The Power of Choice
Diversified by design

Key Highlights

Founded in


in Baltimore,








Assets under management
as of March 31st, 2017

AUM by asset class

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Operational revenues
for fiscal year 2017

Revenue by asset class

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AUM by client domicile

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Financial Highlights (Dollars in thousands, except per-share amounts)

  Years Ended March 31,
  2017 2016 2015 2014 2013
Operating results
Operating revenues $ 2,886,902 2,660,844 2,819,106 2,741,757 2,612,650
Operating income (loss) 422,243 50,831 498,219 430,893 (434,499)
Income (loss) before income tax provisions (benefit) 370,878 (25,218) 367,993 419,641 (510,607)
Net income (loss), attributable to Legg Mason, Inc. 227,256 (25,032) 237,080 284,784 (353,327)
Per share
Net income (loss) attributable to Legg Mason, Inc. shareholders, diluted $ 2.18 (0.25) 2.04 2.33 (2.65)
Dividends declared 0.88 0.80 0.64 0.52 0.44
Book value 41.61 39.37 40.23 40.32 38.44
Financial condition
Total assets $ 8,290,415 7,520,446 7,064,834 7,103,203 7,264,582
Total stockholders' equity attributable to Legg Mason, Inc. 3,983,374 4,213,563 4,484,901 4,724,724 4,818,351
Adjusted EBITDA1 560,240 561,432 658,262 581,462 499,479
1Adjusted EBITDA represents a liquidity measure that is based on a methodology other than generally accepted accounting principles (”non-GAAP”). For more information regarding this non-GAAP measure, see Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report.

Total Return Performance (Dollars)

    Years Ended March 31,
    2012 2013 2014 2015 2016 2017
Legg Mason, Inc. $ 100.00 117.04 180.99 206.30 132.20 141.29
SNL Asset Manager Index 100.00 113.96 138.87 156.55 159.34 186.71
S&P 500 100.00 128.44 161.67 176.28 145.95 162.86

The graph above compares the cumulative total stockholder return on Legg Mason's common stock for the last five fiscal years to the cumulative total return of the S&P 500 Stock Index and the SNL Asset Manager Index over the same period (assuming the investment of $100 in each on March 31, 2012). The SNL Asset Manager Index consists of 41 asset management firms. Source: © 2017 SNL Financial LLC, Charlottesville, VA (

Letter from the CEO

Dear Clients
and Fellow

Joseph A. Sullivan,
Chairman & Chief Executive Officer

I am pleased to report a strong year of progress in executing our strategy of expanding choice for investors, which we continue to pursue and achieve — diversifying options for clients across investment strategies, with different products and vehicles and through additional and innovative access portals, all while continuing to return a significant amount of capital to our shareholders.

This year we were pleased to add new capabilities in private equity real estate through our addition of Clarion Partners and in alternatives through our addition of EnTrust Capital, which we combined with an existing affiliate to form EnTrustPermal. We invested in new product technology through a minority investment in Precidian Investments, a leader in vehicle innovation, particularly with ETFs. Finally, we expanded our alternative distribution capabilities through our acquisition of Financial Guard.

We believe that our strategy of expanding client choice, effected through increasing diversification, has become even more important during this time of serious challenges for our clients and meaningful disruption within our industry.

The disconnect between what investors need financially to preserve their future and what the markets and benchmark strategies are projected to return over the next several years is growing. The impact and ramifications of this disconnect are wide-ranging and are not to be minimized. However, it is this very disconnect that underscores the fundamental need for strong, effective, active asset management, a need that we believe is greater than ever. And the good news is that there are solutions for the increasing and evolving needs of our clients.

Further, at this critical time of need for WHAT we do, our industry faces an existential challenge around HOW we do it: the industry is being fundamentally disrupted in multiple ways that will permanently reshape the asset management landscape. This creates an opportunity for those asset managers that respond to changing industry dynamics and reposition themselves for a very different future.

