10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

[x]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011

OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 1-8529
LEGG MASON, INC.
(Exact name of registrant as specified in its charter)
MARYLAND	52-1200960
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
100 International Drive - Baltimore, MD	21202
(Address of principal executive offices)	(Zip code)
(410) 539-0000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes X No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	X		Accelerated filer
Non-accelerated filer		(Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

139,728,793 shares of common stock as of the close of business on February 2, 2012.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited) 

	December 31, 2011			March 31, 2011
ASSETS
Current Assets
Cash and cash equivalents	$	1,232,594		$	1,375,918
Cash and cash equivalents of consolidated investment vehicles	27,205			37,153
Restricted cash	6,393			9,253
Receivables:
Investment advisory and related fees	310,514			366,571
Other	53,802			29,466
Investment securities	415,267			400,510
Investment securities of consolidated investment vehicles	36,890			82,829
Deferred income taxes	85,656			82,174
Other	56,642			59,700
Other current assets of consolidated investment vehicles	6,583			2,982
Total current assets	2,231,546			2,446,556
Fixed assets, net	246,331			286,705
Intangible assets, net	3,860,587			3,876,775
Goodwill	1,279,319			1,311,652
Investments of consolidated investment vehicles	290,653			312,765
Deferred income taxes	201,580			232,394
Other	259,698			239,210
Other assets of consolidated investment vehicles	1,348			1,699
Total Assets	$	8,371,062		$	8,707,756
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Accrued compensation	$	337,099		$	368,164
Accounts payable and accrued expenses	210,698			207,870
Short-term borrowings	250,000			250,000
Current portion of long-term debt	1,266			792
Other	92,460			87,393
Other current liabilities of consolidated investment vehicles	9,415			54,753
Total current liabilities	900,938			968,972
Deferred compensation	55,754			92,487
Deferred income taxes	247,936			266,193
Other	145,395			90,059
Other liabilities of consolidated investment vehicles	3,998			3,553
Long-term debt	1,125,775			1,201,076
Long-term debt of consolidated investment vehicles	265,478			278,320
Total Liabilities	2,745,274			2,900,660
Commitments and Contingencies (Note 8)
Redeemable Noncontrolling Interests	28,816			36,712
Stockholders’ Equity
Common stock, par value $.10; authorized 500,000,000 shares; issued 139,771,172 shares and 150,218,810 shares, respectively	13,977			15,022
Additional paid-in capital	3,855,743			4,111,095
Employee stock trust	(34,702		)	(34,466		)
Deferred compensation employee stock trust	34,702			34,466
Retained earnings	1,650,713			1,539,984
Appropriated retained earnings of consolidated investment vehicle	12,277			10,922
Accumulated other comprehensive income, net	64,262			93,361
Total Stockholders’ Equity	5,596,972			5,770,384
Total Liabilities and Stockholders’ Equity	$	8,371,062		$	8,707,756

See Notes to Consolidated Financial Statements

2

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Operating Revenues
Investment advisory fees
Separate accounts	$	187,570		$	206,180		$	588,382		$	611,366
Funds	351,598			384,341			1,128,577			1,094,531
Performance fees	6,079			34,592			34,677			76,871
Distribution and service fees	80,709			95,522			258,547			284,150
Other	1,022			1,293			3,800			3,969
Total operating revenues	626,978			721,928			2,013,983			2,070,887
Operating Expenses
Compensation and benefits	254,402			290,423			812,405			841,406
Transition-related compensation	8,818			18,757			32,559			32,444
Total compensation and benefits	263,220			309,180			844,964			873,850
Distribution and servicing	148,275			187,412			489,422			537,946
Communications and technology	43,466			39,399			125,538			118,689
Occupancy	56,401			37,259			125,339			104,426
Amortization of intangible assets	4,869			5,776			15,951			17,253
Other	51,424			45,910			146,228			131,055
Total operating expenses	567,655			624,936			1,747,442			1,783,219
Operating Income	59,323			96,992			266,541			287,668
Other Non-Operating Income (Expense)
Interest income	2,577			2,209			8,614			6,194
Interest expense	(21,831		)	(22,389		)	(65,828		)	(69,639		)
Other income (expense)	255			18,806			(31,844		)	44,704
Other non-operating income (expense) of consolidated investment vehicles, net	7,424			(8,462		)	15,607			(6,356		)
Total other non-operating income (expense)	(11,575		)	(9,836		)	(73,451		)	(25,097		)
Income Before Income Tax Provision	47,748			87,156			193,090			262,571
Income tax provision	12,607			33,792			38,868			87,576
Net Income	35,141			53,364			154,222			174,995
Less: Net income (loss) attributable to noncontrolling interests	7,009			(8,256		)	9,474			(9,891		)
Net Income Attributable to Legg Mason, Inc.	$	28,132		$	61,620		$	144,748		$	184,886
Net Income per Share Attributable to Legg Mason, Inc. Common Shareholders:
Basic	$	0.20		$	0.41		$	1.00		$	1.20
Diluted	$	0.20		$	0.41		$	1.00		$	1.20
Weighted Average Number of Shares Outstanding:
Basic	140,053			149,980			144,363			153,817
Diluted	140,082			150,972			144,428			154,548
Dividends Declared per Share	$	0.08		$	0.06		$	0.24		$	0.14

See Notes to Consolidated Financial Statements

3

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
Net Income	$	35,141		$	53,364		$	154,222		$	174,995
Other comprehensive income:
Foreign currency translation adjustment	3,309			7,760			(29,357		)	27,733
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses), net of tax provision of $(2), $(54), $167 and $3, respectively	(3		)	(80		)	250			4
Reclassification adjustment for (gains) losses included in net income	4			3			8			—
Net unrealized gains (losses) on investment securities	1			(77		)	258			4
Total other comprehensive income (loss)	3,310			7,683			(29,099		)	27,737
Comprehensive Income	38,451			61,047			125,123			202,732
Less: Comprehensive income (loss) attributable to noncontrolling interests	7,009			(8,256		)	9,474			(9,891		)
Comprehensive Income Attributable to Legg Mason, Inc.	$	31,442		$	69,303		$	115,649		$	212,623

See Notes to Consolidated Financial Statements

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’ EQUITY

(Dollars in thousands)

(Unaudited)

	Nine Months Ended December 31,
	2011			2010
COMMON STOCK
Beginning balance	$	15,022		$	16,144
Stock options and other stock-based compensation	7			60
Deferred compensation employee stock trust	6			6
Deferred compensation, net	119			145
Exchangeable shares	—			110
Equity Units exchanged	183			—
Shares repurchased and retired	(1,360		)	(1,257		)
Ending balance	13,977			15,208
SHARES EXCHANGEABLE INTO COMMON STOCK
Beginning balance	—			2,760
Exchanges	—			(2,760		)
Ending balance	—			—
ADDITIONAL PAID-IN CAPITAL
Beginning balance	4,111,095			4,447,612
Stock options and other stock-based compensation	13,465			28,958
Deferred compensation employee stock trust	1,901			1,928
Deferred compensation, net	25,357			26,020
Exchangeable shares	—			2,650
Equity Units exchanged	102,831			36,312
Shares repurchased and retired	(398,906		)	(375,167		)
Ending balance	3,855,743			4,168,313
EMPLOYEE STOCK TRUST
Beginning balance	(34,466		)	(33,095		)
Shares issued to plans	(1,907		)	(1,749		)
Distributions and forfeitures	1,671			448
Ending balance	(34,702		)	(34,396		)
DEFERRED COMPENSATION EMPLOYEE STOCK TRUST
Beginning balance	34,466			33,095
Shares issued to plans	1,907			1,749
Distributions and forfeitures	(1,671		)	(448		)
Ending balance	34,702			34,396
RETAINED EARNINGS
Beginning balance	1,539,984			1,316,981
Net income attributable to Legg Mason, Inc.	144,748			184,886
Dividends declared	(34,019		)	(21,930		)
Ending balance	1,650,713			1,479,937
APPROPRIATED RETAINED EARNINGS OF CONSOLIDATED INVESTMENT VEHICLE
Beginning balance	10,922			—
Cumulative effect of change in accounting principle	—			24,666
Net gain (loss) reclassified to appropriated retained earnings	1,355			(11,832		)
Ending balance	12,277			12,834
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET
Beginning balance	93,361			58,227
Unrealized holding gains on investment securities, net of tax	258			4
Foreign currency translation adjustment	(29,357		)	27,733
Ending balance	64,262			85,964
TOTAL STOCKHOLDERS’ EQUITY	$	5,596,972		$	5,762,256

See Notes to Consolidated Financial Statements

LEGG MASON, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended
	December 31,
	2011			2010
Cash Flows from Operating Activities
Net Income	$	154,222		$	174,995
Adjustments to reconcile Net Income to net cash provided by operations:
Depreciation and amortization	75,160			77,975
Imputed interest for 2.5% convertible senior notes	29,023			27,248
Accretion and amortization of securities discounts and premiums, net	3,464			3,453
Stock-based compensation	38,436			42,325
Net losses (gains) on investments	39,209			(45,189		)
Net losses (gains) of consolidated investment vehicles	(5,809		)	5,238
Deferred income taxes	13,353			49,624
Other	2,709			4,440
Decrease (increase) in assets:
Investment advisory and related fees receivable	55,993			(22,614		)
Net purchases of trading investments	(68,854		)	(42,129		)
Other receivables	(10,877		)	(23,972		)
Other assets	13,453			259
Increase (decrease) in liabilities:
Accrued compensation	(30,188		)	(45,473		)
Deferred compensation	(36,733		)	(9,135		)
Accounts payable and accrued expenses	2,980			(251		)
Other liabilities	34,041			(35,271		)
Net increase in operating assets and liabilities of consolidated investment vehicles, including cash	24,098			33,274
Cash Provided by Operating Activities	333,680			194,797
Cash Flows Provided by (Used for) Investing Activities
Payments for fixed assets	(21,518		)	(20,877		)
Restricted cash	6,995			—
Purchases of investment securities	(4,509		)	(7,277		)
Proceeds from sales and maturities of investment securities	4,883			8,150
Purchases of investments by consolidated investment vehicles	(127,275		)	(102,301		)
Proceeds from sales and maturities of investments by consolidated investment vehicles	144,679			106,539
Cash Provided by (Used for) Investing Activities	3,255			(15,766		)
Cash Flows Used for Financing Activities
Third-party distribution financing, net	—			(1,639		)
Repayment of principal on long-term debt	(811		)	(3,323		)
Repurchases of common stock	(400,266		)	(376,424		)
Issuance of common stock	1,931			13,499
Dividends paid	(32,384		)	(17,633		)
Net repayments of consolidated investment vehicles	(18,309		)	(7,912		)
Net (redemptions/distributions paid to)/subscriptions received from noncontrolling interest holders	(16,016		)	776
Cash Used for Financing Activities	(465,855		)	(392,656		)
Effect of Exchange Rate Changes on Cash	(14,404		)	9,269
Net Decrease in Cash and Cash Equivalents	(143,324		)	(204,356		)
Cash and Cash Equivalents at Beginning of Period	1,375,918			1,465,888
Cash and Cash Equivalents at End of Period	$	1,232,594		$	1,261,532

See Notes to Consolidated Financial Statements

4

LEGG MASON, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts, unless otherwise noted)

December 31, 2011

(Unaudited)

1. Interim Basis of Reporting

The accompanying unaudited interim consolidated financial statements of Legg Mason, Inc. and its subsidiaries (collectively “Legg Mason”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The interim consolidated financial statements have been prepared using the interim basis of reporting and, as such, reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of interim consolidated financial statements requires management to make assumptions and estimates that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates and the differences could have a material impact on the interim consolidated financial statements.

The nature of our business is such that the results of any interim period are not necessarily indicative of the results of a full year. The fiscal year-end condensed balance sheet was derived from audited financial statements and, in accordance with interim financial information standards, does not include all disclosures required by U.S. GAAP for annual financial statements.  Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation.

The information contained in the interim consolidated financial statements should be read in conjunction with our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Unless otherwise noted, all per share amounts for the nine months endedDecember 31, 2010, include both common shares of Legg Mason and shares issued in connection with the acquisition of Legg Mason Canada Inc., which were exchangeable into common shares of Legg Mason on a one-for-one basis at any time. During the quarter ended June 30, 2010, all outstanding exchangeable shares were converted into shares of Legg Mason common stock.

Terms such as “we,” “us,” “our,” and “company” refer to Legg Mason.

2. Significant Accounting Policies

Consolidation

In accordance with financial accounting standards on consolidation, Legg Mason consolidates and separately identifies certain sponsored investment vehicles, the most significant of which is a collateralized loan obligation entity (“CLO”).  The consolidation of these investment vehicles has no impact on Net Income Attributable to Legg Mason, Inc. and does not have a material impact on Legg Mason's consolidated operating results.  Legg Mason also holds investments in certain consolidated sponsored investment funds and the change in the value of these investments, which is recorded in Other non-operating income (expense), is reflected in its Net Income and allocated to noncontrolling interests.  Also, see Note 12 for additional information regarding the consolidation of investment vehicles.

Business Realignment and Goodwill

In connection with a realignment of its executive management team during fiscal 2011, Legg Mason no longer manages its business in two operating segments (divisions), and during the June 2011 quarter, eliminated the previous separation of the Americas and International divisions and combined them into one operating segment, Global Asset Management. Legg Mason believes this structure allows the Company to function as a global organization with a single purpose. Internal management reporting has been modified consistent with this realignment such that discrete financial information regularly received by the chief operating decision maker, our Chief Executive Officer, is at the consolidated Global Asset Management business level. As a result, the former Americas and International operating segments are no longer our reporting units, and subsequently, goodwill is recorded and evaluated at one Global Asset Management reporting unit level.

Restructuring Costs

In May 2010, Legg Mason's management committed to a plan to streamline its business model as further described in Note 11. The costs in connection with this plan primarily relate to employee termination benefits, incentives to retain employees during the transition period, charges for consolidating leased office space, and contract termination costs. Termination benefits, including severance, and retention incentives are recorded as Transition-related compensation in the Consolidated Statements of Income. These compensation items require employees to provide future service and are therefore expensed ratably over the required service period. Expense recognition of contractual lease payments may be accelerated when the related space is either permanently abandoned or subleased at a loss. Contract termination and other costs are expensed when incurred.

Income Taxes

During the quarter ended September 30, 2010, the United Kingdom ("U.K.") Finance Bill 2010 was enacted, which reduced the main U.K. corporate tax rate from 28% to 27%. In July 2011, The U.K. Finance Act 2011 (the "Act") was enacted. The Act further reduced the main U.K. corporate tax rate from 27% to 26% effective April 1, 2011, and from 26% to 25% effective April 1, 2012. The reductions in the U.K. corporate tax rate resulted in tax benefits of $18,268 and $8,878, recognized in the quarters ended September 30, 2011 and 2010, respectively, as a result of the revaluation of deferred tax assets and liabilities at the new rates. As a result of the revaluation adjustments, the effective tax rate for the nine months ended December 31, 2011, was reduced by 9.5 percentage points. Similarly, the effective tax rate for the nine months ended December 31, 2010, was reduced by 3.4 percentage points.

Noncontrolling interests

Noncontrolling interests related to certain consolidated investment vehicles ("CIVs") are classified as redeemable noncontrolling interests since investors in these funds may request withdrawals at any time.  Redeemable noncontrolling interests as of and for the nine months endedDecember 31, 2011 and 2010, were as follows:

	Nine Months Ended
	December 31,
	2011			2010
Balance, beginning of period	$	36,712		$	29,577
Net income attributable to redeemable noncontrolling interests	8,120			1,941
Net (redemptions/distributions paid to)/subscriptions received from noncontrolling interest holders	(16,016		)	776
Balance, end of period	$	28,816		$	32,294

Recent Accounting Developments

In December 2011, the Financial Accounting Standards Board ("FASB") updated the guidance on disclosures for offsetting assets and liabilities to require both gross and net information about instruments and transactions, including derivatives, repurchase and reverse repurchase and other arrangements that are eligible for offset in the balance sheet. The disclosures will be effective for Legg Mason in fiscal 2014, and are not expected to have a material impact on Legg Mason's consolidated financial statements.

In September 2011, the FASB updated the guidance on the annual goodwill test for impairment. The update permits companies to assess qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the currently required quantitative fair value assessment. This update will be effective for Legg Mason in fiscal 2013, if not adopted early.  This update is not expected to have a material effect on its recorded goodwill, but Legg Mason is still evaluating its adoption.

3. Fair Values of Assets and Liabilities

The disclosures below include details of Legg Mason’s assets and liabilities that are measured at fair value, excluding assets and liabilities of CIVs. See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the assets and liabilities of CIVs that are measured at fair value.

The fair values of financial assets and (liabilities) of the Company were determined using the following categories of inputs:

	As of December 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	749,342		$	—	$	—	$	749,342
Time deposits	—			45,150		—		45,150
Total cash equivalents	749,342			45,150		—		794,492
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	94,875			—		—		94,875
Trading proprietary fund products and other investments(3)	169,147			79,293		—		248,440
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	14,689			46,203		11,060		71,952
Total current investments	278,711			125,496		11,060		415,267
Available-for-sale investment securities	2,090			9,234		12		11,336
Investments in partnerships, LLCs and other	812			5,107		28,240		34,159
Equity method investments in partnerships and LLCs(4)	1,289			—		150,302		151,591
Derivative assets:
Currency and market hedges	10,204			—		—		10,204
Other investments	—			—		121		121
	$	1,042,448		$	184,987	$	189,735	$	1,417,170
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(1,402	)	$	—	$	—	$	(1,402	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	912,951		$	—	$	—	$	912,951
Time deposits	—			92,877		—		92,877
Total cash equivalents	912,951			92,877		—		1,005,828
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	120,107			—		—		120,107
Trading proprietary fund products and other investments(3)	90,123			102,562		11,378		204,063
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	15,645			48,528		12,167		76,340
Total current investments	225,875			151,090		23,545		400,510
Available-for-sale investment securities	2,666			8,622		12		11,300
Investments in partnerships, LLCs and other	—			—		22,167		22,167
Equity method investments in partnerships and LLCs(4)	1,420			—		153,931		155,351
Derivative assets:
Currency and market hedges	1,169			—		—		1,169
Other investments	—			—		270		270
	$	1,144,081		$	252,589	$	199,925	$	1,596,595
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(3,120	)	$	—	$	—	$	(3,120	)

(1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1.  Cash investments in time deposits are measured at amortized cost, which approximates fair value because of the short time between the purchase of the instrument and its expected realization, and are classified as Level 2.

(2) Primarily mutual funds where there is minimal market risk to the Company as any change in value is primarily offset by an adjustment to compensation expense and related deferred compensation liability.

(3) Trading proprietary fund products and other investments primarily represent mutual funds that are invested approximately 53% and 47% in equity and debt securities as of December 31, 2011, respectively, and were invested approximately 60% and 40% in equity and debt securities as of March 31, 2011, respectively.

(4) Substantially all of our equity method investments are investment companies which record their underlying investments at fair value.  Fair value is measured using Legg Mason's share of the investee's underlying net income or loss, which is predominately representative of fair value adjustments in the investments held by the equity method investee.

(5) Includes investments under the equity method (which approximates fair value) relating to long-term incentive compensation plans of $46,203 and $48,528 as of December 31, 2011, and March 31, 2011, respectively, and proprietary fund products and other investments of $25,749 and $27,812 as of December 31, 2011, and March 31, 2011, respectively, which are classified as Investment securities on the Consolidated Balance Sheets.

In accordance with new accounting guidance adopted during the three months ended June 30, 2011, the changes in financial assets measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended December 31, 2011, are now presented on a gross basis in the tables below:

	Value as of September 30, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	179	$	—	$	(165	)	$	—		$	—	$	(14	)	$	—
Equity method investments in proprietary fund products	11,605		—		—			—			—		(545		)	11,060
Investments in partnerships, LLCs and other	28,469		—		—			(10		)	—		(219		)	28,240
Equity method investments in partnerships and LLCs	160,662		660		(1,869		)	(1,370		)	—		(7,781		)	150,302
Other investments	133		—		—			—			—		—			133
	$	201,048	$	660	$	(2,034	)	$	(1,380	)	$	—	$	(8,559	)	$	189,735

	Value as of September 30, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	18,063	$	(2,500	)	$	350	$	1,133		$	17,046
Equity method investments in proprietary fund products	11,889		—			—		463			12,352
Investments in partnerships, LLCs and other	23,050		(99		)	—		(1,742		)	21,209
Equity method investments in partnerships and LLCs	154,418		(437		)	—		4,583			158,564
Other investments	1,476		(4,254		)	—		2,875			97
	$	208,896	$	(7,290	)	$	350	$	7,312		$	209,268

	Value as of March 31, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	11,378	$	—	$	(11,906	)	$	—		$	—	$	528		$	—
Equity method investments in proprietary fund products	12,167		—		—			—			—		(1,107		)	11,060
Investments in partnerships, LLCs and other	22,167		6,932		—			(119		)	—		(740		)	28,240
Equity method investments in partnerships and LLCs	153,931		26,164		(5,162		)	(14,067		)	—		(10,564		)	150,302
Other investments	282		—		—			(159		)	—		10			133
	$	199,925	$	33,096	$	(17,068	)	$	(14,345	)	$	—	$	(11,873	)	$	189,735

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	22,459	$	(7,500	)	$	350	$	1,737		$	17,046
Equity method investments in proprietary fund products	12,090		—			—		262			12,352
Investments in partnerships, LLCs and other	23,049		(102		)	—		(1,738		)	21,209
Equity method investments in partnerships and LLCs	98,968		40,084			—		19,512			158,564
Other investments	1,464		(4,254		)	—		2,887			97
	$	158,030	$	28,228		$	350	$	22,660		$	209,268

Realized and unrealized gains and losses recorded for Level 3 investments are included in Other income (expense) on the Consolidated Statements of Income.  Total unrealized (losses) gains for Level 3 investments relating only to those assets still held at the reporting date were $(8,521) and $2,043 for the three months ended December 31, 2011 and 2010, respectively. Total unrealized (losses) gains for Level 3 investments relating only to those assets still held at the reporting date were $(13,940) and $6,867 for the nine months endedDecember 31, 2011 and 2010, respectively.

There were no significant transfers between Levels 1 and 2 during the nine months ended December 31, 2011 and 2010.

As a practical expedient, Legg Mason relies on the net asset value of certain investments as their fair value.  The net asset values that have been provided by the investees have been derived from the fair values of the underlying investments as of the reporting date.  The following table summarizes, as of December 31, 2011, the nature of these investments and any related liquidation restrictions or other factors which may impact the ultimate value realized.

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Funds-of-hedge funds	Global, fixed income, macro, long/short equity, natural resources, systematic, emerging market, European hedge	$	55,570	(1)	n/a		n/a
Hedge funds	Fixed income - developed market, event driven, fixed income - hedge, relative value arbitrage, European hedge	25,222		(2)	$	20,000	n/a
Private equity funds	Long/short equity	28,300		(2)	5,983		Up to 8 years
Private fund	Fixed income, residential and commercial mortgage-backed securities	73,455		(2) (3)	n/a		7 years, subject to two one-year extensions
Other	Various	2,292		(2)	n/a		Various (4)
Total		$	184,839		$	25,983

n/a-not applicable

(1) 68% monthly redemption; 32% quarterly redemption, of which 38% is subject to two-year lock-up.

(2) Liquidations are expected over the remaining term.

(3) Redemptions prohibited until November 2012.

(4) 4% remaining term of less than one year; 96% 20-year remaining term.

There are no current plans to sell any of these investments.

4. Fixed Assets

Fixed assets consist of equipment, software and leasehold improvements.  Equipment consists primarily of communications and technology hardware and furniture and fixtures.  Software includes purchased software and internally developed software. Fixed assets are reported at cost, net of accumulated depreciation and amortization.  The following table reflects the components of fixed assets as of:

	December 31, 2011			March 31, 2011
Equipment	$	157,489		$	200,696
Software	206,007			224,026
Leasehold improvements	243,683			280,277
Total cost	607,179			704,999
Less: accumulated depreciation and amortization	(360,848		)	(418,294		)
Fixed assets, net	$	246,331		$	286,705

Depreciation and amortization expense included in operating income was $25,246 and $19,785 for the three months ended December 31, 2011 and 2010, respectively, and $59,209 and $60,722 for the nine months endedDecember 31, 2011 and 2010, respectively. The decrease in the total cost of fixed assets is substantially due to disposals in conjunction with the business streamlining initiative. See details in Note 11.

5. Intangible Assets and Goodwill

The following table reflects the components of intangible assets as of:

	December 31, 2011			March 31, 2011
Amortizable asset management contracts
Cost	$	206,928		$	208,454
Accumulated amortization	(169,569		)	(155,136		)
Net	37,359			53,318
Indefinite–life intangible assets
Fund management contracts	3,753,428			3,753,657
Trade names	69,800			69,800
	3,823,228			3,823,457
Intangible assets, net	$	3,860,587		$	3,876,775

Legg Mason completed its annual impairment tests of goodwill and indefinite-life intangible assets and determined that there was no impairment in the value of these assets as of December 31, 2011. As a result of increased uncertainty regarding future market conditions, assessing the value of the reporting unit and intangible assets is increasingly difficult, and requires management to exercise significant judgment. Specific to the $2,502 million of indefinite-life domestic mutual fund contracts acquired in the Citigroup Asset Management acquisition, its current assessed fair value exceeds its carrying value by 5%. Given the current uncertainty regarding future market conditions, should market performance, flows, or related assets under management levels decrease in the near term such that cash flow projections deviate from current projections, it is reasonably possible that the asset could be deemed to be impaired by a material amount.

As of December 31, 2011, management contracts are being amortized over a weighted-average life of 3.2 years. Estimated future amortization expense is as follows:

Remaining 2012	$	3,625
2013	14,085
2014	11,902
2015	2,987
2016	2,731
Thereafter	2,029
Total	$	37,359

The change in the carrying value of goodwill for the nine months ended December 31, 2011, is summarized below:

	Gross Book Value			Accumulated Impairment			Net Book Value
Balance as of March 31, 2011	$	2,473,552		$	(1,161,900	)	$	1,311,652
Impact of excess tax basis amortization	(15,993		)	—			(15,993		)
Other, including changes in foreign exchange rates	(16,340		)	—			(16,340		)
Balance as of December 31, 2011	$	2,441,219		$	(1,161,900	)	$	1,279,319

6. Long-Term Debt and Equity Units

The disclosures below include details of Legg Mason’s debt, excluding the debt of CIVs.  See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the debt of CIVs.

The accreted value of long-term debt consists of the following:

	December 31, 2011						March 31, 2011
	Current Accreted Value		Unamortized Discount		Maturity Amount		Accreted Value
2.5% convertible senior notes	$	1,116,955	$	133,045	$	1,250,000	$	1,087,932
5.6% senior notes from Equity Units	—		—		—		103,039
Other term loans	10,086		—		10,086		10,897
Subtotal	1,127,041		133,045		1,260,086		1,201,868
Less: current portion	1,266		—		1,266		792
Total	$	1,125,775	$	133,045	$	1,258,820	$	1,201,076

As of December 31, 2011, the aggregate maturities of long-term debt, based on their contractual terms, are as follows:

Remaining 2012	$	203
2013	1,281
2014	1,333
2015	1,251,386
2016	5,883
Thereafter	—
Total	$	1,260,086

At December 31, 2011, the estimated fair value of long-term debt was approximately $1,218,596.

Legg Mason is accreting the carrying value of the 2.5% convertible senior notes to the principal amount at maturity using an interest rate of 6.5% (the effective borrowing rate for non-convertible debt at the time of issuance) over its expected life of seven years, resulting in interest expense of approximately $9,793 and $9,194 for the three months ended December 31, 2011 and 2010, respectively, and $29,023 and $27,248 for the nine months ended December 31, 2011 and 2010, respectively. The amount by which the notes’ if-converted value exceeds the accreted value, excluding accrued interest, using a current interest rate of 4.0% as of December 31, 2011, is approximately $91,555 (representing a potential loss).

The $103,039 of outstanding debt on the remaining 5.6% senior notes from Equity Units was retired on June 30, 2011, as part of a remarketing. Concurrently, Legg Mason issued 1,830 shares of Legg Mason common stock upon the exercise of the purchase contracts from the Equity Units.

7.  Stock-Based Compensation

Legg Mason’s stock-based compensation includes stock options, employee stock purchase plans, restricted stock awards and units, performance shares payable in common stock, and deferred compensation payable in stock.  Shares available for issuance under the active equity incentive plan as of December 31, 2011, were 13,081. On July 26, 2011, the equity incentive plan was amended to increase the available shares by 6,500. Options under Legg Mason’s employee stock plans have been granted at prices not less than 100% of the fair market value. Options are generally exercisable in equal increments over four to five years and expire within eight to ten years from the date of grant.

Compensation expense relating to stock options for the three months ended December 31, 2011 and 2010, was $3,511 and $6,855, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $11,192 and $15,936, respectively.

Stock option transactions during the nine months endedDecember 31, 2011 and 2010, respectively, are summarized below:

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average exercise price per share		Number of shares		Weighted-average exercise price per share
Options outstanding at March 31	5,419		$	59.82	6,054		$	57.75
Granted	810		33.99		711		33.11
Exercised	(14	)	26.41		(597	)	22.07
Canceled/forfeited	(375	)	48.84		(687	)	48.73
Options outstanding at December 31	5,840		$	57.03	5,481		$	59.57

At December 31, 2011, options were exercisable for 3,415 shares with a weighted-average exercise price of $72.70 and a weighted-average remaining contractual life of 3.2 years.  Unamortized compensation cost related to unvested options (2,425 shares) at December 31, 2011, of $25,821 is expected to be recognized over a weighted-average period of 1.8 years.

The weighted-average fair value of option grants during the nine months endedDecember 31, 2011 and 2010, using the Black-Scholes option-pricing model, was $13.13 and $14.35 per share, respectively.

The following weighted-average assumptions were used in the model for grants in fiscal 2012 and 2011:

	Nine Months Ended December 31,
	2011		2010
Expected dividend yield	1.39	%	1.39	%
Risk-free interest rate	1.95	%	2.38	%
Expected volatility	47.16	%	52.78	%
Expected lives (in years)	5.12		5.18

Compensation expense relating to restricted stock and restricted stock units for the three months ended December 31, 2011 and 2010, was $8,876 and $9,883, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $25,484 and $25,951, respectively.

Restricted stock and restricted stock unit transactions during the nine months endedDecember 31, 2011 and 2010, respectively, are summarized below:

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average grant date value		Number of shares		Weighted-average grant date value
Unvested shares at March 31	2,637		$	33.01	1,605		$	34.80
Granted	1,315		33.79		1,786		32.95
Vested	(806	)	32.44		(475	)	36.39
Canceled/forfeited	(55	)	32.85		(205	)	29.82
Unvested shares at December 31	3,091		$	33.49	2,711		$	33.68

Unamortized compensation cost related to unvested restricted stock and restricted stock unit awards at December 31, 2011, of $69,175 is expected to be recognized over a weighted-average period of 1.8 years.

Compensation expense relating to the stock purchase plan and deferred compensation payable in stock for the three months ended December 31, 2011 and 2010, was $101 and $100, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $385 and $438, respectively.

During the nine months ended December 31, 2011 and 2010, non-employee directors were granted 12 and 17 restricted stock units and 31 and 31 shares of common stock at a fair value of $1,375 and $1,425, respectively. As of December 31, 2011 and 2010, non-employee directors held 193 and 220 stock options, respectively, which are included in the outstanding options presented in the table above. As of December 31, 2011 and 2010, non-employee directors held 75 and 62 restricted stock units, respectively, which vest on the grant date and are therefore not included in the unvested shares of restricted stock and restricted stock units in the table above.  During the nine months ended December 31, 2011, non-employee directors did not exercise any stock options and no restricted stock units were distributed. During the nine months ended December 31, 2010, non-employee directors exercised 9 stock options and 7 restricted stock units were distributed. During the nine months ended December 31, 2011 and 2010, there were 27 and 59 non-employee director stock options canceled or forfeited, respectively.

During the June 2011 quarter, Legg Mason established a long-term incentive plan (the "LTIP") under its equity incentive plan, which provides an additional element of compensation that is based on performance. Under the LTIP, executive officers were granted cash value performance units in the June 2011 quarter that will vest at the end of a three year period based upon Legg Mason's cumulative adjusted earnings per share over the period. Awards granted under the LTIP may be settled in cash and/or shares of Legg Mason common stock, at the discretion of Legg Mason. The estimated amount of the award is being expensed over the vesting period based on a probability assessment of the expected outcome under the LTIP provisions.

As part of the Company's restructuring initiative, as further discussed in Note 11, the employment of certain recipients of stock option and restricted stock awards has been terminated. The termination benefits extended to these employees included accelerated vesting of any portion of their equity incentive awards that would not have vested by January 1, 2012, under the original terms of the awards. During fiscal 2011, the portion of the awards subject to accelerated vesting were revalued and are being expensed over the new vesting period, the impact of which is included above.

8. Commitments and Contingencies

Legg Mason leases office facilities and equipment under non-cancelable operating leases and also has multi-year agreements for certain services. These leases and service agreements expire on varying dates through fiscal 2025. Certain leases provide for renewal options and contain escalation clauses providing for increased rentals based upon maintenance, utility and tax increases.

As of December 31, 2011, the minimum annual aggregate rentals under operating leases and service agreements are as follows:

Remaining 2012	$	42,421
2013	141,197
2014	114,028
2015	100,883
2016	89,933
Thereafter	521,245
Total	$	1,009,707

The minimum rental commitments shown above have not been reduced by $146,591 for minimum sublease rentals to be received in the future under non-cancelable subleases, of which approximately 52% is due from one counterparty.  If a sub-tenant defaults on a sublease, Legg Mason may incur operating charges to reflect expected future sublease rentals at reduced amounts, as a result of the current commercial real estate market.

