FILE NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM S-6
For Registration under the Securities Act of 1933 of Securities of Unit
Investment Trusts Registered on Form N-8B-2.
A. Exact name of Trust: LEGG MASON UNIT INVESTMENT TRUST,
SERIES 8
B. Name of Depositor: LEGG MASON WOOD WALKER, INCORPORATED
C. Complete address of Depositor's principal executive offices:
100 Light Street
Baltimore, Maryland 21203
D. Name and complete address of agents for service:
LEGG MASON WOOD WALKER, INCORPORATED CHAPMAN AND CUTLER
Attention: Marie K. Karpinski Attention: Mark J. Kneedy
100 Light Street 111 West Monroe Street
Baltimore, Maryland 21203 Chicago, Illinois 60603
E. Title and amount of securities being registered: An indefinite number of
Units pursuant to Rule 24f-2 promulgated under the Investment Company Act
of 1940, as amended
F. Approximate date of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF
THE REGISTRATION STATEMENT
|__| Check box if it is proposed that this filing will become effective at
2:00 p.m. on , pursuant to Rule 487.
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The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
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LEGG MASON UNIT INVESTMENT TRUST
SERIES 8
CROSS REFERENCE SHEET
PURSUANT TO RULE 404(C) OF REGULATION C
UNDER THE SECURITIES ACT OF 1933
(FORM N-8B-2 ITEMS REQUIRED BY INSTRUCTION
1 AS TO PROSPECTUS ON FORM S-6)
FORM N-8B-2 FORM S-6
ITEM NUMBER HEADING IN PROSPECTUS
I. ORGANIZATION AND GENERAL INFORMATION
1. (a) Name of trust ) Prospectus Front Cover Page
(b) Title of securities issued ) Prospectus Front Cover Page
2. Name and address of Depositor ) Essential Information
) Administration of the Trust
3. Name and address of Trustee ) Essential Information
) Administration of the Trust
4. Name and address of principal ) Public Offering of Units
underwriter
5. Organization of trust ) The Trust
6. Execution and termination of ) The Trust
Trust Indenture and Agreement ) Administration of the Trust
7. Changes of Name ) *
8. Fiscal year ) *
9. Material Litigation ) *
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II. GENERAL DESCRIPTION OF THE TRUST AND
SECURITIES OF THE TRUST
10. General information regarding ) The Trust
trust's securities and ) Federal Tax Status
rights of security holders ) Public Offering
) Rights of Unitholders
) Trust Administration
11. Type of securities comprising ) Prospectus Front Cover Page
units ) The Trust
) Portfolio
12. Certain information regarding ) *
periodic payment certificates )
13. (a) Loan, fees, charges and expenses ) Prospectus Front Cover Page
) Essential Information
) Portfolio
)
) Expenses of the Trust
) Public Offering of Units
) Rights of Unitholders
(b) Certain information regarding )
periodic payment plan ) *
certificates )
(c) Certain percentages ) Prospectus Front Cover Page
) Essential Information
)
) Public Offering of Units
) Rights of Unitholders
(d) Certain other fees, expenses or ) Expenses of the Trust
charges payable by holders ) Rights of Unitholders
(e) Certain profits to be received ) Public Offering of Units
by depositor, principal ) Public Offering of Units
underwriter, trustee or any ) Portfolio
affiliated persons )
(f) Ratio of annual charges ) *
to income )
14. Issuance of trust's securities ) Rights of Unitholders
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15. Receipt and handling of payments ) *
from purchasers )
16. Acquisition and disposition of ) The Trust
underlying securities ) Rights of Unitholders
) Administration of the Trust
17. Withdrawal or redemption ) Rights of Unitholders
) Administration of the Trust
18. (a) Receipt and disposition ) Prospectus Front Cover Page
of income ) Rights of Unitholders
(b) Reinvestment of distributions ) *
(c) Reserves or special funds ) Expenses of the Trust
) Rights of Unitholders
(d) Schedule of distributions ) *
19. Records, accounts and reports ) Rights of Unitholders
) Administration of the Trust
20. Certain miscellaneous provisions ) Administration of the Trust
of Trust Agreement )
21. Loans to security holders ) *
22. Limitations on liability ) Portfolio
) Administration of the Trust
23. Bonding arrangements ) *
24. Other material provisions of ) *
Trust Indenture Agreement )
III. ORGANIZATION, PERSONNEL AND AFFILIATED
PERSONS OF DEPOSITOR
25. Organization of Depositor ) Administration of the Trust
26. Fees received by Depositor ) *
27. Business of Depositor ) Administration of the Trust
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28. Certain information as to ) *
officials and affiliated )
persons of Depositor )
29. Companies owning securities ) *
of Depositor )
30. Controlling persons of Depositor ) *
31. Compensation of Officers of ) *
Depositor )
32. Compensation of Directors ) *
33. Compensation to Employees ) *
34. Compensation to other persons ) *
IV. DISTRIBUTION AND REDEMPTION OF SECURITIES
35. Distribution of trust's securities ) Public Offering
by states )
36. Suspension of sales of trust's ) *
securities )
37. Revocation of authority to ) *
distribute )
38. (a) Method of distribution )
)
(b) Underwriting agreements ) Public Offering
)
(c) Selling agreements )
39. (a) Organization of principal ) *
underwriter )
(b) N.A.S.D. membership by ) *
principal underwriter )
40. Certain fees received by ) *
principal underwriter )
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41. (a) Business of principal ) Administration of the Trust
underwriter )
(b) Branch offices or principal ) *
underwriter )
(c) Salesmen or principal ) *
underwriter )
42. Ownership of securities of ) *
the trust )
43. Certain brokerage commissions ) *
received by principal underwriter )
44. (a) Method of valuation ) Prospectus Front Cover Page
) Essential Information
) Expenses of the Trust
) Public Offering
(b) Schedule as to offering ) *
price )
(c) Variation in offering price ) *
to certain persons )
46. (a) Redemption valuation ) Rights of Unitholders
) Administration of the Trust
(b) Schedule as to redemption ) *
price )
47. Purchase and sale of interests ) Public Offering
in underlying securities ) Administration of the Trust
V. INFORMATION CONCERNING THE TRUSTEE OR CUSTODIAN
48. Organization and regulation of ) Administration of the Trust
Trustee )
49. Fees and expenses of Trustee ) Essential Information
) Expenses of the Trust
50. Trustee's lien ) Expenses of the Trust
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VI. INFORMATION CONCERNING INSURANCE OF HOLDERS OF SECURITIES
51. Insurance of holders of trust's ) Expenses of the Trust
securities ) *
52. (a) Provisions of trust agreement )
with respect to replacement ) Administration of the Trust
or elimination portfolio )
securities )
(b) Transactions involving )
elimination of underlying ) *
securities )
(c) Policy regarding substitution )
or elimination of underlying ) Administration of the Trust
securities )
(d) Fundamental policy not ) *
otherwise covered )
53. Tax Status of trust ) Federal Taxation
VII. FINANCIAL AND STATISTICAL INFORMATION
54. Trust's securities during ) *
last ten years )
55. )
56. Certain information regarding ) *
57. periodic payment certificates )
58. )
59. Financial statements (Instructions ) Report of Independent
1(c) to Form S-6) ) Auditors Statement of
Condition
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* Inapplicable, omitted, answer negative or not required
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PRELIMINARY PROSPECTUS DATED FEBRUARY 6, 1998
SUBJECT TO COMPLETION
LEGG MASON UNIT INVESTMENT TRUST
SERIES 8
LEGG MASON REIT TRUST II, FEBRUARY 1998 SERIES
Legg Mason REIT Trust II, February 1998 Series (the "TRUST") was formed
with the investment objectives of obtaining high current income and capital
appreciation through investment in a fixed portfolio of domestic, publicly
traded real estate investment trusts ("REITS") which Legg Mason Wood Walker,
Incorporated (the "SPONSOR") believes will outperform other REITs. The
securities selected are considered by the Sponsor to have the potential to
achieve the Trust's objectives over the term of the Trust. See "The Trust
Portfolio." There is no assurance that the Trust will achieve its objectives.
UNITS OF THE TRUST ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK, AND UNITS ARE NOT FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION AND INVOLVE INVESTMENT RISK INCLUDING LOSS
OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The investor is advised to read and retain this Prospectus for future reference.
The date of this Prospectus is February __, 1998.
LEGG MASON WOOD WALKER
INCORPORATED
100 LIGHT STREET
P.O. BOX 1476
BALTIMORE, MARYLAND 21203-1476
(410) 539-0000/(800) 822-5544
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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SUMMARY
THE TRUST. Legg Mason Unit Investment Trust, Series 8 (the "FUND"), which
consists of the Legg Mason REIT Trust II, February 1998 Series (the "TRUST"), is
a unit investment trust registered under the Investment Company Act of 1940, as
amended ("1940 ACT").
The Trust initially consists of securities and delivery statements (i.e.,
contracts) or cash to purchase common stocks issued by companies which the
Sponsor believes have the potential to achieve the objectives of the Trust (the
"SECURITIES"). For the criteria used by the Sponsor in selecting the Securities,
see "The Trust Portfolio -- Securities Selection." The value of all portfolio
Securities and, therefore, the value of the Trust's units (the "UNITS") may be
expected to fluctuate depending on the full range of economic and market
influences affecting corporate profitability, the financial condition of issuers
and the prices of equity securities in general, and the Securities in
particular. The Trust was formed with the investment objectives of obtaining
high current income and capital appreciation over the life of the Trust through
investment in a fixed portfolio of domestic, publicly traded REITs which the
Sponsor believes will outperform other REITs. High current income and capital
appreciation are, of course, dependent upon several factors including, among
other factors, the financial condition of the issuers of the Securities and
therefore, there can be no assurance that these objectives will be achieved (see
"The Trust Portfolio"). Furthermore, because of various factors, including
without limitation, Trust sales charges and expenses, unequal weightings of
stocks, brokerage costs and any delays in purchasing securities with cash
deposited, investors in the Trust may not realize as high a total return as the
theoretical performances of the underlying stocks in the portfolio.
The Sponsor may, from time to time during a period of up to approximately
90 days after the Initial Date of Deposit, deposit additional Securities or cash
(including a letter of credit) with instructions to purchase additional
Securities in the Trust. Such deposits of additional Securities or cash will be
done in such a manner that the original proportionate relationship amongst the
individual issues of the Securities shall be maintained. Any deposit by the
Sponsor of additional Securities, or the purchase of additional Securities
pursuant to a cash deposit, will duplicate, as nearly as is practical, the
original proportionate relationship established on the Initial Date of Deposit,
not the actual proportionate relationship on the subsequent Date of Deposit,
since the two may differ. Any such difference may be due to the sale, redemption
or liquidation of any Securities deposited in the Trust on the Initial, or any
subsequent, Date of Deposit, as well as differentials in each Security's
performance. See "The Trust."
After the opening of business on the Initial Date of Deposit and on
subsequent Date(s) of Deposit, it is expected that all of the Securities in the
Trust will be purchased from the Sponsor in transactions in which the Sponsor
will act as sole underwriter to the issuers of the Securities. These
transactions will be effected by the Sponsor at prices below the current market
value of the Securities due to various factors, including size of the purchase,
expectation of holding period and cost of issuance. All of the Securities will
be deposited in the Trust based on their market value as of the Date(s) of
Deposit. AS A RESULT OF THE SPONSOR'S ABILITY TO PURCHASE THESE SECURITIES BELOW
MARKET VALUE, THE SPONSOR WILL OFFER UNITS OF THE TRUST WITH NO SALES CHARGE
DURING THE INITIAL OFFERING PERIOD. By virtue of buying stock at below market
prices, the Sponsor will realize a profit on the deposit of the Securities to
the Trust in an amount of up to 5% of the market value of these Securities.
