As filed with the Securities and Exchange Commission on March 20, 1995.
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1933 Act File No. 33-56672
1940 Act File No. 811-7418
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8
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LEGG MASON GLOBAL TRUST, INC.
(Exact Name of Registrant as Specified in Charter)
111 South Calvert Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (410) 539-0000
Copies to:
CHARLES A. BACIGALUPO ARTHUR C. DELIBERT, ESQ.
111 South Calvert Street Kirkpatrick & Lockhart
Baltimore, Maryland 21202 1800 M Street, N.W.
(Name and Address of South Lobby - Ninth Floor
Agent for Service) Washington, D.C. 20036-5891
It is proposed that this filing will become effective:
[_______] immediately upon filing pursuant to Rule 485(b)
[_______] on ______________, 1995 pursuant to Rule 485(b)
[___X___] 60 days after filing pursuant to Rule 485(a)(i)
[_______] on ______________ pursuant to Rule 485(a)(i)
[_______] 75 days after filing pursuant to Rule 485(a)(ii)
[_______] on ______________ pursuant to Rule 485(a)(ii)
If appropriate, check the following box:
[________] This post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 and filed the notice required by such Rule
for its most recent fiscal year on February 24, 1995.
Page 1 of ______________
Exhibit Index begins on page ________________
<PAGE>
Legg Mason Global Trust, Inc.
Contents of Registration Statement
This registration statement consists of the following papers and
documents.
Cover Sheet
Table of Contents
Legg Mason Global Equity Trust
------------------------------
Cross Reference Sheet
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
This filing is made to include the Prospectus and the Statement
of Additional Information of the Legg Mason Global Equity Trust. No
changes are hereby made to the currently effective Prospectus or Statement
of Additional Information of the Legg Mason Global Government Trust.
<PAGE>
Legg Mason Global Trust, Inc.
Legg Mason Global Equity Trust
Form N-1A Cross Reference Sheet
----------------------------------
Part A. Item No. Prospectus Caption
---------------- ------------------
1 Cover Page
2 Prospectus Highlights;
Fund Expenses
3 Performance Information
4 Investment Objective and Policies;
Description of the
Corporation and Its Shares
5 Fund Expenses;
The Fund's Management and Investment Adviser; The
Fund's Distributor; the Fund's Custodian and
Transfer and Dividend-Disbursing Agent
6 Prospectus Highlights; Description of the
Corporation and Its Shares; Dividends and Other
Distributions; Shareholder Services; Taxes
7 How You Can Invest in the Fund; How Your
Shareholder Account is Maintained; How Net Asset
Value is Determined; The Fund's Distributor
8 How You Can Redeem Your Fund Shares
9 Not Applicable
Statement of Additional
Part B. Item No. Information Caption
---------------- ----------------------
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Additional Information About investment
Limitations and Policies; Portfolio Transactions
and Brokerage
14 The Corporation's Directors and Officers
15 The Corporation's Directors and Officers
16 The Fund's Investment Adviser; The Fund's
Investment Manager; the Fund's Distributor; The
Corporation's Independent Accountants; The Fund's
Custodian and Transfer and Dividend-Disbursing
Agent
<PAGE>
17 Portfolio Transactions and Brokerage
18 Not Applicable
19 Valuation of Fund Shares; Additional Purchase and
Redemption Information
20 Additional Tax Information; Tax-Deferred
Retirement Plans
21 The Fund's Distributor; Portfolio Transactions
and Brokerage
22 Not Applicable
23 Financial Statements
<PAGE>
Table of Contents
Page
----
Prospectus Highlights . . . . . . . . . . . . . . . . . . . . . . . . .
Fund Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Information . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective and Policies . . . . . . . . . . . . . . . . . . .
How You Can Invest in the Fund . . . . . . . . . . . . . . . . . . . .
How Your Shareholder Account is Maintained . . . . . . . . . . . . . .
How You Can Redeem Your Fund Shares . . . . . . . . . . . . . . . . . .
How Net Asset Value is Determined . . . . . . . . . . . . . . . . . . .
Dividends and Other Distributions . . . . . . . . . . . . . . . . . . .
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Services . . . . . . . . . . . . . . . . . . . . . . . . .
The Fund's Management and Investment Adviser . . . . . . . . . . . . .
The Fund's Distributor . . . . . . . . . . . . . . . . . . . . . . . .
The Fund's Custodian and Transfer and
Dividend-Disbursing Agent . . . . . . . . . . . . . . . . . .
Description of the Corporation and its Shares . . . . . . . . . . . . .
<PAGE>
Addresses
Distributor:
Legg Mason Wood Walker, Inc.
111 South Calvert Street
P.O. Box 1476
Baltimore, MD 21203-1476
410/539/0000 800/822/5544
Transfer and Shareholder Servicing Agent:
Boston Financial Data Services
P.O. Box 8000
Boston, MA 02266-8000
Counsel:
Kirkpatrick & Lockhart
1800 M Street, N.W.
Washington, DC 20036
Independent Accountants:
Coopers & Lybrand L.L.P.
217 East Redwood Street
Baltimore, Maryland 21202
No person has been authorized to give any information or to make any
representations not contained in this Prospectus or the Statement of
Additional Information in connection with the offering made by this
Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Fund or its
distributor. This Prospectus does not constitute an offering by the Fund
or by the principal underwriter in any jurisdiction in which such offering
may not lawfully be made.
<PAGE>
PROSPECTUS
_____________, 1995
The Legg Mason Global Equity Trust
The Legg Mason Global Equity Trust ("Fund") is a diversified,
professionally managed portfolio seeking maximum long-term total return.
The Fund is a separate series of Legg Mason Global Trust, Inc., an open-
end management investment company.
In attempting to achieve the Fund's objective, the Fund's
investment adviser, Batterymarch Financial Management, Inc. ("Adviser"),
normally will invest the Fund's assets in common stocks of companies
located anywhere in the world, including the United States. The Fund may
invest up to 35% of its total assets in the securities of companies
located in developing countries, including countries or regions with
relatively low gross national product per capita compared to the world's
major economies, and in countries or regions with the potential for rapid
but unstable economic growth (collectively, "emerging markets"). Because
of the special risks associated with emerging markets, an investment in
the Fund should be considered speculative.
The Fund is intended for investors who are seeking maximum long-
term total return. Because of the risks associated with common stock
investments, the Fund is intended to be a long-term investment vehicle and
is not designed to provide investors with a means of speculating on short-
term stock market movements. Investors should be able to tolerate sudden,
sometimes substantial fluctuations in the value of their investment.
Investors also should be cognizant of the unique risks of international
investing, including exposure to currency fluctuations. Because of these
risks, the Fund should not be considered a complete investment program.
This Prospectus sets forth concisely the information about the
Fund that a prospective investor ought to know before investing. It should
be read and retained for future reference. A Statement of Additional
Information about the Fund dated ________, 1995 has been filed with the
Securities and Exchange Commission and, as amended or supplemented from
time to time, is incorporated herein by reference. The Statement of
Additional Information is available without charge upon request from the
Fund's distributor, Legg Mason Wood Walker, Incorporated ("Legg Mason")
(address and telephone numbers listed below).
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Dated: ___________, 1995
Legg Mason Wood Walker, Inc.
111 South Calvert Street
P.O. Box 1476
Baltimore, MD 21203-1476
410-539-0000
800-822-5544
<PAGE>
PROSPECTUS HIGHLIGHTS
The Legg Mason Global Equity Trust
The following summary is qualified in its entirety by the more
detailed information appearing in the body of this Prospectus.
Fund Type:
The Fund is an open-end, diversified management investment
company. You may purchase or redeem shares of the Fund through a brokerage
account with Legg Mason or certain of its affiliates. See "How You Can
Invest in the Fund," page __, and "How You Can Redeem Your Fund Shares,"
page __.
Investment Objective and Policies:
The Fund's investment objective is to seek maximum long-term
total return. The Fund attempts to meet this objective by investing
primarily in common stocks of companies located anywhere in the world.
Under normal circumstances, the Fund will invest in equity securities of
issuers located in at least three different countries. The Fund may invest
in the securities of companies located in developing countries, including
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with
the potential for rapid but unstable economic growth. See "The Fund's
Investment Objective and Policies," page __.
Investment Techniques and Risks:
There can be no assurance that the Fund will achieve its
objective. The value of the equity and other instruments held by the Fund,
and thus the net asset value of Fund shares, is subject to market risk.
Additionally, some changes in economic conditions in, or governmental
policies of, foreign nations will have a significant impact on the
performance of the Fund. Foreign investment involves a possibility of
expropriation, nationalization, confiscatory taxation, limitations on the
use or removal of funds or other assets of the Fund, the withholding of
tax on interest or dividends, and restrictions on the ownership of
securities by foreign entities such as the Fund. Fluctuations in the value
of foreign currencies relative to the U.S. dollar will affect the value of
Fund holdings denominated in such currencies. The risks of foreign
investment are greater for investments in emerging markets. The Fund's
participation in hedging and option income strategies would also involve
certain investment risks and transaction costs. See "Description of
Securities and Investment Techniques" in "Investment Objective and
Policies," at pages __-__.
Distributor:
Legg Mason Wood Walker, Incorporated
Investment Adviser:
1
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Batterymarch Financial Management, Inc.
Investment Manager:
Legg Mason Fund Adviser, Inc.
Transfer and Shareholder Servicing Agent:
Boston Financial Data Services
Custodian:
State Street Bank and Trust Company
Exchange Privilege:
All funds in the Legg Mason Family of Funds. See "Exchange
Privilege," page __.
Dividends:
Declared and paid quarterly.
See "Dividends and Other Distributions," page __.
Reinvestment:
All dividends and other distributions are automatically
reinvested in Fund shares unless cash payments are requested.
Initial Purchase:
$1,000 minimum, generally.
Subsequent Purchases:
$100 minimum, generally. See "How You Can Invest in the Fund,"
page __.
Purchase Methods:
Send bank/personal check or wire federal funds.
Public Offering Price Per Share:
Net asset value
2
<PAGE>
FUND EXPENSES
The purpose of the following table is to assist an investor in
understanding the various costs and expenses that an investor will bear
directly or indirectly. The expenses and fees set forth in the table are
based on estimated Fund operating expenses for the current fiscal year,
adjusted for current expense and fee waiver levels.
Shareholder Transaction Expenses
Maximum sales charge on purchases or None
reinvested dividends
Redemption or exchange fees None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees (1) 0.60%
12b-1 fees 1.00%
Other expenses (estimated) 0.65%
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Total operating expenses 2.25%
=====
(1) Pursuant to a voluntary expense limitation, the Adviser,
Manager and Legg Mason have agreed to waive the management and 12b-1 fees
and assume certain other expenses to the extent necessary to limit total
operating expenses for the Fund (exclusive of taxes, interest, brokerage
and extraordinary expenses) to 2.25%, until December 31, 1995. In the
absence of such waivers, the expected management fee, 12b-1 fee, other
expenses and total operating expenses would be 0.75%, 1.00%, 0.65% and
2.40% of average net assets, respectively.
Example of Effect of Fund Expenses
The following example illustrates the expenses that you would pay
on a $1,000 investment over various time periods assuming (1) a 5% annual
rate of return and (2) full redemption at the end of each time period. As
noted in the table above, the Fund charges no redemption fees of any kind.
1 Year 3 Years
------------------------
$23 $70
This example assumes that the percentage amounts listed under
"Annual Fund Operating Expenses" remain the same over the time periods
shown and that all dividends and other distributions are reinvested in
3
<PAGE>
additional Fund shares. If the waiver is not extended beyond December 31,
1995, the expense figures in the example will be higher.
The above tables and the assumption in the example of a 5% annual
return are required by regulations of the Securities and Exchange
Commission ("SEC") applicable to all mutual funds. The assumed 5% annual
return is not a prediction of, and does not represent, the Fund's
projected or actual performance. The above tables should not be considered
a representation of past or future expenses. Actual expenses may be
greater or less than those shown. The Fund's actual expenses will depend
upon, among other things, the level of average net assets, the levels of
sales and redemptions of shares, the extent to which the Adviser and Legg
Mason waive their fees and reimburse Fund expenses and the extent to which
the Fund incurs variable expenses, such as transfer agency costs. Because
the Fund pays a 12b-1 fee, long-term shareholders may pay more in
distribution expenses than the economic equivalent of the maximum front-
end sales charge permitted by the National Association of Securities
Dealers, Inc. ("NASD"). For further information concerning Fund expenses,
see "The Fund's Management and Investment Adviser," page __.
4
<PAGE>
PERFORMANCE INFORMATION
From time to time the Fund may quote its total return in
advertisements or in reports or other communications to shareholders. A
mutual fund's total return is a measurement of the overall change in
value, including changes in share price and assuming reinvestment of
dividends and capital gain distributions, of an investment in the fund.
Cumulative total return shows the fund's performance over a specific
period of time. Average annual total return is the average annual
compounded return that would have produced the same cumulative total
return if the fund's performance had been constant over the entire period.
Average annual returns, which differ from actual year-by-year results,
tend to smooth out variations in a fund's return. No adjustment has been
made for any income taxes payable by shareholders.
Total return information reflects past performance and is not a
prediction or guarantee of future results. Investment return and share
price will fluctuate, and your shares, when redeemed, may be worth more or
less than their original cost. Investment
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek maximum long-term
total return. The Fund attempts to meet this objective by investing
primarily in common stocks of companies located anywhere in the world,
including the United States. Under normal circumstances, the Fund will
invest in equity securities of issuers located in at least three different
countries. The Adviser examines securities from over 20 stock markets,
with emphasis on several of the largest--Japan, the United Kingdom,
France, Canada, Germany and the United States. Common stocks are chosen
using the Adviser's system for identifying common stocks it believes to be
undervalued. The weighting of the Fund's assets among individual countries
will reflect an assessment of the attractiveness of individual equity
securities regardless of where they trade.
In addition, the Fund may invest up to 35% of its total assets in
the securities of companies located in developing countries, including
countries or regions with relatively low gross national product per capita
compared to the world's major economies, and in countries or regions with
the potential for rapid but unstable economic growth (collectively
"emerging markets"). Emerging markets will include any country: (i) having
an "emerging stock market" as defined by the International Finance
Corporation; (ii) with low- to middle-income economies according to the
International Bank for Reconstruction and Development ("World Bank");
(iii) listed in World Bank publications as developing or (iv) determined
by the Adviser to be an emerging market as defined above. The following
issuers are considered to be located in emerging markets: (i) companies
the principal securities trading market for which is an emerging market;
(ii) companies organized under the laws of, and with a principal office
in, emerging markets; (iii) companies whose principal activities are
located in emerging markets; and (iv) companies that derive 50% or more of
5
<PAGE>
their total revenue from either goods or services produced in emerging
markets or sold in emerging markets. There is no assurance the Fund will
attain its investment objective.
The Fund's investment portfolio will normally be diversified
across a broad range of industries and across a number of countries,
consistent with the objective of maximum total return. The Fund is
expected to remain substantially fully invested in equity securities.
However, when cash is temporarily available, or for temporary defensive
purposes, the Fund may invest without limit in repurchase agreements of
domestic issuers. When conditions warrant, for temporary defensive
purposes, the Fund also may invest without limit in short-term debt
instruments, including government, corporate and money market securities
of domestic issuers. Such short-term investments will be rated in one of
the four highest rating categories by Standard & Poor's Ratings Group
("S&P") or Moody's Investors Service, Inc. ("Moody's") or, if unrated by
S&P or Moody's, deemed by the Adviser to be of comparable quality.
The Fund is authorized to invest in stock index futures and
options as discussed below. The Fund may also enter into forward foreign
currency exchange contracts in order to protect against fluctuations in
exchange rates. See "Options, Futures and Forward Currency Exchange
Contracts," and "Risks of Futures, Options and Forward Contracts," page __
The Fund is permitted to hold securities other than common stock,
such as debentures or preferred stock that are convertible into common
stock.
Some of these instruments may be rated below investment grade.
The Fund will not purchase securities rated below investment grade (or
comparable unrated securities) if, as a result, more than 5% of the Fund's
net assets would be so invested.
Investment Risks
Investing in the securities of companies in any foreign country
involves special risks and considerations not typically associated with
investing in U.S. companies. These include risks resulting from
differences in accounting, auditing and financial reporting standards;
lower liquidity than U.S. equity securities; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes
in investment or exchange control regulations (which may include
suspension of the ability to transfer currency out of a country); and
political instability. In many cases, there is less publicly available
information concerning foreign issuers than is available concerning U.S.
issuers. Additionally, purchases and sales of foreign securities and
dividends and interest payable on those securities may be subject to
foreign taxes and tax withholding. Foreign securities generally exhibit
greater price volatility and a greater risk of illiquidity. Changes in
foreign exchange rates will affect the value of securities denominated or
quoted in currencies other than the U.S. dollar irrespective of the
performance of the underlying investment.
6
<PAGE>
The relative performance of various countries' equity markets
historically has reflected wide variations relating to the unique
characteristics of each country's economy. Individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects
as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Foreign securities purchased by the Fund may be listed on foreign
exchanges or traded over-the-counter ("OTC"). Transactions on foreign
exchanges are usually subject to mark-ups or commissions higher than
negotiated commissions on U.S. transactions, although the Fund will
endeavor to obtain the best net results in effecting transactions. There
is less government supervision and regulation of exchanges and brokers in
many foreign countries than in the United States. Additional costs
associated with an investment in foreign securities will include higher
custodial fees than apply to domestic custodial arrangements and the
transaction costs of foreign currency conversions.
The Fund may invest in securities of issuers based in emerging
markets (including, but not limited to, countries in Latin America,
Eastern Europe, Asia and Africa). The risks of foreign investment,
described above, are greater for investments in emerging markets. Because
of the special risks associated with investing in emerging markets, an
investment in the Fund should be considered speculative. Investors are
strongly advised to consider carefully the special risks involved in
emerging markets, which are in addition to the usual risks of investing in
developed markets around the world. Many emerging market countries have
experienced substantial, and in some periods extremely high, rates of
inflation for many years. Inflation and rapid fluctuations in inflation
rates have had, and may continue to have, very negative effects on the
economies and securities markets of certain emerging markets.
Economies in emerging markets generally are dependent heavily
upon international trade and, accordingly, have been and may continue to
be affected adversely by economic conditions, trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which
they trade.
The securities markets of emerging markets are substantially
smaller, less developed, less liquid and more volatile than the securities
markets of the U.S. and other more developed countries. Disclosure and
regulatory standards in many respects are less stringent than in the U.S.
and other major markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely
limited.
Some emerging markets have different settlement and clearance
procedures. In certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions,
making it difficult to conduct such transactions. The inability of the
7
<PAGE>
Fund to make intended securities purchases due to settlement problems
could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems
could result either in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund has entered into a
contract to sell the security, in possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one
or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Fund's
portfolio securities in such markets may not be readily available.
The Fund may invest more than 25% of its total assets in
securities of Japanese issuers. Japan is the largest capitalized stock
market outside the United States. The performance of the Fund may
therefore be significantly affected by events affecting the Japanese
economy and the exchange rate between the Japanese yen and the U.S.
dollar. Japan has recently experienced a recession, including a decline in
real estate values that adversely affected the balance sheets of many
financial institutions. Japan's economy is heavily dependent on foreign
oil. Japan is located in a seismically active area, and severe earthquakes
may damage important elements of the country's infrastructure. Japanese
economic prospects may be affected by the political and military
situations of its nearby neighbors, notably North and South Korea, China,
and Russia.
8
<PAGE>
Investment Restrictions
The investment objective of the Fund may not be changed without a
vote of the Fund's shareholders. Except for the investment objective and
those restrictions or policies specifically identified as "fundamental,"
the investment policies and practices described in this Prospectus and in
the Statement of Additional Information may be changed by the Fund's Board
of Directors without shareholder approval.
Description of Securities and Investment Techniques
The following describes in greater detail certain investment
techniques that may be used by the Fund, in addition to investing in
equity securities.
Repurchase Agreements
A repurchase agreement is an agreement under which either U.S.
government obligations or high-quality liquid debt securities are acquired
from a securities dealer or bank subject to resale at an agreed-upon price
and date. The securities are held for the Fund by State Street Bank and
Trust Company ("State Street"), the Fund's custodian, as collateral until
resold and will be supplemented by additional collateral if necessary to
maintain a total value equal to or in excess of the value of the
repurchase agreement. The Fund bears a risk that the other party to a
repurchase agreement will default on its obligations and the Fund will be
delayed or prevented from exercising its rights to dispose of the
collateral securities, which may decline in value in the interim. The Fund
will enter into repurchase agreements only with financial institutions
determined by the Adviser to present minimal risk of default during the
term of the agreement based on guidelines which are periodically reviewed
by the Board of Directors. The Fund will not enter into repurchase
agreements of more than seven days' duration if more than 15% of its net
assets would be invested in such agreements and other illiquid
investments.
Loans of Portfolio Securities
The Fund may lend portfolio securities to brokers or dealers in
corporate or government securities, banks or other recognized
institutional borrowers of securities, provided that cash or equivalent
collateral, equal to at least 100% of the market value of the securities
loaned, is continuously maintained by the borrower with the Fund. During
the time securities are on loan, the borrower will pay the Fund an amount
equivalent to any dividends or interest paid on such securities, and the
Fund may invest the cash collateral and earn income, or it may receive an
agreed-upon amount of interest income from the borrower who has delivered
equivalent collateral. These loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Fund presently does not
9
<PAGE>
expect to have on loan at any given time securities totaling more than
one-third of its net asset value. When the Fund loans a security to
another party, it runs the risk that the other party will default on its
obligation, and that the value of the collateral will decline before the
Fund can dispose of it.
Restricted And Illiquid Securities
Restricted securities are securities subject to legal or
contractual restrictions on resale, such as private placements. Such
restrictions might prevent the sale of restricted securities at a time
when a sale would otherwise be desirable. The Fund will not acquire a
security for which there is not a readily available market ("illiquid
assets") if such acquisition would cause the aggregate value of illiquid
assets to exceed 15% of the Fund's net assets. Time deposits and
repurchase agreements maturing in more than seven days are considered
illiquid. Illiquid securities may be difficult to value, and the Fund may
have difficulty disposing of such securities promptly. The Fund does not
consider foreign securities to be illiquid if they can be freely sold in
the principal markets in which they are traded, even if they are not
registered for sale in the U.S.
Rule 144A securities, although not registered, may be sold to
qualified institutional buyers in accordance with Rule 144A under the
Securities Act of 1933. The Adviser, acting pursuant to guidelines
established by the Fund's Board of Directors, may determine that some Rule
144A securities are liquid. If the newly-developing institutional markets
for restricted securities do not develop as anticipated, it could
adversely affect the liquidity of the Fund.
Options, Futures and Forward Currency Exchange Contracts
Options, futures and forward currency exchange contracts are
generally considered to be "derivatives." The Fund may enter into forward
foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates in the purchase
and sale of investment securities. It may not enter into such contracts
for speculative purposes.
A forward foreign currency exchange contract is an obligation to
purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed-upon by the
parties, at a price set at the time of the contract. These contracts may
be bought or sold to protect the Fund to a limited extent against adverse
changes in exchange rates between foreign currencies and the U.S. dollar.
Such contracts, which protect the value of the Fund's investment
securities against a decline in the value of a currency, do not eliminate
fluctuations in the underlying prices of the securities. They simply
establish an exchange rate at a future date. Also, although such contracts
tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain
that might be realized should the value of such currency increase.
10
<PAGE>
A futures contract is an agreement between the parties to buy or
sell a specified amount of one or more securities or currencies at a
specified price and date; futures contracts are generally closed out by
the parties in advance of that date for a cash settlement. Under an option
contract, one party has the right to require the other to buy or sell a
specific security, currency or futures contract, and may exercise that
right if the market price of the underlying instrument moves in a
direction advantageous to the holder of the option.
The Fund may utilize futures contracts and options to a limited
extent. Specifically, the Fund may enter into futures contracts and
related options provided that not more than 5% of its assets are required
as a futures contract deposit and/or premium; in addition, the Fund may
not enter into futures contracts or related options if, as a result, more
than 20% of the Fund's total assets would be so invested.
Futures contracts and options may be used for several reasons: to
simulate full investment in underlying securities while retaining a cash
balance for Fund management purposes, to facilitate trading, to reduce
transaction costs, or to seek higher investment returns when a futures
contract is priced more attractively than the underlying equity security
or index.
Risks of Futures, Options and Forward Currency Exchange Contracts
The use of options, futures and forward currency exchange
contracts involves certain investment risks and transaction costs. These
risks include (1) dependence on the Adviser's ability to predict movements
in the prices of individual securities, fluctuations in the general
securities markets or in market sectors and movements in interest rates
and currency markets; (2) imperfect correlation, or no correlation at all,
between movements in the price of options, currencies, futures contracts
or forward currency contracts and movements in the price of the underlying
securities or currencies; (3) the fact that skills needed to use these
instruments are different from those needed to select the Fund's portfolio
securities; (4) the possible lack of a liquid secondary market for any
particular instrument at any particular time; (5) the possibility that the
use of cover or segregation involving a large percentage of the Fund's
assets could impede portfolio management or the Fund's ability to meet
redemption requests or other short-term obligations; (6) the possible need
to defer closing out positions in these instruments in order to avoid
adverse tax consequences; and (7) the fact that, although use of these
instruments for hedging purposes can reduce the risk of loss, they can
also reduce the opportunity for gain, or even result in losses, by
offsetting favorable price movements in hedged investments. There can be
no assurance that the Fund's use of futures contracts, forward currency
contracts or options will be successful. The use of options and futures
contracts for speculative purposes, i.e., to enhance income or to increase
the Fund's exposure to a particular security or foreign currency, subjects
the Fund to additional risk. The use of options and futures to hedge an
anticipated purchase also subjects the Fund to additional risk until the
purchase is completed or the position is closed out.
