XML 93 R44.htm IDEA: XBRL DOCUMENT

VARIABLE INTEREST ENTITIES AND CONSOLIDATION OF INVESTMENT VEHICLES (Tables)

12 Months Ended

Mar. 31, 2011

VARIABLE INTEREST ENTITIES AND CONSOLIDATION OF INVESTMENT VEHICLES

Schedule of impact of consolidated investment entities on consolidated financial statements

	March 31, 2011

	Balance Before Consolidation of CIVs		CIVs		Eliminations			As Reported

Current assets	$	2,378,226	$	122,963	$	(54,633	)	$	2,446,556
Non-current assets		5,946,737		314,463		—			6,261,200

Total assets	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756

Current liabilities	$	914,803	$	55,094	$	(925	)	$	968,972
Long-term debt of CIVs		—		278,320		—			278,320
Other non-current liabilities		1,649,815		3,553		—			1,653,368

Total liabilities		2,564,618		336,967		(925	)		2,900,660

Redeemable non-controlling interests		976		—		35,736			36,712
Total stockholders' equity		5,759,369		100,459		(89,444	)		5,770,384

Total liabilities and equity	$	8,324,963	$	437,426	$	(54,633	)	$	8,707,756

	March 31, 2010

	Balance Before Consolidation of CIVs		CIVs		Eliminations			As Reported

Current assets	$	2,541,880	$	79,692	$	(62,426	)	$	2,559,146
Non-current assets		6,049,794		13,692		—			6,063,486

Total assets	$	8,591,674	$	93,384	$	(62,426	)	$	8,622,632

Current liabilities	$	1,053,893	$	961	$	(578	)	$	1,054,276
Long-term debt of CIVs		—		—		—			—
Other non-current liabilities		1,697,055		—		—			1,697,055

Total liabilities		2,750,948		961		(578	)		2,751,331

Redeemable non-controlling interests		667		—		28,910			29,577
Total stockholders' equity		5,840,059		92,423		(90,758	)		5,841,724

Total liabilities and equity	$	8,591,674	$	93,384	$	(62,426	)	$	8,622,632

Consolidating Statements of Income

	Fiscal Year Ended March 31, 2011

	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported

Total operating revenues	$	2,788,450		$	—		$	(4,133	)	$	2,784,317
Total operating expenses		2,396,938			4,704			(4,133	)		2,397,509

Operating income (loss)		391,512			(4,704	)		—			386,808
Total other non-operating income (expense)		(17,931	)		1,704			(5,384	)		(21,611	)

Income (loss) before income tax provision		373,581			(3,000	)		(5,384	)		365,197
Income tax provision		119,434			—			—			119,434

Net income (loss)		254,147			(3,000	)		(5,384	)		245,763
Less: Net income (loss) attributable to noncontrolling interests		224			—			(8,384	)		(8,160	)

Net income (loss) attributable to Legg Mason, Inc.	$	253,923		$	(3,000	)	$	3,000		$	253,923

	Fiscal Year Ended March 31, 2010

	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported

Total operating revenues	$	2,637,658		$	—		$	(2,779	)	$	2,634,879
Total operating expenses		2,314,376			2,263			(2,943	)		2,313,696

Operating income (loss)		323,282			(2,263	)		164			321,183
Total other non-operating income (expense)		(47	)		17,329			(8,809	)		8,473

Income (loss) before income tax provision		323,235			15,066			(8,645	)		329,656
Income tax provision		118,676			—			—			118,676

Net income (loss)		204,559			15,066			(8,645	)		210,980
Less: Net income (loss) attributable to noncontrolling interests		202			—			6,421			6,623

Net income (loss) attributable to Legg Mason, Inc.	$	204,357		$	15,066		$	(15,066	)	$	204,357

	Fiscal Year Ended March 31, 2009

	Balance Before Consolidation of CIVs			CIVs			Eliminations			As Reported

Total operating revenues	$	3,358,599		$	—		$	(1,232	)	$	3,357,367
Total operating expenses		4,025,842			1,938			(1,233	)		4,026,547

Operating income (loss)		(667,243	)		(1,938	)		1			(669,180	)
Total other non-operating income (expense)		(2,523,722	)		7,796			(3,091	)		(2,519,017	)

Income (loss) before income tax provision		(3,190,965	)		5,858			(3,090	)		(3,188,197	)
Income tax benefit		(1,223,203	)		—			—			(1,223,203	)

Net income (loss)		(1,967,762	)		5,858			(3,090	)		(1,964,994	)
Less: Net income attributable to noncontrolling interests		156			—			2,768			2,924

Net income (loss) attributable to Legg Mason, Inc.	$	(1,967,918	)	$	5,858		$	(5,858	)	$	(1,967,918	)

