LM » Topics » 5. Investments

This excerpt taken from the LM 10-K filed May 29, 2008.

4.  INVESTMENTS

Legg Mason has investments in debt and equity securities that are generally classified as available-for-sale, held-to-maturity and trading as described in Note 1. Investments as of March 31, 2008 and 2007 are as follows:

 

       2008      2007

Investment securities:

     

Trading(1)

   $ 489,081    $ 273,166

Available-for-sale

     7,700      8,297

Other(2)

     1,323      1,298

Total

   $ 498,104    $ 282,761
(1) Includes assets of deferred compensation plans of $207,305 and $191,684, respectively. Fiscal 2008 includes $141,509 of investments issued by structured investment vehicles and other conduit investments acquired from proprietary liquidity funds. The remainder represents seed investments in proprietary products and investments in VIEs.
(2) Includes investments in private equity securities that do not have readily determinable fair values.

 

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Legg Mason uses the specific identification method to determine the cost of a security sold and the amount reclassified from accumulated other comprehensive income into earnings. The proceeds and gross realized gains and losses from sales and maturities of available- for-sale investments are as follows:

 

    Years Ended March 31,  
     2008     2007     2006  

AVAILABLE-FOR-SALE

     

Proceeds

  $ 5,194     $ 21,745     $ 8,074  

Gross realized gains

    34       259       169  

Gross realized losses

    (14 )     (117 )     (8 )

The net unrealized gain (loss) for investment securities classified as trading was ($62,001), $7,141 and ($8,360) for fiscal 2008, 2007 and 2006, respectively. The unrealized loss for fiscal 2008 is primarily related to losses on investments issued by Structured Investment Vehicles (“SIVs”) and other conduit investments acquired from proprietary liquidity funds.

Legg Mason’s available-for-sale investments consist of mortgage-backed securities, U.S. government and agency securities, and equity securities. Gross unrealized gains and losses for investments classified as available-for-sale were $154 and ($82), respectively, as of March 31, 2008, and $407 and ($303), respectively, as of March 31, 2007.

Legg Mason had no investments classified as held-to-maturity as of March 31, 2008 and 2007.

This excerpt taken from the LM 10-K filed May 30, 2007.

4.  INVESTMENTS

Legg Mason has investments in debt and equity securities that are generally classified as available-for-sale, held-to-maturity and trading as described in Note 1. Investments as of March 31, 2007 and 2006 are as follows:

 

       2007      2006

Investment securities:

     

Trading(1)

   $ 273,166    $ 142,206

Held to maturity

          17,255

Available-for-sale

     8,297      7,514

Other(2)

     1,298      1,503

Total

   $ 282,761    $ 168,478

 

(1) Includes assets of deferred compensation plans of $191,684 and $106,170, respectively. The remainder is seed capital and investments in VIEs.
(2) Includes investments in private equity and debt securities that do not have readily determinable fair values.

Legg Mason uses the specific identification method to determine the cost of a security sold and the amount reclassified from accumulated other comprehensive income into earnings. The proceeds and gross realized gains and losses from sales and maturities of available- for-sale investments are as follows:

 

    Years Ended March 31,  
     2007     2006     2005  

AVAILABLE-FOR-SALE

     

Proceeds

  $ 21,745     $ 8,074     $ 10,827  

Gross realized gains

    259       169       6  

Gross realized losses

    (117 )     (8 )     (21 )

The net unrealized gain for investment securities classi-fied as trading was $7,141 for 2007. Net unrealized losses for investment securities classified as trading were $8,360, and $2,564 for 2006 and 2005, respectively.

Legg Mason’s available-for-sale investments consist of mortgage-backed securities, U.S. government and agency securities, and equity securities. The fair value of investments classified as available-for-sale was $8,297 and $7,514, as of March 31, 2007 and 2006, respectively. Gross unrealized gains and losses for investments classified as available-for-sale were $407 and $303, respectively, as of March 31, 2007, and $342 and $383, respectively, as of March 31, 2006.

Legg Mason had no investments classified as held-to-maturity as of March 31, 2007. As of March 31, 2006, the amortized cost of investments classified as held-to-maturity was $17,255. Gross unrealized gains and losses for investment securities classified as held-to-maturity were $72 and $292, respectively, as of March 31, 2006.

This excerpt taken from the LM 10-K filed Jun 9, 2006.

Investments

Legg Mason invests in sponsored mutual funds, limited partnerships, limited liability companies and certain other investment products. The value of such held-to-maturity investments at March 31, 2006 was $17.3 million. Legg Mason has also made certain available-for-sale investments of $7.5 million at March 31, 2006. Declines in market values of these investments may negatively impact Legg Mason’s revenues, net income and comprehensive income.

This excerpt taken from the LM 8-K filed Dec 19, 2005.

5. Investments

 

Trading investments are presented at fair value. The associated unrealized gains and losses are included in the accompanying combined statement of operations. Other investments are carried at cost.

 

At December 31, 2004, Permal Group had the following investments:

 

US Dollars in thousands

 

     2004

Investments - Trading

    

Permal Investment Holdings N.V.

   5 574

Haussmann Holdings N.V.

   118

Permal Asian Holdings N.V.

   1

Permal Emerging Markets Holdings N.V.

   1

Permal European Holdings N.V.

   7

Permal Fx, Financials & Futures Ltd

   71

Permal Japan Holdings N.V.

   1

Permal Japan Opportunities

   1

Alfanar Investment Holdings N.V.

   7

Permal Pan Europe USD

   28

Permal Long Short Global Equity Holdings N.V.

   10 650

Permal (MMF) Lux Global Long / Short

   1 384

Permal (MMF) Multi Strategies

   7 490

Permal Lux Natural Resources

   10 828

PEM

   461

Trading investments in consolidated funds:

    

– Permal Investment Partners, LP

   101 240

– PPEH 2000, LP

   32 255

– Pilot Holdings, LP

   2 885

– PPEO, LP

   29 919

– PPEO II, LP

   11 112
    

Total trading investments

   214 033

Investments - Other

    

Clearbook Financial LLC

   1 000

Caley Center

   288

Synta Pharmaceuticals

   50

Permal East River Fund

   2 041

New Market Partner

   35
    

Total other investments

   3 414
    

Total investments

   217 447

 

This excerpt taken from the LM 10-K filed Jun 3, 2005.

4. Investments

 

Investments include firm investments in marketable and private equity securities and limited partnerships that make private investments. Unrealized gains and losses on marketable equity securities are included in accumulated other comprehensive income (loss) unless an “other than temporary” impairment is determined to exist, in which case the unrealized loss is charged to earnings. Realized gains and losses on marketable equity securities and realized and unrealized gains and losses on private equity securities are included in Other revenue. The Parent Company shares ratably in the income and expenses of its investments in limited partnerships and records its interest on the equity method.

 

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LEGG MASON, INC.

(Parent Company Only)

 

CONDENSED NOTES TO FINANCIAL STATEMENTS — (Continued)

(Amounts in thousands)

 

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