Expanding Opportunities


Key Highlights

Global asset management firm. Founded in 1899

Global asset management firm

Founded in 1899
Headquartered in Baltimore,

Headquartered in

Performing as a public company for 32 years

Listed as a public company for

32 years
Our global network 31 offices worldwide

Our global network

31 offices
Nearly 3000 employees


703 billion

By asset class

By client domicile

2.8 billion

By asset class

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

  Years Ended March 31,
  2015 2014 2013 2012 2011
Operating Results
$Operating revenues 2,819,106 2,741,757 2,612,650 2,662,574 2,784,317
Operating income (loss) 498,219 430,893 (434,499) 338,753 386,808
Income (loss) from continuing operations before income tax provisions (benefit) 367,993 419,641 (510,607) 303,083 365,197
Net income (loss) attributable to Legg Mason, Inc. 237,080 284,784 (353,327) 220,817 253,923
Adjusted Income1 378,751 417,805 347,169 397,030 439,248
Per share
$Net income (loss), diluted 2.04 2.33 (2.65) 1.54 1.63
Adjusted income, diluted1 3.26 3.41 2.61 2.77 2.83
Dividends declared 0.64 0.52 0.44 0.32 0.20
Book value 40.23 40.32 38.44 40.59 38.41
Financial Condition
$Total assets 7,073,977 7,111,349 7,269,660 8,555,747 8,707,756
Total stockholders' equity 4,484,901 4,724,724 4,818,351 5,677,291 5,770,384
Adjusted income, per diluted share represents a performance measure that is based on a methodology other than generally accepted accounting principles ("non-GAAP"). For more information regarding this non-GAAP financial measure, see Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report.

Total Return PerformanceDollars

    Years Ended March 31,
    2010 2011 2012 2013 2014 2015
$Legg Mason, Inc. 100.00 126.62 99.14 116.04 179.45 204.53
SNL Asset Manager Index 100.00 117.03 114.39 146.39 184.94 201.65
S&P 500 100.00 115.65 125.52 143.05 174.31 196.50

The graph above compares the cumulative total stockholder return on Legg Mason's common stock for the last five fiscal years with 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, 2010). The SNL Asset Manager Index consists of 35 asset management firms.

1 Source: © 2015 SNL Financial LC, Charlottesville, VA (www.snl.com)

Dear clients and fellow Shareholders,


I am pleased to report another year of important financial and strategic progress for our Legg Mason.

My Affiliate and corporate Legg Mason colleagues have successfully delivered a year of growth in revenue, anchored by positive long-term flows.

Most importantly, the investment performance that we have delivered for our clients broadly remains strong, with over 80% of strategy AUM beating benchmarks for the critically important three, five and 10 year time periods.

Building upon this success will take continued hard work and discipline. I know that I speak for all at Legg Mason when I say that we embrace both the responsibility and the challenge associated with the pursuit of continuous improvement.

As we look ahead, we see an industry in the midst of substantial challenge and change and we believe Legg Mason is very well positioned to perform and succeed for all of our critical stakeholders.

What makes us so confident?

In a world rife with conflict, and markets characterized by increasing volatility and uncertainty, investors are demanding more. They expect…and deserve…to know that those they have entrusted with their financial future have their best interests foremost in mind. Opportunities for those firms that can respond to this dynamic landscape are plentiful.

We are fortunate to have the right people, culture and mission and a business model that adapts as our industry is being redefined. Ours is a Company that has been created, over many years, for just this purpose and for just this moment; we accept this important responsibility and we are committed to seizing the opportunity before us.

The people of Legg Mason have long embraced a "client first" culture, while recognizing that we are stewards of our shareholders' capital. These two ideals are not at all in conflict but are, instead, complementary.

And it is our mission, investing to improve lives, which ultimately ties together our people, our culture and our model, in pursuit of delivering exceptional results for our stakeholders.

The confluence of need and opportunity make this an important and exciting time for our Legg Mason.

A year of continuous improvement

For fiscal year 2015, we delivered our second consecutive year of growth in both our operating revenues and adjusted operating margin, even while making significant investments in our Global Distribution Platform, which we believe will increase sales and persistency of Assets Under Management in the long run.