The above minimum rental commitments include $892,353 in real estate and equipment leases and $117,354 in service and maintenance agreements.

Included in the table above is $36,092 in commitments related to space that has been permanently abandoned in connection with the business streamlining initiative discussed in Note 11.  A related lease liability for certain of these properties and other subleased space reflects the present value of the excess lease obligations over estimated sublease income and related costs for which $13,886 and $3,054 of expense was recognized in the nine months ended December 31, 2011 and 2010, respectively, with the majority of these expenses being incurred in the three month periods then ended. 

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As of December 31, 2011, Legg Mason had commitments to invest approximately $38,959 in investment vehicles. These commitments are expected to be funded as required through the end of the respective investment periods through fiscal 2018.

In the normal course of business, Legg Mason enters into contracts that contain a variety of representations and warranties and that provide general indemnifications. Legg Mason’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against Legg Mason that have not yet occurred.

Legg Mason has been the subject of customer complaints and has also been named as a defendant in various legal actions arising primarily from securities brokerage, asset management and investment banking activities, including certain class actions, which primarily allege violations of securities laws and seek unspecified damages, which could be substantial. In the normal course of its business, Legg Mason has also received subpoenas and is currently involved in governmental and self-regulatory agency inquiries, investigations and, from time to time, proceedings involving asset management activities. In accordance with guidance for accounting for contingencies, Legg Mason has established provisions for estimated losses from pending complaints, legal actions, investigations and proceedings when it is probable that a loss has been incurred and a reasonable estimate of loss can be made.

In a transaction with Citigroup in December 2005, Legg Mason transferred to Citigroup the subsidiaries that constituted its Private Client/Capital Markets ("PC/CM") businesses, thus transferring the entities that would have primary liability for most of the customer complaint, litigation and regulatory liabilities and proceedings arising from those businesses. However, as part of that transaction, Legg Mason agreed to indemnify Citigroup for most customer complaint, litigation and regulatory liabilities of Legg Mason's former PC/CM businesses that result from pre-closing events. While the ultimate resolution of these matters cannot be currently determined based on current information, after consultation with legal counsel, management believes that any accrual or range of reasonably possible losses as of December 31, 2011 or 2010, is not material. Similarly, although Citigroup transferred to Legg Mason the entities that would be primarily liable for most customer complaint, litigation and regulatory liabilities and proceedings of the Citigroup Asset Management ("CAM") business, Citigroup has agreed to indemnify Legg Mason for most customer complaint, litigation and regulatory liabilities of the CAM business that result from pre-closing events.

The ultimate resolution of other matters cannot be currently determined, and in the opinion of management, after consultation with legal counsel, Legg Mason believes that the resolution of these actions will not have a material effect on Legg Mason’s financial condition. Due in part to the preliminary nature of certain of these matters, Legg Mason is currently unable to estimate the amount or range of potential losses from these matters and the results of operations and cash flows could be materially affected during a period in which a matter is ultimately resolved. In addition, the ultimate costs of litigation-related charges can vary significantly from period-to-period, depending on factors such as market conditions, the size and volume of customer complaints and claims, including class action suits, and recoveries from indemnification, contribution or insurance reimbursement.

One of Legg Mason's asset management subsidiaries was named as the defendant in a lawsuit filed by a former institutional client in late August 2011. The complaint alleges breach of contract and breach of fiduciary duty arising from investments in the former client's account allegedly being inconsistent with the account's objectives, and seeks damages in excess of $90,000. Legg Mason believes that the claims are without merit and intends to defend the matter vigorously. During the quarter, the subsidiary filed a motion to dismiss, which has not yet been ruled upon by the court. Discovery in the case is ongoing. Because of the preliminary status of the matter, Legg Mason cannot estimate the possible loss or range of loss from this matter, if any. In addition, although Legg Mason believes that this matter would likely be covered by insurance policies that may substantially mitigate the amount of any eventual loss, as is not unusual with litigation at this point in the process, there can be no assurance that the action will not have a material effect on Legg Mason's financial position, results of operations or cash flows.

9. Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income or loss attributable to Legg Mason, Inc. by the weighted-average number of shares outstanding. The calculation of weighted-average shares includes common shares, shares exchangeable into common stock and unvested restricted shares deemed to be participating securities. Diluted EPS is similar to basic EPS, but adjusts for the effect of potentially issuable common shares, except when inclusion is antidilutive.

In June 2011, Legg Mason issued 1,830 shares of common stock upon the exercise of purchase contracts on the remaining Equity Units. Of these shares, 1,830 and 1,231 shares are included in weighted-average shares outstanding for the three and nine months ended December 31, 2011, respectively.

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Legg Mason issued 1,303 shares of restricted stock during the nine months ended December 31, 2011. No shares of restricted stock were issued during the three months ended December 31, 2011, related to annual incentive awards. Of the shares issued in the nine month period, 1,303 and 1,075 shares are included in weighted-average shares outstanding for the three and nine months ended December 31, 2011, respectively.

The following table presents the computations of basic and diluted EPS:

	Three Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	140,053		140,053		149,980			149,980
Potential common shares:
Employee stock options	—		29		—			231
Shares related to deferred compensation	—		—		—			761
Total weighted-average diluted shares	140,053		140,082		149,980			150,972
Net Income	$	35,141	$	35,141	$	53,364		$	53,364
Less: Net income (loss) attributable to noncontrolling interests	7,009		7,009		(8,256		)	(8,256		)
Net Income Attributable to Legg Mason, Inc.	$	28,132	$	28,132	$	61,620		$	61,620
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	0.20	$	0.20	$	0.41		$	0.41

	Nine Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	144,363		144,363		153,817			153,817
Potential common shares:
Employee stock options	—		65		—			200
Shares related to deferred compensation	—		—		—			531
Total weighted-average diluted shares	144,363		144,428		153,817			154,548
Net Income	$	154,222	$	154,222	$	174,995		$	174,995
Less: Net income (loss) attributable to noncontrolling interests	9,474		9,474		(9,891		)	(9,891		)
Net Income Attributable to Legg Mason, Inc.	$	144,748	$	144,748	$	184,886		$	184,886
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	1.00	$	1.00	$	1.20		$	1.20

During the nine months ended December 31, 2011, Legg Mason purchased and retired 13,597 shares of its common stock for $400,266 through open market purchases. No shares of common stock were purchased and retired during the three months ended December 31, 2011. The repurchases in the nine month period reduced weighted-average shares outstanding for the three and nine months ended December 31, 2011, by 13,597 shares and 8,432 shares, respectively.

The diluted EPS calculations for the three and nine months ended December 31, 2011 and 2010, exclude any potential common shares issuable under the convertible 2.5% senior notes and, for the three and nine months ended December 31, 2010, any potential common shares issuable under the convertible Equity Units, because the market price of Legg Mason common stock had not exceeded the price at which conversion under either instrument would be dilutive using the treasury stock method.

Options to purchase 5,760 and 5,162 shares for the three months endedDecember 31, 2011 and 2010, respectively, and 7,563 and 5,256 shares for the nine months endedDecember 31, 2011 and 2010, respectively, were not included in the computation of diluted earnings per share because the presumed per share proceeds from exercising such options, including related unamortized cost and income tax benefits, if any, exceed the average price of the common shares for the period and therefore the options are deemed antidilutive.

7

10. Derivatives and Hedging

The disclosures below detail Legg Mason’s derivatives and hedging excluding the derivatives and hedging of CIVs. See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the derivatives and hedging of CIVs.

Legg Mason uses currency forwards to economically hedge the risk of movements in exchange rates, primarily between the U.S. dollar, euro, Australian dollar, Canadian dollar, Brazilian real, Singapore dollar, Japanese yen, and Great Britain pound. In the Consolidated Balance Sheets, Legg Mason nets the fair value of certain foreign currency forwards executed with the same counterparty where Legg Mason has both the legal right and intent to settle the contracts on a net basis. Legg Mason has not designated any derivatives as hedging instruments during the periods ended December 31, 2011 and 2010.

Legg Mason uses market hedges on certain seed capital investments by entering into futures contracts to sell index funds that benchmark the hedged seed capital investments. Open futures contracts required cash collateral of $4,240 and $7,099 as of December 31, 2011 and March 31, 2011, respectively.  

The following table presents the fair values as of December 31, 2011, and March 31, 2011, of derivative instruments not designated as hedging instruments, classified as Other assets and Other liabilities in the Consolidated Balance Sheets:

	December 31, 2011				March 31, 2011
	Assets		Liabilities		Assets		Liabilities
Currency forward contracts	$	10,169	$	853	$	1,112	$	1,633
Futures contracts	35		549		57		1,487
Total	$	10,204	$	1,402	$	1,169	$	3,120

The following table presents gains (losses) recognized on derivative instruments for the three and nine months ended December 31, 2011 and 2010:

		Three months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	3,628	$	(946	)	$	1,184	$	(1,083	)
Seed capital investments	Other non-operating income (expense)	270		(149		)	85		—
Futures contracts	Other non-operating income (expense)	198		(2,290		)	164		(2,920		)
Total		$	4,096	$	(3,385	)	$	1,433	$	(4,003	)

		Nine months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	6,869	$	(2,839	)	$	4,356	$	(4,917	)
Seed capital investments	Other non-operating income (expense)	447		(93		)	71		(88		)
Futures contracts	Other non-operating income (expense)	5,669		(2,196		)	1,378		(4,899		)
Total		$	12,985	$	(5,128	)	$	5,805	$	(9,904	)

11. Restructuring

In May 2010, Legg Mason announced a plan to streamline its business model to drive increased profitability and growth that primarily involved transitioning certain shared services to its investment affiliates which are closer to actual client relationships.  This plan involves headcount reductions in operations, technology, and other administrative areas, which may be partially offset by headcount increases at the affiliates, and will enable Legg Mason to eliminate a portion of its corporate office space that was primarily dedicated to operations and technology employees.  The initiative was substantially completed by

8

December 31, 2011.

This initiative involves transition-related costs primarily comprised of charges for employee termination benefits and retention incentives during the transition period, recorded in Transition-related compensation in the Consolidated Statements of Income.  The transition-related costs also involve other costs, including charges for consolidating leased office space, early contract terminations, asset disposals, and professional fees, recorded in the appropriate operating expense classifications.  Total transition-related costs have been $125,603 through December 31, 2011. Charges for transition-related costs were $23,998 for the three months ended December 31, 2010, and $71,169 and $38,741 for the nine months ended December 31, 2011 and 2010, respectively, which primarily represent costs for severance and retention incentives. Charges for transition-related costs were $42,311 for the three months ended December 31, 2011, which primarily represent costs for lease loss accruals and fixed asset accelerated depreciation related to space permanently abandoned.

The table below presents a summary of changes in the transition-related liability from the initiation of the restructuring plan through December 31, 2011, including non-cash charges, such as asset write-offs and stock-based compensation expense, and cumulative charges incurred to date:

	Severance and retention incentives			Other			Total
Balance as of March 31, 2010	$	—		$	—		$	—
Accrued charges	35,487			6,160			41,647
Payments	(12,276		)	(325		)	(12,601		)
Balance as of March 31, 2011	23,211			5,835			29,046
Accrued charges (1)	27,504			26,000			53,504
Payments	(28,642		)	(12,563		)	(41,205		)
Balance as of December 31, 2011	$	22,073		$	19,272		$	41,345
Non-cash charges (2)
Year ended March 31, 2011	$	9,561		$	3,226		$	12,787
Nine months ended December 31, 2011	5,055			12,610			17,665
Total	$	14,616		$	15,836		$	30,452
Cumulative charges incurred as of December 31, 2011	$	77,607		$	47,996		$	125,603

(1) Other includes lease loss accruals of $18,246 for space permanently abandoned.

(2) Includes stock-based compensation expense, fixed asset accelerated depreciation related to space permanently abandoned, and accelerated depreciation for internally-developed software that will no longer be utilized as a result of the initiative.

12. Variable Interest Entities and Consolidation of Investment Vehicles

In the normal course of its business, Legg Mason sponsors and is the manager of various types of investment vehicles. Certain of these investment vehicles are considered to be variable interest entities (“VIEs”) while others are considered to be voting rights entities (“VREs”) subject to traditional consolidation concepts based on ownership rights. Investment vehicles that are considered VREs are consolidated if Legg Mason has a controlling financial interest in the investment vehicle.

Financial Accounting Standards Board Interpretation No. 46(R) (Accounting Standards Update2010-10, "Amendments to Statement 167 for Certain Investment Funds")

For most sponsored investment funds, including money market funds, Legg Mason determines it is the primary beneficiary of a VIE if it absorbs a majority of the VIE's expected losses, or receives a majority of the VIE's expected residual returns, if any. Legg Mason's determination of expected residual returns excludes gross fees paid to a decision maker if certain criteria are met. In determining whether it is the primary beneficiary of a VIE, Legg Mason considers both qualitative and quantitative factors such as the voting rights of the equity holders, economic participation of all parties, including how fees are earned and paid to Legg Mason, related party ownership, guarantees and implied relationships.

Legg Mason concluded it was the primary beneficiary of one sponsored investment fund VIE, and also held a controlling financial interest in one sponsored investment fund VRE, both of which were consolidated as of December 31, 2011, March 31, 2011, and December 31, 2010. Effective December 31, 2011, a controlling financial interest of $20,814 in a second sponsored investment fund VRE previously consolidated by Legg Mason was redeemed. Accordingly, the fund was deconsolidated by Legg Mason and the fund's balance sheet amounts have been excluded from Legg Mason's consolidated balance sheet as of December 31, 2011, but income statement and cash flow amounts for the fund have been included in Legg Mason's consolidated income and cash flow statements for the three and nine months ended December 31, 2011.

Statement of Financial Accounting Standards No. 167 (Accounting Standards Codification Topic 810, "Consolidation")

For other sponsored investment funds that do not meet certain criteria, if Legg Mason has a significant variable interest, it determines it is the primary beneficiary of the VIE if it has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses, or the right to receive benefits, that potentially could be significant to the VIE.

Legg Mason concluded that it was the primary beneficiary of one of two CLOs in which it has a variable interest. Although it holds no equity interest in either of these investment vehicles, it had both the power to control and had a significant variable interest in one CLO because of its expected subordinated fees. As of December 31, 2011, March 31, 2011, and December 31, 2010, the balances related to this CLO were consolidated on the Company's consolidated financial statements.

Legg Mason's investment in CIVs as of December 31, 2011, and March 31, 2011, was $43,145 and $53,708, respectively, which represents its maximum risk of loss, excluding uncollected advisory fees. The assets of these CIVs are primarily comprised of investment securities. Investors and creditors of these CIVs have no recourse to the general credit or assets of Legg Mason beyond its investment in these funds.

The following tables reflect the impact of CIVs on the Consolidated Balance Sheets as of December 31, 2011, and March 31, 2011, and the Consolidated Statements of Income for the three and nine months endedDecember 31, 2011 and 2010, respectively:

Consolidating Balance Sheets

	December 31, 2011									March 31, 2011
	Balance Before Consolidation of CIVs		CIVs		Eliminations			As Reported		Balance Before Consolidation of CIVs		CIVs (1)		Eliminations			As Reported
Current assets	$	2,204,535	$	70,678	$	(43,667	)	$	2,231,546	$	2,378,226	$	122,963	$	(54,633	)	$	2,446,556
Non-current assets	5,847,514		292,002		—			6,139,516		5,946,737		314,463		—			6,261,200
Total assets	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756
Current liabilities	$	891,674	$	9,785	$	(521	)	$	900,938	$	914,803	$	55,094	$	(925	)	$	968,972
Long-term debt of CIVs	—		265,478		—			265,478		—		278,320		—			278,320
Other non-current liabilities	1,574,860		3,998		—			1,578,858		1,649,815		3,553		—			1,653,368
Total liabilities	2,466,534		279,261		(521		)	2,745,274		2,564,618		336,967		(925		)	2,900,660
Redeemable non-controlling interests	911		—		27,905			28,816		976		—		35,736			36,712
Total stockholders’ equity	5,584,604		83,419		(71,051		)	5,596,972		5,759,369		100,459		(89,444		)	5,770,384
Total liabilities and equity	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756

(1) Certain immaterial non-current liabilities of CIVs are included in Other liabilities on the Consolidated Balance Sheets.

Consolidating Statements of Income

	Three Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	627,731		$	—		$	(753	)	$	626,978		$	723,087		$	—		$	(1,159	)	$	721,928
Total operating expenses	567,550			859			(754		)	567,655			625,452			643			(1,159		)	624,936
Operating income (loss)	60,181			(859		)	1			59,323			97,635			(643		)	—			96,992
Total other non-operating income (expense)	(19,357		)	7,424			358			(11,575		)	(2,177		)	(8,462		)	803			(9,836		)
Income (loss) before income tax provision	40,824			6,565			359			47,748			95,458			(9,105		)	803			87,156
Income tax provision	12,607			—			—			12,607			33,792			—			—			33,792
Net income (loss)	28,217			6,565			359			35,141			61,666			(9,105		)	803			53,364
Less:  Net income (loss) attributable to noncontrolling interests	85			—			6,924			7,009			46			—			(8,302		)	(8,256		)
Net income (loss) attributable to Legg Mason, Inc.	$	28,132		$	6,565		$	(6,565	)	$	28,132		$	61,620		$	(9,105	)	$	9,105		$	61,620

	Nine Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	2,016,413		$	—		$	(2,430	)	$	2,013,983		$	2,073,784		$	—		$	(2,897	)	$	2,070,887
Total operating expenses	1,746,967			2,906			(2,431		)	1,747,442			1,782,769			3,347			(2,897		)	1,783,219
Operating income (loss)	269,446			(2,906		)	1			266,541			291,015			(3,347		)	—			287,668
Total other non-operating income (expense)	(85,586		)	15,607			(3,472		)	(73,451		)	(18,402		)	(6,356		)	(339		)	(25,097		)
Income (loss) before income tax provision	183,860			12,701			(3,471		)	193,090			272,613			(9,703		)	(339		)	262,571
Income tax provision	38,868			—			—			38,868			87,576			—			—			87,576
Net income (loss)	144,992			12,701			(3,471		)	154,222			185,037			(9,703		)	(339		)	174,995
Less:  Net income (loss) attributable to noncontrolling interests	244			—			9,230			9,474			151			—			(10,042		)	(9,891		)
Net income (loss) attributable to Legg Mason, Inc.	$	144,748		$	12,701		$	(12,701	)	$	144,748		$	184,886		$	(9,703	)	$	9,703		$	184,886

Other non-operating income (expense) includes interest income, interest expense and net gains (losses) on investments and long-term debt determined on an accrual basis.

The consolidation of CIVs has no impact on Net Income Attributable to Legg Mason, Inc.

The fair value of the financial assets and (liabilities) of CIVs were determined using the following categories of inputs as of December 31, 2011, and March 31, 2011:

	As of December 31, 2011
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	977	$	9,366		$	26,547		$	36,890
Investments:
CLO loans	—		256,470			—			256,470
CLO bonds	—		10,312			—			10,312
Private equity funds	—		—			23,871			23,871
Total investments	—		266,782			23,871			290,653
	$	977	$	276,148		$	50,418		$	327,543
Liabilities:
CLO debt	$	—	$	—		$	(265,478	)	$	(265,478	)
Derivative liabilities	—		(3,998		)	—			(3,998		)
	$	—	$	(3,998	)	$	(265,478	)	$	(269,476	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	—		$	14,087		$	34,272		$	48,359
Government and corporate securities	—			22,139			—			22,139
Repurchase agreements	—			12,331			—			12,331
Total trading investment securities	—			48,557			34,272			82,829
Investments:
CLO loans	—			275,948			—			275,948
CLO bonds	—			18,813			—			18,813
Private equity funds	—			—			17,879			17,879
Total investments	—			294,761			17,879			312,640
Derivative assets	125			45			—			170
	$	125		$	343,363		$	52,151		$	395,639
Liabilities:
CLO debt	$	—		$	—		$	(278,320	)	$	(278,320	)
Reverse repurchase agreements	—			(18,310		)	—			(18,310		)
Derivative liabilities	(128		)	(14,169		)	—			(14,297		)
	$	(128	)	$	(32,479	)	$	(278,320	)	$	(310,927	)

In accordance with new accounting guidance adopted during the June 2011 quarter, the changes in assets and (liabilities) of CIVs measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended December 31, 2011, are now prepared on a gross basis in the tables below:

	Value as of September 30, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	33,327		$	3,794	$	(10,954	)	$	—	$	380	$	26,547
Private equity funds	23,513			—		—			—		358		23,871
	$	56,840		$	3,794	$	(10,954	)	$	—	$	738	$	50,418
Liabilities:
CLO debt	$	(267,714	)	$	—	$	—		$	—	$	2,236	$	(265,478	)
Total realized and unrealized gains (losses), net											$	2,974

	Value as of September 30, 2010			Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	19,712		$	(849	)	$	3,235	$	3,196		$	25,294
Private equity funds	15,802			1			—		(183		)	15,620
	$	35,514		$	(848	)	$	3,235	$	3,013		$	40,914
Liabilities:
CLO debt	$	(252,822	)	$	—		$	—	$	(15,059	)	$	(267,881	)
Total realized and unrealized gains (losses), net									$	(12,046	)

	Value as of March 31, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	34,272		$	14,493	$	(26,461	)	$	—	$	4,243	$	26,547
Private equity funds	17,879			3,974		—			—		2,018		23,871
	$	52,151		$	18,467	$	(26,461	)	$	—	$	6,261	$	50,418
Liabilities:
CLO debt	$	(278,320	)	$	—	$	—		$	—	$	12,842	$	(265,478	)
Total realized and unrealized gains (losses), net											$	19,103

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net		Transfers (1)			Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	12,374	$	2,540	$	5,862		$	4,518		$	25,294
Private equity funds	13,692		2,655		—			(727		)	15,620
	$	26,066	$	5,195	$	5,862		$	3,791		$	40,914
Liabilities:
CLO debt	$	—	$	—	$	(249,668	)	$	(18,213	)	$	(267,881	)
Total realized and unrealized gains (losses), net								$	(14,422	)

(1) Transfers into Level 3 for the nine months ended December 31, 2010, primarily represent liabilities recorded upon the initial consolidation of investment vehicles.

Realized and unrealized gains and losses recorded for Level 3 assets and liabilities of CIVs are included in Other non-operating income of CIVs on the Consolidated Statements of Income. Total unrealized gains for Level 3 investments and liabilities of CIVs relating only to those assets and liabilities still held at the reporting date were $2,192 and $(12,331) for the three months ended December 31, 2011 and 2010, respectively. Total unrealized gains (losses) for Level 3 investments and liabilities of CIVs relating only to those assets and liabilities still held at the reporting date were $13,127 and $(14,415) for the nine months endedDecember 31, 2011 and 2010, respectively.

There were no significant transfers between Levels 1 and 2 during the nine months ended December 31, 2011 and 2010.

The NAV values used as a practical expedient by CIVs have been provided by the investees and have been derived from the fair values of the underlying investments as of the reporting date.  The following table summarizes, as of December 31, 2011, the nature of these investments and any related liquidation restrictions or other factors which may impact the ultimate value realized.

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Hedge funds	Global, fixed income, macro, long/short equity, systematic, emerging market, U.S. and European hedge	$	36,890	(1)	n/a		n/a
Private equity funds	Long/short equity	23,871		(2)	$	9,610	8 years
Total		$	60,761		$	9,610

n/a – not applicable

(1) 4% daily redemption; 6% monthly redemption; 19% quarterly redemption; and 71% subject to three to five year lock-up or side pocket provisions.

(2) Liquidations are expected over the remaining term.

There are no current plans to sell any of these investments.

Legg Mason has elected the fair value option for certain eligible assets and liabilities, including corporate loans and debt, of the consolidated CLO. Management believes that the use of the fair value option eliminates certain timing differences and better matches the changes in fair value of assets and liabilities related to the CLO.

The following table presents the fair value and unpaid principal balance of CLO loans, bonds and debt carried at fair value under the fair value option as of December 31, 2011, and March 31, 2011:

	December 31, 2011			March 31, 2011
CLO loans and bonds
Unpaid principal balance	$	279,624		$	299,044
Unpaid principal balance in excess of fair value	(12,842		)	(4,283		)
Fair value	$	266,782		$	294,761
Unpaid principal balance of loans that are more than 90 days past due and also in nonaccrual status	$	2,963		$	4,963
Unpaid principal balance in excess of fair value for loans that are more than 90 days past due and also in nonaccrual status	(1,132		)	(2,837		)
Fair value of loans more than 90 days past due and in nonaccrual status	$	1,831		$	2,126
CLO debt
Principal amounts outstanding	$	300,959		$	300,959
Excess unpaid principal over fair value	(35,481		)	(22,639		)
Fair value	$	265,478		$	278,320

During the three and nine months endedDecember 31, 2011, total gains of $7,277 and $2,726, respectively, were recognized in Other non-operating income of CIVs in the Consolidated Statements of Income related to assets and liabilities for which the fair value option was elected. During the three and nine months endedDecember 31, 2010, total losses of $9,545 and $11,131, respectively, were recognized in Other non-operating income of CIVs in the Consolidated Statements of Income related to assets and liabilities for which the fair value option was elected. For CLO loans and CLO debt measured at fair value, substantially all of the estimated gains and losses included in earnings for the three and nine months endedDecember 31, 2011, were attributable to instrument specific credit risk due to the widened credit spreads for these instruments during the current periods. Specifically, overall credit spreads for the CLO debt across the entire capital structure widened due to a general credit curve steepening that occurred during the nine months endedDecember 31, 2011.

The CLO debt bears interest at variable rates based on LIBOR plus a pre-defined spread, which ranges from 25 basis points to 400 basis points.  All outstanding debt matures on July 15, 2018.

Total derivative liabilities of CIVs of $3,998 as of December 31, 2011, and total derivative assets and liabilities of CIVs of $170 and $14,297, respectively, as of March 31, 2011, are primarily recorded in Other liabilities of CIVs.  Gains and (losses) of $491 and $(552), respectively, for the three months ended December 31, 2011, and $54,477 and $(47,388), respectively, for the nine months endedDecember 31, 2011, related to derivative assets and liabilities of CIVs are included in Other non-operating income of CIVs.  Gains and (losses) of $5,725 and $(7,394), respectively, for the three months ended December 31, 2010, and $11,603 and $(15,648), respectively, for the nine months ended December 31, 2010, related to derivative assets and liabilities of CIVs are included in Other non-operating income (expense) of CIVs. There is no risk to Legg Mason in relation to the derivative assets and liabilities of the CIVs in excess of its investment in the funds, if any.

As of December 31, 2011, and March 31, 2011, for VIEs in which Legg Mason holds a significant variable interest or is the sponsor and holds a variable interest, but for which it was not the primary beneficiary, Legg Mason’s carrying value, the related VIE assets and liabilities and maximum risk of loss were as follows:

	As of December 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	394,435	$	366,435	$	—	$	449
Public-Private Investment Program	554,570		2,878		232		375
Other sponsored investment funds	16,430,529		2,048		67,359		103,584
Total	$	17,379,534	$	371,361	$	67,591	$	104,408

	As of March 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	382,692	$	354,692	$	—	$	196
Public-Private Investment Program	692,488		2,002		290		290
Other sponsored investment funds	20,241,752		16,771		83,480		121,899
Total	$	21,316,932	$	373,465	$	83,770	$	122,385

(1) Includes equity investments the Company has made or is required to make and any earned but uncollected management fees.

The assets of these VIEs are primarily comprised of cash and cash equivalents and investment securities, and the liabilities are primarily comprised of debt and various expense accruals.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Legg Mason, Inc., a holding company, with its subsidiaries (which collectively comprise “Legg Mason”) is a global asset management firm. Acting through our subsidiaries, we provide investment management and related services to institutional and individual clients, company-sponsored mutual funds and other investment vehicles. We offer these products and services directly and through various financial intermediaries. We have operations principally in the United States of America and the United Kingdom and also have offices in Australia, Bahamas, Brazil, Canada, Chile, China, Dubai, France, Germany, Italy, Japan, Luxembourg, Poland, Singapore, Spain, Switzerland and Taiwan. Terms such as “we,” “us,” “our,” and “company” refer to Legg Mason.

In connection with a realignment of our executive management team during fiscal 2011, we no longer manage our business in two divisions and, during the June 2011 quarter, eliminated the previous separation of the Americas and International divisions and combined them into one operating segment, Global Asset Management. We believe this structure allows us to function as a global organization with a single purpose. As a result of this change, we no longer present assets under management ("AUM") or revenues by division.

The financial services business we are engaged in is extremely competitive. Our competition includes numerous global, national, regional and local asset management firms, broker-dealers and commercial banks. The industry has been dramatically impacted over the last few years by the economic downturn, the consolidation of financial services firms through mergers and acquisitions and the continued introduction of new products and services.  The industry is also subject to extensive regulation under federal, state, and foreign laws. Like most firms, we have been and will continue to be impacted by regulatory and legislative changes. Responding to these changes, and keeping abreast of regulatory developments, has required us to incur costs that continue to impact our profitability.

Our financial position and results of operations are materially affected by the overall trends and conditions of the financial markets, particularly in the United States, but increasingly in the other countries in which we operate. Results of any individual period should not be considered representative of future results. Our profitability is sensitive to a variety of factors, including the amount and composition of our assets under management, and the volatility and general level of securities prices and interest rates, among other things. Sustained periods of unfavorable market conditions are likely to affect our profitability adversely. In addition, the diversification of services and products offered, investment performance, access to distribution channels, reputation in the market, attracting and retaining key employees and client relations are significant factors in determining whether we are successful in attracting and retaining clients. For a further discussion of factors that may affect our results of operations, refer to Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended March 31, 2011, and in Item 1A. contained within this document.

Our strategy is focused on the three primary areas listed below.  Management keeps these strategic priorities in mind when it evaluates our operating performance and financial condition.  Consistent with this approach, we have also listed below the most important matters on which management currently focuses in evaluating our performance and financial condition.

• Outstanding independent investment managers

• The investment performance of our asset management products and services compared to their benchmarks and to the performance of competitive products for the trailing 1-year, 3-year, 5-year, and 10-year periods.

• Our AUM, the components of the changes in our AUM amid continued market uncertainty, the long-term trend of outflows in AUM, and the resulting impact of changes in AUM on our revenues.

• A corporate center that delivers strategic value

• Management of expenses, including the successful completion of our business model streamlining initiative.

• The amount of excess capital we generate, and deployment of that capital through share repurchases, investments in proprietary fund products, and dividends.

• Promote revenue growth through strategic marketing of products to institutional clients, supported by retail and instividual distribution globally.

• A balanced portfolio across asset classes, geographies and channels

• Our ending and average asset mix, focusing on higher-yielding assets in both equity and fixed income.

• The impact of unfavorable global market conditions during the nine months ended December 31, 2011.

The following discussion and analysis provides additional information regarding our financial condition and results of operations.

9

Business Environment

During the three months ended December 31, 2011, the financial environment in the United States began to recover from concerns regarding economic issues related to the European debt crisis and the unprecedented downgrade to the U.S. credit rating in the September 2011 quarter, which resulted in a decline in the equity markets over the nine months ended December 31, 2011. As a result, while all major U.S. equity market indices increased during the three months ended December 31, 2011, it was not enough to offset the overall decrease of the indices for the nine months ended December 31, 2011; all major U.S. equity market indices declined during the nine months ended December 31, 2011. Both the Barclays Capital U.S. Aggregate Bond Index and the Barclays Capital Global Aggregate Bond Index increased over the periods. Details are illustrated in the following table:

	% Change as of and for the three months ended December 31:				% Change as of and for the nine months ended December 31:
Indices(1)	2011		2010		2011		2010
Dow Jones Industrial Average	11.95	%	7.32	%	(0.83	)%	6.64	%
S&P 500	11.15	%	10.20	%	(5.15	)%	7.54	%
NASDAQ Composite Index	7.86	%	12.00	%	(6.33	)%	10.63	%
Barclays Capital U.S. Aggregate Bond Index	1.12	%	(1.30	)%	7.39	%	4.68	%
Barclays Capital Global Aggregate Bond Index	0.23	%	(1.33	)%	4.34	%	5.83	%

¹  Indices are trademarks of Dow Jones & Company, McGraw-Hill Companies, Inc., NASDAQ Stock Market, Inc., and Barclays Capital, respectively, which are not affiliated with Legg Mason.

During the quarter ended December 31, 2011, the Federal Reserve Board held the federal funds rate at 0.25%. We expect economic challenges to persist and therefore cannot predict how these uncertainties will impact our results.

Quarter Ended December 31, 2011, Compared to Quarter Ended December 31, 2010

Assets Under Management

The components of the changes in our AUM (in billions) for the three months ended December 31, were as follows:

	2011			2010
Beginning of period	$	611.8		$	673.5
Investment funds, excluding liquidity funds
Subscriptions	10.1			12.0
Redemptions	(12.0		)	(11.7		)
Separate account flows, net	(10.0		)	(17.7		)
Liquidity fund flows, net	10.6			0.7
Net client cash flows	(1.3		)	(16.7		)
Market performance and other (1)	17.6			15.0
Dispositions	(1.1		)	—
End of period	$	627.0		$	671.8

⁽¹⁾ Includes impact of foreign exchange, reinvestment of dividends, and other.

In the last three months, AUM increased 2%, or $15.2 billion, from $611.8 billion at September 30, 2011, to $627.0 billion at December 31, 2011. The increase in AUM was primarily attributable to market performance and other of $17.6 billion, driven by equity markets. Net outflows of $1.3 billion consisted of $7.1 billion and $4.9 billion of outflows in the fixed income and equity asset classes, respectively, significantly offset by net liquidity inflows of $10.7 million. Fixed income outflows were primarily in products managed by Western Asset Management Company ("Western Asset"), and equity outflows were primarily at Royce & Associates (“Royce”), ClearBridge Advisors LLC ("ClearBridge"), and Legg Mason Capital Management, LLC (“LMCM”).