This disruption that we are experiencing is not altogether different from that which has affected other industries and, for those managers willing to evolve and change, learning from others can actually serve to create a differentiating growth opportunity. We believe that Legg Mason is just such a firm.


Investor preferences and expectations are evolving at a rapid pace, influenced by their experiences in other consumer segments. In particular, investors increasingly expect to be engaged in more aspects of their investment experience. So, at a time when investors need WHAT we do more than ever, they also expect us to respond to HOW they want to be served.

For a business that has long focused heavily on relative benchmarks to measure performance, our clients are now benchmarking the entirety of their investment experience with us against their other consumer experiences ... at a time when they have more and more diverse options, should they be less than satisfied with their traditional ones.

It is precisely these increasing preferences for varied and easy access, deeper levels of engagement and higher levels of satisfaction that support our strategy for becoming the firm of choice by expanding client choice through diversification.

Investors, retail and institutional, all over the world, in both developed and emerging economies, need thoughtful solutions from the asset management industry to address their increasingly complex client needs that are as diverse as they are personal to the end client.

At the same time, world economies are in need of investment capital — whether to fund water projects in emerging markets, rebuild infrastructure in developed markets, or fuel growth across all sectors of the global economy. Asset managers are an essential connector in facilitating capital flows between those with excess capital to invest and those who need capital to grow: the industry's raison d'être has never been more clear ... or challenged.

A need for diversification and the necessity of active management

Evolving demographics, relatively slow global growth and persistently low inflation are contributing to the increasing disparity or disconnect between the return needs of investors and the expected beta returns of the global markets.

"Market" returns are simply unlikely to generate the income or the growth required by individuals and institutions to meet their future needs, and therefore a combination of diversification beyond traditional asset classes and geographies with the alpha-generating potential of active asset management is needed to help close that gap.

Investors need to access global markets and expand beyond traditional investment strategies to diversify their portfolios, mitigate volatility and generate alpha. Asset managers with scaled, broad capabilities in traditional markets and specialized expertise beyond mainstream asset classes can provide such needed diversification. We are pleased that Legg Mason is better positioned than ever to deliver that diversification, for greater client choice, across asset classes globally, through multiple products and vehicles, and all accessible in multiple ways.

At the same time, the industry faces meaningful disruption coming from a number of fronts, including competitors offering very low-cost, market capitalization-oriented passive strategies that appear, for the moment, to be an attractive option. This is understandable, as many active managers have failed to deliver meaningful returns to justify their higher fees — but it provides opportunity for those managers who deliver investment results.

The regulatory environment continues to expand, rewriting the rules of what is expected and how managers are to engage with clients.

These changes are designed to protect investors further from potential conflicts of interest by increasing transparency and disclosure. Ensuring investor confidence is critical. However, these regulations compel asset managers to revise or modify many of their operating processes and procedures.

And finally, technology will continue to be an enormous driver of change across all aspects of the industry, including the investment process itself, how the industry distributes its strategies and through operational efficiency.

While all of this is challenging in the near term, we believe the industry will improve as a result and ultimately investors should benefit through better pricing and enhanced service.

Perhaps the most disruptive of forces faced by the industry is the degree to which individual investors increasingly are becoming more involved in their investment decisions, driving managers to respond to their shifting preferences. Investors expect a complete, tailored financial plan that is informed by their needs, anticipates and plans for unforeseen circumstances, is intuitive, easily accessible and cost-effective. Investors today expect to dictate what they want, how and when they want it ... and what they're willing to pay for it.

And these investors have options.

Expanding client choice

In response to this evolving investor dynamic, we have been intentional in repositioning Legg Mason over the past few years to provide expanded client choice. We believe that we can now provide investors with deeper insight and greater options for how to use single investment strategies or combine them to achieve the solutions and outcomes they desire. Specifically, through a number of transactions over the past four years, we have expanded choice for our clients across investment strategies, product and vehicle capabilities and enhanced client access.