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Many options on securities are traded primarily on the OTC
market. OTC options are two-party contracts with price and other terms
negotiated between buyer and seller and generally do not have as much
liquidity as exchange-traded options. Thus, when the Fund purchases an OTC
option, it relies on the dealer from which it has purchased the option to
make or take delivery of the securities underlying the option. Failure by
the dealer to do so would result in the loss of the premium paid by the
Fund as well as the loss of the expected benefit of the transaction. OTC
options may be considered "illiquid securities" for purposes of the Fund's
investment limitations. Options and futures traded on U.S. or other
exchanges may be subject to position and daily fluctuation limits, which
may limit the ability of the Fund to reduce risk using such options and
futures and may limit their liquidity.
When using options, futures or forwards, the Fund will cover its
short positions or maintain a segregated asset account, to the extent
required by SEC staff positions. The Statement of Additional Information
contains a more detailed description of futures, options and forward
strategies.
Portfolio Turnover
The Fund anticipates that its average portfolio turnover rate
will not exceed 100%. High turnover rates (100% or more) result in
increased transaction costs, which will be borne directly by the Fund, and
may increase the potential for taxable short-term capital gains. The Fund
will take these possibilities into account as part of its investment
strategy.
How You Can Invest in the Fund
You may purchase shares of the Fund through a brokerage account
with Legg Mason or with an affiliate that has a dealer agreement with Legg
Mason (Legg Mason is a wholly owned subsidiary of Legg Mason, Inc., a
financial services holding company). Your Legg Mason or affiliated
investment executive will be pleased to explain the shareholder services
available from the Fund and answer any questions you may have. Documents
available from your Legg Mason or affiliated investment executive should
be completed if you invest in shares of the Fund through an Individual
Retirement Account ("IRA"), Self-Employed Individual Retirement Plan
("Keogh Plan"), Simplified Employee Pension Plan ("SEP") or other
qualified retirement plan.
The minimum initial investment in the Fund for each account,
including investments made by exchange from other Legg Mason funds, is
$1,000, and the minimum investment for each purchase of additional shares
is $100, except as noted below. Initial investments in an IRA account
established on behalf of a nonworking spouse of a shareholder who has an
IRA invested in the Fund require a minimum amount of only $250. Subsequent
investments in an IRA or similar plan require a minimum amount of $100.
However, once an account is established, the minimum amount for subsequent
investments will be waived if an investment in an IRA or similar plan will
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bring the account total to the maximum amount permitted under the Internal
Revenue Code of 1986, as amended ("Code"). For those investing through the
Fund's Future First Systematic Investment Plan, payroll deduction plans
and plans involving automatic payment of funds from financial institutions
or automatic investment of dividends from certain unit investment trusts,
minimum initial and subsequent investments are lower. The Fund reserves
the right to change these minimum amount requirements at its discretion.
Fund shares purchased on behalf of an IRA, Keogh Plan, SEP or
other qualified retirement plan will be processed at the net asset value
next determined after your Legg Mason or affiliated investment executive
receives a check for the amount of the purchase. Other share purchases
will be processed at the net asset value next determined after your Legg
Mason or affiliated investment executive has transmitted your order to the
Fund; payment must be made within five business days to Legg Mason. Orders
received by Legg Mason's Funds Processing before the close of regular
trading on the New York Stock Exchange, Inc. ("Exchange") (normally 4:00
p.m. Eastern time) ("close of the Exchange") on any day the Exchange is
open will be executed at the net asset value determined as of the close of
the Exchange on that day. Orders received by Legg Mason's Funds Processing
after the close of the Exchange or on days the Exchange is closed will be
executed at the net asset value determined as of the close of the Exchange
on the next day the Exchange is open. See "How Net Asset Value is
Determined," page __. The Fund reserves the right to reject any order for
shares of the Fund or to suspend the offering of shares for a period of
time.
You should always furnish your shareholder account number when
making additional purchases of shares.
There are three ways you can invest in the Fund:
1. Through Your Legg Mason or Affiliated Investment
Executive
Fund shares may be purchased through any Legg Mason or
affiliated investment executive. An investment executive will be
pleased to open an account for you, explain to you the
shareholder services available from the Fund and answer any
questions you may have. After you have established a Legg Mason
or affiliated account, you can order shares of the Fund from your
investment executive in person, by telephone or by mail.
2. Through the Future First Systematic Investment Plan
You may also buy shares in the Fund through the Future
First Systematic Investment Plan. Under this plan, you may
arrange for automatic monthly investments in the Fund of $50 or
more by authorizing Boston Financial Data Services ("BFDS"), the
Fund's transfer agent, to prepare a check each month drawn on
your checking account. There is no minimum initial investment.
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Please contact any Legg Mason or affiliated investment executive
for further information.
3. Through Automatic Investments
Arrangements may be made with some employers and
financial institutions, such as banks or credit unions, for
regular automatic monthly investments of $50 or more in shares of
the Fund. In addition, it may be possible for dividends from
certain unit investment trusts to be invested automatically in
Fund shares. Persons interested in establishing such automatic
investment programs should contact the Fund through any Legg
Mason or affiliated investment executive.
How Your Shareholder Account is Maintained
When you initially purchase shares of the Fund, a shareholder
account is established automatically for you. Any shares that you purchase
or receive as a dividend or other distribution will be credited directly
to your account at the time of purchase or receipt. No certificates are
issued unless you specifically request them in writing. Shareholders who
elect to receive certificates can redeem their shares only by mail.
Certificates will be issued in full shares only. No certificates will be
issued for shares prior to 15 business days after purchase of such shares
by check unless the Fund can be reasonably assured during that period that
payment for the purchase of such shares has been collected. Fund shares
may not be held in, or transferred to, an account with any brokerage firm
other than Legg Mason or its affiliates.
How You Can Redeem Your Fund Shares
There are two ways you can redeem your Fund shares. First, you
may give your Legg Mason or affiliated investment executive an order for
repurchase of your shares. Please have the following information ready
when you call: the number of shares to be redeemed and your shareholder
account number. Second, you may send a written request for redemption to
"Legg Mason Global Equity Trust, c/o Legg Mason Funds Processing, P.O. Box
1476, Baltimore, Maryland 21203-1476."
Upon receipt of a request for redemption in "good order," as
described below, before the close of the Exchange on any day when the
Exchange is open, BFDS, as transfer agent for the Fund, will redeem Fund
shares at the net asset value per share determined as of the close of the
Exchange on that day. Requests for redemption received by the transfer
agent after the close of the Exchange will be executed at the net asset
value determined as of the close of the Exchange on its next trading day.
A redemption request received by Legg Mason's Funds Processing may be
treated as a request for repurchase and, if it is accepted by Legg Mason,
your shares will be purchased at the net asset value per share determined
as of the next close of the Exchange.
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Your check normally will be forwarded immediately after
redemption. However, the Fund reserves the right to take up to seven days
to make payment upon redemption if, in the judgment of the Adviser, the
Fund could be adversely affected by immediate payment. (The Statement of
Additional Information describes several other circumstances in which the
date of payment may be postponed or the right of redemption suspended.)
The proceeds of your redemption or repurchase may be more or less than
your original cost. If the shares to be redeemed or repurchased were paid
for by check (including certified or cashier's checks), within 15 business
days of the redemption or repurchase request, the proceeds will not be
disbursed unless the Fund can be reasonably assured that the check has
been collected.
A redemption request will be considered to be received in "good
order" only if:
1. You have indicated in writing the number of shares to be
redeemed and your shareholder account number;
2. The written request is signed by you and by any co-owner
of the account with exactly the same name or names used
in establishing the account;
3. The written request is accompanied by any certificates
representing the shares that have been issued to you, and
you have endorsed the certificates for transfer or an
accompanying stock power exactly as the name or names
appear on the certificates; and
4. The signatures on the written redemption request and on
any certificates for your shares (or an accompanying
stock power) have been guaranteed without qualification
by a national bank, a state bank, a member of a principal
stock exchange or other entity described in Rule 17Ad-15
under the Securities Exchange Act of 1934.
Other supporting legal documents may be required from
corporations or other organizations, fiduciaries or persons other than the
shareholder of record making the request for redemption or repurchase. If
you have a question concerning the redemption of Fund shares, contact your
Legg Mason or affiliated investment executive.
The Fund will not be responsible for the authenticity of
redemption instructions received by telephone, provided it follows
reasonable procedures to identify the caller. The Fund may request
identifying information from callers or employ identification numbers. The
Fund may be liable for losses due to unauthorized or fraudulent
instructions if it does not follow reasonable procedures. Telephone
redemption privileges are available automatically to all shareholders
unless certificates have been issued. Shareholders who do not wish to have
telephone redemption privileges should call their Legg Mason or affiliated
investment executive for further instructions.
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To redeem your Legg Mason Fund retirement account, a Distribution
Request Form must be completed and returned to Legg Mason Client Services
for processing. This form can be obtained through your Legg Mason or
affiliated investment executive or Legg Mason Client Services in
Baltimore, Maryland.
Because of the relatively high cost of maintaining small
accounts, the Fund may elect to close any account with a current value of
less than $500 by redeeming all of the shares in the account and mailing
the proceeds to you. However, the Fund will not redeem accounts that fall
below $500 solely as a result of a reduction in net asset value per share.
If the Fund elects to redeem the shares in your account, you will be
notified that your account is below $500 and will be allowed 60 days in
which to make an additional investment in order to avoid having your
account closed.
How Net Asset Value is Determined
Net asset value per share is determined for the Fund daily as of
the close of the Exchange on every day that the Exchange is open, by
subtracting the Fund's liabilities from its total assets and dividing the
result by the number of shares outstanding. Fund securities are valued on
the basis of market quotations or, lacking such quotations, at fair value
as determined under the guidance of the Board of Directors. Securities for
which market quotations are readily available are valued at the last sale
price of the day for a comparable position, or, in the absence of any such
sales, the last available bid price for a comparable position. Where a
security is traded on more than one market, which may include foreign
markets, the securities are generally valued on the market considered by
the Adviser to be the primary market. Securities with remaining maturities
of 60 days or less are valued at amortized cost. The Fund will value its
foreign securities in U.S. dollars on the basis of the then-prevailing
exchange rates.
Dividends and Other Distributions
The Fund declares and pays dividends from net investment income
following the end of each quarter. Dividends from net short-term capital
gain and distributions of substantially all net capital gain (the excess
of net long-term capital gain over net short-term capital loss), and any
net realized gain from foreign currency transactions, generally are
declared and paid after the end of the taxable year in which the gain is
realized. Dividends and other distributions, if any, on shares held by
shareholders maintaining a Systematic Withdrawal Plan generally are
reinvested in Fund shares on the payment dates. Other shareholders may
elect to:
1. Receive both dividends and other distributions in Fund
shares;
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2. Receive dividends in cash and other distributions in Fund
shares;
3. Receive dividends in Fund shares and other distributions
in cash; or
4. Receive both dividends and other distributions in cash.
In certain cases, you may reinvest your dividends and other
distributions in shares of another Legg Mason fund. Please contact your
Legg Mason or affiliated investment executive for additional information
about this option.
If no election is made, both dividends and other distributions
will be credited to your account in additional Fund shares at the net
asset value of the shares determined as of the close of the Exchange on
the reinvestment date. Shares received pursuant to any of the first three
(reinvestment) elections above also are credited to your account at that
net asset value. If you elect to receive dividends and/or other
distributions in cash, you will be sent a check or will have your Legg
Mason account credited monthly. You may elect at any time to change your
option by notifying in writing the Fund: Legg Mason Global Equity Trust,
c/o Legg Mason Funds Processing, P.O. Box 1476, Baltimore, MD 21203-1476.
Your election must be received at least 10 days before the payment date in
order to be effective for dividends and other distributions paid as of
that date.
Taxes
The Fund intends to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of federal
income tax on that part of its investment company taxable income
(generally consisting of net investment income and any net short-term
capital gain and net gains from certain foreign currency transactions) and
net capital gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income
(whether paid in cash or reinvested in Fund shares) are taxable to its
shareholders (other than IRAs, Keogh Plans, SEPs, other qualified
retirement plans and other investors not subject to tax on their income)
as ordinary income to the extent of the Fund's earnings and profits.
Distributions of the Fund's net capital gain (whether paid in cash or
reinvested in additional Fund shares) are taxable to those shareholders as
long-term capital gain, regardless of how long they have held their Fund
shares.
The Fund sends each shareholder a notice following the end of
each calendar year specifying, among other things, the amounts of all
ordinary income dividends and capital gain distributions paid (or deemed
paid) during the year. The Fund is required to withhold 31% of all
dividends, capital gain distributions and redemption proceeds payable to
any individuals and certain other non-corporate shareholders who do not
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provide the Fund with a certified taxpayer identification number. The Fund
also is required to withhold 31% of all dividends and capital gain
distributions payable to such shareholders who otherwise are subject to
backup withholding.
A redemption of Fund shares may result in taxable gain or loss to
the redeeming shareholder, depending on whether the redemption proceeds
are more or less than the shareholder's adjusted basis for the redeemed
shares. An exchange of Fund shares for shares of any other Legg Mason fund
generally will have similar tax consequences. See "Shareholder Services--
Exchange Privilege," page __. If Fund shares are purchased within 30 days
before or after redeeming Fund shares at a loss, all or part of that loss
will not be deductible and instead will increase the basis of the newly
purchased shares.
The Fund's dividend and interest income, and gains realized from
disposition of foreign securities, may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that
would reduce the yield on the Fund's securities. Tax conventions between
certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors.
If more than 50% of the value of the Fund's total assets at the
close of any taxable year consists of securities of foreign corporations,
the Fund may file an election with the Internal Revenue Service that will
enable its shareholders, in effect, to receive the benefit of the foreign
tax credit with respect to any foreign and U.S. possessions income taxes
paid by it. Pursuant to any such election, the Fund would treat those
taxes as dividends paid to its shareholders, and each shareholder would be
required to (1) include in gross income, and treat as paid by the
shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid by
the Fund that represents income from foreign or U.S. possessions sources
as the shareholder's own income from those sources, and (3) either deduct
the taxes deemed paid by the shareholder in computing the shareholder's
taxable income or, alternatively, use the foregoing information in
calculating the foreign tax credit against the shareholder's federal
income tax. The Fund will report to its shareholders shortly after each
taxable year their respective shares of the Fund's income from sources
within, and taxes paid to, foreign countries and U.S. possessions if it
makes this election.
A dividend or other distribution paid shortly after shares have
been purchased, although in effect a return of investment, is subject to
federal income tax. Accordingly, an investor should recognize that a
purchase of Fund shares immediately prior to the record date for a
dividend or other distribution could cause the investor to incur tax
liabilities and should not be made solely for the purpose of receiving the
dividend or other distribution.
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The foregoing is only a summary of some of the important federal
income tax considerations generally affecting the Fund and its
shareholders; see the Statement of Additional Information for a further
discussion. In addition to those considerations, which are applicable to
any investment in the Fund, there may be other federal, state, local or
foreign tax considerations applicable to a particular investor.
Prospective shareholders are therefore urged to consult their tax advisers
with respect to the effects of this investment on their own tax
situations.
Shareholder Services
Confirmations and Reports
You will receive from the distributor a confirmation after each
transaction (except a reinvestment of dividends and capital gains and
purchases made through the Future First Systematic Investment Plan or
through automatic investments). An account statement will be sent to you
monthly unless there has been no activity in the account or you are
purchasing shares through the Future First Systematic Investment Plan or
through automatic investments, in which case a cumulative account
statement will be sent quarterly. Reports will be sent to shareholders at
least semi-annually showing the Fund's portfolio and other information. An
annual report containing financial statements audited by the Fund's
independent accountants will also be sent to shareholders each year.
Shareholder inquiries should be addressed to "Legg Mason Global
Equity Trust, c/o Legg Mason Funds Processing, P.O. Box 1476, Baltimore,
Maryland 21203-1476."
Systematic Withdrawal Plan
You may elect to make systematic withdrawals from your Fund account of a
minimum of $50 on a monthly basis if you are purchasing or already own
shares with a net asset value of $5,000 or more. Shareholders should not
purchase shares of the Fund while they are participating in the Systematic
Withdrawal Plan. Please contact your Legg Mason or affiliated investment
executive for further information.
Exchange Privilege
As a Fund shareholder, you are entitled to exchange your shares
of the Fund for shares of the following funds in the Legg Mason Family of
Funds, provided that such shares are eligible for sale in your state of
residence:
Legg Mason Cash Reserve Trust
A money market fund seeking stability of principal and current
income consistent with stability of principal.
Legg Mason Tax Exempt Trust, Inc.
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A money market fund seeking high current income exempt from
federal income tax, preservation of capital, and liquidity.
Legg Mason U. S. Government Money Market Portfolio
A money market fund seeking high current income consistent with
liquidity and conservation of principal.
Legg Mason Value Trust, Inc.
A mutual fund seeking long-term growth of capital.
Legg Mason Special Investment Trust, Inc.
A mutual fund seeking capital appreciation by investing
principally in issuers with market capitalizations of less than $2.5
billion.
Legg Mason Total Return Trust, Inc.
A mutual fund seeking capital appreciation and current income in
order to achieve an attractive total investment return consistent with
reasonable risk.
Legg Mason American Leading Companies Trust
A mutual fund seeking long-term capital appreciation and current
income consistent with prudent investment risk.
Legg Mason U. S. Government Intermediate-Term Portfolio
A mutual fund seeking high current income consistent with prudent
investment risk and liquidity needs, primarily by investing in debt
obligations issued or guaranteed by the U. S. Government, its agencies or
instrumentalities, while maintaining an average dollar-weighted maturity
of between three and ten years.
Legg Mason Investment Grade Income Portfolio
A mutual fund seeking a high level of current income, primarily
through investment in a diversified portfolio of investment grade debt
securities.
Legg Mason High Yield Portfolio
A mutual fund primarily seeking a high level of current income
and secondarily, capital appreciation, by investing principally in high
yield, fixed-income securities.
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Legg Mason Global Government Trust
A mutual fund seeking capital appreciation and current income by
investing principally in debt securities issued or guaranteed by foreign
governments, the U.S. Government, their agencies, instrumentalities and
political subdivisions.
Legg Mason Maryland Tax-Free Income Trust*
A tax-exempt municipal bond fund seeking a high level of current
income exempt from federal and Maryland state and local income taxes,
consistent with prudent investment risk and preservation of capital.
Legg Mason Pennsylvania Tax-Free Income Trust*
A tax-exempt municipal bond fund seeking a high level of current
income exempt from federal income tax and Pennsylvania personal income
tax, consistent with prudent investment risk and preservation of capital.
Legg Mason Tax-Free Intermediate-Term Income Trust*
A tax-exempt municipal bond fund seeking a high level of current
income exempt from federal income tax, consistent with prudent investment
risk.
------------------------
*Shares of these funds are sold with an initial sales charge.
Investments by exchange into the Legg Mason funds sold without an
initial sales charge are made at the per share net asset value determined
on the same business day as redemption of the Fund shares you wish to
exchange. Investments by exchange into the Legg Mason funds sold with an
initial sales charge are made at the per share net asset value, plus the
applicable sales charge, determined on the same business day as redemption
of the Fund shares you wish to redeem; except that no sales charge will be
imposed upon proceeds from the redemption of Fund shares to be exchanged
that were originally purchased by exchange from a fund on which the same
or higher sales charge has already been paid. Exchanges from the other
Legg Mason funds sold without an initial sales charge will be at net asset
value. There is no charge for the exchange privilege, but the Fund
reserves the right to terminate or limit the exchange privilege of any
shareholder who makes more than four exchanges from the Fund in one
calendar year. To obtain further information concerning the exchange
privilege and prospectuses of other Legg Mason funds, or to make an
exchange, please contact your Legg Mason or affiliated investment
executive. To effect an exchange by telephone, please call your Legg Mason
or affiliated investment executive with the information described in "How
You Can Redeem Your Fund Shares," page 9. The other factors relating to
telephone redemptions described in that section apply also to telephone
exchanges. The Fund reserves the right to modify or terminate the exchange
privilege upon 60 days' notice to shareholders. There is no assurance the
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money market funds will be able to maintain a $1.00 share price. None of
the funds is insured or guaranteed by the U.S. Government.
The Fund's Management and Investment Adviser
Board of Directors
The business and affairs of the Fund are managed under the
direction of the Board of Directors of Legg Mason Global Trust, Inc.
("Corporation").
Manager
Pursuant to a management agreement with the Fund ("Management
Agreement"), which was approved by the Corporation's Board of Directors,
Legg Mason Fund Adviser, Inc. ("Manager"), a wholly owned subsidiary of
Legg Mason, Inc., serves as the Fund's manager. The Manager manages the
non-investment affairs of the Fund, directs all matters related to the
operation of the Fund and provides office space and administrative staff
for the Fund. The Fund pays the Manager, pursuant to the Management
Agreement, a fee equal to an annual rate of 0.75% of the Fund's average
daily net assets. The Fund pays all its other expenses which are not
assumed by the Manager or Adviser. These expenses include, among others,
interest expense, taxes, brokerage fees, commissions, expenses of
preparing and printing prospectuses, statements of additional information,
proxy statements and reports and of distributing them to existing
shareholders, custodian charges, transfer agency fees, organizational
expenses, distribution and shareholder servicing fees to the Fund's
distributor, compensation of the independent directors, legal and audit
expenses, insurance expenses, expenses of registering and qualifying
shares of the Fund for sale under federal and state law, governmental fees
and expenses incurred in connection with membership in investment company
organizations.
The Manager acts as manager, investment adviser or consultant to
fifteen investment company portfolios (excluding the Fund) which had
aggregate assets under management of over $4.0 billion as of January 16,
1995.
Adviser
Pursuant to an advisory agreement with the Manager ("Advisory
Agreement"), which was approved by the Corporation's Board of Directors,
Batterymarch Financial Management, Inc. ("Adviser"), a wholly owned
subsidiary of Legg Mason, Inc., serves as the Fund's investment adviser.
The Adviser acts as the portfolio manager for the Fund and is responsible
for the actual investment management of the Fund, including the
responsibility for making decisions and placing orders to buy, sell or
hold a particular security. The Manager pays the Adviser, pursuant to the
Advisory Agreement, a management fee equal to an annual rate of 0.50% of
the Fund's average daily net assets. The Adviser and Manager have
voluntarily agreed to waive their fees and to reimburse the Fund for its
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expenses to the extent necessary to limit the Fund's total operating
expenses (exclusive of taxes, interest, brokerage and extraordinary
expenses) to 2.25% of its average daily net assets. This agreement will
expire on December 31, 1995, unless extended by the Manager and Adviser.
The Adviser acts as investment adviser to institutional accounts,
such as mutual funds, corporate pension plans and endowment funds, as well
as to individual investors. Total assets under management by the Adviser
were approximately $5.0 billion as of January 16, 1995.
Charles Lovejoy is the Portfolio Manager for the Fund. Mr.
Lovejoy joined the Adviser in 1992 as an investment strategist. From 1990
to 1992, he was a Managing Director of Boston International Advisors where
he managed international and emerging markets portfolios. From 1980 to
1990, Mr. Lovejoy was Senior Vice President at Putnam Management Company
where he headed the Quantitative Research Department; his responsibilities
included portfolio management and product development as well as
quantitative research for international, emerging markets and U.S.
equities. A past president of the Boston Quantitative Discussion Group and
the Boston Security Analysts Society, Mr. Lovejoy is a Director of the
International Society of Financial Analysts. Mr. Lovejoy is a Chartered
Financial Analyst.
Legg Mason receives a fee from BFDS for assisting it with its
transfer agent and shareholder servicing functions.
The Fund uses Legg Mason, among others, as broker for agency
transactions in listed and over-the-counter securities at commission rates
and under circumstances consistent with the policy of best execution.
The Fund's Distributor
Legg Mason is the distributor of the Fund's shares pursuant to an
Underwriting Agreement with the Fund. The Underwriting Agreement obligates
Legg Mason to pay certain expenses in connection with the offering of
shares of the Fund, including any compensation to its investment
executives, the printing and distribution of prospectuses, statements of
additional information and periodic reports used in connection with the
offering to prospective investors, after the prospectuses, statements of
additional information and reports have been prepared, set in type and
mailed to existing shareholders at the Fund's expense, and for any
supplementary sales literature and advertising costs.
