Designed for what

You imagineSM

A tapestry is not formed from a single thread. Nor is it formed from many threads. It is formed by combining those threads, uniquely and distinctly, into something greater than its parts.

Key highlights

Founded in 1899
Headquartered in Baltimore, Maryland
40 locations worldwide
3000+ employees
$670 billion
Assets under management
as of March 31, 2016
$670 billion
$670 billion
$2.7 billion
Operating revenues
$2.7 billion

Financial highlights

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

  Years Ended March 31,
  2016 2015 2014 2013 2012
Operating Results
$Operating revenues 2,660,844 2,819,106 2,741,757 2,612,650 2,662,574
Operating income (loss) 50,831 498,219 430,893 (434,499) 338,753
Income (loss) from continuing operations before income tax provisions (benefit) (25,218) 367,993 419,641 (510,607) 303,083
Net income (loss) attributable to Legg Mason, Inc. (25,032) 237,080 284,784 (353,327) 220,817
Adjusted Income1 370,271 378,751 417,805 347,169 397,030
Per share
$Net income (loss), diluted (0.25) 2.04 2.33 (2.65) 1.54
Adjusted income, diluted1 3.36 3.26 3.41 2.61 2.77
Dividends declared 0.80 0.64 0.52 0.44 0.32
Book value 39.37 40.23 40.32 38.44 40.59
Financial Condition
$Total assets 7,520,446 7,064,834 7,103,203 7,264,582 8,547,381
Total stockholders' equity attributable to Legg Mason, Inc. 4,213,563 4,484,901 4,724,724 4,818,351 5,677,291
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 Performance (Dollars)

    Years Ended March 31,
    2011 2012 2013 2014 2015 2016
$Legg Mason, Inc. 100.00 78.30 91.64 141.72 161.53 103.51
SNL Asset Manager Index 100.00 97.75 125.54 158.02 172.30 142.66
S&P 500 100.00 108.54 123.69 150.02 169.92 172.95

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, 2011). The SNL Asset Manager Index consists of 44 asset management firms.

Source: © 2016 SNL Financial LC, Charlottesville, VA (

Video & letter from the CEO

Joseph A. Sullivan, Chairman & Chief Executive Officer

Dear clients and fellow shareholders,

Legg Mason's fiscal year 2016 was a year of significant accomplishment, as we continue to strategically build a better Legg Mason.

We believe that the actions we have undertaken this year, and over the past few years, will benefit Legg Mason's clients, shareholders, communities and employees, as we accept the challenge to evolve and change as our clients expect.

With the addition of RARE Infrastructure and our minority investment in Precidian Investments and the announcement of two additional transactions in Clarion Partners and the combination of EnTrust Capital with Permal, we made substantive progress executing against our strategy of providing global investors with more diversified choices of investment strategies, products, vehicles and access.

While we are pleased with this essential repositioning during a time of meaningful industry pressure and change, we clearly recognize the need now to convert the opportunity we have created into sustained growth: we need to deliver the results that you and our other stakeholders expect.

Executing our long-term strategy in fiscal year 2016 was challenging, as we navigated our legacy business through short-term market turbulence. Market volatility, concerns over global growth and interest rates, as well as geopolitical instability pressured client flows, our AUM, revenues and operating margins. This difficult environment certainly reinforced our ongoing commitment to carefully calibrate our costs in line with revenues.

And while we are disappointed with our financial results for the fiscal year, we are pleased to have been able to continue returning capital to shareholders through our share repurchase program and our dividend, a 10% increase in which we just announced.

Ours is an industry that is in the early stages of significant disruption. This disruption means that change, for Legg Mason and for the industry, is not an option, but a necessity.

The greatest risk we face is the implication of doing nothing and perpetuating the status quo.


We are not willing to take that risk.

Asset management industry at an inflection point

Powerful forces are driving significant industry change.

The globalization of markets, persistently anemic global growth and low interest rates (and expectations for more of the same!), massive shifts in demographics, significant increases in regulation across jurisdictions, and the relentless push from innovation and technology all serve to alter the landscape of our industry.

Being "global," in mind and capability, has never been more important. Investing solely in one's home country neither effectively diversifies risk nor appropriately capitalizes on the opportunities that are abundant globally.