Our previous acquisitions of QS Investors, Martin Currie and RARE Infrastructure provided investment expertise in customized client solutions, non-U.S. equity and listed infrastructure strategies. With QS Investors in particular, Legg Mason now provides multi-asset class models and solutions to help investors optimize their portfolios, consistent with their investment objectives and risk tolerance. In Martin Currie, we offer investors differentiated exposure to the global and emerging markets in higher alpha-potential strategies. And in Sydney-based RARE Infrastructure, we acquired a listed infrastructure investment capability at a time in which global infrastructure financing needs and capital seeking an attractive return are both rising.

This year, we extended our alternative expertise with the combined EnTrustPermal so that now, in addition to our comingled funds-of-funds capability, we can provide investors with the meaningful return potential associated with co-investment and direct lending strategies.

The acquisition of Clarion Partners brings world-class investment expertise in private equity commercial real estate, an asset class that continues to experience a robust growth in global demand.

In addition to expanding client choice across asset class strategies, we have made important investments and acquisitions to support expanded product, vehicle and client access options. Specifically, we have bolstered our vehicle development capabilities with critical hires of highly experienced professionals and our investment in and partnership with Precidian Investments, a recognized thought and vehicle development leader in ETFs. We are very encouraged with the potential to expand vehicle choice through our ETF development work, much of which we expect to launch this year.

Through our acquisition of Financial Guard this past year, we are beginning to expand digital access options for our clients. We believe that this particular investment, while early-stage, holds great long-term promise for expanding the manner in which our clients may choose to engage with us in years to come.

Responding to evolving client needs and expanding choice for what and how clients want to invest is what has driven our repositioning activity for the past several years and we see Legg Mason as better positioned than ever to become the firm OF choice for investors.

The foundation of all our efforts remains a focus on a consequential corporate mission: Investing to Improve LivesSM... and that mission extends to multiple constituencies, beginning with investors.

Increasingly, clients expect their investments to be doing good while doing well, and without sacrificing quality, performance, convenience or price in the process. To that end, in various ways, our managers incorporate principles of responsible investing (PRI) into their investment process at eight of our nine affiliates.

We are also delivering on our mission to financial stakeholders by continuing to be a leader in the rate of capital returned to shareholders.

We work to improve the lives of employees through increased investment in individual training, development and benefits. Legg Mason was voted a "Best Places to Work in Money Management" for the second consecutive year in Pensions & Investments' annual survey of employee satisfaction, a gratifying endorsement.

And finally, we feel compelled to improve the lives of those in our communities through the Legg Mason Foundation and CSR initiatives around the world.

I look forward to reporting to you on our continued progress next year, and I remain most grateful for your continued confidence and support, as we remain passionate about delivering results for you.

Joe Sullivan

Joseph A. Sullivan,
Chairman & Chief Executive Officer

Investment Affiliates

Global value investing
Brandywine Global

Brandywine Global believes in the power of value investing. Acting with conviction and discipline, the firm looks beyond short-term, conventional thinking to deliver long-term value to clients across a broad range of global fixed income and equity strategies.

In a year characterized by geopolitical surprises and economic challenges, Brandywine Global ended the fiscal year (as of March 31, 2017) with $69.5 billion in AUM. Half of AUM originates from over 50 countries outside of the U.S., and more than 75% is managed in global mandates. Brandywine Global is proud that approximately 90% of client assets outperformed their respective benchmark since inception.

In addition to multiple industry accolades for strong long-term performance, the firm earned a "Best Places to Work in Money Management" award from Pensions & Investments, which recognized its engaging workplace culture and commitment to employees. Brandywine Global furthered its commitment to clients by adding seasoned talent through several key appointments. The Global Fixed Income team hired a veteran portfolio manager and two analysts, positioning the firm for future growth, while the appointment of a new CEO to the firm's Singapore affiliate expanded support for the important and growing Asia-Pacific region. Brandywine Global also became a signatory of the United Nations-supported Principles for Responsible Investment (UNPRI), formalizing its long-standing commitment to sustainable investment.