AUM at December 31, 2011, was $627.0 billion, a decrease of $44.8 billion or 6.7% from December 31, 2010. The decrease in AUM was attributable to net client outflows of $31.2 billion and dispositions of $22.9 billion, slightly offset by market appreciation and other of $9.3 billion. The majority of outflows were in fixed income asset classes and equity asset classes of $22.4 billion and $17.6 billion, respectively, with liquidity inflows of $8.8 billion. The majority of fixed income outflows were in products managed by Western Asset. With the exception of the June 2011 quarter, we have experienced outflows in our fixed income asset class since fiscal 2008. Equity outflows were primarily at LMCM, ClearBridge, and Batterymarch Financial Management, Inc. ("Batterymarch"). We generally earn higher fees and profits on equity AUM, and outflows in this asset class will more negatively

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impact our revenues and net income than would outflows in other asset classes. Due in part to investment performance issues, we have experienced outflows in our equity asset class since fiscal 2007, other than the quarter ended June 30, 2010.

During the first quarter of fiscal 2012, Morgan Stanley Smith Barney ("MSSB") amended certain historical Smith Barney brokerage programs providing for investment in liquidity funds that our asset managers manage that resulted in a reduction of approximately $20 billion in liquidity AUM during the nine months ended December 31, 2011. As a significant portion of the management fees generated by these assets were being waived prior to the disposition, the disposition of this liquidity AUM resulted in a relatively small reduction in operating revenue of $14.4 million and $41.7 million, net of related fee waivers, in the three and nine months ended December 31, 2011, respectively, as compared to the three and nine months ended December 31, 2010. The disposition of this AUM also resulted in reductions in distribution and servicing expenses in the three and nine months ended December 31, 2011, as compared to the three and nine months ended December 31, 2010. We expect the amendments to result in an additional $7 billion in liquidity assets being transferred over the next seven months.

AUM by asset class (in billions) as of December 31, was as follows:

	2011		% of Total		2010		% of Total		% Change
Equity	$	153.3	24.5	%	$	184.2	27.4	%	(16.8	)%
Fixed Income	352.6		56.2		355.8		53.0		(0.9	)
Liquidity	121.1		19.3		131.8		19.6		(8.1	)
Total	$	627.0	100.0	%	$	671.8	100.0	%	(6.7	)%

The component changes in our AUM by asset class (in billions) for the three months ended December 31, 2011, were as follows:

	Equity			Fixed Income			Liquidity			Total
September 30, 2011	$	144.9		$	355.5		$	111.4		$	611.8
Investment funds, excluding liquidity funds
Subscriptions	4.2			5.9			—			10.1
Redemptions	(7.4		)	(4.6		)	—			(12.0		)
Separate account flows, net	(1.7		)	(8.4		)	0.1			(10.0		)
Liquidity fund flows, net	—			—			10.6			10.6
Net client cash flows	(4.9		)	(7.1		)	10.7			(1.3		)
Dispositions	—			—			(1.1		)	(1.1		)
Market performance and other	13.3			4.2			0.1			17.6
December 31, 2011	$	153.3		$	352.6		$	121.1		$	627.0

Average AUM by asset class (in billions) for the three months ended December 31, was as follows:

	2011		% of Total		2010		% of Total		% Change
Equity	$	153.4	24.7	%	$	175.7	26.1	%	(12.7	)%
Fixed Income	353.9		56.9	%	364.9		54.3	%	(3.0	)%
Liquidity	114.7		18.4	%	131.8		19.6	%	(13.0	)%
Total	$	622.0	100.0	%	$	672.4	100.0	%	(7.5	)%

Investment Performance⁽¹⁾ 

Investment performance as of December 31, 2011 was generally positive. The economic intervention by central banks in Europe, some positive U.S. economic news, and investors' willingness to take on more risk resulted in a positive equity market, as measured by the Wilshire 5000 Index gaining 12.02% for the three months ended December 31, 2011. The best performing equity sector was energy as measured by the S&P 500 Energy Index returning 18.20% for the three months ended December 31, 2011.  

In the fixed income markets, economic data suggested the economy was slowly gaining steam although uncertainty from the

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European debt crisis contributed to periodic flights-to-safety. Yield curve results were mixed with the long-end steepening while the short-end flattened. The best performing fixed income sector was High Yield as measured by the Barclays U.S. High Yield Index returning 6.46% for the three months ended December 31, 2011.

The following table presents a summary of the percentage of our marketed composite assets⁽²⁾ that outpaced their benchmarks as of December 31, 2011 and 2010, for the trailing 1-year, 3-year, 5-year, and 10-year periods:

	As of December 31, 2011								As of December 31, 2010
	1-year		3-year		5-year		10-year		1-year		3-year		5-year		10-year
Total (includes liquidity)	41	%	81	%	52	%	84	%	74	%	74	%	71	%	89	%
Equity	47	%	58	%	65	%	76	%	36	%	64	%	64	%	80	%
Fixed income	16	%	84	%	29	%	80	%	83	%	69	%	63	%	88	%

The following table presents a summary of the percentage of our U.S. mutual fund assets⁽³⁾ that outpaced their Lipper category averages as of December 31, 2011 and 2010, for the trailing 1-year, 3-year, 5-year, and 10-year periods:

	As of December 31, 2011								As of December 31, 2010
	1-year		3-year		5-year		10-year		1-year		3-year		5-year		10-year
Total long-term	64	%	73	%	77	%	73	%	45	%	75	%	72	%	73	%
Equity	54	%	66	%	73	%	70	%	42	%	75	%	71	%	70	%
Fixed income	79	%	82	%	86	%	84	%	51	%	78	%	78	%	85	%

(1) Index performance in this section includes reinvestment of dividends and capital gains.

(2) A composite is an aggregation of discretionary portfolios (separate accounts and investment funds) into a single group that represents a particular investment objective or strategy. Each of our asset managers has its own specific guidelines for including portfolios in their marketed composites. Assets under management that are not managed in accordance with the guidelines are not included in a composite. As of December 31, 2011 and 2010, 89% and 89% of our equity assets under management and 88% and 90% of our fixed income assets under management, respectively, were in marketed composites.

(3) Source: Lipper Inc. includes open-end, closed-end, and variable annuity funds. As of December 31, 2011 and 2010, the U.S. long-term mutual fund assets represented in the data accounted for 17% of our total assets under management. The performance of our U.S. long-term mutual fund assets is included in the marketed composites.

Business Model Streamlining Initiative

In May 2010, we announced an initiative to streamline our business model to drive increased profitability and growth that primarily involves transitioning certain shared services to our investment affiliates which are closer to the actual client relationships.  We project that the initiative will result in approximately $140 million in expense savings that will be fully realized on an annualized basis by the fourth quarter of fiscal 2012.  These expense savings consist of (i) approximately $80 million in compensation and benefits cost reductions primarily from eliminating positions in certain corporate shared services functions as a result of transitioning such functions to the affiliates, and charging affiliates for other centralized services that will continue to be provided to them without any corresponding adjustment in affiliates' revenue sharing or other compensation arrangements; (ii) approximately $50 million in non-compensation costs from eliminating and streamlining activities in our corporate and distribution business units, including savings associated with consolidating office space; and (iii) approximately $10 million from our global distribution group sharing in certain affiliate revenues from retail assets under management without any corresponding adjustment in revenue sharing or other compensation arrangements.

The initiative has involved $125.6 million in transition-related costs that primarily included charges for employee termination benefits and incentives to retain employees during the transition period.  The transition-related costs have also included charges for consolidating leased office space, early contract terminations, accelerated depreciation of fixed assets, asset disposals and professional fees. During the three and nine months ended December 31, 2011, transition-related costs totaled $42.3 million and $71.2 million, respectively. Substantially all of the costs have been accrued as of December 31, 2011, except for approximately $3 million, primarily relating to compensation expense, which is expected to be incurred in the quarter ended March 31, 2012. On June 30, 2011, we concluded a significant phase of our business streamlining initiative, which included the transition of shared services to our affiliates and our second major reduction-in-force, resulting in the largest headcount reduction under the streamlining initiative. Due to the completion of these activities, we achieved total quarterly estimated transition-related savings of approximately $26 million in both the September 2011 and December 2011 quarters, when compared to expense levels in periods prior to the commencement of the streamlining initiative.  On December 31, 2011, we concluded our third major reduction-in-force under the business streamlining initiative. A majority of the estimated transition-related savings were incremental to the three and nine months ended December 31, 2010, and are explained, where applicable, in the results of operations discussion to follow. We expect the amount of total quarterly savings to increase to approximately $35 million by the fourth quarter of fiscal 2012 w

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hen compared to similar expenses prior to the commencement of the streamlining initiative.

The achievement of all projected cost savings and margin improvements, as well as the amount and nature of transition-related costs, will be subject to many factors, including market conditions and other factors affecting our financial results, and those of our affiliates, and the rate of AUM growth. In addition, our business is dynamic and may require us to incur incremental expenses from time-to-time to grow and better support our business. See Note 11 of Notes to Consolidated Financial Statements for additional information related to our business streamlining initiative.

Results of Operations

In accordance with financial accounting standards on consolidation, we consolidate and separately identify certain sponsored investment vehicles, the most significant of which is a collateralized loan obligation entity (“CLO”).  The consolidation of these investment vehicles has no impact on Net Income Attributable to Legg Mason, Inc. and does not have a material impact on our consolidated operating results.  We also hold investments in certain consolidated sponsored investment funds and the change in the value of these investments, which is recorded in Other non-operating income (expense), is reflected in our Net Income, and amounts allocated to noncontrolling interests.  The impact of the consolidation of investment vehicles is presented in our “Consolidated Statements of Income, Excluding Consolidated Investment Vehicles” (See Supplemental Non-GAAP Financial Information).  Also, see Note 12 of Notes to Consolidated Financial Statements for additional information regarding the consolidation of investment vehicles.

Operating Revenues

Total operating revenues in the quarter ended December 31, 2011, were $627.0 million, a decrease of 13.2% from $721.9 million in the prior year quarter, primarily as a result of a 7% decrease in average AUM and a decline in performance fees. Also contributing to the decrease was the impact of a decrease in average AUM revenue yields, from 34.8 basis points in the three months ended December 31, 2010, to 34.4 basis points in the three months ended December 31, 2011. The previously discussed disposition of liquidity AUM related to the MSSB relationship resulted in a relatively small reduction in operating revenues of $14.4 million, net of related fee waivers, in the December 2011 quarter, as compared to the December 2010 quarter, as a significant portion of the management fees generated by these assets were being waived prior to the disposition.

Investment advisory fees from separate accounts decreased $18.6 million, or 9.0%, to $187.6 million.  Of this decrease, $13.1 million was the result of lower average equity assets managed by Batterymarch, LMCM, ClearBridge, and Brandywine, and $3.2 million was primarily due to the divestiture of a Singapore-based asset manager in the March 2011 quarter.  These decreases were offset in part by an increase of $2.4 million due to higher average fixed income assets managed by Brandywine.

Investment advisory fees from funds decreased $32.7 million, or 8.5%, to $351.6 million.  Of this decrease, $15.9 million, net of related fee waivers, was due to lower average liquidity assets managed at Western Asset, primarily as a result of the disposition of liquidity AUM related to our MSSB relationship. Additionally, $15.4 million of this decrease was the result of lower equity assets managed by The Permal Group, Ltd. ("Permal") and LMCM. These decreases were offset in part by a $4.9 million increase due to higher fixed income assets managed by Western Asset.

Performance fees decreased $28.5 million, or 82.4%, to $6.1 million, primarily as a result of lower performance fees earned on assets managed at Permal and Western Asset, offset slightly by an increase in performance fees earned on assets managed at Brandywine.

Distribution and servicing fees decreased $14.8 million, or 15.5%, to $80.7 million, due to a decline in average mutual fund AUM subject to distribution and servicing fees, the impact of increased fee waivers related to liquidity funds managed by Western Asset, and the impact of the previously discussed disposition of liquidity AUM related to the MSSB relationship.

Operating Expenses

Total compensation and benefits decreased $46.0 million to $263.2 million.  Transition-related compensation decreased $9.9 million to $8.8 million, and represents accruals for severance and retention costs related to our business streamlining initiative. Compensation and benefits, excluding transition-related compensation, decreased $36.0 million, or 12.4%, to $254.4 million.  This decrease was primarily driven by a $27.5 million net decrease in revenue share-based incentive compensation, a $12.4 million decrease in corporate compensation primarily resulting from headcount reductions related to our business streamlining initiative, and a $3.8 million reduction in compensation due to costs transferred to affiliates, also in connection with our business streamlining initiative. There was also a decrease in deferred compensation and revenue share-based incentive obligations of $6.9 million resulting from reduced net market gains on assets invested for deferred compensation plans and seed capital investments, which are offset by gains in Other non-operating income (expense). These decreases were offset in part by an increase in incentives from changes in an expense reimbursement arrangement with Western Asset and an increase in non-cash amortization expense associated with certain deferred compensation awards totaling $17.8 million, as well as additional costs of approximately $4.3 million

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associated with market-based compensation increases among retained staff and new hires, primarily in our global distribution group, to support on-going growth initiatives.

Compensation as a percentage of operating revenues decreased to 42.0% in the December 2011 quarter compared to 42.8% in the prior year quarter primarily as a result of the decline of transition-related compensation. This decrease was offset in part by the impact of the change in the expense reimbursement arrangement with Western Asset.

Distribution and servicing expenses decreased 20.9% to $148.3 million, primarily as a result of a decrease in average AUM in certain products for which we pay fees to third-party distributors, $8.9 million of structuring fees related to a closed-end fund launch in the prior year quarter, and the previously discussed disposition of liquidity AUM related to the MSSB relationship.

Communications and technology expense increased 10.3% to $43.5 million, principally driven by increases in technology outsourcing, market data and other data processing costs totaling $6.0 million, primarily incurred as a result of our business streamlining initiative. These increases were offset in part by $1.7 million in cost savings as a result of our streamlining changes, including reduced depreciation of technology hardware and software and consulting fees.

Occupancy expense increased 51.4% to $56.4 million due to a $14.0 million net increase in lease reserves recorded in the current quarter, primarily related to permanently abandoning certain office space as a part of our business streamlining initiative. In addition, there was a $10.3 million increase as a result of the acceleration of depreciation related to space permanently abandoned in the current quarter, also related to our business streamlining initiative. These increases were offset in part by the write-off in the prior year quarter of a $4.1 million real estate escrow deposit, as well as $1.7 million in cost savings, both as a result of our business streamlining initiative.

Amortization of intangible assets remained essentially flat at $4.9 million.

Other expenses increased $5.5 million to $51.4 million, primarily as a result of a $5.8 million increase in expense reimbursements paid to certain mutual funds and a $1.4 million loss from the disposal of fixed assets due to our business streamlining initiative. These increases were offset in part by $1.5 million of foreign currency gains.

Non-Operating Income (Expense)

Interest income increased 16.7% to $2.6 million, driven by slightly higher average yields earned on investment balances.

Interest expense decreased 2.5% to $21.8 million, due to the retirement of our Equity Units during the June 2011 quarter, which reduced interest expense by $1.4 million. This decrease was offset in part by a $0.6 million increase in interest expense related to our convertible notes.

Other income (expense) decreased $18.6 million to $0.3 million, primarily as a result of $19.1 million in net market losses on investments in proprietary fund products, which were partially offset by compensation decreases discussed above.

Other non-operating income (expense) of consolidated investment vehicles (“CIVs”) increased $15.9 million to income of $7.4 million, primarily due to net market gains on investments of a CIV.

Income Tax Expense

The income tax expense was $12.6 million compared to $33.8 million in the prior year quarter. The effective tax rate was 26.4% for the quarter ended December 31, 2011, compared to an effective tax rate of 38.8% in the prior year quarter. The decrease in the effective tax rate is primarily attributable to proportionately more income in lower tax rate jurisdictions in the current quarter, as well as the impact of losses of CIVs in the prior year quarter for which there was no tax benefit. The effective tax rate, excluding the impact of CIVs, was 30.9% for the three months ended December 31, 2011, compared to an effective tax rate of 35.4% for the three months ended December 31, 2010.

Net Income Attributable to Legg Mason, Inc.

Net Income Attributable to Legg Mason, Inc., hereafter referred to as “Net Income”, for the three months ended December 31, 2011, totaled $28.1 million, or $0.20 per diluted share, compared to $61.6 million, or $0.41 per diluted share, in the prior year quarter.  The decrease in Net Income was primarily due to the net impact of decreased operating revenues, the increase in occupancy expense, and an increase in incentives from changes in an expense reimbursement arrangement with Western Asset, as previously discussed. These decreases were offset in part by a decrease in corporate compensation costs due to our business streamlining initiative, as previously discussed. Adjusted Income (see Supplemental Non-GAAP Financial Information) decreased to $76.8 million, or $0.55 per diluted share, for the quarter ended December 31, 2011, from $110.3 million, or $0.73 per diluted share, in the prior year quarter, primarily due to the decrease in Net Income, as previously discussed. Operating margin decreased to 9.5%

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from 13.4% in the prior year quarter. Operating Margin, as Adjusted (see Supplemental Non-GAAP Financial Information), for the three months ended December 31, 2011 and 2010, was 21.7% and 24.3%, respectively.

Nine Months Ended December 31, 2011, Compared to Nine Months Ended December 31, 2010

Assets Under Management

The components of the changes in our AUM (in billions) for the nine months ended December 31, were as follows:

	2011			2010
Beginning of period	$	677.6		$	684.5
Investment funds, excluding liquidity funds
Subscriptions	34.9			36.3
Redemptions	(39.7		)	(32.1		)
Separate account flows, net	(27.8		)	(42.3		)
Liquidity fund flows, net	10.0			(14.4		)
Net client cash flows	(22.6		)	(52.5		)
Market performance and other (1)	(7.2		)	39.8
Dispositions	(20.8		)	—
End of period	$	627.0		$	671.8

⁽¹⁾ Includes impact of foreign exchange, reinvestment of dividends, and other.

In the last nine months, AUM decreased by $50.6 billion, or 7.5%, from $677.6 billion at March 31, 2011, to $627.0 billion at December 31, 2011. The decrease in AUM was primarily attributable to long-term asset net outflows of $32.2 billion, dispositions of $20.8 billion, and market depreciation and other of $7.2 billion. Net inflows from liquidity funds were $10.0 billion.  The majority of dispositions were in liquidity assets, $19.5 billion, which resulted from the amendment of historical Smith Barney brokerage programs discussed above. There were also $1.3 billion in dispositions from the divestiture of a small affiliate.  Long-term asset net outflows from equity and fixed income classes were $16.4 billion and $15.8 billion, respectively. Equity outflows were primarily at LMCM, ClearBridge, Batterymarch, and Royce.  Fixed income outflows were primarily at Western Asset.

The component changes in our AUM by asset class (in billions) for the nine months ended December 31, 2011, were as follows:

	Equity			Fixed Income			Liquidity			Total
March 31, 2011	$	189.6		$	356.6		$	131.4		$	677.6
Investment funds, excluding liquidity funds
Subscriptions	16.8			18.1			—			34.9
Redemptions	(24.1		)	(15.6		)	—			(39.7		)
Separate account flows, net	(9.1		)	(18.3		)	(0.4		)	(27.8		)
Liquidity fund flows, net	—			—			10.0			10.0
Net client cash flows	(16.4		)	(15.8		)	9.6			(22.6		)
Dispositions	(1.1		)	(0.2		)	(19.5		)	(20.8		)
Market performance and other	(18.8		)	12.0			(0.4		)	(7.2		)
December 31, 2011	$	153.3		$	352.6		$	121.1		$	627.0

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Average AUM by asset class (in billions) for the nine months ended December 31, was as follows:

	2011		% of Total		2010		% of Total		% Change
Equity	$	170.2	26.3	%	$	169.6	25.4	%	0.4	%
Fixed Income	360.6		55.7	%	363.8		54.5	%	(0.9	)%
Liquidity	116.2		18.0	%	134.4		20.1	%	(13.5	)%
Total	$	647.0	100.0	%	$	667.8	100.0	%	(3.1	)%

Operating Revenues

Total operating revenues in the nine months ended December 31, 2011, were $2.01 billion, a decrease of 2.7% from $2.07 billion in the prior year period, mostly due to a 3% decrease in average AUM and a decrease in performance fees. This decrease was offset in part by an increase in average AUM revenue yields, from 33.9 basis points in the nine months ended December 31, 2010, to 35.2 basis points in the nine months ended December 31, 2011, resulting from a more favorable average asset mix. The previously discussed disposition of liquidity AUM related to the MSSB relationship resulted in a relatively small reduction in operating revenues of $41.7 million, net of related fee waivers, in the nine months ended December 31, 2011, as compared to the nine months ended December 31, 2010, as a significant portion of the management fees generated by these assets were being waived prior to the disposition.

Investment advisory fees from separate accounts decreased $23.0 million, or 3.8%, to $588.4 million.  Of this decrease, $17.4 million was the result of lower average equity assets managed by LMCM, Brandywine, Legg Mason Investment Counsel & Trust Company ("LMIC"), and Royce, and $5.8 million was primarily due to the divestiture of a Singapore-based asset manager in March 2011. These decreases were offset in part by a $4.9 million increase due to higher average fixed income assets managed by Brandywine.

Investment advisory fees from funds increased $34.0 million, or 3.1%, to $1.1 billion.  Of this increase, $49.4 million was the result of higher average equity assets managed by Royce and ClearBridge, and $32.9 million was the result of higher average fixed income assets primarily managed at Western Asset. These increases were offset in part by a decrease of $40.3 million, net of related fee waivers, due to lower average liquidity assets managed at Western Asset, primarily as a result of the previously discussed disposition of liquidity AUM related to our MSSB relationship. Additionally, the increases were offset in part by a $12.9 million decrease as the result of lower average equity assets managed by LMCM.

Performance fees decreased $42.2 million, or 54.9%, to $34.7 million, primarily as a result of lower fees earned on assets managed at Permal and Western Asset.

Distribution and servicing fees decreased $25.6 million, or 9.0%, to $258.5 million, due to the disposition of the liquidity AUM related to the MSSB relationship, as well as a decline in average mutual fund AUM subject to distribution and servicing fees.

Operating Expenses

Total compensation and benefits decreased $28.9 million to $845.0 million.  Transition-related compensation remained relatively flat at $32.6 million and represents accruals for severance and retention costs related to our business streamlining initiative. Compensation and benefits, excluding transition-related compensation, decreased $29.0 million, or 3.4%, to $812.4 million, primarily driven by a decrease in deferred compensation and revenue share-based incentive obligations of $41.0 million resulting from net market losses on assets invested for deferred compensation plans and seed capital investments, which are offset by net losses in Other non-operating income (expense), as well as a $34.1 million decrease in corporate compensation, primarily due to headcount reductions resulting from our business streamlining initiative. Additionally, there was a $24.7 million net decrease in revenue share-based incentive compensation. These decreases were offset in part by an increase in incentives from changes in an expense reimbursement arrangement with Western Asset and an increase in non-cash amortization expense associated with certain deferred compensation awards totaling $55.9 million, as well as additional costs of approximately $15.5 million associated with market-based compensation increases among retained staff and new hires, primarily in our global distribution group, to support on-going growth initiatives.

Compensation as a percentage of operating revenues for the nine months ended December 31, 2011, remained relatively flat at 42.0%, in comparison to 42.2% in the prior year period, as the decreases related to net market losses on assets invested for deferred compensation plans and seed capital investments were offset by the impact of the change in the expense reimbursement arrangement with Western Asset.

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Distribution and servicing expenses decreased 9.0% to $489.4 million. The decrease was principally driven by the previously discussed disposition of liquidity AUM related to the MSSB relationship. Additionally, the decrease was due to a $13.9 million decrease in structuring fees related to closed-end fund launches.

Communications and technology expense increased 5.8% to $125.5 million, principally driven by increases in technology outsourcing, market data, consulting fees and other data processing costs totaling $13.7 million, primarily incurred as a result of our business streamlining initiative. These increases were offset in part by $6.7 million in cost savings as a result of our streamlining changes, including reduced depreciation of technology hardware and software and consulting fees.

Occupancy expense increased 20.0% to $125.3 million, primarily due to a $13.1 million net increase in lease reserves recorded in the current period, primarily related to permanently abandoning certain office space as part of our business streamlining initiative. In addition, there was a $10.3 million increase as a result of the acceleration of depreciation related to space permanently abandoned in the current period, also related to our business streamlining initiative. This increase was offset in part by the write-off of a $4.1 million real estate escrow deposit related to our business streamlining initiative in the prior year period.

Amortization of intangible assets remained essentially flat at $16.0 million.

Other expenses increased $15.2 million to $146.2 million, primarily as a result of a $9.3 million increase in expense reimbursements paid to certain mutual funds, a $2.3 million increase in travel, entertainment and advertising costs, and a $2.3 million increase in professional fees.

Non-Operating Income (Expense)

Interest income increased 39.1% to $8.6 million, driven by higher yields earned on investment balances.

Interest expense decreased 5.5% to $65.8 million, as a result of the retirement of our Equity Units during the June 2011 quarter, which reduced interest expense by $2.7 million, a $1.4 million reduction in interest expense due to the termination of a lease related to the business streamlining initiative, and a reduction in interest accruals for uncertain tax positions of $1.3 million. These decreases were offset in part by a $1.8 million increase in interest expense related to our convertible notes.

Other income (expense) decreased $76.5 million to an expense of $31.8 million, primarily as a result of $59.4 million in net market losses on investments in proprietary fund products, which were partially offset by compensation decreases discussed above, and $19.8 million in unrealized market losses on assets invested for deferred compensation plans, which were substantially offset by corresponding decreases described above.

Other non-operating income of consolidated investment vehicles increased $22.0 million, to income of $15.6 million, primarily due to net market gains on investments of certain CIVs.

Income Tax Expense

The provision for income taxes was $38.9 million compared to $87.6 million in the prior year period. During the period ended December 31, 2011, the United Kingdom ("U.K.") Finance Act 2011 (the "Act") was enacted. The Act reduced the main U.K. corporate income tax rate from 27% to 26% effective April 1, 2011, and to 25% effective April 1, 2012. The impact of the tax rate changes on certain existing deferred tax liabilities resulted in a tax benefit of $18.3 million in the current period. The prior year period also included a similar tax benefit of $8.9 million on the revaluation of deferred tax liabilities. The effective tax rate was 20.1% for the nine months ended December 31, 2011, compared to 33.4% in the prior year period.  Changes in the U.K. tax rate impacted the effective tax rate by 9.5 percentage points in the nine months ended December 31, 2011, and 3.4 percentage points in the prior year period. In addition, the decrease in the effective tax rate is also attributable to proportionately more income in lower tax rate jurisdictions in the current period, as previously mentioned, and the impact of losses of CIVs in the prior year period for which there was no tax benefit. The effective tax rate, excluding the impact of CIVs, was approximately 21.1% for the nine months ended December 31, 2011, and 32.1% for the nine months ended December 31, 2010.

Net Income Attributable to Legg Mason, Inc.

Net Income for the nine months ended December 31, 2011, totaled $144.7 million, or $1.00 per diluted share, compared to $184.9 million, or $1.20 per diluted share, in the prior year period.  The decrease in Net Income was primarily due to an increase in incentive compensation from changes in an expense reimbursement arrangement with Western Asset, the impact of net market losses on proprietary fund products and assets invested for deferred compensation plans which are not offset in compensation and benefits, and the increase in occupancy expense due to permanently abandoning certain office space as a result of our business streamlining initiative, as previously discussed. These decreases were offset in part by the net impact of the decrease in corporate compensation costs due to our business streamlining initiative and the impact of the U.K. tax rate adjustment, as previously discussed. Adjusted Income (see Supplemental Non-GAAP Financial Information) decreased to $273.4 million, or $1.89 per

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diluted share, for the nine months ended December 31, 2011, from $321.6 million, or $2.08 per diluted share, in the prior year period, primarily due to the decrease in Net Income, as previously discussed, excluding the impact of the U.K. tax rate adjustment. Operating margin decreased to 13.2% from 13.9% in the prior year period. Operating Margin, as Adjusted (see Supplemental Non-GAAP Financial Information), for the nine months ended December 31, 2011 and 2010, was 21.3% and 23.2%, respectively.

Quarter Ended December 31, 2011 Compared to Quarter Ended September 30, 2011

Results of Operations

Net Income for the three months ended December 31, 2011, was $28.1 million, or $0.20 per diluted share, compared to $56.7 million, or $0.39 per diluted share, in the three months ended September 30, 2011. Operating revenues decreased 6.4% from $669.9 million in the three months ended September 30, 2011, to $627.0 million in the December 2011 quarter, reflecting a 3% decline in average AUM, a less favorable average asset mix and a $3.9 million decrease in performance fees. The decrease was also due to the impact of a decrease in average AUM revenue yields, from 35.3 basis points in the quarter ended September 30, 2011, to 34.4 basis points in the quarter ended December 31, 2011. Operating expenses increased 0.8%, from $563.0 million in the September quarter to $567.7 million in the December quarter, primarily due to a $20.7 million increase in occupancy expense, primarily consisting of transition-related costs. This increase was substantially offset by a reduction in distribution and servicing expenses as a result of a decrease in average AUM, as well as a $3.5 million decrease in transition-related compensation and benefits. Other non-operating expense decreased $39.5 million, primarily due to a $15.9 million increase due to net market gains on assets invested for deferred compensation plans and seed capital investments, reduced net market losses on investments in proprietary fund products, and net market gains related to CIVs.  Adjusted Income (see Supplemental Non-GAAP Financial Information) was $76.8 million, or $0.55 per diluted share, for the December quarter, compared to $87.6 million, or $0.61 per diluted share, in the September quarter.  Operating margin was 9.5% in the December 2011 quarter compared to 16.0% in the September 2011 quarter.  Operating Margin, as Adjusted (see Supplemental Non-GAAP Financial Information), for the three months ended December 31, 2011, and September 30, 2011, was 21.7% and 21.3%, respectively.

Supplemental Non-GAAP Financial Information

As supplemental information, we are providing performance measures that are based on methodologies other than generally accepted accounting principles (“non-GAAP”) for “Consolidated Statements of Income, Excluding Consolidated Investment Vehicles”, "Adjusted Income", and "Operating Margin, As Adjusted" that management uses as benchmarks in evaluating and comparing our period-to-period operating performance.

Consolidated Statements of Income, Excluding Consolidated Investment Vehicles

In accordance with financial accounting standards on consolidation, we consolidate and separately identify certain sponsored investment vehicles, the most significant of which is a CLO.  In presenting our “Consolidated Statements of Income, Excluding Consolidated Investment Vehicles”, we add back the investment advisory and distribution and servicing fees that are eliminated upon the consolidation of investment vehicles and exclude the operating expenses and the impact on non-operating income (expense) and noncontrolling interests of CIVs.

We believe it is important to provide the Consolidated Statements of Income, Excluding Consolidated Investment Vehicles to present the underlying economic performance of our core asset management operations, which does not include the results of the investment funds that we manage but may not own all of the equity invested. By deconsolidating the CIVs from the Consolidated Statements of Income, the investment advisory and distribution fees we earn from CIVs are added back to reflect our actual revenues. Similarly the operating expenses and the impact on non-operating income (expense) and noncontrolling interests of CIVs are removed from the GAAP basis Statements of Income since this activity does not actually belong to us. The deconsolidation of the investment vehicles does not have any impact on Net Income Attributable to Legg Mason, Inc. in any period presented. The Consolidated Statements of Income, Excluding Consolidated Investment Vehicles are presented in addition to our GAAP basis Consolidated Statements of Income, but are not substitutes for the GAAP basis Consolidated Statements of Income and may not be comparable to Consolidated Statements of Income presented on a non-GAAP basis of other companies.

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The following tables present a reconciliation of our Consolidated Statements of Income presented on a GAAP basis to our Consolidated Statements of Income, Excluding Consolidated Investment Vehicles for the three months ended December 31, 2011 and 2010, and September 30, 2011, and the nine months ended December 31, 2011 and 2010:

	Three Months Ended December 31,
	2011									2010
	GAAP Basis			CIVs			Non-GAAP Basis - Excluding CIVs			GAAP Basis			CIVs		Non-GAAP Basis - Excluding CIVs
Total operating revenues	$	626,978		$	753		$	627,731		$	721,928		$	1,159	$	723,087
Total operating expenses	567,655			(105		)	567,550			624,936			516		625,452
Operating Income	59,323			858			60,181			96,992			643		97,635
Other non-operating income (expense)	(11,575		)	(7,782		)	(19,357		)	(9,836		)	7,659		(2,177		)
Income (Loss) before Income Tax Provision	47,748			(6,924		)	40,824			87,156			8,302		95,458
Income tax provision	12,607			—			12,607			33,792			—		33,792
Net Income (Loss)	35,141			(6,924		)	28,217			53,364			8,302		61,666
Less:  Net income (loss) attributable to noncontrolling interests	7,009			(6,924		)	85			(8,256		)	8,302		46
Net Income Attributable to Legg Mason, Inc.	$	28,132		$	—		$	28,132		$	61,620		$	—	$	61,620

	Three Months Ended
	September 30, 2011
	GAAP Basis			CIVs			Non-GAAP Basis - Excluding CIVs
Total operating revenues	$	669,897		$	625		$	670,522
Total operating expenses	563,045			(260		)	562,785
Operating Income	106,852			885			107,737
Other non-operating income (expense)	(51,075		)	(1,522		)	(52,597		)
Income (Loss) before Income Tax Provision	55,777			(637		)	55,140
Income tax benefit	(1,606		)	—			(1,606		)
Net Income (Loss)	57,383			(637		)	56,746
Less:  Net income (loss) attributable to noncontrolling interests	719			(637		)	82
Net Income Attributable to Legg Mason, Inc.	$	56,664		$	—		$	56,664

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	Nine Months Ended December 31,
	2011									2010
	GAAP Basis			CIVs			Non-GAAP Basis - Excluding CIVs			GAAP Basis				CIVs			Non-GAAP Basis - Excluding CIVs
Total operating revenues	$	2,013,983		$	2,430		$	2,016,413		$	2,070,887		—	$	2,897		$	2,073,784
Total operating expenses	1,747,442			(475		)	1,746,967			1,783,219			—	(450		)	1,782,769
Operating Income	266,541			2,905			269,446			287,668				3,347			291,015
Other non-operating income (expense)	(73,451		)	(12,135		)	(85,586		)	(25,097		)	—	6,695			(18,402		)
Income (Loss) before Income Tax Provision	193,090			(9,230		)	183,860			262,571				10,042			272,613
Income tax provision	38,868			—			38,868			87,576				—			87,576
Net Income (Loss)	154,222			(9,230		)	144,992			174,995				10,042			185,037
Less:  Net income (loss) attributable to noncontrolling interests	9,474			(9,230		)	244			(9,891		)		10,042			151
Net Income Attributable to Legg Mason, Inc.	$	144,748		$	—		$	144,748		$	184,886			$	—		$	184,886

Adjusted Income

We define “Adjusted Income” as Net Income Attributable to Legg Mason, Inc., plus amortization and deferred taxes related to intangible assets and goodwill, and imputed interest and tax benefits on contingent convertible debt less deferred income taxes on goodwill and indefinite-life intangible asset impairment, if any. We also adjust for non-core items that are not reflective of our economic performance, such as impairment charges and the impact of tax rate adjustments on certain deferred tax liabilities related to indefinite-life intangible assets and goodwill, and net money market fund support losses (gains).