Investors need to expand their investment world, and our own research indicates a willingness on their part to do so. Exposure to global and unconstrained fixed income and equity, real estate, infrastructure, and alternatives, on the one hand, as well as volatility-mitigation strategies on the other, can help investors achieve their desired investment goals.

We are now well-positioned to offer this.

But investing globally naturally results in more complexity for investors and requires more from the industry. Asset managers who can simultaneously offer global investment capabilities, while providing local client engagement, will be best positioned for success.

We are among them.

New investors in the emerging middle class around the world have very different investment requirements than those in mature economies who have invested for decades. These demographically diverging investment needs, driven in particular by retirement regimes that are in a dramatic phase of evolution, are creating a massive opportunity for those firms with scale, a broad investment capability and a global footprint.

We have established just such a footprint.

Regulation across the globe is increasing significantly. While designed to protect investors and rebuild confidence in the integrity of markets, this dramatic expansion of regulatory reach and compliance requirements clearly adds to the industry complexity. The costs associated with regulatory compliance requirements across multiple geographic regimes necessitates that firms be of an appropriate size and scale.

Embracing regulatory client protection is entirely consistent with our core values and mission.

Lastly, innovation, driven significantly by technology advancement, has created the ability to serve investors in more and better ways. Be it the ongoing evolution of ETFs, the extension of classic active investment capabilities into "next generation" products, or as technology-enabled advice gains acceptance, innovation is transforming the investment opportunities for our clients and redefining consumer expectations for capabilities, access and service.

Innovation is central to our corporate DNA.

Client-driven diversification

Clients want and expect greater choice in all aspects of their lives, and that is no less true in our business.

Higher client expectations and shifting investor preferences, combined with the profound forces of change noted above, create both challenges and opportunities for our industry.

Consequently, we expect to see more industry combinations and consolidations, and there will clearly be fewer winners in this increasingly competitive market.

We intend to be one of them.

With our eyes focused on the future, Legg Mason has diversified our investment capabilities and our product and vehicle options over the past three years, efforts that significantly intensified this year. And while we expect to continue to add unique and differentiated investment capabilities, products and vehicles, we also expect to diversify the access to this expanded lineup of offerings through multiple distribution portals.

We believe that thoughtful diversification expands client choice and drives growth.

That growth, in turn, should benefit the investors and other stakeholders in Legg Mason.

New investment capabilities

With the evolution of the industry in mind, we continued this past year to pursue an aggressive strategic M&A agenda to reposition Legg Mason.

We added investment capability in equity liquid alternatives with the October 2015 acquisition of a 75% majority equity interest in RARE Infrastructure, a pioneer in global listedinfrastructure investing. We see significant long-term growth ahead for infrastructure investing. We are encouraged by the interest this relatively new asset class has drawn and in our ability to bring RARE to market globally.

In April 2016, we purchased an 82% majority equity interest in Clarion Partners, a leading real estate investment management firm, concluding a long search to add world class real estate investing to our broader capabilities. With diverse offerings in private equity real estate, Clarion Partners has a long history of delivering attractive risk- adjusted returns for clients, and it will help to diversify and stabilize our revenue and earnings stream. And again, we believe that we can bring Clarion Partners' investment capabilities to clients in the retail market to address their needs for income and growth in a broader way.

The transaction to combine EnTrust Capital with The Permal Group to create one of the largest global alternative investment managers closed in May 2016, with Legg Mason retaining a 65% stake in the newly-combined firm.

The new EnTrustPermal invests with over 180 individual hedge fund managers, on behalf of 730 institutional investors around the world, while also managing several direct lending, opportunistic, co-investment and other differentiated standalone strategies. EnTrustPermal is one of the most highly diversified global players in the alternatives and hedge fund space, and we are excited about their growth prospects.

And finally, we continued to commercialize new and existing strategies with Martin Currie and QS Investors, the two firms that we acquired in the previous fiscal year.

Our new acquisitions have been structured with a management-retained component of affiliate-level equity to maximize alignment with Legg Mason. In pursuit of similar alignment with our legacy affiliates, we have continued to introduce new Management Equity Plans, including one for Royce & Associates this year.