The Board of Directors of the Corporation has adopted a
Distribution and Shareholder Services Plan ("Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 ("1940 Act"). The Plan provides
that as compensation for its ongoing services to shareholders and its
activities and expenses related to the sale and distribution of Fund
shares, Legg Mason receives from the Fund an annual distribution fee equal
to 0.75% of the Fund's average daily net assets, and an annual service fee
equal to 0.25% of the Fund's average daily net assets. The distribution
fee and the service fee are calculated daily and paid monthly. The fees
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received by Legg Mason during any year may be more or less than its cost
of providing distribution and shareholder services to the Fund. Legg Mason
has temporarily agreed to waive the distribution fee to the extent
necessary to limit the Fund's total operating expenses (exclusive of
taxes, interest, brokerage fees and extraordinary expenses) to 2.25% of
its average daily net assets. This waiver agreement will expire on
December 31, 1995, unless extended by Legg Mason.
NASD rules limit the amount of annual distribution fees that may
be paid by mutual funds and impose a ceiling on the cumulative
distribution fees received. The Fund's Plan complies with those rules.
The Chairman, President and Treasurer of the Corporation are
employed by Legg Mason.
The Fund's Custodian and Transfer and Dividend-Disbursing Agent
State Street Bank and Trust Company, P.O. Box 1713, Boston,
Massachusetts 02105, is custodian for the securities and cash of the Fund.
Boston Financial Data Services, P.O. Box 8000, Boston, Massachusetts
02266-8000, serves as transfer agent for Fund shares and dividend-
disbursing agent for the Fund.
Pursuant to rules adopted under Section 17(f) of the 1940 Act,
the Fund may maintain foreign securities and cash in the custody of
certain eligible foreign banks and securities depositories. Selection of
these foreign custodial institutions is made by the Board of Directors in
accordance with SEC rules. The Board of Directors will consider a number
of factors, including, but not limited to, the relationship of the
institution to State Street, the reliability and financial stability of
the institution, the ability of the institution to capably perform
custodial services for the Fund, the reputation of the institution in its
national market, the political and economic stability of the countries in
which the sub-custodians will be located and risks of potential
nationalization or expropriation of Fund assets. No assurance can be given
that the Board of Directors' appraisal of the risks in connection with
foreign custodial arrangements will always be correct or that
expropriation, nationalization, freezes, or confiscation of Fund assets
will not occur.
Description of the Corporation and its Shares
The Corporation was established as a Maryland corporation on
December 31, 1992. The Articles of Incorporation authorize the Corporation
to issue one billion shares of par value $.001 per share and to create
additional series, each of which may issue separate classes of shares. The
Fund is one of two series currently being offered.
Shareholders of each series of the Corporation are entitled to
one vote per share and fractional votes for fractional shares held. Voting
rights are not cumulative. All shares of the Fund are fully paid and
nonassessable and have no preemptive or conversion rights.
24
<PAGE>
Annual shareholders' meetings will not be held except where the
1940 Act requires a shareholder vote on certain matters (including the
election of directors, approval of an advisory contract and approval of a
plan of distribution pursuant to Rule 12b-1). The Corporation will call a
special meeting of the shareholders at the request of 10% or more of the
shares entitled to vote; shareholders wishing to call such a meeting
should submit a written request to the Fund at 111 South Calvert Street,
Baltimore, Maryland 21202, stating the purpose of the proposed meeting and
the matters to be acted upon.
25
<PAGE>
Legg Mason Global Trust, Inc.
LEGG MASON GLOBAL EQUITY TRUST
STATEMENT OF ADDITIONAL INFORMATION
Legg Mason Global Equity Trust ("Fund"), a diversified,
professionally managed portfolio, is a separate series of Legg Mason
Global Trust, Inc. an open-end management investment company
("Corporation"). The Fund seeks maximum long-term total return. In
attempting to achieve the Fund's objective, the Fund's investment adviser,
Batterymarch Financial Management, Inc. ("Adviser"), normally will invest
in common stocks of companies in at least three different countries. In
addition, the Fund may invest in the securities of companies located in
developing countries, including countries or regions with relatively low
gross national product per capita compared to the world's major economies,
and in countries or regions with the potential for rapid but unstable
economic growth (collectively, "emerging markets").
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus for the Fund, dated
__________, 1995 which has been filed with the Securities and Exchange
Commission ("SEC"). Copies of the Fund's Prospectus are available without
charge from your Legg Mason or affiliated investment executive or by
calling (410) 539-0000.
Dated: __________, 1995
Legg Mason Wood Walker
Incorporated
------------------------------------------------------------------------
111 South Calvert Street
Baltimore, Maryland 21202
(410) 539-0000 (800) 822-5544
<PAGE>
TABLE OF CONTENTS
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Page
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Additional Information About Investment Limitations and
Policies
Additional Purchase and Redemption Information
Additional Tax Information
Performance Information
Valuation of Fund Shares
Tax-Deferred Retirement Plans
The Corporation's Directors and Officers
The Fund's Investment Manager
The Fund's Investment Adviser
The Fund's Distributor
Portfolio Transactions and Brokerage
The Fund's Custodian and Transfer and Dividend-
Disbursing Agent
The Corporation's Legal Counsel
The Corporation's Independent Accountants
No person has been authorized to give any
information or to make any representations not contained
in the Prospectus or this Statement of Additional
Information in connection with the offerings made by the
Prospectus and, if given or made, such information or
representations must not be relied upon as having been
authorized by the Fund or its distributor. The Prospectus
and the Statement of Additional Information do not
constitute offerings by the Fund or by the distributor in
any jurisdiction in which such offerings may not lawfully
be made.
<PAGE>
ADDITIONAL INFORMATION ABOUT INVESTMENT
LIMITATIONS AND POLICIES
In addition to the investment objective described in the
Prospectus, the Fund has adopted certain fundamental investment
limitations that cannot be changed except by vote of the holders of a
majority of the outstanding voting securities of the Fund. The Fund may
not:
1. Borrow money, except from banks or through reverse
repurchase agreements or dollar rolls for temporary purposes in an
aggregate amount not to exceed 33-1/3% of the total assets (including
borrowings), less liabilities (exclusive of borrowings), of the Fund;
provided that borrowings, including reverse repurchase agreements and
dollar rolls, in excess of 5% of such value will be only from banks
(although not a fundamental policy subject to shareholder approval, the
Fund will not purchase securities if borrowings, including reverse
repurchase agreements and dollar rolls, exceed 5% of its total assets);
2. With respect to 75% of its total assets, invest more than
5% of its total assets (taken at market value) in securities of any one
issuer, or purchase more than 10% of the voting securities of any one
issuer (other than, in each case, cash items, securities of the U.S.
Government, its agencies and instrumentalities, and securities issued by
other investment companies);
3. Issue senior securities, except as permitted by the
Investment Company Act of 1940 ("1940 Act");
4. Engage in the business of underwriting the securities of
other issuers except insofar as the Fund may be deemed an underwriter
under the Securities Act of 1933, as amended, in disposing of a portfolio
security;
5. Buy or hold any real estate other than instruments
secured by real estate or interests therein;
6. Purchase or sell any commodities or commodities
contracts, except that the Fund may purchase or sell currencies; futures
contracts on currencies, securities or securities indexes, options on
currencies, securities, and securities indexes; and options on interest
rate and currency futures contracts;
7. Make loans, except loans of portfolio securities and
except to the extent the purchase of notes, bonds, or other evidences of
indebtedness, the entry into repurchase agreements, or deposits with banks
and other financial institutions may be considered loans;
8. Purchase any security if, as a result thereof, 25% or
more of its total assets would be invested in the securities of issuers
having their principal business activities in the same industry. This
limitation does not apply to securities issued or guaranteed by the U.S.
- 2 -
<PAGE>
Government, its agencies or instrumentalities and repurchase agreements
with respect thereto.
The foregoing investment limitations cannot be changed without
the affirmative vote of the lesser of (1) more than 50% of the outstanding
shares of the Fund or (2) 67% or more of the shares of the Fund present at
a shareholders' meeting if more than 50% of the outstanding shares of the
Fund are represented at the meeting in person or by proxy. Except with
respect to the 33-1/3% limit in fundamental investment limitation number
1, if a percentage restriction is adhered to at the time of an investment
or transaction, a later increase or decrease in percentage resulting from
a change in the value of portfolio securities or amount of total assets
will not be considered a violation of any of the foregoing limitations.
The Fund interprets fundamental investment limitation (5) to
prohibit investment in real estate limited partnerships.
Except as otherwise specified, the investment limitations and
policies which follow are non-fundamental and may be changed by the Fund's
Board of Directors without shareholder approval.
The Fund may not:
1. Purchase or sell any oil, gas or mineral exploration or
development programs, including leases;
2. Buy securities on "margin," except for short-term credits
necessary for clearance of portfolio transactions and except that the Fund
may make margin deposits in connection with the use of permitted futures
contracts and options on futures contracts as well as options on
currencies, securities, and securities indexes;
3. Make short sales of securities or maintain a short
position, except that the Fund may (a) make short sales and maintain short
positions in connection with its use of options, futures contracts and
options on futures contracts and (b) sell short "against the box"
(although not a fundamental policy, the Fund does not currently intend to
make short sales during the coming year);
4. Purchase or retain the securities of an issuer if, to the
knowledge of the Fund's management, those officers and directors of the
Fund and officers and directors of Legg Mason Fund Adviser, Inc. and
Batterymarch Financial Management, Inc. who individually own beneficially
more than 0.5% of the outstanding securities of that issuer own in the
aggregate more than 5% of the securities of that issuer;
5. Purchase any security if, as a result, more than 5% of
the Fund's total assets would be invested in securities of companies that
together with any predecessors have been in continuous operation for less
than three years;
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<PAGE>
6. Purchase a security restricted as to resale if, as a
result thereof, more than 10% of the Fund's total assets would be invested
in restricted securities. For purposes of this limitation, securities
that can be sold freely in the principal market in which they are traded
are not considered restricted, even if they cannot be sold in the United
States.
7. Make investments in warrants if such investments, valued
at the lower of cost or market, exceed 5% of the value of its net assets,
which amount may include warrants that are not listed on the New York or
American Stock Exchanges, provided that such unlisted warrants, valued at
the lower of cost or market, do not exceed 2% of the Fund's net assets,
and further provided that this restriction does not apply to warrants
attached to, or sold as a unit with, other securities. For purposes of
this restriction, the term "warrants" does not include options on
securities, stock or bond indices, foreign currencies or futures
contracts.
8. Purchase securities of other investment companies, except
to the extent permitted by the 1940 Act and in the open market at no more
than customary brokerage and commission rates. This limitation does not
apply to securities received or acquired as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or merger.
Foreign Investments
Investors should recognize that investing in foreign companies
involves certain special considerations which are not typically associated
with investing in U.S. companies. Since the stocks of foreign companies
are frequently denominated in foreign currencies, and since the Fund may
temporarily hold uninvested reserves in bank deposits in foreign
currencies, the Fund will be affected favorably or unfavorably by changes
in currency rates and in exchange control regulations, and may incur costs
in connection with conversions between various currencies. The investment
policies of the Fund permit it to enter into forward foreign currency
exchange contracts in order to hedge the Fund's holdings and commitments
against changes in the level of future currency rates, although the Fund
may not hedge many of its positions. Such contracts involve an obligation
to purchase or sell a specific currency at a future date at a price set at
the time of the contract.
Although the Fund will endeavor to achieve most favorable
executions costs in its portfolio transactions, commissions on many
foreign stock exchanges are at fixed rates, and generally these are higher
than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes against
dividend and interest income. Although in some countries a portion of
these taxes is recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from the companies
comprising the Fund. However, these foreign withholding taxes are not
expected to have a significant impact on the Fund, since the Fund's
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<PAGE>
investment objective is to seek long-term total return and any income
should be considered incidental.
Restricted and Illiquid Securities
The Fund is authorized to invest up to 15% of its net assets in
securities for which no readily available market exists, which for this
purpose includes, among other things, repurchase agreements maturing in
more than seven days, over-the-counter ("OTC") options and securities used
as cover for such options. Restricted securities may be sold only (1)
pursuant to SEC Rule 144A or other exemption, (2) in privately negotiated
transactions or (3) in public offerings with respect to which a
registration statement is in effect under the Securities Act of 1933.
Such securities may include those that are subject to restrictions
contained in the securities laws of other countries. Securities that are
freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, are not considered by
the Fund to be restricted. Where registration is required, the Fund may
be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell
and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable
price than prevailed when it decided to sell.
Not all restricted securities are illiquid. SEC regulations
permit certain restricted securities to be traded freely among qualified
purchasers. The SEC has stated that an investment company's board of
directors, or its investment adviser acting under authority delegated by
the board, may determine that a security eligible for trading under this
rule is not "illiquid." The Fund intends to rely on this rule, to the
extent appropriate, to deem restricted securities as not "illiquid." If
the newly-developing institutional markets for restricted securities do
not develop as anticipated, it could adversely affect the liquidity of the
Fund.
Repurchase Agreements
When the Fund enters into a repurchase agreement with a foreign
or domestic entity, it will obtain from that entity securities equal in
value to 102% of the amount of the repurchase agreement (or 100%, if the
securities obtained are U.S. Treasury bills, notes or bonds). Such
securities will be held by the Fund's custodian, an approved foreign sub-
custodian, or an approved securities depository or book-entry system.
Reverse Repurchase Agreements and Other Borrowing
A reverse repurchase agreement is a portfolio management
technique in which the Fund temporarily transfers possession of a
portfolio instrument to another person, such as a financial institution or
broker-dealer, in return for cash. At the same time, the Fund agrees to
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<PAGE>
repurchase the instrument at an agreed upon time (normally within seven
days) and price, including interest payment. The Fund may also enter into
dollar rolls, in which the Fund sells a security for delivery in the
current month and simultaneously contracts to repurchase a substantially
similar security on a specified future date. The Fund would be
compensated by the difference between the current sales price and the
forward price for the future purchase. The Fund may engage in reverse
repurchase agreements and dollar rolls as a means of raising cash to
satisfy redemption requests or for other temporary or emergency purposes
without the necessity of selling portfolio instruments. While engaging in
reverse repurchase agreements or dollar rolls, the Fund will maintain
cash, U.S. government securities or other high-grade liquid securities in
a segregated account at its custodian bank with a value at least equal to
the Fund's obligation under the agreements. For purposes of its borrowing
limitation and policies, the Fund considers reverse repurchase agreements
and dollar rolls to constitute borrowing.
The Fund may borrow only for temporary purposes, which borrowing
may be unsecured. The 1940 Act requires the Fund to maintain continuous
asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of at least 300% of the amount
borrowed. If the asset coverage should decline below 300% as a result of
market fluctuations or for other reasons, the Fund must reduce the debt
and restore the 300% asset coverage within three days (exclusive of
Sundays and holidays) and may have to sell some of its holdings to do so,
even though it may be disadvantageous from an investment standpoint to
sell securities at that time. Borrowing may exaggerate the effect on net
asset value of any increase or decrease in the market value of the
portfolio. To avoid the potential leveraging effects of the Fund's
borrowings, the Fund will not make additional investments while
borrowings, including reverse repurchase agreements and dollar rolls, are
in excess of 5% of the Fund's total assets. Money borrowed will be
subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. If the income and gain on such
securities is less than the cost of borrowing, the Fund will be worse off
than if it had not borrowed at all. The Fund also may be required to
maintain minimum average balances in connection with such borrowing or to
pay a commitment or other fee to maintain a line of credit; either of
these requirements would increase the cost of borrowing over the stated
interest rate. The Fund does not currently intend to use reverse
repurchase agreements and dollar rolls.
Short Sales
The Fund will not sell securities short, other than through the
use of short sales against the box, futures and options as described in
the Prospectus. In a short sale against the box, the Fund simultaneously
owns, or has the right to acquire without the payment of any additional
consideration, securities identical in kind and amount to those sold
short.
Options and Futures
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<PAGE>
The Fund may, as described in the Prospectus, enter into futures
contracts, options and options on futures contracts for several reasons:
to maintain cash reserves while remaining fully invested, to facilitate
trading, to reduce transaction costs, or to seek higher investment returns
when the Adviser believes a futures contract is priced more attractively
than the underlying equity security or index. Options and futures are
generally considered to be "derivatives."
Options on Securities
The Fund may purchase call options on securities that the Adviser
intends to include in the Fund's investment portfolio in order to fix the
cost of a future purchase. Purchased options also may be used as a means
of participating in an anticipated price increase of a security on a more
limited risk basis than would be possible if the security itself were
purchased. In the event of a decline in the price of the underlying
security, use of this strategy would serve to limit the Fund's potential
loss to the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the Fund either
sells or exercises the option, any profit realized will be reduced by the
premium.
The Fund may purchase put options in order to hedge against a
decline in the market value of securities held in its portfolio or to
enhance income. The put option enables the Fund to sell the underlying
security at the predetermined exercise price; thus the potential for loss
to the Fund below the exercise price is limited to the option premium
paid. If the market price of the underlying security is higher than the
exercise price of the put option, any profit the Fund realizes on the sale
of the security would be reduced by the premium paid for the put option
less any amount for which the put option may be sold.
The Fund may write covered call options on securities in which it
is authorized to invest. Because it can be expected that a call option
will be exercised if the market value of the underlying security increases
to a level greater than the exercise price, the Fund might write covered
call options on securities generally when its Adviser believes that the
premium received by the Fund will exceed the extent to which the market
price of the underlying security will exceed the exercise price. The
strategy may be used to provide limited protection against a decrease in
the market price of the security, in an amount equal to the premium
received for writing the call option less any transaction costs. Thus, in
the event that the market price of the underlying security held by the
Fund declines, the amount of such decline will be offset wholly or in part
by the amount of the premium received by the Fund. If, however, there is
an increase in the market price of the underlying security and the option
is exercised, the Fund would be obligated to sell the security at less
than its market value. The Fund would give up the ability to sell the
portfolio securities used to cover the call option while the call option
was outstanding. Such securities would also be considered illiquid in the
case of OTC options written by the Fund, and therefore subject to the
Fund's limitation on investing no more than 15% of its net assets in
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<PAGE>
illiquid securities. In addition, the Fund could lose the ability to
participate in an increase in the value of such securities above the
exercise price of the call option because such an increase would likely be
offset by an increase in the cost of closing out the call option (or could
be negated if the buyer chose to exercise the call option at an exercise
price below the securities' current market value).
The sale of a put option on a security by the Fund also serves to
partially offset the cost of a security that the Fund anticipates
purchasing. If the price of the security rises, the increased cost to the
Fund of purchasing the security will be offset, in whole or in part, by
the premium received. In the event, however, that the price of the
security falls below the exercise price of the option and the option is
exercised, the Fund will be required to purchase the security from the
holder of the option at a price in excess of the current market price of
the security. The Fund's loss on this transaction will be offset, in
whole or in part, to the extent of the premium received by the Fund for
writing the option.
Foreign Currency Options and Related Risks
The Fund may purchase and write (sell) options on foreign
currencies in order to hedge against the risk of foreign exchange rate
fluctuation on foreign securities the Fund holds or which it intends to
purchase. For example, if the Fund enters into a contract to purchase
securities denominated in a foreign currency, it could effectively fix the
maximum U.S. dollar cost of the securities by purchasing call options on
that foreign currency. Similarly, if the Fund held securities denominated
in a foreign currency and anticipated a decline in the value of that
currency against the U.S. dollar, it could hedge against such a decline by
purchasing a put option on the currency involved. The purchase of an
option on foreign currency may be used to hedge against fluctuations in
exchange rates although, in the event of exchange rate movements adverse
to the Fund's options position, it may forfeit the entire amount of the
premium plus related transaction costs.
If the Fund writes an option on foreign currency, it will
constitute only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The Fund may
use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange
rates of a different currency, the movements of which the Adviser
believes will be correlated to movements in the first currency.
The Fund's ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
Although many options on foreign currencies are exchange traded, the
majority are traded on the OTC market. The Fund will not purchase or
write such options unless, in the opinion of the Adviser, the market for
them has developed sufficiently. There can be no assurance that a liquid
secondary market will exist for a particular option at any specific time.
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<PAGE>
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
OTC options also involve credit risks that may not be present in the case
of exchange-traded currency options, because the Fund is dependent on the
ability of a single counterparty to perform the other side of the
contract.
Futures Contracts and Options on Futures Contracts
Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of a specific instrument
at a specified future time and at a specified price. Domestic futures
contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Domestic
futures exchanges and trading are regulated under the Commodity Exchange
Act by the Commodity Futures Trading Commission ("CFTC"), a U.S.
Government agency. Foreign futures exchanges and futures contracts may be
regulated differently, or may be unregulated.
Although futures contracts by their terms call for actual
delivery or acceptance of the underlying securities or currencies, in most
cases the contracts are closed out before the settlement date without the
making or taking of delivery. Closing out an open futures position is
done by taking an opposite position ("buying" a contract which has
previously been "sold," "selling" a contract previously "purchased") in an
identical contract to terminate the position. Brokerage commissions are
incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit
in cash or government securities with a broker or custodian to initiate
and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of
the underlying security) if it is not closed out prior to the specified
delivery date. Minimal initial margin requirements are established by the
futures exchange and may be changed. Brokers may establish deposit
requirements which are higher than the exchange minimums. Futures
contracts are customarily purchased and sold on margin deposits that may
range upward from less than 5% of the value of the contract being traded.
After a futures contract position is opened, the value of the
contract is marked-to-market daily. If the futures contract price changes
to the extent that the margin on deposit does not satisfy margin
requirements, payment of additional "variation" margin will be required.
Conversely, change in the contract value may reduce the required margin,
resulting in a repayment of excess margin to the contract holder.
Variation margin payments are made to and from the futures broker for as
long as the contract remains open. The Fund expects to earn interest
income on its margin deposits.
Regulations of the CFTC applicable to the Fund limit the assets
that can be committed to futures transactions that do not constitute bona
fide hedging transactions. The Fund will sell futures contracts only to
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<PAGE>
protect securities it owns against price declines or purchase contracts to
protect against an increase in the price of securities it intends to
purchase. As evidence of this hedging interest, the Fund expects that
approximately 75% of its futures contract purchases will be "completed";
that is, equivalent amounts of related securities will have been purchased
or are being purchased by the Fund upon sale of open futures contracts.
Although techniques other than the sale and purchase of futures
contracts could be used to control the exposure of the Fund income to
market fluctuations, the use of futures contracts may be a more effective
means of hedging this exposure. While the Fund will incur commission
expenses in both opening and closing out futures positions, these costs
are lower than transaction costs incurred in the purchase and sale of
underlying equity securities.
The Fund may also purchase and sell futures contracts on a
foreign currency. The Fund may sell a foreign currency futures contract
to hedge against possible variations in the exchange rate of the foreign
currency in relation to the U.S. dollar. In addition, the Fund may sell a
foreign currency futures contract when the Adviser anticipates a general
weakening of the foreign currency exchange rate that could adversely
affect the market values of the Fund's foreign securities holdings. In
this case, the sale of futures contracts on the underlying currency may
reduce the risk to the Fund caused by foreign currency variations and, by
so doing, provide an alternative to the liquidation of securities
positions in the Fund and resulting transaction costs. When the Adviser
anticipates a significant foreign exchange rate increase while intending
to invest in a security denominated in a foreign currency, the Fund may
purchase a foreign currency futures contract to hedge against a rise in
foreign exchange rates pending completion of the anticipated transaction.
Such a purchase would serve as a temporary measure to protect the Fund
against any rise in the foreign exchange rate that may add additional
costs to acquiring the foreign security position.
The Fund may also purchase call or put options on foreign
currency futures contracts to obtain a fixed foreign exchange rate at
limited risk. The Fund may purchase a call option on a foreign currency
futures contract to hedge against a rise in the foreign exchange rate
while intending to invest in a foreign security of the same currency. The
Fund may purchase put options on foreign currency futures contracts as a
hedge against a decline in the foreign exchange rates of its foreign
portfolio securities. The Fund may write a call option on a foreign
currency futures contract as a partial hedge against the effects of
declining foreign exchange rates on the value of foreign securities. The
Fund may sell a put option on a foreign currency to partially offset the
cost of a security denominated in that currency that the Fund anticipates
purchasing; however, the cost will only be offset to the extent of the
premium received by the Fund for writing the option. When selling options
on futures, the Fund could be required to purchase or sell the underlying
futures contract at disadvantageous prices, thereby incurring losses.
Limitations on the Use of Futures and Options
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<PAGE>
The Corporation has filed on behalf of the Fund a notice of
eligibility for exclusion from the definition of the term "commodity pool
operator" with the CFTC and the National Futures Association, which
regulate trading in the futures markets. Under Section 4.5 of the
regulations under the Commodity Exchange Act, the notice of eligibility
must include representations that the Fund will use futures contracts and
related options solely for bona fide hedging purposes within the meaning
of the CFTC regulations provided that the Fund may hold futures contracts
and related options that do not fall within the definition of bona fide
hedging transactions if, with respect to such non-hedging transactions,
the initial margin deposits plus premiums paid by the Fund, less the
amount by which any such options positions are "in-the-money" at the time
of purchase, would not exceed 5% of the fair market value of the Fund's
net assets. A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise price. A
put option is "in-the-money" if the exercise price exceeds the value of
the futures contract that is the subject of the option. Foreign currency
options traded on a commodities exchange are considered commodity options
for this purpose. In addition, the Fund will not enter into futures
contracts to the extent that its outstanding obligations to purchase
securities under those contracts would exceed 20% of the Fund's total
assets. Pursuant to an undertaking to a state securities administrator,
the Fund will not invest in puts, calls, straddles, spreads, or any
combination thereof if, as a result, the value of its aggregate investment
in such instruments would exceed 10% of its total assets. Also pursuant
to an undertaking to a state securities administrator, the Fund will buy
and sell options in the OTC market only when such options are unavailable
on exchanges, only when there is an active OTC market for such options
which could establish their pricing and liquidity, and only with dealers
having a minimum net worth of $20 million.
