Legg Mason Reports Results for Third Quarter and First Nine Months of Fiscal Year 2008



    
    - Net Income of $155 Million, or $1.07 per Diluted Share for the Third
    Quarter -

    - Assets Under Management of $998 Billion -
    

    BALTIMORE, Jan. 30 /CNW/ -- Legg Mason, Inc. (NYSE:   LM) today reported
its operating results for the third fiscal quarter and nine months ended
December 31, 2007. For the quarter, revenues were $1.19 billion, up 5% from
$1.13 billion in the third quarter of fiscal 2007. Net income for the quarter
was $154.6 million, or $1.07 per diluted share, representing an 11% and 12%
decline, respectively, from $174.6 million, or $1.21 per diluted share, in the
third quarter of fiscal 2007. The decline in net income included a previously
announced charge of approximately $23 million ($0.16 per diluted share), after
giving effect to related compensation adjustments and taxes, resulting from
support for Asset Backed Commercial Paper ("ABCP") investments held by certain
of the Company's liquidity funds. Cash income for the quarter was $1.42 per
diluted share, down 10% from the third quarter of fiscal 2007.
    Assets Under Management ("AUM") decreased to $998.5 billion, down 1% from
$1.012 trillion at September 30, 2007, but representing an increase of 6% from
$944.8 billion at December 31, 2006.
    For the fiscal year to date, revenues were $3.6 billion, up 11% from the
comparable period in fiscal 2007. Net income was $523.1 million, or $3.62 per
diluted share, both representing a 10% increase from the comparable period.
Cash income for the fiscal year to date was $4.68 per diluted share, up 8%
from the corresponding nine months of fiscal 2007.
    
    Announcement of New President and CEO
    
    On January 28, 2008, the Board of Directors of Legg Mason, Inc. elected
Mark R. Fetting President, Chief Executive Officer and member of the Board of
Directors. Raymond A. "Chip" Mason, the Company's founder and long-time
Chairman, President and Chief Executive Officer, will continue to serve as
non-executive Chairman.
    Harold L. Adams, an independent director who chaired the Board of
Directors' Search Committee, said, "Following a very comprehensive due
diligence process, the Board is unanimous in its conviction that Mark's
extensive industry experience, superb leadership skills, keen intellect and
business acumen make him the ideal steward to lead Legg Mason into the future.
    "As we congratulate Mark, the Board also wishes to greatly acknowledge
the extraordinary leadership of Chip Mason, whose integrity and vision has so
influenced Legg Mason's success over the past 38 years. We look forward to his
continued counsel as a member of the Board."
    
    Comments on Results in the Third Quarter of Fiscal Year 2008
    
    Mr. Mason commented, "This past quarter was among the most volatile
periods the market has experienced. The decline in the equity markets was
harsh and caused substantial investor worry. Throughout the quarter, concerns
about the dollar, a potential recession and the financial sector at large were
widely felt around the world. The bond markets continued to show significant
strain, with little reaction to government stimulation. Other than Treasury
bonds, many markets were sluggish, or had limited bidding capacity.
    "Legg Mason earnings, before the $0.16 charge for money market fund
exposure, were essentially unchanged quarter over quarter and year over year.
Our net income for the nine months through December 2007 shows a 10% increase
year over year, even including the $0.16 earnings charge. We are hopeful that
sometime in the next several quarters, we will return to a more stable
economic environment, as well as more stable and more positive debt and equity
markets.
    "During the past quarter, the Company has enhanced its cash position to
its highest levels in history. With asset managers that are among the most
highly regarded in the industry, and with a strong cash position, we believe
we are well positioned for the future."
    