We believe that Adjusted Income provides a useful representation of our operating performance adjusted for non-cash acquisition related items and other items that facilitate comparison of our results to the results of other asset management firms that have not issued contingent convertible debt, made significant acquisitions, or engaged in money market fund support transactions. We also believe that Adjusted Income is an important metric in estimating the value of an asset management business.

Adjusted Income only considers adjustments for certain items that relate to operating performance and comparability, and therefore, is most readily reconcilable to Net Income Attributable to Legg Mason, Inc. determined under GAAP. This measure is provided in addition to Net Income Attributable to Legg Mason, Inc., but is not a substitute for Net Income Attributable to Legg Mason, Inc. and may not be comparable to non-GAAP performance measures, including measures of adjusted earnings or adjusted income, of other companies. Further, Adjusted Income is not a liquidity measure and should not be used in place of cash flow measures determined under GAAP. We consider Adjusted 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 comparison of our operating results with the results of other asset management firms that have not issued contingent convertible debt, made significant acquisitions, or engaged in money market fund support transactions.

In calculating Adjusted Income, we add the impact of the amortization of intangible assets from acquisitions, such as management contracts, to Net Income Attributable to Legg Mason, Inc. to reflect the fact that these non-cash expenses distort comparisons of our operating results with the results of other asset management firms that have not engaged in significant acquisitions. Deferred taxes on indefinite-life intangible assets and goodwill include actual tax benefits from amortization deductions that are not realized under GAAP absent an impairment charge or the disposition of the related business. Because we fully expect to realize the economic benefit of the current period tax amortization, we add this benefit to Net Income Attributable to Legg Mason, Inc. in the calculation of Adjusted Income. However, because of our net operating loss carryforward, we will receive the benefit of the current tax amortization over time. Conversely, we subtract the non-cash income tax benefits on goodwill and indefinite-life intangible asset impairment charges and United Kingdom tax rate adjustments on excess book basis on certain acquired indefinite-life intangible assets, if applicable, that have been recognized under GAAP. We also add back imputed interest on contingent

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convertible debt, which is a non-cash expense, as well as the actual tax benefits on the related contingent convertible debt that are not realized under GAAP. We also add (subtract) other non-core items, such as net money market fund support losses (gains) (net of losses on the sale of the underlying structured investment vehicle securities, if applicable).  These adjustments reflect that these items distort comparisons of our operating results to prior periods and the results of other asset management firms that have not engaged in money market fund support transactions or significant acquisitions, including any related impairments.

Should a disposition, impairment charge or other non-core item occur, its impact on Adjusted Income may distort actual changes in the operating performance or value of our firm. Also, realized losses on money market fund support transactions are reflective of changes in the operating performance and value of our firm. Accordingly, we monitor these items and their related impact, including taxes, on Adjusted Income to ensure that appropriate adjustments and explanations accompany such disclosures.

Although depreciation and amortization of fixed assets are non-cash expenses, we do not add these charges in calculating Adjusted Income because these charges are related to assets that will ultimately require replacement.

A reconciliation of Net Income Attributable to Legg Mason, Inc. to Adjusted Income (in thousands except per share amounts) is as follows:

	Three Months Ended
	December 31, 2011		September 30, 2011			December 31, 2010
Net Income Attributable to Legg Mason, Inc.	$	28,132	$	56,664		$	61,620
Plus (less):
Amortization of intangible assets	4,869		5,504			5,776
Deferred income taxes on intangible assets:
Tax amortization benefit	33,961		33,955			33,692
U.K. tax rate adjustment	—		(18,268		)	—
Imputed interest on convertible debt	9,793		9,741			9,194
Adjusted Income	$	76,755	$	87,596		$	110,282
Net Income per diluted share attributable to Legg Mason, Inc. common shareholders	$	0.20	$	0.39		$	0.41
Plus (less):
Amortization of intangible assets	0.04		0.04			0.04
Deferred income taxes on intangible assets:
Tax amortization benefit	0.24		0.24			0.22
U.K. tax rate adjustment	—		(0.13		)	—
Imputed interest on convertible debt	0.07		0.07			0.06
Adjusted Income per diluted share	$	0.55	$	0.61		$	0.73

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	Nine Months Ended
	December 31, 2011			December 31, 2010
Net Income Attributable to Legg Mason, Inc.	$	144,748		$	184,886
Plus (less):
Amortization of intangible assets	15,951			17,253
Deferred income taxes on intangible assets:
Tax amortization benefit	101,954			101,060
U.K. tax rate adjustment	(18,268		)	(8,878		)
Imputed interest on convertible debt	29,023			27,249
Adjusted Income	$	273,408		$	321,570
Net Income per diluted share attributable to Legg Mason, Inc. common shareholders	$	1.00		$	1.20
Plus (less):
Amortization of intangible assets	0.11			0.11
Deferred income taxes on intangible assets:
Tax amortization benefit	0.71			0.65
U.K. tax rate adjustment	(0.13		)	(0.06		)
Imputed interest on convertible debt	0.20			0.18
Adjusted Income per diluted share	$	1.89		$	2.08

Operating Margin, as Adjusted

We calculate “Operating Margin, as Adjusted,” by dividing (i) Operating Income, adjusted to exclude the impact on compensation expense of gains or losses on investments made to fund deferred compensation plans, the impact on compensation expense of gains or losses on seed capital investments by our affiliates under revenue sharing agreements, transition-related costs of streamlining our business model, income (loss) of CIVs, and impairment charges by (ii) our operating revenues, adjusted to add back net investment advisory fees eliminated upon consolidation of investment vehicles, less distribution and servicing expenses which we use as an approximate measure of revenues that are passed through to third parties, which we refer to as “Operating Revenues, as Adjusted”. The compensation items, other than transition-related costs, are removed from Operating Income in the calculation because they are offset by an equal amount in Other non-operating income (expense), and thus have no impact on Net Income Attributable to Legg Mason, Inc. Transition-related costs and income (loss) of CIVs are removed from Operating Income in the calculation because these items are not reflective of our core asset management operations. We use Operating Revenues, as Adjusted, in the calculation to show the operating margin without distribution and servicing expenses, which we use to approximate our distribution revenues that are passed through to third parties as a direct cost of selling our products, although distribution and servicing expenses may include commissions paid in connection with the launching of closed-end funds for which there is no corresponding revenue in the period. Operating Revenues, as Adjusted, also include our advisory revenues we receive from CIVs that are eliminated in consolidation under GAAP.

We believe that Operating Margin, as Adjusted, is a useful measure of our performance because it provides a measure of our core business activities excluding items that have no impact on Net Income Attributable to Legg Mason, Inc. and because it indicates what our operating margin would have been without the distribution revenues that are passed through to third parties as a direct cost of selling our products, transition-related costs, and the impact of the consolidation of certain investment vehicles described above. The consolidation of these investment vehicles does not have an impact to Net Income Attributable to Legg Mason, Inc. This measure is provided in addition to our operating margin calculated under GAAP, but is not a substitute for calculations of margins under GAAP and may not be comparable to non-GAAP performance measures, including measures of adjusted margins, of other companies.

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	Three Months Ended
	December 31, 2011			September 30, 2011			December 31, 2010
Operating Revenues, GAAP basis	$	626,978		$	669,897		$	721,928
Plus (less):
Operating revenues eliminated upon consolidation of investment vehicles	753			625			1,159
Distribution and servicing expense excluding consolidated investment vehicles	(148,258		)	(160,379		)	(187,411		)
Operating Revenues, as Adjusted	$	479,473		$	510,143		$	535,676
Operating Income, GAAP basis	$	59,323		$	106,852		$	96,992
Plus (less):
Gains (losses) on deferred compensation and seed investments	1,674			(14,243		)	8,566
Transition-related costs	42,311			15,138			23,998
Operating income and expenses of consolidated investment vehicles	858			885			643
Operating Income, as Adjusted	$	104,166		$	108,632		$	130,199
Operating margin, GAAP basis	9.5		%	16.0		%	13.4		%
Operating margin, as adjusted	21.7			21.3			24.3

	Nine Months Ended
	December 31, 2011			December 31, 2010
Operating Revenues, GAAP basis	$	2,013,983		$	2,070,887
Plus (less):
Operating revenues eliminated upon consolidation of investment vehicles	2,430			2,897
Distribution and servicing expense excluding consolidated investment vehicles	(489,380		)	(537,945		)
Operating Revenues, as Adjusted	$	1,527,033		$	1,535,839
Operating Income, GAAP basis	$	266,541		$	287,668
Plus (less):
Gains (losses) on deferred compensation and seed investments	(14,935		)	26,066
Transition-related costs	71,169			38,741
Operating income and expenses of consolidated investment vehicles	2,905			3,347
Operating Income, as Adjusted	$	325,680		$	355,822
Operating margin, GAAP basis	13.2		%	13.9		%
Operating margin, as adjusted	21.3			23.2

Liquidity and Capital Resources

The primary objective of our capital structure is to appropriately support our business strategies and to provide needed liquidity at all times, including maintaining required capital in certain subsidiaries. Liquidity and the access to liquidity is important to the success of our ongoing operations. For a further discussion of our principal liquidity and capital resources policies, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

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The consolidation of variable interest entities discussed above did not impact our liquidity and capital resources.  We have no rights to the benefits from, nor do we bear the risks associated with, the assets and liabilities of the CIVs, beyond our investments in and investment advisory fees generated from these vehicles, which are eliminated in consolidation.  Additionally, creditors of the CIVs have no recourse to our general credit beyond the level of our investment, if any, so we do not consider these liabilities to be our obligations.

Our assets consist primarily of intangible assets, goodwill, cash and cash equivalents, investment advisory and related fee receivables and investment securities.  Our assets have been principally funded by equity capital, long-term debt and the results of our operations. At December 31, 2011, excluding CIVs, our cash and cash equivalents, total assets, long-term debt and stockholders’ equity were $1.2 billion, $8.1 billion, $1.1 billion and $5.6 billion, respectively.  Total assets and total liabilities of the CIVs at December 31, 2011, were $363 million and $279 million, respectively.

The following table summarizes our Consolidated Statements of Cash Flows for the nine months ended December 31 (in millions):

	2011			2010
Cash flows provided by operating activities	$	333.7		$	194.8
Cash flows provided by/(used for) investing activities	3.3			(15.8		)
Cash flows used for financing activities	(465.9		)	(392.7		)
Effect of exchange rate changes	(14.4		)	9.3
Net change in cash and cash equivalents	(143.3		)	(204.4		)
Cash and cash equivalents, beginning of period	1,375.9			1,465.9
Cash and cash equivalents, end of period	$	1,232.6		$	1,261.5

Cash inflows provided by operating activities during the nine months ended December 31, 2011, were $333.7 million. Excluding activity relating to CIVs, cash inflows provided by operating activities were $315.4 million, primarily related to Net Income, adjusted for non-cash items, offset in part by net purchases of trading investments. Cash inflows provided by investing activities during the nine months ended December 31, 2011, were $3.3 million. Excluding activity related to CIVs, there were cash outflows used for investing activities of $14.1 million, primarily attributable to payments made for fixed assets, offset in part by the payment of an escrow deposit that was charged to occupancy expense as a transition-related cost in the prior year. Cash outflows used for financing activities during the nine months ended December 31, 2011, were $465.9 million. Excluding activity related to CIVs, there were cash outflows used for financing activities of $431.5 million, primarily due to the repurchase of 13.6 million of our common shares for $400.3 million. This repurchase completes our plan to repurchase $400 million of our common stock by the end of fiscal 2012. There remains $155 million under the current Board of Directors authorization to repurchase up to $1 billion of our common stock, announced in May 2010.

Cash inflows provided by operating activities during the nine months ended December 31, 2010, were $194.8 million. Excluding activity related to CIVs, there were cash inflows provided by operating activities of $156.3 million, primarily related to Net Income, adjusted for non-cash items, offset in part by net purchases of trading investments, the impact of annual deferred compensation payments, and the payment of various other obligations.  Cash outflows used for investing activities during the nine months ended December 31, 2010, were $15.8 million. Excluding activity related to CIVs, there were cash outflows used for investing activities of $20.0 million, primarily attributable to payments made for fixed assets.  Cash outflows used for financing activities during the nine months ended December 31, 2010, were $392.7 million. Excluding activity related to CIVs, there were cash outflows provided by financing activities of $385.5 million, primarily due to the repurchase of 12.6 million of our common shares for $376.4 million.

We expect that over the next 12 months our operating activities will be adequate to support our operating cash needs.  In addition to our ordinary operating cash needs, as discussed above, we anticipate other cash needs during the next 12 months. In connection with the announced plan to streamline our business model, we incurred transition-related costs of approximately $126 million through December 2011, of which approximately 25% are non-cash charges. Approximately $54 million of costs have been paid to date, and substantially all of the remaining costs will be paid during the remainder of fiscal 2012. We project that the initiative will result in annual cost savings of approximately $140 million, excluding costs incurred to achieve these savings, and expect to achieve the savings on a run rate basis by the fourth quarter of fiscal 2012.See Note 11 of Notes to Consolidated Financial Statements for information regarding transition-related costs recorded in the nine months ended December 31, 2011.

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We currently intend to utilize our other available resources for any number of potential activities, including seed capital investments in new products, repurchase of shares of our common stock, repayment of outstanding debt, payment of dividends, and acquisitions.

As described above, we currently project that our available cash and cash flows from operating activities will be sufficient to fund our liquidity needs. We also currently have over $850 million of cash in excess of our working capital requirements. We do not currently expect to raise additional debt or equity financing over the next 12 months, although existing facilities may be refinanced. However, there can be no assurances of these expectations as our projections could prove to be incorrect, unexpected events may occur that require additional liquidity, such as an acquisition opportunity or an opportunity to refinance indebtedness, or market conditions might significantly worsen, affecting our results of operations and generation of available cash. If these events result in our operations and available cash being insufficient to fund liquidity needs, we would likely seek to manage our available resources by taking actions such as additional cost-cutting, reducing our expected expenditures on investments, reducing future stock repurchases, selling assets (such as investment securities), repatriating earnings from foreign affiliates, or modifying arrangements with our affiliates and/or employees. Should these types of actions prove insufficient, or should a large acquisition or refinancing opportunity arise, we may seek to raise additional equity or debt.

In a prior year, we initiated plans to repatriate accumulated earnings of approximately $225 million, of which $49 million was repatriated. We currently intend to repatriate $150 million to $200 million of earnings to create foreign source income in order to utilize foreign tax credits that may otherwise expire unutilized. No further repatriation of accumulated prior period foreign earnings beyond the above range is currently planned, however, we may repatriate future earnings.

On June 30, 2011, the $103.0 million of outstanding debt on the remaining 5.6% senior notes from Equity Units was retired, as part of a remarketing. Concurrently, Legg Mason issued 1.8 million shares of Legg Mason common stock upon the exercise of the purchase contracts from the Equity Units.

The agreements entered into as part of our January 2008 issuance of $1.25 billion in 2.5% convertible senior notes prevent us from incurring additional debt, with a few exceptions, if our gross debt to EBITDA ratio (as defined in the documents) exceeds 2.5. As of December 31, 2011, our gross debt to EBITDA ratio was 2.7, which would prohibit us from borrowing additional amounts.

Certain of our outstanding debt is currently impacted by the ratings of two rating agencies. The interest rate on our revolving line of credit is based on the higher credit rating of the two rating agencies. In June 2011, our rating by one of these agencies was downgraded one notch below the other. Should the other agency downgrade our rating, absent an upgrade from the former agency, our interest costs will rise modestly.

On January 24, 2012, the Board of Directors approved a regular quarterly cash dividend in the amount of $0.08 per share payable on April 16, 2012.    

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Contractual Obligations and Contingent Payments

We have contractual obligations to make future payments in connection with our short and long-term debt, non-cancelable lease agreements and service agreements. The following table sets forth these contractual obligations (in millions) by fiscal year as of December 31, 2011, unless otherwise noted, and excludes contractual obligations of CIVs, as we are not responsible or liable for these obligations:

	Remaining 2012		2013		2014		2015		2016		Thereafter		Total
Contractual Obligations
Short-term borrowings(1)	$	250.0	$	—	$	—	$	—	$	—	$	—	$	250.0
Long-term borrowings by contract maturity(2)	0.2		1.3		1.3		1,251.4		5.9		—		1,260.1
Interest on short-term and long-term borrowings(2)(3)	17.6		33.4		31.7		31.6		0.3		—		114.6
Minimum rental and service commitments	42.4		141.2		114.0		100.9		89.9		521.3		1,009.7
Total Contractual Obligations(4)(5)	$	310.2	$	175.9	$	147.0	$	1,383.9	$	96.1	$	521.3	$	2,634.4

(1) Represents borrowing under our revolving line of credit which does not expire until February 2013.  However, we may elect to repay this debt sooner if management elects to utilize a portion of our available cash for this purpose.

(2) Excludes long-term borrowings of the consolidated CLO of $265.5 million and interest on these long-term borrowings, as applicable.

(3) Interest on floating rate short-term debt is based on rates at December 31, 2011.

(4) The table above does not include approximately $39.0 million in capital commitments to investment partnerships in which Legg Mason is a limited partner and other investment vehicles. These obligations are expected to be funded, as required, through the end of the commitment periods through fiscal 2018.    

(5) The table above does not include amounts for uncertain tax positions of $65.2 million (net of the federal benefit for state tax liabilities) because the timing of any related cash outflows cannot be reliably estimated.

Critical Accounting Policies

The following critical accounting policy has been updated from our Annual Report on Form 10-K for the year ended March 31, 2011.

Intangible Assets and Goodwill

Balances as of December 31, 2011 are as follows:

Amortizable asset management contracts	$	37,359
Indefinite-life intangible assets	3,753,428
Trade names	69,800
Goodwill	1,279,319
	$	5,139,906

We completed our annual impairment tests of goodwill and indefinite-life intangible assets during the quarter ended December 31, 2011, as required under applicable accounting standards, and determined that there was no impairment in the value of these assets as of December 31, 2011. As a result of increased uncertainty regarding future market conditions, assessing the value of the reporting unit and intangible assets is increasingly difficult, and requires management to exercise significant judgment.

Indefinite-Life Intangible Assets

The domestic mutual fund contracts acquired in the Citigroup Asset Management (“CAM”) acquisition of $2,502 million and the Permal funds-of-hedge funds contracts of $947 million account for approximately 65% and 25%, respectively, of our indefinite-life intangible assets. Cash flows from the domestic mutual fund contracts are assumed to have an average annual growth rate of approximately 7%. Cash flows on the Permal funds-of-hedge funds contracts are assumed to have an average annual growth rate of approximately 9%.  The projected cash flows from the domestic mutual fund contracts and Permal funds-of-hedge funds contracts

26

are discounted at 13.0% and 14.5%, respectively.  Actual cash flows in any one period may vary from the projected cash flows without resulting in an impairment charge because a variance in any one period must be considered in conjunction with other assumptions that impact projected cash flows.  Assuming all other factors remain the same, actual results and changes in assumptions for the domestic mutual fund and Permal funds-of-hedge funds contracts would have to cause our cash flow projections over the long-term to deviate more than 5% and 35%, respectively, from previous projections or the discount rate would have to be raised to 13.5% and 19.5%, respectively, for the asset to be deemed impaired.  Given the current uncertainty regarding future market conditions, it is reasonably possible that fund performance, flows and AUM levels may decrease in the near term such that actual cash flows from the domestic mutual fund contracts could deviate from the projections by more than 5% and the asset could be deemed to be impaired by a material amount. The approximate fair values of these assets exceed their carrying values by $124 million and $606 million, respectively.

Trade names account for 2% of indefinite-life intangible assets and are primarily related to Permal.  We tested these intangible assets using assumptions similar to those described above for indefinite-life contracts and the resulting fair values significantly exceed the related carrying amounts.

Goodwill

Goodwill principally originated from the acquisitions of CAM, Permal and Royce.  The value of the reporting unit is based on projected net cash flows of assets managed in our mutual funds, closed-end funds and other proprietary funds, in addition to separate account assets of our managers. For our annual December 31 impairment test, the projected cash flows are discounted at 14.0% to determine the present value of cash flows.  As of December 31, 2011, the implied fair value significantly exceeds the carrying value.  Projected cash flows, on an aggregate basis across all asset classes, are assumed to have an average annual growth rate of approximately 8%.  Cash flow growth over the next five years is based on separate factors for equity, fixed income, and liquidity products.  Equity product growth projections are based on long-term growth experience and current market conditions.  Fixed income product growth projections are based on the past experience of our primary fixed income manager and current market influences relevant to their business.  Long-term growth is based on our historical experience, available historic market statistics, and estimates of future expectations.  We believe our growth assumptions are reasonable given our consideration of multiple inputs, including internal and external sources described above.  However, our assumptions are subject to change based on fluctuations in our actual results and market conditions.  Assuming all other factors remain the same, actual results and changes in assumptions would have to cause our cash flow projections over the long-term to deviate approximately 51% from previous projections or the discount rate would have to increase approximately eight percentage points for goodwill to be considered for impairment.

As of December 31, 2011, considering relevant prices of our common shares, our market capitalization, along with a reasonable control premium, exceeds the aggregate carrying value of our reporting unit.

Recent Accounting Developments

See discussion of Other Recent Accounting Developments in Note 2 of Notes to Consolidated Financial Statements.

Forward-Looking Statements

We have made in this report, and from time to time may otherwise make in our public filings, press releases and statements by our management, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including information relating to anticipated growth in revenues or earnings per share, anticipated changes in our businesses or in the amount of our client AUM, anticipated future performance of our business, anticipated future investment performance of our subsidiaries, our expected future net client cash flows, anticipated expense levels, changes in expenses, the expected effects of acquisitions and expectations regarding financial market conditions. The words or phrases “can be,” “may be,” “expects,” “may affect,” “may depend,” “believes,” “estimate,” “project,” “anticipate” and similar words and phrases are intended to identify such forward-looking statements. Such forward-looking statements are subject to various known and unknown risks and uncertainties and we caution readers that any forward-looking information provided by or on behalf of Legg Mason is not a guarantee of future performance.

Actual results may differ materially from those in forward-looking information as a result of various factors, some of which are beyond our control, including but not limited to those discussed elsewhere herein, under the heading “Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended March 31, 2011, and in our other public filings, press releases and statements by our management. Due to such risks, uncertainties and other factors, we caution each person receiving such forward-looking information not to place undue reliance on such statements. Further, such forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligations to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

During the nine months ended December 31, 2011, there were no material changes to the information contained in Part II, Item 7A of Legg Mason’s Annual Report on Form 10-K for the fiscal year ended March 31, 2011.

Item 4. Controls and Procedures

As of December 31, 2011, Legg Mason's management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of Legg Mason's disclosure controls and procedures. In evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  Based on that evaluation, Legg Mason's management, including its Chief Executive Officer and its Chief Financial Officer, concluded that Legg Mason's disclosure controls and procedures were effective on a reasonable assurances basis.  There have been no changes in Legg Mason's internal controls over financial reporting that occurred during the quarter ended December 31, 2011, that have materially affected, or are reasonably likely to materially affect, Legg Mason's internal control over financial reporting.

28

PART II. OTHER INFORMATION

Item 1A. Risk Factors

The following is an update to the risk factors set forth in our Report on Form 10-K for the fiscal year ended March 31, 2011. The risk factor below has been updated to include activity for the nine months ended December 31, 2011.

Potential Impairment of Goodwill and Intangible Assets Could Increase our Expenses and Reduce our Assets

Determining goodwill and intangible assets, and evaluating them for impairment, requires significant management estimates and judgment, including estimating value and assessing life in connection with the allocation of purchase price in the acquisition creating them. Our goodwill and intangible assets may become impaired as a result of any number of factors, including losses of investment management contracts or declines in the value of managed assets. Any impairment of goodwill or intangibles could have a material adverse effect on our results of operations. For example, during the year ended March 31, 2009, we incurred aggregate impairment charges of $1.3 billion ($863 million, net of taxes) relating to goodwill and intangible assets including acquired asset management contracts and trade names. Our $37 million in amortizable intangible assets represent asset management contracts purchased in several transactions. These assets could become impaired if we experience client attrition at a rate faster than projected or fees charged under the contracts are reduced. The domestic mutual fund contracts acquired in the 2005 acquisition of the Citigroup Asset Management business of $2,502 million and the Permal funds-of-hedge funds contracts of $947 million account for approximately 65% and 25%, respectively, of our indefinite-life intangible assets, while the goodwill in our reporting unit aggregates $1.3 billion.

Changes in the assumptions underlying projected cash flows from the assets or reporting unit, resulting from market conditions, reduced assets under management or other factors, could result in an impairment of any of these assets. Assuming all other factors remain the same, actual results and changes in assumptions for the domestic mutual fund and Permal funds-of-hedge funds contracts would have to cause our cash flow projections over the long-term to deviate more than 5% and 35%, respectively, from previous projections or the discount rate would have to increase from 13.0% to 13.5% and from 14.5% to 19.5%, respectively, for the asset to be deemed impaired. Similarly, assuming all other factors remain the same, actual results and changes in assumptions for goodwill would have to cause our cash flow projections over the long-term to deviate approximately 51% from previous projections or the discount rate would have to increase by approximately eight percentage points for goodwill to be deemed impaired. There can be no assurances that continued market turmoil or asset outflows, or other factors, will not produce an impairment. See “Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Intangible Assets and Goodwill.”

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets out information regarding our purchases of Legg Mason common stock in each month during the quarter ended December 31, 2011:

Period	Total number of shares purchased	Average price paid per share		Total number of shares repurchased as part of publicly announced plans or programs (1)	Approximate dollar value that may yet be purchased under the plans or programs (1)
October 1, 2011 through October 31, 2011	—	$	—	—	$	154,938,375
November 1, 2011 through November 30, 2011	—	—		—	154,938,375
December 1, 2011 through December 31, 2011	—	—		—	154,938,375
Total	—	$	—	—	$	154,938,375

(1) On May 10, 2010, we announced that our Board of Directors replaced a prior stock purchase authorization with a new authorization to purchase up to $1 billion worth of our common stock.  There is no expiration date attached to this authorization.  

29

Item 6. Exhibits

3.1	Articles of Incorporation of Legg Mason (incorporated by reference to Legg Mason’s Current Report on Form 8-K for the event on July 26, 2011)
3.2	By-laws of Legg Mason as amended and restated July 26, 2011 (incorporated by reference to Legg Mason, Inc.’s Current Report on Form 8-K for the event on July 26, 2011)
12	Computation of consolidated ratios of earnings to fixed charges
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Financial statements from the quarterly report on Form 10-Q of Legg Mason, Inc. for the quarter ended December 31, 2011, filed on February 7, 2012, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements tagged in detail

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LEGG MASON, INC.
	(Registrant)
DATE:   February 7, 2012	/s/ Mark R. Fetting
	Mark R. Fetting
	Chairman, President and
	Chief Executive Officer
DATE:   February 7, 2012	/s/ Peter H. Nachtwey
	Peter H. Nachtwey
	Chief Financial Officer and Senior Executive Vice President

31

INDEX TO EXHIBITS

3.1	Articles of Incorporation of Legg Mason (incorporated by reference to Legg Mason’s Current Report on Form 8-K for the event on July 26, 2011)
3.2	By-laws of Legg Mason as amended and restated July 26, 2011 (incorporated by reference to Legg Mason, Inc.’s Current Report on Form 8-K for the event on July 26, 2011)
12	Computation of consolidated ratios of earnings to fixed charges
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101	Financial statements from the quarterly report on Form 10-Q of Legg Mason, Inc. for the quarter ended December 31, 2011, filed on February 7, 2012, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements tagged in detail

32

EX-12

Exhibit 12

LEGG MASON, INC. AND SUBSIDIARIES

Computation of Consolidated Ratios of Earnings to Fixed Charges

(Dollars in thousands)

	Nine Months Ended December 31,			Years ended March 31,
	2011			2011			2010			2009			2008
Earnings (loss) from operations before income tax provision	$	193,090		$	365,197		$	329,656		$	(3,188,197	)	$	437,327
Fixed Charges:
Interest Expense	64,758			89,598			124,573			177,588			87,993
Interest on uncertain tax positions included in earnings (loss) from operations before income tax provision1	1,070			2,559			1,700			5,217			1,232
Portion of rental expenses representative of interest factor2	31,554			42,074			43,066			37,487			39,080
Earnings (loss) available for fixed charges	$	290,472		$	499,428		$	498,995		$	(2,967,905	)	$	565,632
Fixed Charges:
Interest Expense	$	65,828		$	92,157		$	126,273		$	182,805		$	89,225
Interest expense included in interest expense not related to third party indebtedness1	(1,070		)	(2,559		)	(1,700		)	(5,217		)	(1,232		)
Portion of rental expense representative of interest factor2	31,554			42,074			43,066			37,487			39,080
Total Fixed Charges	$	96,312		$	131,672		$	167,639		$	215,075		$	127,073
Consolidated ratio of earnings (loss) to fixed charges	3.0			3.8			3.0			(13.8		)	4.5

1) The portion of interest related to uncertain tax positions is excluded from the calculation.

2) The portion of rental expense representative of interest factor is calculated as one third of the total of Rent, Market Data Services, Maintenance, DP Service Bureau and Equipment Rental expenses.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark R. Fetting, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2011 of Legg Mason, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 7, 2012	/s/ Mark R. Fetting
		Mark R. Fetting Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Peter H. Nachtwey, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended December 31, 2011 of Legg Mason, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	February 7, 2012	/s/ Peter H. Nachtwey
		Peter H. Nachtwey Chief Financial Officer and Senior Executive Vice President

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Legg Mason, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2011 as filed with the Securities and Exchange Commission (the “Report”), I, Mark R. Fetting, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Mark R. Fetting

Mark R. Fetting

Chairman, President and

Chief Executive Officer

February 7, 2012

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Legg Mason, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2011 as filed with the Securities and Exchange Commission (the “Report”), I, Peter H. Nachtwey, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Peter H. Nachtwey

Peter H. Nachtwey

Chief Financial Officer and

Senior Executive Vice President

February 7, 2012

XML

Intangible Assets and Goodwill (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Mar. 31, 2011
Intangible assets
Amount domestic funds fair value exceeds carrying value	5.00%
Consolidated Legg Mason Group [Member]
Intangible assets
Indefinite-life intangible assets	$ 3,823,228	$ 3,823,457
Intangible assets, net	3,860,587	3,876,775
Consolidated Legg Mason Group [Member] | Amortizable asset management contracts
Intangible assets
Cost	206,928	208,454
Accumulated amortization	(169,569)	(155,136)
Amortizable asset management contracts, net	37,359	53,318
Consolidated Legg Mason Group [Member] | Fund management contracts
Intangible assets
Indefinite-life intangible assets	3,753,428	3,753,657
Consolidated Legg Mason Group [Member] | Trade names
Intangible assets
Indefinite-life intangible assets	69,800	69,800
Consolidated Legg Mason Group [Member] | Domestic Mutual Fund Contracts [Domain]
Intangible assets
Indefinite-life intangible assets	$ 2,502,000

XML

Restructuring (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended				12 Months Ended		21 Months Ended		9 Months Ended		12 Months Ended		21 Months Ended		9 Months Ended		12 Months Ended		21 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011 Severance and retention incentives		Mar. 31, 2011 Severance and retention incentives		Dec. 31, 2011 Severance and retention incentives		Dec. 31, 2011 Other		Mar. 31, 2011 Other		Dec. 31, 2011 Other		Dec. 31, 2011 Restructuring Charges [Member]		Mar. 31, 2011 Restructuring Charges [Member]		Dec. 31, 2011 Restructuring Charges [Member]
Restructuring Reserve [Line Items]
Restructuring Lease liability expense	$ 18,246
Restructuring Reserve
Beginning Balance					23,211		0		0		5,835		0		0		29,046		0		0
Accrued charges					27,504	[1]	35,487				26,000	[1]	6,160				53,504	[1]	41,647
Payments					(28,642)		(12,276)				(12,563)		(325)				(41,205)		(12,601)
Ending Balance					22,073		23,211		22,073		19,272		5,835		19,272		41,345		29,046		41,345
Non-cash Charges					5,055	[2]	9,561	[2]	14,616	[2]	12,610	[2]	3,226	[2]	15,836	[2]	17,665	[2]	12,787	[2]	30,452	[2]
Transition-related costs	42,311	23,998	71,169	38,741
Restructuring and Related Cost, Cost Incurred to Date									$ 77,607						$ 47,996						$ 125,603

[1] Other includes lease loss accruals of $18,246 for space permanently abandoned.