Notwithstanding the preceding, the Sponsor may create additional Units by
depositing Securities acquired on a national securities exchange. All of the
Securities deposited in the Trust as of the opening of business on the Initial
Date of Deposit were acquired by the Sponsor in such manner. Until such time as
the Sponsor has completed its acquisition of the Securities from the issuers
thereof, which is expected to be completed on the Initial Date of
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Deposit, there is no assurance that the Sponsor will be able to create
sufficient Units to meet investor demand. Thus, there is no assurance that any
or all purchase orders for Units will be fulfilled.
Each Unit of the Trust initially offered represents that undivided interest
in the Trust indicated under "Essential Information." To the extent that any
Units are added or redeemed by the Trustee, the fractional undivided interest in
the Trust represented by each unredeemed Unit will decrease or increase, as the
case may be, although the actual interest in the Trust represented by such
fraction will remain unchanged. Units will remain outstanding until redeemed
upon tender to the Trustee by Unitholders, which may include the Sponsor, or
until the termination of the Trust Agreement.
PUBLIC OFFERING PRICE. The Public Offering Price per Unit of the Trust
during the initial offering period (which is expected to be only the date of
this Prospectus) is based on the aggregate market value (see "Public Offering of
Units -- Public Offering Price") of the Securities in the Trust plus or minus a
pro rata share of cash, if any, in the Capital Account (as hereinafter defined)
held or owned by the Trust, WITH NO SALES CHARGE. In the secondary market, the
Public Offering Price will be calculated in the same manner as in the initial
offering period except that a sales charge of 2.75% (equivalent to 2.828% of the
net amount invested) will be added. The sales charge is reduced on a graduated
scale for sales involving at least $50,000. After February 22, 1999, the
maximum sales charge will be reduced for all transactions. See "Public Offering
of Units -- Public Offering Price."
DISTRIBUTIONS OF INCOME AND CAPITAL. Distributions of dividends received
by the Trust will be made quarterly and any funds in the Capital Account will be
distributed as described under "Unitholders -- Distributions to Unitholders."
MARKET FOR UNITS. While under no obligation to do so, the Sponsor intends
to maintain a market for the Units of the Trust and to repurchase such
Units at prices subject to change at any time based on the current market value
of the Securities in the Trust. If the supply of Units exceeds demand or if some
other business reason warrants it, the Sponsor may either discontinue all
purchases of Units or discontinue purchases of Units at such prices. A
Unitholder may also dispose of Units through redemption at the Redemption Price
on the date of tender to the Trustee. See "Redemption -- Computation of
Redemption Price."
TERMINATION. No later than the Mandatory Termination Date (as defined in
"Essential Information"), Securities will begin to be sold in connection with
the termination of the Trust and it is expected that all Securities in the Trust
will be sold within a reasonable period of time thereafter. The Sponsor will
determine the manner, timing and execution of the sale of the underlying
Securities. See "Administration of the Trust -- Amendment and Termination."
RISK FACTORS. An investment in the Trust should be made with an
understanding of the risks associated therewith, including the possible
deterioration of either the financial condition of the issuers or the general
condition of the stock market. For certain risk considerations related to the
Trust, see "Risk Factors."
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LEGG MASON UNIT INVESTMENT TRUST, SERIES 8
LEGG MASON REIT TRUST II, FEBRUARY 1998 SERIES
ESSENTIAL INFORMATION
AS OF THE OPENING OF BUSINESS ON FEBRUARY __, 1998
SPONSOR AND EVALUATOR: LEGG MASON WOOD WALKER, INCORPORATED
TRUSTEE: THE BANK OF NEW YORK
<TABLE>
<S> <C>
Number of Units(1)........................................................
Fractional Undivided Interest Per Unit(1)................................. 1/
Public Offering Price:
Aggregate Market Value of Securities in Portfolio(2).................... $
Aggregate Market Value of Securities per Unit........................... $10.00
Public Offering Price Per Unit(3)....................................... $10.00
Redemption Price Per Unit................................................. $10.00
Maximum Value of the Trust under which the Trust Agreement may be
Terminated........................................................... The Trust Agreement may be terminated
if the value of the Trust is less
than 40% of the original aggregate
value of the Securities deposited.
Evaluations for purposes of sale, purchase or redemption of Units of the Trust are made as of 4:00 p.m., Eastern
Time, next following receipt of an order for a sale or purchase of Units or receipt by the Trustee of Units
tendered for redemption (the "EVALUATION TIME").
Initial Date of Deposit................................................... February, 1998
Mandatory Termination Date................................................ February, 2000
Evaluator's Annual Evaluation Fee......................................... Maximum of $.0025 per Unit
Trustee's Annual Fee...................................................... $ per Unit
Sponsor's Annual Supervisory Fee.......................................... Maximum of $.0020 per Unit
Estimated Annual Organizational Expenses(4)............................... $ per Unit
Record Dates.............................................................. FIFTEENTH day of each March, June,
September and December, commencing
June, 1998.
Distribution Dates........................................................ LAST day of each March, June,
September and December, commencing
June, 1998.
</TABLE>
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(1) As of the close of business on the Initial Date of Deposit, the number of
Units may be adjusted so that the Public Offering Price per Unit equals $10.
Therefore, to the extent of any such adjustment, the fractional undivided
interest per Unit will increase or decrease accordingly from the amount
above.
(2) Each Security listed on a national securities exchange or the NASDAQ
National Market System is valued at the last sales price, or if the Security
is not so listed, at the mean between the closing bid and offer prices in
the over-the-counter market.
(3) On the Initial Date of Deposit there will be no accumulated dividends in the
Income Account. Anyone ordering Units after such date will pay his or her
pro rata share of any accumulated dividends in such Income Account.
Subsequent to the initial offering period (which is expected to be only the
date of this Prospectus) the maximum sales charge will be 2.75%, subject to
reduction on a graduated scale in the case of quantity purchases.
Additionally, commencing February 23, 1999, the maximum sales charge will be
reduced. See "Public Offering of Units -- Public Offering Price."
(4) The Trust (and therefore Unitholders) will bear all or a portion of its
organizational costs (including costs of preparing the registration
statement, the trust indenture and other closing documents, registering
Units with the Securities and Exchange Commission and States, the initial
audit of the Trust portfolio, legal fees and the initial fees and expenses
of the Trustee but not including the expenses incurred in the printing of
preliminary and final prospectuses, expenses incurred in the preparation and
printing of brochures and other advertising materials and any other selling
expenses) as is common for mutual funds. Total organizational expenses will
be amortized over the life of the Trust. See "Expenses of the Trust."
Historically, the sponsors of unit investment trusts have paid all the costs
of establishing such trusts.
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THE TRUST
Legg Mason Unit Investment Trust, Series 8, which consists of the Legg
Mason REIT Trust II, February 1998 Series, is a unit investment trust created
under the laws of the State of New York pursuant to a trust indenture dated the
Initial Date of Deposit (the "TRUST AGREEMENT") between Legg Mason Wood Walker,
Incorporated (the "SPONSOR") and The Bank of New York (the "TRUSTEE").*
The portfolio contains common stocks issued by domestic real estate
investment trusts ("REITS"). A REIT is a creation of the federal income tax law
and, therefore, its structure and operation must conform to certain requirements
of the Internal Revenue Code of 1986, as amended (the "CODE"). In general, a
REIT must hold at least 75% of its total assets in real estate assets and
distribute at least 95% of its taxable income (without regard to any net capital
gains) on an annual basis. There are two principal types of REITs: those which
hold at least 75% of their invested assets in the ownership of real estate and
benefit from the underlying net rental income generated from the properties
("EQUITY REITS") and those which hold at least 75% of their invested assets in
mortgages which are secured by real estate assets and benefit predominantly from
the difference between the interest income on the mortgage loans and the
interest expense on the capital used to finance the loans ("MORTGAGE REITS"). A
third type combines the investment strategies of the Equity REITs and the
Mortgage REITs ("HYBRID REITS"). As used herein, the term "SECURITIES" means the
common stocks initially deposited in the Trust and any additional common stocks
acquired and held by the Trust pursuant to the provisions of the Trust
Agreement. It is the intention of the Sponsor to invest primarily in Equity
REITs.
On the Initial Date of Deposit, the Sponsor delivered to the Trustee
Securities or contracts for the purchase thereof for deposit in the Trust. For
the Securities, contracts and cash to be so deposited, the Trustee will deliver
to the Sponsor documentation evidencing the ownership of that number of Units of
the Trust set forth under "Essential Information." Subsequent to the Initial
Date of Deposit, the Sponsor may deposit additional Securities or contracts to
purchase additional Securities along with cash (or a bank letter of credit in
lieu of cash) to pay for such contracted Securities or cash (including a letter
of credit) with instructions to purchase additional Securities. Such additional
deposits into the Trust will be in amounts which will maintain, for the first 90
days, as closely as possible the same original percentage relationship among the
number of shares of each Security in the Trust established by the initial
deposit of Securities and, thereafter, the same percentage relationship that
existed on such 90th day. Although additional Units will be issued, each Unit
will continue to represent approximately the same number of shares of each
Security and the percentage relationship among the shares of each Security in
the Trust will remain the same. The required percentage relationship among the
Securities in the Trust will be adjusted to reflect the occurrence of a stock
dividend, a stock split or a similar event which affects the capital structure
of an issuer of a Security in the Trust but which does not affect the Trust's
percentage ownership of the common stock equity of such issuer at the time of
such event. If the Sponsor deposits cash, existing and new investors may
experience a dilution of their investments and a reduction in their anticipated
income because of fluctuations in the prices of the Securities between the time
of the cash deposit and the purchase of the Securities and because the Trust
will pay the associated brokerage fees. To minimize this effect, the Trust will
attempt to purchase the Securities as close to the evaluation time or as close
to the evaluation prices as possible.
The Trust consists of (a) the Securities listed under "Schedule of
Investments" as may continue to be held from time to time in the Trust, (b) any
additional Securities acquired and held by the Trust pursuant to the provisions
of the Trust Agreement and (c) any cash held in the Income and Capital Accounts.
Neither the Sponsor nor the Trustee shall be liable in any way for any failure
in any of the Securities. However, should any contract(s) for the purchase of
any of the Securities initially deposited hereunder fail, the Sponsor will,
unless substantially all of the moneys held in the Trust to cover such purchase
are reinvested in substitute Securities in accordance
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*Reference is made to the Trust Agreement and any statement contained herein is
qualified in its entirety by the provisions of the Trust Agreement.
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with the Trust Agreement, refund the cash and sales charge attributable to such
failed contract(s) to all Unitholders on the next distribution date.
THE TRUST PORTFOLIO
SECURITIES SELECTION. In selecting Securities for the Trust, the following
factors, among others, are considered by the Sponsor: (a) the quality of the
Securities, (b) the price of the Securities relative to other similar securities
and (c) the potential for income and capital appreciation.
At a time of uncertainty in the capital markets, an opportunity exists to
invest in an asset class that seeks to offer a high current return and
capital appreciation potential. That asset class, publicly traded REITs, has
produced high levels of income and capital appreciation in recent years. Robert
A. Frank, CFA, Director of Equity Research at Legg Mason has stated: "The U.S.
capital markets have evolved to offer individual investors an attractive
investment opportunity in the commercial real estate sector through the
ownership of REIT shares. More important is the fact that this has happened at
an opportune time in the real estate cycle." Glenn R. Mueller, Ph.D., head of
Legg Mason Real Estate Research adds: "Our research leads us to the conclusion
that the fundamentals of the commercial real estate markets in the U.S. are
presently very strong, as is the outlook."