The requirements for qualification as a regulated investment
company also may limit the extent to which the Fund may engage in
transactions in options, futures, options on futures, or forward
contracts. See "Additional Tax Information."
Risks Associated with Futures and Options
In considering the Fund's use of futures contracts and options,
particular note should be taken of the following:
(1) Positions in futures contracts may be closed out only on
an exchange or board of trade that provides a secondary market for such
futures contracts. Futures exchanges may limit the amount of fluctuation
permitted in certain futures contract prices during a single trading day.
The daily limit establishes the maximum amount that the price of
transactions in a futures contract may vary either up or down from the
previous day's settlement price at the end of the current trading session.
Once the daily limit has been reached in a futures contract subject to the
limit, no more trades may be made on that day at a price beyond that
limit. The daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses because the
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<PAGE>
limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of positions and subjecting some holders of
futures contracts to substantial losses.
(2) The ability to establish and close out positions in
either futures contracts or exchange-listed options is also subject to the
maintenance of a liquid secondary market. Consequently, it may not be
possible for the Fund to close a position and, in the event of adverse
price movements, the Fund would have to make daily cash payments of
variation margin (except in the case of purchased options). However, in
the event futures contracts or options have been used to hedge portfolio
securities, such securities will not be sold until the contracts can be
terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the
futures contract. However, there is no guarantee that the price of the
securities will, in fact, correlate with the price movements in the
contracts and thus provide an offset to losses on the contracts.
(3) Successful use by the Fund of futures contracts and
options will depend upon the Adviser's ability to predict movements in the
direction of the overall securities, currency and interest rate markets,
which may require different skills and techniques than predicting changes
in the prices of individual securities. Moreover, futures contracts
relate not to the current level of the underlying instrument but to the
anticipated levels at some point in the future. There is, in addition,
the risk that the movements in the price of the futures contract will not
correlate with the movements in prices of the securities or currencies
being hedged. For example, if the price of the futures contract moves
less than the price of the securities or currencies that are subject to
the hedge, the hedge will not be fully effective; however, if the price of
securities or currencies being hedged has moved in an unfavorable
direction, the Fund would usually be in a better position than if it had
not hedged at all. If the price of the securities or currencies being
hedged has moved in a favorable direction, this advantage may be partially
or completely offset by losses in the futures position. In addition, if
the Fund has insufficient cash, it may have to sell assets from its
investment portfolio to meet daily variation margin requirements. Any such
sale of assets may or may not be made at prices that reflect the rising
market; consequently, the Fund may need to sell assets at a time when such
sales are disadvantageous to the Fund. If the price of the futures
contract moves more than the price of the underlying securities or
currencies, the Fund will experience either a loss or a gain on the
futures contract that may or may not be completely offset by movements in
the price of the securities or currencies that are the subject of the
hedge.
(4) The value of an option position will reflect, among other
things, the current market price of the underlying security, futures
contract or currency, the time remaining until expiration, the
relationship of the exercise price to the market price, the historical
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price volatility of the underlying security, index, futures contract or
currency and general market conditions. For this reason, the successful
use of options as a hedging strategy depends upon the Adviser's ability to
forecast the direction of price fluctuations in the underlying market or
market sector.
(5) In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between price movements
in the futures position and the securities or currencies being hedged,
movements in the prices of futures contracts may not correlate perfectly
with movements in the prices of the hedged securities or currencies due to
price distortions in the futures market. There may be several reasons
unrelated to the value of the underlying securities or currencies that
cause this situation to occur. First, as noted above, all participants in
the futures market are subject to initial and variation margin
requirements. If, to avoid meeting additional margin deposit requirements
or for other reasons, investors choose to close a significant number of
futures contracts through offsetting transactions, distortions in the
normal price relationship between the securities or currencies and the
futures markets may occur. Second, because the margin deposit
requirements in the futures market are less onerous than margin
requirements in the securities market, there may be increased
participation by speculators in the futures market; such speculative
activity in the futures market also may cause temporary price distortions.
Third, participants could make or take delivery of the underlying
securities or currencies instead of closing out their contracts. As a
result, a correct forecast of general market trends may not result in
successful hedging through the use of futures contracts over the short
term. In addition, activities of large traders in both the futures and
securities markets involving arbitrage and other investment strategies may
result in temporary price distortions.
(6) Options normally have expiration dates of up to three
years. The exercise price of the options may be below, equal to or above
the current market value of the underlying security, index, futures
contract or currency. Purchased options that expire unexercised have no
value, and the Fund will realize a loss in the amount paid plus any
transaction costs.
(7) Like options on securities and currencies, options on
futures contracts have a limited life. The ability to establish and close
out options on futures will be subject to the development and maintenance
of liquid secondary markets on the relevant exchanges or boards of trade.
There can be no certainty that liquid secondary markets for all options on
futures contracts will develop.
(8) Purchasers of options on futures contracts pay a premium
in cash at the time of purchase. This amount and the transaction costs
are all that is at risk. Sellers of options on futures contracts,
however, must post an initial margin and are subject to additional margin
calls that could be substantial in the event of adverse price movements.
In addition, although the maximum amount at risk when the Fund purchases
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an option is the premium paid for the option and the transaction costs,
there may be circumstances when the purchase of an option on a futures
contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the value of the
securities or currencies being hedged.
(9) The Fund's activities in the futures and options markets
may result in a higher portfolio turnover rate and additional transaction
costs in the form of added brokerage commissions; however, the Fund also
may save on commissions by using such contracts as a hedge rather than
buying or selling individual securities or currencies in anticipation or
as a result of market movements.
(10) The Fund may purchase and write both exchange-traded
options and options traded on the OTC market. The ability to establish
and close out positions on the exchanges is subject to the maintenance of
a liquid secondary market. Although the Fund intends to purchase or write
only those exchange-traded options for which there appears to be an active
secondary market, there is no assurance that a liquid secondary market
will exist for any particular option at any specific time. Closing
transactions may be effected with respect to options traded in the OTC
markets (currently the primary markets for options on foreign currencies)
only by negotiating directly with the other party to the option contract,
or in a secondary market for the option if such market exists. Although
the Fund will enter into OTC options only with dealers that agree to enter
into, and that are expected to be capable of entering into, closing
transactions with the Fund, there can be no assurance that the Fund will
be able to liquidate an OTC option at a favorable price at any time prior
to expiration. In the event of insolvency of the contra-party, the Fund
may be unable to liquidate an OTC option. Accordingly, it may not be
possible to effect closing transactions with respect to certain options,
with the result that the Fund would have to exercise those options that it
has purchased in order to realize any profit. With respect to options
written by the Fund, the inability to enter into a closing transaction may
result in material losses to the Fund. For example, because the Fund must
maintain a covered position with respect to any call option it writes on a
security, futures contract or currency, the Fund may not sell the
underlying security, futures contract or currency or invest any cash, U.S.
government securities or other liquid, high quality debt securities used
as cover during the period it is obligated under such option. This
requirement may impair the Fund's ability to sell a portfolio security or
make an investment at a time when such a sale or investment might be
advantageous.
Special Risks Related to Foreign Currency Futures Contracts, Options on
Such Contracts and Options on Foreign Currencies
Buyers and sellers of foreign currency futures contracts are
subject to the same risks that apply to the use of futures generally. In
addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated
with options on foreign currencies described below. Further, settlement
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<PAGE>
of a foreign currency futures contract usually occurs within the country
issuing the underlying currency. Thus, the Fund must accept or make
delivery of the underlying foreign currency in accordance with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign
banking arrangements by U.S. residents and may be required to pay any
fees, taxes or charges associated with such delivery that are assessed in
the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. The ability to establish and close out positions on
such options is subject to the maintenance of a liquid secondary market.
To reduce this risk, the Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the opinion of the
Adviser, the market for such options has developed sufficiently that the
risks in connection with such options are not greater than the risks in
connection with transactions in the underlying foreign currency futures
contracts. Compared to the purchase or sale of foreign currency futures
contracts, the purchase of call or put options on futures contracts
involves less potential risk to the Fund because the maximum amount at
risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the purchase of a call or put
option on a foreign currency futures contract would result in a loss, such
as when there is no movement in the price of the underlying currency or
futures contract, when the purchase of the underlying futures contract
would not result in a loss.
The value of a foreign currency option depends upon the value of
the underlying currency relative to the U.S. dollar. As a result, the
price of the option position may vary with changes in the value of either
or both currencies and may have no relationship to the investment merits
of a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally consisting
of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
There is no systematic reporting of last sale information for
foreign currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Quotation information available is generally representative of
very large transactions in the interbank market and thus may not reflect
relatively smaller transactions (i.e., less than $1 million) where rates
may be less favorable. The interbank market in foreign currencies is a
global, around-the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying currencies remain
open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until
they reopen.
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<PAGE>
Additional Risks of Options on Securities, Futures Contracts, Options on
Futures and Forward Currency Exchange Contracts and Options Thereon Traded
on Foreign Exchanges
Options on securities, futures contracts, options on futures
contracts, currencies and options on currencies may be traded on foreign
exchanges. Such transactions may not be regulated as effectively as
similar transactions in the United States, may not involve a clearing
mechanism and related guarantees and are subject to the risk of
governmental actions affecting trading in, or the price of, foreign
securities. The value of such positions also could be adversely affected
by (1) other complex foreign political, legal and economic factors, (2)
lesser availability than in the United States of data on which to make
trading decisions, (3) delays in the Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the
United States, (4) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States and
(5) lesser trading volume.
Cover for Strategies Involving Options, Futures and Forward Contracts
The Fund will comply with guidelines established by the SEC with
respect to coverage of these strategies by mutual funds, and, if the
guidelines so require, will set aside cash and/or liquid, high-grade debt
securities in a segregated account with its custodian in the amount
prescribed, as marked-to-market daily. Securities, currencies or other
options or futures positions used for cover and securities held in a
segregated account cannot be sold or closed out while the strategy is
outstanding, unless they are replaced with similar assets. As a result,
there is a possibility that the use of cover or segregation involving a
large percentage of the Fund's assets could impede portfolio management or
the Fund's ability to meet redemption requests or other current
obligations.
Forward Currency Exchange Contracts
The Fund may use forward currency exchange contracts to hedge
against uncertainty in the level of future exchange rates. Forward
contracts are generally considered to be "derivatives."
The Fund may enter into forward currency exchange contracts with
respect to specific transactions. For example, when the Fund anticipates
purchasing or selling a security denominated in a foreign currency, or
when it anticipates the receipt in a foreign currency of dividend or
interest payments on a security that it holds, the Fund may desire to
"lock in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment, as the case may be, by entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars or
foreign currency, of the amount of foreign currency involved in the
underlying transaction. The Fund will thereby attempt to protect itself
against a possible loss resulting from an adverse change in the
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<PAGE>
relationship between the currency exchange rates during the period between
the date on which the security is purchased or sold, or on which the
payment is declared, and the date on which such payments are made or
received.
The Fund also may use forward currency exchange contracts to lock
in the U.S. dollar value of its portfolio positions, or to shift the
Fund's exposure to foreign currency fluctuations from one country to
another. For example, when the Adviser believes that the currency of a
particular foreign country may suffer a substantial decline relative to
the U.S. dollar or another currency, it may enter into a forward contract
to sell the amount of the former foreign currency approximating the value
of some or all of the Fund's securities denominated in such foreign
currency, and purchase a corresponding amount of the other currency.
These investment practices generally are referred to as "cross-currency
hedging" when two foreign currencies are involved. In cross-currency
hedging, the Fund may suffer losses on both currencies if their values do
not move as the Adviser anticipates.
At or before the maturity date of a forward contract requiring
the Fund to sell a currency, the Fund may either sell a portfolio security
and use the sale proceeds to make delivery of the currency or retain the
security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on
the same maturity date, the same amount of the currency that it is
obligated to deliver. Similarly, the Fund may close out a forward
contract requiring it to purchase a specified currency by entering into a
second contract entitling it to sell the same amount of the same currency
on the maturity date of the first contract. The Fund would realize a gain
or loss as a result of entering into such an offsetting forward contract
under either circumstance to the extent the exchange rate or rates between
the currencies involved moved between the execution dates of the first
contract and the offsetting contract.
The precise matching of the forward contract amount and the value
of the securities involved will not generally be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between
the date the forward contract is entered into and the date it matures.
Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot (i.e., cash) market (and bear the expense of
such purchase) if the market value of the security is less than the amount
of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon the sale of the portfolio security if its
market value exceeds the amount of foreign currency the Fund is obligated
to deliver.
The projection of short-term currency market movements is
extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain. Forward contracts involve the risk that
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anticipated currency movements will not be accurately predicted, causing
the Fund to sustain losses on these contracts and transaction costs. The
Fund may enter into forward contracts or maintain a net exposure to such
contracts only if (1) the consummation of the contracts would not obligate
the Fund to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency or (2) the Fund maintains cash, U.S. government securities or
other liquid, high-grade debt securities in a segregated account with the
Fund's custodian, marked-to-market daily, in an amount not less than the
value of the Fund's total assets committed to the consummation of the
contract. Under normal circumstances, consideration of the prospect for
currency parities will be incorporated into the longer-term investment
decisions made with regard to overall diversification strategies.
However, the Fund's Adviser believes that it is important to have the
flexibility to enter into such forward contracts when it determines that
the best interests of the Fund will be served. Some foreign currency
forward contracts into which the Fund enters may be illiquid.
The cost to the Fund of engaging in forward contracts varies with
factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward contracts are
usually entered into on a principal basis, no fees or commissions are
involved. The use of forward contracts does not eliminate fluctuations in
the prices of the underlying securities the Fund owns or intends to
acquire, but it does fix a rate of exchange in advance. In addition,
although forward contracts limit the risk of loss due to a decline in the
value of the hedged currencies, at the same time they limit any potential
gain that might result should the value of the currencies increase.
Although the Fund values its assets daily in terms of U.S.
dollars, it does not intend to convert its holdings of foreign currencies
into U.S. dollars on a daily basis. The Fund may convert foreign currency
from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference between the
prices at which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The Prospectus explains that the basic minimum initial investment
is $1,000 and subsequent investments must be at least $100. Purchases made
through the Future First Systematic Investment Plan, payroll deduction
plans and plans involving automatic payment of funds from financial
institutions or automatic investment of dividends from certain unit
investment trusts are subject to an initial minimum and a minimum monthly
investment of only $50.
Future First Systematic Investment Plan
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<PAGE>
When you purchase shares through the Future First Systematic
Investment Plan, Boston Financial Data Services ("BFDS"), the Fund's
transfer agent, will send a check each month to your bank for collection,
and the proceeds of the check will be used to buy shares of the Fund.
After each purchase of additional shares through your checking account,
you will receive a confirmation. The check will also be reflected on your
regular checking account statement. You will receive a cumulative
statement of your purchases quarterly. You may terminate the Future First
Systematic Investment Plan at any time without charge or penalty. Forms
to enroll in the Future First Systematic Investment Plan are available
from any Legg Mason or affiliated office.
Purchases by Check
In making purchases of Fund shares by check, you should be aware
that checks drawn on a member bank of the Federal Reserve System will
normally be converted to federal funds and used to purchase shares of the
Fund within two business days of receipt by Legg Mason Wood Walker, Inc.
("Legg Mason"). Legg Mason is closed on the days that the New York Stock
Exchange, Inc. ("Exchange") is closed, which are listed under "Valuation
of Fund Shares" on page 25. Checks drawn on banks that are not members of
the Federal Reserve System may take up to nine business days to be
converted.
Redemption Services
The Fund reserves the right to modify or terminate the wire or
telephone redemption services described in the Prospectus at any time.
The right of redemption may be suspended or the date of payment
postponed (a) for any periods during which the Exchange is closed (other
than for customary weekend and holiday closings), (b) when trading in
markets the Fund normally utilizes is restricted or an emergency, as
defined by rules and regulations of the SEC, exists, making disposal of
the Fund's investments or determination of its net asset value not
reasonably practicable, or (c) for such other periods as the SEC, by
order, may permit for protection of the Fund's shareholders. In the case
of any such suspension, you may either withdraw your request for
redemption or receive payment based upon the net asset value next
determined after the suspension is lifted.
The Fund reserves the right under certain conditions, to honor
any request for redemption, or combination of requests from the same
shareholder in any 90-day period, totalling $250,000 or 1% of the net
assets of the Fund, whichever is less, by making payment in whole or in
part by securities valued in the same way as they would be valued for
purposes of computing the Fund's net asset value per share. If payment is
made in securities, a shareholder generally will incur brokerage expenses
in converting those securities into cash and will be subject to
fluctuation in the market price of those securities until they are sold.
The Fund does not redeem in kind under normal circumstances, but would do
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so where the Adviser determines that it would be in the best interests of
the shareholders as a whole.
Foreign securities exchanges may be open for trading on days when
the Fund is not open for business. The net asset value of Fund shares may
be significantly affected on days when investors do not have access to the
Fund to purchase and redeem shares.
ADDITIONAL TAX INFORMATION
The following is a general summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are
urged to consult their own tax advisers for more detailed information
regarding any federal, state or local taxes that may be applicable to
them.
General
In order to qualify for treatment as a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"), the Fund must distribute annually to its shareholders at least
90% of its investment company taxable income (generally, net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions), if any, ("Distribution Requirement") and must meet
several additional requirements. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of securities or
foreign currencies, or other income (including gains from options, futures
or forward contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale
or other disposition of securities, or any of the following, that were
held for less than three months -- options, futures or forward contracts
(other than those on foreign currencies), or foreign currencies (or
options, futures or forward contracts thereon) that are not directly
related to the Fund's principal business of investing in securities (or
options and futures with respect to securities) ("Short-Short
Limitation"); (3) at the close of each quarter of the Fund's taxable year,
at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs and
other securities, with those other securities limited, in respect of any
one issuer, to an amount that does not exceed 5% of the value of the
Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (4) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its
total assets may be invested in the securities (other than U.S. government
securities or the securities of other RICs) of any one issuer.
Dividends and other distributions declared by the Fund in
October, November or December of any year and payable to shareholders of
record on a date in any of those months are deemed to have been paid by
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the Fund and received by the shareholders on December 31 of that year if
they are paid by the Fund during the following January. Accordingly,
those dividends and other distributions will be taxed to shareholders for
the year in which that December 31 falls.
If Fund shares are sold at a loss after being held for six months
or less, the loss will be treated as a long-term, instead of a short-term,
capital loss to the extent of any capital gain distributions received on
those shares.
The Fund will be subject to a nondeductible 4% excise tax
("Excise Tax") to the extent it fails to distribute by the end of any
calendar year substantially all of its ordinary income for that year and
capital gain net income for the one-year period ending on October 31 of
that year, plus certain other amounts.
Income From Foreign Securities
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general,
meets either of the following tests: (1) at least 75% of its gross income
is passive or (2) an average of at least 50% of its assets produce, or are
held for the production of, passive income. Under certain circumstances,
the Fund will be subject to federal income tax on a portion of any "excess
distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly,
will not be taxable to it to the extent that income is distributed to its
shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each year its
pro rata share of the qualified electing fund's annual ordinary earnings
and net capital gain (the excess of net long-term capital gain over net
short-term capital loss)-- which would have to be distributed to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax --
even if those earnings and gain were not received by the Fund. In most
instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.
Three bills passed by Congress in 1991 and 1992 and vetoed by
President Bush would have substantially modified the taxation of U.S.
shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other
provisions) with a regulatory scheme involving entities called "passive
foreign corporations." The "Tax Simplification and Technical Corrections
Bill of 1993," passed in May 1994 by the House of Representatives,
contains the same modifications. It is unclear at this time whether, and
in what form, the proposed modifications may be enacted into law.
Proposed regulations have been published pursuant to which open-
end RICs, such as the Fund, would be entitled to elect to "mark-to-market"
their stock in certain PFICs. "Marking-to-market," in this context, means
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recognizing as gain for each taxable year the excess, as of the end of
that year, of the fair market value of each such PFIC's stock over the
adjusted basis in that stock (including mark-to-market gain for each prior
year for which an election was in effect).
Gains or losses from the disposition of foreign currencies, and
gains or losses attributable to fluctuations in exchange rates that occur
between the time the Fund accrues dividends or other receivables or
accrues expenses or other liabilities denominated in a foreign currency
and the time the Fund actually collects the receivables or pays the
liabilities, generally will be treated as ordinary income or loss. These
gains or losses, referred to under the Code as "section 988" gains or
losses, may increase or decrease the amount of the Fund's investment
company taxable income to be distributed to its shareholders.
Options, Futures, Forward Contracts and Foreign Currencies
The use of hedging strategies, such as writing (selling) and
purchasing options and futures contracts and entering into forward
contracts, involves complex rules that will determine for income tax
purposes the character and timing of recognition of the gains and losses
the Fund realizes in connection therewith. Income from foreign currencies
(except certain gains therefrom that may be excluded by future
regulations), and income from transactions in options, futures and forward
contracts derived by the Fund with respect to its business of investing in
securities and foreign currencies, will qualify as permissible income
under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on foreign currencies)
will be subject to the Short-Short Limitation if such options or futures
contracts are held for less than three months. Income from the
disposition of foreign currencies and options, futures and forward
contracts on foreign currencies, that are not directly related to the
Fund's principal business of investing in securities (or options and
futures with respect to securities) also will be subject to the Short-
Short Limitation if the derivative instruments are held for less than
three months.
If the Fund satisfies certain requirements, any increase in value
of a position that is part of a "designated hedge" will be offset by any
decrease in value (whether realized or not) of the offsetting hedging
position during the period of the hedge for purposes of determining
whether the Fund satisfies the Short-Short Limitation. Thus, only the net
gain, if any, from the designated hedge will be included in gross income
for purposes of that limitation. The Fund will consider whether it should
seek to qualify for this treatment for its hedging transactions. To the
extent the Fund does not so qualify, it may be forced to defer the closing
out of certain options, futures and forward contracts beyond the time when
it otherwise would be advantageous to do so, in order for the Fund to
qualify as a RIC.
Certain options and futures in which the Fund may invest will be
"section 1256 contracts." Section 1256 contracts held by the Fund at the
end of each taxable year, other than section 1256 contracts that are part
of a "mixed straddle" with respect to which the Fund has made an election
not to have the following rules apply, must be "marked-to-market" (that
is, treated as sold for their fair market value) for federal income tax
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<PAGE>
purposes, with the result that unrealized gains or losses will be treated
as though they were realized. Sixty percent of any net gain or loss
recognized on these deemed sales, and 60% of any net realized gain or loss
from any actual sales of section 1256 contracts, will be treated as long-
term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. Section 1256 contracts also may be marked-to-market
for purposes of the Excise Tax.
Code section 1092 (dealing with straddles) also may affect the
taxation of options and futures contracts in which the Fund may invest.
Section 1092 defines a "straddle" as offsetting positions with respect to
personal property; for these purposes, options and futures contracts are
personal property. Section 1092 generally provides that any loss from the
disposition of a position in a straddle may be deducted only to the extent
the loss exceeds the unrealized gain on the offsetting position(s) of the
straddle. Section 1092 also provides certain "wash sale" rules, which
apply to transactions where a position is sold at a loss and a new
offsetting position is acquired within a prescribed period, and "short
sale" rules applicable to straddles. If the Fund makes certain elections,
the amount, character and timing of the recognition of gains and losses
from the affected straddle positions would be determined under rules that
vary according to the elections made. Because only a few of the
regulations implementing the straddle rules have been promulgated, the tax
consequences to the Fund of straddle transactions are not entirely clear.
Miscellaneous
If the Fund invests in shares of preferred stock or otherwise
holds dividend-paying securities as a result of exercising a conversion
privilege, a portion of the dividends from the Fund's investment company
taxable income (whether paid in cash or reinvested in additional Fund
shares) may be eligible for the dividends-received deduction allowed to
corporations. The eligible portion may not exceed the aggregate dividends
received by the Fund from U.S. corporations. However, dividends received
by a corporate shareholder and deducted by it pursuant to the dividends-
received deduction are subject indirectly to the alternative minimum tax.
PERFORMANCE INFORMATION
Total Return Calculations Average annual total return quotes
used in the Fund's advertising and other promotional materials
("Performance Advertisements") are calculated according to the following
formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of
a hypothetical $1,000 payment made
at the beginning of that period.
Under the foregoing formula, the time periods used in Performance
Advertisements will be based on rolling calendar quarters, updated at
least to the last day of the most recent quarter prior to submission of
the Performance Advertisements for publication. Total return, or "T" in
- 23 -
<PAGE>
the formula above, is computed by finding the average annual change in the
value of an initial $1,000 investment over the period. In calculating the
ending redeemable value, all dividends and other distributions by the Fund
are assumed to have been reinvested at net asset value on the reinvestment
dates during the period.