[2] Includes stock-based compensation expense, fixed asset accelerated depreciation related to space permanently abandoned, and accelerated depreciation for internally-developed software that will no longer be utilized as a result of the initiative.

XML

Stock-Based Compensation (Details 4) (Equity Plan for Non-employee Director [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Restricted stock unit
Stock based compensation disclosure
Stock and units granted (in shares)	12	17
Restricted stock units outstanding (in shares)	75	62
Stock Distributed During Period, Shares Restricted Stock Award under Non-Employee Director Plan		7
Stock Option [Member]
Stock based compensation disclosure
Stock options outstanding (in shares)	193	220
Stock options exercised (in shares)		9
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period	27	59
Common Stock [Member]
Stock based compensation disclosure
Stock and units granted (in shares)	31	31
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Total Fair Value	1,375	1,425

XML

Variable Interest Entities and Consolidation of Investment Vehicles (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2011	Mar. 31, 2011	Dec. 31, 2011 Before Consolidation [Member]	Mar. 31, 2011 Before Consolidation [Member]	Dec. 31, 2011 CIVs	Mar. 31, 2011 CIVs		Dec. 31, 2011 Eliminations	Mar. 31, 2011 Eliminations	Dec. 31, 2011 Consolidated Legg Mason Group [Member]	Mar. 31, 2011 Consolidated Legg Mason Group [Member]	Dec. 31, 2010 Consolidated Legg Mason Group [Member]	Mar. 31, 2010 Consolidated Legg Mason Group [Member]
Variable Interest Entity [Line Items]
Controlling financial interest in VRE redeemed	$ 20,814
Variable Interest Entities and Consolidation of Investment Vehicles
Number of sponsored investment fund VIEs for which Legg Mason is the primary beneficiary	1
Number of sponsored investment fund VREs for which Legg Mason has a controlling financial interest	1
Number of CLOs reviewed to determine whether Legg Mason is the primary beneficiary.	2
Number of CLOs for which Legg Mason is the primary beneficiary	1
Investment in consolidated sponsored investment funds	43,145	53,708
Current assets			2,204,535	2,378,226	70,678	122,963	[1]	(43,667)	(54,633)	2,231,546	2,446,556
Non-current assets			5,847,514	5,946,737	292,002	314,463	[1]	0	0	6,139,516	6,261,200
Total Assets			8,052,049	8,324,963	362,680	437,426	[1]	(43,667)	(54,633)	8,371,062	8,707,756
Current liabilities			891,674	914,803	9,785	55,094	[1]	(521)	(925)	900,938	968,972
Long-term debt of CIVs			0	0	265,478	278,320	[1]	0	0	265,478	278,320
Other non-current liabilities			1,574,860	1,649,815	3,998	3,553	[1]	0	0	1,578,858	1,653,368
Total Liabilities			2,466,534	2,564,618	279,261	336,967	[1]	(521)	(925)	2,745,274	2,900,660
Redeemable Noncontrolling Interests			911	976	0	0	[1]	27,905	35,736	28,816	36,712	32,294	29,577
Total stockholders' equity			5,584,604	5,759,369	83,419	100,459	[1]	(71,051)	(89,444)	5,596,972	5,770,384	5,762,256
Total Liabilities and Stockholders' Equity			$ 8,052,049	$ 8,324,963	$ 362,680	$ 437,426	[1]	$ (43,667)	$ (54,633)	$ 8,371,062	$ 8,707,756

[1] Certain immaterial non-current liabilities of CIVs are included in Other liabilities on the Consolidated Balance Sheets.

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Stock-Based Compensation (Details 2) (Black-Scholes option pricing model)	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Black-Scholes option pricing model
Share-based Compensation Arrangement by Share Based Payment Award Fair Value Assumptions
Expected dividend yield (as a percent)	1.39%	1.39%
Risk-free interest rate (as a percent)	1.95%	2.38%
Expected volatility (as a percent)	47.16%	52.78%
Expected lives (in years)	5.12	5.18

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Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Dec. 31, 2011	Dec. 31, 2010
Foreign Corporate Tax Rate [Abstract]
Foreign corporate tax rate before enactment of finance bill of 2010			28.00%
Foreign corporate tax rate after enactment of finance bill of 2010			27.00%
Foreign corporate tax rate after enactment of finance act of 2011, effective April 1, 2011			26.00%
Foreign corporate tax rate after enactment of finance act of 2011, effective April 1, 2012			25.00%
Tax Benefit Resulting from Foreign Tax Rate Change	$ 18,268	$ 8,878
Reduction in Effective Tax Rate			9.50%	3.40%

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 3) (Consolidated Investment Vehicles [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Mar. 31, 2011
Total
Trading investments:
Hedge funds	$ 36,890	$ 48,359
Government and corporate securities		22,139
Repurchase agreements		12,331
Total trading investment securities		82,829
Investments:
CLO loans	256,470	275,948
CLO bonds	10,312	18,813
Private equity funds	23,871	17,879
Total investments	290,653	312,640
Derivative assets		170
Financial assets measured at fair value	327,543	395,639
Liabilities:
CLO debt	(265,478)	(278,320)
Reverse repurchase agreements		(18,310)
Derivative liabilities	(3,998)	(14,297)
Financial liabilities measured at fair value	(269,476)	(310,927)
Quoted prices in active markets (Level 1)
Trading investments:
Hedge funds	977	0
Government and corporate securities		0
Repurchase agreements		0
Total trading investment securities		0
Investments:
CLO loans	0	0
CLO bonds	0	0
Private equity funds	0	0
Total investments	0	0
Derivative assets		125
Financial assets measured at fair value	977	125
Liabilities:
CLO debt	0	0
Reverse repurchase agreements		0
Derivative liabilities	0	(128)
Financial liabilities measured at fair value	0	(128)
Fair Value, Inputs, Level 2 [Member]
Trading investments:
Hedge funds	9,366	14,087
Government and corporate securities		22,139
Repurchase agreements		12,331
Total trading investment securities		48,557
Investments:
CLO loans	256,470	275,948
CLO bonds	10,312	18,813
Private equity funds	0	0
Total investments	266,782	294,761
Derivative assets		45
Financial assets measured at fair value	276,148	343,363
Liabilities:
CLO debt	0	0
Reverse repurchase agreements		(18,310)
Derivative liabilities	(3,998)	(14,169)
Financial liabilities measured at fair value	(3,998)	(32,479)
Significant unobservable inputs (Level 3)
Trading investments:
Hedge funds	26,547	34,272
Government and corporate securities		0
Repurchase agreements		0
Total trading investment securities		34,272
Investments:
CLO loans	0	0
CLO bonds	0	0
Private equity funds	23,871	17,879
Total investments	23,871	17,879
Derivative assets		0
Financial assets measured at fair value	50,418	52,151
Liabilities:
CLO debt	(265,478)	(278,320)
Reverse repurchase agreements		0
Derivative liabilities	0	0
Financial liabilities measured at fair value	$ (265,478)	$ (278,320)

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Intangible Assets and Goodwill (Tables)

9 Months Ended

Dec. 31, 2011

Intangible Assets And Goodwill Disclosure [Abstract]

Components of intangible assets

	December 31, 2011			March 31, 2011
Amortizable asset management contracts
Cost	$	206,928		$	208,454
Accumulated amortization	(169,569		)	(155,136		)
Net	37,359			53,318
Indefinite–life intangible assets
Fund management contracts	3,753,428			3,753,657
Trade names	69,800			69,800
	3,823,228			3,823,457
Intangible assets, net	$	3,860,587		$	3,876,775

Estimated amortization expense

Remaining 2012	$	3,625
2013	14,085
2014	11,902
2015	2,987
2016	2,731
Thereafter	2,029
Total	$	37,359

Changes in carrying value of goodwill

The change in the carrying value of goodwill for the nine months ended December 31, 2011, is summarized below:

	Gross Book Value			Accumulated Impairment			Net Book Value
Balance as of March 31, 2011	$	2,473,552		$	(1,161,900	)	$	1,311,652
Impact of excess tax basis amortization	(15,993		)	—			(15,993		)
Other, including changes in foreign exchange rates	(16,340		)	—			(16,340		)
Balance as of December 31, 2011	$	2,441,219		$	(1,161,900	)	$	1,279,319

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Commitments and Contingencies Legal contingencies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011
Loss Contingencies [Line Items]
Loss Contingency Damages Sought Amount In Excess	$ 90,000

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Long-Term Debt and Equity Units (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Mar. 31, 2011
Debt Instrument [Line Items]
Unamortized Discount	$ 133,045
Legg Mason, Inc.
Debt Instrument [Line Items]
Accreted Value of Long-term debt	1,127,041	1,201,868
Less: current portion	1,266	792
Total	1,125,775	1,201,076
Unamortized Discount	133,045
Maturity Amount	1,260,086
Debt Instrument Maturity Amount, Current	1,266
Total Maturity Amount, noncurrent	1,258,820
Legg Mason, Inc. | 2.5% convertible senior notes
Debt Instrument [Line Items]
Accreted Value of Long-term debt	1,116,955	1,087,932
Unamortized Discount	133,045
Maturity Amount	1,250,000
Legg Mason, Inc. | 5.6% senior notes from Equity Units
Debt Instrument [Line Items]
Accreted Value of Long-term debt	0	103,039
Unamortized Discount	0
Maturity Amount	0
Legg Mason, Inc. | Other term loans [Member]
Debt Instrument [Line Items]
Accreted Value of Long-term debt	10,086	10,897
Unamortized Discount	0
Maturity Amount	$ 10,086

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Fair Values of Assets and Liabilities (Details 4) (Legg Mason, Inc., USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2011
Nature of Investments
Fair Value Determined Using Nav	$ 184,839
Unfunded Commitments	25,983
Funds-of-hedge funds
Nature of Investments
Fair Value Determined Using Nav	55,570	[1]
Percentage of Monthly Redemption	68.00%
Percentage of Quarterly Redemption	32.00%
Percentage of quarterly investment subject to lock-up or side pocket provisions (as a percent)	38.00%
Hedge funds
Nature of Investments
Fair Value Determined Using Nav	25,222	[2]
Unfunded Commitments	20,000
Private equity funds
Nature of Investments
Fair Value Determined Using Nav	28,300	[2]
Unfunded Commitments	5,983
Remaining term, high end of range (in years)	8
Private fund
Nature of Investments
Fair Value Determined Using Nav	73,455	[2],[3]
Remaining term, low end of range (in years)	7
Other investments
Nature of Investments
Fair Value Determined Using Nav	$ 2,292	[2],[4]
Percentage of investment with less than 1 year remaining term (as a percent)	4.00%
Percentage of investment with 20-year remaining term (as a percent)	96.00%
Remaining term, low end of range (in years)	1
Remaining term, high end of range (in years)	20

[1] 68% monthly redemption; 32% quarterly redemption, of which 38% is subject to two-year lock-up.

[2] Liquidations are expected over the remaining term.

[3] Redemptions prohibited until November 2012.

[4] 4% remaining term of less than one year; 96% 20-year remaining term.

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Earnings Per Share (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended	3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2011	Dec. 31, 2011 Stock options	Dec. 31, 2010 Stock options	Dec. 31, 2011 Stock options	Dec. 31, 2010 Stock options	Dec. 31, 2011 Consolidated Legg Mason Group [Member]	Dec. 31, 2011 Consolidated Legg Mason Group [Member] Senior Notes from Equity Units [Member]	Jun. 30, 2011 Consolidated Legg Mason Group [Member] Senior Notes from Equity Units [Member]	Dec. 31, 2011 Consolidated Legg Mason Group [Member] Senior Notes from Equity Units [Member]
Additional earnings per share disclosures
Debt instrument interest rate stated percentage (as a percent)	2.50%	2.50%							5.60%
Common stock issued through Equity Units									1,830
Incremental Common Shares Attributable to Conversion of Debt Securities								1,830		1,231
Common stock purchased and retired (in shares)	0	13,597
Common stock purchased and retired in the open market							$ 400,266
Repurchased and Retired Shares, Excluded from Weighted Average Shares Outstanding Number	13,597	8,432
Number of antidilutive shares excluded from EPS calculation			5,760	5,162	7,563	5,256
Stock Issued During Period, Shares, Restricted Stock Award, Gross	0	1,303
Restricted Stock Included In Weighted-Average Shares Outstanding	1,303	1,075

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 7) (USD $) In Thousands, unless otherwise specified		3 Months Ended		9 Months Ended
	Dec. 31, 2011 CLO-VIE	Dec. 31, 2011 CIVs	Dec. 31, 2010 CIVs	Dec. 31, 2011 CIVs	Dec. 31, 2010 CIVs	Dec. 31, 2011 Estimate of Fair Value, Fair Value Disclosure [Member] CIVs	Mar. 31, 2011 Estimate of Fair Value, Fair Value Disclosure [Member] CIVs
Debt Instrument [Line Items]
Pre-defined interest rate spread of CLO debt, high end of range (as a percent)	4.00%
Pre-defined interest rate spread of CLO debt, low end of range (as a percent)	0.25%
Derivative assets							$ 170
Derivative Liabilities						(3,998)	(14,297)
Gain on Derivative Assets and Liabilities Recorded in Other Non-Operating Income of Consolidated Investment Vehicles		491	5,725	54,477	11,603
Loss on Derivative Assets and Liabilities Recorded in Other Non-Operating Income of Consolidated Investment Vehicles		$ (552)	$ (7,394)	$ (47,388)	$ (15,648)

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Stock-Based Compensation (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Stock based compensation disclosure
Compensation expense relating to restricted stock and restricted stock units	$ 8,876	$ 9,883	$ 25,484	$ 25,951
Compensation expense relating to the stock purchase plan and deferred compensation payable in stock	101	100	385	438
Restricted stock and restricted stock unit
Stock based compensation disclosure
Unvested shares, at the beginning of the period (in shares)			2,637	1,605
Granted (in shares)			1,315	1,786
Vested (in shares)			(806)	(475)
Canceled/ forfeited (in shares)			(55)	(205)
Unvested shares, at the end of the period (in shares)	3,091	2,711	3,091	2,711
Unvested shares, at the beginning of the period (in dollars per share)			$ 33.01	$ 34.80
Granted (in dollars per share)			$ 33.79	$ 32.95
Vested (in dollars per share)			$ 32.44	$ 36.39
Canceled/ forfeited (in dollars per share)	$ 32.85	$ 29.82	$ 32.85	$ 29.82
Unvested shares, at the end of the period (in dollars per share)	$ 33.49	$ 33.68	$ 33.49	$ 33.68
Unamortized compensation cost related to unvested restricted stock awards			$ 69,175
Weighted-average period over which compensation related to unvested restricted stock awards is expected to be recognized (in years)			1.8

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Interim Basis of Reporting

9 Months Ended

Dec. 31, 2011

Interim Basis of Reporting Disclosure [Abstract]

Interim Basis of Reporting

1. Interim Basis of Reporting

The accompanying unaudited interim consolidated financial statements of Legg Mason, Inc. and its subsidiaries (collectively “Legg Mason”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. The interim consolidated financial statements have been prepared using the interim basis of reporting and, as such, reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of the results for the periods presented. The preparation of interim consolidated financial statements requires management to make assumptions and estimates that affect the amounts reported in the interim consolidated financial statements and accompanying notes. Actual amounts could differ from those estimates and the differences could have a material impact on the interim consolidated financial statements.

The nature of our business is such that the results of any interim period are not necessarily indicative of the results of a full year. The fiscal year-end condensed balance sheet was derived from audited financial statements and, in accordance with interim financial information standards, does not include all disclosures required by U.S. GAAP for annual financial statements.  Certain amounts in prior period financial statements have been reclassified to conform to the current period presentation.

The information contained in the interim consolidated financial statements should be read in conjunction with our latest Annual Report on Form 10-K filed with the Securities and Exchange Commission.

Unless otherwise noted, all per share amounts for the nine months endedDecember 31, 2010, include both common shares of Legg Mason and shares issued in connection with the acquisition of Legg Mason Canada Inc., which were exchangeable into common shares of Legg Mason on a one-for-one basis at any time. During the quarter ended June 30, 2010, all outstanding exchangeable shares were converted into shares of Legg Mason common stock.

Terms such as “we,” “us,” “our,” and “company” refer to Legg Mason.

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 8) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2011		Mar. 31, 2011
Variable Interest Entity [Line Items]
VIE Assets Not Consolidated	$ 17,379,534		$ 21,316,932
VIE Liabilities Not Consolidated	371,361		373,465
Equity Interests on the Consolidated Balance Sheet	67,591		83,770
Maximum Risk of Loss	104,408	[1]	122,385	[1]
CDOs/CLOs
Variable Interest Entity [Line Items]
VIE Assets Not Consolidated	394,435		382,692
VIE Liabilities Not Consolidated	366,435		354,692
Equity Interests on the Consolidated Balance Sheet	0		0
Maximum Risk of Loss	449	[1]	196	[1]
Public-Private Investment Program [Member]
Variable Interest Entity [Line Items]
VIE Assets Not Consolidated	554,570		692,488
VIE Liabilities Not Consolidated	2,878		2,002
Equity Interests on the Consolidated Balance Sheet	232		290
Maximum Risk of Loss	375	[1]	290	[1]
Other sponsored investments fund [Member]
Variable Interest Entity [Line Items]
VIE Assets Not Consolidated	16,430,529		20,241,752
VIE Liabilities Not Consolidated	2,048		16,771
Equity Interests on the Consolidated Balance Sheet	67,359		83,480
Maximum Risk of Loss	$ 103,584	[1]	$ 121,899	[1]

[1] Includes equity investments the Company has made or is required to make and any earned but uncollected management fees.

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Long-Term Debt and Equity Units (Details 2) (Legg Mason, Inc., USD $) In Thousands, unless otherwise specified	Dec. 31, 2011
Legg Mason, Inc.
Long-term debt
Remaining 2012	$ 203
2013	1,281
2014	1,333
2015	1,251,386
2016	5,883
Thereafter	0
Total	$ 1,260,086

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Earnings Per Share (Tables)

3 Months Ended

9 Months Ended

Dec. 31, 2011

Dec. 31, 2011

Earnings Per Share, Basic and Diluted [Abstract]

Computations of basic and diluted EPS

	Three Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	140,053		140,053		149,980			149,980
Potential common shares:
Employee stock options	—		29		—			231
Shares related to deferred compensation	—		—		—			761
Total weighted-average diluted shares	140,053		140,082		149,980			150,972
Net Income	$	35,141	$	35,141	$	53,364		$	53,364
Less: Net income (loss) attributable to noncontrolling interests	7,009		7,009		(8,256		)	(8,256		)
Net Income Attributable to Legg Mason, Inc.	$	28,132	$	28,132	$	61,620		$	61,620
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	0.20	$	0.20	$	0.41		$	0.41

	Nine Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	144,363		144,363		153,817			153,817
Potential common shares:
Employee stock options	—		65		—			200
Shares related to deferred compensation	—		—		—			531
Total weighted-average diluted shares	144,363		144,428		153,817			154,548
Net Income	$	154,222	$	154,222	$	174,995		$	174,995
Less: Net income (loss) attributable to noncontrolling interests	9,474		9,474		(9,891		)	(9,891		)
Net Income Attributable to Legg Mason, Inc.	$	144,748	$	144,748	$	184,886		$	184,886
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	1.00	$	1.00	$	1.20		$	1.20

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Commitments and Contingencies (Tables)

9 Months Ended

Dec. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

Minimum annual aggregate rentals under operating leases and service agreements

Remaining 2012	$	42,421
2013	141,197
2014	114,028
2015	100,883
2016	89,933
Thereafter	521,245
Total	$	1,009,707

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Before Consolidation [Member]
Total operating revenues	$ 627,731	$ 723,087	$ 2,016,413	$ 2,073,784
Total operating expenses	567,550	625,452	1,746,967	1,782,769
Operating Income	60,181	97,635	269,446	291,015
Total other non-operating income (expense)	(19,357)	(2,177)	(85,586)	(18,402)
Income Before Income Tax Provision	40,824	95,458	183,860	272,613
Income tax (benefit) provision	12,607	33,792	38,868	87,576
Net Income	28,217	61,666	144,992	185,037
Less: Net income (loss) attributable to noncontrolling interests	85	46	244	151
Net Income (Loss) Attributable to Parent	28,132	61,620	144,748	184,886
Consolidated Investment Vehicles
Total operating revenues	0	0	0	0
Total operating expenses	859	643	2,906	3,347
Operating Income	(859)	(643)	(2,906)	(3,347)
Total other non-operating income (expense)	7,424	(8,462)	15,607	(6,356)
Income Before Income Tax Provision	6,565	(9,105)	12,701	(9,703)
Income tax (benefit) provision	0	0	0	0
Net Income	6,565	(9,105)	12,701	(9,703)
Less: Net income (loss) attributable to noncontrolling interests	0	0	0	0
Net Income (Loss) Attributable to Parent	6,565	(9,105)	12,701	(9,703)
Eliminations
Total operating revenues	(753)	(1,159)	(2,430)	(2,897)
Total operating expenses	(754)	(1,159)	(2,431)	(2,897)
Operating Income	1	0	1	0
Total other non-operating income (expense)	358	803	(3,472)	(339)
Income Before Income Tax Provision	359	803	(3,471)	(339)
Income tax (benefit) provision	0	0	0	0
Net Income	359	803	(3,471)	(339)
Less: Net income (loss) attributable to noncontrolling interests	6,924	(8,302)	9,230	(10,042)
Net Income (Loss) Attributable to Parent	(6,565)	9,105	(12,701)	9,703
Consolidated Legg Mason Group [Member]
Total operating revenues	626,978	721,928	2,013,983	2,070,887
Total operating expenses	567,655	624,936	1,747,442	1,783,219
Operating Income	59,323	96,992	266,541	287,668
Total other non-operating income (expense)	(11,575)	(9,836)	(73,451)	(25,097)
Income Before Income Tax Provision	47,748	87,156	193,090	262,571
Income tax (benefit) provision	12,607	33,792	38,868	87,576
Net Income	35,141	53,364	154,222	174,995
Less: Net income (loss) attributable to noncontrolling interests	7,009	(8,256)	9,474	(9,891)
Net Income (Loss) Attributable to Parent	$ 28,132	$ 61,620	$ 144,748	$ 184,886

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Long-Term Debt and Equity Units (Details 3) (USD $) In Thousands, unless otherwise specified		9 Months Ended			3 Months Ended		9 Months Ended			3 Months Ended
	Dec. 31, 2011	Dec. 31, 2011 Legg Mason, Inc.	Dec. 31, 2010 Legg Mason, Inc.	Mar. 31, 2011 Legg Mason, Inc.	Dec. 31, 2011 2.5% convertible senior notes Legg Mason, Inc.	Dec. 31, 2010 2.5% convertible senior notes Legg Mason, Inc.	Dec. 31, 2011 2.5% convertible senior notes Legg Mason, Inc.	Dec. 31, 2010 2.5% convertible senior notes Legg Mason, Inc.	Mar. 31, 2011 2.5% convertible senior notes Legg Mason, Inc.	Jun. 30, 2011 5.6% senior notes from Equity Units Legg Mason, Inc.	Dec. 31, 2011 5.6% senior notes from Equity Units Legg Mason, Inc.	Mar. 31, 2011 5.6% senior notes from Equity Units Legg Mason, Inc.
Debt Instrument [Line Items]
Long-term Debt, Fair Value		$ 1,218,596
Amount by which the accreted value of the Notes exceeds their if-converted value							91,555
Long-term debt		1,127,041		1,201,868	1,116,955		1,116,955		1,087,932		0	103,039
Debt instrument interest rate stated percentage (as a percent)	2.50%				2.50%		2.50%			5.60%
Debt instrument, effective borrowing rate used to accrete carrying value (as a percent)							6.50%
Imputed Interest for 2.5% Convertible Senior Notes		$ 29,023	$ 27,248		$ 9,793	$ 9,194	$ 29,023	$ 27,248
Debt instrument term for computation of effective rate (in years)							7
Percentage of interest rate used in the calculation of the if-converted value of convertible debt (as a percent)							4.00%
Equity Units exchange										1,830

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Derivatives and Hedging (Tables)

3 Months Ended

9 Months Ended

Dec. 31, 2011

Dec. 31, 2011

Derivatives And Hedging Disclosure [Abstract]

Derivative Instruments not Designated as Hedging Instruments

The following table presents the fair values as of December 31, 2011, and March 31, 2011, of derivative instruments not designated as hedging instruments, classified as Other assets and Other liabilities in the Consolidated Balance Sheets:

	December 31, 2011				March 31, 2011
	Assets		Liabilities		Assets		Liabilities
Currency forward contracts	$	10,169	$	853	$	1,112	$	1,633
Futures contracts	35		549		57		1,487
Total	$	10,204	$	1,402	$	1,169	$	3,120

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

		Three months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	3,628	$	(946	)	$	1,184	$	(1,083	)
Seed capital investments	Other non-operating income (expense)	270		(149		)	85		—
Futures contracts	Other non-operating income (expense)	198		(2,290		)	164		(2,920		)
Total		$	4,096	$	(3,385	)	$	1,433	$	(4,003	)

		Nine months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	6,869	$	(2,839	)	$	4,356	$	(4,917	)
Seed capital investments	Other non-operating income (expense)	447		(93		)	71		(88		)
Futures contracts	Other non-operating income (expense)	5,669		(2,196		)	1,378		(4,899		)
Total		$	12,985	$	(5,128	)	$	5,805	$	(9,904	)

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Restructuring (Tables)

21 Months Ended

Dec. 31, 2011

Restructuring Disclosure [Abstract]

Summary of changes in transition-related liability

The table below presents a summary of changes in the transition-related liability from the initiation of the restructuring plan through December 31, 2011, including non-cash charges, such as asset write-offs and stock-based compensation expense, and cumulative charges incurred to date:

	Severance and retention incentives			Other			Total
Balance as of March 31, 2010	$	—		$	—		$	—
Accrued charges	35,487			6,160			41,647
Payments	(12,276		)	(325		)	(12,601		)
Balance as of March 31, 2011	23,211			5,835			29,046
Accrued charges (1)	27,504			26,000			53,504
Payments	(28,642		)	(12,563		)	(41,205		)
Balance as of December 31, 2011	$	22,073		$	19,272		$	41,345
Non-cash charges (2)
Year ended March 31, 2011	$	9,561		$	3,226		$	12,787
Nine months ended December 31, 2011	5,055			12,610			17,665
Total	$	14,616		$	15,836		$	30,452
Cumulative charges incurred as of December 31, 2011	$	77,607		$	47,996		$	125,603

(1) Other includes lease loss accruals of $18,246 for space permanently abandoned.

(2) Includes stock-based compensation expense, fixed asset accelerated depreciation related to space permanently abandoned, and accelerated depreciation for internally-developed software that will no longer be utilized as a result of the initiative.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Consolidated Legg Mason Group [Member], USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Consolidated Legg Mason Group [Member]
Cash Flows from Operating Activities
Net Income	$ 154,222	$ 174,995
Adjustments to reconcile Net Income to net cash provided by operations:
Depreciation and amortization	75,160	77,975
Imputed Interest for 2.5% convertible senior notes	29,023	27,248
Accretion and amortization of securities discounts and premiums, net	3,464	3,453
Stock-based compensation	38,436	42,325
Net losses (gains) on investments	(39,209)	45,189
Net losses of consolidated investment vehicles	(5,809)	5,238
Deferred income taxes	13,353	49,624
Other	2,709	4,440
Decrease (increase) in assets:
Investment advisory and related fees receivable	55,993	(22,614)
Net purchases of trading investments	(68,854)	(42,129)
Other receivables	(10,877)	(23,972)
Other assets	13,453	259
Increase (decrease) in liabilities:
Accrued compensation	(30,188)	(45,473)
Deferred compensation	(36,733)	(9,135)
Accounts payable and accrued expenses	2,980	(251)
Other liabilities	34,041	(35,271)
Net increase in operating assets and liabilities of consolidated investment vehicles, including cash	24,098	33,274
Cash Provided by Operating Activities	333,680	194,797
Cash Flows Provided by (Used for) Investing Activities
Payments for fixed assets	(21,518)	(20,877)
Restricted cash	6,995	0
Purchases of investment securities	(4,509)	(7,277)
Proceeds from sales and maturities of investment securities	4,883	8,150
Purchases of investments by consolidated investment vehicles	(127,275)	(102,301)
Proceeds from sales and maturities of investments by consolidated investment vehicles	144,679	106,539
Cash Provided by (Used for) Investing Activities	3,255	(15,766)
Cash Flows Used for Financing Activities
Third-party distribution financing, net	0	(1,639)
Repayment of principal on long-term debt	(811)	(3,323)
Repurchases of common stock	(400,266)	(376,424)
Issuance of common stock	1,931	13,499
Dividends paid	(32,384)	(17,633)
Net (repayments) borrowings of consolidated investment vehicles	(18,309)	(7,912)
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interest holders	(16,016)	776
Cash Used for Financing Activities	(465,855)	(392,656)
Effect of Exchange Rate Changes on Cash	(14,404)	9,269
Net Decrease in Cash and Cash Equivalents	(143,324)	(204,356)
Cash and Cash Equivalents at Beginning of Period	1,375,918	1,465,888
Cash and Cash Equivalents at End of Period	$ 1,232,594	$ 1,261,532

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Variable Interest Entities and Consolidation of Investment Vehicles (Tables)

3 Months Ended

9 Months Ended

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Dec. 31, 2011

Dec. 31, 2010

Mar. 31, 2011

Variable Interest Entities and Consolidation of Investment Vehicles [Abstract]

Impact of Consolidated Investment Entities on Consolidated Financial Statements [Table Text Block]

:

Consolidating Balance Sheets

	December 31, 2011									March 31, 2011
	Balance Before Consolidation of CIVs		CIVs		Eliminations			As Reported		Balance Before Consolidation of CIVs		CIVs (1)		Eliminations			As Reported
Current assets	$	2,204,535	$	70,678	$	(43,667	)	$	2,231,546	$	2,378,226	$	122,963	$	(54,633	)	$	2,446,556
Non-current assets	5,847,514		292,002		—			6,139,516		5,946,737		314,463		—			6,261,200
Total assets	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756
Current liabilities	$	891,674	$	9,785	$	(521	)	$	900,938	$	914,803	$	55,094	$	(925	)	$	968,972
Long-term debt of CIVs	—		265,478		—			265,478		—		278,320		—			278,320
Other non-current liabilities	1,574,860		3,998		—			1,578,858		1,649,815		3,553		—			1,653,368
Total liabilities	2,466,534		279,261		(521		)	2,745,274		2,564,618		336,967		(925		)	2,900,660
Redeemable non-controlling interests	911		—		27,905			28,816		976		—		35,736			36,712
Total stockholders’ equity	5,584,604		83,419		(71,051		)	5,596,972		5,759,369		100,459		(89,444		)	5,770,384
Total liabilities and equity	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756

(1) Certain immaterial non-current liabilities of CIVs are included in Other liabilities on the Consolidated Balance Sheets.