We continue to lead the industry in the rate of return of capital to shareholders, spending over $350 million to repurchase our shares during fiscal year 2015, while increasing our dividend rate by 23%.

We took several strategic actions during the year, consistent with building a better Legg Mason.

First, we added QS Investors, a quantitative multi-asset class solutions provider, which when combined with Batterymarch Financial and Legg Mason Global Asset Allocation, creates a powerful quantitative manager in the rapidly growing "solutions" category.

Next, we added Edinburgh, Scotland-based Martin Currie to provide us with a non-U.S. equity platform, filling a longstanding investment capability need for Legg Mason and our clients.

QS and Martin Currie are terrific firms, with highly talented professionals, who share our core cultural tenets and make us better. We are thrilled that they have joined our family of Affiliates.

We divested our wealth management Affiliate, Legg Mason Investment Counsel, which no longer fit within our strategic vision. We are grateful for the contributions of the team over the years and know that their new ownership is a better platform for promoting their growth.

We also took advantage of historically low interest rates to extend our debt and lock in low long-term rates, a move we believe will look very prescient over the long term. We were extremely pleased that our debt offerings were so well received in the marketplace, reflecting the attractiveness of Legg Mason as a credit to lenders.

Capping it all, we achieved nearly $17 billion in long-term inflows. This was the first year of positive net long-term flows in the past eight and an improvement approaching $50 billion in just two years…a breathtaking performance at a time when flows for active managers were meaningfully challenged.

Our global distribution platform was broadly positive in flows across clients, channels and geographies, highlighting the importance of the diversification we currently enjoy and are working to extend.

Legg Mason's culture of respect: An important differentiator

Legg Mason has long enjoyed a special culture that reflects a deep respect for our many stakeholders.

One core element of that culture we define as "No Chalk."

Evolved over 100 years of serving investors, "No Chalk" is understood and practiced worldwide by all Legg Mason colleagues. It expresses the expectation that we conduct our business well "in-bounds," never so much as nearing the "out of bounds" chalk lines of unethical territory.

This culture has been protected, passionately and without compromise, throughout many challenging market environments and remains a bedrock of the Company today.

It is my job…and that of all Legg Mason employees…to take this "client first" culture, so engrained in the Company's corporate DNA, and extend it in an even more proactive fashion.

This "No Chalk" mindset and our unique business model position us to best serve the evolving financial needs of our clients with new and differentiated solutions in an increasingly interconnected and complex world.

Another of our core cultural elements recognizes that we are stewards of our shareholder's capital.

Over the past two years, we have undertaken productivity training, embracing six-sigma concepts to ensure that Legg Mason operates with a high degree of efficiency and effectiveness. As our CFO, Pete Nachtwey, likes to remind our colleagues: We all must hold dear our shareholders' checkbooks!

Like "No Chalk," this cost-stewardship mentality has embedded itself in our corporate DNA.

These are two of the cultural characteristics that define and guide Legg Mason in pursuit of our mission to improve the lives of our clients through investing.

The Legg Mason Model: A competitive advantage

We are firmly committed to our "best of both worlds" business model to deliver optimal results for both our clients and shareholders. A few other firms embrace the "multi-manager" model…but none execute it as uniquely as Legg Mason.

We are a pure-play asset manager. We honor the investment independence and operating autonomy of our Affiliates, while offering world class retail distribution, product development and certain other shared services on a centralized basis. This yields meaningful advantages of scale.

This model, combining the best of what multi-managers and integrated firms have to offer, affords the benefits of scale without the investment mediocrity that can often accompany it — hence the "best of both worlds." This model increasingly resonates with investors and potential new Affiliates.

A critical component of our multi-Affiliate model is the diversification of our business.

We continue to diversify our business investments across asset classes and over a multitude of client channels and geographies. This purposefully avoids leaving us dependent upon any single investment strategy or market.

It is likely that we may often have one or more Affiliate or asset classes performing well, while others might be challenged. We firmly believe that such a diversified business delivers better results for both clients and shareholders through market cycles.