To fund our acquisitions and investments, we are pleased to have efficiently deployed a combination of cash and debt, successfully issuing $700 million in public bonds during the year, at what remain historically low rates.

New products and vehicles

In December 2015, we launched our first exchange-traded fund (ETF) vehicles with four smart beta strategies managed by QS Investors, that leverage long institutional track records and should deliver attractive, diversified results within a systematic style of investing. The initial performance of these ETFs, launched in a very volatile market, has been strong.

We're also pleased with a minority interest investment we made in Precidian Investments in January 2016, bringing a product innovation capability to help us create more diverse investment vehicle choices for investors.

The team at Precidian specializes in solving market structure issues for ETFs, which is consistent with our intention, not just to enter the ETF market, but to be an innovation leader.

We expect to work with our affiliates to launch additional differentiated product offerings in the ETF wrapper throughout the coming year.

We have also continued to reshape and evolve our product lineup, with one-third of our strategies now classified as next generation active, including outcome-oriented, volatility-managed, multi-asset class, unconstrained and alternative products managed by our investment affiliates.

Increased client access

During an extremely difficult period for the retail distribution business, our global retail platform had nearly flat net sales for the fiscal year on gross sales of just over $70 billion. In the midst of such a challenging market, we're pleased to have expanded our market share in the U.S. retail, insurance and RIA channels, and in our-cross border fund ranges across several geographies.

But this performance reinforces the importance of continuing to diversify our retail business by investment product, asset class, channel and geography, with both new and existing affiliates, positioning us to win long-term and over market cycles.

We also announced a modest investment in iVEZT to expand retirement product access to employees of small businesses, and we continue to pursue creating more choice by exploring opportunities in digital distribution to provide our partners with technology-enabled advice.

Guided by a consequential mission

We aspire to be a great global company that, through investing, meaningfully impacts the lives of all the constituents with whom we interact.

And we believe that building a better, more consequential company for our clients is the foundation for building the best possible company for each of our stakeholders.

Investing to Improve LivesSM is our mission, our internal compass, reinforced by a culture of doing the right thing, always. This culture has been protected, passionately and without compromise, throughout many challenging market environments in our history, and it remains so today.

We recognize that this mission is meaningful only if we deliver on our strategy, and we embrace the accountability necessary to succeed.

Designed for What You Imagine

Legg Mason has always been a company designed with our clients in mind, and that client-focused creation continues today. Providing choices today that weave the fabric of solutions for our clients' future needs, we are laying the foundation for a successful and enduring asset management firm.

Thoughtfully and intentionally constructed, it is incumbent on us to deliver what our clients want, and how they want it, in order to help them achieve what they imagine.

Our design combines nine independent investment managers, with a diversity of perspectives and specialized expertise across asset classes, with a centralized global distribution and shared services platform. Our investment strategies may be utilized as single investment threads or woven together, to deliver the investment tapestry imagined by our clients.

Our design provides our investment capabilities through varied products and vehicles and via multiple points of access: the choices necessary to satisfy changing client preferences, and which are necessary for growth.

We believe deeply that by providing investors with more choice, we can become their firm of choice, and in the process, create greater long-term shareholder value.

Choice for our clients,

Growth for our shareholders, and

Investing to improve the lives of our many constituents.

We are designed for what you imagine.

We thank you for joining us on this journey, and we look forward to continuing to earn your trust and confidence, every day.

Joe Sullivan

Joseph A. Sullivan,
Chairman & Chief Executive Officer

Investment Affiliates


Global value investing

As it nears its 30-year anniversary, Brandywine Global celebrates a history of success and dedication to value investing. Acting with conviction and challenging conventional ways of thinking are hallmarks of its approach.
Brandywine Global
Assets by strategy (%)
78 Fixed Income
14 Diversified Equity
7 Large Cap Equity
1 Small/Mid Cap Equity

Brandywine Global's assets under management grew for the seventh consecutive fiscal year, to $70.2 billion as of March 31, 2016. With approximately half of AUM now originating from over 50 countries outside of the U.S. and more than 75% being managed in global mandates, the firm's globally diversified reach and experience are well established.

