As filed with the Securities and Exchange Commission on July 2, 1999
Registration No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___ [ ] Post-Effective Amendment No.
--
LEGG MASON GLOBAL TRUST, INC.
(Exact Name of Registrant as Specified in Charter)
100 Light Street
Baltimore, MD 21202
(Address of Principal Executive Offices)
(410) 539-0000
(Registrant's Area Code and Telephone Number)
Charles A. Bacigalupo
100 Light Street
Baltimore, MD 21202
(Name and Address of Agent for Service)
Copies to:
Arthur J. Brown, Esq.
Valerie M. Baruch, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
2nd Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9367
Approximate Date of Proposed Public Offering: as soon as practicable after
this Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on August 2, 1999,
pursuant to Rule 488.
Title of securities being registered: capital stock, par value $0.001 per
share.
<PAGE>
No filing fee is required because of reliance on Section 24(f) under the
Investment Company Act of 1940, as amended.
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheets
Letter to Shareholders
Notice of Special Meeting
Part A - Prospectus/Proxy Statement
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
3
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
FORM N-14 CROSS REFERENCE SHEET
Part A Item No. Prospectus/Proxy
and Caption Statement Caption
- --------------- -----------------
1. Beginning of Registration Statement Cover Page
and Outside Front Cover Page of
Prospectus
2. Beginning and Outside Back Cover Page Table of Contents
of Prospectus
3. Synopsis Information and Risk Factors Synopsis; Comparison of Principal
Risk Factors
4. Information About the Transaction Synopsis; The Proposed Transaction
5. Information About the Registrant Synopsis; Comparison of Principal
Risk Factors; Additional
Information About Legg Mason
International Equity Trust;
Miscellaneous; See also, the
Prospectus for Legg Mason
International Equity Trust, dated
May 3, 1999, previously filed on
EDGAR, Accession Number
0000950168-99-001634
6. Information About the Company Being Synopsis; Comparison of Principal
Acquired Risk Factors; Miscellaneous; See
also, the Prospectus for Bartlett
Value International Fund, dated
May 3, 1999, previously filed on
EDGAR, Accession Number
0000950168-99-001637
7. Voting Information Voting Information
8. Interest of Certain Persons and Not Applicable
Experts
9. Additional Information Required for Not Applicable
Re-offering by Persons Deemed to be
Underwriters
4
<PAGE>
Part B Item No. Statement of Additional
and Caption Information Caption
- --------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Not Applicable
12. Additional Information About the Statement of Additional
Registrant Information of Legg Mason
International Equity Trust, dated
May 3, 1999, previously filed on
EDGAR, Accession Number
0000950168-99-001634
13. Additional Information About the Statement of Additional
Company Being Acquired Information of Bartlett Value
International Fund, dated May 3,
1999, previously filed on EDGAR,
Accession Number
0000950168-99-001637
14. Financial Statements Annual Report of Legg Mason
International Equity Trust for
Fiscal Year Ended December 31,
1998, previously filed on EDGAR,
Accession Number
0000950168-99-000685; Annual
Report of Bartlett Value
International Fund for Fiscal Year
Ended December 31, 1998,
previously filed on EDGAR,
Accession Number
0000950168-99-000678, Pro Forma
Financial Statements for the
fiscal year ended December 31,
1998.
5
<PAGE>
Part C
------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
PART A
<PAGE>
BARTLETT VALUE INTERNATIONAL FUND
(A SERIES OF BARTLETT CAPITAL TRUST)
August 2, 1999
Dear Bartlett Value International Fund Shareholder:
The attached proxy materials describe a proposal that Bartlett Value
International Fund ("Bartlett International Fund"), reorganize and become part
of Legg Mason International Equity Trust ("Legg Mason International Fund,") a
series of Legg Mason Global Trust, Inc. If the proposal is approved and
implemented, each shareholder of Bartlett International Fund will automatically
become a shareholder of Legg Mason International Fund.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL. The board
believes that combining the two Funds will benefit Bartlett International Fund's
shareholders by providing them with a portfolio that has a similar investment
objective and a similar investment strategy but a larger asset base and lower
overall expenses. The attached proxy materials provide more information about
the proposed reorganization and the two Funds.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your
shares early will permit Bartlett International Fund to avoid costly follow-up
mail and telephone solicitation. After reviewing the attached materials, please
complete, date and sign your proxy card and mail it in the enclosed return
envelope today. As an alternative to using the paper proxy card to vote, you may
vote by telephone, by facsimile, through the Internet or in person.
Very truly yours,
Edward A. Taber, III
President
Bartlett Capital Trust/Bartlett Value
International Fund
<PAGE>
BARTLETT VALUE INTERNATIONAL FUND
(A SERIES OF BARTLETT CAPITAL TRUST)
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 23, 1999
To The Shareholders:
A special meeting of shareholders of Bartlett Value International Fund
("Bartlett International Fund"), a series of Bartlett Capital Trust, will be
held on September 23, 1999 at 10:00 a.m. at the offices of Bartlett
International Fund at 100 Light Street, Baltimore, Maryland 21202, for the
following purposes:
(1) To approve an Agreement and Plan of Reorganization and Termination
under which Legg Mason International Equity Trust ("Legg Mason International
Fund"), a series of Legg Mason Global Trust, Inc., would acquire all the assets
of Bartlett International Fund in exchange solely for shares of Legg Mason
International Fund and the assumption by Legg Mason International Fund of all of
Bartlett International Fund's liabilities, followed by the distribution of those
shares to the shareholders of Bartlett International Fund, all as described in
the accompanying Prospectus/Proxy Statement; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are entitled to vote at the meeting and any adjournment thereof if you
owned shares of Bartlett International Fund at the close of business on July 30,
1999. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. IF YOU DO
NOT EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE. As an alternative to
using the paper proxy card to vote, you may vote by telephone, by facsimile,
through the Internet, or in person.
By order of the board of trustees,
Susan L. Silva
Secretary
August 2, 1999
<PAGE>
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card, sign
and date the card, and return it in the envelope provided. IF YOU SIGN, DATE AND
RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED
"FOR" THE PROPOSAL DESCRIBED ABOVE. In order to avoid the additional expense of
further solicitation, we ask your cooperation in mailing your proxy card
promptly. As an alternative to using the paper proxy card to vote, you may vote
by mail, telephone, through the Internet, by facsimile machine, or in person.
Shares that are registered in your name, as well as shares held in "street name"
through a broker, may be voted via the Internet or by telephone. To vote in this
manner, you will need the 12-digit "control" number(s) that appear on your proxy
card(s). To vote via the Internet, please access http://www.________.com on the
World Wide Web. In addition, shares that are registered in your name may be
voted by faxing your completed proxy card(s) to 1-___-____. You may also call
1-___-____ and vote by phone. If we do not receive your completed proxy cards
after several weeks, you may be contacted by your Financial Advisor.
Unless proxy cards submitted by corporations and partnerships are signed by the
appropriate persons as indicated in the voting instructions on the proxy card,
they will not be voted.
- --------------------------------------------------------------------------------
2
<PAGE>
LEGG MASON INTERNATIONAL EQUITY TRUST
(A SERIES OF LEGG MASON GLOBAL TRUST, INC.)
BARTLETT VALUE INTERNATIONAL FUND
(A SERIES OF BARTLETT CAPITAL TRUST)
100 LIGHT STREET
BALTIMORE, MD 21202
(410) 539-0000
PROSPECTUS/PROXY STATEMENT
AUGUST 2, 1999
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of Bartlett Value International Fund ("Bartlett International
Fund"), a series of Bartlett Capital Trust, in connection with the solicitation
of proxies by its board of trustees for use at a special meeting of its
shareholders to be held on September 23, 1999, at 10:00 a.m., Eastern time, and
at any adjournment thereof, if it is adjourned for any reason.
As more fully described in this Proxy Statement, the purpose of the
meeting is to vote on a proposed reorganization in which Legg Mason
International Equity Trust ("Legg Mason International Fund"), a series of Legg
Mason Global Trust, Inc. ("Global Trust"), would acquire all the assets of
Bartlett International Fund, in exchange solely for shares of Legg Mason
International Fund and the assumption by Legg Mason International Fund of all
the liabilities of Bartlett International Fund ("Reorganization"). Those shares
of Legg Mason International Fund would then be distributed to the shareholders
of Bartlett International Fund, so that each shareholder would receive a number
of full and fractional shares of Legg Mason International Fund having an
aggregate value that, on the effective date of the Reorganization, would equal
the aggregate net asset value of the shareholder's shares of Bartlett
International Fund. As soon as practicable following the distribution of shares,
Bartlett International Fund would be terminated.
Legg Mason International Fund is a diversified series of Global Trust,
which is an open-end management investment company. Legg Mason International
Fund's investment objective is long-term total return.
This Proxy Statement, which should be retained for future reference, sets
forth concisely information about the Reorganization and Legg Mason
International Fund that a shareholder should know before voting on the
reorganization. A Statement of Additional Information, dated August 2, 1999,
relating to the reorganization and including historical financial statements,
has been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by this reference (that is, the Statement of Additional
Information is legally a part of this Proxy Statement). A Primary Class shares
Prospectus and a Navigator Class shares Prospectus, each dated May 1, 1999, a
Statement of Additional Information for Legg Mason International Fund, also
ii
<PAGE>
dated May 1, 1999, and Legg Mason International Fund's Annual Report to
Shareholders for the fiscal year ended December 31, 1998, have each been filed
with the SEC and are incorporated herein by this reference. A Class A and Class
C Shares Prospectus and a Class Y Shares Prospectus, each dated May 3, 1999, and
a Statement of Additional Information for Bartlett International Fund, dated May
1, 1999, have each been filed with the SEC and also are incorporated herein by
this reference. A copy of Legg Mason International Fund's Class A Shares
Prospectus is attached as Appendix D to this Proxy Statement/Prospectus. Also,
management's discussion of the performance of Legg Mason International Fund,
which is included in the Annual Report to Shareholders of Legg Mason
International Fund for the fiscal year ended December 31, 1998, is attached as
Appendix E to this Proxy Statement/Prospectus. The section of copies of the
other referenced documents, as well as Bartlett International Fund's Annual
Report to Shareholders for the fiscal year ended December 31, 1998, may be
obtained without charge, and further inquiries may be made, by writing to Legg
Mason Wood Walker, Inc., 100 Light Street, P.O. Box 1476, Baltimore, Maryland
21203-1476, or by calling toll-free 1-800-822-5544.
The SEC maintains a website (http://www.sec.gov) that contains the Legg
Mason Global Trust Statement of Additional Information, dated August 2, 1999,
and other material incorporated by reference, together with other information
regarding Legg Mason International Fund and Bartlett International Fund.
THE SEC HAS NOT APPROVED OR DISAPPROVED THE SHARES OF LEGG MASON
INTERNATIONAL FUND, OR DETERMINED WHETHER THIS PROXY STATEMENT IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Section Title Page
- ------------- ----
VOTING INFORMATION...........................................................1
THE REORGANIZATION...........................................................3
SYNOPSIS.....................................................................3
The Proposed Reorganization...............................................3
Comparative Fee Table.....................................................4
Example of Effect on Fund Expenses........................................5
Forms of Organization.....................................................6
Investment Adviser........................................................6
Distributor...............................................................7
Fund Directors and Officers...............................................9
Investment Objectives and Policies........................................9
Operations of Legg Mason International Fund Following the Reorganization.11
Purchases and Redemptions................................................11
Exchanges................................................................12
Dividends and Other Distributions........................................12
Federal Income Tax Consequences of the Reorganization....................13
COMPARISON OF PRINCIPAL RISK FACTORS........................................13
THE PROPOSED TRANSACTION....................................................15
Reorganization Plan......................................................15
Reasons for the Reorganization...........................................17
Description of Securities to be Issued...................................18
Temporary Waiver of Investment Restrictions..............................18
Federal Income Tax Considerations........................................18
Capitalization...........................................................20
Additional Information about Legg Mason International Fund: Financial
Highlights.............................................................21
OTHER BUSINESS..............................................................22
MISCELLANEOUS...............................................................23
Available Information....................................................23
Legal Matters............................................................23
Experts..................................................................23
APPENDIX A: Principal Shareholders........................................A-1
APPENDIX B: Agreement and Plan of Reorganization and Termination..........B-1
APPENDIX C: Comparison of Investment Objectives and Limitations of
Bartlett Value International Fund and Legg Mason
International Equity Trust....................................C-1
APPENDIX D: Legg Mason International Equity Trust: Class A Shares
Prospectus, dated July 30, 1999...............................D-1
APPENDIX E: Management's Discussion of Fund Performance (Legg Mason
International Equity Trust)...................................E-1
<PAGE>
BARTLETT VALUE INTERNATIONAL FUND
(a series of Bartlett Capital Trust)
-----------
PROSPECTUS/PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 23, 1999
-----------
VOTING INFORMATION
This Prospectus/Proxy Statement ("Proxy Statement") is being furnished to
shareholders of Bartlett Value International Fund ("Bartlett International
Fund"), a series of Bartlett Capital Trust, in connection with the solicitation
of proxies from Bartlett International Fund shareholders by the board of
trustees of Bartlett Capital Trust ("Board") for use at a special meeting of
shareholders to be held on September 23, 1999 ("Meeting"), and at any
adjournment of the Meeting. This Proxy Statement will first be mailed to
shareholders on or about August 6, 1999.
One-third of Bartlett International Fund's shares outstanding on July 30,
1999 ("Record Date"), represented in person or by proxy, shall constitute a
quorum and must be present for the transaction of business at the Meeting. If a
quorum is not present at the Meeting or a quorum is present but sufficient votes
to approve the proposal are not received, the persons named as proxies may
propose one or more adjournments of the Meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of a majority
of those shares represented at the Meeting in person or by proxy. The persons
named as proxies will vote those proxies that they are entitled to vote FOR the
proposal in favor of such an adjournment and will vote those proxies required to
be voted AGAINST the proposal against such adjournment.
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be voted for or against any adjournment or proposal. Accordingly,
abstentions and broker non-votes effectively will be a vote against adjournment
or against the proposal where the required vote is a percentage of the shares
present or outstanding. Abstentions and broker non-votes will not be counted,
however, as votes cast for purposes of determining whether sufficient votes have
been received to approve the proposal.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your directions as indicated on the proxy card, if your proxy
card is received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you sign, date and return the proxy card, but give no
voting instructions, your shares will be voted in favor of approval of the
proposal. In addition, if you sign, date and return the proxy card, but give no
voting instructions, the duly appointed proxies may, in their discretion, vote
<PAGE>
upon any other matters that come before the Meeting. The proxy card may be
revoked by giving another proxy or by letter or telegram revoking the initial
proxy. To be effective, revocation must be received by Bartlett Capital Trust
prior to the Meeting and must indicate your name and account number. If you
attend the Meeting in person you may, if you wish, vote by ballot at the
Meeting, thereby canceling any proxy previously given.
[In order to reduce costs, the notices to a shareholder having more than
one account in Bartlett International Fund listed under the same Social Security
number at a single address have been combined. The proxy cards have been coded
so that a shareholder's votes will be counted for each such account.]
As of the Record Date, Bartlett International Fund had _____________
shares of beneficial interest outstanding, which were allocated to the following
classes: __________ Class A shares, __________ Class C shares, and __________
Class Y shares. The solicitation of proxies, the cost of which will be borne by
Legg Mason Fund Adviser, Inc. ("Fund Adviser"), will be made primarily by mail
but also may be made by telephone or oral communications by representatives of
Fund Adviser, Bartlett & Company ("Bartlett"), Batterymarch Financial
Management, Inc. ("Batterymarch") and Legg Mason Wood Walker, Inc. ("Legg
Mason"), the distributor of the Legg Mason group of investment companies, who
will not receive any compensation for these activities from either Bartlett
International Fund or Legg Mason International Fund (each a "Fund"). Proxies
voted by telephone, facsimile or Internet may be revoked at any time before they
are voted in the same manner that proxies voted by mail may be revoked.
Except as set forth in Appendix A, Bartlett and Batterymarch do not know
of any person who owns beneficially 5% or more of the shares of either Fund.
[Trustees and officers of Bartlett Capital Trust own in the aggregate less than
1% of the shares of Bartlett International Fund.]
REQUIRED VOTE. Approval of the proposal requires the affirmative vote of a
majority of the outstanding voting securities of Bartlett International Fund.
Each outstanding full share of Bartlett International Fund is entitled to one
vote, and each outstanding fractional share thereof is entitled to a
proportionate fractional share of one vote. If the proposal is not approved by
the requisite vote of shareholders of Bartlett International Fund, the persons
named as proxies may propose one or more adjournments of the Meeting to permit
further solicitation of proxies.
2
<PAGE>
THE REORGANIZATION
PROPOSAL. TO APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION AND
TERMINATION ("REORGANIZATION PLAN") UNDER WHICH LEGG MASON
INTERNATIONAL FUND WOULD ACQUIRE ALL THE ASSETS OF BARTLETT
INTERNATIONAL FUND IN EXCHANGE SOLELY FOR SHARES OF LEGG MASON
INTERNATIONAL FUND AND THE ASSUMPTION BY LEGG MASON INTERNATIONAL
FUND OF ALL OF BARTLETT INTERNATIONAL FUND'S LIABILITIES, FOLLOWED BY
THE DISTRIBUTION OF THOSE SHARES TO THE SHAREHOLDERS OF BARTLETT
INTERNATIONAL FUND ("REORGANIZATION").
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Proxy Statement, the Prospectuses and Statement of Additional Information
of each Fund (which are incorporated herein by reference), and the
Reorganization Plan (which is attached as Appendix B to this Proxy Statement).
As discussed more fully below, the Board believes that the Reorganization will
benefit Bartlett International Fund's shareholders. The Funds are essentially
compatible in terms of their investment objectives, policies, strategies and
limitations.
THE PROPOSED REORGANIZATION
The Board considered and approved the Reorganization Plan at meetings held
on May 10, 1999 and June 21, 1999. The Reorganization Plan provides for the
acquisition of all the assets of Bartlett International Fund by Legg Mason
International Fund, in exchange solely for shares of common stock of Legg Mason
International Fund and the assumption by Legg Mason International Fund of all
the liabilities of Bartlett International Fund. Bartlett International Fund then
will distribute those shares of Legg Mason International Fund to its
shareholders, so that each Bartlett International Fund shareholder will receive
the number of full and fractional shares that is equal in aggregate value to the
value of the shareholder's holdings in Bartlett International Fund as of the day
the Reorganization is completed. Bartlett International Fund will be terminated
as soon as practicable thereafter.
The Reorganization will occur as of the close of business on September 30,
1999, or at a later date when the Reorganization is approved and all
contingencies have been met ("Closing Date").
For the reasons set forth below under "The Proposed Transaction - Reasons
for the Reorganization," the Board, including its trustees who are not
"interested persons," as that term is defined in the Investment Company Act of
1940, as amended ("1940 Act"), of Bartlett Capital Trust, Global Trust,
Bartlett, Batterymarch or Fund Adviser ("Independent Trustees"), has determined
that the Reorganization is in the best interests of Bartlett International Fund
and that the interests of Bartlett International Fund's shareholders will not be
diluted as a result of the Reorganization. Accordingly, the Board recommends
approval of the Reorganization. In addition, the board of directors of Global
<PAGE>
Trust, including its directors who are not "interested persons," as that term is
defined in the 1940 Act, of Bartlett Capital Trust, Global Trust, Bartlett,
Batterymarch or Fund Adviser has determined that the Reorganization is in the
best interests of Legg Mason International Fund and that the interests of Legg
Mason International Fund's shareholders will not be diluted as a result of the
Reorganization.