Critical to the successful execution of our business model is a foundation rooted in mutual accountability. We recognize the symbiotic relationship we enjoy with our Affiliates but it is our mutual commitment to accountability to one another that drives execution and results.

Legg Mason intends to be the firm of choice for investors globally, for current and future Affiliates, and for talented professionals. Exceptional execution of our model will make this intention a reality.

While not perfected…we have significantly improved the execution of our model; to that end, we are seeing significantly heightened interest in Legg Mason by investors, asset managers and professionals.

A clear and enduring mission for Legg Mason is essential

We aspire to be a great global company in the asset management business that, through investing, meaningfully impacts the lives of all the constituencies with whom we interact.

That's a tall order but one with a consequential purpose. Reaching high and declaring bold ambitions are only meaningful if we deliver ...and we eagerly accept that accountability.

We must act proactively and "invest to improve the lives" of our constituents; adding to and strengthening our deep corporate "No Chalk" culture with a mission, a purpose…a "why?"...that drives everything we do, every day.

And this "why?" — combined with an emphasis on execution excellence — is what will distinguish Legg Mason in both the short term and over the long run, making us an enduring global leader in asset management.

We are sober about the challenges we will face, as we execute against this standard: it requires a sensitive balancing of a delicate ecosystem to achieve success.

Multiple constituencies must be satisfied: clients, regulators, shareholders and bondholders, along with our employees and the communities in which we operate. All have a stake in the outcomes we deliver and our success as a firm.

The themes we have chosen for this and our past two Annual Reports have been quite intentional.

Two years ago we declared that we could only succeed if we moved "Forward Together" and we have done just that.

Last year, we recognized that we were "Building Momentum" and we clearly are.

This year, we pursue "Expanding Opportunities." Our goal is to make this happen for our multiple constituencies, starting with clients and ultimately ending with my Legg Mason colleagues.

We intend to deliver.

Expanding opportunities is about enriching the lives of our stakeholders through the exceptional execution of our business, investing in the careers of our employees, engaging in activities that strengthen our communities, and building a strong and lasting Legg Mason for us all.

Expanding opportunities for this ecosystem and investing to improve the lives of all within it is our deepest passion, our driving force and our lasting commitment.

On behalf of all of my colleagues at Legg Mason, I am grateful that you are joining us on this important journey. I thank you for your continued trust and support and please know that we are committed to continue earning both in this coming year and beyond.

Joseph A. Sullivan

Executive Committee

Executive Committee

(Left to right)
Ursula Schliessler, Chief Administrative Officer
Pete Nachtwey, Chief Financial Officer
Tom Hoops, Head of Business Development
Joseph A. Sullivan, Chairman & Chief Executive Officer
Tom Merchant, General Counsel
Terry Johnson, Head of Global Distribution

Environmental, Social and Governance Investing — ESG

Environmental, Social and Governance Investing — ESG

More investors each day are coming to believe that focusing on ESG principles can help deliver what everyone wants: superior, risk-adjusted performance over the long term.

Assets under management in ESG investments are growing steadily, as both the number and type of options increase across asset classes. Some large global consulting firms have even explicitly incorporated ESG into their investment belief statements.

ESG investing has moved far beyond its origins in the late 1800s, when it was primarily a way for religious organizations to avoid owning "sin stocks." The emphasis now is on actively finding companies with quality attributes — environmental and product safety, workforce diversity, employee retention and strong corporate governance — that can positively impact future shareholder value.

ESG choices have grown not only in AUM but in sheer variety. These include everything from index and smart beta funds to quant strategies and different approaches to shareholder engagement. Entire asset allocations can be constructed consistent with ESG principles, including public and private equity, fixed income and alternative assets.

At ClearBridge Investments, all companies considered for investment are given an ESG rating, updated annually. Likewise, at Martin Currie, governance and sustainability considerations are fully integrated into the investment process. This can be collaborative: portfolio managers work with companies that want to improve ESG performance through direct engagement and proxy voting.

ClearBridge Investments, Martin Currie and Permal are all signatories to the Principals for Responsible Investment, reflecting the importance of that commitment.