The investment objectives of the Trust are to seek high current income and
capital appreciation through a fixed, diversified portfolio of domestic,
publicly traded REITs selected by Legg Mason Research. Most REITs focus on a
particular property type and/or geographic region in the country. Thus, to
diversify particular geographic risk and property-type risk, it is necessary to
buy a number of REITs. Legg Mason Research will select REITs for the Trust with
a view to representing various real estate sectors, which may include office,
industrial, multifamily, retail, hotel, and healthcare.
With a market capitalization of $5 trillion, commercial real estate makes
up 20% of major U.S. investments. Historically, commercial real estate as an
investment class has been available only to high net worth individuals and
institutional investors who took advantage of purchasing real estate directly to
diversify their portfolios. But now real estate investment, in the form of
REITs, is available to individual investors. REITs were created by the U.S.
Congress as a way for individual investors to hold real estate in a more liquid
form without the burden of double taxation. Since 1991, the REIT market has
grown from $9 billion to over $140 billion today and has rewarded many investors
with both high income and capital appreciation.
Income from REIT stocks is the result of their high dividend payouts. Over
the past five years, the dividend yield from all equity REITs in the National
Association of Real Estate Income Trust (NAREIT) Equity Index ranged from
5.45%-8.18%. Over this same period, the dividend yield of the S&P 500 and of the
Dow Jones Utilities Indices, and the 10-year Treasury bond yield to maturity,
ranged between 1.62%-3.07%, 4.31%-7.41% and 5.38%-7.91%, respectively. Sources:
FactSet Research Systems, Inc., Bloomberg, NAREIT. The five-year period was
selected because REITs underwent an investment paradigm shift in 1992. At
various times over this period, the dividend yield on the 10-year Treasury bond
and the Dow Jones Utilities Index has exceeded that of the NAREIT Equity Index.
This performance is not representative of the performance of the Trust and past
performance is no guarantee of future results. In addition, a portion of many
REITs' dividends is treated as non-taxable return of capital for tax purposes.
This feature provides investors with a tax deferral benefit on current income.
Total Return from REIT stocks is a function of both income and change in
price. For the past 5 years, the cumulative total return of equity REITs as a
group (using the NAREIT Equity Index) of 131.5% exceeded that of the Dow Jones
Utilities Index (65.1%) and the Salomon Brothers 10-Year Treasury Benchmark
Index (48.2%) and closely approached the cumulative total return of the S&P 500
which was 151.2%. Source: Frontier Analytics as of December 31, 1997. This
performance is not representative of the performance of the Trust and past
performance is not a guarantee of future results. An investment in equity REITs
provides only commercial real estate industry exposure and therefore is
characterized by a relative lack of diversification as compared to an investment
in all of the common stocks which comprise the S&P 500 Index. REITs are subject
to increased market risk compared to an investment
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in U.S. government bonds which are guaranteed as to the timely payment of
principal and interest. In addition, there is no assurance that the Trust will
achieve similar results.
Legg Mason has one of the largest and most distinguished Real Estate
Research Teams in the country. Robert A. Frank, CFA is one of the most
experienced REIT analysts in the U.S. Mr. Frank is a nationally recognized
pioneer in real estate securities pricing and selection. Glenn R. Mueller holds
a Ph.D. in real estate, and is nationally known in institutional investment
circles for his work regarding real estate market cycles and real estate
portfolio diversification. Combined with the 5 other members of their team, the
Legg Mason Real Estate Research Group has 115 years of real estate experience.
In selecting REITs for the Trust, Legg Mason will choose REIT equity
securities that in its view have the potential for income growth and capital
appreciation. As indicated under "Summary--The Trust," all of the Securities
deposited in the Trust after the opening of business on the Initial Date of
Deposit were acquired by the Sponsor directly from the issuers of such
Securities. The decision by such issuers to sell the Securities to the Sponsor
was a significant determinant as to which REIT equity securities were selected
for inclusion in the Trust. Although there can be no assurance that the Trust's
objectives will be achieved or that the Trust's securities will appreciate in
value over the life of the Trust, over time, equity investments have generally
outperformed most other investment classes. However, it should be understood
that equity investments carry greater risks than other investments, including
the risk that the value of an investment can decrease, and past performance is
no guarantee of future results. An investment in the Trust should be made with
an understanding of the problems and risks inherent in REITs specifically and
real estate generally. Real estate companies are especially subject to the
adverse effects of economic recession, volatile interest rates and the supply
and demand for real estate in their local markets. Additionally, weather
disasters, environmental problems, poor decisions by management, and changes in
tax laws could negatively impact earnings and the ability of a company to pay
dividends. See "Risk Factors" for additional information concerning the risks
inherent in this investment.
RISK FACTORS
GENERAL. The Trust may be an appropriate investment vehicle for investors
who desire to participate in a portfolio of equity securities with greater
diversification than they might be able to acquire individually. An investment
in Units of the Trust should be made with an understanding of the risks inherent
in an investment in equity securities, including the risk that the financial
condition of the issuers of the Securities may become impaired or that the
general condition of the stock market may worsen (both of which may contribute
directly to a decrease in the value of the Securities and thus in the value of
the Units) or the risk that holders of common stock have a right to receive
payments from the issuers of those stocks that is generally inferior to that of
creditors of, or holders of debt obligations issued by, the issuers and that the
rights of holders of common stock generally rank inferior to the rights of
holders of preferred stock. Common stocks are especially susceptible to general
stock market movements and to volatile increases and decreases in value as
market confidence in, and perceptions of, the issuers change. These perceptions
are based on unpredictable factors including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.
Holders of common stock incur more risk than holders of preferred stock and
debt obligations because common stockholders, as owners of the entity, have
generally inferior rights to receive payments from the issuer in comparison with
the rights of creditors of, or holders of debt obligations or preferred stock
issued by the issuer. Holders of common stock of the type held by the portfolio
have a right to receive dividends only when and if, and in the amounts, declared
by the issuer's Board of Directors and to participate in amounts available for
distribution by the issuer only after all other claims on the issuer have been
paid or provided for. By contrast, holders of preferred stock have the right to
receive dividends at a fixed rate when and as declared by the issuer's Board of
Directors, normally on a cumulative basis, but do not participate in other
amounts available for distribution by the issuing corporation. Cumulative
preferred stock dividends must be paid before common stock dividends and any
cumulative preferred stock dividend omitted is added to future dividends payable
to the holders of cumulative preferred stock. Preferred stocks are also entitled
to rights on liquidation which are senior to those of common
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<PAGE>
stocks. Moreover, common stocks do not represent an obligation of the issuer and
therefore do not offer any assurance of income or provide the degree of
protection of capital of debt securities. Indeed, the issuance of debt
securities or even preferred stock will create prior claims for payment of
principal, interest, liquidation preferences and dividends which could adversely
affect the ability and inclination of the issuer to declare or pay dividends on
its common stock or the rights of holders of common stock with respect to assets
of the issuer upon liquidation or bankruptcy. Further, unlike debt securities
which typically have a stated principal amount payable at maturity (whose value,
however, will be subject to market fluctuations prior thereto), common stocks
have neither a fixed principal amount nor a maturity and have values which are
subject to market fluctuations for as long as the stocks remain outstanding. The
value of the Securities in the portfolio thus may be expected to fluctuate over
the entire life of the Trust to values higher or lower than those prevailing on
the Initial Date of Deposit.
Whether or not the Securities are listed on a national securities exchange,
the principal trading market for the Securities may be in the over-the-counter
market. As a result, the existence of a liquid trading market for the Securities
may depend on whether dealers will make a market in the Securities. There can be
no assurance that a market will be made for any of the Securities, that any
market for the Securities will be maintained or of the liquidity of the
Securities in any markets made. In addition, the Trust is restricted under the
1940 Act from selling Securities to the Sponsor. The price at which the
Securities may be sold to meet redemptions and the value of the Trust will be
adversely affected if trading markets for the Securities are limited or absent.
The Trust may purchase Securities (not to exceed fifteen percent of the net
asset value of the Trust) that are not registered ("Restricted Securities")
under the Securities Act of 1933 (the "Securities Act"). While they remain
unregistered, these Restricted Securities increase the level of illiquidity in
the Trust, but can be offered and sold to certain institutional buyers. The
Sponsor is planning to take actions designed to eliminate such restrictions on
resale. There is, however, no guarantee that such actions will be effective.
SPECIAL REIT RISK FACTORS. An investment in the Trust should be made with
an understanding of the risks inherent in an investment in REITs specifically
and in real estate generally (in addition to securities market risks). REITs are
financial vehicles that have as their objective the pooling of capital from a
number of investors in order to participate directly in real estate ownership or
financing. REITs are generally fully integrated operating companies that have
interests in income-producing real estate. REITs are differentiated by the types
of real estate properties held and the actual geographic location of properties
and fall into two major categories: Equity REITs emphasize direct property
investment, holding their invested assets primarily in the ownership of real
estate or other equity interests, while Mortgage REITs concentrate on real
estate financing, holding their assets primarily in mortgages secured by real
estate. REITs obtain capital funds for investment in underlying real estate
assets by selling debt or equity securities in the public or institutional
capital markets or by bank borrowings. Thus, the returns on common equities of
the REITs in which the Trust invests will be significantly affected by changes
in costs of capital and, particularly in the case of highly "leveraged" REITs
(i.e., those with large amounts of borrowings outstanding), by changes in the
level of interest rates. The objective of an Equity REIT is to purchase
income-producing real estate properties in order to generate high levels of cash
flow from rental income and a gradual asset appreciation, and they typically
invest in properties such as office, retail, industrial, hotel and apartment
buildings and healthcare facilities. The objective of a Mortgage REIT is to
invest primarily in mortgages secured by real estate in order to generate cash
flow from payments on the mortgage loans.
REITs are a creation of the tax law. REITs essentially operate as a
corporation or business trust with the advantage of exemption from corporate
income taxes provided the REIT satisfies the requirements of Sections 856
through 860 of the Code. The major tests for tax-qualified status are that the
REIT (i) be managed by one or more trustees or directors, (ii) issue shares of
transferable interest to its owners, (iii) have at least 100 shareholders, (iv)
have no more than 50% of its shares held by five or fewer individuals, (v)
invest substantially all of its capital in real estate related assets and derive
substantially all of its gross income from real estate related assets and (vi)
distribute at least 95% of its taxable income to its shareholders each year. If
any REIT in the Trust's
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<PAGE>
portfolio should fail to qualify for such tax status, the related shareholders
(including the Trust) could be adversely affected by the resulting tax
consequences.
The underlying value of the Securities and the Trust's ability to make
distributions to Unitholders may be adversely affected by changes in the
national, state and local economic climate and real estate conditions (such as
oversupply of, or reduced demand for, space and changes in market rental rates),
perceptions of prospective tenants of the safety, convenience and attractiveness
of the properties, the ability of the owner to provide adequate management,
maintenance and insurance, the ability to collect on a timely basis all rents
from tenants, tenant defaults, the cost of complying with the Americans with
Disabilities Act, increased competition from other properties, obsolescence of
properties, changes in the availability, cost and terms of mortgage funds, the
impact of present or future environmental legislation and compliance with
environmental laws, the ongoing need for capital improvements, particularly in
older properties, changes in real estate tax rates and other operating expenses,
regulatory and economic impediments to raising rents, adverse changes in
governmental rules and fiscal policies, dependency on management skills, civil
unrest, acts of God, including earthquakes and other natural disasters (which
may result in uninsured losses), acts of war, adverse changes in zoning laws,
and other factors which are beyond the control of the issuers of the REITs in
the Trust.