Real estate investment specialists
Clarion Partners

For over 35 years, Clarion Partners has been a leading real estate investment manager, providing innovative real estate solutions to its global and diverse institutional client base. Clarion invests in the Americas in both equity and debt positions across a broad range of property types with varied risk profiles.

Headquartered in New York, Clarion has 280 employees in nine offices across the U.S., Latin America, and the UK. Distinguished by its research-driven investment approach and strong partnership culture, Clarion invests with the consistent goal of generating superior investment returns and creating value for its clients.

Clarion officially joined the Legg Mason group of affiliates as of April 13, 2016. The firm continued its path of steady growth in fiscal year 2017, as total assets under management grew to exceed $43.1 billion, as of March 31, 2017, and 33 new clients were added.

Active global equity
ClearBridge Investments

ClearBridge Investments is a leading global equity manager that draws on more than 50 years of experience to deliver long-term results through active management across strategies focused on income, high active share and low-volatility objectives.

ClearBridge Investments is committed to delivering long-term results through active management. Its investment solutions are driven by fundamental research that integrates environmental, social and governance (ESG) factors and differentiated, high-conviction stock selection to move its clients forward.

Consistently strong investment performance during the fiscal year enabled ClearBridge to extend its market presence across its platform of high active share, income and low-volatility strategies, highlighted by new client mandates across U.S. and international equities that led to positive net inflows.

During the fiscal year, ClearBridge continued to expand its leadership position in ESG investment, taking an active role promoting ESG integration in global equity strategies. The firm also saw continued strong adoption of its innovative Dynamic MDA Portfolios. In addition, ClearBridge was named one of Pensions & Investments' "Best Places to Work in Money Management" for the fifth year in a row.

Global alternative funds-of-funds

As one of the world’s largest hedge fund investors, EnTrustPermal has the global talent, scale and resources to bring clients meaningful innovation in a dynamic industry. With histories dating back to 1997 and 1973, respectively, EnTrust and Permal combined their deep industry knowledge and expertise in 2016 in an effort to lead the way forward in alternative investing, creating EnTrustPermal.

With 11 offices globally, EnTrustPermal offers investment solutions through customized portfolios, co-investments, direct investments and established funds across alternative strategies including diversified, strategy-focused and opportunistic. At the core of the firm's culture is a strong emphasis on personal service, a high level of communication, extensive due diligence and proprietary risk management.

During the fiscal year, EnTrustPermal won the Thomson Reuters Lipper Fund Award for its Alternative Core Fund for the second year in a row; the award recognizes excellence in providing risk-adjusted returns in its class. EnTrustPermal has continued to offer innovative products in the alternative investment space with the introduction of the Blue Ocean Fund, a direct lending vehicle focusing on distressed debt in the maritime industry. While the firm enjoys continued growth in creating highly bespoke portfolios, the impending launch of EnTrustPermal’s Strategic Opportunities Fund 4 is also suggestive of the firm’s expertise in sourcing differentiated and unique co-investments for institutional and high net worth investors across the globe.

Active equity specialists
Martin Currie

Martin Currie is an international equity specialist firm, crafting high-conviction portfolios to deliver client-focused solutions.

Martin Currie’s product range is designed to meet its clients’ needs. Martin Currie offers three distinctive solutions, defined by the risk framework and the outcomes it provides: Market Aware; Sustainable Income; and Unconstrained.

Integral to its investment process is Martin Currie’s differentiated approach to ESG. The firm believes that by implementing comprehensive ESG analysis, it can identify companies best able to sustain high returns and resist competitive pressures. Stewardship of client capital through active engagement is central to its approach. This is recognized by Martin Currie’s A+ rating from the UNPRI.