COMPARATIVE FEE TABLE
If the Reorganization Plan is approved by Bartlett International Fund
shareholders, shareholders of each class of Bartlett International Fund will
receive in the Reorganization shares of the comparable class of Legg Mason
International Fund. That is, Class A shareholders of Bartlett International Fund
will receive Class A shares of Legg Mason International Fund, Class C
shareholders of Bartlett International Fund will receive Primary Class shares of
Legg Mason International Fund, and Class Y shareholders of Bartlett
International Fund will receive Navigator Class shares of Legg Mason
International Fund. As of the date of this Proxy Statement, Class A Shares of
Legg Mason International Fund, which have been authorized, have not yet been
issued. Additional information about those shares is included in Appendix C
attached hereto.
As shown in the tables below, overall, the expense ratios of the Class A,
Class C and Class Y shares of Bartlett International Fund are generally higher
than the expense ratios of the comparable classes of Legg Mason International
Fund shares. Although these expense ratios are historical only, the terms of the
contracts that Legg Mason International Fund has with its service providers and
that Fund's higher asset levels warrant an expectation of lower costs for the
combined Fund.
The current fees and expenses incurred by each Fund for the fiscal year
ended December 31, 1998, and PRO FORMA fees for Legg Mason International Fund
after the Reorganization are shown below.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
LEGG MASON BARTLETT
INTERNATIONAL FUND INTERNATIONAL FUND COMBINED PRO FORMA FUND
------------------ ------------------ -----------------------
Primary Navigator Primary Navigator
Class A Class Class Class A Class C Class Y Class A Class Class
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum sales 4.75% none none 4.75% none none 4.75% none none
charge (load)
imposed on
purchases of
shares (as a % of
offering price)
Deferred Sales none(a) none none none(a) 1.00%(b) none none(a) none none
Charge (Load) (as
a % of offering
price)
</TABLE>
4
<PAGE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) (AS
A % OF NET ASSETS) (AFTER FEE WAIVERS OR EXPENSE REIMBURSEMENTS, IF ANY)
<TABLE>
<CAPTION>
LEGG MASON BARTLETT PRO FORMA
INTERNATIONAL FUND(E) INTERNATIONAL FUND(C) COMBINED FUND
--------------------- --------------------- -------------
Primary Navigator Primary Navigator
Class A Class Class Class A Class C Class Y Class A Class Class
SHARES(d) SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
--------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management fees 0.75% 0.75% 0.75% 1.25% 1.25% 1.25% 0.75% 0.75% 0.75%
Distribution 0.25% 1.00% none 0.25% 1.00% none 0.25% 1.00% none
(12b-1) fees
Other expenses 0.39% 0.39% 0.29% 0.37% 0.44% 0.36% 0.26% 0.33% 0.25%
----- ----- ----- ----- ----- ----- ----- ----- -----
Total fund 1.39% 2.14% 1.04% 1.87% 2.69% 1.61% 1.26% 2.08% 1.00%
operating expenses
(net of waivers)
</TABLE>
(a) A contingent deferred sales charge ("CDSC") of 1% of the net asset value of
Class A shares at the time of purchase or sale, whichever is less, is imposed on
redemptions made within one year of the purchase date of shares purchased
pursuant to the front-end sales charge waiver on purchases of $1 million or more
of Class A shares.
(b) A CDSC of 1% of net asset value at the time of purchase or sale, whichever
is less, may be charged on redemptions of Bartlett International Fund Class C
shares made within one year of the purchase date.
(c) Bartlett, as investment adviser, has voluntarily agreed to waive fees so
that expenses of Class A shares, Class C shares, and Class Y shares (exclusive
of taxes, interest, brokerage and extraordinary expenses) do not exceed annual
rates of 1.80%, 2.55% and 1.55%, respectively, of the Fund's average daily net
assets attributable to that particular class. These voluntary waivers will
continue until May 1, 2000 and may be terminated at any time. With these
waivers, the management fee and total fund operating expenses would have been
1.11% and 1.73%, respectively, for Class A shares, 1.11% and 2.55%,
respectively, for Class C shares, and 1.11% and 1.47%, respectively, for Class Y
shares.
(d) Estimated.
(e) The Manager has a voluntary agreement to waive fees so that expenses of
Class A, Primary Class and Navigator Class shares (exclusive of taxes, interest,
brokerage and extraordinary expenses) do not exceed annual rates of 1.50%,
2.25%, and 1.25%, respectively, of the Fund's average daily net assets
attributable to that particular class. No fee waivers were necessary for the
Fund for the fiscal year ended December 31, 1998. These voluntary waivers may be
terminated at any time.
A sales charge will not be imposed on purchases or redemptions occurring
as a result of the Reorganization.
EXAMPLE OF EFFECT ON FUND EXPENSES
The Example is intended to help you compare the cost of investing in
Bartlett International Fund with the cost of investing in Legg Mason
International Fund, as it presently exists, and the cost of investing in Legg
Mason International Fund, assuming the Reorganization has been completed.
The Example assumes that you invest $10,000 in the specified Fund for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each
year, that all dividends and other distributions are reinvested and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be:
5
<PAGE>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
BARTLETT
INTERNATIONAL FUND:
Class A $656 $1,035 $1,438 $2,561
Class C $374 $835 $1,425 $3,022
(assuming no $272 $835 $1,425 $3,022
redemption)
Class Y $164 $508 $876 $1,911
LEGG MASON
INTERNATIONAL FUND:
Class A $610 $894 $1,199 $2,064
Primary Class $217 $670 $1,149 $2,472
Navigator Class $106 $331 $574 $1,271
COMBINED FUND:
Class A $597 $856 $1,134 $1,925
Primary Class $211 $652 $1,119 $2,410
Navigator Class $102 $318 $552 $1,225
FORMS OF ORGANIZATION
Legg Mason International Fund is a series of Global Trust, an open-end,
diversified investment company that was organized as a Maryland corporation on
December 31, 1992. That Fund currently offers two classes of shares, Primary
Class shares and Navigator Class shares. As of the date of this Proxy Statement,
Class A shares, which have been authorized, have not yet been issued.
Bartlett International Fund is a series of Bartlett Capital Trust, an
open-end, diversified investment company that was established under the laws of
Massachusetts by an Agreement and Declaration of Trust dated October 31, 1982.
That Fund currently offers three classes of shares: Class A shares, Class C
shares, and Class Y shares.
Neither Bartlett Capital Trust nor Global Trust is required to (nor does
it) hold annual shareholder meetings. Neither Fund issues share certificates.
INVESTMENT ADVISER
Bartlett, a wholly owned subsidiary of Legg Mason, Inc., currently serves
as the investment adviser to Bartlett International Fund. If the proposal is
approved by Bartlett International Fund shareholders, the current investment
manager and investment adviser for Legg Mason International Fund, Fund Adviser
and Batterymarch, respectively, would continue to serve in those capacities for
the reorganized Fund, and Bartlett would no longer serve as investment adviser.
Fund Adviser and Batterymarch, which are also wholly owned subsidiaries of Legg
Mason, Inc., have been providing investment management and advisory services to
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Legg Mason International Fund since its inception. Fund Adviser acts as manager
or adviser to investment companies with aggregate assets of over $18 billion.
Bartlett International Fund has a single portfolio manager with only minor,
non-dedicated assistance of one junior analyst. Legg Mason International Fund
calls on an investment team at Batterymarch. As of April 30, 1999, international
assets under management at Batterymarch exceed $2.2 billion, whereas Bartlett
has international assets of only about $157 million under management.
Bartlett International Fund pays Bartlett a fee, subject to any fee waiver
arrangements in place, computed daily and paid monthly at the annual rate of
1.25% of Bartlett International Fund's net assets. Bartlett has agreed to waive
fees until May 1, 2000 to the extent that the Fund's expenses exceed the
following annual rates of average daily net assets: Class A - 1.80%, Class C -
2.55% and Class Y - 1.55%. If the Reorganization is not approved by Bartlett
International Fund shareholders, Bartlett does not expect to continue to waive
fees after May 1, 2000, and Fund expenses could be higher.
The management fees charged to Legg Mason International Fund by Fund
Adviser are 50 basis points (100 basis points = 1%) lower than the fees paid by
Bartlett International Fund. Fund Adviser serves as the manager of Legg Mason
International Fund and 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. Fund Adviser pays Batterymarch a monthly fee of 66
2/3% of the fee it receives from the Fund. Fund Adviser and Batterymarch have a
voluntary agreement to waive fees so that expenses of Primary Class and
Navigator Class shares (exclusive of taxes, interest, brokerage and
extraordinary expenses) do not exceed annual rates of 2.25%, and 1.25%,
respectively, of the Fund's average daily net assets attributable to that
particular class. No fee waivers were necessary for the Fund for the fiscal year
ended December 31, 1998. These voluntary waivers may be terminated at any time.
Fund Adviser and Batterymarch will enter into a voluntary agreement to waive
fees so that expenses of Class A shares (exclusive of taxes, interest, brokerage
and extraordinary expenses) do not exceed an annual rate of 1.50% of the Fund's
average daily net assets attributable to Class A.
DISTRIBUTOR
Bartlett International Fund's distributor, Legg Mason Financial Partners,
Inc., and Legg Mason International Fund's distributor, Legg Mason Wood Walker,
Inc. ("Legg Mason"), are both wholly owned subsidiaries of Legg Mason, Inc. If
the reorganization is approved by Bartlett International Fund shareholders, Legg
Mason will distribute shares of the reorganized Fund. The access to Legg Mason's
vastly larger marketing resources, among other things, could enable the combined
Fund to be serviced and marketed more efficiently, which could result in a
future increase in assets and shareholders.
Legg Mason acts as distributor of Legg Mason International Fund's shares
pursuant to an Underwriting Agreement with Global Trust. 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
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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.
Legg Mason International Fund has adopted a Distribution and Shareholder
Services Plan ("Plan") pertaining to Class A shares ("Class A Plan") and a Plan
pertaining to Primary Class shares ("Primary Class Plan"). Each Plan, among
other things, permits the Fund to pay Legg Mason fees for its services related
to sales and distribution of Class A shares and Primary Class shares, as
applicable, and the provision of ongoing services to shareholders of the
applicable class. Distribution activities for which such payments may be made
include compensation to 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 Primary Class Plan was adopted, as required by Rule 12b-1 under the
1940 Act, by a vote of Global Trust's board of directors on October 21, 1994,
including a majority of the directors who are not "interested persons," as that
term is defined in the 1940 Act, of Global Trust and who have no direct or
indirect financial interest in the operation of the Plan or the Underwriting
Agreement ("12b-1 Directors"). The Class A Plan was preliminarily adopted by a
vote of that board, including the 12b-1 Directors, on June 28, 1999.
Amendment of the Primary Class Plan to conform to new rules of the
National Association of Securities Dealers, Inc., was approved by Global Trust's
board of directors on May 14, 1993. Continuation of the Primary Class Plan was
most recently approved by that board, including a majority of the 12b-1
Directors, on November 13, 1998. In approving the Class A Plan, and approving
the continuance of the Primary Class Plan, in accordance with the requirements
of Rule 12b-1, the directors determined that there was a reasonable likelihood
that the Plans would benefit the applicable fund and its shareholders. The
directors noted that, to the extent that a Plan results in additional sales of
shares of a Fund, the Plan may enable that Fund to achieve economies of scale
that could reduce expenses and to minimize the prospects that the Fund will
experience net redemptions and the accompanying disruption of portfolio
management.
As compensation for its services and expenses pursuant to the Primary
Class Plan, Legg Mason receives from Legg Mason International Fund an annual
distribution fee equivalent to 0.75% of its average daily net assets
attributable to Primary Class shares and a service fee equivalent to 0.25% of
its average daily net assets attributable to Primary Class shares in accordance
with the Primary Class Plan. The distribution and service fees are calculated
daily and payable monthly. Legg Mason has voluntarily agreed to waive
indefinitely its fees and reimburse the Fund if and to the extent its expenses
attributable to Primary Class shares (exclusive of taxes, interest, brokerage
and extraordinary expenses) exceed during any month an annual rate of 2.25% of
the Fund's average daily net assets attributable to Primary Class shares.
Pursuant to the Class A Plan, Legg Mason receives from Legg Mason
International Fund a service fee equivalent to 0.25% of its average daily net
assets attributable to Class A shares. The service fee is calculated daily and
payable monthly. Legg Mason will enter into a voluntary agreement to waive
indefinitely its fees and reimburse the Fund if and to the extent its expenses
attributable to Class A shares (exclusive of taxes, interest, brokerage and
extraordinary expenses) exceed during any month
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an annual rate of 1.50% of the Fund's average daily net assets attributable to
Class A shares.
OTHER FUND SERVICE PROVIDERS
The Funds have the same transfer and shareholder servicing agent (Boston
Financial Data Services), the same custodian (State Street Bank and Trust
Company) and the same independent accountants (PricewaterhouseCoopers LLP). Upon
completion of the Reorganization, those entities will continue to provide
services to the combined Fund.
FUND DIRECTORS AND OFFICERS
Global Trust's directors will continue to serve in that capacity for the
reorganized Fund. The same individuals have served on that board since Legg
Mason International Fund's inception. There is currently one director, the
President of the Fund, Edward A. Taber, III, who serves on the board of
trustees/directors of each Trust. For a complete description of the directors
and officers of Global Trust, including a description of each director's
principal occupation for the past five years and compensation paid to each
director, see the May 1, 1999, Global Trust Statement of Additional Information,
incorporated by reference herein.
INVESTMENT OBJECTIVES AND POLICIES
Bartlett and Batterymarch believe that the two Funds have similar
investment objectives, policies, strategies and limitations. Bartlett
International Fund's investment objective is to seek capital appreciation by
investing primarily in foreign equity securities believed by Bartlett to be
attractively priced relative to their intrinsic value. Income is a secondary
consideration. Legg Mason International Fund's investment objective is to seek
maximum long-term total return. Each Fund seeks to achieve its objective by
investing at least 65% of its respective assets in equity securities of issuers
located outside of the United States.
According to Bartlett International Fund's prospectus, Bartlett invests
using a bottom-up, value-based investment strategy. Its approach to equity
investment is to screen equities for valuations based upon earnings, cash flow,
book value and dividend multiples that fall into the lower half of the global
stock universe. Only companies with strong balance sheets and proven track
records are included. Bartlett then performs a more intense financial and
company evaluation to select those stocks with superior outlooks. Finally, it
evaluates the economic, political and market environment in which the company
operates, as well as potential currency risk. Bartlett's goal of individual
stock selection and portfolio construction is to produce a portfolio of stocks
with above average potential for growth and financial strength, albeit with
attractive valuations.
Batterymarch also uses a value-based investment strategy, and combines it
with certain growth style analyses. According to Legg Mason International Fund's
prospectus, for the developed markets portion of the Fund's portfolio,
Batterymarch's stock selection process ranks stocks daily according to a
bottom-up, quantitative stock selection model that is intended to measure
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growth, value, fundamental expectations, and technical indicators (I.E. supply
and demand). Each Fund invests in emerging market securities; for that portion
of the portfolio, Batterymarch has a dedicated emerging markets investment
process. For its international portfolios, Batterymarch focuses on the larger,
more liquid emerging market issues.
The Funds' portfolios reflect differences between each adviser's
particular strategy. As of March 31, 1999, Bartlett International Fund had a
portfolio that includes less than fifty positions in twenty-two countries and
Legg Mason International Fund had a more widely diversified portfolio with
greater than one hundred and seventy-five positions in twenty-seven countries.
For the most part, Legg Mason International Fund's investments in a particular
country are not as concentrated and limited as those of Bartlett International
Fund. The following chart shows the five or six countries in which each Fund is
predominantly invested, as of March 31, 1999, showing both the number of
holdings per country and the percentage of net assets that those holdings
represent.
BARTLETT INTERNATIONAL FUND
Number of Percentage of
COUNTRY HOLDINGS NET ASSETS
- ------- -------- ----------
Japan 8 19.7%
United Kingdom 4 10.4%
Germany 4 10.2%
France 3 8.2%
Canada 2 6.4%
LEGG MASON INTERNATIONAL FUND
Number of Percentage of
COUNTRY HOLDINGS NET ASSETS
- ------- -------- ----------
United Kingdom 27 19.3%
Japan 27 11.5%
Germany 10 10.3%
France 14 8.9%
Italy 14 7.1%
Switzerland 15 7.1%
Under their charters, each Fund has very similar authority. Both Funds may
hold securities other than common stock, such as debentures or preferred stock.
Legg Mason International Fund may not purchase securities rated below investment
grade if, as a result, more than 5% of the Fund's net assets would be so
invested.
Bartlett International Fund and Legg Mason International Fund may invest
in stock index futures and options and may enter into forward foreign currency
exchange contracts. Legg Mason International 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, and Bartlett International Fund may not enter into
such contracts or options if, immediately thereafter more than one-third of its
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assets would be hedged. Neither Fund may enter into futures contracts and
related options if more than 5% of the fair market value of the Fund's assets
would be required to be deposited as initial margin for the transaction.
Bartlett International Fund may not invest more than 10% of its assets in
illiquid investments and Legg Mason International Fund may not invest more than
15% of its assets in such investments. A chart comparing the different stated
policies and objectives of each Fund is attached as Appendix C hereto.
OPERATIONS OF LEGG MASON INTERNATIONAL FUND FOLLOWING THE REORGANIZATION
As indicated above, Bartlett and Batterymarch believe that the two Funds
are essentially compatible in terms of their investment objectives, policies,
strategies and limitations. As a result, Bartlett and Batterymarch do not
believe that the Reorganization will require any basic change in the investment
policies of Legg Mason International Fund as the sole surviving Fund. It is also
anticipated that at least a majority of current assets held by Bartlett
International Fund will be retained by Batterymarch following the
Reorganization. Accordingly, the Reorganization would not result in material
brokerage or other transactional costs or the realization of a significant
amount of net capital gains as a result of the disposition of portfolio
securities. If, however, Bartlett International Fund has any assets that may not
be held by Legg Mason International Fund, those assets will be sold prior to the
Reorganization. The proceeds of such sales will be held in temporary investments
or reinvested in assets that qualify to be held by Legg Mason International
Fund. The possible need for Bartlett International Fund to dispose of assets
prior to the Reorganization could result in selling securities at a
disadvantageous time and could result in Bartlett International Fund's realizing
losses that would not otherwise have been realized. Alternatively, these sales
could result in Bartlett International Fund's realizing gains that would not
otherwise have been realized, the net proceeds of which would be included in a
distribution to its shareholders prior to the Reorganization.
PURCHASES AND REDEMPTIONS
PURCHASES. Bartlett International Fund Class A and Class C shares, and
Legg Mason International Fund Class A shares and Primary Class shares may be
purchased through brokers affiliated with Legg Mason, through unaffiliated
brokers that have entered into an agreement with Legg Mason, or through
automatic investment plans. Bartlett International Fund Class Y shares and Legg
Mason International Fund Navigator Class shares each may be purchased by
qualified institutional investors either directly from that Fund's distributor
or through an institutional intermediary. Shares of each Fund are sold on a
continuous basis at a price based on the net asset value ("NAV") per share next
determined after receipt of a purchase order in good form (plus any front-end
sales charge applicable to Class A shares). Purchase orders received before the
close of regular trading on the New York Stock Exchange (the "Exchange") on any
day the Exchange is open ("Business Day") are executed at the public offering
price determined as of the close of the Exchange on that day. Purchase orders
received after the close of the Exchange or on days that the Exchange is closed
are executed at the NAV determined as of the close of the Exchange on the next
day that the Exchange is open. For a more complete discussion of share
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purchases, see "How to Purchase and Redeem Your Shares" in the Bartlett
International Fund Prospectuses, "How You Can Invest in the Funds" in the Legg
Mason International Fund Primary and Class A shares Prospectuses, or "How to
Purchase and Redeem Shares" in the Legg Mason International Fund Navigator Class
Prospectus.