The value of the REITs may at times be particularly sensitive to
devaluation in the event of rising interest rates. Equity REITs are less likely
to be affected by interest rate fluctuations than Mortgage REITs and the nature
of the underlying assets of an Equity REIT may be considered more tangible than
that of a Mortgage REIT. Equity REITs are more likely to be adversely affected
by changes in the value of the underlying property it owns than Mortgage REITs.
REITs may concentrate investments in specific geographic areas or in
specific property types, i.e., hotels, shopping malls, residential complexes,
and office buildings. The impact of economic conditions on REITs can also be
expected to vary with geographic location and property type. Investors should be
aware that REITs may not be diversified and are subject to the risks of
financing projects. REITs are also subject to defaults by borrowers,
self-liquidation, the market's perception of the REIT industry generally, and
the possibility of failing to qualify for pass-through of income under the Code,
and to maintain exemption from the 1940 Act. A default by a borrower or lessee
may cause the REIT to experience delays in enforcing its rights as mortgagee or
lessor and to incur significant costs related to protecting its investments. In
addition, because real estate generally is subject to real property taxes, the
REITs in the Trust may be adversely affected by increases or decreases in
property tax rates and assessments or reassessments of the properties underlying
the REITs by taxing authorities. Furthermore, because real estate is relatively
illiquid, the ability of REITs to vary their portfolios in response to changes
in economic and other conditions may be limited and may adversely affect the
value of the Units. There can be no assurance that any REIT will be able to
dispose of its underlying real estate assets when advantageous or necessary.
The issuer of REITs generally maintains comprehensive insurance on
presently owned and subsequently acquired real property assets, including
liability, fire and extended coverage. However, certain types of losses may be
uninsurable or not be economically insurable for local risks to which the REITs
may be susceptible. There can be no assurance that insurance coverage will be
sufficient to pay the full current market value or current replacement cost of
any lost investment. Various factors might make it impractical to use insurance
proceeds to replace a facility after it has been damaged or destroyed. Under
such circumstances, the insurance proceeds received by a REIT might not be
adequate to restore its economic position with respect to such property.
Under various environmental laws, a current or previous owner or operator
of real property may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under, or in such property. Such laws often
impose liability whether or not the owner or operator caused or knew of the
presence of such hazardous or toxic substances and whether or not the storage of
such substances was in violation of a tenant's lease. In addition, the presence
of hazardous or toxic substances, or the failure to remediate such property
properly, may
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<PAGE>
adversely affect the owner's ability to borrow using such real property as
collateral. No assurance can be given that one or more of the REITs in the Trust
may not be presently liable or potentially liable for any such costs in
connection with real estate assets they presently own or subsequently acquire
while such REITs are held in the Trust.
FEDERAL TAX STATUS
The following is a general discussion of certain of the federal income tax
consequences of the purchase, ownership and disposition of the Units. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. Unitholders should consult their tax advisers in determining the
federal, state, local and any other tax consequences of the purchase, ownership
and disposition of Units in the Trust. For purposes of the following discussion
and opinion, it is assumed that each Security is considered a share in a real
estate investment trust for federal income tax purposes.
In the opinion of Chapman and Cutler, special counsel for the Sponsor,
under existing law:
1. The Trust is not an association taxable as a corporation for federal
income tax purposes; each Unitholder will be treated as the owner of a pro rata
portion of each of the assets of the Trust under the Code; and the income of the
Trust will be treated as income of the Unitholders thereof under the Code. Each
Unitholder will be considered to have received his or her pro rata share of
income derived from the Trust asset when such income is considered to be
received by the Trust.
2. Each Unitholder will have a taxable event when the Trust disposes of a
Security (whether by sale, taxable exchange, liquidation, redemption, or
otherwise) or upon the sale or redemption of Units by such Unitholder. The price
a Unitholder pays for his or her Units is allocated among his pro rata portion
of each Security held by the Trust (in proportion to the fair market values
thereof on the valuation date nearest the date the Unitholder purchased his or
her Units) in order to determine his or her tax basis for his or her pro rata
portion of each Security held by the Trust. It should be noted that certain
legislative proposals have been made which could affect the calculation of basis
for Unitholders holding securities that are substantially identical to the
Securities. Unitholders should consult their own tax advisers with regard to the
calculation of basis. For federal income tax purposes, a Unitholder's pro rata
portion of dividends (other than capital gains dividends of a REIT, as described
below), as defined by Section 316 of the Code, paid with respect to a Security
held by the Trust is taxable as ordinary income to the extent of such
corporation's current and accumulated "earnings and profits." A Unitholder's pro
rata portion of dividends paid on such Security which exceeds such current and
accumulated earnings and profits will first reduce a Unitholder's tax basis in
such Security, and to the extent that such dividends exceed a Unitholder's tax
basis in such Security shall generally be treated as capital gain. In general,
the holding period for such capital gain will be determined by the period of
time a Unitholder has held his or her Units. The issuers of the Securities
intend to qualify under special federal income tax rules as "real estate
investment trusts" (each a "REIT," shares of such issuers held by the Trust
shall be referred to collectively as the "REIT SHARES"). Because Unitholders are
deemed to directly own a pro rata portion of the REIT Shares as discussed above,
Unitholders are advised to consult their tax advisers for information relating
to the tax consequences of owning the REIT Shares. Provided an issuer qualifies
as a REIT, certain distributions by such issuers may qualify as "capital gain
dividends," taxable to shareholders (and, accordingly, to the Unitholders as
owners of a pro rata portion of the REIT Shares) as long-term capital gains,
regardless of how long a shareholder has owned such shares. In addition,
distributions of income or capital gains declared on REIT Shares in October,
November or December will be deemed to have been paid to shareholders (and,
accordingly, to the Unitholders as owners of a pro rata portion of the REIT
Shares) on December 31 of the year they are declared, even when paid by a REIT
during the following January and received by shareholders or Unitholders in such
following year.
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<PAGE>
3. A Unitholder's portion of gain, if any, upon the sale or redemption of
Units or the disposition of Securities held by the Trust will generally be
considered a capital gain (except in the case of a dealer or a financial
institution). A Unitholder's portion of loss, if any, upon the sale or
redemption of Units or the disposition of Securities held by the Trust, will
generally be considered a capital loss (except in the case of a dealer or a
financial institution). Unitholders should consult their tax advisers regarding
the recognition of gains and losses for federal income tax purposes, as special
rules, described below, apply to a Unitholder's pro rata protion of the REIT
Shares.
DIVIDENDS RECEIVED DEDUCTION. Dividends received on the Securities (so
long as such Securities qualify as REIT shares) are not eligible for the
dividends received deduction.
LIMITATIONS ON DEDUCTIBILITY OF TRUST EXPENSES BY UNITHOLDERS. Each
Unitholder's pro rata share of each expense paid by the Trust is deductible by
the Unitholder to the same extent as if the expense had been paid directly by
such Unitholder. It should be noted that as a result of the Tax Reform Act of
1986, certain miscellaneous itemized deductions, such as investment expenses,
tax return preparation fees and employee business expenses will be deductible by
an individual only to the extent they exceed 2% of such individual's adjusted
gross income. Unitholders may be required to treat some or all of the expenses
of the Trust as miscellaneous itemized deductions subject to this limitation.
RECOGNITION OF TAXABLE GAIN OR LOSS UPON DISPOSITION OF SECURITIES BY THE
TRUST OR DISPOSITION OF UNITS. As discussed above, a Unitholder may recognize
taxable gain (or loss) when a Security is disposed of by the Trust or if the
Unitholder disposes of a Unit. However, any loss realized by a Unitholder with
respect to the disposition of his or her pro rata portion of the REIT Shares, to
the extent such Unitholder has owned his or her Units for less than six months
or the Trust has held the REIT Shares for less than six months, will be treated
as long-term capital loss to the extent of such Unitholder's pro rata portion of
any capital gain dividends received (or deemed to have been received) with
respect to the REIT Shares. The Taxpayer Relief Act of 1997 (the "1997 ACT")
provides that for taxpayers other than corporations, net capital gain (which is
defined as net long-term capital gain over net short-term capital loss for the
taxable year) is subject to a maximum marginal stated tax rate of either 28% or
20%, depending upon the holding periods of the capital assets. Capital gain or
loss is long-term if the holding period for the asset is more than one year, and
is short-term if the holding period for the asset is one year or less.
Generally, capital gains realized from assets held for more than one year but
not more than 18 months are taxed at a maximum marginal stated tax rate of 28%
and capital gains realized from assets (with certain exclusions) held for more
than 18 months are taxed at a maximum marginal stated tax rate of 20% (10% in
the case of certain taxpayers in the lowest tax bracket). Further, capital gains
realized from assets held for one year or less are taxed at the same rates as
ordinary income. Legislation is currently pending that provides the appropriate
methodology that should be applied in netting the realized capital gains and
losses. Such legislation is proposed to be effective retroactively for tax years
ending after May 6, 1997. Note, however, that the 1997 Act provides that the
application of the rules described above in the case of pass-through entities
such as the REITs will be prescribed in future Treasury Regulations. The
Internal Revenue Service has released preliminary guidance which provides that,
in general, pass-through entities such as REITs may designate their capital gain
dividends as either a 20% rate gain distribution or a 28% rate gain
distribution, depending on the nature of the gain received by the pass-through
entity. Unitholders should consult their own tax advisers as to the tax rate
applicable to capital gain dividends.
In addition, please note that capital gains may be recharacterized as
ordinary income in the case of certain financial transactions that are
considered "conversion transactions" effective for transactions entered into
after April 30, 1993. Unitholders and prospective investors should consult their
tax advisers regarding the potential effect of this provision on their
investment in Units.
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<PAGE>
If a Unitholder disposes of a Unit, he or she is deemed thereby to have
disposed of his entire pro rata interest in all assets of the Trust involved
including his pro rata portion of all the Securities represented by the Unit.
The 1997 Act includes provisions that treat certain transactions designed to
reduce or eliminate risk of loss and opportunities for gain (e.g., short sales,
off-setting notional principal contracts, futures or forward contracts, or
similar transactions) as constructive sales for purposes of recognition of gain
(but not loss) and for purposes of determining the holding period. Unitholders
should consult their own tax advisers with regard to any such constructive sale
rules.
SPECIAL TAX CONSEQUENCES OF IN-KIND DISTRIBUTIONS UPON TERMINATION OF THE
TRUST. A Unitholder may, under certain circumstances, request an "In-Kind
Distribution" upon the termination of the Trust. See "Administration of the
Trust -- Amendment and Termination." As previously discussed, prior to the
termination of the Trust, a Unitholder is considered as owning a pro rata
portion of each of the Trust assets for federal income tax purposes. The receipt
of an In-Kind Distribution will result in a Unitholder receiving an undivided
interest in whole shares of Securities plus, possibly, cash.
The potential tax consequences that may occur under an In-Kind Distribution
will depend on whether or not a Unitholder receives cash in addition to
Securities. A "Security" for this purpose is a particular class of stock issued
by a particular REIT. A Unitholder will not recognize gain or loss if a
Unitholder only receives Securities in exchange for his or her pro rata portion
in the Securities held by the Trust. However, if a Unitholder also receives cash
in exchange for a fractional share of a Security held by the Trust, such
Unitholder will generally recognize gain or loss based upon the difference
between the amount of cash received by the Unitholder and his tax basis in such
fractional share of a Security held by the Trust.