Schedule of assets and liabilities held by consolidated investment entities measured at fair value on a recurring basis

			Quoted prices in active markets (Level 1)			Significant other observable inputs (Level 2)			Significant unobservable inputs (Level 3)			Value as of March 31, 2011


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	)

			Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Value as of March 31, 2010


Assets:
	Trading investment securities:
		Hedge funds	$	—	$	24,813	$	12,374	$	37,187
	Investments:
		Private equity funds		—		—		13,692		13,692

			$	—	$	24,813	$	26,066	$	50,879

Schedule of changes on Level 3 assets and liabilities of consolidated investment entities measured at fair value on a recurring basis

		Value as of March 31, 2010		Purchases, sales, issuances and settlements, net		Net transfer into/out of Level 3⁽¹⁾			Realized and unrealized gains/ (losses), net			Value as of March 31, 2011


Assets:
	Hedge funds	$	12,374	$	8,340	$	5,862		$	7,696		$	34,272
	Private equity funds		13,692		4,906		—			(719	)		17,879

		$	26,066	$	13,246	$	5,862		$	6,977		$	52,151

Liabilities:
	CLO debt	$	—	$	—	$	(249,668	)	$	(28,652	)	$	(278,320	)

Total realized and unrealized gains (losses), net									$	(21,675	)

		Value as of March 31, 2009		Purchases, sales, issuances and settlements, net			Net transfer into/out of Level 3⁽¹⁾		Realized and unrealized gains/ (losses), net		Value as of March 31, 2010


Assets:
	Hedge funds	$	4,250	$	(3,670	)	$	10,414	$	1,380	$	12,374
	Private equity funds		4,976		8,716			—		—		13,692

		$	9,226	$	5,046		$	10,414	$	1,380	$	26,066

(1): Transfers into Level 3 for the fiscal years ended March 31, 2011 and 2010 primarily represent assets and liabilities recorded upon the initial consolidation of investment vehicles.

Fair value of investments determined using net asset value

The following table summarizes, as of March 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 Europe hedge	$	45,978	⁽¹⁾		n/a	n/a
Fund-of-hedge funds	Fixed income-emerging market, and Europe hedge		2,381	⁽²⁾		n/a	n/a
Private equity funds	Long/short equity		17,879	⁽³⁾	$	11,830	8 years

Total		$	66,238		$	11,830

n/a — not applicable

(1): 30% quarterly redemption; 1% annual redemption; and 69% subject to three to five year lock-up or side pocket provisions.
(2): Monthly redemption.
(3): Liquidations are expected during the remaining term.

Schedule of fair value and unpaid principal balance of assets and liabilities under fair value option

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 March 31, 2011:



CLO loans and bonds
	Unpaid principal balance	$	299,044
	Unpaid principal balance in excess of fair value		(4,283	)

	Fair value	$	294,761

	Unpaid principal balance of loans that are more than 90 days past due and also in nonaccrual status	$	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		(2,837	)

	Fair value of loans more than 90 days past due and in nonaccrual status	$	2,126

Debt
	Principal amounts outstanding	$	300,959
	Excess unpaid principal over fair value		(22,639	)

	Fair value	$	278,320

Unconsolidated VIEs' assets and liabilities and maximum risk of loss

	As of March 31, 2011

	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss⁽²⁾

CDOs/CLOs⁽¹⁾	$	382,692	$	354,692	$	—	$	196
Public-Private Investment Program⁽³⁾		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

	As of March 31, 2010

	VIE Assets Not Consolidated		VIE Liabilities Not Consolidated		Equity Interests on the Consolidated Balance Sheet		Maximum Risk of Loss⁽²⁾

CDOs/CLOs⁽¹⁾	$	3,508,290	$	3,215,890	$	—	$	—
Public-Private Investment Program⁽³⁾		411,489		—		55,526		72,245
Other sponsored investment funds		16,564,227		1,334		47,484		71,383

Total	$	20,484,006	$	3,217,224	$	103,010	$	143,628

(1): Legg Mason manages certain CDOs/CLOs in which it is no longer considered to have a variable interest under new accounting guidance effective April 1, 2010. The aggregate cumulative assets and liabilities of these CDOs/CLOs were $2,817,357 and $2,577,457, respectively, as of March 31, 2010.
(2): Includes equity investments the Company has made or is required to make and any earned but uncollected management fees.
(3): The Company continues to manage funds under the Public-Private Investment Program. As a result of restructuring its investment during the three months ended June 30, 2010, the Company remains a sponsor but no longer has a variable interest in certain of the Public-Private Investment Program funds.

- Definition

This element represents quantitative disclosures relating to the Company's election to apply the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the Company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

+ References+ Details