REDEMPTIONS. Shares of all classes of both Funds may be redeemed by
telephone, by mail, or by the Funds' Systematic Withdrawal Plan. Redemptions are
made at the NAV per share of each Fund next determined after a request in proper
form is received. A CDSC of 1% of the shares' NAV at the time of purchase or
sale, whichever is less, may be charged on redemptions made within one year of
the purchase date of shares purchased pursuant to the front-end sales charge
waiver for purchases of $1 million or more. Normally, proceeds from redemptions
of Class A, C and Y shares of Bartlett International Fund and Legg Mason
International Fund Primary and Class A shares will settle in customers'
brokerage accounts two business days after the trade date. Proceeds from
redemptions of Legg Mason International Fund Navigator Class shares are normally
electronically deposited in a specified bank account or mailed the next business
day after the trade date. However, each Fund reserves the right to take up to
seven days to make payment upon redemption if, in the judgment of that Fund's
investment adviser, the Fund could be adversely affected by immediate payment.
For a more complete discussion of share redemption procedures, see "How to
Purchase and Redeem Your Shares" in the Bartlett International Fund
Prospectuses, "How You Can Redeem Your Shares" in the Legg Mason International
Fund Primary and Class A shares Prospectuses, or "How to Purchase and Redeem
Shares" in the Legg Mason International Fund Navigator Class Prospectus.
Redemptions of Bartlett International Fund shares may be effected through
the Closing Date.
EXCHANGES
Shares of Legg Mason International Fund may be exchanged for the
comparable class of shares of other Legg Mason Funds on the basis of their
respective NAVs at the time of the exchange. Additionally, after the
Reorganization, Class A shares of Legg Mason International Fund will be
exchangeable for Class A shares of other Legg Mason Funds that offer Class A
shares. For a more complete discussion of Legg Mason International Fund's
exchange policies, see "Shareholder Services - Exchange Privilege" in either the
Legg Mason International Fund Primary Class Shares Prospectus, the Legg Mason
International Fund Class A Shares Prospectus, or the Legg Mason International
Fund Navigator Class Shares Prospectus.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund earns investment income in the form of dividends on investments,
substantially all of which is distributed in the form of dividends to its
shareholders. Bartlett International Fund declares and pays dividends from net
investment income quarterly. Legg Mason International Fund declares and pays
dividends from net investment income annually. Dividends are automatically
reinvested in additional shares of each Fund at the NAV on the payable date
unless otherwise requested.
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Each Fund also realizes capital gains and losses when it sells securities
or derivatives for more or less than it paid. If total gains on these sales
exceed total losses (including losses carried forward from previous years), the
Fund has capital gain net income. Net realized capital gains, if any, together
with net gains realized on foreign currency transactions, if any, are
distributed to each Fund's shareholders at the end of the taxable year in which
the gains are realized. Capital and foreign currency gain distributions are
automatically reinvested in additional shares of each Fund on the payable date
unless otherwise requested.
On or immediately before the Closing Date, Bartlett International Fund
will declare as a distribution substantially all of its net investment income
and realized net capital gain, if any, and distribute that amount plus any
previously declared but unpaid distributions, in order to continue to maintain
its tax status as a regulated investment company.
FEDERAL INCOME TAX CONSEQUENCES OF THE REORGANIZATION
The Funds have received an opinion of their counsel, Kirkpatrick &
Lockhart LLP, to the effect that the Reorganization will qualify as a tax-free
reorganization within the meaning of section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended ("Code"). Accordingly, neither Fund will
recognize any gain or loss as a result of the Reorganization. See "The Proposed
Transaction - Federal Income Tax Considerations," below. To the extent Bartlett
International Fund sells securities prior to the Closing Date, there may be net
recognized gains or losses to that Fund. Any net recognized gains would increase
the amount of any distribution made to shareholders of Bartlett International
Fund prior to the Closing Date.
COMPARISON OF PRINCIPAL RISK FACTORS
An investment in Legg Mason International Fund is subject to specific
risks arising from the types of securities in which the Fund invests and general
risks arising from investing in any mutual fund. Investors can lose money by
investing in the Fund. There is no assurance that the Fund will meet its
investment objective. Because Bartlett International Fund's investment objective
and policies are substantially similar to those of Legg Mason International
Fund, an investment in Legg Mason International Fund is subject to many of the
same specific risks as an investment in Bartlett International Fund. The
principal specific risks associated with investing in Legg Mason International
Fund include:
MARKET RISK. The Fund invests primarily in foreign equity securities.
Prices of equity securities generally fluctuate more than those of other
securities. The Fund may experience a substantial or complete loss on an
individual stock. Market risk may affect a single issuer, industry or section of
the economy or may affect the market as a whole.
FOREIGN SECURITIES RISK. The Fund's investments in foreign securities
(including those denominated in U.S. dollars) involve certain risks not
typically associated with investments in domestic issuers. The values of foreign
securities are subject to economic and political developments in the countries
and regions where the companies operate, such as changes in economic or monetary
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policies, and to changes in exchange rates. Values may also be affected by
foreign tax laws and restrictions on receiving the investment proceeds from a
foreign country.
In general, less information is publicly available about foreign companies
than about U.S. companies. Foreign companies are generally not subject to the
same accounting, auditing and financial reporting standards as are U.S.
companies. Some foreign governments have defaulted on principal and interest
payments.
Some securities issued by foreign governments or their subdivisions,
agencies and instrumentalities may not be backed by the full faith and credit of
the foreign government. Even where a security is backed by the full faith and
credit of a foreign government, it may be difficult for the Fund to pursue its
rights against a foreign government in that country's courts.
EMERGING MARKETS RISK. The Fund may invest up to 35% of its total assets
in emerging market securities. The risks of foreign investment are greater for
investments in emerging markets. Emerging market countries typically have
economic and political systems that are less fully developed, and can be
expected to be less stable than those of more advanced countries. Low trading
volumes may result in a lack of liquidity and in price volatility. Emerging
market countries may have policies that restrict investment by foreigners, or
that prevent foreign investors from withdrawing their money at will.
Because the Fund may invest a significant amount of its total assets in
emerging market securities, investors should be able to tolerate sudden,
sometimes substantial fluctuations in the value of their investments. An
investment in any fund that invests in emerging market securities should be
considered speculative.
CURRENCY RISK. Because the Fund invests significantly in securities
denominated in foreign currencies, its value can be affected by changes in the
rates of exchange between those currencies and the U.S. dollar. Currency
exchange rates can be volatile and affected by, among other factors, the general
economics of a country, the actions of the United States and foreign governments
or central banks, the imposition of currency controls, and speculation. A
security may be denominated in a currency that is different from the currency
where the issuer is domiciled.
The Fund may from time to time hedge a portion of its currency risk, using
currency futures, forwards, or options. However, these instruments may not
always work as intended, and in specific cases the Fund may be worse off than if
it had not used a hedging instrument. For most emerging market currencies, there
are not suitable hedging instruments available.
On January 1, 1999, the conversion of European currencies into the Euro
began and is expected to continue into 2002. Full implementation of the Euro may
be delayed and difficulties with the conversion may significantly impact
European capital markets resulting in increased volatility in world capital
markets. Individual issuers may suffer substantial losses if they or their
suppliers are not adequately prepared for the transition.
INVESTMENT MODELS. The proprietary models used by the advisers to evaluate
securities or securities markets are based on the advisers' understanding of the
interplay of market factors and do not assure successful investment. The
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markets, or the prices of individual securities, may be affected by factors not
foreseen in developing the models.
YEAR 2000. Like other mutual funds (and most organizations around the
world), the Fund could be adversely affected by computer problems related to the
year 2000. These could interfere with operations of the Fund, its adviser or
distributor, or could impact companies in which the Fund invests. The Year 2000
poses an even greater risk for foreign securities.
While no one know if these problems will have any impact on the Fund or on
financial markets in general, the adviser and its affiliates are taking steps to
protect Fund investors. These include efforts to determine that the problem will
not directly affect the systems used by major service providers. Whether these
steps will be effective can only be known for certain in the year 2000.
THE PROPOSED TRANSACTION
REORGANIZATION PLAN
The terms and conditions under which the proposed transaction will be
consummated are set forth in the Reorganization Plan. Significant provisions of
the Reorganization Plan are summarized below; however, this summary is qualified
in its entirety by reference to the Reorganization Plan, which is attached as
Appendix B to this Proxy Statement.
The Reorganization Plan provides for (a) the acquisition by Legg Mason
International Fund on the Closing Date of all the assets of Bartlett
International Fund in exchange solely for Legg Mason International Fund shares
and the assumption by Legg Mason International Fund of all of Bartlett
International Fund's liabilities and (b) the distribution of those Legg Mason
International Fund shares to the shareholders of Bartlett International Fund.
The assets of Bartlett International Fund to be acquired by Legg Mason
International Fund include all cash, cash equivalents, securities, receivables,
claims and rights of action, rights to register shares under applicable
securities laws, books and records, deferred and prepaid expenses shown as
assets on Bartlett International Fund's books, and all other property owned by
Bartlett International Fund. Legg Mason International Fund will assume all of
Bartlett International Fund's liabilities, debts, obligations and duties of
whatever kind or nature; provided, however, that Bartlett International Fund
will use its best efforts to discharge all of its known liabilities before the
Closing Date. Legg Mason International Fund will deliver its shares to Bartlett
International Fund, which will distribute the shares to Bartlett International
Fund's shareholders.
The value of Bartlett International Fund's assets to be acquired by Legg
Mason International Fund and the NAV per share of the Legg Mason International
Fund shares to be exchanged for those assets will be determined as of the close
of regular trading on the Exchange on the Closing Date ("Valuation Time"), using
the valuation procedures described in each Fund's then-current Prospectuses and
Statement of Additional Information. Bartlett International Fund's net value
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shall be the value of its assets to be acquired by Legg Mason International
Fund, less the amount of its liabilities, as of the Valuation Time.
On, or as soon as practicable after, the Closing Date, Bartlett
International Fund will distribute the Legg Mason International Fund shares it
receives PRO RATA to its shareholders of record as of the effective time of the
Reorganization, so that each Bartlett International Fund shareholder will
receive a number of full and fractional Legg Mason International Fund shares of
the corresponding class equal in aggregate value to the shareholder's holdings
in Bartlett International Fund (I.E. the account for a shareholder of Class A,
Class C or Class Y shares of Bartlett International Fund will be credited with
the respective PRO RATA number of Class A, Primary Class shares or Navigator
Class shares of Legg Mason International Fund due that shareholder). Bartlett
International Fund will be terminated as soon as practicable after the share
distribution. The shares will be distributed by opening accounts on the books of
Legg Mason International Fund in the names of Bartlett International Fund
shareholders and by transferring to those accounts the shares previously
credited to the account of Bartlett International Fund on those books.
Fractional shares in Legg Mason International Fund will be rounded to the third
decimal place.
Because Legg Mason International Fund shares will be issued at NAV in
exchange for the net assets of Bartlett International Fund, the aggregate value
of Legg Mason International Fund shares issued to Bartlett International Fund
shareholders will equal the aggregate value of Bartlett International Fund
shares. The NAV per share of Legg Mason International Fund will be unchanged by
the transaction. Thus, the Reorganization will not result in a dilution of any
shareholder's interest.
Any transfer taxes payable upon the issuance of Legg Mason International
Fund shares in a name other than that of the registered Bartlett International
Fund shareholder will be paid by the person to whom those shares are to be
issued as a condition of the transfer. Any reporting responsibility of Bartlett
International Fund to a public authority will continue to be its responsibility
until it is dissolved.
All costs pertaining to the Reorganization will be borne by Fund Adviser.
The consummation of the Reorganization is subject to a number of
conditions set forth in the Reorganization Plan, some of which may be waived by
either Fund. In addition, the Reorganization Plan may be amended in any mutually
agreeable manner, except that no amendment may be made subsequent to the Meeting
that has a material adverse effect on the interests of Bartlett International
Fund's shareholders.
REASONS FOR THE REORGANIZATION
The Reorganization has been proposed because, among other things, Bartlett
International Fund has a relatively poor performance record, a low asset level
with poor sales history and poor cash flow and no prospects for improvement.
Bartlett International Fund's assets have declined substantially in a
twenty-five month period from March 31, 1997 to April 30, 1999, from about $84
million to $50 million. During that same time period, Legg Mason International
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Fund's assets increased from $188.5 million to $250.4 million. As of April 30,
1999, the Bartlett fund complex had total assets of $300 million and the Legg
Mason fund complex had total assets of over $19 billion. The Reorganization is
being proposed because of the anticipated benefits of merging into a Fund with a
very similar investment objective and policies that also can provide better
economics of scale, I.E. lower cost, for each class of shares and whose past
performance is generally better.
In approving the Reorganization, each Board, including a majority of its
Independent Trustees/Directors, considered a number of factors, including the
following:
(1) the compatibility of each Fund's investment objectives, policies and
restrictions and the compatibility of the assets being acquired to
those already held by the Legg Mason International Fund;
(2) the effect of the Reorganization on expected investment performance;
(3) the effect of the Reorganization on the expense ratio of each class
of the Fund relative to its current expense ratio;
(4) the costs to be incurred by each Fund as a result of the
Reorganization;
(5) the tax consequences of the Reorganization;
(6) possible alternatives to the proposed Reorganization; and
(7) the potential benefits of the transaction to other persons, including
Fund Adviser, Batterymarch, Bartlett, Legg Mason, and Legg Mason
Financial Partners, Inc.
The Reorganization was recommended to the Board of Bartlett Capital Trust
by Bartlett at meetings held on May 10, 1999 and June 21, 1999, and to the Board
of Global Trust by Batterymarch at meetings held on May 3, 1999 and June 28,
1999. In recommending the Reorganization, Bartlett and Batterymarch advised each
Board that the investment advisory and administration fee schedule applicable to
Legg Mason International Fund would be lower than that currently in effect for
Bartlett International Fund and that it is likely Bartlett would cease to absorb
expenses of Bartlett International Fund. The Board considered the fact that Legg
Mason International Fund has a better performance record and that Bartlett
International Fund has had more difficulty in attracting assets than Legg Mason
International Fund. The Boards also considered the similarity in investment
objectives and strategies between the two Funds.
DESCRIPTION OF SECURITIES TO BE ISSUED
Global Trust is registered with the SEC as an open-end management
investment company. It has an authorized capitalization of 1,250,000,000 shares
of common stock (par value $0.001 per share), 125,000,000 shares of which are
allocated to Class A shares, 125,000,000 shares of which are allocated to
Primary Class shares and 125,000,000 of which are allocated to Navigator Class
shares. Shares of Legg Mason International Fund entitle their holders to one
vote per full share and fractional votes for fractional shares held.
17
<PAGE>
Legg Mason International Fund does not hold annual meetings of
shareholders. There normally will be no meetings of shareholders for the purpose
of electing directors unless fewer than a majority of the directors holding
office have been elected by shareholders, at which time the directors then in
office will call a shareholders' meeting for the election of directors. The
directors will call annual or special meetings of shareholders for action by
shareholder vote as may be required by the 1940 Act or Global Trust's Articles
of Incorporation, or at their discretion.
TEMPORARY WAIVER OF INVESTMENT RESTRICTIONS
Certain fundamental investment restrictions of Bartlett International
Fund, which prohibit it from acquiring more than a stated percentage of
ownership of another company, might be construed as restricting its ability to
carry out the Reorganization. By approving the Reorganization Plan, Bartlett
International Fund shareholders will be agreeing to waive, only for the purpose
of the Reorganization, those fundamental investment restrictions that could
prohibit or otherwise impede the transaction.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Bartlett International Fund's assets for Legg Mason
International Fund shares and Legg Mason International Fund's assumption of
Bartlett International Fund's liabilities is intended to qualify for federal
income tax purposes as a tax-free reorganization under section 368(a)(1)(C) of
the Code. The Funds have received an opinion of their counsel, Kirkpatrick &
Lockhart LLP, substantially to the effect that -
(1) Legg Mason International Fund's acquisition of Bartlett
International Fund's assets in exchange solely for Legg Mason
International Fund shares and Legg Mason International Fund's assumption
of Bartlett International Fund's liabilities, followed by Bartlett
International Fund's distribution of those shares PRO RATA to its
shareholders constructively in exchange for their Bartlett International
Fund shares, will qualify as a reorganization within the meaning of
section 368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
(2) Bartlett International Fund will recognize no gain or loss on
the transfer to Legg Mason International Fund of its assets in exchange
solely for Legg Mason International Fund shares and Legg Mason
International Fund's assumption of Bartlett International Fund's
liabilities or on the subsequent distribution of those shares to Bartlett
International Fund's shareholders in constructive exchange for their
Bartlett International Fund shares:
(3) Legg Mason International Fund will recognize no gain or loss on
its receipt of the transferred assets in exchange solely for Legg Mason
International Fund shares and its assumption of Bartlett International
Fund's liabilities;
18
<PAGE>
(4) Legg Mason International Fund's basis for the transferred assets
will be the same as the basis thereof in Bartlett International Fund's
hands immediately before the Reorganization, and Legg Mason International
Fund's holding period for those assets will include Bartlett International
Fund's holding period therefor;
(5) A Bartlett International Fund shareholder will recognize no gain
or loss on the constructive exchange of all its Bartlett International
Fund shares solely for Legg Mason International Fund shares pursuant to
the Reorganization; and
(6) A Bartlett International Fund shareholder's aggregate basis for
the Legg Mason International Fund shares to be received by it in the
Reorganization will be the same as the aggregate basis for its Bartlett
International Fund shares to be constructively surrendered in exchange for
those Legg Mason International Fund shares, and its holding period for
those Legg Mason International Fund shares will include its holding period
for those Bartlett International Fund shares, provided they are held as
capital assets by the shareholder on the Closing Date.
Shareholders of Bartlett International Fund should consult their tax
advisers regarding the effect, if any, of the Reorganization in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, those shareholders also
should consult their tax advisers about state and local tax consequences, if
any, of the Reorganization.
19
<PAGE>
CAPITALIZATION
The following table shows the capitalization of each Fund as of December
31, 1998, and on a PRO FORMA combined basis as of December 31, 1998, giving
effect to the Reorganization (amounts are in thousands):
<TABLE>
<CAPTION>
LEGG MASON BARTLETT INTERNATIONAL COMBINED FUND
---------- ---------------------- -------------
INTERNATIONAL FUND FUND (PRO FORMA)
------------------ ----------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Assets.................... $ 258,566 $ 57,182 $ 315,748
Net Asset Value Per Share..... $ 12.64 - Primary $ 11.50 - Class A $ 12.64 - Class A
Class $ 12.07 - Class A $ 12.64 - Primary Class
$ 12.64 - Navigator (plus sales
Class charge) $ 12.64 - Navigator Class
$ 11.34 - Class C
$ 11.46 - Class Y
Shares Outstanding............ 20,454 - Primary 4,161 - Class A 3,786,122 - Class A
Class 345 - Class C 20,764,287 - Primary Class
4 - Navigator 472 - Class Y 431,522 - Navigator Class
Class
</TABLE>
20
<PAGE>
ADDITIONAL INFORMATION ABOUT LEGG MASON INTERNATIONAL FUND - FINANCIAL
HIGHLIGHTS
The table below provides selected per share data and ratios for one share
of Legg Mason International Fund for each of the periods shown. This information
is supplemented by the financial statements and accompanying notes in Legg Mason
International Fund's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, which are incorporated by reference. The financial statements
and notes for the fiscal years ended December 31, 1998 and earlier shown below
have been audited by PricewaterhouseCoopers LLP, independent accountants, whose
report is included in the Annual Report to Shareholders.