    Assets Under Management Decreased to $998 Billion
    
    AUM decreased to $998.5 billion as of December 31, 2007, down $13.1
billion, or 1%, from $1.012 trillion as of September 30, 2007. There were net
client cash outflows of $9.1 billion in the December quarter and market
depreciation of $4.0 billion. Equity outflows were $10.6 billion and liquidity
outflows were $0.5 billion, while fixed income recorded inflows of $2.0
billion for the quarter.
    Average AUM during the quarter was $1.014 trillion, compared to $994.7
billion in the second quarter of fiscal year 2008 and $925.0 billion in the
third quarter of fiscal year 2007. At December 31, 2007, equity products
represented 32% of AUM, fixed income represented 52% and liquidity represented
16%. By business division, 53% of total AUM was in Institutional, 40% in
Managed Investments and 7% in Wealth Management. Assets managed for non-U.S.
domiciled clients represented 34% of total AUM at December 31, 2007.
    The Institutional division's assets grew during the quarter, primarily at
Western Asset and Brandywine Global Investment. Managed Investment assets
declined moderately in the quarter primarily as a result of market
depreciation and outflows in key equity products at ClearBridge Advisors and
Legg Mason Capital Management. Wealth Management assets declined slightly,
with continued outflows at Private Capital Management partially offset by
positive flows at Permal.
    
    Comparison to the Third Quarter of Fiscal Year 2007
    
    Revenues increased 5% from the prior year quarter, reflecting an increase
of 10% in average AUM, principally in fixed income and liquidity assets.
Performance fees declined 19%, to $50.8 million, reflecting lower levels
earned at several of our investment managers. Operating expenses declined 3%
from the prior year quarter. Absent the ABCP related compensation adjustment,
operating expenses would have increased 3%, largely due to higher distribution
and servicing costs related to increased AUM, and higher compensation costs
related to increased revenues. Non-operating expense increased $109.4 million,
driven by approximately $91 million of unrealized losses and other costs
related to the Company's support of the liquidity funds. Net income was $154.6
million, or $1.07 per diluted share, down 11% and 12%, respectively, from
$174.6 million, or $1.21 per diluted share, in the corresponding third quarter
of fiscal year 2007. As noted earlier, the decline in net income included an
after-tax charge of approximately $23 million related to a reduction in the
value of certain ABCP held by certain of the Company's liquidity funds.
Diluted earnings per share were $1.07, including the ABCP related charge of
$0.16 per share. Cash income was $205.1 million, or $1.42 per diluted share,
compared to $227.4 million, or $1.58 per diluted share, in the comparable
period last fiscal year.
    The pre-tax profit margin decreased to 20.8% from 24.5% in the third
quarter of fiscal year 2007. The pre-tax profit margin, as adjusted for
distribution and servicing expense was 28.7%, down from 33.5%.
    
    Consolidated Results for the Fiscal Year to Date 2008
    
    Total revenues for the first nine months of fiscal 2008 were $3.6
billion, up 11% from the corresponding fiscal year period ended December 31,
2006, reflecting an increase of 12% in average AUM and increases in fund
advisory and separate account revenues of 19% and 5%, respectively.
Performance fees increased by 24%, to $129.5 million. Net income was $523.1
million, or $3.62 per diluted share, an increase of 10% from $474.3 million,
or $3.29 per diluted share for the comparable nine month period in fiscal year
2007. Higher net income was a result of higher AUM and performance fees,
partially offset by ABCP related charges. Cash income was $675.8 million, or
$4.68 per diluted share, up 8% from $623.0 million, or $4.32 per diluted
share, for the corresponding fiscal year to date period.
    The pre-tax profit margin for the first nine months was 23.5%, compared
to 24.0% for the nine months ended December 31, 2006. The pre-tax profit
margin, as adjusted for distribution and servicing expense, was 32.2%, down
from 33.1% for the corresponding prior year period.
    
    Comparison to the Second Quarter of Fiscal Year 2008
    
    Revenues increased 1% and net income declined 13% from the sequential
September quarter. Higher operating revenues, fueled by an increase in
performance fees, were more than offset by ABCP related charges. Compensation
and benefits declined as a result of reductions in connection with the ABCP
related support, along with declines in deferred compensation plans resulting
from declines in the market value of the underlying investments. Other
expenses increased as a result of higher marketing costs and foreign currency
losses. Cash income was $205.1 million, or $1.42 per diluted share, compared
to $231.8 million, or $1.60 per diluted share, during the second quarter of
fiscal year 2008.
    The pre-tax profit margin declined to 20.8% from 24.2% in the prior
quarter. The pre-tax profit margin, as adjusted for distribution and servicing
expense was 28.7%, down from 33.4% in the prior quarter.
    