Because the Trust will own many Securities, a Unitholder who requests an
In-Kind Distribution will have to analyze the tax consequences with respect to
each Security owned by the Trust. If a Unitholder is deemed to recognize gain or
loss on the In-Kind Distribution because cash is received in addition to
Securities, the amount of taxable gain (or loss) recognized upon such exchange
will generally equal the sum of the gain (or loss) recognized under the rules
described above by such Unitholder with respect to each Security owned by the
Trust. Unitholders who request an In-Kind Distribution are advised to consult
their tax advisers in this regard.
COMPUTATION OF THE UNITHOLDER'S TAX BASIS. Initially, a Unitholder's tax
basis in his or her Units will generally equal the price paid by such Unitholder
for his or her Units. The cost of the Units is allocated among the Securities
held in the Trust in accordance with the proportion of the fair market values of
such Securities on the valuation date nearest the date the Units are purchased
in order to determine such Unitholder's tax basis for his pro rata portion of
each Security.
A Unitholder's tax basis in his Units and his pro rata portion of a
Security held by the Trust will be reduced to the extent dividends paid with
respect to such Security are received by the Trust which are not taxable as
ordinary income and are not capital gain dividends as described above.
GENERAL. Each Unitholder will be requested to provide the Unitholder's
taxpayer identification number to the Trustee and to certify that the Unitholder
has not been notified by the Internal Revenue Service that payments to the
Unitholder are subject to back-up withholding. If the proper taxpayer
identification number and appropriate certification are not provided when
requested, distributions by the Trust to such Unitholder (including amounts
received upon the redemption of Units) will be subject to back-up withholding.
Distributions by the Trust (other than those that are not treated as United
States source income, if any) will generally be subject to United States income
taxation and withholding in the case of Units held by non-resident alien
individuals, foreign corporations or other non-United States persons. Such
persons should consult their tax advisers.
Unitholders will be notified annually of the amount of dividends includable
in the Unitholder's gross income and amounts of Trust expenses which may be
claimed as itemized deductions.
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The foregoing discussion relates only to United States federal income
taxation of U.S. Unitholders; Unitholders may be subject to state and local
taxation. Unitholders should consult their tax advisers regarding potential
foreign, state and local taxation with respect to the Units, and foreign
investors should consult their tax advisers with respect to United States tax
consequences of ownership of Units.
Unitholders desiring to purchase Units for tax-deferred plans and
Individual Retirement Accounts ("IRAs") should consult their financial advisor
for details on establishing such accounts. Units may also be purchased by
persons who already have self-directed plans established.
PUBLIC OFFERING OF UNITS
PUBLIC OFFERING PRICE. During the initial offering period (which is
expected to be only the date of this Prospectus), Units of the Trust are offered
at the Public Offering Price (which is based on the aggregate market value of
the Securities in the Trust plus a pro rata share of any accumulated dividends
in the Income Account of the Trust) WITH NO SALES CHARGE.
After the initial offering period, the Public Offering Price of the Units
of the Trust will be determined by adding to the aggregate market value of the
Securities in the Trust a sales charge equal to 2.75% of the Public Offering
Price (2.828% of the net amount invested, plus a pro rata portion of the
amounts, if any, in the Income Account). The sales charge applicable to quantity
purchases is reduced on a graduated scale for sales to any purchaser of at least
$50,000.
Sales charges (until February 22, 1999) are as follows:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- ------------------------------------------------------ ---------- ----------
<S> <C> <C>
Fewer than $50,000.................................... 2.75% 2.828%
$50,000 but less than $100,000........................ 2.50 2.564
$100,000 but less than $250,000....................... 2.25 2.302
$250,000 but less than $500,000....................... 2.00 2.041
$500,000 but less than $1,000,000..................... 1.75 1.781
$1,000,000 or more.................................... 1.50 1.523
</TABLE>
Commencing February 23, 1999, the sales charge will be reduced as follows:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------
PERCENT OF PERCENT OF
OFFERING NET AMOUNT
AMOUNT PURCHASED PRICE INVESTED
- ----------------------------------------------------- ---------- ----------
<S> <C> <C>
Fewer than $50,000................................... 1.75% 1.781%
$50,000 but less than $100,000....................... 1.50 1.523
$100,000 but less than $250,000...................... 1.25 1.266
$250,000 but less than $500,000...................... 1.00 1.010
$500,000 but less than $1,000,000.................... 0.75 0.756
$1,000,000 or more................................... 0.50 0.503
</TABLE>
Any such reduced sales charge shall be the responsibility of the selling
broker/dealer, bank or other selling agent. The reduced sales charges as shown
in the tables above will apply to all secondary market purchases of Units.
Additionally, Units purchased in the name of a spouse or child (under 21) of
such purchaser will be deemed to be additional purchases by such purchaser. The
reduced sales charges will also be applicable to a trust or other fiduciary
purchasing for a single trust estate or single fiduciary account.
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<PAGE>
The Sponsor intends to permit officers, directors and employees of the
Sponsor, broker/dealers, banks or other selling agents and their affiliates and,
at the Sponsor's discretion, investment clients of the Sponsor in certain
accounts subject to a comprehensive "wrap fee" to purchase Units of the Trust in
the secondary market less the concession the Sponsor typically allows
broker/dealers.
As of the opening of business on the Initial Date of Deposit, the
determination of the Public Offering Price was made on the basis of an
evaluation of the Securities in the Trust prepared by the Trustee. After the
opening of business on the Initial Date of Deposit, the Evaluator will appraise
or cause to be appraised daily the market value of the underlying Securities as
of the Evaluation Time on days the New York Stock Exchange, Inc. ("EXCHANGE") is
open and will adjust the Public Offering Price of the Units commensurate with
such valuation. Such Public Offering Price will be effective for all orders
received at or prior to the Evaluation Time on each such day. Orders received by
the Trustee, Sponsor or any dealer for purchases, sales or redemptions after
that time, or on a day when the Exchange is closed, will be held until the next
determination of price.
The market value of the Securities will generally be determined on each
business day by the Evaluator based on the last sales prices for Securities
listed on a national securities exchange or the NASDAQ National Market System
and at the mean between the closing bid and offer prices for Securities traded
over-the-counter.
The minimum purchase in both the initial and secondary markets is 100 Units
(25 Units for IRAs).
PUBLIC DISTRIBUTION OF UNITS. During the initial offering period, Units of
the Trust will be distributed to the public at the Public Offering Price
thereof. Upon the completion of the initial offering, Units, which may be
acquired in the secondary market (see "Market for Units"), may be offered at a
price determined in the manner provided above.
The Sponsor intends to qualify Units of the Trust for sale in a number of
states. Sales initially will be made to dealers and other selling agents at
prices which represent a concession or agency commission of 2.5% of the Public
Offering Price for primary market sales. For secondary market sales, dealers and
other selling agents will receive a concession or agency commission equal to
2.5% of the Public Offering Price until February 22, 1999, and 1.5% thereafter.
The Sponsor reserves the right to change the amount of the concession or agency
commission from time to time. Certain commercial banks may be making Units of
the Trust available to their customers on an agency basis. A portion of the
sales charge paid by these customers is retained by or remitted to the banks in
the amounts indicated above. Under the Glass-Steagall Act, banks are prohibited
from underwriting Trust Units; however, the Glass-Steagall Act does permit
certain agency transactions and the banking regulators have not indicated that
these particular agency transactions are not permitted under such Act. In Texas
and in certain other states, any banks making Units available must be registered
as broker/dealers under state law. The Sponsor reserves the right to reject, in
whole or in part, any order for the purchase of Units.
SPONSOR PROFITS. The Sponsor may be expected to realize a profit as of the
Initial Date of Deposit resulting from the difference between the purchase
prices of the Securities to the Sponsor and the cost of such Securities to the
Trust, which is based on the evaluation of the Securities on the Initial Date of
Deposit. See "Public Offering of Units -- Public Distribution of Units" for
information regarding the receipt of additional concessions available to dealers
and other selling agents. During the initial offering period, dealers and other
selling agents also may realize profits or sustain losses as a result of
fluctuations after the Initial Date of Deposit in the Public Offering Price
received by the dealers and other selling agents upon the sale of Units.
The Sponsor will receive, in connection with secondary market Unit sales,
gross sales charges equal to the percentage of the Public Offering Price of the
Units of the Trust as stated under "Public Offering Price." The secondary market
Public Offering Price of Units may be greater or less than the cost of such
Units to the Sponsor.
The Sponsor has adopted an internal policy whereby an allocation of sales
credit to a financial consultant may be reversed if Units are sold within 30
days of the effective date of the Trust.
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MARKET FOR UNITS
After the initial offering period, while not obligated to do so, the
Sponsor intends, subject to change at any time, to maintain a market for Units
of the Trust offered hereby and to continuously offer to purchase said Units at
prices, determined by the Evaluator, based on the last sales prices for
Securities listed on a national securities exchange or the NASDAQ National
Market System and at the mean between the closing bid and offer prices for
Securities which are traded in the over-the-counter market. The offering price
of any Units resold by the Sponsor will be in accordance with that described in
the currently effective Prospectus describing such Units. Any profit or loss
resulting from the resale of such Units will belong to the Sponsor. The Sponsor
may suspend or discontinue purchases of Units of the Trust if the supply of
Units exceeds demand, or for other business reasons.
REDEMPTION
GENERAL. A Unitholder who does not dispose of Units in the secondary
market described above may cause Units to be redeemed by the Trustee by making a
written request to the Trustee, at its Unit Investment Trust Division, 101
Barclay Street, 20th Floor, New York, New York 10286. Unitholders must sign the
request exactly as their names appear on the records of the Trustee. Additional
documentation may be requested, and a signature guarantee is always required,
from corporations, executors, administrators, trustees, guardians or
associations. The signatures must be guaranteed by a participant in the
Securities Transfer Agents Medallion Program ("STAMP") or such other signature
guaranty program in addition to, or in substitution for, STAMP, as may be
accepted by the Trustee.
Redemption shall be made by the Trustee on the third business day following
the day on which a tender for redemption is received (the "REDEMPTION DATE") by
payment of cash equivalent to the Redemption Price for the Trust, determined as
set forth below under "Computation of Redemption Price," as of the Evaluation
Time stated under "Essential Information," next following such tender,
multiplied by the number of Units being redeemed. Any Units redeemed shall be
cancelled and any undivided fractional interest in the Trust extinguished. The
price received upon redemption might be more or less than the amount paid by the
Unitholder depending on the market value of the Securities in the Trust at the
time of redemption.
Under regulations issued by the Internal Revenue Service, the Trustee is
required to withhold a specified percentage of the principal amount of a Unit
redemption if the Trustee has not been furnished with the redeeming Unitholder's
taxpayer identification number in the manner required by such regulations. Any
amount so withheld is transmitted to the Internal Revenue Service and may be
recovered by the Unitholder only when filing a tax return. Under normal
circumstances the Trustee obtains the Unitholder's taxpayer identification
number from the selling broker/dealer or financial advisor. However, any time a
Unitholder elects to tender Units for redemption, such Unitholder should make
sure that the Trustee has been provided a certified taxpayer identification
number in order to avoid this possible back-up withholding. In the event the
Trustee has not been previously provided such number, one must be provided at
the time redemption is requested.