INTERNATIONAL EQUITY TRUST -- PRIMARY CLASS SHARES
--------------------------------------------------
<TABLE>
<CAPTION>
Income from
Investment Operations
-------------------------------------------------------------
Net Realized &
Unrealized Gain
(Loss) On
Investments,
Options, Futures
and Foreign Total From
For the Net Asset Value, Net Investment Currency Investment
Years Ended Dec. 31 Beginning of Year Income Transactions Operations
- ------------------------- ----------------- -------------- ---------------------- ----------
<S> <C> <C> <C> <C>
1998 $ 11.78 $ 0.01 $ 0.99 $ 1.00
1997 12.09 0.02 0.19 0.21
1996 10.70 0.02 (b) 1.74 1.76
1995 (b) 10.00 0.04 (b) 0.77 0.81
Distributions
-------------------------------------------------------------
<CAPTION>
For the Years In Excess of From Net In Excess of
Ended Dec. 31, From Net Net Realized Net Realized Net Asset
Investment Investment Gain on Gain on Total Value, End of
Income Income Investments Investments Distribution Year
------ ------ ----------- ----------- ------------ ----
<S> <C> <C> <C> <C> <C> <C>
1998 $ (.14) $ -- $ -- $ -- $ (.14) $ 12.64
1997 (.08) -- (.44) -- (.52) 11.78
1996 (.05) -- (.32) -- (.37) 12.09
1995 (a) (.04) -- -- (.07) (.11) 10.70
</TABLE>
21
<PAGE>
INTERNATIONAL EQUITY TRUST -- PRIMARY CLASS SHARES
- --------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net
- ------------- ----------- ----------- Investment ----------- -----------
Expenses Income to Net
For the Total to Average Average Net Turnover Assets,
Years Ended Return Net Assets Assets (%) Rate End of
Dec. 31, (%) (%) (%) Year
(thousands -- $)
----------- ------ ----------- ----------- -------- ----------------
1998 8.49 2.14 .06 72 258,521
1997 1.76 2.17 .17 59 227,655
1996 16.49 2.25 (b) .21 (b) 83 167,926
1995 (a) 8.11 (d) 2.25 (b,c) .52 (b,c) 58 (c) 65,947
(a) February 17, 1995 (commencement of operations) to December 31, 1995.
(b) Net of fees waived by the manager for expenses in excess of a voluntary
expense limitation of 2.25%. If no fees had been waived by the manager,
the annualized ratio of expenses to average daily net assets would have
been: 1996, 2.32% and 1995, 2.91%.
(c) Annualized.
(d) Not annualized.
REQUIRED VOTE. Approval of the Reorganization Plan requires the
affirmative vote of a majority of the outstanding voting securities of Bartlett
International Fund.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS VOTE "FOR" THE PROPOSAL
-------------------------
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting. If,
however, any other matters properly come before the Meeting, it is the intention
that proxies that do not contain specific instructions to the contrary will be
voted on such matters in accordance with the judgment of the persons designated
in the proxies.
MISCELLANEOUS
AVAILABLE INFORMATION
Each Fund is subject to the information requirements of the Securities
Exchange Act of 1934 and the 1940 Act and in accordance with those requirements
files reports, proxy material and other information with the SEC. These reports,
proxy material and other information can be inspected and copied at the Public
Reference Room maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, The Midwest Regional office of the SEC, Northwest Atrium Center, 500 West
Madison Street, Suite 400, Chicago, Illinois 60611, and the Northeast Regional
Office of the SEC, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, SEC, Washington,
D.C. 20459 at prescribed rates.
22
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the issuance of Legg Mason
International Fund shares as part of the Reorganization will be passed upon by
Legg Mason International Fund's counsel, Kirkpatrick & Lockhart LLP.
EXPERTS
The audited financial statements of Legg Mason International Fund and
Bartlett International Fund, incorporated herein by reference and incorporated
by reference or included in their respective Statements of Additional
Information, have been audited by PricewaterhouseCoopers LLP, independent
accountants for the Funds, whose reports thereon are included in the Funds'
Annual Reports to Shareholders for the fiscal year ended December 31, 1998. The
financial statements audited by PricewaterhouseCoopers LLP have been
incorporated herein by reference in reliance on their reports given on their
authority as experts in auditing and accounting matters.
23
<PAGE>
APPENDIX A
----------
PRINCIPAL SHAREHOLDERS
----------------------
The following table sets forth the beneficial ownership of each Fund's
outstanding equity securities as of ______ __, 1999 by each beneficial owner of
5% or more of a Fund's outstanding equity securities.
LEGG MASON INTERNATIONAL EQUITY TRUST
NAME AND ADDRESS NATURE OF AMOUNT PERCENT
- ---------------- --------- ------ -------
OWNERSHIP
---------
BARTLETT VALUE INTERNATIONAL FUND
NAME AND ADDRESS NATURE OF AMOUNT PERCENT
- ---------------- --------- ------ -------
OWNERSHIP
---------
A-1
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION
THIS AGREEMENT AND PLAN OF REORGANIZATION AND TERMINATION ("Agreement") is
made as of July 2, 1999, between BARTLETT CAPITAL TRUST, a Massachusetts
business trust ("Trust"), on behalf of Bartlett Value International Fund, a
segregated portfolio of assets ("series") thereof ("Target"), and LEGG MASON
GLOBAL TRUST, INC., a Maryland corporation ("Corporation"), on behalf its Legg
Mason International Equity Trust series ("Acquiring Fund"). (Target and
Acquiring Fund are sometimes referred to herein individually as a "Fund" and
collectively as the "Funds," and Trust and Corporation are sometimes referred to
herein individually as an "Investment Company" and collectively as the
"Investment Companies.") All agreements, representations, actions, and
obligations described herein made or to be taken or undertaken by either Fund
are made and shall be taken or undertaken by Corporation on behalf of Acquiring
Fund and by Trust on behalf of Target.
The Investment Companies wish to effect a reorganization described in
section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended ("Code"),
and intend this Agreement to be a "plan of reorganization" within the meaning of
the regulations under the Code. The reorganization will involve the transfer to
Acquiring Fund of Target's assets in exchange solely for voting shares of common
stock in Acquiring Fund, par value $0.001 per share ("Acquiring Fund Shares"),
and the assumption by Acquiring Fund of Target's liabilities, followed by the
constructive distribution of the Acquiring Fund Shares PRO rata to the holders
of shares of common stock in Target ("Target Shares") in exchange therefor, all
on the terms and conditions set forth herein. The foregoing transactions are
referred to herein collectively as the "Reorganization."
The Target Shares are divided into three classes, designated Class A,
Class C, and Class Y shares ("Class A Target Shares," "Class C Target Shares,"
and "Class Y Target Shares," respectively). The Acquiring Fund Shares also are
divided into three classes, designated Class A, Primary Class, and Navigator
Class shares ("Class A Acquiring Fund Shares," "Primary Class Acquiring Fund
Shares," and "Navigator Class Acquiring Fund Shares," respectively). Each class
of Acquiring Fund Shares is substantially similar to the corresponding class of
Target Shares (the Funds' Class A Shares correspond to each other, Class C
Target Shares correspond to Primary Class Acquiring Fund Shares, and Class Y
Target Shares correspond to Navigator Class Acquiring Fund Shares), except that
Class C Target Shares are subject to a contingent deferred sales charge, while
Primary Class Acquiring Fund Shares are not subject to such a charge.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. PLAN OF REORGANIZATION AND TERMINATION
1.1. Target agrees to assign, sell, convey, transfer, and deliver all of
its assets described in paragraph 1.2 ("Assets") to Acquiring Fund. Acquiring
Fund agrees in exchange therefor --
(a) to issue and deliver to Target the number of full and fractional
(rounded to the third decimal place) (i) Class A Acquiring Fund Shares
determined by dividing the net value of Target (computed as set forth in
paragraph 2.1) ("Target Value") attributable to the Class A Target Shares
B-1
<PAGE>
by the net asset value ("NAV") of a Class A Acquiring Fund Share (computed
as set forth in paragraph 2.2), (ii) Primary Class Acquiring Fund Shares
determined by dividing the Target Value attributable to the Class C Target
Shares by the NAV of a Primary Class Acquiring Fund Share (as so
computed), and (iii) Navigator Class Acquiring Fund Shares determined by
dividing the Target Value attributable to the Class Y Target Shares by the
NAV of a Navigator Class Acquiring Fund Share (as so computed), and
(b) to assume all of Target's liabilities described in paragraph 1.3
("Liabilities"). Such transactions shall take place at the Closing (as
defined in paragraph 3.1).
1.2. The Assets shall include, without limitation, all cash, cash
equivalents, securities, receivables (including interest and dividends
receivable), claims and rights of action, rights to register shares under
applicable securities laws, books and records, deferred and prepaid expenses
shown as assets on Target's books, and other property owned by Target at the
Effective Time (as defined in paragraph 3.1).
1.3. The Liabilities shall include (except as otherwise provided herein)
all of Target's liabilities, debts, obligations, and duties of whatever kind or
nature, whether absolute, accrued, contingent, or otherwise, whether or not
arising in the ordinary course of business, whether or not determinable at the
Effective Time, and whether or not specifically referred to in this Agreement.
Notwithstanding the foregoing, Target agrees to use its best efforts to
discharge all its known Liabilities before the Effective Time.
1.4. At or immediately before the Effective Time, Target shall declare
and pay to its shareholders a dividend and/or other distribution in an amount
large enough so that it will have distributed substantially all (and in any
event not less than 90%) of its investment company taxable income (computed
without regard to any deduction for dividends paid) and substantially all of its
realized net capital gain, if any, for the current taxable year through the
Effective Time.
1.5. At the Effective Time (or as soon thereafter as is reasonably
practicable), Target shall distribute the Acquiring Fund Shares received by it
pursuant to paragraph 1.1 to Target's shareholders of record, determined as of
the Effective Time (each a "Shareholder" and collectively "Shareholders"), in
constructive exchange for their Target Shares. Such distribution shall be
accomplished by Corporation's transfer agent's opening accounts on Acquiring
Fund's share transfer books in the Shareholders' names and transferring such
Acquiring Fund Shares thereto. Each Shareholder's account shall be credited with
the respective PRO RATA number of full and fractional (rounded to the third
decimal place) Acquiring Fund Shares due that Shareholder, by class (I.E., the
account for a Shareholder of Class A Target Shares shall be credited with the
respective PRO RATA number of Class A Acquiring Fund Shares due that
Shareholder, the account for a Shareholder of Class C Target Shares shall be
credited with the respective PRO RATA number of Primary Class Acquiring Fund
Shares due that Shareholder, and the account for a Shareholder of Class Y Target
Shares shall be credited with the respective PRO RATA number of Navigator Class
Acquiring Fund Shares due that Shareholder). All outstanding Target Shares,
including any represented by certificates, shall simultaneously be canceled on
Target's share transfer books. Acquiring Fund shall not issue certificates
representing the Acquiring Fund Shares issued in connection with the
Reorganization.
B-2
<PAGE>
1.6. As soon as reasonably practicable after distribution of the
Acquiring Fund Shares pursuant to paragraph 1.5, but in all events within twelve
months after the Effective Time, Target shall be terminated as a series of Trust
and any further actions shall be taken in connection therewith as required by
applicable law.
1.7. Any reporting responsibility of Target to a public authority is and
shall remain its responsibility up to and including the date on which it is
terminated.
1.8. Any transfer taxes payable upon issuance of Acquiring Fund Shares in
a name other than that of the registered holder on Target's books of the Target
Shares constructively exchanged therefor shall be paid by the person to whom
such Acquiring Fund Shares are to be issued, as a condition of such transfer.
2. VALUATION
2.1. For purposes of paragraph 1.1(a), Target's net value shall be (a)
the value of the Assets computed as of the close of regular trading on the New
York Stock Exchange ("NYSE") on the date of the Closing ("Valuation Time"),
using the valuation procedures set forth in Target's then-current prospectuses
and statement of additional information ("SAI") less (b) the amount of the
Liabilities as of the Valuation Time.
2.2. For purposes of paragraph 1.1(a), the NAV per share of each class of
Acquiring Fund Shares shall be computed as of the Valuation Time, using the
valuation procedures set forth in Acquiring Fund's then-current prospectuses and
SAI.
2.3. All computations pursuant to paragraph 2.1 shall be made by or under
the direction of Bartlett & Co. All computations pursuant to paragraph 2.2 shall
be made by or under the direction of Legg Mason Fund Adviser, Inc. ("LMFA") and
Batterymarch Financial Management, Inc.
3. CLOSING AND EFFECTIVE TIME
3.1. The Reorganization, together with related acts necessary to
consummate the same ("Closing"), shall occur at Corporation's principal office
on or about September 30, 1999, or at such other place and/or on such other date
as to which the parties may agree. All acts taking place at the Closing shall be
deemed to take place simultaneously as of the close of business on the date
thereof or at such other time as to which the parties may agree ("Effective
Time"). If, immediately before the Valuation Time, (a) the NYSE is closed to
trading or trading thereon is restricted or (b) trading or the reporting of
trading on the NYSE or elsewhere is disrupted, so that accurate appraisal of the
net value of Target and the NAV of an Acquiring Fund Share is impracticable, the
Effective Time shall be postponed until the first business day after the day
when such trading shall have been fully resumed and such reporting shall have
been restored.
3.2. Trust's fund accounting and pricing agent shall deliver at the
Closing a certificate of an authorized officer verifying that the information
(including adjusted basis and holding period, by lot) concerning the Assets,
including all portfolio securities, transferred by Target to Acquiring Fund, as
reflected on Acquiring Fund's books immediately following the Closing, does or
B-3
<PAGE>
will conform to such information on Target's books immediately before the
Closing. Trust's custodian shall deliver at the Closing a certificate of an
authorized officer stating that (a) the Assets held by the custodian will be
transferred to Acquiring Fund at the Effective Time and (b) all necessary taxes
in conjunction with the delivery of the Assets, including all applicable federal
and state stock transfer stamps, if any, have been paid or provision for payment
has been made.
3.3. Trust shall deliver to Corporation at the Closing a list of the
names and addresses of the Shareholders and the number of outstanding Target
Shares (by class) owned by each Shareholder, all as of the Effective Time,
certified by the Secretary or Assistant Secretary of Trust. Corporation's
transfer agent shall deliver at the Closing a certificate as to the opening on
Acquiring Fund's share transfer books of accounts in the Shareholders' names.
Corporation shall issue and deliver a confirmation to Trust evidencing the
Acquiring Fund Shares to be credited to Target at the Effective Time or provide
evidence satisfactory to Trust that such Acquiring Fund Shares have been
credited to Target's account on Acquiring Fund's books. At the Closing, each
party shall deliver to the other such bills of sale, checks, assignments, stock
certificates, receipts, or other documents as the other party or its counsel may
reasonably request.
3.4. Each Investment Company shall deliver to the other at the Closing a
certificate executed in its name by its President or a Vice President in form
and substance satisfactory to the recipient and dated the Effective Time, to the
effect that the representations and warranties it made in this Agreement are
true and correct at the Effective Time except as they may be affected by the
transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES
4.1. Target represents and warrants as follows:
4.1.1. Trust is a trust operating under a written declaration of
trust, the beneficial interest in which is divided into transferable
shares ("Business Trust"), that is duly organized and validly existing
under the laws of the Commonwealth of Massachusetts; and a copy of its
Amended and Restated Agreement and Declaration of Trust ("Declaration of
Trust") is on file with the Secretary of the Commonwealth of
Massachusetts;
4.1.2. Trust is duly registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
("1940 Act"), and such registration will be in full force and effect at
the Effective Time;
4.1.3. Target is a duly established and designated series of
Trust;
4.1.4. At the Closing, Target will have good and marketable title
to the Assets and full right, power, and authority to sell, assign,
transfer, and deliver the Assets free of any liens or other encumbrances;
and upon delivery and payment for the Assets, Acquiring Fund will acquire
good and marketable title thereto;
4.1.5. Target's current prospectuses and SAI conform in all
material respects to the applicable requirements of the Securities Act of
1933, as amended ("1933 Act"), and the 1940 Act and the rules and
regulations thereunder and do not include any untrue statement of a
B-4
<PAGE>
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
4.1.6. Target is not in violation of, and the execution and
delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Massachusetts law
or any provision of the Declaration of Trust or Trust's By-Laws or of any
agreement, instrument, lease, or other undertaking to which Target is a
party or by which it is bound or result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree to which Target is a party or by which it is bound,
except as previously disclosed in writing to and accepted by Corporation;
4.1.7. Except as otherwise disclosed in writing to and accepted by
Corporation, all material contracts and other commitments of or applicable
to Target (other than this Agreement and investment contracts, including
options, futures, and forward contracts) will be terminated, or provision
for discharge of any liabilities of Target thereunder will be made, at or
prior to the Effective Time, without either Fund's incurring any liability
or penalty with respect thereto and without diminishing or releasing any
rights Target may have had with respect to actions taken or omitted or to
be taken by any other party thereto prior to the Closing;
4.1.8. Except as otherwise disclosed in writing to and accepted by
Corporation, no litigation, administrative proceeding, or investigation of
or before any court or governmental body is presently pending or (to
Target's knowledge) threatened against Trust with respect to Target or any
of its properties or assets that, if adversely determined, would
materially and adversely affect Target's financial condition or the
conduct of its business; Target knows of no facts that might form the
basis for the institution of any such litigation, proceeding, or
investigation and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially or adversely affects its business or its ability to consummate
the transactions contemplated hereby;
4.1.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Trust's board of trustees, which has made the determinations
required by Rule 17a-8(a) under the 1940 Act; and, subject to approval by
Target's shareholders, this Agreement constitutes a valid and legally
binding obligation of Target, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
4.1.10. At the Effective Time, the performance of this Agreement
shall have been duly authorized by all necessary action by Target's
shareholders;
4.1.11. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the Securities Exchange Act of
1934, as amended ("1934 Act"), or the 1940 Act for the execution or
performance of this Agreement by Trust, except for (a) the filing with the
B-5
<PAGE>
Securities and Exchange Commission ("SEC") of a registration statement by
Corporation on Form N-14 relating to the Acquiring Fund Shares issuable
hereunder, and any supplement or amendment thereto ("Registration
Statement"), including therein a prospectus/proxy statement ("Proxy
Statement"), and (b) such consents, approvals, authorizations, and filings
as have been made or received or as may be required subsequent to the
Effective Time;
4.1.12. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Corporation for use therein;
4.1.13. The Liabilities were incurred by Target in the ordinary
course of its business and are associated with the Assets; and there are
no Liabilities other than liabilities disclosed or provided for in Trust's
financial statements referred to in paragraph 4.1.19 and liabilities
incurred by Target in the ordinary course of its business subsequent to
December 31, 1998, or otherwise previously disclosed to Corporation, none
of which has been materially adverse to the business, assets, or results
of Target operations;
4.1.14. Target is a "fund" as defined in section 851(g)(2) of the
Code; it qualified for treatment as a regulated investment company under
Subchapter M of the Code ("RIC") for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; and it has no earnings
and profits accumulated in any taxable year in which the provisions of
Subchapter M did not apply to it. The Assets shall be invested at all
times through the Effective Time in a manner that ensures compliance with
the foregoing;
4.1.15. Target is not under the jurisdiction of a court in a
proceeding under Title 11 of the United States Code or similar case within
the meaning of section 368(a)(3)(A) of the Code;
4.1.16. Not more than 25% of the value of Target's total assets
(excluding cash, cash items, and U.S. government securities) is invested
in the stock and securities of any one issuer, and not more than 50% of
the value of such assets is invested in the stock and securities of five
or fewer issuers;
4.1.17. Target will be terminated as soon as reasonably practicable
after the Effective Time, but in all events within twelve months
thereafter;
4.1.18. Target's federal income tax returns, and all applicable
state and local tax returns, for all taxable years to and including the
B-6
<PAGE>
taxable year ended December 31, 1997, have been timely filed and all taxes
payable pursuant to such returns have been timely paid; and
4.1.19. The financial statements of Trust for the year ended
December 31, 1998, to be delivered to Corporation, fairly represent the
financial position of Target as of that date and the results of its
operations and changes in its net assets for the year then ended.