    Business Developments
    
    Despite challenging market conditions, the Company's investment managers
continued to expand their business into new markets, to launch new products,
to build new distribution relationships and to achieve industry recognition.

    
    -- In a significant new initiative for the Company, Legg Mason Global
       Funds are launching in China, through a distribution partnership with
       Citibank China. The fund family includes products from Legg Mason
       Capital Management, Western Asset, Brandywine Global Investment, Royce,
       and Batterymarch. Penetration of the Chinese market is an important
       component of the Company's global growth strategy.
    

    
    -- New product activity continued across many of the Company's leading
       managers:
    

    
       -- ClearBridge launched a 130/30 value strategy and two concentrated
          portfolios focused on absolute returns.
    

    
       -- Permal launched the Permal Investment Partners (US) and Silk Road
          funds.
    

    
       -- Western Asset launched two opportunistic products: Levered Loan LLC
          and the Strategic USD High Yield Portfolio LLC; two strategic
          products: Investment Grade Long Duration LLC and Non-US Floating
          Rate High Income Fund LLC; and the SMASh Series Municipal Extended
          Credit (MEC).
    

    
    -- New and expanded distribution relationships helped several key managers
       to access new clients and new opportunities:
    

    
       -- Legg Mason International Distribution continues to sign new
          agreements with key partners globally for cross border funds
          including Hartford, Mass Mutual, ING Morgan Stanley, HSBC and Grand
          Cathay.
    

    
       -- Legg Mason Capital Management funds will now be offered in fee-based
          accounts through Merrill Lynch.
    

    
       Also in the quarter, several of our managers and products were
       recognized by the industry for their achievements:
    

    
       -- Legg Mason Global Plus, a Japan domiciled mutual fund, was awarded
          "The Fund of the Year 2007" by Morningstar. The fixed income portion
          is managed by Western Asset and the equity portion is managed by
          Batterymarch.
    

    
       -- The Municipal Bond team at Western Asset was a finalist for
          Morningstar Fixed  Income Manager of the Year.
    

    
       -- Robert Hagstrom of Legg Mason Capital Management and manager of the
          Legg Mason Growth Trust fund and Charlie Dreifus from Royce &
          Associates, manager of the Royce Special Equity Fund, both received
          Morningstar Honorable Mention for Domestic Stock Fund Manager of the
          Year.
    Balance Sheet
    
    At December 31, 2007, Legg Mason's cash position was $1.2 billion, total
debt was $1.5 billion and stockholders' equity was $7.0 billion. The ratio of
total debt to equity was 21.6%.
    During January, the Company entered into an arrangement to increase its
capital base by agreeing to issue $1.25 billion of 2.5% convertible senior
notes. After transaction costs and the repurchase of preferred stock
convertible into 2.5 million shares of Legg Mason common stock, the
transaction will increase the Company's cash position by approximately $1.0
billion, significantly strengthening the Company's liquidity. In addition, an
existing credit facility was increased to $1.0 billion from $500 million.
    