Investment Affiliates

We are one of the world's largest asset managers. We have a local presence in 31 cities around the globe, serving individual and institutional investors located in 190 countries across six continents. Our global distribution network, combined with our diverse family of specialized investment managers, creates a strong platform to deliver performance.


Assets by strategy (%)

Pursuing value since 1986 across equity and fixed income, globally and in the U.S. Historically institutionally focused, the firm has both a boutique's agility and a leader's stability and resources.

Brandywine Global experienced growth in fiscal 2015 while continuing to focus on culture and reinvestment in the business. Assets under management over the year increased by more than 25% to $66.5 billion, as of March 31, 2015 — the highest level in firm history.

By the close of the fiscal year, the firm experienced its fourteenth consecutive quarter of asset growth, added 37 talented professionals to our team, and earned a "Best Places to Work" award from The Philadelphia Business Journal. To broaden the investor base with which it can partner, Brandywine launched seven new hedge fund, UCITS, or mutual fund vehicles. Brandywine's asset base remains globally diversified with over 42% of AUM originating from over 50 countries outside of the U.S. and more than 75% of AUM being managed in global mandates.


Assets by strategy (%)

Global investment manager with over 50 years of experience and long-tenured portfolio managers who seek to build income, high active share or low volatility portfolios.

ClearBridge Investments is an established global investment manager focusing on active stock selection that is guided by proprietary, bottom-up research. With over 50 years of experience building client portfolios, long-tenured portfolio managers provide strong leadership in a centralized investment structure.

Consistently strong investment performance helped ClearBridge extend its market leadership position across its platform of high active share, income and low volatility strategies. During the fiscal year, ClearBridge's Aggressive Growth Strategy won numerous Lipper country awards and ClearBridge was named one of Pension & Investments' "Best Places to Work in Money Management" for the third year in a row. ClearBridge remains focused on delivering a distinguished client experience and on building new investment strategies intended to help investors achieve their goals.

Martin Currie

Assets by strategy (%)

An active equity specialist that builds global, stock-driven portfolios based on fundamental research, devoting all of its resources to delivering optimum investment outcomes and superior client relationships.

Martin Currie joined Legg Mason in October 2014 as our international active equity specialist. Headquartered in Edinburgh, the firm is driven by investment expertise and focused on managing money for a wide range of global institutional and retail clients. Martin Currie is innovative in its approach and able to take a long-term view. The firm offers high conviction investment strategies that are distinctive and based on detailed in-depth fundamental research.

As part of Legg Mason, Martin Currie accesses new markets and client segments through its global retail distribution network. Martin Currie also successfully integrated Legg Mason's Australian Equities team into its company, creating Martin Currie Australia, with the goal of being one of the leading investors in Australia. Martin Currie Australia, with total AUM of A$4.6 billion (US$3.6 billion) as of March 31, 2015, is attracting clients from both Australia and Japan.


Assets by strategy (%)

A global pioneer in multi-manager, multi-strategy alternative investing. The firm has made investments in new and established hedge fund managers across strategies, asset classes and regions since 1973.

Permal Group is a pioneer in multi-manager, multi-strategy alternative investing. Established in 1973, the firm has offices in nine international financial centers and extensive networks of experienced managers and relationships around the globe. Permal is recognized for hedge fund investments across strategies, asset classes and regions.

The year saw some sizeable institutional wins, including a billion dollar mandate from a U.S. pension fund, along with encouraging growth in the Chinese and Korean markets. There were new products covering the liquidity spectrum, with the launch of a variable insurance trust portfolio for a key distributor, as well as the launch of Permal's latest longer lock-up fund. On the managed account platform (PMAP), which at over $9 billion ranked 3rd overall, and is the largest buyside platform,1 Permal was among the first asset managers to create an ICAV onshore structure for a number of its BVI offshore accounts.

QS Investors

Assets by strategy (%)

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

QS Investors partners with clients to create innovative solutions within a quantitative framework. Taking a consultative approach to global asset management, they apply a diversified, systematic and adaptive approach to managing portfolios with a repeatable, risk-aware process. Strategies include global equities, liquid alternatives, multi-asset and customized solutions.