4.2. Acquiring Fund represents and warrants as follows:
4.2.1. Corporation is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maryland;
and a copy of its Articles of Incorporation is on file with the Secretary
of the State of Maryland;
4.2.2. Corporation is duly registered as an open-end management
investment company under the 1940 Act, and such registration will be in
full force and effect at the Effective Time;
4.2.3. Acquiring Fund is a duly established and designated series
of Corporation;
4.2.4. No consideration other than Acquiring Fund Shares (and
Acquiring Fund's assumption of the Liabilities) will be issued in exchange
for the Assets in the Reorganization;
4.2.5. The Acquiring Fund Shares to be issued and delivered to
Target hereunder will, at the Effective Time, have been duly authorized
and, when issued and delivered as provided herein, will be duly and
validly issued and outstanding shares of Acquiring Fund, fully paid and
non-assessable;
4.2.6. Acquiring Fund's current prospectuses and SAI conform in
all material respects to the applicable requirements of the 1933 Act and
the 1940 Act and the rules and regulations thereunder and do not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
4.2.7. Acquiring Fund is not in violation of, and the execution
and delivery of this Agreement and consummation of the transactions
contemplated hereby will not conflict with or violate, Maryland law or any
provision of Corporation's Articles of Incorporation or By-Laws or of any
provision of any agreement, instrument, lease, or other undertaking to
which Acquiring Fund is a party or by which it is bound or result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Acquiring Fund is a party or
by which it is bound, except as previously disclosed in writing to and
accepted by Trust;
4.2.8. Except as otherwise disclosed in writing to and accepted by
Trust, no litigation, administrative proceeding, or investigation of or
before any court or governmental body is presently pending or (to
Acquiring Fund's knowledge) threatened against Corporation with respect to
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Acquiring Fund or any of its properties or assets that, if adversely
determined, would materially and adversely affect Acquiring Fund's
financial condition or the conduct of its business; Acquiring Fund knows
of no facts that might form the basis for the institution of any such
litigation, proceeding, or investigation and is not a party to or subject
to the provisions of any order, decree, or judgment of any court or
governmental body that materially or adversely affects its business or its
ability to consummate the transactions contemplated hereby;
4.2.9. The execution, delivery, and performance of this Agreement
have been duly authorized as of the date hereof by all necessary action on
the part of Corporation's board of directors (together with Trust's board
of trustees, the "Boards"), which has made the determinations required by
Rule 17a-8(a) under the 1940 Act; and this Agreement constitutes a valid
and legally binding obligation of Acquiring Fund, enforceable in
accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium,
and similar laws relating to or affecting creditors' rights and by general
principles of equity;
4.2.10. No governmental consents, approvals, authorizations, or
filings are required under the 1933 Act, the 1934 Act, or the 1940 Act for
the execution or performance of this Agreement by Corporation, except for
(a) the filing with the SEC of the Registration Statement and a
post-effective amendment to Corporation's registration statement on Form
N1-A and (b) such consents, approvals, authorizations, and filings as have
been made or received or as may be required subsequent to the Effective
Time;
4.2.11. On the effective date of the Registration Statement, at the
time of the shareholders' meeting referred to in paragraph 5.2, and at the
Effective Time, the Proxy Statement will (a) comply in all material
respects with the applicable provisions of the 1933 Act, the 1934 Act, and
the 1940 Act and the regulations thereunder and (b) not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which such statements were made, not misleading;
provided that the foregoing shall not apply to statements in or omissions
from the Proxy Statement made in reliance on and in conformity with
information furnished by Trust for use therein;
4.2.12. Acquiring Fund is a "fund" as defined in section 851(g)(2)
of the Code; it qualified for treatment as a RIC for each past taxable
year since it commenced operations and will continue to meet all the
requirements for such qualification for its current taxable year;
Acquiring Fund intends to continue to meet all such requirements for the
next taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M of the Code did not
apply to it;
4.2.13. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, except to the extent it is
required by the 1940 Act to redeem any of its shares presented for
redemption at NAV in the ordinary course of that business;
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4.2.14. Following the Reorganization, Acquiring Fund (a) will
continue Target's "historic business" (within the meaning of section
1.368-1(d)(2) of the Income Tax Regulations under the Code), (b) use a
significant portion of Target's historic business assets (within the
meaning of section 1.368-1(d)(3) of the Income Tax Regulations under the
Code) in a business, (c) has no plan or intention to sell or otherwise
dispose of any of the Assets, except for dispositions made in the ordinary
course of that business and dispositions necessary to maintain its status
as a RIC, and (d) expects to retain substantially all the Assets in the
same form as it receives them in the Reorganization, unless and until
subsequent investment circumstances suggest the desirability of change or
it becomes necessary to make dispositions thereof to maintain such status;
4.2.15. There is no plan or intention for Acquiring Fund to be
dissolved or merged into another corporation or a business trust or any
"fund" thereof (within the meaning of section 851(g)(2) of the Code)
following the Reorganization;
4.2.16. Immediately after the Reorganization, (a) not more than 25%
of the value of Acquiring Fund's total assets (excluding cash, cash items,
and U.S. government securities) will be invested in the stock and
securities of any one issuer and (b) not more than 50% of the value of
such assets will be invested in the stock and securities of five or fewer
issuers;
4.2.17. Acquiring Fund does not directly or indirectly own, nor at
the Effective Time will it directly or indirectly own, nor has it directly
or indirectly owned at any time during the past five years, any shares of
Target;
4.2.18. Acquiring Fund's federal income tax returns, and all
applicable state and local tax returns, for all taxable years to and
including the taxable year ended December 31, 1997, have been timely filed
and all taxes payable pursuant to such returns have been timely paid;
4.2.19. The financial statements of Corporation for the year ended
December 31, 1998, to be delivered to Trust, fairly represent the
financial position of Acquiring Fund as of that date and the results of
its operations and changes in its net assets for the year then ended; and
4.2.20. If the Reorganization is consummated, Acquiring Fund will
treat each Shareholder that receives Acquiring Fund Shares in connection
with the Reorganization as having made a minimum initial purchase of
Acquiring Fund Shares for the purpose of making additional investments in
Acquiring Fund Shares, regardless of the value of the Acquiring Fund
Shares so received.
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4.3. Each Fund represents and warrants as follows:
4.3.1. The fair market value of the Acquiring Fund Shares when
received by each Shareholder will be approximately equal to the fair
market value of its Target Shares constructively surrendered in exchange
therefor;
4.3.2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person related
(within the meaning of section 1.368-1(e)(3) of the Income Tax Regulations
under the Code) to either Fund or (ii) any portion of the Acquiring Fund
Shares to be received by them in the Reorganization to any person related
(as so defined) to Acquiring Fund, (b) does not anticipate dispositions of
those Acquiring Fund Shares at the time of or soon after the
Reorganization to exceed the usual rate and frequency of dispositions of
shares of Target as a series of an open-end investment company, (c)
expects that the percentage of Shareholder interests, if any, that will be
disposed of as a result of or at the time of the Reorganization will be DE
MINIMIS, and (d) does not anticipate that there will be extraordinary
redemptions of Acquiring Fund Shares immediately following the
Reorganization;
4.3.3. The Shareholders will pay their own expenses, if any,
incurred in connection with the Reorganization;
4.3.4. Immediately following consummation of the Reorganization,
Acquiring Fund will hold substantially the same assets and be subject to
substantially the same liabilities that Target held or was subject to
immediately prior thereto (in addition to the assets and liabilities
Acquiring Fund then held or was subject to), plus any liabilities and
expenses of the parties incurred in connection with the Reorganization;
4.3.5. The fair market value of the Assets on a going concern
basis will equal or exceed the Liabilities to be assumed by Acquiring Fund
and those to which the Assets are subject;
4.3.6. There is no intercompany indebtedness between the Funds
that was issued or acquired, or will be settled, at a discount;
4.3.7. Pursuant to the Reorganization, Target will transfer to
Acquiring Fund, and Acquiring Fund will acquire, at least 90% of the fair
market value of the net assets, and at least 70% of the fair market value
of the gross assets, held by Target immediately before the Reorganization.
For the purposes of this representation, any amounts used by Target to pay
its Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions not made as
part of the Reorganization and (b) distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
section 4982 of the Code) will be included as assets held thereby
immediately before the Reorganization;
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4.3.8. None of the compensation received by any Shareholder who is
an employee of or service provider to Target will be separate
consideration for, or allocable to, any of the Target Shares held by such
Shareholder; none of the Acquiring Fund Shares received by any such
Shareholder will be separate consideration for, or allocable to, any
employment agreement; investment advisory agreement, or other service
agreement; and the consideration paid to any such Shareholder will be for
services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services;
4.3.9. Immediately after the Reorganization, the Shareholders will
not own shares constituting "control" of Acquiring Fund within the meaning
of section 304(c) of the Code; and
4.3.10. Neither Fund will be reimbursed for any expenses incurred
by it or on its behalf in connection with the Reorganization unless those
expenses are solely and directly related to the Reorganization (determined
in accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1
C.B. 187) ("Reorganization Expenses").
5. COVENANTS
5.1. Each Fund covenants to operate its respective business in the
ordinary course between the date hereof and the Closing, it being understood
that:
(a) such ordinary course will include declaring and paying customary
dividends and other distributions and such changes in operations as are
contemplated by each Fund's normal business activities and
(b) each Fund will retain exclusive control of the composition of
its portfolio until the Closing; provided that (1) Target shall not
dispose of more than an insignificant portion of its historic business
assets during such period without Acquiring Fund's prior consent and (2)
if Target's shareholders' approve this Agreement (and the transactions
contemplated hereby), then between the date of such approval and the
Closing, the Investment Companies shall coordinate the Funds' respective
portfolios so that the transfer of the Assets to Acquiring Fund will not
cause it to fail to be in compliance with all of its investment policies
and restrictions immediately after the Closing.
5.2. Target covenants to call a shareholders' meeting to consider and act
on this Agreement and to take all other action necessary to obtain approval of
the transactions contemplated hereby.
5.3. Target covenants that the Acquiring Fund Shares to be delivered
hereunder are not being acquired for the purpose of making any distribution
thereof, other than in accordance with the terms hereof.
5.4. Target covenants that it will assist Corporation in obtaining such
information as Corporation reasonably requests concerning the beneficial
ownership of Target Shares.
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5.5. Target covenants that its books and records (including all books and
records required to be maintained under the 1940 Act and the rules and
regulations thereunder) will be turned over to Corporation at the Closing.
5.6. Each Fund covenants to cooperate in preparing the Proxy Statement in
compliance with applicable federal securities laws.
5.7. Each Fund covenants that it will, from time to time, as and when
requested by the other Fund, execute and deliver or cause to be executed and
delivered all such assignments and other instruments, and will take or cause to
be taken such further action, as the other Fund may deem necessary or desirable
in order to vest in, and confirm to, (a) Acquiring Fund, title to and possession
of all the Assets, and (b) Target, title to and possession of the Acquiring Fund
Shares to be delivered hereunder, and otherwise to carry out the intent and
purpose hereof.
5.8. Acquiring Fund covenants to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act, and such
state securities laws it may deem appropriate in order to continue its
operations after the Effective Time.
5.9. Subject to this Agreement, each Fund covenants to take or cause to
be taken all actions, and to do or cause to be done all things, reasonably
necessary, proper, or advisable to consummate and effectuate the transactions
contemplated hereby.
6. CONDITIONS PRECEDENT
Each Fund's obligations hereunder shall be subject to (a) performance by
the other Fund of all its obligations to be performed hereunder at or before the
Effective Time, (b) all representations and warranties of the other Fund
contained herein being true and correct in all material respects as of the date
hereof and, except as they may be affected by the transactions contemplated
hereby, as of the Effective Time, with the same force and effect as if made at
and as of the Effective Time, and (c) the following further conditions that, at
or before the Effective Time:
6.1. This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the Boards and shall have been approved by
Target's shareholders in accordance with applicable law.
6.2. All necessary filings shall have been made with the SEC and state
securities authorities, and no order or directive shall have been received that
any other or further action is required to permit the parties to carry out the
transactions contemplated hereby. The Registration Statement shall have become
effective under the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued, and the SEC shall not have issued an unfavorable
report with respect to the Reorganization under section 25(b) of the 1940 Act
nor instituted any proceedings seeking to enjoin consummation of the
transactions contemplated hereby under section 25(c) of the 1940 Act. All
consents, orders, and permits of federal, state, and local regulatory
authorities (including the SEC and state securities authorities) deemed
necessary by either Investment Company to permit consummation, in all material
respects, of the transactions contemplated hereby shall have been obtained,
except where failure to obtain same would not involve a risk of a material
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<PAGE>
adverse effect on the assets or properties of either Fund, provided that either
Investment Company may for itself waive any of such conditions.
6.3. At the Effective Time, no action, suit, or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or to obtain damages or other relief in connection with,
the transactions contemplated hereby.
6.4. Trust shall have received an opinion of Kirkpatrick & Lockhart LLP
substantially to the effect that:
6.4.1. Acquiring Fund is a duly established series of Corporation,
a corporation duly organized, validly existing, and in good standing under the
laws of the State of Maryland with power under its Articles of Incorporation to
own all its properties and assets and, to the knowledge of such counsel, to
carry on its business as presently conducted;
6.4.2. This Agreement (a) has been duly authorized, executed, and
delivered by Corporation on behalf of Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by Trust on
behalf of Target, is a valid and legally binding obligation of Corporation
with respect to Acquiring Fund, enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights and by general principles of equity;
6.4.3. The Acquiring Fund Shares to be issued and distributed to
the Shareholders under this Agreement, assuming their due delivery as
contemplated by this Agreement, will be duly authorized and validly issued
and outstanding and fully paid and non-assessable;
6.4.4. The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not,
materially violate Corporation's Articles of Incorporation or By-Laws or
any provision of any agreement (known to such counsel, without any
independent inquiry or investigation) to which Corporation (with respect
to Acquiring Fund) is a party or by which it is bound or (to the knowledge
of such counsel, without any independent inquiry or investigation) result
in the acceleration of any obligation, or the imposition of any penalty,
under any agreement, judgment, or decree to which Corporation (with
respect to Acquiring Fund) is a party or by which it is bound, except as
set forth in such opinion or as previously disclosed in writing to and
accepted by Trust;
6.4.5. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation by
Corporation on behalf of Acquiring Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act, the 1934
Act, and the 1940 Act and such as may be required under state securities
laws;
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6.4.6. Corporation is registered with the SEC as an investment
company, and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.4.7. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding,
or investigation of or before any court or governmental body is pending or
threatened as to Corporation (with respect to Acquiring Fund) or any of
its properties or assets attributable or allocable to Acquiring Fund and
(b) Corporation (with respect to Acquiring Fund) is not a party to or
subject to the provisions of any order, decree, or judgment of any court
or governmental body that materially and adversely affects Acquiring
Fund's business, except as set forth in such opinion or as otherwise
disclosed in writing to and accepted by Trust.
In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the State of Maryland, on an opinion of competent Maryland counsel,
(2) make assumptions regarding the authenticity, genuineness, and/or conformity
of documents and copies thereof without independent verification thereof, (3)
limit such opinion to applicable federal and state law, and (4) define the word
"knowledge" and related terms to mean the knowledge of attorneys then with such
firm who have devoted substantive attention to matters directly related to this
Agreement and the Reorganization.
6.5. Corporation shall have received an opinion of Kirkpatrick & Lockhart
LLP substantially to the effect that:
6.5.1. Target is a duly established series of Trust, a Business
Trust duly organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under the Declaration of Trust to
own all its properties and assets and, to the knowledge of such counsel,
to carry on its business as presently conducted;
6.5.2. This Agreement (a) has been duly authorized, executed, and
delivered by Trust on behalf of Target and (b) assuming due authorization,
execution, and delivery of this Agreement by Corporation on behalf of
Acquiring Fund, is a valid and legally binding obligation of Trust with
respect to Target, enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium, and similar laws relating to or affecting
creditors' rights and by general principles of equity;
6.5.3. The execution and delivery of this Agreement did not, and
the consummation of the transactions contemplated hereby will not,
materially violate the Declaration of Trust or Trust's By-Laws or any
provision of any agreement (known to such counsel, without any independent
inquiry or investigation) to which Trust (with respect to Target) is a
party or by which it is bound or (to the knowledge of such counsel,
without any independent inquiry or investigation) result in the
acceleration of any obligation, or the imposition of any penalty, under
any agreement, judgment, or decree to which Trust (with respect to Target)
is a party or by which it is bound, except as set forth in such opinion or
as previously disclosed in writing to and accepted by Corporation;
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6.5.4. To the knowledge of such counsel (without any independent
inquiry or investigation), no consent, approval, authorization, or order
of any court or governmental authority is required for the consummation by
Trust on behalf of Target of the transactions contemplated herein, except
such as have been obtained under the 1933 Act, the 1934 Act, and the 1940
Act and such as may be required under state securities laws;
6.5.5. Trust is registered with the SEC as an investment company,
and to the knowledge of such counsel no order has been issued or
proceeding instituted to suspend such registration; and
6.5.6. To the knowledge of such counsel (without any independent
inquiry or investigation), (a) no litigation, administrative proceeding,
or investigation of or before any court or governmental body is pending or
threatened as to Trust (with respect to Target) or any of its properties
or assets attributable or allocable to Target and (b) Trust (with respect
to Target) is not a party to or subject to the provisions of any order,
decree, or judgment of any court or governmental body that materially and
adversely affects Target's business, except as set forth in such opinion
or as otherwise disclosed in writing to and accepted by Corporation.
In rendering such opinion, such counsel may (1) rely, as to matters governed by
the laws of the Commonwealth of Massachusetts, on an opinion of competent
Massachusetts counsel, (2) make assumptions regarding the authenticity,
genuineness, and/or conformity of documents and copies thereof without
independent verification thereof, (3) limit such opinion to applicable federal
and state law, and (4) define the word "knowledge" and related terms to mean the
knowledge of attorneys then with such firm who have devoted substantive
attention to matters directly related to this Agreement and the Reorganization.
6.6. Each Investment Company shall have received an opinion of
Kirkpatrick & Lockhart LLP, addressed to and in form and substance satisfactory
to it, as to the federal income tax consequences mentioned below ("Tax
Opinion"). In rendering the Tax Opinion, such counsel may rely as to factual
matters, exclusively and without independent verification, on the
representations made in this Agreement (or in separate letters addressed to such
counsel) and the certificates delivered pursuant to paragraph 3.4. The Tax
Opinion shall be substantially to the effect that, based on the facts and
assumptions stated therein and conditioned on consummation of the Reorganization
in accordance with this Agreement, for federal income tax purposes:
6.6.1. Acquiring Fund's acquisition of the Assets in exchange
solely for Acquiring Fund Shares and Acquiring Fund's assumption of the
Liabilities, followed by Target's distribution of those shares PRO RATA to
the Shareholders constructively in exchange for the Shareholders' Target
Shares, will qualify as a reorganization within the meaning of section
368(a)(1)(C) of the Code, and each Fund will be "a party to a
reorganization" within the meaning of section 368(b) of the Code;
6.6.2. Target will recognize no gain or loss on the transfer to
Acquiring Fund of the Assets in exchange solely for Acquiring Fund Shares
and Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
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6.6.3. Acquiring Fund will recognize no gain or loss on its
receipt of the Assets in exchange solely for Acquiring Fund Shares and its
assumption of the Liabilities;
6.6.4. Acquiring Fund's basis for the Assets will be the same as
the basis thereof in Target's hands immediately before the Reorganization,
and Acquiring Fund's holding period for the Assets will include Target's
holding period therefor;
6.6.5. A Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund
Shares pursuant to the Reorganization; and
6.6.6. A Shareholder's aggregate basis for the Acquiring Fund
Shares to be received by it in the Reorganization will be the same as the
aggregate basis for its Target Shares to be constructively surrendered in
exchange for those Acquiring Fund Shares, and its holding period for those
Acquiring Fund Shares will include its holding period for those Target
Shares, provided they are held as capital assets by the Shareholder at the
Effective Time.