    Use of Supplemental Non-GAAP Financial Information
    Cash Income
    
    As supplemental information, we are providing a performance measure that
is based on a methodology other than generally accepted accounting principles
("non-GAAP") for "cash income" that management uses as a benchmark in
evaluating and comparing the period-to-period operating performance of Legg
Mason, Inc. and its subsidiaries. We define "cash income" as net income, plus
amortization and deferred taxes related to intangible assets. We believe that
cash income provides a good representation of our operating performance
adjusted for non-cash acquisition related items and it facilitates comparison
of our results to the results of other asset management firms that have not
engaged in significant acquisitions. We also believe that cash income is an
important metric in estimating the value of an asset management business. In
considering acquisitions, we often calculate a target firm's cash earnings as
a metric in estimating its value. This measure is provided in addition to net
income, but is not a substitute for net income and may not be comparable to
non-GAAP performance measures, including measures of cash earnings or cash
income, of other companies. Further, cash income is not a liquidity measure
and should not be used in place of cash flow measures determined under GAAP.
Legg Mason considers cash income to be useful to investors because it is an
important metric in measuring the economic performance of asset management
companies, as an indicator of value and because it facilitates comparisons of
Legg Mason's operating results with the results of other asset management
firms that have not engaged in significant acquisitions.
    In calculating cash income, we add the impact of the pre-tax amortization
of intangible assets from acquisitions, such as management contracts, to net
income to reflect the fact that this non-cash expense does not represent an
actual decline in the value of the intangible assets. Deferred taxes on
intangible assets, including goodwill, represent actual tax benefits that are
not realized under GAAP absent an impairment charge or the disposition of the
related business. Because we actually receive these tax benefits, we add them
to income in the calculation of cash income. Should a disposition or
impairment charge occur, its impact on cash income may distort actual changes
in the operating performance or value of our firm. Accordingly, we monitor
changes in intangible assets and goodwill and the related impact on cash
income to ensure appropriate explanations accompany disclosures of cash
income.
    Although depreciation and amortization on fixed assets are non-cash
expenses, we do not add these charges in calculating cash income because these
charges are related to assets that will ultimately require replacement.
    
    A reconciliation of net income to non-GAAP cash income is presented below.
    Pre-Tax Profit Margin Adjusted for Distribution and Servicing Expense
    
    We believe that pre-tax profit margin adjusted for distribution and
servicing expense is a useful measure of our performance because it indicates
what our margins would have been without the distribution revenues that are
passed through to third parties as a direct cost of selling our products, and
thus shows the effect of these revenues on our margins. This measure is
provided in addition to the Company's pre-tax profit margin calculated under
GAAP, but is not a substitute for calculations of margin under GAAP and may
not be comparable to non-GAAP performance measures, including measures of
adjusted margins, of other companies. A reconciliation of consolidated pre-tax
profit margin, as adjusted, to pre-tax profit margin under GAAP is presented
below.
    
    Conference Call to Discuss Results
    
    A conference call to discuss the Company's results, hosted by Mr. Mason,
will be held at 8:30 am E.S.T. today. The call will be open to the general
public. Interested participants should access the call by dialing
1-866-793-1308 (or for international calls 1-703-639-1310) at least 10 minutes
prior to the scheduled start to ensure connection.
    A replay or transcript of the live broadcast will be available on the
Legg Mason web site, in the investor relations section, or by dialing
1-888-266-2081 (or for international calls 1-703-925-2533), access Pin Number
1192802, after completion of the call. Please note that the replay will be
available beginning 1:00 p.m., E.S.T. on Wednesday, January 30, 2008 and
ending February 13, 2008.
    
    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" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Legg Mason's Annual Report on Form 10-K for the
fiscal year ended March 31, 2007 and its subsequent quarterly reports on Form
10-Q.



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
           (Dollar amounts in thousands, except per share amounts)
                                 (Unaudited)
    


    
                              Quarters Ended                   % Change
                          December   September  December  December    December
                           2007        2007      2006       2007        2007
                                                          Compared    Compared
                                                            to          to
                                                         September    December
                                                           2007        2006
    Operating Revenues:
    Investment advisory
      fees:
      Separate accounts   $365,735    $376,003   $367,217     (2.7)%    (0.4)%
      Funds                593,375     590,746    514,065       0.4      15.4
      Performance fees      50,848      24,285     63,103     109.4     (19.4)
    

    
    Distribution and
     service fees          172,637     177,421    185,451      (2.7)     (6.9)
    Other                    4,049       3,896      3,137       3.9      29.1
       Total operating
        revenues         1,186,644   1,172,351  1,132,973       1.2       4.7
    