Any amounts paid on redemption representing unpaid dividends shall be
withdrawn from the Income Account of the Trust to the extent that funds are
available for such purpose, or from the Capital Account. All other amounts paid
on redemption shall be withdrawn from the Capital Account for the Trust. The
Trustee is empowered to sell Securities from the Trust in order to make funds
available for the redemption of Units of the Trust. Such sale may be required
when Securities would not otherwise be sold and might result in lower prices
than might otherwise be realized. To the extent that Securities are sold, the
size of the Trust will, and the diversity of the Trust may, be reduced, but each
remaining Unit will continue to represent approximately the same proportionate
interest in each Security. The price received upon redemption may be more or
less than the amount paid by the Unitholder depending on the value of the
Securities in the portfolio at the time of redemption.
The right of redemption may be suspended and payment postponed (1) for any
period during which the Exchange is closed, other than customary weekend and
holiday closings, or during which (as determined by the
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Securities and Exchange Commission ("SEC")) trading on the Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which disposal by the Trustee of Securities is not reasonably practical or it is
not reasonably practical to fairly determine the value of the underlying
Securities in accordance with the Trust Agreement; or (3) for such other period
as the SEC may by order permit. The Trustee is not liable to any person in any
way for any loss or damage which may result from any such suspension or
postponement.
COMPUTATION OF REDEMPTION PRICE. The Redemption Price per Unit (as well as
the secondary market price) will be determined on the basis set forth below.
While the Trustee has the power to determine the Redemption Price per Unit when
Units are tendered for redemption, such authority will be delegated to the
Evaluator which determines the price per Unit on a daily basis. The Redemption
Price per Unit is the pro rata share of each Unit in the Trust determined on the
basis of (i) the cash on hand in the Trust or monies in the process of being
collected and (ii) the market value of the Securities in the Trust less (a)
amounts representing taxes or other governmental charges payable out of the
Trust, (b) any amount owing to the Trustee for its advances and (c) the accrued
expenses of the Trust. The Evaluator may determine the market value of the
Securities in the Trust in the following manner: if the Security is listed on a
national securities exchange or the NASDAQ National Market System, the
evaluation will generally be based on the last sales price on the exchange or
system (unless the Evaluator deems the price inappropriate as a basis for
evaluation). If the Security is not so listed or, if so listed and the principal
market for the Security is other than on the exchange or system, the evaluation
will generally be made by the Evaluator in good faith based on the mean between
the closing bid and offer prices in the over-the-counter market (unless the
Evaluator deems such price inappropriate as a basis for evaluation) or, if
closing prices are not available, (1) on the basis of the current bid price for
comparable securities, (2) by the Evaluator's appraising the value of the
Securities in good faith at the bid side of the market or (3) by any combination
thereof. See "Public Offering of Units -- Public Offering Price."
RETIREMENT PLANS
The Trust may be suitable for purchase by IRAs, pension plans and other
qualified retirement plans. Generally, capital gains and income received under
each of the foregoing plans are deferred from federal taxation. All
distributions from such plans are generally treated as ordinary income but may,
in some cases, be eligible for special income averaging or tax-deferred rollover
treatment. Investors considering participation in any such plan should review
specific tax laws related thereto and should consult their attorneys or tax
advisers with respect to the establishment and maintenance of any such plan.
Such plans are offered by brokerage firms and other financial institutions. Fees
and charges with respect to such plans may vary.
UNITHOLDERS
OWNERSHIP OF UNITS. Ownership of Units of the Trust will not be evidenced
by certificates and will be in book entry form only. Units are transferable by
making a written request to the Trustee. Unitholders must sign such written
request exactly as their names appear on the records of the Trustee. Such
signatures must be guaranteed as stated under "Redemption -- General."
Units may be purchased and will be issued in denominations of one Unit or
any multiple thereof, subject to the Trust's minimum investment requirement of
100 Units (25 Units for IRAs). Fractions of Units, if any, will be computed to
three decimal places.
DISTRIBUTIONS TO UNITHOLDERS. Income received by the Trust is credited by
the Trustee to the Income Account of the Trust. Other receipts are credited to
the Capital Account of the Trust. Income received by the Trust will be
distributed on or shortly after the last day of each March, June, September and
December on a pro rata basis to Unitholders of record as of the preceding record
date (which will be the fifteenth day of the related
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month). All distributions will be net of applicable expenses. There is no
assurance that any actual distributions will be made since all dividends
received may be used to pay expenses. In addition, amounts from the Capital
Account of the Trust, if any, will be distributed at least annually in December
to the Unitholders then of record. Proceeds received from the disposition of any
of the Securities after a record date and prior to the following distribution
date will be held in the Capital Account and not distributed until the next
distribution date applicable to the Capital Account. The Trustee shall not be
required to make a distribution from the Capital Account unless the cash balance
on deposit therein available for distribution shall be sufficient to distribute
at least $1.00 per 100 Units. The Trustee is not required to pay interest on
funds held in the Capital or Income Accounts (but may itself earn interest
thereon and therefore benefit from the use of such funds). The Trustee is
authorized to reinvest any funds held in the Capital or Income Accounts, pending
distribution, in U.S. Treasury obligations which mature on or before the next
applicable distribution date. Any obligations so acquired must be held until
they mature and proceeds therefrom may not be reinvested.
The distribution to the Unitholders as of each record date will be made on
the following distribution date or shortly thereafter and shall consist of an
amount substantially equal to such portion of the Unitholders' pro rata share of
the dividend distributions then held in the Income Account after deducting
estimated expenses. Because dividends are not received by the Trust at a
constant rate throughout the year, such distributions to Unitholders are
expected to fluctuate. Persons who purchase Units will commence receiving
distributions only after such person becomes a record owner. Notification to the
Trustee of the transfer of Units is the responsibility of the purchaser, but in
the normal course of business such notice is provided by the selling firm.
As of the first day of each month, the Trustee will deduct from the Income
Account of the Trust and, to the extent funds are not sufficient therein, from
the Capital Account of the Trust amounts necessary to pay the expenses of the
Trust (as determined on the basis set forth under "Expenses of the Trust"). The
Trustee also may withdraw from said accounts such amounts, if any, as it deems
necessary to establish a reserve for any governmental charges payable out of the
Trust. Amounts so withdrawn shall not be considered a part of the Trust's assets
until such time as the Trustee shall return all or any part of such amounts to
the appropriate accounts. In addition, the Trustee may withdraw from the Income
and Capital Accounts of the Trust such amounts as may be necessary to cover
redemptions of Units.
STATEMENTS TO UNITHOLDERS. With each distribution, the Trustee will
furnish or cause to be furnished to each Unitholder a statement of the amount of
income and the amount of other receipts, if any, which are being distributed,
expressed in each case as a dollar amount per Unit.
The accounts of the Trust are required to be audited annually, at the
Trust's expense, by independent public auditors designated by the Sponsor,
unless the Sponsor determines that such an audit would not be in the best
interest of the Unitholders of the Trust. The auditors' report will be furnished
by the Trustee to any Unitholder of the Trust upon written request. Within a
reasonable period of time after the end of each calendar year, the Trustee shall
furnish to each person who at any time during the calendar year was a Unitholder
of the Trust a statement, covering the calendar year, setting forth for the
Trust: (1) a summary of transactions in the Trust for such year; (2) any
Securities sold during the year and the Securities held at the end of such year
by the Trust; (3) the redemption price per Unit based upon a computation thereof
on the 31st day of December of such year (or the last business day prior
thereto); and (4) amounts of income and capital distributed during such year.
In order to comply with federal and state tax reporting requirements,
Unitholders will be furnished, upon request to the Trustee, evaluations of the
Securities in the Trust furnished to it by the Evaluator.
RIGHTS OF UNITHOLDERS. A Unitholder may at any time tender Units to the
Trustee for redemption. No Unitholder shall have the right to control the
operation and management of the Trust in any manner, except to vote with respect
to the amendment of the Trust Agreement or termination of the Trust.
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INVESTMENT SUPERVISION
The Trust is a unit investment trust and is not an "actively managed" fund.
Traditional methods of investment management for a managed fund typically
involve frequent changes in a portfolio of securities on the basis of economic,
financial and market analyses. The portfolio of the Trust will not be actively
managed and therefore the adverse financial condition of an issuer will not
necessarily require the sale of its securities from the portfolio. However, the
Sponsor may direct the Trustee to dispose of Securities upon default in payment
of amounts due on debt obligations of the issuer of the Securities or upon a
decline in price or the occurrence of other market or credit factors that in the
opinion of the Sponsor would make the retention of such Securities in the Trust
detrimental to the interest of the Unitholders. The Trustee may sell any
securities or other properties acquired in exchange for Securities such as those
acquired in connection with a merger or other transaction. If offered such new
or exchanged securities or property, the Trustee shall reject the offer.
However, in the event such securities or property are nonetheless acquired by
the Trust, they may be accepted for deposit in the Trust and either sold by the
Trustee or held in the Trust pursuant to the direction of the Sponsor. Proceeds
from the sale of Securities (or any securities or other property received by the
Trust in exchange for Securities) are credited to the Capital Account for
distribution to Unitholders or to meet redemptions. Except as stated under "The
Trust" for failed securities and as provided in this paragraph, the acquisition
by the Trust of any securities other than the Securities is prohibited. The
Trustee may, from time to time, retain and pay compensation to the Sponsor (or
an affiliate of the Sponsor) to act as agent for the Trust with respect to
selling Securities from the Trust. In acting in such capacity, the Sponsor or
its affiliate will be subject to the restrictions under the 1940 Act.
The Trustee may sell Securities, designated by the Sponsor, from the Trust
for the purpose of redeeming Units of the Trust tendered for redemption and the
payment of expenses.
The Sponsor, in designating Securities to be sold by the Trustee, will
generally make selections in order to maintain, to the extent practical, the
proportionate relationship among the number of shares of individual issues of
Securities. To the extent this is not practical, the composition and diversity
of the Securities may be altered. In order to obtain the best price for the
Trust, it may be necessary for the Sponsor to specify minimum amounts (generally
100 shares) in which blocks of Securities are to be sold.
ADMINISTRATION OF THE TRUST
THE TRUSTEE. The Trustee is The Bank of New York, a trust company
organized under the laws of New York. The Bank of New York has its Unit
Investment Trust Division offices at 101 Barclay Street, New York, New York
10286. The Bank of New York is subject to supervision and examination by the
Superintendent of Banks of the State of New York and the Board of Governors of
the Federal Reserve System, and its deposits are insured by the FDIC to the
extent permitted by law.
The Trustee, whose duties are ministerial in nature, has not participated
in selecting the portfolio of the Trust. For information relating to the
responsibilities of the Trustee under the Trust Agreement, reference is made to
the material set forth under "Unitholders."
In accordance with the Trust Agreement, the Trustee shall keep records of
all transactions at its office. Such records shall include the name and address
of, and the number of Units held by, every Unitholder of the Trust. Such books
and records shall be open to inspection by any Unitholder of the Trust at all
reasonable times during usual business hours. The Trustee shall make such annual
or other reports as may from time to time be required under any applicable state
or federal statute, rule or regulation. The Trustee shall keep a certified copy
or duplicate original of the Trust Agreement on file in its office available for
inspection at all reasonable times during usual business hours by any
Unitholder, together with a current list of the Securities held in the Trust.
Pursuant to the Trust Agreement, the Trustee may employ one or more agents for
the purpose of custody and safeguarding of Securities comprising the Trust.
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Under the Trust Agreement, the Trustee or any successor trustee may resign
and be discharged of the trust created by the Trust Agreement by executing an
instrument in writing and filing the same with the Sponsor.