Additionally, the firm has received several awards from leading industry publications recognizing its strong long-term performance. Even through the volatility of the past year, Brandywine Global continued to provide clients with attractive returns over the long term, with 90% of client accounts outperforming their respective benchmarks over the last five years.

Brandywine Global consistently seeks to bring value to all its relationships, including finding ways to more effectively reach and service clients around the world. The firm expanded operations in London and welcomed 33 new associates globally. Adding to its steady stream of thought leadership and research, the firm launched its blog, Around the Curve.2 The blog, featuring regular topical essays and opinions from senior investment personnel, demonstrates the firm's commitment to bringing real-time ideas to an increasingly global client base.


Real estate investment specialists

Clarion Partners is a leading real estate investment manager that has invested for over 34 years, successfully executing through market cycles both in private and public equity and debt. Clarion invests in the Americas across a broad range of properties focusing on consistently generating strong performance for clients.
Clarion Partners
Assets by product type (%)
56 Core
31 Core Plus
12 Value
1 Opportunistic

Distinguished by its research-driven investment approach, long-term organizational stability, and strong partnership culture, Clarion Partners provides innovative long-term real estate solutions for its clients. Established in 1982, the firm is headquartered in New York, with seven offices across the United States, as well as offices in London and São Paulo.

Clarion joined the Legg Mason group of affiliates on April 13, 2016. Legg Mason owns 82% of Clarion Partners. A 2015 achievement for Clarion Partners was the $3.2 billion recapitalization of the Clarion Gables Multifamily Trust. Clarion converted Gables Residential, a market-leading, vertically-integrated multifamily real estate company into a perpetual life, open-end fund vehicle.

With strong real estate performance, Clarion continued its year-over-year growth in assets under management, topping $41 billion as of April 30, 2016.


Quality-focused equity

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
Assets by product type (%)
61 High Active Share
21 Income Solutions
18 Low Volatility

ClearBridge Investments is committed to delivering long-term results through active management. It has over a half century of experience in investment solutions driven by fundamental research that emphasize differentiated stock selection to move our clients forward.

Consistently strong investment performance and superior client service enabled ClearBridge to extend its market presence across its platform of high active share, income and low-volatility strategies, highlighted by institutional mandate wins in multiple asset classes.

During the fiscal year, ClearBridge's Large Cap Growth Strategy won numerous country awards, and the firm continued to bring innovative solutions to investors with the launch of the ClearBridge Sustainability Leaders Fund, its first ESG-focused mutual fund. In addition, ClearBridge was named one of Pensions & Investments "Best Places to Work in Money Management" for the fourth year in a row.


Global alternative funds-of-funds

EnTrustPermal is a leading global alternative asset manager providing investment solutions to pension funds, foundations, endowments, sovereign wealth funds, insurance companies, private banks, family offices and individuals.
Multi-manager funds' assets by strategy (%)
32 Opportunistic
24 Event Driven, Multi-Strategy and Arbitrage
20 Activist Long/Short Equity
15 Credit and Special Situations
7 Long/Short Equity
2 Tail Risk

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.

In the fiscal year, EnTrust and Legg Mason announced a transaction to combine EnTrust with The Permal Group to create one of the world's largest alternatives managers. The combination was closed on May 2, 2016. Legg Mason owns 65% of the newly combined company, EnTrustPermal. The new company shares an entrepreneurial mindset, investment-led culture, and client-centric philosophy. In addition to an expanded investment team that can source opportunities from a broader range of managers in terms of strategy, geography and assets, it has created an expanded operational due diligence and compliance platform. Today, EnTrustPermal invests with over 180 managers, on behalf of 730 institutional investors around the world, and is committed to being ahead of the curve in evolving investment offerings to serve investors.


Active equity specialists

Martin Currie is an active global equity specialist that builds high-conviction, stock-driven portfolios based on fundamental research. The firm is dedicated to delivering optimum investment outcomes and superior client relationships.
Martin Currie
Assets by strategy (%)
34 High Active Share
31 Equity Income
27 Absolute Return
8 Passive

Headquartered in Edinburgh, Martin Currie manages money for a wide range of global, institutional and retail clients. The firm offers high-conviction investment strategies built around three main pillars, each delivering distinct client outcomes: high active share; income; and absolute return. Over the past year, the firm has enhanced its three product offerings in terms of expertise and innovation.