From time to time the Fund may compare its performance in
advertising and sales literature to the performance of other investment
companies, groups of investment companies or various market indices. One
such market index is the Standard & Poor's Composite Stock Price Index
("S&P 500"), a widely recognized, unmanaged index composed of the
capitalization-weighted average of the prices of 500 of the largest
publicly traded stocks in the United States. The prices reflected in the
S&P 500 assume reinvestment of all dividends. It takes no account of the
costs of investing or the tax consequences of distributions. The Fund
invests in many securities that are not included in the S&P 500.
The Fund may also cite rankings and ratings, and compare its
return with data published by Lipper Analytical Services, Inc. ("Lipper"),
CDA Investment Technologies, Inc., Wiesenberger Investment Company
Services, Value Line, Morningstar, and other services or publications that
monitor, compare and/or rank the performance of investment companies. The
Fund may also refer to mutual fund performance rankings, ratings,
comparisons with funds having similar investment objectives, and other
mutual funds reported in independent periodicals, including, but not
limited to, FINANCIAL WORLD, MONEY Magazine, FORBES, BUSINESS WEEK,
BARRON'S, FORTUNE, THE KIPLINGER LETTERS, THE WALL STREET JOURNAL, and THE
NEW YORK TIMES.
Fund advertisements may reference the history of the distributor
and its affiliates, the education and experience of the portfolio manager,
and the fact that the portfolio manager engages in value investing. With
value investing, the Adviser invests in those securities it believes to be
undervalued in relation to the long-term earning power or asset value of
their issuers. Securities may be undervalued because of many factors,
including market decline, poor economic conditions, tax-loss selling, or
actual or anticipated unfavorable developments affecting the issuer of the
security. The Adviser believes that the securities of sound, well-managed
companies that may be temporarily out of favor due to earnings declines or
other adverse developments are likely to provide a greater total return
than securities with prices that appear to reflect anticipated favorable
developments and that are therefore subject to correction should any
unfavorable developments occur.
In advertising, the Fund may illustrate hypothetical investment
plans designed to help investors meet long-term financial goals, such as
saving for a child's college education or for retirement. Sources such as
the Internal Revenue Service, the Social Security Administration, the
Consumer Price Index and Chase Global Data and Research may supply data
concerning interest rates, college tuitions, the rate of inflation, Social
Security benefits, mortality statistics and other relevant information.
The Fund may use other recognized, reliable sources as they become
available.
The Fund may use data prepared by Ibbotson Associates of Chicago,
Illinois ("Ibbotson") to compare the returns of various capital markets
- 24 -
<PAGE>
and to show the value of a hypothetical investment in a capital market.
Ibbotson relies on different indices to calculate the performance of
common stocks, corporate and government bonds and Treasury bills.
The Fund may illustrate and compare the historical volatility of
different portfolio compositions where the performance of stocks is
represented by the performance of an appropriate market index, such as the
S&P 500 and the performance of bonds is represented by a nationally
recognized bond index, such as the Lehman Brothers Long-Term Government
Bond Index.
The Fund may also include in advertising biographical information
on key investment and managerial personnel.
The Fund may advertise examples of the potential benefits of
periodic investment plans, such as dollar cost averaging, a long-term
investment technique designed to lower average cost per share. Under such
a plan, an investor invests in a mutual fund at regular intervals a fixed
dollar amount thereby purchasing more shares when prices are low and fewer
shares when prices are high. Although such a plan does not guarantee
profit or guard against loss in declining markets, the average cost per
share could be lower than if a fixed number of shares were purchased at
the same intervals. Investors should consider their ability to purchase
shares through low price levels.
The Fund may discuss Legg Mason's tradition of service. Since
1899, Legg Mason and its affiliated companies have helped investors meet
their specific investment goals and have provided a full spectrum of
financial services. Legg Mason affiliates serve as investment advisors
for private accounts and mutual funds with assets of more than $17 billion
as of December 31, 1994.
The Fund invests primarily in the global equity securities
described in its Prospectus, and does not generally invest in the equity
securities that make up the S&P 500 or the Dow Jones indices. Comparison
with such indices is intended to show how an investment in the Fund
behaved as compared to indices that are often taken as a measure of
performance of the equity market as a whole. The indices, like the Fund's
total return, assume reinvestment of all dividends and other
distributions. They do not take account of the costs or the tax
consequences of investing.
The Fund may include in advertising and sales literature
descriptive material relating to both domestic and global economic
conditions including but not limited to discussions regarding the effects
of inflation as well as discussions which compare the growth of various
world equity markets. The Fund may depict the historical performance of
the securities in which the Fund may invest over periods reflecting a
variety of market or economic conditions whether alone or in comparison
with alternative investments, performance indexes of those investments or
economic indicators. The Fund may also describe its portfolio holdings
and depict its size, the number and make-up of its shareholder base and
other descriptive factors concerning the Fund.
The Fund may discuss the investment adviser's philosophy
regarding international investing. Recognizing the differing evolutionary
- 25 -
<PAGE>
stages of the distinct emerging market segments, the Adviser, intent on
participating in all of these marketplaces, does not apply a uniform
investment process and approach to its different marketplaces. As a
result, the Adviser's investment processes for the U.S., non-U.S.
developed countries and emerging markets are distinct. Well-defined
disciplines appropriate to the respective markets are applied within the
company's framework of strong, experienced management, sound fundamental
research and analysis, and superior data and modeling resources.
The Adviser is recognized as a "pioneer" in international
investing and is well-known in the investment community. The Adviser has
been applying a consistent investment discipline in the international
markets for over 10 years. During this time, the Adviser has studied the
world's equity markets and developed time-tested disciplines appropriate
to each country's respective market.
The Fund may include discussions or illustrations of the effects
of compounding in performance advertisements. "Compounding" refers to the
fact that, if dividends or other distributions on the Fund investment are
reinvested by being paid in additional Fund shares, any future income or
capital appreciation of the Fund would increase the value, not only of the
original Fund investment, but also of the additional Fund shares received
through reinvestment. As a result, the value of the Fund investment would
increase more quickly than if dividends or other distributions had been
paid in cash.
The Fund may also compare its performance with the performance of
bank certificates of deposit (CDs) as measured by the CDA Investment
Technologies, Inc. Certificate of Deposit Index and the Bank Rate Monitor
National Index. In comparing the Fund's performance to CD performance,
investors should keep in mind that bank CDs are insured in whole or in
part by an agency of the U.S. Government and offer fixed principal and
fixed or variable rates of interest, and that bank CD yields may vary.
Fund shares are not insured or guaranteed by the U.S. Government and
returns and net asset value will fluctuate. The securities held by the
Fund generally have longer maturities than most CDs and may reflect
interest rate fluctuations for longer-term securities. An investment in
the Fund involves greater risks than an investment in certificates of
deposit.
VALUATION OF FUND SHARES
As described in the Prospectus, securities for which market
quotations are readily available are valued at current market value.
Securities are valued at the last sale price for a comparable position on
the day the securities are being valued or, lacking any sales on such day,
at the last available bid price. In cases where securities are traded on
more than one market, the securities are generally valued on the market
considered by the Adviser as the primary market. The Fund is open for
business and its net asset value is calculated each day the Exchange is
open for business. The Exchange currently observes the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
- 26 -
<PAGE>
All investments valued in foreign currency are valued daily in
U.S. dollars on the basis of the foreign currency exchange rate prevailing
at the time such valuation is determined. Foreign currency exchange rates
are generally determined prior to the close of trading on the New York
Stock Exchange. Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they
are determined and the close of trading on the Exchange. Such investments
will be valued at their fair value, as determined in good faith by or
under the direction of the Board of Directors. Foreign currency exchange
transactions of the Fund occurring on a spot basis are valued at the spot
rate for purchasing or selling currency prevailing on the foreign exchange
market.
TAX-DEFERRED RETIREMENT PLANS
As noted in the Prospectus, an investment in shares of the Fund
may be appropriate for individual retirement accounts ("IRAs"), self-
employed individual retirement plans (so-called "Keogh Plans"), simplified
employee pension plans ("SEPs") and other qualified retirement plans. In
general, income earned through the investment in assets of qualified
retirement plans is not taxed to the beneficiaries of such plans until the
income is distributed to them. Investors who are considering establishing
such a plan should consult their attorneys or tax advisers with respect to
individual tax questions. The option of investing in these plans through
regular payroll deductions may be arranged with a Legg Mason or affiliated
investment executive and your employer. Additional information with
respect to these plans is available upon request from any Legg Mason or
affiliated investment executive.
Individual Retirement Account - IRA
If neither you nor your spouse is an active participant in a
qualified employer or government retirement plan, or if either you or your
spouse is an active participant and your adjusted gross income does not
exceed a certain level, then you may deduct cash contributions made to an
IRA in an amount for each taxable year not exceeding the lesser of 100% of
your earned income or $2,000. In addition, if your spouse is not employed
and you file a joint return, you may establish a separate IRA for your
spouse and contribute up to a total of $2,250 to the two IRAs, provided
that a legally specified minimum amount is contributed to each. If you
and your spouse are both employed and neither of you is an active
participant in a qualified employer or government retirement plan and you
establish separate IRAs, you each may contribute all of your earned
income, up to $2,000 each, and thus may together receive tax deductions of
up to $4,000 for contributions to your IRAs. If your employer's plan
qualifies as SEP, permits voluntary contributions and meets certain other
requirements, you may make voluntary contributions to that plan that are
treated as deductible IRA contributions.
Even if you are not in one of the categories described in the
preceding paragraph, you may find it advantageous to invest in shares of
the Fund through IRA contributions, up to certain limits, because all
dividends and capital gain distributions on your shares of the Fund are
then not immediately taxable to you or the IRA; they become taxable only
when distributed to you. To avoid penalties, your interest in an IRA must
- 27 -
<PAGE>
be distributed, or start to be distributed, to you not later than the end
of the taxable year in which you attain age 70 1/2. Distributions made
before age 59 1/2, in addition to being taxable, generally are subject to
a penalty equal to 10% of the distribution, except in the case of death or
disability, where the distribution is rolled over into another qualified
plan, or certain other situations.
Self-Employed Individual Retirement Plan - Keogh Plan
Legg Mason makes available to self-employed individuals a Plan
and Trustee Agreement for a Keogh Plan through which shares of the Fund
may be purchased. You have the right to use a bank of your own choice to
provide these services at your own cost. There are penalties for
distributions from a Keogh Plan prior to age 59 1/2, except in the case of
death or disability.
Simplified Employee Pension Plan - SEP
Legg Mason also makes available to corporate and other employers
a Simplified Employee Pension Plan for investment in shares of the Fund.
Withholding at the rate of 20% is required for federal income tax
purposes on certain "eligible rollover distributions" (excluding, for
example, certain periodic payments) from the foregoing retirement plans
(except IRAs and SEPs), unless the recipient transfers the distribution
directly to an "eligible retirement plan" (including IRAs and other
qualified plans) that accepts those distributions. Other distributions
generally are subject to regular wage withholding or withholding at the
rate of 10% (depending on the type and amount of the distribution), unless
the recipient elects not to have any withholding apply. Please consult
your plan administrator or tax adviser for further information.
THE CORPORATION'S DIRECTORS AND OFFICERS
The Corporation's officers are responsible for the operation of
the Corporation under the direction of the Board of Directors. The
officers and directors of the Fund and their principal occupations during
the past five years are set forth below. An asterisk (*) indicates
officers and/or directors who are "interested persons" of the Corporation
as defined by the Investment Company Act of 1940 ("1940 Act"). The
business address of each officer and director is 111 South Calvert Street,
Baltimore, Maryland 21202, unless otherwise indicated.
JOHN F. CURLEY, JR.*, [55] Chairman of the Board and Director;
Vice Chairman and Director of Legg Mason Wood Walker, Inc. and Legg Mason,
Inc.; Director of Legg Mason Fund Adviser, Inc. and Western Asset
Management Company; Officer and/or Director of various other affiliates of
Legg Mason, Inc.; President and Director of three Legg Mason funds;
Chairman of the Board and Trustee of one Legg Mason fund; Chairman of the
Board, President and Trustee of one Legg Mason fund; and Chairman of the
Board and Director of three Legg Mason funds.
EDWARD A. TABER, III,* [51] President and Director; Executive Vice-
President of Legg Mason, Inc. and Legg Mason Wood Walker, Inc.; Vice-
Chairman and Director of Legg Mason Fund Adviser, Inc.; Director of three
Legg Mason funds; Trustee of one Legg Mason fund; President and Director
- 28 -
<PAGE>
of two Legg Mason funds; Vice President of Worldwide Value Fund, Inc.
Formerly: Executive Vice President of T. Rowe Price-Fleming
International, Inc. (1986-1992) and Director of the Taxable Fixed Income
Division at T. Rowe Price Associates, Inc. (1973-1992).
RICHARD G. GILMORE, [67] Director; 5534 Chanteclaire, Sarasota,
Florida. Independent Consultant. Director of CSS Industries, Inc.
(diversified holding company engaged in manufacture and sale of decorative
paper products, business forms, and specialty metal packaging); Director
of PECO Energy Company (formerly Philadelphia Electric Company; Director
of six Legg Mason funds; Trustee of one Legg Mason fund. Formerly: Senior
Vice President and Chief Financial Officer of Philadelphia Electric
Company (now PECO Energy Company); Executive Vice President and Treasurer,
Girard Bank, and Vice President of its parent holding company, the Girard
Company (bank holding company) and Director of Finance, City of
Philadelphia.
CHARLES F. HAUGH, [69] Director; 14201 Laurel Park Drive, Laurel,
Maryland. Real Estate Developer and Investor; President and Director of
Resource Enterprises, Inc. (real estate brokerage); Chairman of Resource
Realty LLC (management of retail and office space); Partner in Greater
Laurel Health Park Ltd. Partnership (real estate investment and
development); Director of six Legg Mason funds; Trustee of two Legg Mason
funds.
ARNOLD L. LEHMAN, [51] Director; The Baltimore Museum of Art, Art
Museum Drive, Baltimore, Maryland. Director of the Baltimore Museum of
Art; Director of six Legg Mason funds; Trustee of two Legg Mason funds.
JILL E. McGOVERN, [50] Director; 1500 Wilson Boulevard,
Arlington, Virginia. Chief Executive Officer of the Marrow Foundation;
Director of six Legg Mason funds; Trustee of two Legg Mason funds.
Formerly: Executive Director of the Baltimore International Festival
(January 1991 - March 1993); Senior Assistant to the President of The
Johns Hopkins University (1986-1991).
T. A. RODGERS, [60] Director; 2901 Boston Street, Baltimore,
Maryland. Principal, T. A. Rodgers & Associates (management consulting);
Director and Vice President of Corporate Development of Polk Audio, Inc.
(manufacturer of audio components); Director of six Legg Mason funds;
Trustee of one Legg Mason fund. Formerly: Director of Polk Audio, Inc.
(manufacturer of audio components) through July 1994.
The executive officers of the Fund, other than those who also
serve as directors, are:
MARIE K. KARPINSKI* [46], Vice-President and Treasurer; Treasurer
of Legg Mason Fund Adviser, Inc.; Vice President and Treasurer of eight
Legg Mason funds; Secretary/Treasurer of Worldwide Value Fund, Inc.; Vice
President of Legg Mason.
KATHI D. GLENN* [30], Secretary and Assistant Treasurer;
Secretary and Assistant Treasurer of two other Legg Mason funds; employee
of Legg Mason.
- 29 -
<PAGE>
BLANCHE P. ROCHE* [46], Assistant Secretary and Assistant Vice
President; Assistant Secretary and Assistant Vice President of seven Legg
Mason funds; employee of Legg Mason since 1991. Formerly: Manager of
Consumer Financial Services (1989-1991).
- 30 -
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
Pension or Compensation
Retirement Estimated From
Aggregate Benefits Annual Corporation
Compensation Accrued as Benefits and Fund
Name of Person and From Part of Fund Upon Complex Paid
Position Corporation Expenses Retirement to Directors
------------------ ----------- ------------ ---------- ------------
John F. Curley, Jr. -
Chairman of the Board
and Director None N/A N/A None
Edward A. Taber, III -
President and Director None N/A N/A None
Marie K. Karpinski -
Vice President and
Treasurer None N/A N/A None
Richard G. Gilmore -
Director $2,000 N/A N/A $21,600
Charles F. Haugh -
Director $2,000 N/A N/A $23,600
Arnold L. Lehman -
Director $2,000 N/A N/A $23,600
Jill E. McGovern -
Director $2,000 N/A N/A $23,600
T. A. Rodgers -
Director $2,000 N/A N/A $21,600
</TABLE>
The information provided above is for the year ended December 31, 1994.
Officers and directors of the Corporation who are interested
persons thereof receive no salary or fees from the Corporation.
Independent directors of the Corporation receive a fee of $400 annually
for serving as a director and a fee of $400 for each meeting of the Board
of Directors attended by him or her.
The Nominating Committee of the Board of Directors is responsible
for the selection and nomination of disinterested directors. The
Committee is composed of Messrs. Gilmore, Haugh, Lehman and Rodgers and
Dr. McGovern.
- 31 -
<PAGE>
THE FUND'S INVESTMENT MANAGER
Legg Mason Fund Adviser, Inc. ("Manager"), 111 South Calvert
Street, Baltimore, MD 21202, is a wholly owned subsidiary of Legg Mason,
Inc., which is also the parent of Legg Mason Wood Walker, Incorporated.
The Manager serves as the manager for the Fund under a Management
Agreement ("Management Agreement"), which was approved by the
Corporation's Board of Directors, including a majority of the directors
who are not "interested persons" (as defined in the 1940 Act) of the
Corporation, the Manager or the Adviser, on October 21, 1994. The
Management Agreement provides that, subject to overall direction by the
Board of Directors, the Manager will manage the investment and other
affairs of the Fund. The Manager is responsible for managing the Fund's
securities and for making purchases and sales of securities consistent
with the investment objectives and policies described in the Fund's
Prospectus and this Statement of Additional Information. The Manager is
obligated to furnish the Fund with office space and certain administrative
services as well as executive and other personnel necessary for the
operation of the Fund. The Manager and its affiliates also are
responsible for the compensation of directors and officers of the
Corporation who are employees of the Manager and/or its affiliates. The
Manager has delegated the portfolio management functions for the Fund to
the Adviser, Batterymarch Financial Management, Inc.
As explained in the Fund's Prospectus, the Manager receives for
its services a management fee, calculated daily and payable monthly, at an
annual rate equal to 0.75% of the Fund's average daily net assets. The
Manager and Adviser have voluntarily agreed to waive their fees if and to
the extent necessary to limit the Fund's total operating expenses
(exclusive of taxes, interest, brokerage and extraordinary expenses) to
2.25% of its average daily net assets. This agreement will expire on
December 31, 1995, unless extended by the Manager and Adviser.
Under the Management Agreement, the Manager will not be liable
for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of the Management Agreement,
except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or losses resulting from willful
misfeasance, bad faith or gross negligence in the performance of its
duties or from reckless disregard of its obligations or duties thereunder.
The Management Agreement terminates automatically upon assignment
and is terminable at any time without penalty by vote of the Corporation's
Board of Directors, by vote of a majority of the outstanding voting
securities or by the Manager, on not less than 60 days' written notice to
the other party, and may be terminated immediately upon the mutual written
consent of the Manager and the Fund.
The Fund pays all its other expenses which are not expressly
assumed by the Manager. These expenses include, among others, interest
expense, taxes, brokerage fees, commissions, expenses of preparing and
printing prospectuses, statements of additional information, proxy
statements and reports and of distributing them to existing shareholders,
custodian charges, transfer agency fees, organizational expenses,
distribution fees to the Fund's distributor, compensation of the
independent directors, legal and audit expenses, insurance expenses,
- 32 -
<PAGE>
expenses of registering and qualifying shares of the Fund for sale under
federal and state law, governmental fees and expenses incurred in
connection with membership in investment company organizations.
Under the Management Agreement, the Fund has the non-exclusive
right to use the name "Legg Mason" until that Agreement is terminated or
until the right is withdrawn in writing by the Manager.
THE FUND'S INVESTMENT ADVISER
The Adviser, Batterymarch Financial Management, Inc., is a wholly
owned subsidiary of Legg Mason, Inc., which also is the parent of Legg
Mason. The Adviser serves as the Fund's investment adviser under an
Investment Advisory Agreement ("Advisory Agreement"). Under the Advisory
Agreement, the Adviser is responsible, subject to the general supervision
of the Manager and the Corporation's Board of Directors, for the actual
management of the Fund's assets, including the responsibility for making
decisions and placing orders to buy, sell or hold a particular security.
For the Adviser's services, the Manager (not the Fund) pays the Adviser a
fee, computed daily and payable monthly, at an annual rate equal to 0.50%
of the average daily net assets of the Fund.
Under the Advisory Agreement, the Adviser will not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the performance of the Advisory Agreement, except
a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its obligations or
duties thereunder.
The Advisory Agreement terminates automatically upon assignment.
It also is terminable at any time without penalty by vote of the
Corporation's Board of Directors, by vote of a majority of the Fund's
outstanding voting securities, or by the Adviser, on not less than 60
days' notice to the other party to the Agreement and may be terminated
immediately upon the mutual written consent of both parties to the
Agreement.
THE FUND'S DISTRIBUTOR
Legg Mason acts as distributor of the Fund's shares pursuant to
an Underwriting Agreement with the Corporation. The Underwriting
Agreement obligates Legg Mason to promote the sale of Fund shares and to
pay certain expenses in connection with its distribution efforts,
including the printing and distribution of prospectuses and periodic
reports used in connection with the offering to prospective investors
(after the prospectuses and reports have been prepared, set in type and
mailed to existing shareholders at the Fund's expense) and for
supplementary sales literature and advertising costs.
The Fund has adopted a Distribution Plan ("Plan") which, among
other things, permits the Fund to pay Legg Mason fees for its services
related to sales and distribution of Fund shares and the provision of
ongoing services to shareholders. Distribution activities for which such
payments may be made include, but are not limited to, compensation to
- 33 -
<PAGE>
persons who engage in or support distribution and redemption of shares,
printing of prospectuses and reports for persons other than existing
shareholders, advertising, preparation and distribution of sales
literature, overhead, travel and telephone expenses.
The Plan was adopted, as required by Rule 12b-1 under the 1940
Act, by a vote of the Board of Directors on October 21, 1994, including a
majority of the directors who are not "interested persons" of the Fund as
that term is defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plan or the Underwriting
Agreement ("12b-1 Directors").
In approving the Plan, in accordance with the requirements of
Rule 12b-1, the directors determined that there was a reasonable
likelihood that the Plan would benefit the Fund and its shareholders. The
directors considered, among other things, the extent to which the
potential benefits of the Plan to the Fund's shareholders outweighed the
costs of the Plan; the likelihood that the Plan would succeed in producing
such potential benefits; the merits of certain possible alternatives to
the Plan; and the extent to which the retention of assets and additional
sales of the Fund's shares would be likely to maintain or increase the
amount of compensation paid by the Fund to its Adviser.
In considering the costs of the Plan, the directors gave
particular attention to the fact that any payments made by the Fund to
Legg Mason under the Plan would increase the Fund's level of expenses in
the amount of such payments. Further, the directors recognized that the
Adviser would earn greater management fees if the Fund's assets were
increased, because such fees are calculated as a percentage of the Fund's
assets and thus would increase if net assets increase. The directors
further recognized that there can be no assurance that any of the
potential benefits described below would be achieved if the Plan were
implemented.
Among the potential benefits of the Plan, the directors noted
that the payment of service fees to Legg Mason and its investment
executives could motivate them to improve their sales efforts with respect
to the Fund's shares and to maintain and enhance the level of services
they provide to the Fund's shareholders. These efforts, in turn, could
lead to increased sales and reduced redemptions, eventually enabling the
Fund to achieve economies of scale and lower per-share operating expenses.
Any reduction in such expenses would serve to offset, in whole or in part,
the additional expenses incurred by the Fund in connection with the Plan.
Furthermore, the investment management of the Fund could be enhanced, as
net inflows of cash from new sales might enable its portfolio manager to
take advantage of attractive investment opportunities, and reduced
redemptions could eliminate the potential need to liquidate attractive
securities positions in order to raise the funds necessary to meet the
redemption requests.
As compensation for its services and expenses, Legg Mason
receives from the Fund an annual distribution fee equivalent to 0.75% of
its average daily net assets and a service fee equivalent to 0.25% of its
average daily net assets in accordance with the Plan. The distribution and
service fees are calculated daily and payable monthly. Legg Mason has
voluntarily agreed to waive its fees and reimburse the Fund if and to the
- 34 -
<PAGE>
extent necessary to limit its operating expenses (exclusive of taxes,
interest and brokerage and extraordinary expenses) to 2.25% of its average
daily net assets. This agreement will expire on December 31, 1995, unless
extended by Legg Mason.
The Plan will continue in effect only so long as it is approved
at least annually by the vote of a majority of the Board of Directors,
including a majority of the 12b-1 Directors, cast in person at a meeting
called for the purpose of voting on the Plan. The Plan may be terminated
with respect to the Fund by a vote of a majority of 12b-1 Directors or by
vote of a majority of the outstanding voting securities of the Fund. Any
change in the Plan that would materially increase the distribution costs
to the Fund requires shareholder approval; otherwise, the Plan may be
amended by the directors, including a majority of the 12b-1 Directors.
