dollar, which was the lowest level since the year was introduced in 1999.
- Oil hit a $100 a barrel which was a record and commodities in general were at record highs during the quarter.

Royce has over 99% of its fund assets beating the Lipper category average for the trailing one, three and ten-year time periods.

- The emerging markets trust, which is run by battery March, is top decile versus the Lipper category for one, three and five-year time periods.
- Fixed income had difficulty in the quarter as they have in most of this year. Global credit issues continue to have an impact, although their long-term track record remains very strong.

The underperformance that unfolded from that was negative 350 basis points.

- Partners managed muni funds, which is a large segment in the municipal bond business and the largest muni fund is $3.1 billion, and the two key managers were finalists in the fixed income through the year versus the Lipper category.
- They were trailing one year as the second, as in 2%, second percentile to third percentile for trailing three and then trail in 10% of the trailing prize.
- The international side of the appetite for international investments remain high, as assets under management domiciled outside of the United States, continues to grow and be focused.