    
    Operating Expenses:
      Compensation
       and benefits        366,377     430,231    415,820     (14.8)    (11.9)
      Distribution
       and servicing       326,698     321,108    303,338       1.7       7.7
      Communications
       and technology       45,400      47,747     47,875      (4.9)     (5.2)
      Occupancy             34,303      31,533     27,044       8.8      26.8
      Amortization of
       intangible assets    14,155      14,375     17,337      (1.5)    (18.4)
      Other                 57,720      48,939     58,165      17.9      (0.8)
    

    
         Total operating
          expenses         844,653     893,933    869,579      (5.5)     (2.9)
    


    Operating Income       341,991     278,418    263,394      22.8      29.8


    
    Other Income (Expense)
      Interest income       19,356      18,154     14,291       6.6      35.4
      Interest expense     (20,837)    (16,627)   (18,507)      25.3     12.6
      Other                (93,518)      4,252     18,656       n/m    (601.3)
         Total other
          income
          (expense)        (94,999)      5,779     14,440       n/m    (757.9)
    Income from Continuing
     Operations before
     Income Tax Provision
     and Minority
     Interests             246,992     284,197    277,834     (13.1)    (11.1)
    

    
     Income tax
      provision             92,319     106,574    103,652     (13.4)    (10.9)
    

    
    Income from Continuing
     Operations before
     Minority Interests    154,673     177,623    174,182     (12.9)    (11.2)
    

    
     Minority interests,
      net of tax               (91)       (159)      (121)      n/m       n/m
    

    
    Income from
     Continuing
     Operations            154,582     177,464     174,061    (12.9)    (11.2)
    

    
     Gain on sale of
      discontinued
      operations, net
       of tax                    -           -         572      n/m       n/m
    

    Net Income            $154,582    $177,464    $174,633    (12.9)   
(11.5)

    n/m - not meaningful



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF INCOME
               (Amounts in thousands, except per share amounts)
                                 (Unaudited)
                                 (continued)
    

    
                                    Quarters Ended             % Change
                                                          December   December
                                                            2007       2007
                                                          Compared   Compared
                                                             to         to
                              December September December  September  December
                                2007     2007     2006       2007       2006
    Net income per share:
      Basic
        Income from continuing
         operations              $1.09    $1.25    $1.23     (12.8)%  (11.4)%
        Gain on sale of
         discontinued operations     -        -        -       n/m      n/m
                                 $1.09    $1.25    $1.23     (12.8)   (11.4)
    

    
      Diluted
        Income from continuing
         operations              $1.07    $1.23    $1.21     (13.0)   (11.6)
        Gain on sale of
         discontinued
         operations                  -        -        -       n/m      n/m
                                 $1.07    $1.23    $1.21     (13.0)   (11.6)
    

    
    Weighted average number of
     shares outstanding:
          Basic                142,297  142,427  141,422
          Diluted              144,018  144,627  144,317
    

    n/m - not meaningful



    
                         LEGG MASON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
             (Dollar amounts in thousands, except per share amounts)
                                   (Unaudited)
    

    
                                         For the Nine Months Ended
                                        December 2007  December 2006  % Change
    Operating Revenues:
      Investment advisory fees:
        Separate accounts                  $1,122,715   $1,069,485       5.0%
        Funds                               1,761,406    1,480,444      19.0
        Performance fees                      129,482      104,731      23.6
      Distribution and service fees           533,556      534,869      (0.2)
      Other                                    17,804       12,349      44.2
          Total operating revenues          3,564,963    3,201,878      11.3
    

    
    Operating Expenses:
      Compensation and benefits             1,242,618    1,163,662       6.8
      Distribution and servicing              969,312      878,156      10.4
      Communications and technology           140,495      128,035       9.7
      Occupancy                                96,529       71,324      35.3
      Amortization of intangible assets        43,585       51,696     (15.7)
      Other                                   159,852      153,161       4.4
          Total operating expenses          2,652,391    2,446,034       8.4
    