Rule 12b-1 requires that any person authorized to direct the
disposition of monies paid or payable by the Fund, pursuant to the Plan or
any related agreement shall provide to the Fund's Board of Directors, and
the directors shall review, at least quarterly, a written report of the
amounts so expended and the purposes for which the expenditures were made.
Rule 12b-1 also provides that the Fund may rely on that Rule only if,
while the Plan is in effect, the nomination and selection of the Fund's
independent directors is committed to the discretion of such independent
directors.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser is responsible for the
execution of portfolio transactions and must seek the most favorable price
and execution for such transactions, subject to the possible payment, as
described below, of higher brokerage commissions to brokers who provide
research and analysis. The Fund may not always pay the lowest commission
or spread available. Rather, in placing orders for the Fund the Adviser
takes into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's facilities (including the
services described below), and any risk assumed by the executing broker.
Consistent with the policy of most favorable price and execution,
the Adviser may give consideration to research and statistical services
furnished by brokers or dealers to the Adviser for its use, may place
orders with brokers who provide supplemental investment and market
research and securities and economic analysis, and may pay to these
brokers a higher brokerage commission than may be charged by other
brokers. Such services include, without limitation, advice as to the
value of securities; the advisability of investing in, purchasing, or
selling securities; advice as to the availability of securities or of
purchasers or sellers of securities; and furnishing analyses and reports
concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and the performance of accounts. Such research and
analysis may be useful to the Adviser in connection with services to
clients other than the Fund. The Adviser's fee is not reduced by reason of
its receiving such brokerage and research services.
From time to time the Fund may use Legg Mason to effect agency
transactions in listed securities at commission rates and under
circumstances consistent with the policy of best execution. Commissions
- 35 -
<PAGE>
paid to Legg Mason will not exceed "usual and customary brokerage
commissions." Rule 17e-1 under the 1940 Act defines "usual and customary"
commissions to include amounts which are "reasonable and fair compared to
the commission, fee or other remuneration received or to be received by
other brokers in connection with comparable transactions involving similar
securities being purchased or sold on a securities exchange during a
comparable period of time." In the OTC market, the Fund generally will
deal with responsible primary market makers unless a more favorable
execution can otherwise be obtained.
Except as permitted by SEC rules or orders, the Fund may not buy
securities from, or sell securities to, Legg Mason or its affiliated
persons as principal. The Corporation's Board of Directors has adopted
procedures in conformity with Rule 10f-3 under the 1940 Act whereby the
Fund may purchase securities that are offered in certain underwritings in
which Legg Mason or any of its affiliated persons is a participant. These
procedures, among other things, limit the Fund's investment in the amount
of securities of any class of securities offered in an underwriting in
which Legg Mason or any of its affiliated persons is a participant so
that: (i) the Fund together with all other registered investment companies
advised by the Adviser, may not purchase more than 4% of the principal
amount of the offering of such class or $500,000 in principal amount,
whichever is greater, but in no event greater than 10% of the principal
amount of the offering; and (ii) the consideration to be paid by the Fund
in purchasing the securities being offered may not exceed 3% of the total
assets of the Fund. In addition, the Fund may not purchase securities
during the existence of an underwriting if Legg Mason is the sole
underwriter of those securities.
Section 11(a) of the Securities Exchange Act of 1934 prohibits
Legg Mason from executing transactions on an exchange for its affiliates,
such as the Fund, unless the affiliate expressly consents by written
contract. The Advisory Agreement expressly provides such consent in
accordance with Rule 11a2-2(T).
Investment decisions for the Fund are made independently from
those of other funds and accounts advised by the Adviser. However, the
same security may be held in the portfolios of more than one fund or
account. When two or more accounts simultaneously engage in the purchase
or sale of the same security, the prices and amounts will be equitably
allocated to each account. In some cases, this procedure may adversely
affect the price or quantity of the security available to a particular
account. In other cases, however, an account's ability to participate in
large-volume transactions may produce better executions and prices.
THE FUND'S CUSTODIAN AND
TRANSFER AND DIVIDEND-DISBURSING AGENT
State Street Bank & Trust Company ("State Street"), P.O. Box
1713, Boston, Massachusetts, serves as custodian of the Fund's assets.
Boston Financial Data Services, P.O. Box 8000, Boston, Massachusetts
02266-8000 serves as transfer and dividend-disbursing agent and
administrator of various shareholder services. Legg Mason also assists
BFDS with certain of its duties as transfer agent, for which BFDS pays
- 36 -
<PAGE>
Legg Mason a fee. The Fund reserves the right, upon 60 days' written
notice, to make other charges to investors to cover administrative costs.
THE CORPORATION'S LEGAL COUNSEL
Kirkpatrick & Lockhart, 1800 M Street, N.W., Washington, D.C.
20036, serves as counsel to the Corporation.
THE CORPORATION'S INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 217 East Redwood Street, Baltimore,
Maryland 21202, have been selected by the directors to serve as the
Corporation's independent accountants.
- 37 -
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
INTERNATIONAL EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 16, 1994
Assets
Cash $ 1,000
Deferred organization and initial offering costs 50,000
--------
Total assets 51,000
--------
Liabilities
Accrued organization expenses and initial
offering costs 50,000
--------
Total liabilities 50,000
--------
Net Assets - Offering and redemption price of $10.00 per
share with 100 shares outstanding (1,000,000,000
shares par value $.001 per share authorized) $ 1,000
========
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
A. Legg Mason Global Trust, Inc. ("Corporation") was organized on
December 31, 1992. The International Equity Trust ("Fund") constitutes one
of the two series established under the Corporation at November 16, 1994.
The Fund has had no operations other than those matters related to its
organization and registration as an investment company under the Investment
Company Act of 1940 and the sale of its shares. Legg Mason Fund Adviser
Inc. ("Fund Adviser"), a wholly owned subsidiary of Legg Mason, Inc. (a
financial services holding company), has provided the initial capital for
the Fund by purchasing 100 shares of the Fund at $10.00 per share. Such
shares were acquired for investment and can be disposed of only by
redemption. Legg Mason Wood Walker, Incorporated, a wholly owned subsidiary
of Legg Mason, Inc. and a member of the New York Stock Exchange, acts as
distributor of the Fund's shares.
B. Deferred organization and initial offering costs represent expenses
incurred in connection with the Fund's organization and will be amortized on
a straight line basis over five years commencing on the effective date of the
Fund's initial sale of shares to the public. The Fund has agreed to reimburse
Fund Adviser for organization expenses advanced by Fund Adviser. The advances
are repayable on demand but must be fully repaid within five years from the
commencement of operations. The proceeds realized by Fund Adviser upon
redemption during the amortization period of any of the shares constituting
initial capital will be reduced by a proportionate amount of unamortized
deferred organization expenses which the number of initial shares redeemed
bears to the number of initial shares then outstanding.
- 38 -
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of Legg Mason Global Trust, Inc.:
We have audited the accompanying statement of assets and liabilities
of the Legg Mason International Equity Trust (the "Fund"), one of the
portfolios of the Legg Mason Global Trust, Inc., as of November 16, 1994.
This financial statement is the responsibility of the Fund's management.
Our responsibility is to express an opinion on this financial statement
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 financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial position of
the Legg Mason International Equity Trust as of November 16, 1994, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Baltimore, Maryland
November 16, 1994
<PAGE>
Legg Mason Global Trust, Inc.
Part C. Other Information
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements: The Statement of Assets and
Liabilities of the Corporation's Global Equity Trust
(formerly Legg Mason International Equity Trust) as
of November 16, 1994, and the report of the Corporation's
independent accountants are included in the Statement of
Additional Information.
(b) Exhibits
(1) (a) Articles of Incorporation2/
(b) Articles Supplementary6/
(2) By-Laws1/
(3) Voting trust agreement -- none
(4) Specimen security
(a) Global Government Trust2/
(b) Global Equity Trust6/
(5) (a) Investment Advisory Agreement (form
of) -- Global Equity Trust filed
herewith
(b) Management Agreement (form of) -- Global
Equity Trust - filed herewith
(c) Investment Advisory Agreement (form
of) -- Global Government Trust - filed
herewith
(d) Investment Advisory and Management
Agreement (form of) -- Global Government
Trust - filed herewith
(6) Underwriting Agreement
(a) Global Government Trust3/
(b) Global Equity Trust - (form of) filed
herewith
(7) Bonus, profit sharing or pension plans -- none
(8) Custodian Agreement3/
(9) Transfer Agency and Service Agreement3/
(10) Opinion and consent of counsel
(a) Global Government Trust2/
(b) Global Equity Trust6/
(11) Other opinions, appraisals, rulings and consents
-- Accountant's consent
(a) Global Government Trust8/
(b) Global Equity Trust - filed herewith
(12) Financial statements omitted from Item 23 -- none
(13) Agreement for providing initial capital2/
(14) (a) Prototype IRA Plan5/
(b) Prototype Corporate Simplified Employee
Pension Plan5/
(c) Prototype Keogh Plan5/
<PAGE>
(15) Plan pursuant to Rule l2b-1
(a) Global Government Trust3/
(b) Global Equity Trust - (form of) filed
herewith
(16) Schedule for computation of performance
quotations
(a) Global Government Trust8/
(b) Global Equity Trust - none
_________________
1/ Incorporated by reference from the initial registration statement,
SEC File No. 33-56672, filed December 31, 1992.
2/ Incorporated by reference from Pre-Effective Amendment No. 2 to the
registration statement, SEC File No. 33-56672, filed April 1, 1993.
3/ Incorporated by reference from Post-Effective Amendment No. 1 to the
registration statement, SEC File No. 33-56672, filed October 4, 1993.
4/ Incorporated by reference from Post-Effective Amendment No. 2 to the
registration statement, SEC File No. 33-56672, filed April 28, 1994.
5/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 8 to the registration statement of Legg Mason Income Trust,
Inc., SEC File No. 33-12092, filed April 28, 1991.
6/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 3 to the registration statement, SEC File No. 33-56672,
filed November 28, 1994.
7/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 4 to the registration statement, SEC File No. 33-56672,
filed January 31, 1995.
8/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 5 to the registration statement, SEC File No. 33-56672,
filed March 1, 1995.
Item 25. Persons Controlled by or under Common Control with
Registrant
--------------------------------------------------
None.
- 2 -
<PAGE>
Item 26. Number of Holders of Securities
--------------------------------
Number of Recordholders
Title of Class as of January 31, 1995
--------------------------------------------------
Capital Stock
par value $.001
---------------
Legg Mason Global Government Trust 10,190
Legg Mason Global Equity Trust 1
Item 27. Indemnification
---------------
This item is incorporated by reference from Item 27 of
Part C of Post-Effective Amendment No. 1 to the registration statement,
SEC File No. 33-56672, filed October 4, 1993.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
I. Legg Mason Fund Adviser, Inc. ("Adviser"), investment
adviser to the Registrant's Legg Mason Global Government Trust series, is
a registered investment adviser incorporated on January 20, 1982. The
Adviser is engaged primarily in the investment advisory business. The
Adviser also serves as manager and/or investment adviser to fourteen open-
end investment companies and as investment consultant for one closed-end
investment company. Information as to the officers and directors of the
Adviser is included in its Form ADV-S filed June 30, 1994 with the
Securities and Exchange Commission (registration number 801-16958) and is
incorporated herein by reference.
II. Western Asset Management Company ("Western"), sub-adviser
to the Registrant's Legg Mason Global Government Trust series, is a
registered investment adviser incorporated on October 5, 1971. Western is
primarily engaged in the investment advisory business. Western also
serves as investment adviser for six open-end investment companies and one
closed-end investment company. Information as to the officers and
directors of Western is included in its Form ADV filed on June 8, 1994
with the Securities and Exchange Commission (registration number 801-
08162) and is incorporated herein by reference.
III. Batterymarch Financial Management, Inc. ("Batterymarch"),
investment adviser to the Registrant's Legg Mason Global Equity Trust
series, is a registered investment adviser incorporated on January 5,
1995. Batterymarch is engaged primarily in the investment advisory
business. Batterymarch also acts as investment adviser or subadviser to
five investment companies. Information as to the officers and directors
of Batterymarch is included in its Form ADV filed March 31, 1994 with the
Securities and Exchange Commission (registration number 801-25379) and is
incorporated herein by reference.
- 3 -
<PAGE>
Item 29. Principal Underwriters
----------------------
(a) Legg Mason Cash Reserve Trust
Legg Mason Special Investment Trust, Inc.
Legg Mason Value Trust, Inc.
Legg Mason Tax-Exempt Trust, Inc.
Legg Mason Income Trust, Inc.
Legg Mason Total Return Trust, Inc.
Legg Mason Tax-Free Income Fund
Legg Mason Investors Trust, Inc.
Western Asset Trust, Inc.
(b) The following table sets forth information concerning
each director and officer of the Registrant's principal
underwriter, Legg Mason Wood Walker, Incorporated
("LMWW").
Position and Positions and
Name and Principal Offices with Offices with
Business Address* Underwriter - LMWW Registrant
------------------ ------------------ --------------
Raymond A. Mason Chairman of the None
Board
John F. Curley, Jr. Vice Chairman Chairman of
the Board and
Director
James W. Brinkley President and None
Director
Edmund J. Cashman, Jr. Senior Executive None
Vice President and
Director
Robert G. Sabelhaus Executive Vice None
President and
Director
Richard J. Himelfarb Executive Vice None
President and
Director
Edward A. Taber III Executive Vice President and
President and Director
Director
Charles A. Bacigalupo Senior Vice None
President, Secretary
and Director
- 4 -
<PAGE>
Thomas M. Daly, Jr. Senior Vice None
President and
Director
Jerome M. Dattel Senior Vice None
President and
Director
Robert G. Donovan Senior Vice None
President and
Director
William F. Haneman, Jr. Senior Vice None
One Battery Park Plaza President and
New York, New York 10005 Director
Thomas E. Hill Senior Vice None
One Mill Place President and
Easton, MD 21601 Director
Arnold S. Hoffman Senior Vice None
1735 Market Street President and
Philadelphia, PA 19103 Director
Carl Hohnbaum Senior Vice None
24th Floor President and
Two Oliver Plaza Director
Pittsburgh, PA 15222
William B. Jones, Jr. Senior Vice None
1747 Pennsylvania Avenue, N.W. President and
Washington, D.C. 20006 Director
Laura L. Lange Senior Vice None
President and
Director
Marvin McIntyre Senior Vice None
1747 Pennsylvania Avenue, N.W. President and
Washington, D.C. 20006 Director
Douglas C. Petty, Jr. Senior Vice None
1747 Pennsylvania Avenue, N.W. President and
Washington, D.C. 20006 Director
Mark I. Preston Senior Vice None
President and
Director
F. Barry Bilson Senior Vice None
President and
Director
M. Walter D'Alessio, Jr. Director None
1735 Market Street
Philadelphia, PA 19103
- 5 -
<PAGE>
Harry M. Ford, Jr. Senior Vice None
President
Edward R. Hipp, III Senior Vice None
600 Thimble Shoals Blvd. President
Newport News, VA 23607
Theodore S. Kaplan Senior Vice None
President and
General Counsel
Horace M. Lowman, Jr. Senior Vice None
President and
Asst. Secretary
Robert L. Meltzer Senior Vice None
One Battery Park Plaza President
New York, NY 10004
William H. Miller, III Senior Vice None
President
John A. Pliakas Senior Vice None
99 Summer Street President
Boston, MA 02101
E. Robert Quasman Senior Vice None
President
Gail Reichard Senior Vice None
7 E. Redwood St. President
Baltimore, MD 21202
Timothy C. Scheve Senior Vice None
President and
Treasurer
Elisabeth N. Spector Senior Vice None
President
Joseph Sullivan Senior Vice None
Peter J. Biche President None
1735 Market Street Vice President
Philadelphia, PA 19103
John C. Boblitz Vice President None
7 E. Redwood St.
Baltimore, MD 21202
Andrew J. Bowden Vice President None
D. Stuart Bowers Vice President None
7 E. Redwood St.
Baltimore, MD 21202
Edwin J. Bradley, Jr. Vice President None
- 6 -
<PAGE>
Scott R. Cousino Vice President None
Robert Dickey, IV Vice President None
One World Trade Center
New York, NY 10048
John R. Gilner Vice President None
Richard A. Jacobs Vice President None
C. Gregory Kallmyer Vice President None
John J. Koorey Vice President None
One Battery Park Plaza
New York, NY 10004
Seth J. Lehr Vice President None
1735 Market St.
Philadelphia, PA 19103
Edward W. Lister, Jr. Vice President None
Eileen M. O'Rourke Vice President None
and Controller
Marie K. Karpinski Vice President Vice
and Treasurer President
Jonathan M. Pearl Vice President None
1777 Reisterstown Rd.
Pikesville, MD 21208
Douglas F. Pollard Vice President None
Chris Scitti Vice President None
7 E. Redwood St.
Baltimore, MD 21202
Eugene B. Shephard Vice President None
1111 Bagby St.
Houston, TX 77002-2510
Lawrence D. Shubnell Vice President None
Charles R. Spencer, Jr. Vice President None
600 Thimble Shoals Blvd.
Newport News, VA 23606
Alexander M. Stewart Vice President None
One World Trade Center
New York, NY 10048
Lewis T. Yeager Vice President None
7 E. Redwood St.
Baltimore, MD 21202
Joseph F. Zunic Vice President None
- 7 -
<PAGE>
----------------
* All addresses are 111 South Calvert Street, Baltimore, Maryland
21202, unless otherwise indicated.
(c) The Registrant has no principal underwriter which is not
an affiliated person of the Registrant or an affiliated
person of such an affiliated person.
Item 30. Location of Accounts and Records
--------------------------------
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
Item 31. Management Services - None
-------------------
Item 32. Undertakings
------------
Registrant hereby undertakes to provide each person to
whom a prospectus is delivered with a copy of its latest
annual report to shareholders upon request and without
charge.
- 8 -
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, Legg Mason Global
Trust, Inc., has duly caused this Post-Effective Amendment No. 6 to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Baltimore and State of Maryland,
on the 20th day of March, 1995.
LEGG MASON GLOBAL TRUST, INC.
By:/s/ John F. Curley, Jr.
------------------------------
John F. Curley, Jr.
Chairman of the Board and Director
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 to the Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
/s/ John F. Curley, Jr. Chairman of the Board March 20, 1995
------------------------- and Director
John F. Curley, Jr.
/s/ Edward A. Taber, III President and Director March 20, 1995
-------------------------
Edward A. Taber, III
/s/Richard G. Gilmore Director March 20, 1995
-------------------------
Richard G. Gilmore*
/s/Charles F. Haugh Director March 20, 1995
-------------------------
Charles F. Haugh*
/s/Arnold L. Lehman Director March 20, 1995
-------------------------
Arnold L. Lehman*
/s/Jill E. McGovern Director March 20, 1995
-------------------------
Jill E. McGovern*
/s/T.A. Rodgers Director March 20, 1995
-------------------------
T. A. Rodgers*
- 9 -
<PAGE>
/s/Marie K. Karpinski Vice President March 20, 1995
------------------------- and Treasurer
Marie K. Karpinski
*Signatures affixed by Marie K. Karpinski pursuant to powers of attorney
dated February 5, 1993 incorporated herein by reference to Pre-Effective
Amendment No. 2, filed April 1, 1993.
- 10 -
<PAGE>
Legg Mason Global Trust, Inc.
Exhibit Index
Exhibit
Number Page
------ ----
(1) (a) Articles of Incorporation2/
(b) Articles Supplementary6/
(2) By-Laws1/
(3) Voting trust agreement -- none
(4) Specimen security
(a) Global Government Trust2/
(b) Global Equity Trust6/
(5) (a) Investment Advisory Agreement (form of) -- Global Equity
Trust -filed herewith
(b) Management Agreement (form of) -- Global Equity
Trust - filed herewith
(c) Investment Advisory Agreement (form of) -- Global
Government Trust - filed herewith
(d) Investment Advisory and Management Agreement (form of) -
Global Government Trust - filed herewith
(6) Underwriting Agreement
(a) Global Government Trust3/
(b) Global Equity Trust - (form of) filed herewith
(7) Bonus, profit sharing or pension plans -- none
(8) Custodian Agreement3/
(9) Transfer Agency and Service Agreement3/
(10) Opinion and consent of counsel
(a) Global Government Trust2/
(b) Global Equity Trust6/
(11) Other opinions, appraisals, rulings and consents -- Accountant's
consent
(a) Global Government Trust8/
(b) Global Equity Trust - filed herewith
(12) Financial statements omitted from Item 23 -- none
(13) Agreement for providing initial capital2/
(14) (a) Prototype IRA Plan5/
(b) Prototype Corporate Simplified Employee Pension Plan5/
(c) Prototype Keogh Plan5/
(15) Plan pursuant to Rule 12b-1
(a) Global Government Trust3/
(b) Global Equity Trust - (form of) filed herewith
(16) Schedule for computation of performance quotations
(a) Global Government Trust8/
(b) Global Equity Trust - none
_____________
1/ Incorporated by reference from the initial registration statement, SEC
File No. 33-56672, filed December 31, 1992.
- 11 -
<PAGE>
2/ Incorporated by reference from Pre-Effective Amendment No. 2 to the
registration statement, SEC File No. 33-56672, filed April 1, 1993.
3/ Incorporated by reference from Post-Effective Amendment No. 1 to the
registration statement, SEC File No. 33-56672, filed October 4, 1993.
4/ Incorporated by reference from Post-Effective Amendment No. 2 to the
registration statement, SEC File No. 33-56672, filed April 28, 1994.
5/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 8 to the registration statement of Legg Mason Income Trust,
Inc., SEC File No. 33-12092, filed April 28, 1991.
6/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 3 to the registration statement, SEC File No. 33-56672,
filed November 28, 1994.
7/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 4 to the registration statement, SEC File No. 33-56672,
filed January 31, 1995.
8/ Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 5 to the registration statement, SEC File No. 33-56672,
filed March 1, 1995.
- 12 -
<PAGE>
Exhibit 5(b)
FORM OF
INVESTMENT ADVISORY AGREEMENT
LEGG MASON GLOBAL TRUST, INC.
AGREEMENT made this ______ day of __________, 199_ by and between
Legg Mason Fund Adviser, Inc. ("Manager"), a Maryland corporation, and
Batterymarch Financial Management Corporation ("Adviser"), a Maryland
corporation, each of which is registered as an investment adviser under
the Investment Advisers Act of 1940.
WHEREAS, Manager is the manager of Legg Mason Global Trust, Inc.
(the "Corporation"), an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), and
WHEREAS, Manager wishes to retain Adviser to provide it with
certain investment advisory services in connection with Manager's
management of the Legg Mason Global Equity Trust ("Fund"), a series of
shares of the Corporation; and
WHEREAS, Adviser is willing to furnish such services on the terms
and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. Appointment. Manager hereby appoints Batterymarch
Financial Management Corporation as investment adviser for the Fund for
the period and on the terms set forth in this Agreement. Adviser accepts
such appointment and agrees to furnish the services herein set forth for
the compensation herein provided.
2. Delivery of Documents. Manager has furnished the
Adviser with copies properly certified or authenticated of each of the
following:
(a) The Corporation's Articles of Incorporation, as
filed with the State Department of Assessments and Taxation of
the State of Maryland on December 31, 1992 and all amendments
thereto (such Articles of Incorporation, as presently in effect
and as they shall from time to time be amended, are herein called
the "Articles");
(b) The Corporation's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as they shall
from time to time be amended, are herein called the "By-Laws");
<PAGE>
(c) Resolutions of the Corporation's Board of
Directors authorizing the appointment of Manager as the manager
and Batterymarch Financial Management Corporation as investment
adviser and approving the Management Agreement between Manager
and the Fund dated ________________, 199_ (the "Management
Agreement") and this Agreement;
(d) The Corporation's Registration Statement on Form
N-1A under the Securities Act of 1933, as amended, and the 1940
Act (File No. 33-56672) as filed with the Securities and Exchange
Commission on _____, 1994, including all exhibits thereto,
relating to shares of common stock of the Fund, par value $.001
per share (herein called "Shares") and all amendments thereto;
(e) The Fund's most recent prospectus (such
prospectus, as presently in effect and all amendments and
supplements thereto are herein called the "Prospectus"); and
(f) The Fund's most recent statement of additional
information (such statement of additional information, as
presently in effect and all amendments and supplements thereto
are herein called the "Statement of Additional Information").
The Manager will furnish Adviser from time to time with copies of all
amendments of or supplements to the foregoing.
