Legg Mason Announces Reduction in Asset Backed Commercial Paper Investments in Two Non-US Liquidity Funds

    BALTIMORE, Dec. 28 /CNW/ -- Legg Mason, Inc. (NYSE:   LM) announced that it
has taken action to reduce the holdings of securities issued by certain asset
backed commercial paper ("ABCP") issuers held by two non-US stable net asset
value liquidity funds managed by a subsidiary.  The company acted to enhance
the liquidity of the two funds in light of current market conditions and the
composition of their portfolios and to provide further support for one of the
fund's portfolio ratings.  Neither fund, nor their shareholders, incurred any
loss in connection with the transactions.
    As of December 21, 2007, Legg Mason's liquidity business had $164 billion
of assets under management.  Of this amount, exposure to Structured Investment
Vehicles ("SIVs"), one type of ABCP, held by liquidity funds has declined
substantially as a result of maturities and sales of certain positions.  As a
result of the actions announced today, the SIV exposure in liquidity funds has
declined to 3.2% of total liquidity assets.  Approximately 1.1% of the
liquidity assets are invested in bank-sponsored SIVs, which have been
announcing their full support for these programs.  While current market
conditions remain challenging, and no guarantees can be given, Legg Mason is
confident that its liquidity funds will continue to maintain a stable net
asset value and their portfolios are appropriately positioned to continue to
satisfy the liquidity needs of investors.
    In a Dublin-domiciled fund, Legg Mason reduced the fund's SIV holdings
through (1) a transaction whereby the fund received cash of $890 million for
certain SIV securities that were transferred to a major banking institution
(the "Bank") in connection with a total return swap between the Bank and the
Company, and (2) Legg Mason purchasing for cash an aggregate of $132 million
in principal amount of SIV securities from the fund.  All of the securities in
question have scheduled maturities ranging from January to November 2008.
Under the total return swap, Legg Mason is responsible for any loss incurred
by the Bank below its purchase price through November 2008 plus a return to
the Bank (net of any interest received on the securities) and would benefit
from any gain realized by the Bank above its purchase price.  Legg Mason has
provided $83 million to collateralize the swap, which may be increased or
decreased based on changes in the market value of the underlying instruments
or upon any maturity of, or default under, any of the underlying instruments.
    In the second non-US fund, Legg Mason has agreed to acquire for cash an
aggregate of $99 million in principal amount of conduit securities issued by
Canadian ABCP issuers.  These conduits are currently undergoing a
restructuring process in Canada.
    Raymond A. "Chip" Mason, the company's chairman, president and chief
executive officer, commented, "This action is consistent with our ongoing
efforts to reduce the ABCP exposure in our liquidity funds in light of current
stresses in the credit markets.  The actions we are announcing today have
meaningfully reduced one fund's ABCP holdings and essentially eliminated the
other fund's holdings.  These actions are further evidence of our continuing
support of our liquidity products in light of current unprecedented market
conditions.  We will continue to monitor our liquidity funds carefully and may
elect to take additional action in the future if we deem it appropriate."
    As a result of all the liquidity fund support it has provided to date
(including the actions announced today), Legg Mason currently expects, based
on current market conditions, to accrue an aggregate expense in the quarter
ending December 31, 2007 of $89.7 million ($22.2 million, or $0.15 per diluted
share, after tax and after giving effect to related adjustments to a revenue
sharing agreement with a subsidiary).
    The Company will also file a Form 8-K with further details of these
    Legg Mason, Inc. is a global asset management firm, with over $1 trillion
in assets under management as of September 30, 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 its Quarterly Reports on Form 10-Q.

For further information:

For further information: Investor Relations: F. Barry Bilson, 
+1-410-539-0000; or Media: Mary Athridge, +1-917-208-1710, both of Legg Mason
Web Site: http://www.leggmason.com

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