The Trustee or successor trustee must mail a copy of the notice of
resignation to all Unitholders then of record, not less than sixty days before
the date specified in such notice when such resignation is to take effect. The
Sponsor upon receiving notice of such resignation is obligated to appoint a
successor trustee promptly. If, upon such resignation, no successor trustee has
been appointed and has accepted the appointment within thirty days after
notification, the retiring Trustee may apply to a court of competent
jurisdiction for the appointment of a successor. The Sponsor may at any time
remove the Trustee, with or without cause, and appoint a successor trustee as
provided in the Trust Agreement. Notice of such removal and appointment shall be
mailed to each Unitholder by the Sponsor. Upon execution of a written acceptance
of such appointment by such successor trustee, all the rights, powers, duties
and obligations of the original Trustee shall vest in the successor. The Trustee
must be a corporation organized under the laws of the United States or any state
thereof, be authorized under such laws to exercise trust powers and have at all
times aggregate capital, surplus and undivided profits of not less than
$5,000,000.
THE SPONSOR. The Sponsor, Legg Mason Wood Walker, Incorporated, is a
wholly owned subsidiary of Legg Mason, Inc. and is a registered broker-dealer
incorporated under the laws of the State of Maryland. The Sponsor is a member
firm of the New York Stock Exchange and is a member of the National Association
of Securities Dealers, Inc. The Sponsor, through its over 100 offices located in
21 states, and other subsidiaries of Legg Mason, Inc. offer a full line of
investment services including investment research and trade execution services
for listed and unlisted equity and fixed-income securities and options; exchange
floor execution; investment banking services for corporations and public sector
clients; and professional investment management services for individual and
institutional clients. The Sponsor and other subsidiaries of Legg Mason, Inc.
may, but need not, make a principal market as dealer in one or more of the
Securities in the Trust. As of December 31, 1997 the stockholders' equity of
Legg Mason Wood Walker, Incorporated, on an unconsolidated basis, was
$230,326,000 (unaudited). The foregoing information with regard to the Sponsor
relates to the Sponsor only and not to the Trust. Such information is included
in this prospectus only for the purpose of informing investors as to the
responsibility of the Sponsor and its ability to carry out its contractual
obligations with respect to the Trust. More detailed financial information
concerning the Sponsor can be obtained upon request from the Sponsor.
If at any time the Sponsor shall fail to perform any of its duties under
the Trust Agreement or shall become incapable of acting or shall be adjudged
bankrupt or insolvent or shall have its affairs taken over by public
authorities, then the Trustee may (a) appoint a successor sponsor at rates of
compensation deemed by the Trustee to be reasonable and not exceeding such
reasonable amounts as may be prescribed by the SEC, or (b) terminate the Trust
Agreement and liquidate the Trust as provided therein, or (c) continue to act as
Trustee without terminating the Trust Agreement.
THE EVALUATOR. The Sponsor serves as Evaluator. The Evaluator may resign
or be removed by the Trustee in which event the Trustee is to use its best
efforts to appoint a satisfactory successor. Such resignation or removal shall
become effective upon acceptance of appointment by the successor evaluator. If
upon resignation of the Evaluator no successor has accepted appointment within
thirty days after notice of resignation, the Evaluator may apply to a court of
competent jurisdiction for the appointment of a successor. Notice of such
resignation or removal and appointment shall be mailed by the Trustee to each
Unitholder.
AMENDMENT AND TERMINATION. The Trust Agreement may be amended by the
Trustee and the Sponsor without the consent of any of the Unitholders: (1) to
cure any ambiguity or to correct or supplement any provision which may be
defective or inconsistent; (2) to change any provision thereof as may be
required by the SEC or any successor governmental agency; or (3) to make such
provisions as shall not adversely affect the interests of the Unitholders. The
Trust Agreement with respect to the Trust may also be amended in any respect by
the
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Sponsor and the Trustee, or any of the provisions thereof may be waived, with
the consent of the holders of Units representing 66-2/3% of the Units then
outstanding of the Trust, provided that no such amendment or waiver will reduce
the interest of any Unitholder thereof without the consent of such Unitholder or
reduce the percentage of Units required to consent to any such amendment or
waiver without the consent of all Unitholders of the Trust. In no event shall
the Trust Agreement be amended to increase the number of Units of the Trust
issuable thereunder or to permit the acquisition of any Securities in addition
to or in substitution for those initially deposited in the Trust, except in
accordance with the provisions of the Trust Agreement. The Trustee shall
promptly notify Unitholders of the substance of any such amendment.
The Trust Agreement provides that the Trust shall terminate upon the
liquidation, redemption or other disposition of the last of the Securities held
in the Trust but in no event is it to continue beyond the Mandatory Termination
Date set forth under "Essential Information." If the value of the Trust shall be
less than the applicable minimum value stated under "Essential Information," the
Trustee may, in its discretion, and shall, when so directed by the Sponsor,
terminate the Trust. The Trust may be terminated at any time by Unitholders
representing 66-2/3% of the Units thereof then outstanding.
No later than the Mandatory Termination Date, the Trustee will begin to
sell all of the underlying Securities on behalf of Unitholders in connection
with the termination of the Trust. The Sponsor has agreed to assist the Trustee
in these sales. The sale proceeds will be net of any incidental expenses
involved in the sales. Prior to termination of the Trust, written notice thereof
will be sent by the Trustee to all Unitholders of the Trust and will include a
form to enable Unitholders owning 2,500 or more Units to request an In-Kind
Distribution of stocks rather than payment in cash upon termination of the
Trust. To be effective, this request must be returned to the Trustee at least
ten business days prior to the Mandatory Termination Date. On the Mandatory
Termination Date (or shortly thereafter), the Trustee will deliver each
requesting Unitholder's pro rata number of whole shares of each of the
Securities to the account of the broker-dealer designated by the Unitholder at
Depository Trust Company. Unitholders electing to receive an In-Kind
Distribution will, however, receive a cash payment representing their
proportionate share of any Restricted Securities held by the Trust. The value of
the Unitholder's fractional shares will be paid in cash. Within a reasonable
period after termination, the Trustee will sell any Securities remaining in the
Trust and, after paying all expenses and charges incurred by the Trust, will
either distribute to Unitholders (other than Unitholders requesting an In-Kind
Distribution) their pro rata share of the balances remaining in the Income and
Capital Accounts of the Trust or if the Sponsor is at that time offering units
in a unit investment trust or shares in an open-ended managed fund, either of
which having objectives similar to those of the Trust, reinvest upon written
direction from the Unitholder or his or her representative such funds into the
directed unit investment trust or mutual fund at a reduced fee.
LIMITATIONS ON LIABILITY. The Sponsor: The Sponsor is liable for the
performance of its obligations arising from its responsibilities under the Trust
Agreement, but will be under no liability to the Unitholders for taking any
action or refraining from any action in good faith pursuant to the Trust
Agreement or for errors in judgment, except in cases of its own gross
negligence, bad faith or willful misconduct or its reckless disregard for its
duties thereunder. The Sponsor shall not be liable or responsible in any way for
depreciation or loss incurred by reason of the sale of any Securities.
The Trustee: The Trust Agreement provides that the Trustee shall be under
no liability for any action taken in good faith in reliance upon prima facie
properly executed documents or for the disposition of monies, Securities or
certificates except by reason of its own gross negligence, bad faith or willful
misconduct, or its reckless disregard for its duties under the Trust Agreement,
nor shall the Trustee be liable or responsible in any way for depreciation or
loss incurred by reason of the sale by the Trustee of any Securities. In the
event that the Sponsor shall fail to act, the Trustee may act and shall not be
liable for any such action taken by it in good faith. The Trustee shall not be
personally liable for any taxes or other governmental charges imposed upon or in
respect of
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the Securities or upon the interest thereof. In addition, the Trust Agreement
contains other customary provisions limiting the liability of the Trustee.
The Evaluator: The Trustee, Sponsor and Unitholders may rely on any
evaluation furnished by the Evaluator and shall have no responsibility for the
accuracy thereof. The Trust Agreement provides that the determinations made by
the Evaluator shall be made in good faith upon the basis of the best information
available to it, provided, however, that the Evaluator shall be under no
liability to the Trustee or Unitholders for errors in judgment, but shall be
liable only for its gross negligence, bad faith or willful misconduct or its
reckless disregard for its obligations under the Trust Agreement.
EXPENSES OF THE TRUST
The Sponsor will not charge the Trust any fees for services performed as
Sponsor but will receive that fee set forth under "Essential Information" for
providing supervisory services. Such fee, which is calculated monthly, is based
on the largest number of Units outstanding during the calendar year for which
such compensation relates. The Sponsor will also receive a portion of the sales
commissions, if any, paid in connection with the purchase of Units and will
share in profits, if any, related to the deposit of Securities in the Trust.
The Trustee receives for its services that fee set forth under "Essential
Information." The Trustee's fee which is calculated monthly is based on the
largest number of Units outstanding during the calendar year for which such
compensation relates. The Trustee's fees are payable monthly on or before the
fifteenth day of the month from the Income Account to the extent funds are
available and then from the Capital Account. The Trustee benefits to the extent
there are funds for future distributions, payment of expenses and redemptions in
the Capital and Income Accounts since these Accounts are non-interest bearing
and the amounts earned by the Trustee are retained by the Trustee. Part of the
Trustee's compensation for its services to the Trust is expected to result from
the use of these funds.
For evaluation of Securities in the Trust, the Evaluator shall receive that
fee set forth under "Essential Information," payable monthly, based upon the
largest number of Units outstanding during the calendar year for which such
compensation relates.
The Trustee's fees, the Sponsor's supervisory fees and the Evaluator's fees
are deducted from the Income Account of the Trust to the extent funds are
available and then from the Capital Account. Each such fee may be increased
without approval of Unitholders by amounts not exceeding a proportionate
increase in the Consumer Price Index or any equivalent index substituted
therefor. In addition, with respect to the fees payable to the Sponsor for
providing supervisory services and evaluation services, such individual fees may
exceed the actual costs of providing such services for the Trust, but at no time
will the total amount received for such services rendered to all unit investment
trusts of which Legg Mason Wood Walker, Incorporated is the Sponsor in any
calendar year exceed the actual cost to the Sponsor of supplying such services
in such year.
Expenses incurred in establishing the Trust, including the cost of the
initial preparation of documents relating to the Trust (including the Prospectus
and the Trust Agreement), federal and state registration fees, the initial fees
and expenses of the Trustee, legal and accounting expenses, payment of closing
fees and any other out-of-pocket expenses, will be paid by the Trust and
amortized over the life of the Trust. The following additional charges are or
may be incurred by the Trust: (a) fees for the Trustee's extraordinary services;
(b) expenses of the Trustee (including legal and auditing expenses, but not
including any fees and expenses charged by an agent for custody and safeguarding
of Securities) and of counsel, if any; (c) various governmental charges; (d)
expenses and costs of any action taken by the Trustee to protect the Trust or
the rights and interests of the Unitholders; (e) indemnification of the Trustee
for any loss, liability or expense incurred by it in the administration of the
Trust not resulting from gross negligence, bad faith or willful misconduct on
its part or its reckless disregard for its obligations under the Trust
Agreement; (f) indemnification of the Sponsor for any loss, liability or expense
incurred in acting in that capacity without gross negligence, bad faith or
willful misconduct or its reckless disre-
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gard for its obligations under the Trust Agreement; and (g) expenditures
incurred in contacting Unitholders upon termination of the Trust. The fees and
expenses set forth herein are payable out of the Trust and, when owing to the
Trustee, are secured by a lien on the Trust. Since the Securities are all common
stocks, and the income stream produced by dividend payments, if any, is
unpredictable, the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of the Trust. If the balances in the
Income and Capital Accounts are insufficient to provide for amounts payable by
the Trust, the Trustee has the power to sell Securities to pay such amounts.