The last fiscal year saw AUM increase by over 50% to $18 billion, with $5 billion net flows. Japanese distribution of its Australian Equity products contributed strongly to that success. Martin Currie also saw $200 million in initial seeding for its International Unconstrained Equity product. Its established expertise in Emerging Markets produced strong results for its U.S. 1940 Act fund, and also a $250 million mandate from a large U.S. public plan.

Quantitative equity and multi-asset manager
QS Investors

QS Investors applies a diversified, systematic and adaptive approach to its investment discipline to provide consistent, repeatable and risk-managed returns across multiple market environments.

Now in its third year as a Legg Mason affiliate, QS Investors has continued to forge and strengthen strategic partnerships across the firm and with other Legg Mason affiliates to design next-generation products and solutions that take advantage of the best QS Investors and Legg Mason have to offer. Multi-asset models, a pillar of QS Investors’ institutional capabilities, were launched for broader retail distribution through Legg Mason to enhance solutions-based partnerships across channels. Within the institutional business, QS Investors continues to see growth in the multi-asset business.

QS Investors' equity outcome strategies focused on Defensive Equity Income won several leading industry awards during the fiscal year, recognizing its strong long-term performance. Client demand continues in these strategies, supporting asset growth and further product expansion in the ETF business.

Global listed infrastructure

RARE is a specialist investment manager focused exclusively on global listed infrastructure.

Established in 2006, RARE has grown to one of the largest listed infrastructure managers globally. RARE's experienced team of infrastructure investment specialists invest in companies that own and develop major infrastructure assets such as airports; gas, electricity and water systems; roads; ports; and communication towers in both developed and emerging economies. Excellence in research and managing risk is at the heart of RARE’s investment process.

In fiscal year 2017, RARE pursued opportunities to develop and grow its business across the globe. Together with Legg Mason, RARE launched a Retail 40 Act Fund, an Infrastructure Benchmark and an ETF in the United States. In the United Kingdom, RARE launched a Global Infrastructure Income Fund and merged the RARE UCITS Fund into the Legg Mason Global Funds Plc, facilitating greater distribution in the UK, Europe and Asia.

As of March 31, 2017, RARE employed 50 staff and managed over $5.4 billion. RARE’s head office is located in Sydney, Australia, and the company has been a signatory of the UNPRI since 2009.

Small-cap equity
Royce & Associates

Royce & Associates, investment advisor to The Royce Funds, is a small-cap equity specialist offering strategies with distinctive investment approaches to address specific investment goals. An asset class pioneer, the firm has been managing micro-cap, small-cap and small/mid-cap portfolios for more than 40 years.

In fiscal year 2017, Royce was very pleased that 11 of its 13 domestic small-cap portfolios advanced 16% or more in the fiscal year, while four increased at least 23% (and two bested their benchmark in the process). These performances were largely rooted in our long-standing commitment to disciplined approaches to highly active, small-cap equity investing.

In the last fiscal year, Royce continued to deepen relationships with its existing intermediary partners, and it established a major new relationship with a leading brokerage firm, while also seeing a substantial increase in investment from international investors. In addition, Royce continued to enhance the development and distribution of strategic research and thought leadership around the small-cap asset class.

Royce continues to build on what they view their core investment advantages: an unparalleled domain knowledge and sustained focus on the small-cap asset class, their notably experienced team of portfolio managers with an average tenure of more than 10 years (compared to less than seven for small-cap portfolios tracked by Morningstar), and extensive access to company management teams (more than 2,000 company meetings in the last fiscal year).

Global value investors in fixed income
Western Asset

Western Asset is known for its long-term fundamental value approach, proprietary macro and credit research capabilities, and team-oriented culture.

With 867 employees in nine global offices and $426.9 billion in assets under management as of March 31, 2017, the firm sources investment ideas and delivers client solutions worldwide. Founded in 1971, Western Asset has been an independent affiliate of Legg Mason since 1986.