Consolidating Statements of Income

	Three Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	627,731		$	—		$	(753	)	$	626,978		$	723,087		$	—		$	(1,159	)	$	721,928
Total operating expenses	567,550			859			(754		)	567,655			625,452			643			(1,159		)	624,936
Operating income (loss)	60,181			(859		)	1			59,323			97,635			(643		)	—			96,992
Total other non-operating income (expense)	(19,357		)	7,424			358			(11,575		)	(2,177		)	(8,462		)	803			(9,836		)
Income (loss) before income tax provision	40,824			6,565			359			47,748			95,458			(9,105		)	803			87,156
Income tax provision	12,607			—			—			12,607			33,792			—			—			33,792
Net income (loss)	28,217			6,565			359			35,141			61,666			(9,105		)	803			53,364
Less:  Net income (loss) attributable to noncontrolling interests	85			—			6,924			7,009			46			—			(8,302		)	(8,256		)
Net income (loss) attributable to Legg Mason, Inc.	$	28,132		$	6,565		$	(6,565	)	$	28,132		$	61,620		$	(9,105	)	$	9,105		$	61,620

	Nine Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	2,016,413		$	—		$	(2,430	)	$	2,013,983		$	2,073,784		$	—		$	(2,897	)	$	2,070,887
Total operating expenses	1,746,967			2,906			(2,431		)	1,747,442			1,782,769			3,347			(2,897		)	1,783,219
Operating income (loss)	269,446			(2,906		)	1			266,541			291,015			(3,347		)	—			287,668
Total other non-operating income (expense)	(85,586		)	15,607			(3,472		)	(73,451		)	(18,402		)	(6,356		)	(339		)	(25,097		)
Income (loss) before income tax provision	183,860			12,701			(3,471		)	193,090			272,613			(9,703		)	(339		)	262,571
Income tax provision	38,868			—			—			38,868			87,576			—			—			87,576
Net income (loss)	144,992			12,701			(3,471		)	154,222			185,037			(9,703		)	(339		)	174,995
Less:  Net income (loss) attributable to noncontrolling interests	244			—			9,230			9,474			151			—			(10,042		)	(9,891		)
Net income (loss) attributable to Legg Mason, Inc.	$	144,748		$	12,701		$	(12,701	)	$	144,748		$	184,886		$	(9,703	)	$	9,703		$	184,886

Fair Value Assets and Liabilities Measured on Recurring Basis of Consolidated Investments Entities [Table Text Block]

	As of December 31, 2011
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	977	$	9,366		$	26,547		$	36,890
Investments:
CLO loans	—		256,470			—			256,470
CLO bonds	—		10,312			—			10,312
Private equity funds	—		—			23,871			23,871
Total investments	—		266,782			23,871			290,653
	$	977	$	276,148		$	50,418		$	327,543
Liabilities:
CLO debt	$	—	$	—		$	(265,478	)	$	(265,478	)
Derivative liabilities	—		(3,998		)	—			(3,998		)
	$	—	$	(3,998	)	$	(265,478	)	$	(269,476	)

	As of December 31, 2011
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	977	$	9,366		$	26,547		$	36,890
Investments:
CLO loans	—		256,470			—			256,470
CLO bonds	—		10,312			—			10,312
Private equity funds	—		—			23,871			23,871
Total investments	—		266,782			23,871			290,653
	$	977	$	276,148		$	50,418		$	327,543
Liabilities:
CLO debt	$	—	$	—		$	(265,478	)	$	(265,478	)
Derivative liabilities	—		(3,998		)	—			(3,998		)
	$	—	$	(3,998	)	$	(265,478	)	$	(269,476	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	—		$	14,087		$	34,272		$	48,359
Government and corporate securities	—			22,139			—			22,139
Repurchase agreements	—			12,331			—			12,331
Total trading investment securities	—			48,557			34,272			82,829
Investments:
CLO loans	—			275,948			—			275,948
CLO bonds	—			18,813			—			18,813
Private equity funds	—			—			17,879			17,879
Total investments	—			294,761			17,879			312,640
Derivative assets	125			45			—			170
	$	125		$	343,363		$	52,151		$	395,639
Liabilities:
CLO debt	$	—		$	—		$	(278,320	)	$	(278,320	)
Reverse repurchase agreements	—			(18,310		)	—			(18,310		)
Derivative liabilities	(128		)	(14,169		)	—			(14,297		)
	$	(128	)	$	(32,479	)	$	(278,320	)	$	(310,927	)

Fair Value Assets and Liabilities of Consolidated Investment Entities Measured on Recurring Basis, Unobservable Input, Reconciliation [Table Text Block]

	Value as of September 30, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	33,327		$	3,794	$	(10,954	)	$	—	$	380	$	26,547
Private equity funds	23,513			—		—			—		358		23,871
	$	56,840		$	3,794	$	(10,954	)	$	—	$	738	$	50,418
Liabilities:
CLO debt	$	(267,714	)	$	—	$	—		$	—	$	2,236	$	(265,478	)
Total realized and unrealized gains (losses), net											$	2,974

	Value as of September 30, 2010			Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	19,712		$	(849	)	$	3,235	$	3,196		$	25,294
Private equity funds	15,802			1			—		(183		)	15,620
	$	35,514		$	(848	)	$	3,235	$	3,013		$	40,914
Liabilities:
CLO debt	$	(252,822	)	$	—		$	—	$	(15,059	)	$	(267,881	)
Total realized and unrealized gains (losses), net									$	(12,046	)

	Value as of March 31, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	34,272		$	14,493	$	(26,461	)	$	—	$	4,243	$	26,547
Private equity funds	17,879			3,974		—			—		2,018		23,871
	$	52,151		$	18,467	$	(26,461	)	$	—	$	6,261	$	50,418
Liabilities:
CLO debt	$	(278,320	)	$	—	$	—		$	—	$	12,842	$	(265,478	)
Total realized and unrealized gains (losses), net											$	19,103

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net		Transfers (1)			Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	12,374	$	2,540	$	5,862		$	4,518		$	25,294
Private equity funds	13,692		2,655		—			(727		)	15,620
	$	26,066	$	5,195	$	5,862		$	3,791		$	40,914
Liabilities:
CLO debt	$	—	$	—	$	(249,668	)	$	(18,213	)	$	(267,881	)
Total realized and unrealized gains (losses), net								$	(14,422	)

(1) Transfers into Level 3 for the nine months ended December 31, 2010, primarily represent liabilities recorded upon the initial consolidation of investment vehicles.

Schedule of Fair Value of Investment and Related Liquidation Restriction [Table Text Block]

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Hedge funds	Global, fixed income, macro, long/short equity, systematic, emerging market, U.S. and European hedge	$	36,890	(1)	n/a		n/a
Private equity funds	Long/short equity	23,871		(2)	$	9,610	8 years
Total		$	60,761		$	9,610

n/a – not applicable

(1) 4% daily redemption; 6% monthly redemption; 19% quarterly redemption; and 71% subject to three to five year lock-up or side pocket provisions.

(2) Liquidations are expected over the remaining term.

Fair Value, Option, Quantitative Disclosures [Table Text Block]

The following table presents the fair value and unpaid principal balance of CLO loans, bonds and debt carried at fair value under the fair value option as of December 31, 2011, and March 31, 2011:

	December 31, 2011			March 31, 2011
CLO loans and bonds
Unpaid principal balance	$	279,624		$	299,044
Unpaid principal balance in excess of fair value	(12,842		)	(4,283		)
Fair value	$	266,782		$	294,761
Unpaid principal balance of loans that are more than 90 days past due and also in nonaccrual status	$	2,963		$	4,963
Unpaid principal balance in excess of fair value for loans that are more than 90 days past due and also in nonaccrual status	(1,132		)	(2,837		)
Fair value of loans more than 90 days past due and in nonaccrual status	$	1,831		$	2,126
CLO debt
Principal amounts outstanding	$	300,959		$	300,959
Excess unpaid principal over fair value	(35,481		)	(22,639		)
Fair value	$	265,478		$	278,320

Schedule of Variable Interest Entities Assets Liabilities and Maximum Risk of Loss [Table Text Block]

	As of December 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	394,435	$	366,435	$	—	$	449
Public-Private Investment Program	554,570		2,878		232		375
Other sponsored investment funds	16,430,529		2,048		67,359		103,584
Total	$	17,379,534	$	371,361	$	67,591	$	104,408

	As of March 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	382,692	$	354,692	$	—	$	196
Public-Private Investment Program	692,488		2,002		290		290
Other sponsored investment funds	20,241,752		16,771		83,480		121,899
Total	$	21,316,932	$	373,465	$	83,770	$	122,385

(1) Includes equity investments the Company has made or is required to make and any earned but uncollected management fees.

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Intangible Assets and Goodwill (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2011
Estimated amortization expense
Weighted-average life of management contracts (in years)	3.2
Estimated amortization expense:
Remaining 2012	$ 3,625
2013	14,085
2014	11,902
2015	2,987
2016	2,731
Thereafter	2,029
Total	$ 37,359

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Derivatives and Hedging (Details) (Legg Mason, Inc., USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Mar. 31, 2011
Derivative
Derivative Assets	$ 10,204		$ 10,204		$ 1,169
Derivative Liabilities	1,402		1,402		3,120
Gains recognized on derivative instruments not designated as hedging instruments	4,096	1,433	12,985	5,805
Losses recognized on derivative instruments not designated as hedging instruments	(3,385)	(4,003)	(5,128)	(9,904)
Forward foreign currency contracts
Derivative [Line Items]
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value	853		853		1,633
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value	10,169		10,169		1,112
Derivative
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value	10,169		10,169		1,112
Foreign Currency Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value	853		853		1,633
Forward foreign currency contracts | Operating activities - other expense
Derivative
Gains recognized on derivative instruments not designated as hedging instruments	3,628	1,184	6,869	4,356
Losses recognized on derivative instruments not designated as hedging instruments	(946)	(1,083)	(2,839)	(4,917)
Forward foreign currency contracts | Seed Capital Investments - Other non-operating income (expense)
Derivative
Gains recognized on derivative instruments not designated as hedging instruments	270	85	447	71
Losses recognized on derivative instruments not designated as hedging instruments	(149)	0	(93)	(88)
Futures contracts
Derivative
Cash collateral	4,240		4,240		7,099
Open futures contracts with aggregate gross asset fair values	35		35		57
Open futures contracts with aggregate gross liability fair values	549		549		1,487
Futures contracts | Seed Capital Investments - Other non-operating income (expense)
Derivative
Gains recognized on derivative instruments not designated as hedging instruments	198	164	5,669	1,378
Losses recognized on derivative instruments not designated as hedging instruments	$ (2,290)	$ (2,920)	$ (2,196)	$ (4,899)

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CONSOLIDATED BALANCE SHEETS (Consolidated Legg Mason Group [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2011	Mar. 31, 2011
Consolidated Legg Mason Group [Member]
Current Assets
Cash and cash equivalents	$ 1,232,594	$ 1,375,918
Cash and cash equivalents of consolidated investment vehicles	27,205	37,153
Restricted cash	6,393	9,253
Receivables:
Investment advisory and related fees	310,514	366,571
Other	53,802	29,466
Investment securities	415,267	400,510
Investment securities of consolidated investment vehicles	36,890	82,829
Deferred income taxes	85,656	82,174
Other	56,642	59,700
Other current assets of consolidated investment vehicles	6,583	2,982
Total current assets	2,231,546	2,446,556
Fixed assets, net	246,331	286,705
Intangible assets, net	3,860,587	3,876,775
Goodwill	1,279,319	1,311,652
Investments of consolidated investment vehicles	290,653	312,765
Deferred income taxes	201,580	232,394
Other	259,698	239,210
Other assets of consolidated investment vehicles	1,348	1,699
Total Assets	8,371,062	8,707,756
Current Liabilities
Accrued compensation	337,099	368,164
Accounts payable and accrued expenses	210,698	207,870
Short-term borrowings	250,000	250,000
Current portion of long-term debt	1,266	792
Other	92,460	87,393
Other current liabilities of consolidated investment vehicles	9,415	54,753
Total current liabilities	900,938	968,972
Deferred compensation	55,754	92,487
Deferred income taxes	247,936	266,193
Other	145,395	90,059
Other liabilities of consolidated investment vehicles	3,998	3,553
Long-term debt	1,125,775	1,201,076
Long-term debt of consolidated investment vehicles	265,478	278,320
Total Liabilities	2,745,274	2,900,660
Commitments and Contingencies (Note 8)
Redeemable Noncontrolling Interests	28,816	36,712
Stockholders' Equity
Common stock, par value $.10; authorized 500,000,000 shares; issued 139,771,172 shares and 150,218,810 shares, respectively	13,977	15,022
Additional paid-in capital	3,855,743	4,111,095
Employee stock trust	(34,702)	(34,466)
Deferred compensation employee stock trust	34,702	34,466
Retained earnings	1,650,713	1,539,984
Appropriated retained earnings of consolidated investment vehicle	12,277	10,922
Accumulated other comprehensive income, net	64,262	93,361
Total Stockholders' Equity	5,596,972	5,770,384
Total Liabilities and Stockholders' Equity	$ 8,371,062	$ 8,707,756

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Stock-Based Compensation (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Stock based compensation disclosure
Shares available for issuance under equity incentive plan (in shares)	13,081		13,081
Increase In Available Shares	6,500		6,500
Share-based Compensation Arrangement by Share-based Payment Award Granted Price as Percentage of Fair Market Value Minimum			100.00%
Share-based Compensation Option Exercisable Period from Date of Grant, Low End of Range			4
Share-based Compensation Option Exercisable Period from Date of Grant, High End of Range			5
Share-based Compensation Option Expiration Period from Date of Grant, Low End of Range			8
Share-based Compensation Option Expiration Period from Date of Grant, High End of Range			10
Compensation expense relating to stock options	$ 3,511	$ 6,855	$ 11,192	$ 15,936
Stock Option Transactions
Options exercisable (in shares)	3,415		3,415
Weighted-average exercise price per share of exercisable options (in dollars per share)	$ 72.70		$ 72.70
Weighted-average remaining contractual life of exercisable options (in years)	3.2		3.2
Unvested options, shares			2,425
Unamortized compensation cost related to unvested options			$ 25,821
Weighted-average period over which compensation cost related to unvested options is expected to be recognized (in years)			1.8
Summary of unvested stock options under equity incentive plans
Weighted Average Grant Date Fair Value, granted (in dollar per share)			$ 13.13	$ 14.35
Legg Mason, Inc.
Stock Option Transactions
Options outstanding, beginning of period (in shares)			5,419	6,054
Granted (in shares)			810	711
Exercised (in shares)			(14)	(597)
Canceled/forfeited (in shares)			(375)	(687)
Options outstanding, end of period (in shares)	5,840	5,481	5,840	5,481
Options outstanding, beginning of period (in dollars per share)			$ 59.82	$ 57.75
Granted (in dollars per share)	$ 33.99	$ 33.11	$ 33.99	$ 33.11
Exercised (in dollars per share)	$ 26.41	$ 22.07	$ 26.41	$ 22.07
Canceled/forfeited (in dollars per share)	$ 48.84	$ 48.73	$ 48.84	$ 48.73
Options outstanding, end of period (in dollars per share)	$ 57.03	$ 59.57	$ 57.03	$ 59.57

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Other comprehensive income:
Unrealized holding gains (losses), tax provision	$ (2)	$ (54)	$ 167	$ 3

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 5) (Consolidated Investment Vehicles [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2011
Nature of Investments and Related Liquidation Restrictions or Other Factors [Line Items]
Fair Value Determined Using NAV	$ 60,761
Unfunded Commitments	9,610
Hedge funds
Nature of Investments and Related Liquidation Restrictions or Other Factors [Line Items]
Fair Value Determined Using NAV	36,890	[1]
Percentage of Daily Redemption	4.00%
Percentage of Monthly Redemption	6.00%
Percentage of Quarterly Redemption	19.00%
Percentage subject to lock-up or side pocket provisions (as a percent)	71.00%
Investment lock up period or side pocket provisions period, low end of range (in years)	3
Investment lock up period or side pocket provisions period, high end of range (in years)	5
Private equity funds
Nature of Investments and Related Liquidation Restrictions or Other Factors [Line Items]
Fair Value Determined Using NAV	23,871	[2]
Unfunded Commitments	$ 9,610
Remaining term (in years)	8

[1] 4% daily redemption; 6% monthly redemption; 19% quarterly redemption; and 71% subject to three to five year lock-up or side pocket provisions.

[2] Liquidations are expected over the remaining term.

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Fair Values of Assets and Liabilities (Details 2) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2011 Legg Mason, Inc.	Mar. 31, 2011 Legg Mason, Inc.	Dec. 31, 2011 Legg Mason, Inc. Total		Mar. 31, 2011 Legg Mason, Inc. Total		Dec. 31, 2011 Legg Mason, Inc. Quoted prices in active markets (Level 1)		Mar. 31, 2011 Legg Mason, Inc. Quoted prices in active markets (Level 1)		Dec. 31, 2011 Legg Mason, Inc. Significant other observable inputs (Level 2)		Mar. 31, 2011 Legg Mason, Inc. Significant other observable inputs (Level 2)		Dec. 31, 2011 Legg Mason, Inc. Significant unobservable inputs (Level 3)		Mar. 31, 2011 Legg Mason, Inc. Significant unobservable inputs (Level 3)
Cash equivalents:
Money market funds				$ 749,342	[1]	$ 912,951	[1]	$ 749,342	[1]	$ 912,951	[1]	$ 0	[1]	$ 0	[1]	$ 0	[1]	$ 0	[1]
Time deposits				45,150	[1]	92,877	[1]	0	[1]	0	[1]	45,150	[1]	92,877	[1]	0	[1]	0	[1]
Total cash equivalents				794,492	[1]	1,005,828	[1]	749,342	[1]	912,951	[1]	45,150	[1]	92,877	[1]	0	[1]	0	[1]
Investment securities:
Trading investments relating to long-term incentive compensation plans				94,875	[2]	120,107	[2]	94,875	[2]	120,107	[2]	0	[2]	0	[2]	0	[2]	0	[2]
Trading proprietary fund products and other investments				248,440	[3]	204,063	[3]	169,147	[3]	90,123	[3]	79,293	[3]	102,562	[3]	0	[3]	11,378	[3]
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments				71,952	[4],[5]	76,340	[4],[5]	14,689	[4],[5]	15,645	[4],[5]	46,203	[4],[5]	48,528	[4],[5]	11,060	[4],[5]	12,167	[4],[5]
Total current investments				415,267		400,510		278,711		225,875		125,496		151,090		11,060		23,545
Available-for-sale investment securities				11,336		11,300		2,090		2,666		9,234		8,622		12		12
Investments in partnerships and, LLCs, and other				34,159		22,167		812		0		5,107		0		28,240		22,167
Equity method investments in partnerships and LLCs				151,591	[4]	155,351	[4]	1,289	[4]	1,420	[4]	0	[4]	0	[4]	150,302	[4]	153,931	[4]
Derivative Assets:
Derivative assets, Currency and market hedges				10,204		1,169		10,204		1,169		0		0		0		0
Other investments				121		270		0		0		0		0		121		270
Financial assets measured at fair value				1,417,170		1,596,595		1,042,448		1,144,081		184,987		252,589		189,735		199,925
Derivative liabilities:
Currency and market hedges				(1,402)		(3,120)		(1,402)		(3,120)		0		0		0		0
Cash and Cash Equivalents, Maturity Period	90
Equity method investments relating to long-term incentive compensation plans		46,203	48,528
Equity method investments relating to proprietary fund products and other investments		$ 25,749	$ 27,812
Proprietary fund products disclosures
Proprietary fund products and other investments, equity securities percentage (as a percent)		53.00%	60.00%
Proprietary fund products and other investments, debt securities percentage (as a percent)		47.00%	40.00%

[1] Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1. Cash investments in time deposits are measured at amortized cost, which approximates fair value because of the short time between the purchase of the instrument and its expected realization, and are classified as Level 2.

[2] Primarily mutual funds where there is minimal market risk to the Company as any change in value is primarily offset by an adjustment to compensation expense and related deferred compensation liability.

[3] Trading proprietary fund products and other investments primarily represent mutual funds that are invested approximately 53% and 47% in equity and debt securities as of December 31, 2011, respectively, and were invested approximately 60% and 40% in equity and debt securities as of March 31, 2011, respectively.

[4] Substantially all of our equity method investments are investment companies which record their underlying investments at fair value. Fair value is measured using Legg Mason's share of the investee's underlying net income or loss, which is predominately representative of fair value adjustments in the investments held by the equity method investee.

[5] Includes investments under the equity method (which approximates fair value) relating to long-term incentive compensation plans of $46,203 and $48,528 as of December 31, 2011, and March 31, 2011, respectively, and proprietary fund products and other investments of $25,749 and $27,812 as of December 31, 2011, and March 31, 2011, respectively, which are classified as Investment securities on the Consolidated Balance Sheets.

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Significant Accounting Policies Significant Accounting Policies (Tables)

9 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

Changes in redeemable noncontrolling interests

	Nine Months Ended
	December 31,
	2011			2010
Balance, beginning of period	$	36,712		$	29,577
Net income attributable to redeemable noncontrolling interests	8,120			1,941
Net (redemptions/distributions paid to)/subscriptions received from noncontrolling interest holders	(16,016		)	776
Balance, end of period	$	28,816		$	32,294

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Fair Values of Assets and Liabilities (Details 3) (Legg Mason, Inc., USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	$ 201,048	$ 208,896	$ 199,925	$ 158,030
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(7,290)		28,228
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	660		33,096
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(2,034)		(17,068)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	(1,380)		(14,345)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	350	0	350
Realized and unrealized gains/(losses), net, assets	(8,559)	7,312	(11,873)	22,660
Assets measured at fair value using significant unobservable inputs, value at end of period	189,735	209,268	189,735	209,268
Unrealized gains (losses) on Level 3 assets and liabilities still held at the reporting date	(8,521)	2,043	(13,940)	6,867
Trading proprietary fund products and other investments
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	179	18,063	11,378	22,459
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(2,500)		(7,500)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(165)		(11,906)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	350	0	350
Realized and unrealized gains/(losses), net, assets	(14)	1,133	528	1,737
Assets measured at fair value using significant unobservable inputs, value at end of period	0	17,046	0	17,046
Equity method investments in proprietary fund products
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	11,605	11,889	12,167	12,090
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0	0
Realized and unrealized gains/(losses), net, assets	(545)	463	(1,107)	262
Assets measured at fair value using significant unobservable inputs, value at end of period	11,060	12,352	11,060	12,352
Investments in partnerships, LLCs and other
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	28,469	23,050	22,167	23,049
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(99)		(102)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		6,932
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	(10)		(119)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0	0
Realized and unrealized gains/(losses), net, assets	(219)	(1,742)	(740)	(1,738)
Assets measured at fair value using significant unobservable inputs, value at end of period	28,240	21,209	28,240	21,209
Equity method investments in partnerships and LLCs
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	160,662	154,418	153,931	98,968
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(437)		40,084
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	660		26,164
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(1,869)		(5,162)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	(1,370)		(14,067)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0	0
Realized and unrealized gains/(losses), net, assets	(7,781)	4,583	(10,564)	19,512
Assets measured at fair value using significant unobservable inputs, value at end of period	150,302	158,564	150,302	158,564
Other investments
Fair Value Assets and Liabilities Measured on Recurring Basis Financial Statement Unobservable Input Level 3
Assets measured at fair value using significant unobservable inputs, value at beginning of period	133	1,476	282	1,464
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(4,254)		(4,254)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Settlements	0		(159)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0	0
Realized and unrealized gains/(losses), net, assets	0	2,875	10	2,887
Assets measured at fair value using significant unobservable inputs, value at end of period	$ 133	$ 97	$ 133	$ 97

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Fixed Assets (Tables)

9 Months Ended

Dec. 31, 2011

Fixed Assets Disclosure [Abstract]

Components of fixed assets

	December 31, 2011			March 31, 2011
Equipment	$	157,489		$	200,696
Software	206,007			224,026
Leasehold improvements	243,683			280,277
Total cost	607,179			704,999
Less: accumulated depreciation and amortization	(360,848		)	(418,294		)
Fixed assets, net	$	246,331		$	286,705

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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Consolidated Legg Mason Group [Member], USD $) In Thousands, unless otherwise specified	Consolidated Legg Mason Group [Member] USD ($)	Consolidated Legg Mason Group [Member] COMMON STOCK USD ($)	Consolidated Legg Mason Group [Member] SHARES EXCHANGEABLE INTO COMMON STOCK USD ($)	Consolidated Legg Mason Group [Member] ADDITIONAL PAID-IN CAPITAL USD ($)	Consolidated Legg Mason Group [Member] EMPLOYEE STOCK TRUST USD ($)	Consolidated Legg Mason Group [Member] DEFERRED COMPENSATION EMPLOYEE STOCK TRUST USD ($)	Consolidated Legg Mason Group [Member] RETAINED EARNINGS USD ($)	Consolidated Legg Mason Group [Member] APPROPRIATED RETAINED EARNINGS OF CONSOLIDATED INVESTMENT VEHICLES USD ($)	Consolidated Legg Mason Group [Member] ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS), NET USD ($)
Balance at Mar. 31, 2010		$ 16,144	$ 2,760	$ 4,447,612	$ (33,095)	$ 33,095	$ 1,316,981	$ 0	$ 58,227
Increase (Decrease) in Stockholders' Equity
Stock options and other stock-based compensation		60		28,958
Deferred compensation employee stock trust		6		1,928
Deferred compensation, net		145		26,020
Exchangeable shares		110	(2,760)	2,650
Equity Units exchanged		0		36,312
Shares repurchased and retired		(1,257)		(375,167)
Shares issued to plans					(1,749)	1,749
Distributions and forfeitures					448	(448)
Net Income (Loss) Attributable to Parent	184,886						184,886
Dividends declared							(21,930)
Cumulative effect of change in accounting principle								24,666
Net loss reclassified to appropriated retained earnings								(11,832)
Unrealized holding gains on investment securities, net of tax	4								4
Foreign currency translation adjustment	27,733								27,733
Balance at Dec. 31, 2010	5,762,256	15,208	0	4,168,313	(34,396)	34,396	1,479,937	12,834	85,964
Balance at Sep. 30, 2010
Increase (Decrease) in Stockholders' Equity
Net Income (Loss) Attributable to Parent	61,620
Unrealized holding gains on investment securities, net of tax	(77)
Foreign currency translation adjustment	7,760
Balance at Dec. 31, 2010	5,762,256
Balance at Mar. 31, 2011	5,770,384	15,022	0	4,111,095	(34,466)	34,466	1,539,984	10,922	93,361
Increase (Decrease) in Stockholders' Equity
Stock options and other stock-based compensation		7		13,465
Deferred compensation employee stock trust		6		1,901
Deferred compensation, net		119		25,357
Exchangeable shares		0	0	0
Equity Units exchanged		183		102,831
Shares repurchased and retired	(400,266)	(1,360)		(398,906)
Shares issued to plans					(1,907)	1,907
Distributions and forfeitures					1,671	(1,671)
Net Income (Loss) Attributable to Parent	144,748						144,748
Dividends declared							(34,019)
Cumulative effect of change in accounting principle								0
Net loss reclassified to appropriated retained earnings								1,355
Unrealized holding gains on investment securities, net of tax	258								258
Foreign currency translation adjustment	(29,357)								(29,357)
Balance at Dec. 31, 2011	5,596,972	13,977	0	3,855,743	(34,702)	34,702	1,650,713	12,277	64,262
Balance at Sep. 30, 2011
Increase (Decrease) in Stockholders' Equity
Net Income (Loss) Attributable to Parent	28,132
Unrealized holding gains on investment securities, net of tax	1
Foreign currency translation adjustment	3,309
Balance at Dec. 31, 2011	$ 5,596,972

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2011	Mar. 31, 2011
CONSOLIDATED BALANCE SHEETS
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized shares	500,000,000	500,000,000
Common stock, issued shares	139,771,172	150,218,810

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Earnings Per Share

9 Months Ended

Dec. 31, 2011

Earnings Per Share Disclosure [Abstract]

Earnings Per Share

9. Earnings Per Share

Basic earnings per share (“EPS”) is calculated by dividing net income or loss attributable to Legg Mason, Inc. by the weighted-average number of shares outstanding. The calculation of weighted-average shares includes common shares, shares exchangeable into common stock and unvested restricted shares deemed to be participating securities. Diluted EPS is similar to basic EPS, but adjusts for the effect of potentially issuable common shares, except when inclusion is antidilutive.

In June 2011, Legg Mason issued 1,830 shares of common stock upon the exercise of purchase contracts on the remaining Equity Units. Of these shares, 1,830 and 1,231 shares are included in weighted-average shares outstanding for the three and nine months ended December 31, 2011, respectively.

Legg Mason issued 1,303 shares of restricted stock during the nine months ended December 31, 2011. No shares of restricted stock were issued during the three months ended December 31, 2011, related to annual incentive awards. Of the shares issued in the nine month period, 1,303 and 1,075 shares are included in weighted-average shares outstanding for the three and nine months ended December 31, 2011, respectively.

The following table presents the computations of basic and diluted EPS:

	Three Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	140,053		140,053		149,980			149,980
Potential common shares:
Employee stock options	—		29		—			231
Shares related to deferred compensation	—		—		—			761
Total weighted-average diluted shares	140,053		140,082		149,980			150,972
Net Income	$	35,141	$	35,141	$	53,364		$	53,364
Less: Net income (loss) attributable to noncontrolling interests	7,009		7,009		(8,256		)	(8,256		)
Net Income Attributable to Legg Mason, Inc.	$	28,132	$	28,132	$	61,620		$	61,620
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	0.20	$	0.20	$	0.41		$	0.41

	Nine Months Ended December 31,
	2011				2010
	Basic		Diluted		Basic			Diluted
Weighted-average basic shares outstanding	144,363		144,363		153,817			153,817
Potential common shares:
Employee stock options	—		65		—			200
Shares related to deferred compensation	—		—		—			531
Total weighted-average diluted shares	144,363		144,428		153,817			154,548
Net Income	$	154,222	$	154,222	$	174,995		$	174,995
Less: Net income (loss) attributable to noncontrolling interests	9,474		9,474		(9,891		)	(9,891		)
Net Income Attributable to Legg Mason, Inc.	$	144,748	$	144,748	$	184,886		$	184,886
Net Income per Share Attributable to  Legg Mason, Inc. Common Shareholders	$	1.00	$	1.00	$	1.20		$	1.20

During the nine months ended December 31, 2011, Legg Mason purchased and retired 13,597 shares of its common stock for $400,266 through open market purchases. No shares of common stock were purchased and retired during the three months ended December 31, 2011. The repurchases in the nine month period reduced weighted-average shares outstanding for the three and nine months ended December 31, 2011, by 13,597 shares and 8,432 shares, respectively.

The diluted EPS calculations for the three and nine months ended December 31, 2011 and 2010, exclude any potential common shares issuable under the convertible 2.5% senior notes and, for the three and nine months ended December 31, 2010, any potential common shares issuable under the convertible Equity Units, because the market price of Legg Mason common stock had not exceeded the price at which conversion under either instrument would be dilutive using the treasury stock method.

Options to purchase 5,760 and 5,162 shares for the three months endedDecember 31, 2011 and 2010, respectively, and 7,563 and 5,256 shares for the nine months endedDecember 31, 2011 and 2010, respectively, were not included in the computation of diluted earnings per share because the presumed per share proceeds from exercising such options, including related unamortized cost and income tax benefits, if any, exceed the average price of the common shares for the period and therefore the options are deemed antidilutive.

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Document and Entity Information	9 Months Ended
	Dec. 31, 2011	Feb. 02, 2012
Document Information [Line Items]
Entity Registrant Name	LEGG MASON, INC.
Entity Central Index Key	0000704051
Document Type	10-Q
Document Period End Date	Dec. 31, 2011
Amendment Flag	false
Current Fiscal Year End Date	--03-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		139,728,793
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3

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Derivatives and Hedging

9 Months Ended

Dec. 31, 2011

Derivatives And Hedging Disclosure [Abstract]

Derivatives and Hedging

10. Derivatives and Hedging

The disclosures below detail Legg Mason’s derivatives and hedging excluding the derivatives and hedging of CIVs. See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the derivatives and hedging of CIVs.

Legg Mason uses currency forwards to economically hedge the risk of movements in exchange rates, primarily between the U.S. dollar, euro, Australian dollar, Canadian dollar, Brazilian real, Singapore dollar, Japanese yen, and Great Britain pound. In the Consolidated Balance Sheets, Legg Mason nets the fair value of certain foreign currency forwards executed with the same counterparty where Legg Mason has both the legal right and intent to settle the contracts on a net basis. Legg Mason has not designated any derivatives as hedging instruments during the periods ended December 31, 2011 and 2010.

Legg Mason uses market hedges on certain seed capital investments by entering into futures contracts to sell index funds that benchmark the hedged seed capital investments. Open futures contracts required cash collateral of $4,240 and $7,099 as of December 31, 2011 and March 31, 2011, respectively.  

The following table presents the fair values as of December 31, 2011, and March 31, 2011, of derivative instruments not designated as hedging instruments, classified as Other assets and Other liabilities in the Consolidated Balance Sheets:

	December 31, 2011				March 31, 2011
	Assets		Liabilities		Assets		Liabilities
Currency forward contracts	$	10,169	$	853	$	1,112	$	1,633
Futures contracts	35		549		57		1,487
Total	$	10,204	$	1,402	$	1,169	$	3,120

The following table presents gains (losses) recognized on derivative instruments for the three and nine months ended December 31, 2011 and 2010:

		Three months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	3,628	$	(946	)	$	1,184	$	(1,083	)
Seed capital investments	Other non-operating income (expense)	270		(149		)	85		—
Futures contracts	Other non-operating income (expense)	198		(2,290		)	164		(2,920		)
Total		$	4,096	$	(3,385	)	$	1,433	$	(4,003	)

		Nine months ended December 31,
		2011					2010
	Income Statement Classification	Gains		Losses			Gains		Losses
Currency forward contracts for:
Operating activities	Other expense	$	6,869	$	(2,839	)	$	4,356	$	(4,917	)
Seed capital investments	Other non-operating income (expense)	447		(93		)	71		(88		)
Futures contracts	Other non-operating income (expense)	5,669		(2,196		)	1,378		(4,899		)
Total		$	12,985	$	(5,128	)	$	5,805	$	(9,904	)

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CONSOLIDATED STATEMENTS OF INCOME (Consolidated Legg Mason Group [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Consolidated Legg Mason Group [Member]
Investment advisory fees
Separate accounts	$ 187,570	$ 206,180	$ 588,382	$ 611,366
Funds	351,598	384,341	1,128,577	1,094,531
Performance fees	6,079	34,592	34,677	76,871
Distribution and service fees	80,709	95,522	258,547	284,150
Other	1,022	1,293	3,800	3,969
Total operating revenues	626,978	721,928	2,013,983	2,070,887
Operating Expenses
Compensation and benefits	254,402	290,423	812,405	841,406
Transition-related compensation	8,818	18,757	32,559	32,444
Total compensation and benefits	263,220	309,180	844,964	873,850
Distribution and servicing	148,275	187,412	489,422	537,946
Communications and technology	43,466	39,399	125,538	118,689
Occupancy	56,401	37,259	125,339	104,426
Amortization of intangible assets	4,869	5,776	15,951	17,253
Other	51,424	45,910	146,228	131,055
Total operating expenses	567,655	624,936	1,747,442	1,783,219
Operating Income	59,323	96,992	266,541	287,668
Other Non-Operating Income (Expense)
Interest income	2,577	2,209	8,614	6,194
Interest expense	(21,831)	(22,389)	(65,828)	(69,639)
Other income (expense)	255	18,806	(31,844)	44,704
Other non-operating income (expense) of consolidated investment vehicles, net	7,424	(8,462)	15,607	(6,356)
Total other non-operating income (expense)	(11,575)	(9,836)	(73,451)	(25,097)
Income Before Income Tax (Benefit) Provision	47,748	87,156	193,090	262,571
Income tax (benefit) provision	12,607	33,792	38,868	87,576
Net Income	35,141	53,364	154,222	174,995
Less: Net income (loss) attributable to noncontrolling interests	7,009	(8,256)	9,474	(9,891)
Net Income Attributable to Legg Mason, Inc.	$ 28,132	$ 61,620	$ 144,748	$ 184,886
Net Income per Share Attributable to Legg Mason, Inc. Common Shareholders:
Basic (in dollars per share)	$ 0.20	$ 0.41	$ 1.00	$ 1.20
Diluted (in dollars per share)	$ 0.20	$ 0.41	$ 1.00	$ 1.20
Weighted Average Number of Shares Outstanding:
Basic (in shares)	140,053	149,980	144,363	153,817
Diluted (in shares)	140,082	150,972	144,428	154,548
Dividends Declared per Share (in dollars per share)	$ 0.08	$ 0.06	$ 0.24	$ 0.14

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Fixed Assets

9 Months Ended

Dec. 31, 2011

Fixed Assets Disclosure [Abstract]

Fixed Assets

4. Fixed Assets

Fixed assets consist of equipment, software and leasehold improvements.  Equipment consists primarily of communications and technology hardware and furniture and fixtures.  Software includes purchased software and internally developed software. Fixed assets are reported at cost, net of accumulated depreciation and amortization.  The following table reflects the components of fixed assets as of:

	December 31, 2011			March 31, 2011
Equipment	$	157,489		$	200,696
Software	206,007			224,026
Leasehold improvements	243,683			280,277
Total cost	607,179			704,999
Less: accumulated depreciation and amortization	(360,848		)	(418,294		)
Fixed assets, net	$	246,331		$	286,705

Depreciation and amortization expense included in operating income was $25,246 and $19,785 for the three months ended December 31, 2011 and 2010, respectively, and $59,209 and $60,722 for the nine months endedDecember 31, 2011 and 2010, respectively. The decrease in the total cost of fixed assets is substantially due to disposals in conjunction with the business streamlining initiative. See details in Note 11.