    Operating Income                          912,572      755,844      20.7

    
    Other Income (Expense)
      Interest income                          54,001       43,209      25.0
      Interest expense                        (54,608)     (53,367)      2.3
      Other                                   (75,206)      23,873    (415.0)
          Total other income (expense)        (75,813)      13,715    (652.8)
    

    
    Income from Continuing Operations
     before
      Income Tax Provision and Minority
       Interests                              836,759      769,559       8.7
    

    Income tax provision                    313,483      295,566       6.1

    
    Income from Continuing Operations
      before Minority Interests               523,276      473,993      10.4
    

    Minority interests, net of tax             (215)        (221)     (2.7)

    Income from Continuing Operations         523,061      473,772      10.4

    
      Gain on sale of discontinued
       operations,
        net of tax                                  -          572       n/m
    

    Net Income                               $523,061     $474,344      10.3

    n/m - not meaningful




    
                        LEGG MASON, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                 (Amounts in thousands, except per share amounts)
                                   (Unaudited)
                                   (continued)
    

    
                                            For the Nine Months Ended
                                        December 2007  December 2006  % Change
    Net income per share:
      Basic
        Income from continuing
         operations                            $3.68        $3.36         9.5%
        Gain on sale of discontinued
         operations                                -            -         n/m
                                               $3.68        $3.36         9.5
    

    
      Diluted
        Income from continuing
         operations                            $3.62        $3.29        10.0
        Gain on sale of discontinued
         operations                                -            -         n/m
                                               $3.62        $3.29        10.0
    

    
    Weighted average number of shares
      outstanding:
        Basic                                142,258      140,960
        Diluted                              144,351      144,243
    

    n/m - not meaningful




    
                      LEGG MASON, INC. AND SUBSIDIARIES
                              SUPPLEMENTAL DATA
    

    
               RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS
                TO NON-GAAP CASH INCOME FROM CONTINUING OPERATIONS
             (Dollar amounts in thousands, except per share amounts)
                                   (Unaudited)
    


    
                                  Quarters Ended               % Change
                                                         December   December
                                                           2007       2007
                                                         Compared   Compared
                                                            to         to
                           December September  December  September  December
                             2007      2007      2006      2007       2006
    

    
    Income from Continuing
     Operations            $154,582  $177,464  $174,061    (12.9)%    (11.2)%
    

    
        Amortization of
         intangible assets   14,155    14,375    17,337     (1.5)     (18.4)
        Deferred income
         taxes on
         intangible assets   36,385    39,957    36,016     (8.9)       1.0
    

    
    Cash Income from
     Continuing Operations $205,122  $231,796  $227,414    (11.5)      (9.8)
    

    
    Income from Continuing
     Operations per
     Diluted Share            $1.07     $1.23     $1.21    (13.0)     (11.6)
    

    
        Amortization of
         intangible assets     0.10      0.10      0.12        -      (16.7)
        Deferred income
         taxes on intangible
          assets               0.25      0.27      0.25     (7.4)         -
    

    
    Cash Income from
     Continuing Operations
      per Diluted Share       $1.42     $1.60     $1.58    (11.3)     (10.1)
    



    
                           For the Nine Months Ended
                          December 2007  December 2006  % Change
    

    
    Income from Continuing
     Operations              $523,061      $473,772      10.4%
    

    
         Amortization of
          intangible assets    43,585        51,696     (15.7)
         Deferred income
          taxes on intangible
          assets              109,125        97,497      11.9
    

    
    Cash Income from
     Continuing
     Operations              $675,771      $622,965       8.5
    

    
    Income from Continuing
     Operations per Diluted
     Share                      $3.62         $3.29      10.0
       Amortization of
        intangible assets        0.30          0.36     (16.7)
       Deferred income taxes on
        intangible assets        0.76          0.67      13.4
    

    
    Cash Income from Continuing
     Operations
      per Diluted Share         $4.68         $4.32       8.3
    



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                              SUPPLEMENTAL DATA
    