In high active share, there has been realignment of investment resources, focusing research teams on client outcomes. The income pillar has been strengthened by the recruitment of a new Head of Global Income in Edinburgh and broadening of the Martin Currie Australia suite with the launch of new products and new hires. And absolute return saw the launch of the Global Long-Term Unconstrained strategy and the hire of an experienced team to lead the Japan long/short capability.

At a broader level, the firm was awarded an A+ rating by UNPRI, recognizing how governance and sustainability is embedded across the investment proposition. Now in its second year as a Legg Mason affiliate, the firm has benefited from initiatives such as merging existing pooled funds into the Legg Mason platform and launching the firm's first two 1940 Act funds in the U.S.


Quantitative equity and multi-asset manager

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.
QS Investors
Total AUM by product (%)
58 Customized Solutions
22 Global Equities
20 U.S. Equities

QS Investors partners with clients to create innovative solutions within a quantitative framework. Taking a consultative approach to global asset management, it applies 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.

QS Investors' long-term goal is to provide investors with innovative investment options directly aligned to each investor's individual objectives and risk tolerances. To that end, fiscal year 2016 was a landmark year. Legg Mason's strong distribution capabilities allowed QS to bring long-standing institutional investment strategies to retail investors. QS launched its first alternative equity fund that directly addresses market risk and an investor's need for growth. It launched four smart beta equity ETFs to target specific investment outcomes in a cost-effective format. Tying it all together, the multi-asset business continued to expand the business across target date, lifestyle and other outcome-oriented strategies. Success was realized with strong growth in both the multi-asset and equity businesses.


Listed infrastructure equity

RARE Infrastructure is dedicated to global listed infrastructure investments.
RARE Infrastructure
Assets by product type (%)
84 Value Infrastructure
11 Tailored Portfolio Infrastructure
4 Emerging Markets Infrastructure
1 Yield Infrastructure

Established in 2006, RARE has grown to become 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 October 2015, RARE officially joined the Legg Mason group of affiliates, with Legg Mason acquiring a 75% equity holding. This partnership has provided opportunities to expand RARE's UCITS product into an additional nine new markets across Europe and Asia. Additionally, RARE has recently expanded into the U.S. retail market through the launch of a 40 Act Fund and is planning further expansion into the UK through the launch of a Yield Strategy.

RARE's head office is located in Sydney, Australia, with offices in London, Chicago and Melbourne. As of March 31, 2016, RARE managed over $6.3 billion on behalf of clients located in the UK, Europe, the United States and Australia. These clients include government, corporate and industry pension funds, sovereign wealth funds, and retail investors in Australia and Canada.


Small-cap equity

Royce & Associates is a small-cap equity specialist with unparalleled knowledge and experience, offering portfolios with distinctive investment approaches to meet an investor's specific goals.
Royce & Associates
Assets by product type (%)
86 U.S. Equity
7 Non-U.S. Equity
4 European Equity
3 Cash and Cash Equivalents

Royce & Associates, investment advisor to The Royce Funds, is a small-cap equity specialist offering portfolios 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.

Throughout the fiscal year, Royce continued its efforts to create more meaningful differentiation among its portfolios. In doing this, Royce aligned its portfolio managers with the strategy that works best with their expertise. The firm also rationalized its portfolio lineup as part of this initiative.

In addition, Royce added more dedicated research analysts and quantitative resources to improve and refine its advantages — a notably experienced team of small-cap 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 managements (more than 1,200 company meetings in the last fiscal year). These changes paved the way for many of its funds to respond positively to changes since the small-cap Russell 2000 Index peaked on June 23, 2015. From that date through the end of the fiscal year, more than 80 percent of Royce Funds benchmarked to that index outperformed it.


Fixed income

Founded in 1971, the firm is known for its long-term fundamental value approach, proprietary research and team management.
Western Asset
Total AUM by mandate (%)
46 Specialized
26 Liquidity
23 Broad Portfolio
5 Municipals

Western Asset Management is one of the world's leading global fixed-income managers. With more than 830 employees in nine global offices and $428.9 billion in assets under management as of March 31, 2016, the firm delivers client solutions across markets around the world. Since 1971, Western Asset has focused on long-term fundamental value with deep experience across the range of fixed income sectors.