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Fair Values of Assets and Liabilities

9 Months Ended

Dec. 31, 2011

Investments and Fair Values of Assets and Liabilities Disclosure [Abstract]

Fair Values of Assets and Liabilities

3. Fair Values of Assets and Liabilities

The disclosures below include details of Legg Mason’s assets and liabilities that are measured at fair value, excluding assets and liabilities of CIVs. See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the assets and liabilities of CIVs that are measured at fair value.

The fair values of financial assets and (liabilities) of the Company were determined using the following categories of inputs:

	As of December 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	749,342		$	—	$	—	$	749,342
Time deposits	—			45,150		—		45,150
Total cash equivalents	749,342			45,150		—		794,492
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	94,875			—		—		94,875
Trading proprietary fund products and other investments(3)	169,147			79,293		—		248,440
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	14,689			46,203		11,060		71,952
Total current investments	278,711			125,496		11,060		415,267
Available-for-sale investment securities	2,090			9,234		12		11,336
Investments in partnerships, LLCs and other	812			5,107		28,240		34,159
Equity method investments in partnerships and LLCs(4)	1,289			—		150,302		151,591
Derivative assets:
Currency and market hedges	10,204			—		—		10,204
Other investments	—			—		121		121
	$	1,042,448		$	184,987	$	189,735	$	1,417,170
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(1,402	)	$	—	$	—	$	(1,402	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	912,951		$	—	$	—	$	912,951
Time deposits	—			92,877		—		92,877
Total cash equivalents	912,951			92,877		—		1,005,828
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	120,107			—		—		120,107
Trading proprietary fund products and other investments(3)	90,123			102,562		11,378		204,063
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	15,645			48,528		12,167		76,340
Total current investments	225,875			151,090		23,545		400,510
Available-for-sale investment securities	2,666			8,622		12		11,300
Investments in partnerships, LLCs and other	—			—		22,167		22,167
Equity method investments in partnerships and LLCs(4)	1,420			—		153,931		155,351
Derivative assets:
Currency and market hedges	1,169			—		—		1,169
Other investments	—			—		270		270
	$	1,144,081		$	252,589	$	199,925	$	1,596,595
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(3,120	)	$	—	$	—	$	(3,120	)

(1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1.  Cash investments in time deposits are measured at amortized cost, which approximates fair value because of the short time between the purchase of the instrument and its expected realization, and are classified as Level 2.

(2) Primarily mutual funds where there is minimal market risk to the Company as any change in value is primarily offset by an adjustment to compensation expense and related deferred compensation liability.

(3) Trading proprietary fund products and other investments primarily represent mutual funds that are invested approximately 53% and 47% in equity and debt securities as of December 31, 2011, respectively, and were invested approximately 60% and 40% in equity and debt securities as of March 31, 2011, respectively.

(4) Substantially all of our equity method investments are investment companies which record their underlying investments at fair value.  Fair value is measured using Legg Mason's share of the investee's underlying net income or loss, which is predominately representative of fair value adjustments in the investments held by the equity method investee.

(5) Includes investments under the equity method (which approximates fair value) relating to long-term incentive compensation plans of $46,203 and $48,528 as of December 31, 2011, and March 31, 2011, respectively, and proprietary fund products and other investments of $25,749 and $27,812 as of December 31, 2011, and March 31, 2011, respectively, which are classified as Investment securities on the Consolidated Balance Sheets.

In accordance with new accounting guidance adopted during the three months ended June 30, 2011, the changes in financial assets measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended December 31, 2011, are now presented on a gross basis in the tables below:

	Value as of September 30, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	179	$	—	$	(165	)	$	—		$	—	$	(14	)	$	—
Equity method investments in proprietary fund products	11,605		—		—			—			—		(545		)	11,060
Investments in partnerships, LLCs and other	28,469		—		—			(10		)	—		(219		)	28,240
Equity method investments in partnerships and LLCs	160,662		660		(1,869		)	(1,370		)	—		(7,781		)	150,302
Other investments	133		—		—			—			—		—			133
	$	201,048	$	660	$	(2,034	)	$	(1,380	)	$	—	$	(8,559	)	$	189,735

	Value as of September 30, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	18,063	$	(2,500	)	$	350	$	1,133		$	17,046
Equity method investments in proprietary fund products	11,889		—			—		463			12,352
Investments in partnerships, LLCs and other	23,050		(99		)	—		(1,742		)	21,209
Equity method investments in partnerships and LLCs	154,418		(437		)	—		4,583			158,564
Other investments	1,476		(4,254		)	—		2,875			97
	$	208,896	$	(7,290	)	$	350	$	7,312		$	209,268

	Value as of March 31, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	11,378	$	—	$	(11,906	)	$	—		$	—	$	528		$	—
Equity method investments in proprietary fund products	12,167		—		—			—			—		(1,107		)	11,060
Investments in partnerships, LLCs and other	22,167		6,932		—			(119		)	—		(740		)	28,240
Equity method investments in partnerships and LLCs	153,931		26,164		(5,162		)	(14,067		)	—		(10,564		)	150,302
Other investments	282		—		—			(159		)	—		10			133
	$	199,925	$	33,096	$	(17,068	)	$	(14,345	)	$	—	$	(11,873	)	$	189,735

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	22,459	$	(7,500	)	$	350	$	1,737		$	17,046
Equity method investments in proprietary fund products	12,090		—			—		262			12,352
Investments in partnerships, LLCs and other	23,049		(102		)	—		(1,738		)	21,209
Equity method investments in partnerships and LLCs	98,968		40,084			—		19,512			158,564
Other investments	1,464		(4,254		)	—		2,887			97
	$	158,030	$	28,228		$	350	$	22,660		$	209,268

Realized and unrealized gains and losses recorded for Level 3 investments are included in Other income (expense) on the Consolidated Statements of Income.  Total unrealized (losses) gains for Level 3 investments relating only to those assets still held at the reporting date were $(8,521) and $2,043 for the three months ended December 31, 2011 and 2010, respectively. Total unrealized (losses) gains for Level 3 investments relating only to those assets still held at the reporting date were $(13,940) and $6,867 for the nine months endedDecember 31, 2011 and 2010, respectively.

There were no significant transfers between Levels 1 and 2 during the nine months ended December 31, 2011 and 2010.

As a practical expedient, Legg Mason relies on the net asset value of certain investments as their fair value.  The net asset values that have been provided by the investees have been derived from the fair values of the underlying investments as of the reporting date.  The following table summarizes, as of December 31, 2011, the nature of these investments and any related liquidation restrictions or other factors which may impact the ultimate value realized.

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Funds-of-hedge funds	Global, fixed income, macro, long/short equity, natural resources, systematic, emerging market, European hedge	$	55,570	(1)	n/a		n/a
Hedge funds	Fixed income - developed market, event driven, fixed income - hedge, relative value arbitrage, European hedge	25,222		(2)	$	20,000	n/a
Private equity funds	Long/short equity	28,300		(2)	5,983		Up to 8 years
Private fund	Fixed income, residential and commercial mortgage-backed securities	73,455		(2) (3)	n/a		7 years, subject to two one-year extensions
Other	Various	2,292		(2)	n/a		Various (4)
Total		$	184,839		$	25,983

n/a-not applicable

(1) 68% monthly redemption; 32% quarterly redemption, of which 38% is subject to two-year lock-up.

(2) Liquidations are expected over the remaining term.

(3) Redemptions prohibited until November 2012.

(4) 4% remaining term of less than one year; 96% 20-year remaining term.

There are no current plans to sell any of these investments.

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Fair Values of Assets and Liabilities (Tables)

3 Months Ended

9 Months Ended

12 Months Ended

Dec. 31, 2011

Dec. 31, 2010

Dec. 31, 2011

Dec. 31, 2010

Mar. 31, 2011

Investments and Fair Values of Assets and Liabilities Disclosure [Abstract]

Fair values of financial assets and liabilities

	As of December 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	749,342		$	—	$	—	$	749,342
Time deposits	—			45,150		—		45,150
Total cash equivalents	749,342			45,150		—		794,492
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	94,875			—		—		94,875
Trading proprietary fund products and other investments(3)	169,147			79,293		—		248,440
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	14,689			46,203		11,060		71,952
Total current investments	278,711			125,496		11,060		415,267
Available-for-sale investment securities	2,090			9,234		12		11,336
Investments in partnerships, LLCs and other	812			5,107		28,240		34,159
Equity method investments in partnerships and LLCs(4)	1,289			—		150,302		151,591
Derivative assets:
Currency and market hedges	10,204			—		—		10,204
Other investments	—			—		121		121
	$	1,042,448		$	184,987	$	189,735	$	1,417,170
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(1,402	)	$	—	$	—	$	(1,402	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Cash equivalents(1):
Money market funds	$	912,951		$	—	$	—	$	912,951
Time deposits	—			92,877		—		92,877
Total cash equivalents	912,951			92,877		—		1,005,828
Investment securities:
Trading investments relating to long-term incentive compensation plans(2)	120,107			—		—		120,107
Trading proprietary fund products and other investments(3)	90,123			102,562		11,378		204,063
Equity method investments relating to long-term incentive compensation plans, proprietary fund products and other investments(4)(5)	15,645			48,528		12,167		76,340
Total current investments	225,875			151,090		23,545		400,510
Available-for-sale investment securities	2,666			8,622		12		11,300
Investments in partnerships, LLCs and other	—			—		22,167		22,167
Equity method investments in partnerships and LLCs(4)	1,420			—		153,931		155,351
Derivative assets:
Currency and market hedges	1,169			—		—		1,169
Other investments	—			—		270		270
	$	1,144,081		$	252,589	$	199,925	$	1,596,595
Liabilities:
Derivative liabilities:
Currency and market hedges	$	(3,120	)	$	—	$	—	$	(3,120	)

(1) Cash equivalents include highly liquid investments with original maturities of 90 days or less. Cash investments in actively traded money market funds are measured at NAV and are classified as Level 1.  Cash investments in time deposits are measured at amortized cost, which approximates fair value because of the short time between the purchase of the instrument and its expected realization, and are classified as Level 2.

(2) Primarily mutual funds where there is minimal market risk to the Company as any change in value is primarily offset by an adjustment to compensation expense and related deferred compensation liability.

(3) Trading proprietary fund products and other investments primarily represent mutual funds that are invested approximately 53% and 47% in equity and debt securities as of December 31, 2011, respectively, and were invested approximately 60% and 40% in equity and debt securities as of March 31, 2011, respectively.

(4) Substantially all of our equity method investments are investment companies which record their underlying investments at fair value.  Fair value is measured using Legg Mason's share of the investee's underlying net income or loss, which is predominately representative of fair value adjustments in the investments held by the equity method investee.

(5) Includes investments under the equity method (which approximates fair value) relating to long-term incentive compensation plans of $46,203 and $48,528 as of December 31, 2011, and March 31, 2011, respectively, and proprietary fund products and other investments of $25,749 and $27,812 as of December 31, 2011, and March 31, 2011, respectively, which are classified as Investment securities on the Consolidated Balance Sheets.

Summary of changes in financial assets measured at fair value using significant unobservable inputs (Level 3)

	Value as of September 30, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	179	$	—	$	(165	)	$	—		$	—	$	(14	)	$	—
Equity method investments in proprietary fund products	11,605		—		—			—			—		(545		)	11,060
Investments in partnerships, LLCs and other	28,469		—		—			(10		)	—		(219		)	28,240
Equity method investments in partnerships and LLCs	160,662		660		(1,869		)	(1,370		)	—		(7,781		)	150,302
Other investments	133		—		—			—			—		—			133
	$	201,048	$	660	$	(2,034	)	$	(1,380	)	$	—	$	(8,559	)	$	189,735

	Value as of September 30, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	18,063	$	(2,500	)	$	350	$	1,133		$	17,046
Equity method investments in proprietary fund products	11,889		—			—		463			12,352
Investments in partnerships, LLCs and other	23,050		(99		)	—		(1,742		)	21,209
Equity method investments in partnerships and LLCs	154,418		(437		)	—		4,583			158,564
Other investments	1,476		(4,254		)	—		2,875			97
	$	208,896	$	(7,290	)	$	350	$	7,312		$	209,268

	Value as of March 31, 2011		Purchases		Sales			Settlements/ Other			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2011
Assets:
Trading proprietary fund products and other investments	$	11,378	$	—	$	(11,906	)	$	—		$	—	$	528		$	—
Equity method investments in proprietary fund products	12,167		—		—			—			—		(1,107		)	11,060
Investments in partnerships, LLCs and other	22,167		6,932		—			(119		)	—		(740		)	28,240
Equity method investments in partnerships and LLCs	153,931		26,164		(5,162		)	(14,067		)	—		(10,564		)	150,302
Other investments	282		—		—			(159		)	—		10			133
	$	199,925	$	33,096	$	(17,068	)	$	(14,345	)	$	—	$	(11,873	)	$	189,735

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Trading proprietary fund products and other investments	$	22,459	$	(7,500	)	$	350	$	1,737		$	17,046
Equity method investments in proprietary fund products	12,090		—			—		262			12,352
Investments in partnerships, LLCs and other	23,049		(102		)	—		(1,738		)	21,209
Equity method investments in partnerships and LLCs	98,968		40,084			—		19,512			158,564
Other investments	1,464		(4,254		)	—		2,887			97
	$	158,030	$	28,228		$	350	$	22,660		$	209,268

Fair value of investments determined using net asset value

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Funds-of-hedge funds	Global, fixed income, macro, long/short equity, natural resources, systematic, emerging market, European hedge	$	55,570	(1)	n/a		n/a
Hedge funds	Fixed income - developed market, event driven, fixed income - hedge, relative value arbitrage, European hedge	25,222		(2)	$	20,000	n/a
Private equity funds	Long/short equity	28,300		(2)	5,983		Up to 8 years
Private fund	Fixed income, residential and commercial mortgage-backed securities	73,455		(2) (3)	n/a		7 years, subject to two one-year extensions
Other	Various	2,292		(2)	n/a		Various (4)
Total		$	184,839		$	25,983

n/a-not applicable

(1) 68% monthly redemption; 32% quarterly redemption, of which 38% is subject to two-year lock-up.

(2) Liquidations are expected over the remaining term.

(3) Redemptions prohibited until November 2012.

(4) 4% remaining term of less than one year; 96% 20-year remaining term.

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Restructuring

9 Months Ended

Dec. 31, 2011

Restructuring Disclosure [Abstract]

Restructuring

11. Restructuring

In May 2010, Legg Mason announced a plan to streamline its business model to drive increased profitability and growth that primarily involved transitioning certain shared services to its investment affiliates which are closer to actual client relationships.  This plan involves headcount reductions in operations, technology, and other administrative areas, which may be partially offset by headcount increases at the affiliates, and will enable Legg Mason to eliminate a portion of its corporate office space that was primarily dedicated to operations and technology employees.  The initiative was substantially completed by December 31, 2011.

This initiative involves transition-related costs primarily comprised of charges for employee termination benefits and retention incentives during the transition period, recorded in Transition-related compensation in the Consolidated Statements of Income.  The transition-related costs also involve other costs, including charges for consolidating leased office space, early contract terminations, asset disposals, and professional fees, recorded in the appropriate operating expense classifications.  Total transition-related costs have been $125,603 through December 31, 2011. Charges for transition-related costs were $23,998 for the three months ended December 31, 2010, and $71,169 and $38,741 for the nine months ended December 31, 2011 and 2010, respectively, which primarily represent costs for severance and retention incentives. Charges for transition-related costs were $42,311 for the three months ended December 31, 2011, which primarily represent costs for lease loss accruals and fixed asset accelerated depreciation related to space permanently abandoned.

The table below presents a summary of changes in the transition-related liability from the initiation of the restructuring plan through December 31, 2011, including non-cash charges, such as asset write-offs and stock-based compensation expense, and cumulative charges incurred to date:

	Severance and retention incentives			Other			Total
Balance as of March 31, 2010	$	—		$	—		$	—
Accrued charges	35,487			6,160			41,647
Payments	(12,276		)	(325		)	(12,601		)
Balance as of March 31, 2011	23,211			5,835			29,046
Accrued charges (1)	27,504			26,000			53,504
Payments	(28,642		)	(12,563		)	(41,205		)
Balance as of December 31, 2011	$	22,073		$	19,272		$	41,345
Non-cash charges (2)
Year ended March 31, 2011	$	9,561		$	3,226		$	12,787
Nine months ended December 31, 2011	5,055			12,610			17,665
Total	$	14,616		$	15,836		$	30,452
Cumulative charges incurred as of December 31, 2011	$	77,607		$	47,996		$	125,603

(1) Other includes lease loss accruals of $18,246 for space permanently abandoned.

(2) Includes stock-based compensation expense, fixed asset accelerated depreciation related to space permanently abandoned, and accelerated depreciation for internally-developed software that will no longer be utilized as a result of the initiative.

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Stock-Based Compensation

9 Months Ended

Dec. 31, 2011

Stock-based Compensation Disclosure [Abstract]

Stock-Based Compensation

7.  Stock-Based Compensation

Legg Mason’s stock-based compensation includes stock options, employee stock purchase plans, restricted stock awards and units, performance shares payable in common stock, and deferred compensation payable in stock.  Shares available for issuance under the active equity incentive plan as of December 31, 2011, were 13,081. On July 26, 2011, the equity incentive plan was amended to increase the available shares by 6,500. Options under Legg Mason’s employee stock plans have been granted at prices not less than 100% of the fair market value. Options are generally exercisable in equal increments over four to five years and expire within eight to ten years from the date of grant.

Compensation expense relating to stock options for the three months ended December 31, 2011 and 2010, was $3,511 and $6,855, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $11,192 and $15,936, respectively.

Stock option transactions during the nine months endedDecember 31, 2011 and 2010, respectively, are summarized below:

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average exercise price per share		Number of shares		Weighted-average exercise price per share
Options outstanding at March 31	5,419		$	59.82	6,054		$	57.75
Granted	810		33.99		711		33.11
Exercised	(14	)	26.41		(597	)	22.07
Canceled/forfeited	(375	)	48.84		(687	)	48.73
Options outstanding at December 31	5,840		$	57.03	5,481		$	59.57

At December 31, 2011, options were exercisable for 3,415 shares with a weighted-average exercise price of $72.70 and a weighted-average remaining contractual life of 3.2 years.  Unamortized compensation cost related to unvested options (2,425 shares) at December 31, 2011, of $25,821 is expected to be recognized over a weighted-average period of 1.8 years.

The weighted-average fair value of option grants during the nine months endedDecember 31, 2011 and 2010, using the Black-Scholes option-pricing model, was $13.13 and $14.35 per share, respectively.

The following weighted-average assumptions were used in the model for grants in fiscal 2012 and 2011:

	Nine Months Ended December 31,
	2011		2010
Expected dividend yield	1.39	%	1.39	%
Risk-free interest rate	1.95	%	2.38	%
Expected volatility	47.16	%	52.78	%
Expected lives (in years)	5.12		5.18

Compensation expense relating to restricted stock and restricted stock units for the three months ended December 31, 2011 and 2010, was $8,876 and $9,883, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $25,484 and $25,951, respectively.

Restricted stock and restricted stock unit transactions during the nine months endedDecember 31, 2011 and 2010, respectively, are summarized below:

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average grant date value		Number of shares		Weighted-average grant date value
Unvested shares at March 31	2,637		$	33.01	1,605		$	34.80
Granted	1,315		33.79		1,786		32.95
Vested	(806	)	32.44		(475	)	36.39
Canceled/forfeited	(55	)	32.85		(205	)	29.82
Unvested shares at December 31	3,091		$	33.49	2,711		$	33.68

Unamortized compensation cost related to unvested restricted stock and restricted stock unit awards at December 31, 2011, of $69,175 is expected to be recognized over a weighted-average period of 1.8 years.

Compensation expense relating to the stock purchase plan and deferred compensation payable in stock for the three months ended December 31, 2011 and 2010, was $101 and $100, respectively, and for the nine months endedDecember 31, 2011 and 2010, was $385 and $438, respectively.

During the nine months ended December 31, 2011 and 2010, non-employee directors were granted 12 and 17 restricted stock units and 31 and 31 shares of common stock at a fair value of $1,375 and $1,425, respectively. As of December 31, 2011 and 2010, non-employee directors held 193 and 220 stock options, respectively, which are included in the outstanding options presented in the table above. As of December 31, 2011 and 2010, non-employee directors held 75 and 62 restricted stock units, respectively, which vest on the grant date and are therefore not included in the unvested shares of restricted stock and restricted stock units in the table above.  During the nine months ended December 31, 2011, non-employee directors did not exercise any stock options and no restricted stock units were distributed. During the nine months ended December 31, 2010, non-employee directors exercised 9 stock options and 7 restricted stock units were distributed. During the nine months ended December 31, 2011 and 2010, there were 27 and 59 non-employee director stock options canceled or forfeited, respectively.

During the June 2011 quarter, Legg Mason established a long-term incentive plan (the "LTIP") under its equity incentive plan, which provides an additional element of compensation that is based on performance. Under the LTIP, executive officers were granted cash value performance units in the June 2011 quarter that will vest at the end of a three year period based upon Legg Mason's cumulative adjusted earnings per share over the period. Awards granted under the LTIP may be settled in cash and/or shares of Legg Mason common stock, at the discretion of Legg Mason. The estimated amount of the award is being expensed over the vesting period based on a probability assessment of the expected outcome under the LTIP provisions.

As part of the Company's restructuring initiative, as further discussed in Note 11, the employment of certain recipients of stock option and restricted stock awards has been terminated. The termination benefits extended to these employees included accelerated vesting of any portion of their equity incentive awards that would not have vested by January 1, 2012, under the original terms of the awards. During fiscal 2011, the portion of the awards subject to accelerated vesting were revalued and are being expensed over the new vesting period, the impact of which is included above.

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 6) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011 Collateralized Loan Obligations [Member]	Mar. 31, 2011 Collateralized Loan Obligations [Member]
CLO loans and bonds
Unpaid principal balance					$ 279,624	$ 299,044
Unpaid principal balance in excess of fair value					(12,842)	(4,283)
Fair value					266,782	294,761
Unpaid principal balance of loans that are more than 90 days past due and also in nonaccrual status					2,963	4,963
Unpaid principal balance in excess of fair value for loans that are more than 90 days past due and also in nonaccrual status					(1,132)	(2,837)
Fair value of loans more than 90 days past due and in nonaccrual status					1,831	2,126
CLO Debt
Principal amounts outstanding					300,959	300,959
Excess unpaid principal over fair value					(35,481)	(22,639)
Debt Instrument, Fair Value Disclosure					265,478	278,320
Fair Value, Option, Loans Held as Assets [Abstract]
Fair Value, Option, Changes in Fair Value, Gain (Loss) recognized in Other non-operating income (expense) of CIVs	$ 7,277	$ (9,545)	$ 2,726	$ (11,131)

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Intangible Assets and Goodwill

9 Months Ended

Dec. 31, 2011

Intangible Assets And Goodwill Disclosure [Abstract]

Intangible Assets and Goodwill

5. Intangible Assets and Goodwill

The following table reflects the components of intangible assets as of:

	December 31, 2011			March 31, 2011
Amortizable asset management contracts
Cost	$	206,928		$	208,454
Accumulated amortization	(169,569		)	(155,136		)
Net	37,359			53,318
Indefinite–life intangible assets
Fund management contracts	3,753,428			3,753,657
Trade names	69,800			69,800
	3,823,228			3,823,457
Intangible assets, net	$	3,860,587		$	3,876,775

Legg Mason completed its annual impairment tests of goodwill and indefinite-life intangible assets and determined that there was no impairment in the value of these assets as of December 31, 2011. As a result of increased uncertainty regarding future market conditions, assessing the value of the reporting unit and intangible assets is increasingly difficult, and requires management to exercise significant judgment. Specific to the $2,502 million of indefinite-life domestic mutual fund contracts acquired in the Citigroup Asset Management acquisition, its current assessed fair value exceeds its carrying value by 5%. Given the current uncertainty regarding future market conditions, should market performance, flows, or related assets under management levels decrease in the near term such that cash flow projections deviate from current projections, it is reasonably possible that the asset could be deemed to be impaired by a material amount.

As of December 31, 2011, management contracts are being amortized over a weighted-average life of 3.2 years. Estimated future amortization expense is as follows:

Remaining 2012	$	3,625
2013	14,085
2014	11,902
2015	2,987
2016	2,731
Thereafter	2,029
Total	$	37,359

The change in the carrying value of goodwill for the nine months ended December 31, 2011, is summarized below:

	Gross Book Value			Accumulated Impairment			Net Book Value
Balance as of March 31, 2011	$	2,473,552		$	(1,161,900	)	$	1,311,652
Impact of excess tax basis amortization	(15,993		)	—			(15,993		)
Other, including changes in foreign exchange rates	(16,340		)	—			(16,340		)
Balance as of December 31, 2011	$	2,441,219		$	(1,161,900	)	$	1,279,319

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Long-Term Debt and Equity Units

9 Months Ended

Dec. 31, 2011

Long-term Debt Disclosure [Abstract]

Long-Term Debt and Equity Units

6. Long-Term Debt and Equity Units

The disclosures below include details of Legg Mason’s debt, excluding the debt of CIVs.  See Note 12, Variable Interest Entities and Consolidation of Investment Vehicles, for information related to the debt of CIVs.

The accreted value of long-term debt consists of the following:

	December 31, 2011						March 31, 2011
	Current Accreted Value		Unamortized Discount		Maturity Amount		Accreted Value
2.5% convertible senior notes	$	1,116,955	$	133,045	$	1,250,000	$	1,087,932
5.6% senior notes from Equity Units	—		—		—		103,039
Other term loans	10,086		—		10,086		10,897
Subtotal	1,127,041		133,045		1,260,086		1,201,868
Less: current portion	1,266		—		1,266		792
Total	$	1,125,775	$	133,045	$	1,258,820	$	1,201,076

As of December 31, 2011, the aggregate maturities of long-term debt, based on their contractual terms, are as follows:

Remaining 2012	$	203
2013	1,281
2014	1,333
2015	1,251,386
2016	5,883
Thereafter	—
Total	$	1,260,086

At December 31, 2011, the estimated fair value of long-term debt was approximately $1,218,596.

Legg Mason is accreting the carrying value of the 2.5% convertible senior notes to the principal amount at maturity using an interest rate of 6.5% (the effective borrowing rate for non-convertible debt at the time of issuance) over its expected life of seven years, resulting in interest expense of approximately $9,793 and $9,194 for the three months ended December 31, 2011 and 2010, respectively, and $29,023 and $27,248 for the nine months ended December 31, 2011 and 2010, respectively. The amount by which the notes’ if-converted value exceeds the accreted value, excluding accrued interest, using a current interest rate of 4.0% as of December 31, 2011, is approximately $91,555 (representing a potential loss).

The $103,039 of outstanding debt on the remaining 5.6% senior notes from Equity Units was retired on June 30, 2011, as part of a remarketing. Concurrently, Legg Mason issued 1,830 shares of Legg Mason common stock upon the exercise of the purchase contracts from the Equity Units.

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Commitments and Contingencies

9 Months Ended

Dec. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

Legg Mason leases office facilities and equipment under non-cancelable operating leases and also has multi-year agreements for certain services. These leases and service agreements expire on varying dates through fiscal 2025. Certain leases provide for renewal options and contain escalation clauses providing for increased rentals based upon maintenance, utility and tax increases.

As of December 31, 2011, the minimum annual aggregate rentals under operating leases and service agreements are as follows:

Remaining 2012	$	42,421
2013	141,197
2014	114,028
2015	100,883
2016	89,933
Thereafter	521,245
Total	$	1,009,707

The minimum rental commitments shown above have not been reduced by $146,591 for minimum sublease rentals to be received in the future under non-cancelable subleases, of which approximately 52% is due from one counterparty.  If a sub-tenant defaults on a sublease, Legg Mason may incur operating charges to reflect expected future sublease rentals at reduced amounts, as a result of the current commercial real estate market.

The above minimum rental commitments include $892,353 in real estate and equipment leases and $117,354 in service and maintenance agreements.

Included in the table above is $36,092 in commitments related to space that has been permanently abandoned in connection with the business streamlining initiative discussed in Note 11.  A related lease liability for certain of these properties and other subleased space reflects the present value of the excess lease obligations over estimated sublease income and related costs for which $13,886 and $3,054 of expense was recognized in the nine months ended December 31, 2011 and 2010, respectively, with the majority of these expenses being incurred in the three month periods then ended. 

As of December 31, 2011, Legg Mason had commitments to invest approximately $38,959 in investment vehicles. These commitments are expected to be funded as required through the end of the respective investment periods through fiscal 2018.

In the normal course of business, Legg Mason enters into contracts that contain a variety of representations and warranties and that provide general indemnifications. Legg Mason’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against Legg Mason that have not yet occurred.

Legg Mason has been the subject of customer complaints and has also been named as a defendant in various legal actions arising primarily from securities brokerage, asset management and investment banking activities, including certain class actions, which primarily allege violations of securities laws and seek unspecified damages, which could be substantial. In the normal course of its business, Legg Mason has also received subpoenas and is currently involved in governmental and self-regulatory agency inquiries, investigations and, from time to time, proceedings involving asset management activities. In accordance with guidance for accounting for contingencies, Legg Mason has established provisions for estimated losses from pending complaints, legal actions, investigations and proceedings when it is probable that a loss has been incurred and a reasonable estimate of loss can be made.

In a transaction with Citigroup in December 2005, Legg Mason transferred to Citigroup the subsidiaries that constituted its Private Client/Capital Markets ("PC/CM") businesses, thus transferring the entities that would have primary liability for most of the customer complaint, litigation and regulatory liabilities and proceedings arising from those businesses. However, as part of that transaction, Legg Mason agreed to indemnify Citigroup for most customer complaint, litigation and regulatory liabilities of Legg Mason's former PC/CM businesses that result from pre-closing events. While the ultimate resolution of these matters cannot be currently determined based on current information, after consultation with legal counsel, management believes that any accrual or range of reasonably possible losses as of December 31, 2011 or 2010, is not material. Similarly, although Citigroup transferred to Legg Mason the entities that would be primarily liable for most customer complaint, litigation and regulatory liabilities and proceedings of the Citigroup Asset Management ("CAM") business, Citigroup has agreed to indemnify Legg Mason for most customer complaint, litigation and regulatory liabilities of the CAM business that result from pre-closing events.

The ultimate resolution of other matters cannot be currently determined, and in the opinion of management, after consultation with legal counsel, Legg Mason believes that the resolution of these actions will not have a material effect on Legg Mason’s financial condition. Due in part to the preliminary nature of certain of these matters, Legg Mason is currently unable to estimate the amount or range of potential losses from these matters and the results of operations and cash flows could be materially affected during a period in which a matter is ultimately resolved. In addition, the ultimate costs of litigation-related charges can vary significantly from period-to-period, depending on factors such as market conditions, the size and volume of customer complaints and claims, including class action suits, and recoveries from indemnification, contribution or insurance reimbursement.

One of Legg Mason's asset management subsidiaries was named as the defendant in a lawsuit filed by a former institutional client in late August 2011. The complaint alleges breach of contract and breach of fiduciary duty arising from investments in the former client's account allegedly being inconsistent with the account's objectives, and seeks damages in excess of $90,000. Legg Mason believes that the claims are without merit and intends to defend the matter vigorously. During the quarter, the subsidiary filed a motion to dismiss, which has not yet been ruled upon by the court. Discovery in the case is ongoing. Because of the preliminary status of the matter, Legg Mason cannot estimate the possible loss or range of loss from this matter, if any. In addition, although Legg Mason believes that this matter would likely be covered by insurance policies that may substantially mitigate the amount of any eventual loss, as is not unusual with litigation at this point in the process, there can be no assurance that the action will not have a material effect on Legg Mason's financial position, results of operations or cash flows.