These sales may result in capital gains or losses to Unitholders. See "Federal
Tax Status."
LEGAL OPINIONS
The legality of the Units offered hereby and certain matters relating to
federal tax law have been passed upon by Chapman and Cutler, 111 West Monroe
Street, Chicago, Illinois 60603, as counsel for the Sponsor.
INDEPENDENT AUDITORS
The statement of net assets, including the schedule of investments, of the
Trust at the opening of business on the Initial Date of Deposit appearing in
this Prospectus and Registration Statement has been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon appearing
elsewhere herein and in the Registration Statement, and is included herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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REPORT OF INDEPENDENT AUDITORS
TO THE UNITHOLDERS OF
LEGG MASON UNIT INVESTMENT TRUST, SERIES 8
(LEGG MASON REIT TRUST II, FEBRUARY 1998 SERIES):
We have audited the accompanying statement of net assets, including the
schedule of investments, of Legg Mason Unit Investment Trust, Series 8,
comprised of the Legg Mason REIT Trust II, February 1998 Series, as of the
opening of business on February __, 1998. The statement of net assets is the
responsibility of the Trust's Sponsor. Our responsibility is to express an
opinion on this statement of net assets based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of net assets is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of net assets. Our
procedures included confirmation of the letter of credit held by the Trustee and
deposited in the Trust on February __, 1998. An audit also includes assessing
the accounting principles used and significant estimates made by the Sponsor, as
well as evaluating the overall presentation of the statement of net assets. We
believe our audit provides a reasonable basis for our opinion.
In our opinion, the statement of net assets referred to above presents
fairly, in all material respects, the financial position of Legg Mason Unit
Investment Trust, Series 8, comprised of the Legg Mason REIT Trust II, February
1998 Series, at the opening of business on February __, 1998, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Philadelphia, Pennsylvania
February __, 1998
------------------------
LEGG MASON UNIT INVESTMENT TRUST, SERIES 8
(LEGG MASON REIT TRUST II, FEBRUARY 1998 SERIES)
STATEMENT OF NET ASSETS
AT THE OPENING OF BUSINESS ON FEBRUARY __, 1998, THE INITIAL DATE OF DEPOSIT
<TABLE>
<S> <C>
ASSETS
Investment in Securities represented by purchase contracts (1)(2).................................. $
Organizational costs (3)...........................................................................
------------
Total assets....................................................................................... $
------------
LIABILITIES
Accrued organizational costs.......................................................................
------------
Net assets......................................................................................... $
------------
------------
Cost to investors (1).............................................................................. $
------------
------------
Number of Units....................................................................................
------------
------------
</TABLE>
- ---------------
(1) Aggregate cost of the Securities listed in the Schedule of Investments is
based on evaluations as determined by the Trustee.
(2) An irrevocable letter of credit has been deposited with the Trustee covering
the funds necessary for the purchase of the Securities in the Trust
represented by purchase contracts.
(3) Deferred organizational costs (which are based on an estimated Trust size of
$ ) will be amortized on a straight-line basis over the life of the
Trust commencing on the Initial Date of Deposit.
23
<PAGE>
LEGG MASON UNIT INVESTMENT TRUST, SERIES 8
(LEGG MASON REIT TRUST II, FEBRUARY 1998 SERIES)
SCHEDULE OF INVESTMENTS
AT THE OPENING OF BUSINESS ON FEBRUARY __, 1998, THE INITIAL DATE OF DEPOSIT
<TABLE>
<CAPTION>
AGGREGATE
NAME OF ISSUER COST OF
OF SECURITIES SECURITIES
DEPOSITED OR PERCENTAGE OF NUMBER OF TO
CONTRACTED FOR (1) PORTFOLIO(1) SYMBOL SHARES PRICE PER SHARE TRUST (2)
- ------------------------------------------------- ------------- ------ --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(1) All of the Securities are represented by "regular way" contracts for the
performance of which an irrevocable letter of credit has been deposited with
the Trustee. At the Initial Date of Deposit, the Sponsor has assigned to the
Trustee all of its rights, title and interest in and to such undelivered
Securities. Contracts to purchase Securities were entered into on or before
February __, 1998 and all have expected settlement dates on or before
February __, 1998 (see "The Trust"). Percentages are based on the cost of
Securities to the Trust.
(2) The market value of each Security is based on the closing sales price on the
New York Stock Exchange on the day prior to the Initial Date of Deposit. As
of the opening of business on the Initial Date of Deposit the aggregate cost
of the Securities to the Sponsor was $ and its net loss was $ .
* Within the last three years, the Sponsor or one of its affiliates was the
manager (co-manager) of a public offering of the securities of this company
or an affiliate.
------------------------------------
ADDITIONAL INFORMATION
The Sponsor in its general securities business acts as agent or principal
in connection with the purchase and sale of equity securities, which may include
Securities in the Trust, and may act as a market maker in certain of the
Securities. The Sponsor may also from time to time issue reports on and make
recommendations relating to equity securities, which may include the Securities.
From time to time the Sponsor may act as investment banker or an employee or
affiliate may be a director of a company whose shares are included among the
Securities; nonpublic information concerning such a company would not be
disclosed to or for the benefit of the Trust under such circumstances.
24
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY.......................................... 2
ESSENTIAL INFORMATION............................ 4
THE TRUST........................................ 5
THE TRUST PORTFOLIO.............................. 6
RISK FACTORS..................................... 7
FEDERAL TAX STATUS............................... 10
PUBLIC OFFERING OF UNITS......................... 13
Public Offering Price.......................... 13
Public Distribution of Units................... 14
Sponsor Profits................................ 14
MARKET FOR UNITS................................. 15
REDEMPTION....................................... 15
General........................................ 15
Computation of Redemption Price................ 16
RETIREMENT PLANS................................. 16
UNITHOLDERS...................................... 16
Ownership of Units............................. 16
Distributions to Unitholders................... 17
Statements to Unitholders...................... 17
Rights of Unitholders.......................... 18
INVESTMENT SUPERVISION........................... 18
ADMINISTRATION OF THE TRUST...................... 18
The Trustee.................................... 18
The Sponsor.................................... 19
The Evaluator.................................. 19
Amendment and Termination...................... 19
Limitations on Liability....................... 20
EXPENSES OF THE TRUST............................ 21
LEGAL OPINIONS................................... 22
INDEPENDENT AUDITORS............................. 22
REPORT OF INDEPENDENT AUDITORS................... 23
STATEMENT OF NET ASSETS.......................... 23
SCHEDULE OF INVESTMENTS.......................... 24
ADDITIONAL INFORMATION........................... 24
</TABLE>
------------------
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION WITH RESPECT TO THE
INVESTMENT COMPANY SET FORTH IN ITS REGISTRATION STATEMENT AND EXHIBITS RELATING
THERETO WHICH HAVE BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WASHINGTON, D.C. UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT
OF 1940, AND TO WHICH REFERENCE IS HEREBY MADE.
------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THIS INVESTMENT COMPANY NOT CONTAINED IN THIS
PROSPECTUS; AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, THE TRUSTEE, OR THE
SPONSOR. SUCH REGISTRATION DOES NOT IMPLY THAT THE TRUST OR THE UNITS HAVE BEEN
GUARANTEED, SPONSORED, RECOMMENDED OR APPROVED BY THE UNITED STATES OR ANY STATE
OR ANY AGENCY OR OFFICER THEREOF.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL
TO MAKE SUCH OFFER IN SUCH STATE OR COUNTRY.
LEGG MASON
UNIT INVESTMENT TRUST
SERIES 8
PROSPECTUS
FEBRUARY __, 1998
LEGG MASON
REIT TRUST II
FEBRUARY 1998 SERIES
LEGG MASON WOOD WALKER
INCORPORATED
100 LIGHT STREET
P.O. BOX 1476
BALTIMORE, MARYLAND 21203-1476
(410) 539-0000/(800) 822-5544
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement comprises the following papers and documents:
The facing sheet
The Cross-Reference Sheet
The Prospectus
The signatures
The consents of independent public accountants, rating services
and legal counsel
The following exhibits:
1.1 Proposed form of Trust Agreement (to be filed by amendment).
3.1 Opinion and consent of counsel as to legality of securities being
registered (to be filed by amendment).
3.2 Opinion of counsel as to Federal income tax status of securities
being registered (to be filed by amendment).
4.1 Consent of Independent Auditors (to be filed by amendment).
S-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Legg Mason Unit Investment Trust, Series 8 has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Baltimore and State of Maryland on the 6th day
of February, 1998.
LEGG MASON UNIT INVESTMENT TRUST, SERIES 8
(Registrant)
By LEGG MASON WOOD WALKER, INCORPORATED
(Depositor)
/s/ Kathi D. Bair
------------------------------
Kathi D. Bair
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on February 6, 1998.
Signature Title
--------- -----
/s/ Raymond A. Mason
- ----------------------
Raymond A. Mason Chairman of the Board
/s/ James W. Brinkley
- ----------------------
James W. Brinkley President and Director
/s/ Edmund J. Cashman, Jr.
- ----------------------
Edmund J. Cashman, Jr. Senior Executive Vice President
and Director
/s/ Richard J. Himelfarb
- ----------------------
Richard J. Himelfarb Senior Executive Vice President
and Director
/s/ Edward A. Taber III
- ----------------------
Edward A. Taber III Senior Executive Vice President
and Director
/s/ Robert A. Frank
- ----------------------
Robert A. Frank Executive Vice President
and Director
/s/ Robert G. Sabelhaus
- ----------------------
Robert G. Sabelhaus Executive Vice President
and Director
/s/ Charles A. Bacigalupo
- ----------------------
Charles A. Bacigalupo Senior Vice President, Secretary
and Director
S-2
/s/ Thomas M. Daly, Jr.
- ----------------------
Thomas M. Daly, Jr. Senior Vice President
and Director
/s/ Jerome M. Dattel
- ----------------------
Jerome M. Dattel Senior Vice President
and Director
/s/ Robert G. Donovan
- ----------------------
Robert G. Donovan Senior Vice President
and Director
/s/ Thomas E. Hill
- ----------------------
Thomas E. Hill Senior Vice President
and Director
/s/ Arnold S. Hoffman
- ----------------------
Arnold S. Hoffman Senior Vice President
and Director
/s/ Carl Hohnbaum
- ----------------------
Carl Hohnbaum Senior Vice President
and Director
/s/ William B. Jones, Jr.
- ----------------------
William B. Jones, Jr. Senior Vice President
and Director
/s/ Laura L. Lange
- ----------------------
Laura L. Lange Senior Vice President
and Director
/s/ Marvin H. McIntyre
- ----------------------
Marvin H. McIntyre Senior Vice President
and Director
/s/ Mark I. Preston
- ----------------------
Mark I. Preston Senior Vice President
and Director
/s/ M. Walter D'Alessio
- ----------------------
M. Walter D'Alessio Director
/s/ F. Barry Bilson
- ----------------------
F. Barry Bilson Senior Vice President
and Director
/s/ Kathi D. Bair
-----------------
(Attorney-in-fact)*
- -----------
*An executed copy of the related powers of attorney were filed as Exhibit 7.1 to
the initial Registration Statement for Legg Mason Unit Investment Trust, Series
5 as filed on March 24, 1995 and Amendment No. 1 to the Registration Statement
for Legg Mason Unit Investment Trust, Series 5 as filed on May 23, 1995 (file
no. 33-90620).
S-3