3. Investment Advisory Services. (a) Subject to the
supervision of the Corporation's Board of Directors and the Manager,
Adviser shall regularly provide the Fund with investment research, advice,
management and supervision and shall furnish a continuous investment
program for the Fund's portfolio of securities consistent with the Fund's
investment objective, policies, and limitations as stated in the Fund's
current Prospectus and Statement of Additional Information. The Adviser
shall determine from time to time what securities will be purchased,
retained or sold by the Fund, and shall implement those decisions, all
subject to the provisions of the Corporation's Articles of Incorporation
and By-Laws, the 1940 Act, the applicable rules and regulations of the
Securities and Exchange Commission, and other applicable federal and state
law, as well as the investment objective, policies, and limitations of the
Fund. The Adviser will place orders pursuant to its investment
determinations for the Fund either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers, Adviser
will attempt to obtain the best net price and the most favorable execution
of its orders; however, the Adviser may, in its discretion, purchase and
sell portfolio securities from and to brokers and dealers who provide the
Fund with research, analysis, advice and similar services, and Adviser may
pay to these brokers, in return for research and analysis, a higher
commission than may be charged by other brokers. In no instance will
portfolio securities be purchased from or sold to the Adviser or any
affiliated person thereof except in accordance with the rules, regulations
or orders promulgated by the Securities and Exchange Commission pursuant
- 2 -
<PAGE>
to the 1940 Act. The Adviser shall also perform such other functions of
management and supervision as may be requested by the Manager and agreed
to by Adviser.
(b) The Adviser will oversee the maintenance of all books and
records with respect to the securities transactions of the Fund in
accordance with all applicable federal and state laws and regulations, and
will furnish the Board of Directors of the Corporation with such periodic
and special reports as the Board or the Manager reasonably may request.
(c) The Corporation hereby authorizes any entity or person
associated with the Adviser which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Corporation which is permitted by Section 11(a) of the Securities Exchange
Act of 1934 and Rule 11a2-2(T) thereunder, and the Corporation hereby
consents to the retention by such person associated with the Adviser of
compensation for such transactions in accordance with Rule 11a2-
2(T)(a)(2)(iv).
4. Services Not Exclusive. The Adviser's services hereunder
are not deemed to be exclusive, and Adviser shall be free to render
similar services to others. It is understood that persons employed by
Adviser to assist in the performance of its duties hereunder might not
devote their full time to such service. Nothing herein contained shall be
deemed to limit or restrict the right of the Adviser or any affiliate of
Adviser to engage in and devote time and attention to other businesses or
to render services of whatever kind or nature.
5. Books and Records. In compliance with the requirements
of Rule 31a-3 under the 1940 Act, Adviser hereby agrees that all books and
records which it maintains for the Fund are property of the Fund and
further agrees to surrender promptly to the Fund or its agents any of such
records upon the Fund's request. The Adviser further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act, any such
records required to be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, Adviser
will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
7. Compensation. For the services which Adviser will render
to Manager and the Fund under this Agreement, Manager will pay Adviser a
fee, computed daily and paid monthly, at an annual rate equal to __% of
the fee received by the Manager from the Fund, net of any waivers or
reimbursements by the Manager of its fee. Fees due to the Adviser
hereunder shall be paid promptly to Adviser by the Manager following its
receipt of fees from the Fund. If this Agreement is terminated as of any
date not the last day of a calendar month, a final fee shall be paid
promptly after the date of termination and shall be based on the
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<PAGE>
percentage of days of the month during which the contract was still in
effect.
8. Limitation of Liability. The Adviser will not be liable
for any error of judgment or mistake of law or for any loss suffered by
Manager or by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations or duties under this Agreement.
9. Definitions. As used in this Agreement, the terms
"securities" and "net assets" shall have the meanings ascribed to them in
the Articles of Incorporation of the Corporation; and the terms
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities
and Exchange Commission by any rule, regulation or order.
10. Duration and Termination. This Agreement will become
effective ________________, 199_, provided that it shall have been
approved by the Corporation's Board of Directors and by the shareholders
of the Fund in accordance with the requirements of the 1940 Act and,
unless sooner terminated as provided for herein, shall continue in effect
until ___________________, 199_. Thereafter, if not terminated, this
Agreement shall continue in effect for successive annual periods, provided
that such continuance is specifically approved at least annually (i) by
the Corporation's Board of Directors or (ii) by a vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Fund,
provided that in either event the continuance is also approved by a
majority of the Corporation's Directors who are not interested persons (as
defined in the 1940 Act) of the Corporation or of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of
voting on such approval. This Agreement is terminable without penalty, by
vote of the Corporation's Board of Directors, by vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of the Fund,
by the Manager or by the Adviser, on not less than 60 days' notice to the
Fund and/or the other party(ies) and will be terminated immediately upon
any termination of the Management Agreement with respect to the Fund or
upon the mutual written consent of the Adviser, the Manager, and the Fund.
Termination of this Agreement with respect to the Fund shall in no way
affect continued performance with regard to any other portfolio of the
Corporation. This Agreement will automatically and immediately terminate
in the event of its assignment.
11. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
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<PAGE>
12. Amendments. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no material
amendment of this Agreement shall be effective until approved by vote of
the holders of a majority of the Fund's outstanding voting securities.
13. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and supersedes all
prior agreements and understandings relating to the subject matter hereof.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. Should any part of this
Agreement be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers designated below on the day and year
first above written.
[SEAL] LEGG MASON FUND ADVISER, INC.
Attest:
By:______________________ By:_______________________________
[SEAL] BATTERYMARCH FINANCIAL MANAGEMENT
CORPORATION
Attest:
By:______________________ By:_______________________________
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Exhibit 5(c)
FORM OF
MANAGEMENT AGREEMENT
This INVESTMENT MANAGEMENT AGREEMENT, made this __ day of
____________, 199_, by and between Legg Mason Global Trust, Inc., a
Maryland corporation (the "Corporation"), on behalf of Legg Mason Global
Equity Trust ("Fund"), and Legg Mason Fund Adviser, Inc., a Maryland
corporation (the "Manager").
WHEREAS, the Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act") currently consisting of two portfolios; and
WHEREAS, the Corporation wishes to retain the Manager to provide
investment advisory, management, and administrative services to the Fund;
and
WHEREAS, the Manager is willing to furnish such services on the
terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. The Corporation hereby appoints Legg Mason Fund Adviser,
Inc. as Manager of the Fund for the period and on the terms set forth in
this Agreement. The Manager accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. The Fund shall at all times keep the Manager fully
informed with regard to the securities owned by it, its funds available,
or to become available, for investment, and generally as to the condition
of its affairs. It shall furnish the Manager with such other documents
and information with regard to its affairs as the Manager may from time to
time reasonably request.
3. (a) Subject to the supervision of the Corporation's
Board of Directors, the Manager shall regularly provide the Fund with
investment research, advice, management and supervision and shall furnish
a continuous investment program for the Fund's portfolio of securities
consistent with the Fund's investment goals and policies. The Manager
shall determine from time to time what securities will be purchased,
retained or sold by the Fund, and shall implement those decisions, all
subject to the provisions of the Corporation's Articles of Incorporation
and By-laws, the 1940 Act, the applicable rules and regulations of the
Securities and Exchange Commission, and other applicable federal and state
law, as well as the investment goals and policies of the Fund. The Manager
will place orders pursuant to its investment determinations for the Fund
either directly with the issuer or with any broker or dealer. In placing
<PAGE>
orders with brokers and dealers the Manager will attempt to obtain the
best net price and the most favorable execution of its orders; however,
the Manager may, in its discretion, purchase and sell portfolio securities
through brokers who provide the Fund with research, analysis, advice and
similar services, and the Manager may pay to these brokers, in return for
research and analysis, a higher commission or spread than may be charged
by other brokers. The Manager shall also provide advice and
recommendations with respect to other aspects of the business and affairs
of the Fund, and shall perform such other functions of management and
supervision as may be directed by the Board of Directors of the
Corporation.
(b) The Fund hereby authorizes any entity or person
associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and Rule 11a2-2(T) thereunder, and the Fund hereby consents to the
retention by such person associated with the Manager of compensation for
such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).
4. The Manager may enter into a contract ("Investment
Advisory Agreement") with an investment adviser in which the Manager
delegates to such investment adviser any or all its duties specified in
Paragraph 3 hereunder, provided that such Investment Advisory Agreement
imposes on the investment adviser bound thereby all duties and conditions
to which the Manager is subject hereunder, and further provided that such
Investment Advisory Agreement meets all requirements of the 1940 Act and
rules thereunder.
5. (a) The Manager, at its expense, shall supply the
Board of Directors and officers of the Corporation with all statistical
information and reports reasonably required by them and reasonably
available to the Manager and shall furnish the Fund with office
facilities, including space, furniture and equipment and all personnel
reasonably necessary for the operation of the Fund. The Manager shall
oversee the maintenance of all books and records with respect to the
Fund's securities transactions and the keeping of the Fund's books of
account in accordance with all applicable federal and state laws and
regulations. In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Manager hereby agrees that any records which it maintains
for the Fund are the property of the Corporation, and further agrees to
surrender promptly to the Fund or its agents any of such records upon the
Fund's request. The Manager further agrees to arrange for the
preservation of the records required to be maintained by Rule 31a-1 under
the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act.
The Manager shall authorize and permit any of its directors, officers and
employees, who may be elected as directors or officers of the Fund, to
serve in the capacities in which they are elected.
(b) Other than as herein specifically indicated, the Manager
shall not be responsible for the Fund's expenses. Specifically, the
Manager will not be responsible, except to the extent of the reasonable
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<PAGE>
compensation of employees of the Fund whose services may be used by the
Manager hereunder, for any of the following expenses of the Fund, which
expenses shall be borne by the Fund: advisory fees; distribution fees;
interest, taxes, governmental fees, fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; the cost (including brokerage commissions or charges, if
any) of securities purchased or sold by the Fund and any losses in
connection therewith; fees of custodians, transfer agents, registrars or
other agents; legal expenses; expenses of preparing share certificates;
expenses relating to the redemption or repurchase of the Fund's shares;
expenses of registering and qualifying shares of the Fund for sale under
applicable federal and state law; expenses of preparing, setting in print,
printing and distributing prospectuses, reports, notices and dividends to
Fund shareholders; costs of stationery; costs of stockholders' and other
meetings of the Fund; directors' fees; audit fees; travel expenses of
officers, directors and employees of the Corporation if any; and the
Corporation's pro rata portion of premiums on any fidelity bond and other
insurance covering the Corporation and its officers and directors.
6. No director, officer or employee of the Corporation or
Fund shall receive from the Corporation any salary or other compensation
as such director, officer or employee while he is at the same time a
director, officer, or employee of the Manager or any affiliated company of
the Manager. This paragraph shall not apply to directors, executive
committee members, consultants and other persons who are not regular
members of the Manager's or any affiliated company's staff.
7. As compensation for the services performed and the
facilities furnished and expenses assumed by the Manager, including the
services of any consultants or sub-advisers retained by the Manager, shall
pay the Manager, as promptly as possible after the last day of each month,
a fee, computed daily at an annual rate of 0.75% of the average daily net
assets of the Fund. The first payment of the fee shall be made as
promptly as possible at the end of the month succeeding the effective date
of this Agreement. If this Agreement is terminated as of any date not the
last day of a month, such fee shall be paid as promptly as possible after
such date of termination, shall be based on the average daily net assets
of the Fund in that period from the beginning of such month to such date
of termination, and shall be based on that proportion of such average
daily net assets as the number of business days in such period bears to
the number of business days in such month. The average daily net assets
of the Fund shall in all cases be based only on business days and be
computed as of the time of the regular close of business of the New York
Stock Exchange, or such other time as may be determined by the Board of
Directors of the Corporation. Each such payment shall be accompanied by a
report of the prepared either by the Fund or by a reputable firm of
independent accountants, which shall show the amount properly payable to
the Manager under this Agreement and the detailed computation thereof.
8. The Manager assumes no responsibility under this
Agreement other than to render the services called for hereunder, in good
faith, and shall not be responsible for any action of the Board of
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<PAGE>
Directors of the Corporation in following or declining to follow any
advice or recommendations of the Manager; provided, that nothing in this
Agreement shall protect the Manager against any liability to the Fund or
its shareholders to which it would otherwise be subject by reason or
willful misfeasance, bad faith, or gross negligence in the performance of
its duties or by reason of its reckless disregard of its obligations and
duties hereunder.
9. Nothing in this Agreement shall limit or restrict the
right of any director, officer, or employee of the Manager who may also be
a director, officer, or employee of the Corporation or the Fund, to engage
in any other business or to devote his time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature, or limit or restrict the right of the
Manager to engage in any other business or to render services of any kind,
including investment advisory and management services, to any other
corporation, firm, individual or association.
10. As used in this Agreement, the terms "assignment",
"interested persons", and "majority of the outstanding voting securities"
shall have the meanings given to them by Section 2(a) of the 1940 Act,
subject to such exemptions and interpretations as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.
11. This Agreement will become effective with respect to the
Fund on the date first written above, provided that it shall have been
approved by the Corporation's Board of Directors and by the shareholders
of the Fund in accordance with the requirements of the 1940 Act and,
unless sooner terminated as provided herein, will continue in effect for
two years from the above written date. Thereafter, if not terminated,
this Agreement shall continue in effect with respect to the Fund for
successive annual periods ending on the same date of each year, provided
that such continuance is specifically approved at least annually (i) by
the Corporation's Board of Directors or (ii) by a vote of a majority of
the outstanding voting securities of the Fund (as defined in the 1940
Act), provided that in either event the continuance is also approved by a
majority of the Corporation's Directors who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
12. This Agreement is terminable with respect to the Fund
without penalty by the Corporation's Board of Directors, by vote of a
majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act), or by the Manager, on not less than 60 days' notice to the
other party and will be terminated upon the mutual written consent of the
Manager and the Corporation. This Agreement shall terminate automatically
in the event of its assignment by the Manager and shall not be assignable
by the Corporation without the consent of the Manager.
13. In the event this Agreement is terminated by either party
or upon written notice from the Manager at any time, the Corporation
hereby agrees that it will eliminate from its corporate name any reference
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<PAGE>
to the name of "Legg Mason." The Corporation shall have the non-exclusive
use of the name "Legg Mason" in whole or in part only so long as this
Agreement is effective or until such notice is given.
14. The Manager agrees that for services rendered to the
Fund, or indemnity due in connection with service to the Fund, it shall
look only to assets of the Fund for satisfaction and that it shall have no
claim against the assets of any other fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers thereunto duly authorized.
Attest: LEGG MASON GLOBAL TRUST, INC.
By: ______________________ By: _____________________________
Attest: LEGG MASON FUND ADVISER, INC.
By: ______________________ By: _____________________________
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<PAGE>
Exhibit 5(d)
FORM OF
INVESTMENT ADVISORY AGREEMENT
LEGG MASON GLOBAL TRUST, INC.
AGREEMENT made this ______ day of May, 1995 by and between Legg
Mason Fund Adviser, Inc. ("Manager"), a Maryland corporation, and Western
Asset Management Company ("Western"), a California corporation, each of
which is registered as an investment adviser under the Investment Westerns
Act of 1940.
WHEREAS, Manager is the manager of Legg Mason Global Trust, Inc.
(the "Corporation"), an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), and
WHEREAS, Manager wishes to retain Western to provide it with
certain investment advisory services in connection with Manager's
management of the Legg Mason Global Government Trust ("Fund"), a portfolio
of the Corporation represented by a separate series of shares; and
WHEREAS, Western is willing to furnish such services on the terms
and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. Appointment. Manager hereby appoints Western Asset
Management Company as an investment adviser for the Fund for the period
and on the terms set forth in this Agreement. Western accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
2. Delivery of Documents. Manager has furnished the
Western with copies properly certified or authenticated of each of the
following:
(a) The Corporation's Articles of Incorporation, as
filed with the State Department of Assessments and Taxation of
the State of Maryland on December 31, 1992 and all amendments
thereto (such Articles of Incorporation, as presently in effect
and as they shall from time to time be amended, are herein called
the "Articles");
(b) The Corporation's By-Laws and all amendments
thereto (such By-Laws, as presently in effect and as they shall
from time to time be amended, are herein called the "By-Laws");
<PAGE>
(c) Resolutions of the Corporation's Board of
Directors authorizing the appointment of Manager as the manager
and Western Asset Management Company as investment adviser and
approving the Management Agreement between Manager and the Fund
dated May __, 1995 (the "Management Agreement") and this
Agreement;
(d) The Corporation's Registration Statement on Form
N-1A under the Securities Act of 1933, as amended, and the 1940
Act (File No. 33-56672) as filed with the Securities and Exchange
Commission most recently, including all exhibits thereto,
relating to shares of common stock of the Fund, par value $.001
per share (herein called "Shares") and all amendments thereto;
(e) The Fund's most recent prospectus (such
prospectus, as presently in effect and all amendments and
supplements thereto are herein called the "Prospectus"); and
(f) The Fund's most recent statement of additional
information (such statement of additional information, as
presently in effect and all amendments and supplements thereto
are herein called the "Statement of Additional Information").
The Manager will furnish Western from time to time with copies of all
amendments of or supplements to the foregoing.
3. Investment Advisory Services. (a) Subject to the
supervision of the Corporation's Board of Directors and the Manager,
Western shall as requested by the Manager regularly provide the Fund with
investment research, advice, management and supervision and shall furnish
a continuous investment program for the Fund's portfolio of securities
consistent with the Fund's investment objective, policies, and limitations
as stated in the Fund's current Prospectus and Statement of Additional
Information. Western shall as requested by the Manager determine from
time to time what securities will be purchased, retained or sold by the
Fund, and shall implement those decisions, all subject to the provisions
of the Corporation's Articles of Incorporation and By-Laws, the 1940 Act,
the applicable rules and regulations of the Securities and Exchange
Commission, and other applicable federal and state law, as well as the
investment objective, policies, and limitations of the Fund. Western will
as requested by the Manager place orders pursuant to investment
determinations for the Fund either directly with the issuer or with any
broker or dealer. In placing orders with brokers and dealers, Western
will attempt to obtain the best net price and the most favorable execution
of its orders; however, the Western may, in its discretion, purchase and
sell portfolio securities from and to brokers and dealers who provide the
Fund with research, analysis, advice and similar services, and Western may
pay to these brokers, in return for research and analysis, a higher
commission than may be charged by other brokers. In no instance will
portfolio securities be purchased from or sold to the Western or any
affiliated person thereof except in accordance with the rules, regulations
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<PAGE>
or orders promulgated by the Securities and Exchange Commission pursuant
to the 1940 Act. Western shall also perform such other functions of
management and supervision as may be requested by the Manager and agreed
to by Western.
(b) Western will as requested by the Manager oversee the
maintenance of all books and records with respect to the securities
transactions of the Fund in accordance with all applicable federal and
state laws and regulations, and will furnish the Board of Directors of the
Corporation with such periodic and special reports as the Board or the
Manager reasonably may request.
(c) The Corporation hereby authorizes any entity or person
associated with the Western which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Corporation which is permitted by Section 11(a) of the Securities Exchange
Act of 1934, and the Corporation hereby consents to the retention by such
person associated with the Western of compensation for such transactions,
whether in accordance with Rule 11a2-2(T)(a)(2)(iv) or otherwise.
4. Services Not Exclusive. Western's services hereunder are
not deemed to be exclusive, and Western shall be free to render similar
services to others. It is understood that persons employed by Western to
assist in the performance of its duties hereunder might not devote their
full time to such service. Nothing herein contained shall be deemed to
limit or restrict the right of the Western or any affiliate of Western to
engage in and devote time and attention to other businesses or to render
services of whatever kind or nature.
5. Books and Records. In compliance with the requirements
of Rule 31a-3 under the 1940 Act, Western hereby agrees that all books and
records which it maintains for the Fund are property of the Fund and
further agrees to surrender promptly to the Fund or its agents any of such
records upon the Fund's request. Western further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act, any such records
required to be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, Western
will pay all expenses incurred by it in connection with its activities
under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Fund.
7. Compensation. For the services which Western will render
to Manager and the Fund under this Agreement, Manager will pay Western a
fee, computed daily and paid monthly, at an annual rate equal to 53-1/3%
of the fee received by the Manager from the Fund, net of any waivers or
reimbursements by the Manager of its fee. Fees due to the Western
hereunder shall be paid promptly to Western by the Manager following its
receipt of fees from the Fund. If this Agreement is terminated as of any
date not the last day of a calendar month, a final fee shall be paid
promptly after the date of termination and shall be based on the
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<PAGE>
percentage of days of the month during which the contract was still in
effect.
8. Limitation of Liability. Western will not be liable for
any error of judgment or mistake of law or for any loss suffered by
Manager or by the Fund in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting
from willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations or duties under this Agreement.
9. Definitions. As used in this Agreement, the terms
"securities" and "net assets" shall have the meanings ascribed to them in
the Articles of Incorporation of the Corporation; and the terms
"assignment," "interested person," and "majority of the outstanding voting
securities" shall have the meanings given to them by Section 2(a) of the
1940 Act, subject to such exemptions as may be granted by the Securities
and Exchange Commission by any rule, regulation or order.
10. Duration and Termination. This Agreement will become
effective May __, 1995, provided that it shall have been approved by the
Corporation's Board of Directors and by the shareholders of the Fund in
accordance with the requirements of the 1940 Act and, unless sooner
terminated as provided for herein, shall continue in effect until May __,
1997. Thereafter, if not terminated, this Agreement shall continue in
effect for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by the Corporation's Board of
Directors or (ii) by a vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of the Fund, provided that in either
event the continuance is also approved by a majority of the Corporation's
Directors who are not interested persons (as defined in the 1940 Act) of
the Corporation or of any party to this Agreement, by vote cast in person
at a meeting called for the purpose of voting on such approval. This
Agreement is terminable without penalty, by vote of the Corporation's
Board of Directors, by vote of a majority (as defined in the 1940 Act) of
the outstanding voting securities of the Fund, by the Manager or by the
Western, on not less than 60 days' notice to the Fund and/or the other
party(ies) and will be terminated immediately upon any termination of the
Management Agreement with respect to the Fund or upon the mutual written
consent of the Western, the Manager, and the Fund. Termination of this
Agreement with respect to the Fund shall in no way affect continued
performance with regard to any other portfolio of the Corporation. This
Agreement will automatically and immediately terminate in the event of its
assignment.
11. Further Actions. Each party agrees to perform such
further acts and execute such further documents as are necessary to
effectuate the purposes hereof.
12. Amendments. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
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<PAGE>
change, waiver, discharge or termination is sought, and no material
amendment of this Agreement shall be effective until approved by vote of
the holders of a majority of the Fund's outstanding voting securities.
13. Miscellaneous. This Agreement embodies the entire
agreement and understanding between the parties hereto, and supersedes all
prior agreements and understandings relating to the subject matter hereof.
The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. Should any part of this
Agreement be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers designated below on the day and year
first above written.
[SEAL] LEGG MASON FUND ADVISER, INC.
Attest:
By:______________________ By:_______________________________
[SEAL] WESTERN ASSET MANAGEMENT COMPANY
Attest:
By:______________________ By:_______________________________
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<PAGE>
Exhibit 5(e)
FORM OF
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, made this __
day of May, 1995, by and between Legg Mason Global Trust, Inc., a Maryland
corporation (the "Corporation"), on behalf of Legg Mason Global Government
Trust ("Fund"), and Legg Mason Fund Adviser, Inc., a Maryland corporation
(the "Manager").
WHEREAS, the Corporation is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"); and
WHEREAS, the Corporation wishes to retain the Manager to provide
investment advisory, management, and administrative services to the Fund;
and
WHEREAS, the Manager is willing to furnish such services on the
terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. The Corporation hereby appoints Legg Mason Fund Adviser,
Inc. as Manager of the Fund for the period and on the terms set forth in
this Agreement. The Manager accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. The Fund shall at all times keep the Manager fully
informed with regard to the securities owned by it, its funds available,
or to become available, for investment, and generally as to the condition
of its affairs. It shall furnish the Manager with such other documents
and information with regard to its affairs as the Manager may from time to
time reasonably request.
3. (a) Subject to the supervision of the Corporation's
Board of Directors, the Manager shall regularly provide the Fund with
investment research, advice, management and supervision and shall furnish
a continuous investment program for the Fund's portfolio of securities
consistent with the Fund's investment goals and policies. The Manager
shall determine from time to time what securities will be purchased,
retained or sold by the Fund, and shall implement those decisions, all
subject to the provisions of the Corporation's Articles of Incorporation
and By-laws, the 1940 Act, the applicable rules and regulations of the
Securities and Exchange Commission, and other applicable federal and state
law, as well as the investment goals and policies of the Fund. The Manager
will place orders pursuant to its investment determinations for the Fund
either directly with the issuer or with any broker or dealer. In placing
<PAGE>
orders with brokers and dealers the Manager will attempt to obtain the
best net price and the most favorable execution of its orders; however,
the Manager may, in its discretion, purchase and sell portfolio securities
through brokers who provide the Fund with research, analysis, advice and
similar services, and the Manager may pay to these brokers, in return for
research and analysis, a higher commission or spread than may be charged
by other brokers. The Manager shall also provide advice and
recommendations with respect to other aspects of the business and affairs
of the Fund, and shall perform such other functions of management and
supervision as may be directed by the Board of Directors of the
Corporation.
(b) The Corporation hereby authorizes any entity or person
associated with the Manager which is a member of a national securities
exchange to effect any transaction on the exchange for the account of the
Fund which is permitted by Section 11(a) of the Securities Exchange Act of
1934 and the Corporation hereby consents to the retention by such person
associated with the Manager of compensation for such transactions, whether
in accordance with Rule 11a2-2(T)(a)(2)(iv) or otherwise.
