We define Adjusted EBITDA, a performance measure, as Net income attributable to Legg Mason, Inc. (“Net income”) plus (i) interest expense, (ii) income tax provision, (iii) depreciation and amortization, (iv) amortization of intangible assets and (v) closed-end fund launch costs. EBITDA, Bank Defined, a liquidity measure, which is the measure of EBITDA that is used in the financial covenants of our bank credit agreement, is defined as Cash provided by operating activities plus (minus) (i) allocation of the repurchase prepayment of 2.5% convertible senior notes, (ii) interest expense, net of non-cash items, (iii) current income tax expense, (iv) gains/(losses) on investments and (v) net change of other assets and liabilities.

          We believe that Adjusted EBITDA is useful to investors because it is based on a performance measure that is widely used as an estimate of the cash income from a business, as adjusted to exclude closed-end fund launch costs, which occur only from time to time upon the launch of funds. We believe that EBITDA, Bank Defined, is useful to investors as a refined liquidity measure that adds back certain cash items. These measures are provided in addition to Net income and Cash provided by operating activities and may not be comparable to non-GAAP performance measures, including measures of EBITDA or cash flow measures, of other companies. Further, Adjusted EBITDA and EBITDA, Bank Defined are not to be confused with Net income, Cash provided by operating activities or other measures of earnings or cash flows under GAAP, and are provided as a supplement to, and not in replacement of, such GAAP measures.