    
               PRE-TAX PROFIT MARGIN FROM CONTINUING OPERATIONS
               ADJUSTED FOR DISTRIBUTION AND SERVICING EXPENSE
           (Dollar amounts in thousands, except per share amounts)
                                 (Unaudited)
    

    
                                 Quarters Ended               % Change
                                                         December   December
                                                           2007       2007
                                                         Compared   Compared
                                                            to         to
                           December September  December  September  December
                             2007      2007      2006      2007       2006
    

    
    Operating Revenues, $1,186,644  $1,172,351 $1,132,973     1.2%      4.7%
      GAAP Basis
      Less:
        Distribution
        and servicing
        expense            326,698     321,108    303,338     1.7      7.7
    


    
    Operating Revenues,
      as adjusted         $859,946    $851,243   $829,635     1.0      3.7
    

    
    Income from
     Continuing Operations
     before Income Tax
     Provision and
     Minority
     Interests           $246,992    $284,197   $277,834   (13.1)   (11.1)
    


    
     Pre-tax profit margin,
      GAAP basis             20.8%       24.2%      24.5%
    

    
     Pre-tax profit margin,
      as adjusted             28.7        33.4       33.5
    



    
                           For the Nine Months Ended
                      December 2007     December 2006   % Change
    

    
    Operating Revenues,
     GAAP basis           $3,564,963     $3,201,878      11.3%
    

    
    Less:
      Distribution and
      servicing expense      969,312        878,156      10.4
    

    
    Operating Revenues,
     as adjusted          $2,595,651     $2,323,722      11.7
    

    
    Income from
     Continuing Operations
     before Income Tax
     Provision and
     Minority
     Interests              $836,759       $769,559       8.7
    

    
    Pre-tax profit margin,
      GAAP basis                23.5%          24.0%
    

    
    Pre-tax profit margin,
     as adjusted                32.2           33.1
    



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                           ASSETS UNDER MANAGEMENT
                         (Dollar amounts in billions)
                                 (Unaudited)
    


    
                                       Quarters Ended
                                 December   September  June   March   December
                                   2007       2007     2007   2007     2006
    

    
    By asset class:
      Equity                       $320.8    $343.9   $352.3  $338.0   $337.1
      Fixed Income                  514.5     506.0    479.2   470.9    460.0
      Liquidity                     163.2     161.7    160.9   159.6    147.7
        Total                      $998.5  $1,011.6   $992.4  $968.5   $944.8
    

    
    By asset class (average):
      Equity                       $335.6    $341.6   $349.3  $338.5   $328.5
      Fixed Income                  512.9     492.2    475.9   465.0    453.0
      Liquidity                     165.2     160.9    159.7   155.4    143.5
        Total                    $1,013.7    $994.7   $984.9  $958.9   $925.0
    

    
    By client domicile:
      US                           $661.0    $675.7   $659.9  $644.5   $631.4
      Non-US                        337.5     335.9    332.5   324.0    313.4
        Total                      $998.5  $1,011.6   $992.4  $968.5   $944.8
    

    
    By division:
      Managed Investments          $398.8    $411.4   $414.2  $403.2   $384.8
      Institutional                 532.4     530.3    506.8   496.3    492.1
      Wealth Management              67.3      69.9     71.4    69.0     67.9
        Total                      $998.5  $1,011.6   $992.4  $968.5   $944.8
    



    
                      LEGG MASON, INC. AND SUBSIDIARIES
                 COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT
                         (Dollar amounts in billions)
                                 (Unaudited)
    

    
                                                Quarters Ended
                               December   September   June    March   December
                                 2007        2007     2007    2007     2006
    

    
    Beginning of period       $1,011.6    $992.4    $968.5    $944.8   $891.4
    Net client cash flows         (9.1)      0.3       1.7      13.6     23.0
    Market performance
     and other                    (4.0)     18.9      23.5      10.4     30.9
    Acquisitions (Dispositions),
     net                             -         -      (1.3)     (0.3)    (0.5)
    End of period               $998.5  $1,011.6    $992.4    $968.5   $944.8
    