4. The Manager may enter into a contract ("Investment
Advisory Agreement") with an investment adviser in which the Manager
delegates to such investment adviser any or all its duties specified in
Paragraph 3 hereunder, provided that such Investment Advisory Agreement
imposes on the investment adviser bound thereby all duties and conditions
to which the Manager is subject hereunder with respect to the duties so
delegated. Such Investment Advisory Agreement must meet all requirements
of the 1940 Act and rules thereunder.
5. (a) The Manager, at its expense, shall supply the
Board of Directors and officers of the Corporation with all statistical
information and reports reasonably required by them and reasonably
available to the Manager and shall furnish the Corporation and the Fund
with office facilities, including space, furniture and equipment and all
personnel reasonably necessary for the operation of the Corporation and
the Fund. The Manager shall oversee the maintenance of all books and
records with respect to the Fund's securities transactions and the keeping
of the Corporation and the Fund's books of account in accordance with all
applicable federal and state laws and regulations. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Manager hereby agrees
that any records which it maintains for the Corporation or the Fund are
the property of the Corporation, and further agrees to surrender promptly
to the Corporation or its agents any of such records upon the
Corporation's request. The Manager further agrees to arrange for the
preservation of the records required to be maintained by Rule 31a-1 under
the 1940 Act for the periods prescribed by Rule 31a-2 under the 1940 Act.
The Manager shall authorize and permit any of its directors, officers and
employees, who may be elected as directors or officers of the Corporation,
to serve in the capacities in which they are elected.
(b) Other than as herein specifically indicated, the Manager
shall not be responsible for the expenses of the Corporation or any
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<PAGE>
Series. Specifically, the Manager will not be responsible, except to the
extent of the reasonable compensation of employees of the Corporation and
the Fund whose services may be used by the Manager hereunder, for any of
the following expenses of the Fund, which expenses shall be borne by the
Fund: advisory fees; distribution fees; interest, taxes, governmental
fees, fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations; the cost
(including brokerage commissions or charges, if any) of securities
purchased or sold by the Fund and any losses in connection therewith; fees
of custodians, transfer agents, registrars or other agents; legal
expenses; expenses of preparing share certificates; expenses relating to
the redemption or repurchase of the Fund's shares; expenses of registering
and qualifying shares of the Fund for sale under applicable federal and
state law; expenses of preparing, setting in print, printing and
distributing prospectuses, reports, notices and dividends to Fund
shareholders; costs of stationery; costs of stockholders' and other
meetings of the Fund; directors' fees; audit fees; travel expenses of
officers, directors and employees of the Corporation, if any; and the
Corporation's pro rata portion of premiums on any fidelity bond and other
insurance covering the Corporation, its officers or directors.
6. No director, officer or employee of the Corporation or
Fund shall receive from the Corporation any salary or other compensation
as such director, officer or employee while he is at the same time a
director, officer, or employee of the Manager or any affiliated company of
the Manager. This paragraph shall not apply to directors, executive
committee members, consultants and other persons who are not regular
members of the Manager's or any affiliated company's staff.
7. As compensation for the services performed and the
facilities furnished and expenses assumed by the Manager, including the
services of any consultants or sub-advisers retained by the Manager, the
Fund shall pay the Manager, as promptly as possible after the last day of
each month, a fee, computed daily at an annual rate of 0.75% of the
average daily net assets of the Fund. The first payment of the fee shall
be made as promptly as possible at the end of the month succeeding the
effective date of this Agreement. If this Agreement is terminated as of
any date not the last day of a month, such fee shall be paid as promptly
as possible after such date of termination, shall be based on the average
daily net assets of the Fund in that period from the beginning of such
month to such date of termination, and shall be based on that proportion
of such average daily net assets as the number of business days in such
period bears to the number of business days in such month. The average
daily net assets of the Fund shall in all cases be based only on business
days and be computed as of the time of the regular close of business of
the New York Stock Exchange, or such other time as may be determined by
the Board of Directors of the Corporation. Each such payment shall be
accompanied by a report prepared either by the Fund or by a reputable firm
of independent accountants, which shall show the amount properly payable
to the Manager under this Agreement and the detailed computation thereof.
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<PAGE>
8. The Manager assumes no responsibility under this
Agreement other than to render the services called for hereunder, in good
faith, and shall not be responsible for any action of the Board of
Directors of the Corporation in following or declining to follow any
advice or recommendations of the Manager; provided, that nothing in this
Agreement shall protect the Manager against any liability to the Fund or
its shareholders to which it would otherwise be subject by reason or
willful misfeasance, bad faith, or gross negligence in the performance of
its duties or by reason of its reckless disregard of its obligations and
duties hereunder.
9. Nothing in this Agreement shall limit or restrict the
right of any director, officer, or employee of the Manager who may also be
a director, officer, or employee of the Corporation or the Fund, to engage
in any other business or to devote his time and attention in part to the
management or other aspects of any other business, whether of a similar
nature or a dissimilar nature, or limit or restrict the right of the
Manager to engage in any other business or to render services of any kind,
including investment advisory and management services, to any other
corporation, firm, individual or association.
10. As used in this Agreement, the terms "assignment",
"interested persons", and "majority of the outstanding voting securities"
shall have the meanings given to them by Section 2(a) of the 1940 Act,
subject to such exemptions and interpretations as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.
11. This Agreement will become effective on the date first
written above, provided that it shall have been approved by the
Corporation's Board of Directors and by the shareholders of the Fund in
accordance with the requirements of the 1940 Act and, unless sooner
terminated as provided herein, will continue in effect for two years from
the above written date. Thereafter, if not terminated, this Agreement
shall continue in effect with respect to the Fund for successive annual
periods ending on the same date of each year, provided that such
continuance is specifically approved at least annually (i) by the
Corporation's Board of Directors or (ii) by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the 1940 Act),
provided that in either event the continuance is also approved by a
majority of the Corporation's Directors who are not interested persons (as
defined in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
12. This Agreement is terminable with respect to the Fund
without penalty by the Corporation's Board of Directors, by vote of a
majority of the outstanding voting securities of the Fund (as defined in
the 1940 Act), or by the Manager, on not less than 60 days' notice to the
other party and will be terminated upon the mutual written consent of the
Manager and the Corporation. This Agreement shall terminate automatically
in the event of its assignment by the Manager and shall not be assignable
by the Corporation without the consent of the Manager.
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<PAGE>
13. In the event this Agreement is terminated by either party
or upon written notice from the Manager at any time, the Corporation
hereby agrees that it will eliminate from its corporate name any reference
to the name of "Legg Mason." The Corporation shall have the non-exclusive
use of the name "Legg Mason" in whole or in part only so long as this
Agreement is effective or until such notice is given.
14. The Manager agrees that for services rendered to the
Fund, or indemnity due in connection with service to the Fund, it shall
look only to assets of the Fund for satisfaction and that it shall have no
claim against the assets of any other Series of the Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their officers thereunto duly authorized.
Attest: LEGG MASON GLOBAL TRUST, INC.
By: ______________________ By: _____________________________
Attest: LEGG MASON FUND ADVISER, INC.
By: ______________________ By: _____________________________
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<PAGE>
Exhibit 6(b)
FORM OF
UNDERWRITING AGREEMENT
This UNDERWRITING AGREEMENT, made this __ day of ________, 199_,
by and between Legg Mason Global Trust, Inc., a Maryland corporation
("Corporation") on behalf of the Legg Global Equity Trust ("Fund"), and
Legg Mason Wood Walker, Incorporated, a Maryland corporation (the
"Distributor").
WHEREAS, the Corporation is registered with the Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), and has registered
shares of common stock of the Fund for sale to the public under the
Securities Act of 1933 (the "1933 Act") and various state securities laws;
and
WHEREAS, the Corporation wishes to retain the Distributor as the
principal underwriter in connection with the offering and sale of the
shares of common stock of the Fund ("Shares") and to furnish certain other
services to the Corporation as specified in this Agreement; and
WHEREAS, this Agreement has been approved by separate votes of
the Corporation's Board of Directors and of certain disinterested
directors in conformity with Section 15 of, and paragraph (b)(2) of Rule
12b-1 under, the 1940 Act; and
WHEREAS, the Distributor is willing to act as principal
underwriter and to furnish such services on the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. (a) The Corporation hereby appoints the Distributor as
principal underwriter in connection with the offering and sale of the
Fund. The Distributor, as exclusive agent for the Corporation, upon the
commencement of operations of the Fund and subject to applicable federal
and state law and the Articles of Incorporation and By-Laws of the
Corporation, shall: (i) promote the Fund; (ii) solicit orders for the
purchase of the Shares subject to such terms and conditions as the
Corporation may specify; and (iii) accept orders for the purchase of the
Shares on behalf of the Corporation (collectively, "Distribution
Services"). The Distributor shall comply with all applicable federal and
state laws and offer the Shares of the Fund on an agency or "best efforts"
basis under which the Corporation shall issue only such Shares of the Fund
as are actually sold. The Distributor shall have the right to use any
list of shareholders of the Corporation or the Fund or any other list of
<PAGE>
investors which it obtains in connection with its provision of services
under this Agreement; provided, however, that the Distributor shall not
sell or knowingly provide such list or lists to any unaffiliated person
without the consent of the Corporation's Board of Directors.
(b) The Distributor shall provide ongoing shareholder liaison
services, including responding to shareholder inquiries, providing
shareholders with information on their investments, and any other services
now or hereafter deemed to be appropriate subjects for the payments of
"service fees" under Article III, Section 26 of the Rules of Fair Practice
of the National Association of Securities Dealers, Inc. (collectively,
"Shareholder Services").
2. The Distributor may enter into dealer agreements with
registered and qualified securities dealers it may select for the
performance of Distribution and Shareholder Services, the form thereof to
be as mutually agreed upon and approved by the Corporation and the
Distributor. In making arrangements with such dealers, the Distributor
shall act only as principal and not as agent for the Corporation. No
dealer is authorized to act as agent for the Corporation in connection
with the offering or sale of Shares to the public or otherwise.
3. The public offering price of the Shares of the Fund shall
be the net asset value per share (as determined by the Corporation) of the
outstanding Shares of the Fund plus any applicable sales charge as
described in the Registration Statement of the Corporation. The
Corporation shall furnish the Distributor with a statement of each
computation of public offering price and of the details entering into such
computation.
4. As compensation for providing Distribution Services under
this Agreement, the Distributor shall retain the sales charge, if any, on
purchases of Shares as set forth in the Registration Statement. The
Distributor is authorized to collect the gross proceeds derived from the
sale of the Shares, remit the net asset value thereof to the Corporation
upon receipt of the proceeds and retain the sales charge, if any. The
Distributor shall receive from the Fund a distribution fee and a service
fee at the rates and under the terms and conditions of the Plan of
Distribution ("Plan") adopted by the Corporation with respect to the Fund,
as such Plan is in effect from time to time, and subject to any further
limitations on such fees as the Corporation's Board of Directors may
impose. The Distributor may reallow any or all of the sales charge,
distribution fee and service fee that it has received under this Agreement
to such dealers as it may from time to time determine; provided, however,
that the Distributor may not reallow to any dealer for Shareholder
Services an amount in excess of .25% of the average annual net asset value
of the shares with respect to which said dealer provides Shareholder
Services.
5. As used in this Agreement, the term "Registration
Statement" shall mean the registration statement most recently filed by
the Corporation with the Securities and Exchange Commission and effective
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<PAGE>
under the 1940 Act and 1933 Act, as such Registration Statement is amended
by any amendments thereto at the time in effect, and the terms
"Prospectus" and "Statement of Additional Information" shall mean,
respectively, the form of prospectus and statement of additional
information with respect to the Fund filed by the Corporation as part of
the Registration Statement, or as they may be amended from time to time.
6. The Distributor shall print and distribute to prospective
investors Prospectuses, and shall print and distribute, upon request, to
prospective investors Statements of Additional Information, and may print
and distribute such other sales literature, reports, forms and
advertisements in connection with the sale of the Shares as comply with
the applicable provisions of federal and state law. In connection with
such sales and offers of sale, the Distributor and any dealer shall give
only such information and make only such statements or representations as
are contained in the Prospectus, Statement of Additional Information, or
in information furnished in writing to the Distributor by the Corporation,
and the Corporation shall not be responsible in any way for any other
information, statements or representations given or made by the
Distributor, any dealer, or their representatives or agents. Except as
specifically provided in this Agreement, the Corporation shall bear none
of the expenses of the Distributor in connection with its offer and sale
of the Shares.
7. The Corporation agrees at its own expense to register the
Shares with the Securities and Exchange Commission, state and other
regulatory bodies, and to prepare and file from time to time such
Prospectuses, Statements of Additional Information, amendments, reports
and other documents as may be necessary to maintain the Registration
Statement. The Fund shall bear all expenses related to preparing and
typesetting such Prospectuses, Statements of Additional Information, and
other materials required by law and such other expenses, including
printing and mailing expenses, related to such Fund's communications with
persons who are shareholders of the Fund.
8. The Corporation agrees to indemnify, defend and hold the
Distributor, its several officers and directors, and any person who
controls the Distributor within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which the Distributor, its officers or directors, or
any such controlling person may incur, under the 1933 Act or under common
law or otherwise, arising out of or based upon any alleged untrue
statement of a material fact contained in the Registration Statement or
arising out of or based upon any alleged omission to state a material fact
required to be stated or necessary to make the Registration Statement not
misleading, provided that in no event shall anything contained in this
Agreement be construed so as to protect the Distributor against any
liability to the Corporation or its shareholders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance of its duties, or by reason of its
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<PAGE>
reckless disregard of its obligations and duties under this Agreement, and
further provided that the Corporation shall not indemnify the Distributor
for conduct set forth in paragraph 9.
9. The Distributor agrees to indemnify, defend and hold the
Corporation, its several officers and directors, and any person who
controls the Corporation within the meaning of Section 15 of the 1933 Act,
free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending
such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which the Corporation, its officers or directors, or
any such controlling person may incur, under the 1933 Act or under common
law or otherwise, on account of any wrongful act of the Distributor or any
of its employees or arising out of or based upon any alleged untrue
statement of a material fact contained in information furnished in writing
by the Distributor to the Corporation for use in the Registration
Statement or arising out of or based upon any alleged omission to state a
material fact in connection with such information required to be stated in
the Registration Statement or necessary to make such information not
misleading. As used in this paragraph, the term "employee" shall not
include a corporate entity under contract to provide services to the
Corporation or the Fund, or any employee of such a corporate entity,
unless such person is otherwise an employee of the Corporation.
10. The Corporation reserves the right at any time to
withdraw all offerings of the Shares of the Fund by written notice to the
Distributor at its principal office.
11. The Corporation shall not issue certificates representing
Shares unless requested by a shareholder. If such request is transmitted
through the Distributor, the Corporation will cause certificates
evidencing the Shares owned to be issued in such names and denominations
as the Distributor shall from time to time direct, provided that no
certificates shall be issued for fractional Shares.
12. The Distributor may at its sole discretion, directly or
through dealers, repurchase Shares offered for sale by the shareholders or
dealers. Repurchase of Shares by the Distributor shall be at the net
asset value next determined after a repurchase order has been received.
The Distributor will receive no commission or other remuneration for
repurchasing Shares. At the end of each business day, the Distributor
shall notify by telex or in writing, the Corporation and State Street Bank
and Trust Company, the Corporation's transfer agent, of the orders for
repurchase of Shares received by the Distributor since the last such
report, the amount to be paid for such Shares, and the identity of the
shareholders or dealers offering Shares for repurchase. Upon such notice,
the Corporation shall pay the Distributor such amounts as are required by
the Distributor for the repurchase of such Shares in cash or in the form
of a credit against moneys due the Corporation from the Distributor as
proceeds from the sale of Shares. The Corporation reserves the right to
suspend such repurchase right upon written notice to the Distributor. The
Distributor further agrees to act as agent for the Corporation to receive
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<PAGE>
and transmit promptly to the Corporation's transfer agent shareholder and
dealer requests for redemption of Shares.
13. The Distributor is an independent contractor and shall be
agent for the Corporation only in respect to the sale and redemption of
the Shares.
14. The services of the Distributor to the Corporation under
this Agreement are not to be deemed exclusive, and the Distributor shall
be free to render similar services or other services to others so long as
its services hereunder are not impaired thereby.
15. The Distributor shall prepare reports for the
Corporation's Board of Directors on a quarterly basis showing such
information concerning expenditures related to this Agreement as from time
to time shall be reasonably requested by the Board of Directors.
16. As used in this Agreement, the terms "assignment",
"interested person", and "majority of the outstanding voting securities"
shall have the meanings given to them by Section 2(a) of the 1940 Act,
subject to such exemptions as may be granted by the Securities and
Exchange Commission by any rule, regulation or order.
17. This Agreement will become effective with respect to the
Fund on the date first written above and, unless sooner terminated as
provided herein, will continue in effect for one year from the above
written date. Thereafter, if not terminated, this Agreement shall
continue in effect with respect to the Fund for successive annual periods
ending on the same date of each year, provided that such continuance is
specifically approved at least annually (i) by the Corporation's Board of
Directors or (ii) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the
Corporation's Directors who are not interested persons (as defined in the
1940 Act) of any party to this Agreement, by vote cast in person at a
meeting called for the purpose of voting on such approval.
18. This Agreement is terminable with respect to the Fund or
in its entirety without penalty by the Corporation's Board of Directors,
by vote of a majority of the outstanding voting securities of the Fund (as
defined in the 1940 Act), or by the Distributor, on not less than 60 days'
notice to the other party and will be terminated upon the mutual written
consent of the Distributor and the Corporation. This Agreement will also
automatically and immediately terminate in the event of its assignment.
19. No provision of this Agreement may be changed, waived,
discharged or terminated orally, except by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought.
20. In the event this Agreement is terminated by either party
or upon written notice from the Distributor at any time, the Corporation
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<PAGE>
hereby agrees that it will eliminate from its corporate name any reference
to the name of "Legg Mason." The Corporation shall have the non-exclusive
use of the name "Legg Mason" in whole or in part only so long as this
Agreement is effective or until such notice is given.
IN WITNESS WHEREOF, the parties hereto caused this Agreement to
be executed by their officers thereunto duly authorized.
Attest: LEGG MASON GLOBAL TRUST, INC.
By:__________________________ By:_____________________________
Attest: LEGG MASON WOOD WALKER,
INCORPORATED
By:_________________________ By:________________________________
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<PAGE>
Exhibit 11(b)
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the inclusion in the Post-Effective Amendment No. 6
to the Registration Statement on Form N-1A (File Number 33-56672) of Legg
Mason Global Trust, Inc. of our report dated November 16, 1994, on our
audit of the statement of assets and liabilities of Legg Mason Internal
[sic] Equity Trust, a portfolio of Legg Mason Global Trust, Inc., as of
November 16, 1994, which is included in the Registration Statement. We
also consent to the reference of our firm under the caption "Independent
Accountants."
/s/COOPERS & LYBRAND L.L.P
-----------------------------
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
March 17, 1995
<PAGE>
Exhibit 15(b)
FORM OF
DISTRIBUTION PLAN OF
LEGG MASON GLOBAL TRUST, INC.
WHEREAS, Legg Mason Global Trust, Inc. (the "Corporation") is an
open-end management investment company registered under the Investment
Company Act of 1940, as amended ("1940 Act"), and intends to offer for
public sale shares of common stock of a series to be known as the Legg
Mason Global Equity Trust ("Fund");
WHEREAS, the Corporation has registered the offering of its
shares of common stock under a Registration Statement filed with the
Securities and Exchange Commission and that Registration Statement is in
effect as of the date hereof or expected to be made effective in the near
future;
WHEREAS, the Corporation's Board of Directors has established a
second Series of shares of common stock of the Corporation: Legg Mason
Global Equity Trust;
WHEREAS, the Corporation desires to adopt a Distribution Plan
pursuant to Rule 12b-1 under the 1940 Act and the Board of Directors has
determined that there is a reasonable likelihood that adoption of the
Distribution Plan will benefit the Corporation and its shareholders; and
WHEREAS, the Corporation has employed Legg Mason Wood Walker,
Incorporated ("Legg Mason") as principal underwriter of the shares of the
Corporation;
NOW, THEREFORE, the Corporation hereby adopts this Distribution
Plan (the "Plan") in accordance with Rule 12b-1 under the 1940 Act on the
following terms and conditions:
1. A. Legg Mason Global Equity Trust shall pay to Legg
Mason, as compensation for Legg Mason's services as principal underwriter
of the Fund shares, a distribution fee at the rate of 0.75% on an
annualized basis of the average daily net assets of the Fund's shares,
such fee to be calculated and accrued daily and paid monthly or at such
other intervals as the Board shall determine.
B. The Corporation shall pay to Legg Mason, as
compensation for ongoing services provided to the Fund's shareholders, a
service fee at the rate of 0.25% on an annualized basis of the average
daily net assets of the Fund's shares, such fee to be calculated and
accrued daily and paid monthly or at such other intervals as the Board
shall determine.
<PAGE>
C. The Corporation may pay a distribution or service
fee to Legg Mason at a lesser rate than the fees specified in paragraphs
1.A. and 1.B., respectively, of this Plan, in either case as agreed upon
by the Board and Legg Mason and as approved in the manner specified in
paragraph 4 of this Plan. The distribution and service fees payable
hereunder are payable without regard to the aggregate amount that may be
paid over the years, provided that, so long as the limitations set forth
in Article III, Section 26(d) of the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. ("NASD") remain in effect
and apply to distributors or dealers in the Corporation's shares, the
amounts paid hereunder shall not exceed those limitations, including
permissible interest.
2. As principal underwriter of the Corporation's shares,
Legg Mason may spend such amounts as it deems appropriate on any
activities or expenses primarily intended to result in the sale of the
shares of the Fund and/or the servicing and maintenance of shareholder
accounts, including, but not limited to, compensation to employees of Legg
Mason; compensation to Legg Mason and other broker-dealers that engage in
or support the distribution of shares or who service shareholder accounts;
expenses of Legg Mason and such other broker-dealers, including overhead
and telephone and other communication expenses; the printing of
prospectuses, statements of additional information, and reports for other
than existing shareholders; and preparation and distribution of sales
literature and advertising materials.
3. This Plan shall take effect on ______________, 199_ and
shall continue in effect for successive periods of one year from its
execution for so long as such continuance is specifically approved at
least annually together with any related agreements, by votes of a
majority of both (a) the Board of Directors of the Corporation and (b)
those Directors who are not "interested persons" of the Corporation, as
defined in the 1940 Act, and who have no direct or indirect financial
interest in the operation of this Plan or any agreements related to it
(the "Rule 12b-1 Directors"), cast in person at a meeting or meetings
called for the purpose of voting on this Plan and such related agreements;
and only if the Directors who approve the Plan taking effect have reached
the conclusion required by Rule 12b-1(e) under the 1940 Act.
4. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Plan or any related agreement
shall provide to the Corporation's Board of Directors and the Board shall
review, at least quarterly, a written report of the amounts so expended
and the purposes for which such expenditures were made. Legg Mason shall
submit only information regarding amounts expended for "distribution
activities," as defined in this paragraph 4, to the Board in support of
the distribution fee payable hereunder and shall submit only information
regarding amounts expended for "service activities," as defined in this
paragraph 4, to the Board in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities"
shall mean any activities in connection with Legg Mason's performance of
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<PAGE>
its obligations under the underwriting agreement, dated April 5, 1993, by
and between the Corporation and Legg Mason, that are not deemed "service
activities." "Service activities" shall mean activities covered by the
definition of "service fee" contained in amendments to Article III,
Section 26(d) of the NASD's Rules of Fair Practice that became effective
July 7, 1993, including the provision by Legg Mason of personal,
continuing services to investors in the Corporation's shares. Overhead
and other expenses of Legg Mason related to its "distribution activities"
or "service activities," including telephone and other communications
expenses, may be included in the information regarding amounts expended
for such distribution or service activities, respectively.
5. This Plan may be terminated with respect to the Fund at
any time by vote of a majority of the Rule 12b-1 Directors or by vote of a
majority of the outstanding voting securities of the Fund.
6. This Plan may not be amended to increase materially the
amount of distribution fees provided for in paragraph 1.A. hereof or the
amount of service fees provided for in paragraph 1.B. hereof unless such
amendment is approved by a vote of at least a majority of the outstanding
securities, as defined in the 1940 Act, of the Corporation, and no
material amendment to the Plan shall be made unless such amendment is
approved in the manner provided for continuing approval in paragraph 4
hereof.
8. While this Plan is in effect, the selection and
nomination of Directors who are not interested persons of the Corporation,
as defined in the 1940 Act, shall be committed to the discretion of
Directors who are themselves not interested persons.
9. The Corporation shall preserve copies of this Plan and
any related agreements for a period of not less than six years from the
date of expiration of the Plan or agreement, as the case may be, the first
two years in an easily accessible place; and shall preserve copies of each
report made pursuant to paragraph 5 hereof for a period of not less than
six years from the date of such report, the first two years in an easily
accessible place.
IN WITNESS WHEREOF, the Corporation has executed this
Distribution Plan as of the day and year set forth below.
Date: ____________________ LEGG MASON GLOBAL TRUST, INC.
Attest: By: ______________________
By: ____________________
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<PAGE>
Agreed and assented to by
LEGG MASON WOOD WALKER, INCORPORATED
By:________________________________
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<PAGE>