Western Asset’s strong capabilities and investment performance continue to garner broad recognition. Last year, the firm was honored across a diverse range of investment categories and geographical regions, winning accolades from Hong Kong-based Asian Investor Marquee Awards, Lipper Fund Awards Germany and the Revista Investidor Institucional Benchmark Awards in São Paulo, among others.

Western Asset was named one of the “Best Places to Work in Money Management” by Pensions & Investments in 2016 — a distinction earned four times in the last five years.

Executive Committee

Executive Committee

Left to right: Peter H. Nachtwey, Chief Financial Officer; Ursula A. Schliessler, Chief Administrative Officer; Thomas K. Hoops, Head of Business Development; Joseph A. Sullivan, Chairman & Chief Executive Officer; Thomas C. Merchant, General Counsel; Terence A. Johnson, Head of Global Distribution

Not pictured: Frances L. Cashman, Global Head of Communications & Engagement; John D. Kenney, Global Head of Affiliate Strategic Initiatives; Patricia Lattin, Chief Human Resources Officer

ESG Investing

Time to believe the hype behind ESG investing

With sustainability becoming increasingly important to investors, Legg Mason’s affiliates have integrated environmental, social and governance (ESG) issues into their businesses. Legg Mason has seen a number of affiliates actively engage on issues that impact the businesses in which they invest.

Several recent studies examined the performance aspects of integrating ESG factors and concluded that ESG portfolio performance should be comparable to the performance of conventionally managed portfolios.2

As investors have realized this, sustainably invested assets in the United States have risen considerably. According to the Forum for Sustainable and Responsible Investment (U.S. SIF), by the end of the year in 2015 “more than one out of every five dollars under professional management in the United States — $8.72 trillion or more — was invested according to SRI strategies.” The same study reported that from 2012 through 2014 those ESG assets rose 76% to nearly $6.6 trillion.3 Even after 2014’s dramatic increase, there has been another 33% increase in assets invested in ESG strategies.

Nearly a quarter (22%) of the $40.3 trillion in total AUM tracked by Cerulli Associates — is involved in ESG. Clearly, this isn’t just a trend, but rather, the new normal.

Board of Directors

Board of Directors

Standing (left to right)

W. Allen Reed
Private Investor, Retired Chief Executive Officer, GM Asset Management Corporation;
(Chair of the Finance Committee)

Carol Anthony ("John") Davidson
Private Investor; Retired Controller and Chief Accounting Officer, Tyco International, LTD.

Barry W. Huff
Retired Vice Chairman, Deloitte;
(Chair of the Audit Committee)

John V. Murphy
Retired Chief Executive Officer, Oppenheimer Funds Inc.; (Lead Independent Director, Chair of the Nominating & Corporate Governance Committee)


Joseph A. Sullivan
Chairman & Chief Executive Officer,
Legg Mason, Inc.

Cheryl Gordon Krongard
Private Investor; Retired Chief Executive Officer, Rothschild Asset Management;
(Chair of the Compensation Committee)

Dennis M. Kass
Private Investor; Retired Chief Executive Officer, Jennison Associates

Kurt L. Schmoke
President of the University of Baltimore; Former Mayor, City of Baltimore

Seated (left to right)

Robert E. Angelica
Private Investor; Retired Chairman & Chief Executive Officer, AT&T Investment Management Corporation; (Chair of the Risk Committee)

Margaret Milner Richardson
Private Consultant & Investor; Former U.S. Commissioner of Internal Revenue

Robert Chiu
President, Shanda Group

Not pictured

John H. Myers
Senior Advisor, Angelo, Gordon & Co.; Retired Chief Executive Officer, GE Asset Management

Tianqiao Chen
Vice Chairman, Legg Mason, Inc.; Chairman & Chief Executive Officer, Shanda Group

Additional Resources