Fiscal year 2015 was a notable year for QS Investors. The combination of QS Investors' innovative multi-asset and solutions platform with Legg Mason's strong distribution capabilities and diversified multi-affiliate model produced substantial momentum under the leadership of Adam Petryk, Head of Multi-Asset and Solutions. Working with larger institutional clients, the team has just begun to expand the business across Target Date, Lifestyle and other Outcome-Oriented strategies. Meanwhile, equity performance has been strong, demonstrating the benefits of QS Investors' systematic, diversified and adaptive approach to investing. Looking ahead, CIO Rosy Macedo is driving the firm forward with new alternative equity strategies that directly address market volatility and an investor's need for growth.

Royce & Associates

Assets by strategy (%)

Known for its disciplined, value-oriented approach to managing small-caps. An asset class pioneer, the firm's founder is one of the longest-tenured active managers.

For more than 40 years, Royce & Associates, investment advisor to The Royce Funds, has focused on small-cap portfolios. Royce's portfolio managers use disciplined, consistent investment approaches that emphasize close attention to risk. CEO Chuck Royce is one of the pioneers in small-cap value investing and enjoys one of the longest tenures of any active manager.

Royce strengthened its executive leadership team during fiscal year 2015. On January 1 Chris Clark and Francis Gannon, who together have more than 40 years of investment industry experience, became Co-CIOs. In July, Chris Clark became President while Chuck remains Royce Chairman and CEO. In December, Peter Hoglund joined as Principal, Chief Financial Officer, and Chief Administrative Officer. Fund and manager recognitions included: Royce Opportunity Fund added to the Money 50 List, Morningstar listed Royce Micro-Cap Trust among the best-performing closed end equity funds for 2013, and Chuck mentioned in Morningstar's "The Few, the Proud, the 30-Year Veterans With Good Results." Roycefunds.com was ranked #1 in Kasina's annual Top Mutual Fund Websites for Financial Intermediaries report. The marketing team also received MFEA's coveted Overall Communications award.

Western Asset

Assets by strategy (%)

One of the world's leading global fixed income managers. Founded in 1971, the firm is known for team management, proprietary research and a long-term fundamental value approach.

Western Asset Management is one of the world's leading fixed income managers. With a focus on long-term fundamental value investing that employs a top-down and bottom-up approach, the firm has nine offices around the globe and deep experience across the range of fixed income sectors. Founded in 1971, Western Asset's approach emphasizes team management and intensive proprietary research, supported by robust risk management.

Strong investment performance at Western Asset garnered recognition from prestigious industry sources in the fiscal year. Institutional Investor Magazine named Western Asset a repeat winner as U.S. Fixed-Income Core Manager of the Year, and expanded the distinction to the Core Plus strategy for 2014. The Firm was also named Morningstar's 2014 Fixed-Income U.S. Fund Manager of the Year for the Core and Core Plus Funds.† To meet investor need for absolute return and unconstrained fixed income products, Western Asset launched the High-Yield Credit Energy Fund and the Global Total Return strategy, and celebrated the Macro Opportunities strategy reaching $6 billion in AUM. Not only did Western Asset receive recognition for its investment expertise, it was named to Pension & Investments' 2014 "Best Places to Work in Money Management."

Awarded to Ken Leech, Carl Eichstaedt, and Mark Lindbloom for Western Asset Core Bond Fund (WACSX) and Western Asset Core Plus Bond Fund (WAPSX) named Morningstar 2014 U.S. Fixed Income Manager of the Year, United States of America. Morningstar Awards 2015 © Morningstar, Inc.

Product and Distribution

The Legg Mason Global Sales Leadership meeting in March 2015 at the Baltimore headquarters brought together colleagues from Legg Mason and its Affiliates spanning six continents to collaborate, review best practices, and set growth priorities.

As we look to the future, we know one thing — the needs of investors will be more complex and more diverse.

Around the world, retail investors will need to take a more active role in their financial futures to meet their goals. We intend to lead the way, in conjunction with our distribution partners, to help them meet those myriad needs.

Respondents to Legg Mason's Global Investment Survey of individuals with $200,000 or more in investible assets, not including their home, identified reasons both practical and personal for their investment and cited a number of factors that could impact achieving those goals.

