Bill Katz (Buckingham Research): Can you quantify the unusual bond outflows this quarter?

Barry Bilson: The indication that was in the liquidity space was a singular account with about $10 billion and then there were two or three long bond accounts with about $5 billion that pulled the management in-house.

Jeff Hopson (A.G. Edwards): December is thought to be the strongest quarter In regard to Permal and performance fees. What do you think about it relative to last year?

Chip Mason: The company always looks at the tracking number. They are quarterly numbers which have been different than what the company had experienced before having been tracking better than their annual number. Legg Mason also has some limits on the annual numbers that are substantially less on the quarterly numbers. The only answer it can give is it does not know.

Jeff Hopson (A.G. Edwards): How would you say Western is positioned given the weaker credit cycle that appears to be occurring?

Chip Mason: Western came off good last year. Its numbers were probably the best in the business. One of the concerns is whenever there are such good numbers one is getting all the benefits of those numbers and attracting accounts and one will suffer if there is a change in numbers. There is no sign of any diminution, because what the company tends to watch is how many presentations it is making and the size of those presentations, and what are the basis points it is working on. It can not be mislead which is easy to do in the fixed income area. Factually Western appears to be unchanged. There is no sign of anything that would indicate there is a slow down. There is less presentations or the size of the accounts is coming down when one is averaging 600 million or 700 million, when the average win dropped down four that is a big difference. There is no sign of any of that. Except for the liquidity business, they are in the lower fees side, because they have tended.

Prashant Bhatia (Citigroup): The operating expenses are up about $45 million sequential during the quarter. How much of that expense growth was picked up by the revenue share partners and how much was outside of the revenue share partners?

Barry Bilson: There is about a $42 million increase and relative to revenue sharing entities. The corporate incentive cores are 85% to 90% of that increase and this is sort of a major gaps is variable.

Prashant Bhatia (Citigroup): Some of the other firms are participating on the closed in fund side of the business. Is that something that you have plans to participate in?

Chip Mason: The company is not satisfied with the broad diversity of mangers that it has as in some areas it has not been effective. Un-bennies to most people are now on most of the major systems platform and the company does have products going all over the world through them. The company has not accepted the smash account for Western Asset, which was launched a month ago. It has been silent and for that it could be criticized. That was part of that focus that Legg Mason had on bringing the assets in. It was not merging theses assets, it was acquiring. The company had to bring all of them in to its systems in a third party relationship. To an extent it did the right thing. On the other hand it did not focus on the large pools of money that are out there. Now it has talked to a number with distributors and hopes over the next six months to make a change in that.

Robert Lee (KBW): Of the cash flow that you are generating of the $230 odd million, how much of that will be discretionary that is not being generated outside the U.S. and what is the available item that is out of the pay down that acquisitions sort of repurchase shares?

Chip Mason: The external 10 to 15 a month is in Europe or outside the U.S. $200 million a year is outside. It does not mean the company can not use it is just much harder. Legg Mason has got $700 million to $800 million that is free money with some obligations against it, because it does have a payment coming to Permal that has to be paid, $240 million. There are some required debt repayments, which are $50 million a quarter. The cash will build and Legg Mason’s liquidity does not appear to be an issue.

Robert Lee (KBW): Can you put more color on the complexion of the equity flows?

Chip Mason: It is even across the board. The three equity managers have shared that about equally in the past quarter. People keep putting it all in ClearBridge, which is not fair. It is all three. In fairness to private capital, they had a series of trusts outside of the United States that had been liquidated at a certain period of time, and they are in the last piece of that somewhere in here. In their case some of the downturn in terms of outflows has been coming from the European trust that was sizable. In the case of the others, Bill Miller''s area is very mixed.

Robert Lee (KBW): Can you update on your search for a successor?

Chip Mason: There is a four-person committee of the board that has been working diligently since April. It has four physical meeting and they have not set down timeframes, but they have made it clear what their expectations are. Their progress has been as good as expected. The company can not give a date, because there is not a confirmed date.

Tom Gallagher (Credit Suisse): Is the $5 billion being pulled in-house by some clients a trend that you had seen at all in the past?

Chip Mason: No. This was a one-off.

Tom Gallagher (Credit Suisse): What are you seeing domestically and internationally within fixed income?

Chip Mason: Western domestic performance is fine. Their performance in Europe is fine. Their performance in Asia is fine. Their performance in the UK which has been strong for years has been mediocre over the last two years. With as many debts they have got, there is always going to have some area of the world that is not doing as well.