Notwithstanding subparagraphs 6.6.2 and 6.6.4, the Tax Opinion may state that no
opinion is expressed as to the effect of the Reorganization on the Funds or any
Shareholder with respect to any asset as to which any unrealized gain or loss is
required to be recognized for federal income tax purposes at the end of a
taxable year (or on the termination or transfer thereof) under a mark-to-market
system of accounting.
At any time before the Closing, either Investment Company may waive any of
the foregoing conditions (except that set forth in paragraph 6.1) if, in the
judgment of its Board, such waiver will not have a material adverse effect on
its Fund's shareholders' interests.
7. BROKERAGE FEES AND EXPENSES
7.1. Each Investment Company represents and warrants to the other that
there are no brokers or finders entitled to receive any payments in connection
with the transactions provided for herein.
7.2. Except as otherwise provided herein, all the Reorganization Expenses
will be borne by LMFA.
8. ENTIRE AGREEMENT; NO SURVIVAL
Neither party has made any representation, warranty, or covenant not set
forth herein, and this Agreement constitutes the entire agreement between the
parties. The representations, warranties, and covenants contained herein or in
any document delivered pursuant hereto or in connection herewith shall not
survive the Closing.
9. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time at or prior to the Effective
Time, whether before or after approval by Target's shareholders:
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9.1. By either Fund (a) in the event of the other Fund's material breach
of any representation, warranty, or covenant contained herein to be performed at
or prior to the Effective Time, (b) if a condition to its obligations has not
been met and it reasonably appears that such condition will not or cannot be
met, or (c) if the Closing has not occurred on or before December 31, 1999; or
9.2. By the parties' mutual agreement.
In the event of termination under paragraphs 9.1(c) or 9.2, there shall be no
liability for damages on the part of either Fund, or the directors, trustees, or
officers of either Investment Company, to the other Fund.
10. AMENDMENT
This Agreement may be amended, modified, or supplemented at any time,
notwithstanding approval thereof by Target's shareholders, in such manner as may
be mutually agreed upon in writing by the parties; provided that following such
approval no such amendment shall have a material adverse effect on the
Shareholders' interests.
11. MISCELLANEOUS
11.1. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Maryland; provided that, in the case of any
conflict between such laws and the federal securities laws, the latter shall
govern.
11.2. Nothing expressed or implied herein is intended or shall be
construed to confer upon or give any person, firm, trust, or corporation other
than the parties and their respective successors and assigns any rights or
remedies under or by reason of this Agreement.
11.3 The parties acknowledge that Trust is a Business Trust. Notice is
hereby given that this instrument is executed on behalf of Trust's trustees
solely in their capacities as trustees, and not individually, and that Trust's
obligations under this instrument are not binding on or enforceable against any
of its trustees, officers, or shareholders but are only binding on and
enforceable against Targets' assets and property. Acquiring Fund agrees that, in
asserting any rights or claims under this Agreement, it shall look only to
Target's assets and property in settlement of such rights or claims and not to
such trustees or shareholders.
11.4. This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been executed by each Investment Company and
delivered to the other party hereto. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, each party has caused this Agreement to be executed
and delivered by its duly authorized officers as of the day and year first
written above.
ATTEST: BARTLETT CAPITAL TRUST,
on behalf of its series,
Bartlett Value International Fund
/s/ Susan L. Silva By: /s/ Marie K. Karpinski
- ------------------------- -------------------------
Susan L. Silva Marie K. Karpinski
Secretary Vice President
Attest: LEGG MASON GLOBAL TRUST, INC.,
on behalf of its series,
Legg Mason International Equity Trust
/s/ Susan L. Silva By: /s/ Marie K. Karpinski
- ------------------------- -------------------------
Susan L. Silva Marie K. Karpinski
Secretary Vice President
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APPENDIX C
COMPARISON OF INVESTMENT OBJECTIVES AND LIMITATIONS OF
BARTLETT VALUE INTERNATIONAL FUND AND LEGG MASON INTERNATIONAL EQUITY TRUST
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Investment Objective Investment Objective
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<S> <C>
To seek maximum long-term total return To seek capital appreciation
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Seeks to achieve objective by investing Seeks to achieve objective by investing
substantially all the Fund's assets in primarily in foreign equity securities believed
non-U.S. equity securities to be attractively priced relative to their
intrinsic value. Income is a secondary
consideration.
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Types Of Investments Types Of Investments
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Under normal circumstances, Fund invests at Under normal circumstances, Fund invests at
least 65% of its assets in equity securities least 65% of its assets in equity securities of
of issuers located outside of the United non-U.S. issuers
States
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Fund invests substantially all of its assets Fund invests primarily in equity securities of
in non-U.S. equity securities. non-U.S. issuers generally consisting of common
stocks, common stock equivalents and preferred
stocks.
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Fund expects to remain substantially fully No requirement that the Fund invest exclusively
invested in equity securities in foreign equity securities
When cash is temporarily available or for Fund may invest a portion of its assets in
temporary defensive purposes, Fund may invest U.S. government obligations, debt and equity
without limit in cash and obligations of U.S. issuers, and repurchase
U.S. dollar-denominated money market agreements, and may hold a portion of its
instruments, including repurchase agreements assets in cash and U.S. dollar-denominated time
of domestic issuers deposits.
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C-1
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Fund examines securities from over 20 Fund may invest in countries in Europe, the Far
international stock markets, with emphasis on East, Latin America, Asia, Africa, Canada,
several of the largest - Japan, the United Australia, and other geographic regions.
Kingdom, France, Canada, and Germany
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Fund will normally be diversified across a Fund may, from time to time, have more than 25%
broad range of industries and across a number of its total assets invested in any major
of countries industrial or developed country which in the
view of Bartlett poses no unique investment risk
Fund may invest more than 25% of its total
assets in securities of issuers located in a For temporary defensive purposes, Fund may
single country invest substantially all of its assets in one
or two countries
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When cash is temporarily available or for For temporary defensive purposes, Fund may hold
temporary defensive purposes, Fund may invest all or a portion of its assets in money market
without limit in short-term debt instruments, instruments, cash equivalents, short-term
including government, corporate, or money government and corporate obligations or
market securities of domestic issuers repurchase agreements
Such short-term investments will be rated in
one of the four highest rating categories by
S&P or Moody's or, if unrated by S&P or
Moody's, judged to be of comparable quality
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Fund may invest in stock index futures and Fund may engage in option transactions
options and may enter into forward foreign involving equity securities, debt securities,
currency exchange contracts in order to futures contracts, and stock indexes. Fund may
protect against fluctuations in exchange also engage in option transactions involving
rates. foreign currencies and foreign stock indexes.
Fund may enter into futures contracts and Fund may not purchase or sell futures contracts
related options provided not more than 5% of or related contracts or purchase related
its net assets are required as a futures options if, immediately thereafter, more than
contract deposit and/or premium; in addition, one-third of its net assets would be hedged.
the Fund may not enter into futures contracts In addition, the Fund may not enter into
or related options if, as a result, more than transactions involving futures contracts and
20% of the Fund's total assets would be so related options if such transactions would
invested result in more than 5% of the fair market value
of the Fund's assets being deposited as initial
margin for such transaction.
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Fund may not invest more than 15% of its Fund may not invest more than 10% of its assets
assets in illiquid investments in illiquid investments
Fund does not intend to invest more than 5% of
its net assets in restricted securities
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Fund may invest in the securities of other Same policy
investment companies, but it will not own
more than 3% of the total outstanding voting
stock of any investment company, invest more
than 5% of it total assets in any one
investment company, or invest more than 10%
of its total assets in investment companies
in general
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Fund may invest up to 35% of its total assets Fund may invest in securities of issuers based
in emerging market securities in emerging markets
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Fund may not make short sales of securities Fund may employ several investment techniques,
or maintain a short position, except that the including the use of options, hedging programs,
Fund may (a)make short sales and maintain currency transactions, repurchase agreements,
short positions in connection with its use of lending of portfolio securities, short sales
options, futures contracts and options on "against the box" and forward commitment
futures contracts and (b)sell short "against transactions
the box" (the Fund does not intend to make
short sales during the coming year)
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Fundamental Investment Restrictions Fundamental Investment Restrictions
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Borrowing Borrowing
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Fund may not borrow money, except from banks Fund will not borrow money, except (a) from a
or through reverse repurchase agreements or bank, provided that immediately after such
dollar rolls for temporary purposes in an borrowing there is an asset coverage of 300%
aggregate amount not to exceed 33 1/3% of the for all borrowings of the Fund; or (b) from a
total assets (including borrowings) less bank or other persons for temporary purposes
liabilities (exclusive of borrowings), of the only, provided that such temporary borrowings
Fund; provided that borrowings, including are in an amount not exceeding 5% of the Fund's
reverse repurchase agreements and dollar total assets at the time when the borrowing is
rolls, in excess of 5% of such value will be made. Fund will not borrow money in excess of
only from banks one-third of the Fund's total assets at the
time when the borrowing is made.
Fund has a non-fundamental policy that it
will not purchase securities if borrowings, Fund has a non-fundamental policy that it will
including reverse repurchase agreements and not invest in mortgage-related securities and
dollar rolls, exceed 5% of its total assets will limit its borrowings to an amount not
exceeding 5% of the Fund's total assets at the
time when the borrowing is made
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Diversification Diversification
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Fund may not, with respect to 75% of its Fund will not purchase the securities of any
total assets, invest more than 5% of its issuer if such purchase at the time thereof
total assets (taken at market value) in would cause less than 75% of the value of its
securities of any one issuer, or purchase total assets to be invested in cash and cash
more than 10% of the voting securities of any items (including receivables), securities
one issuer (other than, in each case, cash issued by the U.S. government, its agencies or
items, securities of the U.S. Government, its instrumentalities and repurchase agreements
agencies and instrumentalities and securities with respect thereto, securities of other
issued by other investment companies) investment companies, other securities for the
purposes of this calculation limited in respect
of any one issuer to an amount not greater in
value than 5% of the value of the total assets
of the Fund and to not more than 10% of the
outstanding voting securities of such issuer.
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Senior Securities Senior Securities
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Fund may not issue senior securities, except Fund will not issue senior securities. This
as permitted by the 1940 Act limitation is not applicable to activities that
may be deemed to involve the issuance or sale
of a senior security by the Fund, provided that
the Fund's engagement in such activities is
consistent with or permitted by the 1940 Act,
the rules and regulations promulgated
thereunder or interpretations of the SEC or its
staff.
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Underwriting Underwriting
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Fund may not engage in the business of Fund will not act as an underwriter of
underwriting the securities of other issuers securities issued by other persons. This
except insofar as the Fund may be deemed an limitation is not applicable to the extent
underwriter under the Securities Act of 1933, that, in connection with the disposition of
as amended, in disposing of a portfolio portfolio securities (including restricted
security securities), the Fund may be deemed an
underwriter under certain federal securities
laws.
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Real Estate Real Estate
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Fund may not buy or hold any real estate Fund will not purchase, hold or deal in real
other than instruments secured by real estate estate. This limitation is not applicable to
or interests therein investments in securities which are secured by
or represent interest in real estate or to
securities issued by companies including real
estate investment trusts, that invest in real
estate or interests in real estate. This
limitation does not preclude the Fund from
investing in mortgage-related securities.
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Commodities Commodities
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Fund may not purchase or sell any commodities Fund will not purchase, hold or deal in
or commodities contracts, except that the commodities or commodities futures contracts
Fund may purchase or sell currencies; futures except as described in the prospectuses and
contracts on currencies, securities or statement of additional information. This does
securities indexes, options on currencies, not preclude the Fund from investing in futures
securities, and securities indexes; and contracts, put and call options on foreign
options on interest rate and currency futures currencies or forward currency exchange
contracts contracts.
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Loans Loans
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Fund may not make loans, except loans of Fund will not make loans to other persons,
portfolio securities and except to the extent except (a) by loaning portfolio securities,
the purchase of notes, bonds, or other (b)by engaging in repurchase agreements, or
evidences of indebtedness, the entry into (c)by purchasing nonpublicly offered debt
repurchase agreements, or deposits with banks securities. For purposes of this limitation,
and other financial institutions may be the term "loans" shall not include the purchase
considered loans of a portion of an issue of publicly
distributed bonds, debentures or other
securities.
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LEGG MASON INTERNATIONAL BARTLETT VALUE
EQUITY FUND INTERNATIONAL FUND
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Industry Concentration Industry Concentration
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Fund may not purchase any security if, as a Same policy
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. Government,
its agencies or instrumentalities and
repurchase agreements with respect thereto.
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Mortgaging, Pledging or Hypothecating Mortgaging, Pledging or Hypothecating
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No equivalent policy Fund will not mortgage, pledge, hypothecate or
in any manner transfer, as security for
indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings
described above. (Margin deposits, security
interests, liens and collateral arrangements
with respect to transactions involving options,
futures contracts, short sales and other
permitted investments and techniques are not
deemed to be a mortgage, pledge or
hypothecation of assets for purposes of this
limitation.)
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Margin Margin
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Fund may not buy securities on margin, except Fund will not purchase securities or evidences
margin for short-term credits necessary for of interest thereon on "margin". This
clearance of portfolio transactions and limitation is not applicable to short term
except that the Fund may make margin deposits credit obtained by the Fund for the clearance
in connection with the use of permitted of purchases and sales or redemption of
futures contracts and options on futures securities, or to arrangements with respect to
contracts as well as options on currencies, transactions involving options, futures
securities and securities indexes. THIS IS A contracts, short sales and other permitted
NON-FUNDAMENTAL POLICY OF LEGG MASON investments and techniques (including foreign
INTERNATIONAL FUND. currency exchange contracts). THIS IS A
FUNDAMENTAL POLICY OF BARTLETT INTERNATIONAL
FUND.
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C-7
</TABLE>
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APPENDIX D
L e g g M a s o n G l o b a l T r u s t , I n c . :
L e g g M a s o n I n t e r n a t i o n a l E q u i t y T r u s t
CLASS A SHARES PROSPECTUS AUGUST 2, 1999
logo
HOW TO INVEST(SM)
As with all mutual funds, the Securities and Exchange Commission has not passed
upon the adequacy of this prospectus, nor has it approved or disapproved these
securities. It is a criminal offense to state otherwise.
D-1
<PAGE>
T A B L E O F C O N T E N T S
A b o u t t h e f u n d:
xx Investment Objective
xx Principal Risks
xx Performance
xx Fees and Expenses of the Fund
xx Management
A b o u t y o u r i n v e s t m e n t:
xx How to invest
xx How to sell your shares
xx Account policies
xx Services for investors
xx Dividends and taxes
xx Financial highlights
D-2
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
INTERNATIONAL EQUITY TRUST:
Three classes of International Equity Trust shares are offered to the
public: Class A, Primary Class and Navigator Class. The terms and conditions of
Primary Class and Navigator Class shares are discussed in separate prospectuses.
Class A shares, which have been authorized, have not yet been issued.
[icon] I N V E S T M E N T O B J E C T I V E
INVESTMENT OBJECTIVE: maximum long-term total return
PRINCIPAL INVESTMENT STRATEGIES: Batterymarch Financial Management,
Inc., the fund's adviser, currently intends to invest substantially all of the
fund's assets in non-U.S. equity securities.
The primary focus of the adviser is stock selection, with a secondary
focus on country allocation. The adviser uses a bottom-up, quantitative stock
selection process for the developed markets portion of the fund's portfolio. The
cornerstone of this process is a proprietary stock selection model that ranks
the 2,800 stocks in the fund's principal investable universe by relative
attractiveness on a daily basis. The quantitative factors within this model are
intended to measure growth, value, fundamental expectations and technical
indicators (I.E., supply and demand). Because the same quantitative factors are
not effective across all markets due to individual market characteristics, the
adviser adjusts the stock selection model to include factors that its research
indicates are effective, eliminating factors that are not valid in a particular
market. The adviser runs the stock selection model and re-balances the portfolio
daily, purchasing all stocks ranked "buys" by the model and selling all stocks
ranked "sells." Stocks are sold when the original reason for purchase no longer
pertains, the fundamentals have deteriorated or portfolio re-balancing warrants.
Country allocation for the developed markets portion of the fund is
based on rankings generated by the adviser's proprietary country model. The
adviser examines securities from over 20 international stock markets, with
emphasis on several of the largest: Japan, the United Kingdom, France, Canada
and Germany.
The fund may invest up to 35% of its total assets in emerging market
securities. The adviser's investment strategy for the emerging markets portion
of the fund represents a distinctive combination of tested quantitative
methodology and traditional fundamental analysis. The emerging markets
allocation focuses on higher-quality, dominant companies which the adviser
believes to have strong growth prospects and reasonable valuations. Country
allocation for the emerging markets portion of the portfolio also combines
quantitative and fundamental approaches.
The fund's investment portfolio will normally be diversified across a
broad range of industries and across a number of countries, consistent with the
D-3
<PAGE>
objective of maximum total return. The adviser may also seek to enhance
portfolio returns through active currency hedging strategies.
More than 25% of the fund's total assets may be denominated in a single
currency or invested in securities of issuers located in a single country.
When cash is temporarily available, or for temporary defensive
purposes, when the adviser believes such action is warranted by abnormal market
or economic situations, the fund may invest without limit in cash and U.S.
dollar-denominated money market instruments, including repurchase agreements of
domestic issuers. Such securities will be rated investment grade or, if unrated,
will be determined by the fund's adviser to be equivalent to investment grade.
The fund may not achieve its investment objective when so invested.
D-4
<PAGE>
[icon] P R I N C I P A L R I S K S
IN GENERAL
As with all mutual funds, an investment in the fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency; investors can lose money by investing in the fund. There is no assurance
that the fund will meet its investment objective.
MARKET RISK
The fund invests primarily in foreign equity securities. Prices of
equity securities generally fluctuate more than those of other securities. The
fund may experience a substantial or complete loss on an individual stock.
Market risk may affect a single issuer, industry or section of the economy or
may affect the market as a whole.
FOREIGN SECURITIES RISK
Investments in foreign securities (including those denominated in U.S.
dollars) involve certain risks not typically associated with investments in
domestic issuers. The values of foreign securities are subject to economic and
political developments in the countries and regions where the companies operate,
such as changes in economic or monetary policies, and to changes in exchange
rates. Values may also be affected by foreign tax laws and restrictions on
receiving the investment proceeds from a foreign country.
In general, less information is publicly available about foreign
companies than about U.S. companies. Foreign companies are generally not subject
to the same accounting, auditing and financial reporting standards as are U.S.
companies. Some foreign governments have defaulted on principal and interest
payments.
Some securities issued by foreign governments or their subdivisions,
agencies and instrumentalities may not be backed by the full faith and credit of
the foreign government. Even where a security is backed by the full faith and
credit of a foreign government, it may be difficult for the fund to pursue its
rights against a foreign government in that country's courts.
EMERGING MARKETS RISK
The risks of foreign investment are greater for investments in emerging
markets. Emerging market countries typically have economic and political systems
that are less fully developed, and can be expected to be less stable than those
of more advanced countries. Low trading volumes may result in a lack of
liquidity and in price volatility. Emerging market countries may have policies
that restrict investment by foreigners, or that prevent foreign investors from
withdrawing their money at will.
Because the fund may invest up to 35% of its total assets in emerging
market securities, investors should be able to tolerate sudden, sometimes
D-5
<PAGE>
substantial fluctuations in the value of their investments. An investment in any
fund that invests in emerging market securities should be considered
speculative.