In January 2016, Western Asset became a UNPRI signatory, demonstrating its commitment to ESG issues. Strong investment performance at Western Asset also garnered recognition from the industry. Among its many accolades, the firm was named a finalist for Morningstar's 2015 Fixed-Income U.S. Fund Manager of the Year award for the Core and Core Plus Funds. In addition, Western Asset was named to Pensions & Investments' 2015 "Best Places to Work in Money Management."

Executive Committee

Executive Committee

(Left to right)

Pete Nachtwey
Chief Financial Officer

Ursula Schliessler
Chief Administrative Officer

Tom Hoops
Head of Business Development

Joseph A. Sullivan
Chairman & Chief Executive Officer

Tom Merchant
General Counsel

Terry Johnson
Head of Global Distribution

Diversification by investment capability and strategy

Globalization of markets has both created more correlation and more complexity for investors to navigate. This also creates opportunity for globally focused managers to provide investors access to new asset classes and strategies from outside their home markets. The ability to be local while being global is essential for future success.

Traditional fixed income strategies are challenged by persistently low interest rates. Traditional equity strategies are challenged both by the low-return environment and increasing volatility.

New investment strategies are needed to bridge those gaps. Global bond, unconstrained and alternative credit product categories can add returns in both a low and rising interest rate environment. Real estate and infrastructure add diversification. And, for those investors that want to manage volatility or invest outside their home equity markets, there are global equity, managed volatility, unconstrained and long-short alternative equity strategies.

Over the past three years, we have embarked on a strategic M&A agenda and added:

  • A multi-asset class solutions capability with QS Investors
  • An international equity capability with Martin Currie
  • A liquid alternatives expertise with RARE Infrastructure
  • A leading real estate investment firm in Clarion Partners
  • A new alternatives manager with greater scale and broader investment capability with the merger of EnTrust Capital with Permal

Diversification by Product and Vehicle

We believe the needs of retirees in mature economies are different than those of younger investors and those in emerging economies. Defined contribution programs have largely replaced defined benefit plans in the United States, and retirement regimes all over the world are in a dramatic phase of evolution.

In the U.S., we expect the Department of Labor fiduciary standard for retirement plans to accelerate the move by investors toward different products and vehicles, especially exchange-traded funds (ETFs), separately managed accounts (SMAs), collective investment trusts (CITs) and other strategies.

We believe all of these trends signify both that individuals throughout the world will need to assume more control over their investments and that they will require more choice for a variety of investment needs. And, technology and innovation have created opportunities to offer those investors more transparency and customization in increasingly cost-effective vehicles.

Innovation, whether that is the ongoing evolution of ETFs, development of alternatives and outcome-oriented strategies, or extension of active investment capabilities into what we call "next generation" products, is changing the face of our industry.

At Legg Mason, we have been expanding our offering of "next generation" products, now 34% of our total retail product offerings. In December, we entered the solutions-oriented ETF market with four smart beta ETFs.

In January, Legg Mason made a strategic minority investment in Precidian Investments. Precidian specializes in creating innovative products and solutions and solving market structure issues, particularly with regard to the ETF marketplace. We expect them to enhance our ability to create more diverse investment vehicle choices for investors.

Diversification by distribution channel

Thanks to technological advances, the average investor has unprecedented access to information, unimagined by previous generations. This is driving profound changes in consumer buying behavior. Access to information and an increasing comfort with technology by investors of all ages suggests that new choices for client engagement are a necessity.

Legg Mason is looking at ways to be more innovative in distributing our strategies globally, including diversification of distribution partners and how we work with them. We are engaging a wider range of advisors across new channels and using a combination of people and technology to service them better.

In the U.S., over the past 20 months since we began an initiative to further engage advisors, we've generated approximately $6.2 billion in sales from nearly 15,000 advisors with whom we had done less than $25,000 in sales each over the previous two years.

Finally, there is technology-enabled advice: the next generation of distribution. We have set a dedicated Alternative Distribution Strategies team, to develop and evolve our distribution model further.

