Legg Mason Inc. will take a $734 million impairment charge largely related to a drop in value of certain fund contracts, the Baltimore-based money manager disclosed Tuesday in a filing with the Securities and Exchange Commission.

Last month, Legg announced the acquisition of Fauchier Partners, a European money manager that would be merged into its affiliate Permal. At that time, it said it would take a charge of $650 million to $750 million.

Legg conducted an "impairment test" last month to measure the value of certain domestic mutual fund contracts along with Permal funds-of hedge funds contracts.

Given outflows from Permal funds and other factors, the total impairment charge would be $734 million, or $508 million after taxes, the company reported Tuesday.

The impact of the charge will be seen in Legg's quarterly earnings report to be released Feb. 1.

The disclosure comes as Legg seeks to switch $650 million in private placement bonds to publicly traded securities. Legg originally issued the bonds as part of a major debt restructuring.

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