CURRENCY RISK
Because the fund invests significantly in securities denominated in
foreign currencies, its value can be affected by changes in the rates of
exchange between those currencies and the U.S. dollar. Currency exchange rates
can be volatile and affected by, among other factors, the general economics of a
country, the actions of the U.S and foreign governments or central banks, the
imposition of currency controls, and speculation. A security may be denominated
in a currency that is different from the currency where the issuer is domiciled.
The fund may from time to time hedge a portion of its currency risk, using
currency futures, forwards, or options. However, these instruments may not
always work as intended, and in specific cases the fund may be worse off than if
it had not used a hedging instrument. For most emerging market currencies, there
are not suitable hedging instruments available.
On January 1, 1999, the conversion of European currencies into the Euro
began and is expected to continue into 2002. Full implementation of the Euro may
be delayed and difficulties with the conversion may significantly impact
European capital markets resulting in increased volatility in world capital
markets. Individual issuers may suffer substantial losses if they or their
suppliers are not adequately prepared for the transition.
CONCENTRATION AND NON-DIVERSIFICATION
A fund concentrating a significant portion of its investments in a
single country, currency or industry will be more susceptible to factors
adversely affecting issuers within that country, currency or industry than would
a less concentrated portfolio of securities.
INVESTMENT MODELS
The proprietary models used by the adviser to evaluate securities or
securities markets are based on the adviser's understanding of the interplay of
market factors and do not assure successful investment. The markets, or the
prices of individual securities, may be affected by factors not foreseen in
developing the models.
YEAR 2000
Like other mutual funds (and most organizations around the world), the
fund could be adversely affected by computer problems related to the year 2000.
These could interfere with operations of the fund, its adviser, or its
distributor, and could impact companies in which the fund invests. The year 2000
poses an even greater risk for foreign securities.
While no one knows if these problems will have any impact on the fund
or on financial markets in general, the manager and its affiliates are taking
steps to protect fund investors. These include efforts to determine that the
problem will not directly affect the systems used by major service providers.
D-6
<PAGE>
Whether these steps will be effective can only be known for certain in
the year 2000.
D-7
<PAGE>
[icon] P E R F O R M A N C E
The fund has three authorized classes of shares: Class A shares,
Primary Class shares, and Navigator Class shares. Class A shares, which have
been authorized, have not yet been issued. The information provided below is for
Primary Class shares, which is the class with the longest history. Each class is
subject to different expenses and a different sales charge structure. Primary
Class and Navigator Class shares are offered through separate prospectuses.
Navigator Class shares are available only to certain investors. The information
below provides an indication of the risks of investing in the fund by showing
changes in the fund's performance from year to year.1 Annual returns assume
reinvestment of dividends and distributions. Historical performance of a fund
does not necessarily indicate what will happen in the future.
INTERNATIONAL EQUITY TRUST - PRIMARY CLASS SHARES
YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)
20% 16.49
15%
10% 8.49
5% 1.76
0%
1996 1997 1998
DURING THE LAST THREE CALENDAR YEARS ENDING DECEMBER 31, 1998:
- ---------------------------------------------------------------------------
Quarter Ended Total Return
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Best quarter: March 31, 1998 +15.70%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Worst quarter: September 30, 1998 -20.06%
- ---------------------------------------------------------------------------
In the following table, average annual total returns as of December 31, 1998 are
compared with the Morgan Stanley Capital International Europe, Australia and the
Far East (EAFE) Index, which is an unmanaged index of common stocks of foreign
companies.
- -------------------------
1 The performance figures listed in the bar chart and tables are for Primary
Class shares of the fund, which are offered separately in another prospectus.
Annual performance figures for Class A shares of the fund would have been
substantially similar because Class A and Primary Class shares invest in the
same portfolio of securities. Such performance figures differ only to the extent
that Class A and Primary Class shares are not subject to the same expenses.
D-8
<PAGE>
- ---------------------------------------------------------------------------
1 YEAR LIFE OF CLASS
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
International Equity Trust +8.49% +8.88%(a)
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
MSCI EAFE Index +20.00% +11.18%(b)
- ---------------------------------------------------------------------------
These figures include changes in principal value, reinvested dividends and
capital gain distributions, if any.
(a) February 17, 1995 (commencement of operations) to December 31, 1998.
(b) February 28, 1995 to December 31, 1998.
D-9
<PAGE>
[icon] F E E S A N D E X P E N S E S O F T H E F U N D
The table below describes the fees and expenses you will incur directly or
indirectly as an investor in the fund. The fund pays operating expenses directly
out of its assets so they lower the fund's share price and reduce its dividends.
Other expenses include transfer agency, custody, professional and registration
fees. Shares of the fund are subject to an initial sales charge and a 12b-1 fee.
Certain shares of the fund are subject to a 1% contingent deferred sales charge
("CDSC") if redeemed within one year after purchase.
The fees shown are current fees, and the expenses shown are based on
expenses for the fiscal year ended December 31, 1998. The fees and expenses are
calculated as a percentage of average net assets.
CLASS A SHARES - INTERNATIONAL EQUITY TRUST
SHAREHOLDER FEES
(fees paid directly from your investment)
-----------------------------------------------------------------------
Maximum sales charge on purchases (as a % of offering 4.75%
price) (a)
Maximum deferred sales charge (as a % of net asset None
value) (b)
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ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
-----------------------------------------------------------------------
Management fees (c) 0.75%
Distribution and/or Service (12b-1) fees 0.25%
Other expenses 0.26%
Total Annual Fund Operating Expenses (c) 1.26%
- -----------------------------------
(a) Sales charge waivers and reduced sales charge purchase plans are available
for Class A shares of the fund. See "How to Invest."
(b) A CDSC of 1% of the net asset value of Class A shares of the fund will be
imposed on redemptions of shares purchased pursuant to the front-end sales
charge waiver for purchases of $1 million or more of Class A shares of the fund
made within 1 year of the purchase date. See "How to Invest."
(c) Legg Mason Fund Adviser, Inc., as investment adviser, has voluntarily agreed
to waive its fees so that expenses of Class A shares of the fund (exclusive of
taxes, interest, brokerage, and extraordinary expenses) do not exceed 1.50% of
the fund's average daily net assets attributable to that class. This voluntary
waiver may be terminated at any time. With this waiver, management fees and
total annual fund operating expenses would have been 0.75% and 1.26%,
respectively.
D-10
<PAGE>
EXAMPLE:
This example helps you compare the cost of investing in Class A shares
of the fund with the cost of investing in other mutual funds. Although your
actual costs may be higher or lower, you would pay the following expenses on a
$10,000 investment in Class A shares of the fund, assuming (1) a 5% return each
year, (2) the fund's operating expenses remain the same as shown in the table
above, and (3) you redeem all of your shares at the end of the time periods
shown. Actual returns may be higher or lower than 5% per year.
-------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------------
-------------------------------------------------------------------------
International Equity
Trust $597 $856 $1,134 $1,925
Class A Shares
-------------------------------------------------------------------------
D-11
<PAGE>
[icon] M A N A G E M E N T
Management and Adviser:
Legg Mason Fund Advisor, Inc. ("the Manager"), 100 Light Street,
Baltimore, Maryland 21202, is the fund's manager. The Manager is responsible for
investment management and administrative services and for overseeing the fund's
relationships with outside service providers, such as the custodian, transfer
agent, accountants, and lawyers.
For its services during the fiscal year ended December 31, 1998, the
fund paid the Manager 0.75% of its average daily net assets.
The Manager acts as manager or adviser to investment companies with
aggregate assets of $18.1 billion as of March 31, 1999.
Batterymarch Financial Management, Inc. ("Batterymarch"), 200 Clarendon
Street, Boston, Massachusetts 02116, is investment adviser to the fund.
Batterymarch is responsible for the actual investment management of the fund,
which includes making investment decisions and placing orders to buy or sell a
particular security.
The Manager pays Batterymarch a monthly fee of 66 2/3% of the fee it
receives from the fund. Fees paid to Batterymarch are net of any waivers.
Batterymarch acts as investment adviser to institutional accounts, such
as corporate pension plans, mutual funds and endowment funds, as well as to
individual investors. Total assets under management by Batterymarch were
approximately $4.5 billion, as of March 31, 1999.
Portfolio management:
A Batterymarch investment team has been responsible for the day-to-day
management of International Equity Trust since its inception.
Distributor of the fund's shares:
Legg Mason Wood Walker, Inc. ("Legg Mason"), 100 Light Street,
Baltimore, Maryland 21202, is the distributor of the fund's shares. The fund has
adopted a service plan pertaining to Class A shares ("Class A Plan"), which
allows the fund to pay a shareholder service fee for services provided to Class
A shareholders. Under the Class A Plan, the fund may pay Legg Mason an annual
service fee equal to 0.25% of its average daily net assets attributable to Class
A shares. Because this fee is paid out of the fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
Legg Mason may enter into agreements with other brokers to sell Class A
shares of the fund, under which it may pay such brokers up to 90% of the service
fee that it receives from the fund for sales of Class A fund shares.
D-12
<PAGE>
The Manager, Batterymarch, and Legg Mason are each wholly-owned
subsidiaries of Legg Mason, Inc., a financial services holding company.
D-13
<PAGE>
[icon] H O W T O I N V E S T
To open a regular account or a retirement account with the fund,
contact a Legg Mason financial advisor or other entity that has entered into an
agreement with the fund's distributor to sell shares of the Legg Mason family of
funds. A Legg Mason financial advisor will explain the shareholder services
available from the fund and answer any questions you may have. The minimum
initial investment for regular accounts and retirement accounts is $1,000 and
the minimum for each purchase of additional shares is $100, except as noted
below.
Retirement accounts include traditional IRAs, spousal IRAs, education
IRAs, Roth IRAs, simplified employee pension plans, savings incentive match
plans for employees and other qualified retirement plans. For more information
on investing in Class A shares of the fund through tax-deferred retirement
plans, please see Appendix A to this Prospectus. Also, you should contact your
Legg Mason financial advisor or other entity offering shares of the fund to
discuss which one might be appropriate for you.
SHARE PURCHASE SCHEDULE:
The offering price of fund shares is equal to the net asset value per
share plus a front-end sales charge determined from the following schedule
(which may be amended from time to time):
------------------------------------------------------------------------------
DEALER
SALES CHARGE AS SALES CHARGE AS REALLOWANCE AS A
A PERCENTAGE OF A PERCENTAGE OF PERCENTAGE OF
AMOUNT OF PURCHASE PURCHASE PRICE NET INVESTMENT OFFERING PRICE
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Less than $25,000 4.75% 4.99% 4.00%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$25,000 to $49,999 4.50% 4.71% 3.75%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$50,000 to $99,999 4.00% 4.17% 3.25%
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$100,000 to 3.50% 3.63% 2.75%
$249,999
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$250,000 to 2.50% 2.56% 2.00%
$499,999
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$500,000 to 2.00% 2.04% 1.60%
$999,999
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$1 million or more* 0.00% 0.00% 1.00%**
------------------------------------------------------------------------------
* A CDSC of 1% of the shares' net asset value at the time of purchase or sale,
whichever is less, may be charged on redemptions of shares purchased pursuant to
the front-end sales charge waiver for purchases of $1 million or more made
within 1 year of the purchase date. See "How to Sell Your Shares" for a
discussion of any applicable CDSC on Class A shares.
** Legg Mason will pay the following commissions to brokers that initiate and
are responsible for purchases of shares of the fund by any single purchaser of
$2 million or more in the aggregate: 0.80% up to $2,999,999, plus 0.50% of the
D-14
<PAGE>
excess over $3 million up to $20 million, plus 0.25% of the excess over $20
million.
SALES CHARGE WAIVERS:
Purchases of shares of the fund made by the following investors will not be
subject to a sales charge:
o advisory clients (and related accounts) of the Manager or Batterymarch
o certain employee benefit or retirement accounts (subject to the discretion of
the Manager);
o officers and directors of Legg Mason Global Trust, Inc.;
o employees of Legg Mason, Inc. and its affiliates;
o registered representatives or full-time employees of broker/dealers that
have dealer agreements with Legg Mason;
o the children, siblings and parents of such persons;
o broker/dealers, registered investment advisers, financial institutions or
financial planners for the accounts of clients participating in "wrap fee"
advisory programs that adhere to certain standards and that are subject to
agreements between those entities and Legg Mason;
o purchases of $1,000,000 or more (purchases of Class A shares in two or more
Legg Mason funds may be combined for this purpose).
Investors may be eligible for a reduced sales charge on purchases of fund shares
through a Right of Accumulation or under a Letter of Intent.
RIGHT OF ACCUMULATION:
To receive the Right of Accumulation, investors must give Legg Mason or their
broker/dealer sufficient information to permit qualification. If qualified,
investors may purchase Class A shares of the fund at the sales charge applicable
to the total of:
o the dollar amount being purchased plus
o the dollar amount of the investors' concurrent purchases of Class A shares of
other Legg Mason funds plus
o the price of all Class A shares of the fund already held by the investor.
LETTER OF INTENT:
Investors may execute a Letter of Intent indicating an aggregate amount to be
invested in fund shares in the following thirteen months. All purchases made
during that period will be subject to the sales charge applicable to that
aggregate amount.
If a Letter of Intent is executed within 90 days of a prior purchase of fund
shares, the prior purchase may be included under the Letter of Intent and an
adjustment will be made to the applicable sales charge. The adjustment will be
based on the current net asset value of fund. If the total amount of purchases
does not equal the aggregate amount covered by the Letter of Intent after the
thirteenth month, you will be required to pay the difference between the sales
charges paid at the reduced rate and the sales charge applicable to the
purchases actually made.
D-15
<PAGE>
Shares having a value equal to 5% of the amount specified in the Letter of
Intent will be held in escrow during the thirteen month period (while remaining
registered your name) and will be subject to redemption to assure any necessary
payment to Legg Mason of a higher applicable sales charge.
ONCE YOUR ACCOUNT IS OPEN, YOU MAY USE THE FOLLOWING METHODS TO ADD TO YOUR
ACCOUNT:
- --------------------------------------------------------------------------------
IN PERSON Give your financial advisor a check for $100 or more
payable to the fund.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MAIL Mail your check, payable to the fund, for $100 or
more to your financial advisor.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TELEPHONE OR WIRE Call your financial advisor to transfer available
cash balances in your brokerage account or to
transfer money from your bank directly to Legg
Mason. Wire transfers may be subject to a service
charge by your bank.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FUTURE FIRST Contact your Legg Mason financial advisor to enroll
SYSTEMATIC in Legg Mason's Future First Systematic Investment
INVESTMENT PLAN Plan. Under this plan, you may arrange for automatic
monthly investments in the fund of $50 or more. The
fund's transfer agent will transfer funds monthly from
your Legg Mason account or from your checking account
to purchase shares of the fund.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AUTOMATIC Arrangements may be made with some and
financial INVESTMENTS and financial institutions for
regular automatic monthly investments of $50 or more
in shares of the fund. You may also reinvest dividends
from certain unit investment trusts in shares of the
fund.
- --------------------------------------------------------------------------------
Call your financial advisor or another entity offering the fund for
sale with any questions regarding the investment options above. Certain
investment methods may be subject to lower minimum initial and additional
investments.
Investments made through entities other than Legg Mason may be subject
to transaction fees or other purchase conditions established by those entities.
Any such fees will be in addition to any sales charges payable on purchases of
fund shares. You should consult their program literature for further
information.
Purchase orders received by your financial advisor or the entity
offering the funds before the close of the New York Stock Exchange (normally
4:00 p.m., Eastern time) will be processed at the fund's net asset value, plus
any applicable sales charge, as of the close of the exchange on that day. Orders
received after the close of the exchange will be processed at the fund's net
asset value as of the close of the exchange on the next day the exchange is
open. Payment must be made within three business days to Legg Mason.
D-16
<PAGE>
[icon] H O W T O S E L L Y O U R S H A R E S
Redemptions made through entities other than Legg Mason may be subject to
transaction fees or other conditions imposed by those entities. You should
consult their program literature for further information.
Any of the following methods may be used to sell your shares:
- -------------------------------------------------------------------------------
TELEPHONE Call your Legg Mason financial advisor or entity offering the
fund and request a redemption. Please have the following
information ready when you call: the name of the fund, the
number of shares (or dollar amount) to be redeemed and your
shareholder account number.
Proceeds will be credited to your brokerage account or a
check will be sent to you, at your direction, at no charge to
you. Wire requests will be subject to a fee of $18. Be sure
that your financial advisor has your bank account information
on file.
The funds will follow reasonable procedures to ensure the
validity of any telephone redemption request, such as
requesting identifying information from callers or employing
identification numbers. Unless you specify that you do not
wish to have telephone redemption privileges, you may be held
responsible for any fraudulent telephone order.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MAIL Send a letter to the fund requesting redemption of
your shares. The letter should be signed by all of
the owners of the account and their signatures
guaranteed without qualification. You may obtain a
signature guarantee from most banks or securities
dealers.
- -------------------------------------------------------------------------------
Your order will be processed promptly and you will generally receive the
proceeds within a week. Fund shares will be sold at the next net asset value
calculated after your redemption request is received by your Legg Mason
financial advisor or another entity (plus any applicable CDSC).
Redemptions of shares that were recently purchased by check or acquired
through reinvestment of dividends on such shares may be delayed for up to 10
days from the purchase date in order to allow for the check to clear. Additional
documentation may be required from corporations, executors, partnerships,
administrators, trustees or custodians.
D-17
<PAGE>
CDSC APPLICABLE TO CERTAIN FUND SHARES:
If you redeem fund shares within one year that were purchased without a
sales charge because the purchase totaled $1 million or more, you will be
subject to a CDSC of 1% of the lower of the original purchase price or the net
asset value of such shares at the time of redemption. You may exchange such
shares purchased without a sales charge for Class A shares of another Legg Mason
fund without being charged a CDSC. You will be subject to a CDSC if you redeem
shares acquired through an exchange.
Fund shares that are redeemed will not be subject to the CDSC to the
extent that the value of such shares represents: (1) reinvestment of dividends
or other distributions or (2) shares redeemed more than 1 year after their
purchase. The amount of any CDSC will be paid to Legg Mason.
D-18
<PAGE>
[icon] A C C O U N T P O L I C I E S
CALCULATION OF NET ASSET VALUE:
Net asset value per share is determined daily as of the close of the
New York Stock Exchange, on every day that the exchange is open. To calculate
the fund's share price, its assets attributable to each class are valued and
totaled, liabilities are subtracted, and the resulting net assets are divided by
the number of shares of that class outstanding. The fund's 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 fund's
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.
OTHER:
Fund shares may not be held in, or transferred to, an account with any
firm that does not have an agreement with Legg Mason or its affiliates.
If your account falls below $500, the fund may ask you to increase your
balance. If, after 60 days, your account is still below $500, the fund may close
your account and send you the proceeds.
The fund reserves the right to:
o reject any order for shares or suspend the offering of shares for a
period of time;
o change its minimum investment amounts; or
o delay sending out redemption proceeds for up to seven days. This
generally applies only in cases of very large redemptions, excessive
trading or during unusual market conditions. The fund may delay
redemptions beyond seven days, or suspend redemptions, only as
permitted by the SEC.
D-19
<PAGE>
[icon] S E R V I C E S F O R I N V E S T O R S
For further information regarding any of the services below, please
contact your financial advisor or other entity offering the fund for sale.
CONFIRMATIONS AND ACCOUNT STATEMENTS:
You will receive from Legg Mason a confirmation after each transaction
involving fund shares (except a reinvestment of dividends, capital gain
distributions and purchases made through the Future First Systematic Investment
Plan or through automatic investments). Legg Mason or the entity through which
you invest will send you account statements monthly unless there has been no
activity in the account, in which case a statement will be sent quarterly. Legg
Mason will send you statements quarterly if you participate in the Future First
Systematic Investment Plan or if you purchase fund shares through automatic
investments.