    
    BY DIVISION
                                                    Quarters Ended
                               December   September   June    March   December
      Managed Investments         2007       2007      2007    2007     2006
    

    
      Beginning of period       $411.4     $414.2   $403.2    $384.8   $355.7
      Net client cash flows       (6.1)      (8.8)    (3.3)     10.2     14.5
      Market performance and
        other                     (6.5)       6.0     14.3       8.2     14.7
      Acquisitions (Dispositions),
       net                           -          -        -         -     (0.1)
      End of period             $398.8     $411.4   $414.2    $403.2   $384.8
    

    
    Institutional
      Beginning of period       $530.3     $506.8   $496.3    $492.1   $471.4
      Net client cash flows       (0.2)       9.9      4.6       2.7      8.9
      Market performance and
      other                        2.3       13.6      5.9       1.5     12.2
      Acquisitions (Dispositions),
       net                           -          -        -         -     (0.4)
      End of period             $532.4     $530.3   $506.8    $496.3   $492.1
    


    
    Wealth Management
      Beginning of period        $69.9       $71.4   $69.0     $67.9    $64.3
      Net client cash flows       (2.8)       (0.8)    0.4       0.7     (0.4)
      Market performance and
       other                       0.2        (0.7)    3.3       0.7      4.0
      Acquisitions (Dispositions),
       net                           -           -    (1.3)     (0.3)       -
      End of period              $67.3       $69.9   $71.4     $69.0    $67.9
    



    LEGG MASON, INC. AND SUBSIDIARIES

    
                 COMPONENT CHANGES IN ASSETS UNDER MANAGEMENT
                         (Dollar amounts in billions)
                                 (Unaudited)
    

    
                        For the Nine Months Ended  For the Twelve Months Ended
                               December     December     December     December
                                 2007         2006          2007         2006
    

    
    Beginning of period         $968.5       $867.6         $944.8     $850.8
    Net client cash flows         (7.2)        30.6            6.5       32.2
    Market performance and
     other                        38.5         47.1           48.8       62.3
    Acquisitions
     (Dispositions), net          (1.3)        (0.5)          (1.6)      (0.5)
    End of period               $998.5       $944.8         $998.5     $944.8
    



    
     BY DIVISION
                        For the Nine Months Ended  For the Twelve Months Ended
                               December    December       December   December
                                2007         2006           2007        2006
    

    
    Managed Investments
      Beginning of period       $403.2       $356.5         $384.8     $362.6
      Net client cash flows      (18.2)        13.3           (7.9)       4.0
      Market performance and
       other                      13.8         15.1           21.9       18.3
      Acquisitions
       (Dispositions), net           -         (0.1)             -       (0.1)
      End of period             $398.8       $384.8         $398.8     $384.8
    


    
    Institutional
      Beginning of period       $496.3       $444.8         $492.1     $425.3
      Net client cash flows       14.2         19.0           16.9       29.5
      Market performance and
       other                      21.9         28.7           23.4       37.7
      Acquisitions
       (Dispositions), net           -         (0.4)             -       (0.4)
      End of period             $532.4       $492.1         $532.4     $492.1
    


    
    Wealth Management
      Beginning of period        $69.0        $66.3          $67.9      $62.9
      Net client cash flows       (3.2)        (1.7)          (2.5)      (1.3)
      Market performance
       and other                   2.8          3.3            3.5        6.3
      Acquisitions
       (Dispositions), net        (1.3)           -           (1.6)         -
      End of period              $67.3        $67.9          $67.3      $67.9
    


    
    Note:  Immaterial differences may result from the rounding of quarterly
            amounts.
    




For further information:

For further information: Investor Relations, F. Barry Bilson, 
+1-410-539-0000, or Media, Mary Athridge, +1-410-454-4421, both of Legg Mason,
 Inc. Web Site: http://www.leggmason.com

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LEGG MASON, INC.

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