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Significant Accounting Policies (Details 2) (Legg Mason, Inc., USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
Legg Mason, Inc.
Noncontrolling Interests Redeemable
Balance, beginning of period	$ 36,712	$ 29,577
Net income attributable to redeemable noncontrolling interests	8,120	1,941
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interest holders	(16,016)	776
Balance, end of period	$ 28,816	$ 32,294

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Earnings Per Share (Details) (Consolidated Legg Mason Group [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Consolidated Legg Mason Group [Member]
Earnings per share
Weighted-average basic shares outstanding (in shares)	140,053	149,980	144,363	153,817
Potential common shares:
Employee stock options (in shares)	29	231	65	200
Shares related to deferred compensation (in shares)	0	761	0	531
Weighted-average diluted shares (in shares)	140,082	150,972	144,428	154,548
Net Income	$ 35,141	$ 53,364	$ 154,222	$ 174,995
Less: Net income (loss) attributable to noncontrolling interests	7,009	(8,256)	9,474	(9,891)
Net Income (Loss) Attributable to Parent	$ 28,132	$ 61,620	$ 144,748	$ 184,886
Net Income per Share Attributable to Legg Mason, Inc. common shareholders, Basic (in dollars per share)	$ 0.20	$ 0.41	$ 1.00	$ 1.20
Net Income per Share Attributable to Legg Mason, Inc. common shareholders, Diluted (in dollars per share)	$ 0.20	$ 0.41	$ 1.00	$ 1.20

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Significant Accounting Policies Significant Accounting Policies (Policies)

9 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

In accordance with financial accounting standards on consolidation, Legg Mason consolidates and separately identifies certain sponsored investment vehicles, the most significant of which is a collateralized loan obligation entity (“CLO”).  The consolidation of these investment vehicles has no impact on Net Income Attributable to Legg Mason, Inc. and does not have a material impact on Legg Mason's consolidated operating results.  Legg Mason also holds investments in certain consolidated sponsored investment funds and the change in the value of these investments, which is recorded in Other non-operating income (expense), is reflected in its Net Income and allocated to noncontrolling interests.  Also, see Note 12 for additional information regarding the consolidation of investment vehicles.

Business Realignment and Goodwill [Policy Text Block]

In connection with a realignment of its executive management team during fiscal 2011, Legg Mason no longer manages its business in two operating segments (divisions), and during the June 2011 quarter, eliminated the previous separation of the Americas and International divisions and combined them into one operating segment, Global Asset Management. Legg Mason believes this structure allows the Company to function as a global organization with a single purpose. Internal management reporting has been modified consistent with this realignment such that discrete financial information regularly received by the chief operating decision maker, our Chief Executive Officer, is at the consolidated Global Asset Management business level. As a result, the former Americas and International operating segments are no longer our reporting units, and subsequently, goodwill is recorded and evaluated at one Global Asset Management reporting unit level.

Costs Associated with Exit or Disposal Activities or Restructurings, Policy [Policy Text Block]

In May 2010, Legg Mason's management committed to a plan to streamline its business model as further described in Note 11. The costs in connection with this plan primarily relate to employee termination benefits, incentives to retain employees during the transition period, charges for consolidating leased office space, and contract termination costs. Termination benefits, including severance, and retention incentives are recorded as Transition-related compensation in the Consolidated Statements of Income. These compensation items require employees to provide future service and are therefore expensed ratably over the required service period. Expense recognition of contractual lease payments may be accelerated when the related space is either permanently abandoned or subleased at a loss. Contract termination and other costs are expensed when incurred.

Income Tax, Policy [Policy Text Block]

During the quarter ended September 30, 2010, the United Kingdom ("U.K.") Finance Bill 2010 was enacted, which reduced the main U.K. corporate tax rate from 28% to 27%. In July 2011, The U.K. Finance Act 2011 (the "Act") was enacted. The Act further reduced the main U.K. corporate tax rate from 27% to 26% effective April 1, 2011, and from 26% to 25% effective April 1, 2012. The reductions in the U.K. corporate tax rate resulted in tax benefits of $18,268 and $8,878, recognized in the quarters ended September 30, 2011 and 2010, respectively, as a result of the revaluation of deferred tax assets and liabilities at the new rates. As a result of the revaluation adjustments, the effective tax rate for the nine months ended December 31, 2011, was reduced by 9.5 percentage points. Similarly, the effective tax rate for the nine months ended December 31, 2010, was reduced by 3.4 percentage points.

Noncontrolling Interests Redeemable [Policy Text Block]

Noncontrolling interests related to certain consolidated investment vehicles ("CIVs") are classified as redeemable noncontrolling interests since investors in these funds may request withdrawals at any time.

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

In December 2011, the Financial Accounting Standards Board ("FASB") updated the guidance on disclosures for offsetting assets and liabilities to require both gross and net information about instruments and transactions, including derivatives, repurchase and reverse repurchase and other arrangements that are eligible for offset in the balance sheet. The disclosures will be effective for Legg Mason in fiscal 2014, and are not expected to have a material impact on Legg Mason's consolidated financial statements.

In September 2011, the FASB updated the guidance on the annual goodwill test for impairment. The update permits companies to assess qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the currently required quantitative fair value assessment. This update will be effective for Legg Mason in fiscal 2013, if not adopted early.  This update is not expected to have a material effect on its recorded goodwill, but Legg Mason is still evaluating its adoption.

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Long-Term Debt and Equity Units (Tables)

9 Months Ended

Dec. 31, 2011

Long-term Debt Disclosure [Abstract]

Schedule of accreted value of long-term debt

	December 31, 2011						March 31, 2011
	Current Accreted Value		Unamortized Discount		Maturity Amount		Accreted Value
2.5% convertible senior notes	$	1,116,955	$	133,045	$	1,250,000	$	1,087,932
5.6% senior notes from Equity Units	—		—		—		103,039
Other term loans	10,086		—		10,086		10,897
Subtotal	1,127,041		133,045		1,260,086		1,201,868
Less: current portion	1,266		—		1,266		792
Total	$	1,125,775	$	133,045	$	1,258,820	$	1,201,076

Schedule of aggregate maturities of long-term debt based on contractual terms

Remaining 2012	$	203
2013	1,281
2014	1,333
2015	1,251,386
2016	5,883
Thereafter	—
Total	$	1,260,086

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Dec. 31, 2011	Dec. 31, 2011	Dec. 31, 2010
Operating leases
Remaining 2012	$ 42,421	$ 42,421
2013	141,197	141,197
2014	114,028	114,028
2015	100,883	100,883
2016	89,933	89,933
Thereafter	521,245	521,245
Total	1,009,707	1,009,707
Minimum sublease rentals to be received in the future under non-cancelable subleases	146,591	146,591
Sublease rentals due from one counterparty (as a percent)	52.00%
Minimum rental commitments, real estate leases and equipment leases	892,353	892,353
Minimum rental commitments, service and maintenance agreements	117,354	117,354
Lease liability expense		13,886	3,054
Lease Commitments for space permanently abandoned	36,092	36,092
Commitment to invest in investment vehicles
Commitment to invest in investment vehicles	$ 38,959	$ 38,959

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Intangible Assets and Goodwill (Details 3) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Dec. 31, 2011
Goodwill, Gross Book Value
Changes in the carrying value of goodwill
Gross Book Value, at the beginning of period	$ 2,473,552
Impact of excess tax basis amortization	(15,993)
Other, including changes in foreign exchange rates	(16,340)
Goodwill, Gross	2,441,219
Goodwill, Accumulated Impairment
Changes in the carrying value of goodwill
Accumulated Impairment, at the beginning of period	(1,161,900)
Impact of excess tax basis amortization	0
Other, including changes in foreign exchange rates	0
Goodwill, Impaired, Accumulated Impairment Loss	(1,161,900)
Goodwill, Net Book Value
Changes in the carrying value of goodwill
Net Book Value, at the beginning of period	1,311,652
Impact of excess tax basis amortization	(15,993)
Other, including changes in foreign exchange rates	(16,340)
Net Book Value, at the end of period	$ 1,279,319

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Consolidated Legg Mason Group [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Consolidated Legg Mason Group [Member]
Net Income	$ 35,141	$ 53,364	$ 154,222	$ 174,995
Other comprehensive income:
Foreign currency translation adjustment	3,309	7,760	(29,357)	27,733
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses), net of tax provision of ($2), $(54), $167 and $3, respectively	(3)	(80)	250	4
Reclassification adjustment for losses (gains) included in net income	4	3	8	0
Net unrealized gains on investment securities	1	(77)	258	4
Total other comprehensive income (loss)	3,310	7,683	(29,099)	27,737
COMPREHENSIVE INCOME	38,451	61,047	125,123	202,732
Less: Comprehensive income (loss) attributable to noncontrolling interests	7,009	(8,256)	9,474	(9,891)
COMPREHENSIVE INCOME ATTRIBUTABLE TO LEGG MASON, INC.	$ 31,442	$ 69,303	$ 115,649	$ 212,623

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Significant Accounting Policies

9 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

Significant Accounting Policies

2. Significant Accounting Policies

Consolidation

In accordance with financial accounting standards on consolidation, Legg Mason consolidates and separately identifies certain sponsored investment vehicles, the most significant of which is a collateralized loan obligation entity (“CLO”).  The consolidation of these investment vehicles has no impact on Net Income Attributable to Legg Mason, Inc. and does not have a material impact on Legg Mason's consolidated operating results.  Legg Mason also holds investments in certain consolidated sponsored investment funds and the change in the value of these investments, which is recorded in Other non-operating income (expense), is reflected in its Net Income and allocated to noncontrolling interests.  Also, see Note 12 for additional information regarding the consolidation of investment vehicles.

Business Realignment and Goodwill

In connection with a realignment of its executive management team during fiscal 2011, Legg Mason no longer manages its business in two operating segments (divisions), and during the June 2011 quarter, eliminated the previous separation of the Americas and International divisions and combined them into one operating segment, Global Asset Management. Legg Mason believes this structure allows the Company to function as a global organization with a single purpose. Internal management reporting has been modified consistent with this realignment such that discrete financial information regularly received by the chief operating decision maker, our Chief Executive Officer, is at the consolidated Global Asset Management business level. As a result, the former Americas and International operating segments are no longer our reporting units, and subsequently, goodwill is recorded and evaluated at one Global Asset Management reporting unit level.

Restructuring Costs

In May 2010, Legg Mason's management committed to a plan to streamline its business model as further described in Note 11. The costs in connection with this plan primarily relate to employee termination benefits, incentives to retain employees during the transition period, charges for consolidating leased office space, and contract termination costs. Termination benefits, including severance, and retention incentives are recorded as Transition-related compensation in the Consolidated Statements of Income. These compensation items require employees to provide future service and are therefore expensed ratably over the required service period. Expense recognition of contractual lease payments may be accelerated when the related space is either permanently abandoned or subleased at a loss. Contract termination and other costs are expensed when incurred.

Income Taxes

During the quarter ended September 30, 2010, the United Kingdom ("U.K.") Finance Bill 2010 was enacted, which reduced the main U.K. corporate tax rate from 28% to 27%. In July 2011, The U.K. Finance Act 2011 (the "Act") was enacted. The Act further reduced the main U.K. corporate tax rate from 27% to 26% effective April 1, 2011, and from 26% to 25% effective April 1, 2012. The reductions in the U.K. corporate tax rate resulted in tax benefits of $18,268 and $8,878, recognized in the quarters ended September 30, 2011 and 2010, respectively, as a result of the revaluation of deferred tax assets and liabilities at the new rates. As a result of the revaluation adjustments, the effective tax rate for the nine months ended December 31, 2011, was reduced by 9.5 percentage points. Similarly, the effective tax rate for the nine months ended December 31, 2010, was reduced by 3.4 percentage points.

Noncontrolling interests

Noncontrolling interests related to certain consolidated investment vehicles ("CIVs") are classified as redeemable noncontrolling interests since investors in these funds may request withdrawals at any time.  Redeemable noncontrolling interests as of and for the nine months endedDecember 31, 2011 and 2010, were as follows:

	Nine Months Ended
	December 31,
	2011			2010
Balance, beginning of period	$	36,712		$	29,577
Net income attributable to redeemable noncontrolling interests	8,120			1,941
Net (redemptions/distributions paid to)/subscriptions received from noncontrolling interest holders	(16,016		)	776
Balance, end of period	$	28,816		$	32,294

Recent Accounting Developments

In December 2011, the Financial Accounting Standards Board ("FASB") updated the guidance on disclosures for offsetting assets and liabilities to require both gross and net information about instruments and transactions, including derivatives, repurchase and reverse repurchase and other arrangements that are eligible for offset in the balance sheet. The disclosures will be effective for Legg Mason in fiscal 2014, and are not expected to have a material impact on Legg Mason's consolidated financial statements.

In September 2011, the FASB updated the guidance on the annual goodwill test for impairment. The update permits companies to assess qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the currently required quantitative fair value assessment. This update will be effective for Legg Mason in fiscal 2013, if not adopted early.  This update is not expected to have a material effect on its recorded goodwill, but Legg Mason is still evaluating its adoption.

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Variable Interest Entities and Consolidation of Investment Vehicles (Details 4) (CIVs, Significant unobservable inputs (Level 3), USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
ASSETS:
Assets measured at fair value using significant unobservable inputs, value at beginning of period	$ 56,840	$ 35,514	$ 52,151	$ 26,066
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(848)		5,195
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	3,794		18,467
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(10,954)		(26,461)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	3,235	0	5,862	[1]
Realized and unrealized gains/(losses), net, assets	738	3,013	6,261	3,791
Assets measured at fair value using significant unobservable inputs, value at end of period	50,418	40,914	50,418	40,914
Fair Value Disclosures [Abstract]
Unrealized gains (losses) on Level 3 assets and liabilities still held at the reporting date	2,192	(12,331)	13,127	(14,415)
Hedge funds
ASSETS:
Assets measured at fair value using significant unobservable inputs, value at beginning of period	33,327	19,712	34,272	12,374
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		(849)		2,540
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	3,794		14,493
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	(10,954)		(26,461)
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	3,235	0	5,862	[1]
Realized and unrealized gains/(losses), net, assets	380	3,196	4,243	4,518
Assets measured at fair value using significant unobservable inputs, value at end of period	26,547	25,294	26,547	25,294
Private equity funds
ASSETS:
Assets measured at fair value using significant unobservable inputs, value at beginning of period	23,513	15,802	17,879	13,692
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		1		2,655
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		3,974
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0	0	0	0	[1]
Realized and unrealized gains/(losses), net, assets	358	(183)	2,018	(727)
Assets measured at fair value using significant unobservable inputs, value at end of period	23,871	15,620	23,871	15,620
CLO debt
ASSETS:
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases, Sales, Issuances, Settlements		0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Sales	0		0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0		0
LIABILITIES:
Liabilities measured at fair value using significant unobservable inputs, value at beginning of period	(267,714)	(252,822)	(278,320)	0
Transfers of Level 3, liabilities		0		(249,668)	[1]
Realized and unrealized gains/(losses), net, liabilities	2,236	(15,059)	12,842	(18,213)
Liabilities measured at fair value using significant unobservable inputs, value at end of period	(265,478)	(267,881)	(265,478)	(267,881)
Gain (Loss) on Investments [Member]
Fair Value Disclosures [Abstract]
Fair Value Measurement with Unobservable Inputs Reconciliation Recurring Basis Asset Liability Gain (Loss) Included in Earnings	$ 2,974	$ (12,046)	$ 19,103	$ (14,422)

[1] Transfers into Level 3 for the nine months ended December 31, 2010, primarily represent liabilities recorded upon the initial consolidation of investment vehicles.

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Stock-Based Compensation (Tables)

9 Months Ended

Dec. 31, 2011

Stock-based Compensation Disclosure [Abstract]

Stock option transactions

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average exercise price per share		Number of shares		Weighted-average exercise price per share
Options outstanding at March 31	5,419		$	59.82	6,054		$	57.75
Granted	810		33.99		711		33.11
Exercised	(14	)	26.41		(597	)	22.07
Canceled/forfeited	(375	)	48.84		(687	)	48.73
Options outstanding at December 31	5,840		$	57.03	5,481		$	59.57

Assumptions used to determine the weighted-average fair value of option grants

	Nine Months Ended December 31,
	2011		2010
Expected dividend yield	1.39	%	1.39	%
Risk-free interest rate	1.95	%	2.38	%
Expected volatility	47.16	%	52.78	%
Expected lives (in years)	5.12		5.18

Restricted stock and restricted stock unit transactions

	Nine Months Ended December 31,
	2011				2010
	Number of shares		Weighted-average grant date value		Number of shares		Weighted-average grant date value
Unvested shares at March 31	2,637		$	33.01	1,605		$	34.80
Granted	1,315		33.79		1,786		32.95
Vested	(806	)	32.44		(475	)	36.39
Canceled/forfeited	(55	)	32.85		(205	)	29.82
Unvested shares at December 31	3,091		$	33.49	2,711		$	33.68

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Fixed Assets (Details) (Consolidated Legg Mason Group [Member], USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010	Mar. 31, 2011
Fixed assets:
Total cost	$ 607,179		$ 607,179		$ 704,999
Less: accumulated depreciation and amortization	(360,848)		(360,848)		(418,294)
Fixed assets, net	246,331		246,331		286,705
Depreciation and amortization expense included in operating income	25,246	19,785	59,209	60,722
Equipment
Fixed assets:
Total cost	157,489		157,489		200,696
Software
Fixed assets:
Total cost	206,007		206,007		224,026
Leasehold improvements
Fixed assets:
Total cost	$ 243,683		$ 243,683		$ 280,277

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Variable Interest Entities and Consolidation of Investment Vehicles

9 Months Ended

Dec. 31, 2011

Variable Interest Entities Disclosure [Abstract]

Consolidated Investment Vehicles and Other Variable Interest Entities Disclosure [Text Block]

12. Variable Interest Entities and Consolidation of Investment Vehicles

In the normal course of its business, Legg Mason sponsors and is the manager of various types of investment vehicles. Certain of these investment vehicles are considered to be variable interest entities (“VIEs”) while others are considered to be voting rights entities (“VREs”) subject to traditional consolidation concepts based on ownership rights. Investment vehicles that are considered VREs are consolidated if Legg Mason has a controlling financial interest in the investment vehicle.

Financial Accounting Standards Board Interpretation No. 46(R) (Accounting Standards Update2010-10, "Amendments to Statement 167 for Certain Investment Funds")

For most sponsored investment funds, including money market funds, Legg Mason determines it is the primary beneficiary of a VIE if it absorbs a majority of the VIE's expected losses, or receives a majority of the VIE's expected residual returns, if any. Legg Mason's determination of expected residual returns excludes gross fees paid to a decision maker if certain criteria are met. In determining whether it is the primary beneficiary of a VIE, Legg Mason considers both qualitative and quantitative factors such as the voting rights of the equity holders, economic participation of all parties, including how fees are earned and paid to Legg Mason, related party ownership, guarantees and implied relationships.

Legg Mason concluded it was the primary beneficiary of one sponsored investment fund VIE, and also held a controlling financial interest in one sponsored investment fund VRE, both of which were consolidated as of December 31, 2011, March 31, 2011, and December 31, 2010. Effective December 31, 2011, a controlling financial interest of $20,814 in a second sponsored investment fund VRE previously consolidated by Legg Mason was redeemed. Accordingly, the fund was deconsolidated by Legg Mason and the fund's balance sheet amounts have been excluded from Legg Mason's consolidated balance sheet as of December 31, 2011, but income statement and cash flow amounts for the fund have been included in Legg Mason's consolidated income and cash flow statements for the three and nine months ended December 31, 2011.

Statement of Financial Accounting Standards No. 167 (Accounting Standards Codification Topic 810, "Consolidation")

For other sponsored investment funds that do not meet certain criteria, if Legg Mason has a significant variable interest, it determines it is the primary beneficiary of the VIE if it has both the power to direct the activities of the VIE that most significantly impact the entity's economic performance and the obligation to absorb losses, or the right to receive benefits, that potentially could be significant to the VIE.

Legg Mason concluded that it was the primary beneficiary of one of two CLOs in which it has a variable interest. Although it holds no equity interest in either of these investment vehicles, it had both the power to control and had a significant variable interest in one CLO because of its expected subordinated fees. As of December 31, 2011, March 31, 2011, and December 31, 2010, the balances related to this CLO were consolidated on the Company's consolidated financial statements.

Legg Mason's investment in CIVs as of December 31, 2011, and March 31, 2011, was $43,145 and $53,708, respectively, which represents its maximum risk of loss, excluding uncollected advisory fees. The assets of these CIVs are primarily comprised of investment securities. Investors and creditors of these CIVs have no recourse to the general credit or assets of Legg Mason beyond its investment in these funds.

The following tables reflect the impact of CIVs on the Consolidated Balance Sheets as of December 31, 2011, and March 31, 2011, and the Consolidated Statements of Income for the three and nine months endedDecember 31, 2011 and 2010, respectively:

Consolidating Balance Sheets

	December 31, 2011									March 31, 2011
	Balance Before Consolidation of CIVs		CIVs		Eliminations			As Reported		Balance Before Consolidation of CIVs		CIVs (1)		Eliminations			As Reported
Current assets	$	2,204,535	$	70,678	$	(43,667	)	$	2,231,546	$	2,378,226	$	122,963	$	(54,633	)	$	2,446,556
Non-current assets	5,847,514		292,002		—			6,139,516		5,946,737		314,463		—			6,261,200
Total assets	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756
Current liabilities	$	891,674	$	9,785	$	(521	)	$	900,938	$	914,803	$	55,094	$	(925	)	$	968,972
Long-term debt of CIVs	—		265,478		—			265,478		—		278,320		—			278,320
Other non-current liabilities	1,574,860		3,998		—			1,578,858		1,649,815		3,553		—			1,653,368
Total liabilities	2,466,534		279,261		(521		)	2,745,274		2,564,618		336,967		(925		)	2,900,660
Redeemable non-controlling interests	911		—		27,905			28,816		976		—		35,736			36,712
Total stockholders’ equity	5,584,604		83,419		(71,051		)	5,596,972		5,759,369		100,459		(89,444		)	5,770,384
Total liabilities and equity	$	8,052,049	$	362,680	$	(43,667	)	$	8,371,062	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756

(1) Certain immaterial non-current liabilities of CIVs are included in Other liabilities on the Consolidated Balance Sheets.

Consolidating Statements of Income

	Three Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	627,731		$	—		$	(753	)	$	626,978		$	723,087		$	—		$	(1,159	)	$	721,928
Total operating expenses	567,550			859			(754		)	567,655			625,452			643			(1,159		)	624,936
Operating income (loss)	60,181			(859		)	1			59,323			97,635			(643		)	—			96,992
Total other non-operating income (expense)	(19,357		)	7,424			358			(11,575		)	(2,177		)	(8,462		)	803			(9,836		)
Income (loss) before income tax provision	40,824			6,565			359			47,748			95,458			(9,105		)	803			87,156
Income tax provision	12,607			—			—			12,607			33,792			—			—			33,792
Net income (loss)	28,217			6,565			359			35,141			61,666			(9,105		)	803			53,364
Less:  Net income (loss) attributable to noncontrolling interests	85			—			6,924			7,009			46			—			(8,302		)	(8,256		)
Net income (loss) attributable to Legg Mason, Inc.	$	28,132		$	6,565		$	(6,565	)	$	28,132		$	61,620		$	(9,105	)	$	9,105		$	61,620

	Nine Months Ended
	December 31, 2011												December 31, 2010
	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported			Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported
Total operating revenues	$	2,016,413		$	—		$	(2,430	)	$	2,013,983		$	2,073,784		$	—		$	(2,897	)	$	2,070,887
Total operating expenses	1,746,967			2,906			(2,431		)	1,747,442			1,782,769			3,347			(2,897		)	1,783,219
Operating income (loss)	269,446			(2,906		)	1			266,541			291,015			(3,347		)	—			287,668
Total other non-operating income (expense)	(85,586		)	15,607			(3,472		)	(73,451		)	(18,402		)	(6,356		)	(339		)	(25,097		)
Income (loss) before income tax provision	183,860			12,701			(3,471		)	193,090			272,613			(9,703		)	(339		)	262,571
Income tax provision	38,868			—			—			38,868			87,576			—			—			87,576
Net income (loss)	144,992			12,701			(3,471		)	154,222			185,037			(9,703		)	(339		)	174,995
Less:  Net income (loss) attributable to noncontrolling interests	244			—			9,230			9,474			151			—			(10,042		)	(9,891		)
Net income (loss) attributable to Legg Mason, Inc.	$	144,748		$	12,701		$	(12,701	)	$	144,748		$	184,886		$	(9,703	)	$	9,703		$	184,886

Other non-operating income (expense) includes interest income, interest expense and net gains (losses) on investments and long-term debt determined on an accrual basis.

The consolidation of CIVs has no impact on Net Income Attributable to Legg Mason, Inc.

The fair value of the financial assets and (liabilities) of CIVs were determined using the following categories of inputs as of December 31, 2011, and March 31, 2011:

	As of December 31, 2011
	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	977	$	9,366		$	26,547		$	36,890
Investments:
CLO loans	—		256,470			—			256,470
CLO bonds	—		10,312			—			10,312
Private equity funds	—		—			23,871			23,871
Total investments	—		266,782			23,871			290,653
	$	977	$	276,148		$	50,418		$	327,543
Liabilities:
CLO debt	$	—	$	—		$	(265,478	)	$	(265,478	)
Derivative liabilities	—		(3,998		)	—			(3,998		)
	$	—	$	(3,998	)	$	(265,478	)	$	(269,476	)

	As of March 31, 2011
	Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Total
Assets:
Trading investments:
Hedge funds	$	—		$	14,087		$	34,272		$	48,359
Government and corporate securities	—			22,139			—			22,139
Repurchase agreements	—			12,331			—			12,331
Total trading investment securities	—			48,557			34,272			82,829
Investments:
CLO loans	—			275,948			—			275,948
CLO bonds	—			18,813			—			18,813
Private equity funds	—			—			17,879			17,879
Total investments	—			294,761			17,879			312,640
Derivative assets	125			45			—			170
	$	125		$	343,363		$	52,151		$	395,639
Liabilities:
CLO debt	$	—		$	—		$	(278,320	)	$	(278,320	)
Reverse repurchase agreements	—			(18,310		)	—			(18,310		)
Derivative liabilities	(128		)	(14,169		)	—			(14,297		)
	$	(128	)	$	(32,479	)	$	(278,320	)	$	(310,927	)

In accordance with new accounting guidance adopted during the June 2011 quarter, the changes in assets and (liabilities) of CIVs measured at fair value using significant unobservable inputs (Level 3) for the three and nine months ended December 31, 2011, are now prepared on a gross basis in the tables below:

	Value as of September 30, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	33,327		$	3,794	$	(10,954	)	$	—	$	380	$	26,547
Private equity funds	23,513			—		—			—		358		23,871
	$	56,840		$	3,794	$	(10,954	)	$	—	$	738	$	50,418
Liabilities:
CLO debt	$	(267,714	)	$	—	$	—		$	—	$	2,236	$	(265,478	)
Total realized and unrealized gains (losses), net											$	2,974

	Value as of September 30, 2010			Purchases, sales, issuances and settlements, net			Transfers		Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	19,712		$	(849	)	$	3,235	$	3,196		$	25,294
Private equity funds	15,802			1			—		(183		)	15,620
	$	35,514		$	(848	)	$	3,235	$	3,013		$	40,914
Liabilities:
CLO debt	$	(252,822	)	$	—		$	—	$	(15,059	)	$	(267,881	)
Total realized and unrealized gains (losses), net									$	(12,046	)

	Value as of March 31, 2011			Purchases		Sales			Transfers		Realized and unrealized gains/(losses), net		Value as of December 31, 2011
Assets:
Hedge funds	$	34,272		$	14,493	$	(26,461	)	$	—	$	4,243	$	26,547
Private equity funds	17,879			3,974		—			—		2,018		23,871
	$	52,151		$	18,467	$	(26,461	)	$	—	$	6,261	$	50,418
Liabilities:
CLO debt	$	(278,320	)	$	—	$	—		$	—	$	12,842	$	(265,478	)
Total realized and unrealized gains (losses), net											$	19,103

	Value as of March 31, 2010		Purchases, sales, issuances and settlements, net		Transfers (1)			Realized and unrealized gains/(losses), net			Value as of December 31, 2010
Assets:
Hedge funds	$	12,374	$	2,540	$	5,862		$	4,518		$	25,294
Private equity funds	13,692		2,655		—			(727		)	15,620
	$	26,066	$	5,195	$	5,862		$	3,791		$	40,914
Liabilities:
CLO debt	$	—	$	—	$	(249,668	)	$	(18,213	)	$	(267,881	)
Total realized and unrealized gains (losses), net								$	(14,422	)

(1) Transfers into Level 3 for the nine months ended December 31, 2010, primarily represent liabilities recorded upon the initial consolidation of investment vehicles.

Realized and unrealized gains and losses recorded for Level 3 assets and liabilities of CIVs are included in Other non-operating income of CIVs on the Consolidated Statements of Income. Total unrealized gains for Level 3 investments and liabilities of CIVs relating only to those assets and liabilities still held at the reporting date were $2,192 and $(12,331) for the three months ended December 31, 2011 and 2010, respectively. Total unrealized gains (losses) for Level 3 investments and liabilities of CIVs relating only to those assets and liabilities still held at the reporting date were $13,127 and $(14,415) for the nine months endedDecember 31, 2011 and 2010, respectively.

There were no significant transfers between Levels 1 and 2 during the nine months ended December 31, 2011 and 2010.

The NAV values used as a practical expedient by CIVs have been provided by the investees and have been derived from the fair values of the underlying investments as of the reporting date.  The following table summarizes, as of December 31, 2011, the nature of these investments and any related liquidation restrictions or other factors which may impact the ultimate value realized.

Category of Investment	Investment Strategy	Fair Value Determined Using NAV			Unfunded Commitments		Remaining Term
Hedge funds	Global, fixed income, macro, long/short equity, systematic, emerging market, U.S. and European hedge	$	36,890	(1)	n/a		n/a
Private equity funds	Long/short equity	23,871		(2)	$	9,610	8 years
Total		$	60,761		$	9,610

n/a – not applicable

(1) 4% daily redemption; 6% monthly redemption; 19% quarterly redemption; and 71% subject to three to five year lock-up or side pocket provisions.

(2) Liquidations are expected over the remaining term.

There are no current plans to sell any of these investments.

Legg Mason has elected the fair value option for certain eligible assets and liabilities, including corporate loans and debt, of the consolidated CLO. Management believes that the use of the fair value option eliminates certain timing differences and better matches the changes in fair value of assets and liabilities related to the CLO.

The following table presents the fair value and unpaid principal balance of CLO loans, bonds and debt carried at fair value under the fair value option as of December 31, 2011, and March 31, 2011:

	December 31, 2011			March 31, 2011
CLO loans and bonds
Unpaid principal balance	$	279,624		$	299,044
Unpaid principal balance in excess of fair value	(12,842		)	(4,283		)
Fair value	$	266,782		$	294,761
Unpaid principal balance of loans that are more than 90 days past due and also in nonaccrual status	$	2,963		$	4,963
Unpaid principal balance in excess of fair value for loans that are more than 90 days past due and also in nonaccrual status	(1,132		)	(2,837		)
Fair value of loans more than 90 days past due and in nonaccrual status	$	1,831		$	2,126
CLO debt
Principal amounts outstanding	$	300,959		$	300,959
Excess unpaid principal over fair value	(35,481		)	(22,639		)
Fair value	$	265,478		$	278,320

During the three and nine months endedDecember 31, 2011, total gains of $7,277 and $2,726, respectively, were recognized in Other non-operating income of CIVs in the Consolidated Statements of Income related to assets and liabilities for which the fair value option was elected. During the three and nine months endedDecember 31, 2010, total losses of $9,545 and $11,131, respectively, were recognized in Other non-operating income of CIVs in the Consolidated Statements of Income related to assets and liabilities for which the fair value option was elected. For CLO loans and CLO debt measured at fair value, substantially all of the estimated gains and losses included in earnings for the three and nine months endedDecember 31, 2011, were attributable to instrument specific credit risk due to the widened credit spreads for these instruments during the current periods. Specifically, overall credit spreads for the CLO debt across the entire capital structure widened due to a general credit curve steepening that occurred during the nine months endedDecember 31, 2011.

The CLO debt bears interest at variable rates based on LIBOR plus a pre-defined spread, which ranges from 25 basis points to 400 basis points.  All outstanding debt matures on July 15, 2018.

Total derivative liabilities of CIVs of $3,998 as of December 31, 2011, and total derivative assets and liabilities of CIVs of $170 and $14,297, respectively, as of March 31, 2011, are primarily recorded in Other liabilities of CIVs.  Gains and (losses) of $491 and $(552), respectively, for the three months ended December 31, 2011, and $54,477 and $(47,388), respectively, for the nine months endedDecember 31, 2011, related to derivative assets and liabilities of CIVs are included in Other non-operating income of CIVs.  Gains and (losses) of $5,725 and $(7,394), respectively, for the three months ended December 31, 2010, and $11,603 and $(15,648), respectively, for the nine months ended December 31, 2010, related to derivative assets and liabilities of CIVs are included in Other non-operating income (expense) of CIVs. There is no risk to Legg Mason in relation to the derivative assets and liabilities of the CIVs in excess of its investment in the funds, if any.

As of December 31, 2011, and March 31, 2011, for VIEs in which Legg Mason holds a significant variable interest or is the sponsor and holds a variable interest, but for which it was not the primary beneficiary, Legg Mason’s carrying value, the related VIE assets and liabilities and maximum risk of loss were as follows:

	As of December 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	394,435	$	366,435	$	—	$	449
Public-Private Investment Program	554,570		2,878		232		375
Other sponsored investment funds	16,430,529		2,048		67,359		103,584
Total	$	17,379,534	$	371,361	$	67,591	$	104,408

	As of March 31, 2011
	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss (1)
CLO	$	382,692	$	354,692	$	—	$	196
Public-Private Investment Program	692,488		2,002		290		290
Other sponsored investment funds	20,241,752		16,771		83,480		121,899
Total	$	21,316,932	$	373,465	$	83,770	$	122,385

(1) Includes equity investments the Company has made or is required to make and any earned but uncollected management fees.

The assets of these VIEs are primarily comprised of cash and cash equivalents and investment securities, and the liabilities are primarily comprised of debt and various expense accruals.