BALTIMORE, March 31 /CNW/ -- Legg Mason, Inc. (NYSE: LM) announced that
the Company has entered into capital support agreements (CSAs) to provide
support to a money market fund managed by a subsidiary of the Company.
Neither the fund, nor its shareholders incurred a loss in this transaction.
Legg Mason also provided today an update regarding the anticipated earnings
impact of these actions for the quarter ended March 31, 2008 as well as an
update to accruals related to previously announced money market fund support.
"Legg Mason is putting the CSAs in place to provide support at a time
when certain segments of the marketplace continue to experience asset price
fluctuations," said Mark R. Fetting, the Company's president and chief
executive officer. "We are confident in the overall soundness of the
Company's money market funds and remain committed to providing our fund
shareholders with principal stability, credit quality, and current income,
although no guarantees can be given.
"Legg Mason has the financial strength to work through the issues caused
by the current conditions in the credit markets. We are encouraged by the
improved tone in the credit markets after the Fed's substantial actions to
restore liquidity to the financial system. We will continue to monitor market
conditions and may take additional action if we deem it appropriate,"
concluded Mr. Fetting.
Under the CSAs, the Company will make capital contributions to the fund
if the fund realizes a loss on the sale of or certain other events relating to
two asset backed commercial paper securities in the portfolio. The Company
will make up to a maximum of $400 million of contributions to the fund under
the CSAs and has fully collateralized this obligation. The CSAs will terminate
in one year. The Company is filing a Form 8-K with further details of this
Impact on Quarterly Earnings
Reflecting the entry into the CSAs announced today, the Company has
incurred an estimated $316 million non-cash charge in the quarter ended March
31, 2008 to its earnings ($195 million net of taxes, or $1.38 per diluted
share) reflecting the fair value of the underlying securities as of March 28,
Based on current market conditions and prices, Legg Mason has accrued an
estimated non-cash charge to earnings of approximately $498 million, ($279
million net of adjustments to incentive compensation and taxes, or $1.96 per
diluted share), in the quarter ended March 31, 2008 principally representing
unrealized losses in the securities underlying its cumulative support to date.
This charge consists of the combined impact of the action announced today
together with incremental, non-cash, mark-to-market charges attributable to
previously announced money market fund support, including securities purchased
from money market funds.
About Legg Mason
Legg Mason is a global asset management firm, with $998 billion in assets
under management as of December 31, 2007. The Company provides active asset
management in many major investment centers throughout the world. Legg Mason
is headquartered in Baltimore, Maryland, and its common stock is listed on the
New York Stock Exchange (symbol: LM).
This release contains forward-looking statements subject to risks,
uncertainties and other factors that may cause actual results to differ
materially. For a discussion of these risks and uncertainties, see "Risk
Factors" in Legg Mason's Annual Report on Form 10-K for the fiscal year ended
March 31, 2007 and the subsequent quarterly reports on Form 10-Q.
An investment in a money market fund is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although a money market fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in a money market
For further information:
For further information: Investor Relations, F. Barry Bilson,
+1-410-539-0000, or Media, Mary Athridge, +1-212-805-6035, both of Legg Mason,
Inc. Web Site: http://www.leggmason.com