One theme is clear — investors face volatile markets and an interconnected and, at times, challenging global economy as they look to build financial security. They need to consider looking across multiple asset classes and beyond the borders of regional geographies in new and different ways to achieve their investment objectives.

Findings like this have significant implications for how we view our portfolio of investment affiliates, how we work with those affiliates on new product initiatives and how we manage our current product offering.

It also informs how we engage with clients, how we use technology and data to better understand their needs, and how we partner with intermediaries to serve them.

Size, a global reach, diversity of investment capabilities and commitment to listening to our clients are essential to success.



When we look at our business opportunity today, we see a bifurcated world. Rather than join the debate about active vs. passive, we recognize that to serve investors well, it's about active AND passive.

Legg Mason identifies three broad opportunity sets in product development

Traditional, classic active

Here, Legg Mason has investment strength across fixed income and equities in markets around the world.

Next generation active

These are flexible, alternative and outcome oriented strategies that are increasingly in demand from investors. In just two years, we have grown the number of products we offer by 27% and are accelerating that effort.

The evolution of the ETF vehicle beyond traditional passive

This year, we added an ETF team who is evaluating opportunities to extend existing active strategies and add new strategies into ETF wrappers.

In fiscal year 2015, Legg Mason's global retail product team launched 23 products and streamlined 69 existing products to create a more relevant, focused product set. Through the acquisitions of Martin Currie and QS Investors, Legg Mason added significant new investment capabilities and additional opportunities yet to be commercialized into new retail products.

Our product development agenda will always be driven by our clients' needs and preferences.


The world's demographics are changing, which creates opportunities for investment managers who both understand their responsibility to the investors they serve and are willing to embrace innovative ways to reach them.

We believe our global distribution organization is a strategic asset that will enable us to do just that.

Today we and our intermediary partners are working together in multiple ways to solve the diverse financial needs of a global investor population. We've realigned our client facing teams to maximize their time in front of clients and expanded our team globally. We've invested in technology and predictive analytics to better understand client needs. Finally, we're partnering with rogenSi for our Global Sales Academy to connect our sales teams around the globe and create the same high quality consultative sales approach in every region in which we operate.

Partnership is the guiding principle of our work with our investment affiliates. Collectively, our seven primary investment Affiliates bring significant capabilities across asset classes and geographies to our clients. We believe that we can best position clients for success when we are working with them to identify investment opportunities early and tailor them across all of the regions we serve.

By expanding opportunities throughout the organization, we're seeing strong momentum everywhere we operate. Legg Mason's Global Distribution Group recorded record gross and net sales of nearly $83 and $19 billion respectively. Furthermore, the growing diversity of our business is evident is six straight quarters of positive net sales by our Distribution Group, both internationally and in the U.S.

Board of Directors

Board of Directors

(Standing left to right)
John H. Myers, Senior Advisor, Gordon & Co.; Former CEO, GE Asset Management
Dennis M. Kass, Private Investor; Retired CEO, Jennison Associates
Joseph A. Sullivan, Chairman & Chief Executive Officer, Legg Mason, Inc.
John V. Murphy, Former CEO, Oppenheimer Funds Inc.; (Lead Independent Director, Chairman of the Nominating & Corporate Governance Committees)
Cheryl Gordon Krongard, Private Investor; Former CEO, Rothschild Asset Management; (Chair of the Compensation Committee)
Barry W. Huff, Retired Vice Chairman, Deloitte; (Chairman of the Audit Committee)
Carol Anthony ("John") Davidson, Private investor; Former Controller and Chief Accounting Officer, Tyco International

(Seated left to right)
Margaret Milner Richardson, Private Consultant and Investor; Former U.S. Commissioner of Internal Revenue
Kurt L. Schmoke, President of the University of Baltimore; Former Mayor of Baltimore
Robert E. Angelica, Private Investor; Former Chairman and CEO, AT&T Investment Management Corporation; (Chairman of the Risk Committee)
W. Allen Reed, Private Investor; Retired CEO, GM Asset Management Corporation; (Chairman of the Finance Committee)

Additional Resources