One such initiative is Legg Mason's minority investment in iVEZT. The initiative will leverage technology to provide small businesses without employer-sponsored retirement programs with the back-office operations necessary to provide their employees the opportunity to participate in iVEZT's payroll deduction IRAs. Forty million Americans are currently without a retirement program, and this venture could serve many of them.

We expect to have more to report on all of our technology initiatives in the new fiscal year.

Creating choice starts with understanding investors' views

Millennials: More conservative as investors


Most investors over 40 say the glass is half-full
% Optimistic about investing in 2016


Where they live matters
Portfolio return in 2015 (%) for investors over 40


Looking abroad for opportunity
64% of investors over 40 say they'll focus more on international investments next year


Designed for what you imagine

Global investors' expectations of their investment managers are evolving in significant ways. These investors expect a diverse set of investment solutions to help them achieve their financial goals. They expect those solutions to consistently deliver compelling investment performance. And they want them to be available in cost-efficient vehicles and to be able to access them where and how they want.

No longer satisfied to simply take what the industry offers, the global investor is demanding that investment managers respond to these shifting preferences ... or risk losing their business. The Legg Mason operating model is intentionally designed to respond to shifting client preferences. It is thoughtfully designed for what our clients imagine.

Our strategy is straightforward and focused to help our clients meet their goals: Legg Mason aims to provide global investors with more diversified choices of investment strategies, products, vehicles and access.

We believe thoughtful diversification across all of those categories will expand client choice, offer greater investment opportunities, and ultimately drive growth to the benefit of the Company's stakeholders.

Our design combines nine independent investment managers that bring together a diversity of perspectives and expertise across equities, fixed income and alternatives with a world class global distribution platform that offers broad choice in accessing the many different strategies of our managers.

This client-centric design allows each part of the organization to focus on what it does best, be that investing, product or vehicle development, or distribution access.

Designed for what you imagine: it is what our clients rightfully expect. It is what we deliver.

ETF launch

On December 29, 2015, Legg Mason launched four new outcome-oriented index-based ETF funds on the Nasdaq Stock Market® in partnership with QS Investors. Increasing concerns about macroeconomic risks, equity volatility, and the continuing search for stable income are pressuring investors to look beyond traditional market cap weighted indices.

Leveraging QS Investors' proprietary strategies with a long institutional track record, these smart beta products are positioned to deliver on their investment objectives in a very crowded field, and the initial performance of these strategies in volatile equity markets is very encouraging.

Legg Mason's distribution and product teams are working with authorized participants and advisors, particularly in the RIA segment, to expand the commercialization of these strategies.

ETF Launch

ESG investing

Environmental, Social and Governance (ESG) investing has evolved over the past several decades, as companies and investment teams increasingly understand that positive ESG attributes can lead to better performance over time. Sustainability is just that: whether it's better resource utilization, product safety, labor relations, reporting transparency, or adherence to regulatory or health and safety standards, strong practices in this regard are hallmarks of sustainable business models for the future.

As of April 2016, six of our investment Affiliates are signatories of the Principles for Responsible Investment (PRI), demonstrating their commitment to incorporate environmental, social and governance factors into investment decisions. Our affiliates believe that consideration of those factors can have a positive impact on managing risk and generating sustainable long-term returns.

A critical part of our strategy to serve our many stakeholders is a culture that values diversity and inclusion. Diverse teams and multiple perspectives throughout the organization can yield stronger results and are supported by the management team. Formal programs have been in place for more than a decade, and we have evolved this work to include seven Employee Resource Groups (ERGs), including a Veterans group that was most recently added. In 2016, we also launched a global Executive Diversity Council, sponsored by a member of Executive Management, reflecting the firm's commitment to diversity and inclusion.

Board of Directors

Board of Directors

Standing (Left to right)

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

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

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

John V. Murphy
Retired CEO, 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 CEO,
Rothschild Asset Management;
(Chair of the Compensation Committee)

Dennis M. Kass
Private Investor; Retired CEO,
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 and CEO,
AT&T Investment Management Corporation;
(Chair of the Risk Committee)

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

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

Additional resources