FUTURE FIRST SYSTEMATIC INVESTMENT PLAN
If you invest in Class A shares of the Fund, you may buy additional
Class A shares through the Future First Systematic Investment Plan. Under this
plan, you may arrange for automatic monthly investments in Class A shares of $50
or more by authorizing Boston Financial Data Services, the fund's transfer
agent, to transfer funds to be used to buy those shares at the per share net
asset value determined on the day the funds are sent by your bank. You will
receive a quarterly account statement. 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.
SYSTEMATIC WITHDRAWAL PLAN:
If you are purchasing or already own Class A shares of the fund with a
net asset value of $5,000 or more, you may elect to make systematic withdrawals
from the fund. The minimum amount for each withdrawal is $50. The amounts paid
to you each month are obtained by redeeming sufficient Class A shares from your
account to provide the withdrawal amount that you have specified. The Systematic
Withdrawal Plan is not currently available for shares held in an Individual
Retirement Account ("IRA"), Simplified Employee Pension Plan ("SEP"), Savings
Incentive Match Plan for Employees ("SIMPLE") or other qualified retirement
plan. You may change the monthly amount to be paid to you without charge not
more than once a year by notifying Legg Mason or the affiliate with which you
have an account. Redemptions will be made at the shares' net asset value
determined as of the close of regular trading of the Exchange on the first day
of each month. If the Exchange is not open for business on that day, the shares
will be redeemed at the net asset value determined as of the close of regular
trading of the Exchange on the preceding business day. The check for the
withdrawal payment will usually be mailed to you on the next business day
following redemption. If you elect to participate in the Systematic Withdrawal
Plan, dividends and other distributions on all shares in your account must be
automatically reinvested in the applicable class of shares. You may terminate
the Systematic Withdrawal Plan at any time without charge or penalty. The fund,
its transfer agent, and Legg Mason also reserve the right to modify or terminate
the Systematic Withdrawal Plan at any time.
D-20
<PAGE>
Withdrawal payments are treated as a sale of shares rather than as a
dividend or other distribution. These payments are taxable to the extent that
the total amount of the payments exceeds the tax basis of the shares sold. If
the periodic withdrawals exceed reinvested dividends and other distributions,
the amount of your original investment may be correspondingly reduced.
Ordinarily, you should not purchase additional shares of the fund in
which you have an account if you maintain a Systematic Withdrawal Plan because
you may incur tax liabilities in connection with such purchases and withdrawals.
The fund will not knowingly accept purchase orders from you for additional
shares if you maintain a Systematic Withdrawal Plan unless your purchase is
equal to at least one year's scheduled withdrawals. In addition, if you maintain
a Systematic Withdrawal Plan you may not make periodic investments under the
Future First Systematic Investment Plan.
EXCHANGE PRIVILEGE:
Shares of the fund may be exchanged for Class A shares in any other
Legg Mason fund that offers Class A shares, provided the fund being exchanged
into is eligible for sale in your state of residence. You can request an
exchange in writing or by phone. Be sure to read the current prospectus for any
fund into which you are exchanging.
There is currently no fee for exchanges; however, you may be subject to
a sales charge when exchanging into a fund that has one. In addition, an
exchange of the fund's shares will be treated as a sale of the shares and any
gain on the transaction may be subject to tax.
The fund reserves the right to:
o terminate or limit the exchange privilege of any shareholder who
makes more than four exchanges from the fund in one calendar year;
o terminate or modify the exchange privilege after 60 days' notice to
shareholders.
REINSTATEMENT PRIVILEGE:
If you have redeemed your Class A fund shares, you may reinstate your
fund account without a sales charge up to the dollar amount redeemed by
purchasing Class A fund shares within 90 days of redemption. Within 90 days of
redemption, contact Legg Mason or your broker/dealer and notify them of you
desire to reinstate and give them an order for the amount to be purchased. The
reinstatement will be made at the net asset value next determined after the
notification and purchase order have been received by the transfer agent.
D-21
<PAGE>
[icon] D I S T R I B U T I O N S A N D T A X E S
The Fund declares and pays dividends annually. 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. A
second distribution of net capital gain may be necessary in some years to avoid
imposition of a federal excise tax.
Your dividends and distributions will be automatically reinvested in
additional Class A shares of the fund. If you wish to receive dividends and/or
distributions in cash, you must notify the fund at least 10 days before the next
dividend and/or distribution is to be paid.
If the postal or other delivery service is unable to deliver your
check, your distribution option will automatically be converted to having all
dividends and distributions reinvested in fund shares. No interest will accrue
on amounts represented by uncashed distribution or redemption checks.
Fund dividends and other distributions are taxable to investors (other
than retirement plans and other tax-exempt investors) whether received in cash
or reinvested in additional shares of the fund. Dividends of net investment
income and any net short-term capital gains will be taxable as ordinary income.
Distributions of the fund's net capital gain will be taxable as long-term
capital gain, regardless of how long you have held your fund shares.
The sale or exchange of fund shares may result in a taxable gain or
loss, depending on whether the proceeds are more or less than the cost of your
shares.
The fund's dividend and interest income, and gains realized from the
disposition of foreign securities, may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions.
A tax statement is sent to you at the end of each year detailing the
tax status of your distributions.
The fund will withhold 31% of all dividends, capital gain distributions
and redemption proceeds payable to individuals and certain other non-corporate
shareholders who do not provide the fund with a valid taxpayer identification
number. The fund will also withhold 31% of all dividends and capital gain
distributions payable to such shareholders who are otherwise subject to backup
withholding.
Because each investor's tax situation is different, please consult your
tax advisor about federal, state and local tax considerations.
D-22
<PAGE>
[icon] F I N A N C I A L H I G H L I G H T S
The financial highlights table is intended to help you understand the fund's
financial performance since inception. As stated above, the fund has three
authorized classes of shares: Class A shares, Primary Class shares, and
Navigator Class shares. Class A shares, which have been authorized, have not yet
been issued. The information provided below is for Primary Class shares, which
is the class with the longest history. Total return represents the rate that an
investor would have earned (or lost) on an investment in the fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by the fund's independent accountants, PricewaterhouseCoopers LLP, whose
report, along with the fund's financial statements, is incorporated by reference
into the Statement of Additional Information (see back cover) and is included in
the annual report. The annual report is available upon request by calling
toll-free 1-800-822-5544.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY TRUST - PRIMARY CLASS SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Operations Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For the Net Net Net Realized Total From From Net From Net In excess of Total Net
Years Asset Invest- & Unrealized Investment Investment Realized Net Realized Distri Asset
Ended Value, ment Gain Operations Income Gain on Gain on butions Value,
Dec. 31, Beginning Income on Investments Investments Investments End of
of Year Options, Futures Year
Foreign Currency
Transactions
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $11.78 $.01 $0.99 $1.00 $(0.14) -- -- $(0.14) $12.64
- ------------------------------------------------------------------------------------------------------------------------------------
1997 12.09 .02 0.19 0.21 (0.08) $(0.44) -- (0.52) 11.78
- ------------------------------------------------------------------------------------------------------------------------------------
1996 10.70 1.74 1.76 (0.05) (0.32) -- (0.37) 12.09
.02(b)
- ------------------------------------------------------------------------------------------------------------------------------------
1995(a) 10.00 0.77 0.81 (0.04) -- $(0.07) (0.11) 10.70
.04(b)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------
Ratios/Supplemental Data
----------------------------------------------------------------
Expenses to Net Net Assets,
Total Average Net Investment Portfolio End of Year
Return Assets Income to Turnover (thousands)
Average Net Rate
Assets
----------------------------------------------------------------
------------------------------------------------------------------------
1998 8.49% 2.14% 0.06% 72% $258,521
------------------------------------------------------------------------
---------------------------------------------------------------
1997 1.76% 2.17% 0.17% 59% 227,655
------------------------------------------------------------------------
------------------------------------------------------------------------
1996 16.49% 2.25%(b) 0.21%(b) 83% 167,926
------------------------------------------------------------------------
------------------------------------------------------------------------
1995(a) 58%(c) 65,947
8.11%(d) 2.25%(b),(c) 0.52%(b),(c)
------------------------------------------------------------------------
A February 17, 1995 (commencement of operations) to December 31, 1995.
D-23
<PAGE>
B Net of fees waived by the Manager for expenses in excess of a voluntary
expense limitation of 2.25% of average daily net assets. If no fees had
been waived by the Manager, the annualized ratio of expenses to average
daily net assets would have been: 1996, 2.32% and 1995, 2.91%.
C Annualized.
D Not annualized.
D-24
<PAGE>
APPENDIX A: INVESTING THROUGH
TAX-DEFERRED RETIREMENT PLANS
Investors may invest in Class A shares of the fund through IRAs, SEPs,
SIMPLEs and other qualified retirement plans. In general, income earned through
the investment of assets of qualified retirement accounts and plans is not taxed
to the beneficiaries thereof until the income is distributed to them. Investors
who are considering establishing such a plan should consult their attorneys or
other tax advisors with respect to individual tax questions. Please contact your
Financial Advisor or other entity offering the fund for further information with
respect to these plans.
INDIVIDUAL RETIREMENT ACCOUNTS - IRAs
TRADITIONAL IRA. Certain investors may obtain tax advantages by
establishing an IRA. Specifically, except as noted below, 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 in
such a plan and your adjusted gross income does not exceed a certain level, then
each of 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.
However, a married investor who is not an active participant in such a plan and
files a joint income tax return with his or her spouse (and their combined
adjusted gross income does not exceed $150,000) is not affected by the spouse's
active participant status. 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 $4,000 to the two IRAs, provided that the
contribution to either does not exceed $2,000. If your employer's plan qualifies
as a SIMPLE, permits voluntary contributions and meets certain 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 Class A shares of the fund
through non-deductible IRA contributions, up to certain limits, because all
dividends and other distributions on your Class A shares 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 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.
ROTH IRA. A shareholder whose adjusted gross income (or combined
adjusted gross income with his or her spouse) does not exceed certain levels may
establish and contribute up to $2,000 per tax year to a Roth IRA. In addition,
for a shareholder whose adjusted gross income does not exceed $100,000 (or is
not married filing a separate return), certain distributions from traditional
IRAs may be rolled over to a Roth IRA and any of the shareholder's traditional
IRAs may be converted to a Roth IRA; these rollover distributions and
conversions are, however, subject to federal income tax.
D-25
<PAGE>
Contributions to a Roth IRA are not deductible; however, earnings
accumulate tax-free in a Roth IRA, and withdrawals of earnings are not subject
to federal income tax if the account has been held for at least five years (or
in the case of earnings attributable to rollover contributions from or
conversions of a traditional IRA, the rollover or conversion occurred more than
five years before the withdrawal) and the account holder has reached age 59 1/2
(or certain other conditions apply).
EDUCATION IRA. Although not technically for retirement savings,
Education IRAs provide a vehicle for saving for a child's higher education. An
Education IRA may be established for the benefit of any minor, and any person
whose adjusted gross income does not exceed certain levels may contribute to an
Education IRA, provided that no more than $500 may be contributed for any year
to Education IRAs for the same beneficiary. Contributions are not deductible and
may not be made after the beneficiary reaches age 18; however, earnings
accumulate tax-free, and withdrawals are not subject to tax if used to pay the
qualified higher education expenses of the beneficiary (or transferred to an
Education IRA of a qualified family member).
D-26
<PAGE>
L e g g M a s o n G l o b a l T r u s t , I n c .
The following additional information about the fund is available upon request
and without charge:
STATEMENT OF ADDITIONAL INFORMATION (SAI) - the SAI is filed with the Securities
and Exchange Commission (SEC) and is incorporated by reference into (is
considered part of) the prospectus. The SAI provides additional details about
the fund and its policies.
ANNUAL AND SEMIANNUAL REPORTS - additional information about the fund's
investments is available in its annual and semiannual reports to shareholders.
These reports provide detailed information about the fund's portfolio holdings
and operating results.
To request the SAI or any reports to shareholders, or to obtain more
information:
o call toll-free 1-800-822-5544;
o visit us on the Internet via http://www.leggmason.com
o write to us at: Legg Mason Wood Walker, Incorporated 100 Light
Street, P.O. Box 1476 Baltimore, Maryland 21203-1476
Information about the fund, including the SAI, can be reviewed and copied at the
SEC's public reference room in Washington, D.C. (phone 1-800-SEC-0330). Reports
and other information about the fund are available on the SEC's Internet site at
http://www.sec.gov. Investors may also write to: SEC, Public Reference Section,
Washington, D.C. 20549-6009. A fee will be charged for making copies.
LMF-___ SEC file number 811-07418.
D-27
<PAGE>
APPENDIX E
PORTFOLIO MANAGERS' COMMENTS
INTERNATIONAL EQUITY TRUST
Performance ahead of the MSCI EAFE index for the first half of 1998, the Legg
Mason International Equity Trust lost ground in the second half due to stock
selection in Europe and an underweighted position in Japan relative to the
index. International markets saw increased volatility as investors responded
emotionally to short-term shocks rather than long-term fundamentals. This was
evident as our short-term measures, earnings expectations and technical factors
worked well while the longer-term measures, earnings growth and traditional
value, did not. In the third quarter, global investors were shaken by the Asian
crisis, near-meltdown in Russia, risks in global financial institutions and
fears of contagion into Latin America, and staged an emotional retreat into
defensive issues such as utilities and pharmaceuticals. Throughout Europe,
investors favored large-cap stocks regardless of value, a frenzy termed
"europhoria" in the press. Our stock selection process, oriented toward
long-term measures of value and growth, favored European financials and
cyclicals for the Fund. Investor confidence recovered in the fourth quarter. The
Japanese market rallied dramatically following the unexpected interest rate cut
in the US in mid-October, triggering a fall in the dollar. (The Japanese market
was up 26.9% in dollars and 5.2% in local currency for the fourth quarter.) The
strong yen hurt Japanese export companies and sparked a rally in financials. The
Fund's underweight in Japan hurt performance for the quarter (although the
underweight helped performance for the year as Japan underperformed the MSCI
EAFE Index for1998). The Fund ended the year 1998 with a return of 8.5%,
trailing the MSCI EAFE index return of 20.0%. This was a difficult year for many
managers; according to Lipper Analytical Services, Inc. the average
International fund underperformed the MSCI EAFE index for 1998. Over the
longer-term, the Fund's performance is in line with the MSCI EAFE index. The
Fund's average annual total return for the three years ended December31, 1998,
was 8.8% compared with 9.0% for the MSCI EAFE index.
MARKET OVERVIEW
The outlook for Europe is positive. The investment implications of the euro
should be twofold: 1) higher fund flows into the large capitalization
Pan-European stocks as investors restructure their portfolios from a national to
a regional focus; and 2) a gradual change in analyst coverage from countries to
sectors. Corporate restructuring continues as EMU forces European corporations
to become more competitive. This will eventually lead to higher returns to
equity holders as Europe moves away from a government-protected environment. In
the fourth quarter, the pace of high-profile mergers accelerated. Lower interest
rates and pension requirements have led to increased investment in equities. As
E-1
<PAGE>
the combination of lower inflation and monetary convergence forced down interest
rates in European countries, investors have been faced with "sticker shock" in
rolling over their interest-bearing instruments and have moved into equities.
Moreover, the combination of aging demographics and the continued inadequacies
of state-sponsored pension systems are forcing Europeans to save more and put
savings into equities. In Japan, the stock market has shown recent significant
positive returns in dollars. This may signal a recovery in this market, but
there are still many barriers to significant improvements. The positives for
Japan begin with the recent Government stimuli: public funds to support banks
and tax cuts may have halted the downward trend of GDP, encouraged consumer
spending and increased confidence in banking. Growth expectations for the next
two years have improved and earnings revisions show signs of reaching bottom.
The negatives: the recent emergency package is not enough to turn around bank
company failures and it supports some companies that would naturally fail. The
yen continues to strengthen which would continue to hurt export companies.
STRATEGY
We emphasize stock selection with a secondary focus on country selection. Our
stock selection process ranks stocks daily across earnings growth, cash flow,
expectations, traditional value and technical measures. We customize stock
selection by market, based on which attributes are most predictive of excess
return within each country. For portfolio construction, we systematically
balance the expected returns of stocks with risk and country constraints. We
combine expectations with our proprietary country ratings to determine optimal
stock and country target weights. Our disciplined investment process remains
oriented toward long-term measures of value and growth. The Fund is overweight
in Europe and underweight in the Pacific. Earnings expectation revisions are
more favorable in Europe than in the Pacific, and valuations remain more
attractive. Looking ahead, we feel the Fund is well-positioned with better value
than its benchmark and better growth opportunity. The Fund has a forward P/E of
12.6x compared with 21.8x for the Index, a two-year growth rate of 13.9%
compared with 12.7% and a growth-to-P/E ratio of 1.1x compared with 0.6x for the
Index. We feel the Fund is well diversified across countries and industries.
Batterymarch Financial Management, Inc.
February 18, 1999
E-2
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
PART B
<PAGE>
LEGG MASON INTERNATIONAL EQUITY TRUST
(A SERIES OF LEGG MASON GLOBAL TRUST, INC.)
BARTLETT VALUE INTERNATIONAL FUND
(A SERIES OF BARTLETT CAPITAL TRUST)
100 LIGHT STREET
BALTIMORE MARYLAND 21202
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates specifically to the
proposed Reorganization whereby Legg Mason International Equity Trust ("Legg
Mason International Fund") would acquire the assets of Bartlett Value
International Fund ("Bartlett International Fund") in exchange solely for shares
of Legg Mason International Fund and the assumption by Legg Mason International
Fund of Bartlett International Fund's liabilities. This Statement of Additional
Information consists of this cover page, the PROFORMA financial statements of
Legg Mason International Fund (giving effect to the Reorganization) for the
fiscal year ended December 31, 1998, and the following described documents, each
of which is incorporated by reference herein:
(1) The Statement of Additional Information of Legg Mason International
Fund, dated May 1, 1999.
(2) The Statement of Additional Information of Bartlett International
Fund, dated May 1, 1999.
(3) The Annual Report to Shareholders of Legg Mason International Fund for
the fiscal year ended December 31, 1998.
(4) The Annual Report to Shareholders of Bartlett International Fund for
the fiscal year ended December 31, 1998.
This Statement of Additional Information is not a prospectus and should be
read only in conjunction with the Prospectus/Proxy Statement dated August 2,
1999 relating to the above-referenced matter. A copy of the Prospectus/Proxy
Statement may be obtained by calling toll-free 1-800-822-5544. This Statement
of Additional Information is dated August 2, 1999.
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS AND EQUITY INTERESTS 96.77%
ARGENTINA 1.52%
450047204 IRSA Inversiones y Representaciones S.A. GDR 51,602.97 0.00 1,435,207.51 1,435,207.51
288121007 Telefonica de Argentia S.A. 643,600.00 1,835,912.32 1,835,912.32
984245100 YPF Sociedad Anonima SA ADR 55,000.00 0.00 1,536,562.50 1,536,562.50
1,835,912.32 2,971,770.01 1,835,912.32
AUSTRALIA 4.46%
606666009 Amcor Ltd. 192,900.00 824,248.85 824,248.85
606558005 Australia * New Zealand Banking Group Limited 137.450.00 899,544.09 899,544.09
612000000 Brambles Industries Ltd. 56,600.00 0.00 1,378,669.04 1,378,669.24
621141001 Comalco Limited 94,200.00 360,775.78
621503002 Commonwealth Bank of Australia 40,600.00 576,271.71
635953000 GIO Australia Holdings Limited 218,200.00 716,681.17 716,681.17
633654009 Goodman Fielder Limited 428,600.00 433,353.76 433,353.76
662460005 National Australia Bank Limited 222,250.00 3,350,297.20 3,350,297.20
632525408 National Australia Bank ADR 20,025.00 0.00 1,490,610.93 1,490,610.93
663710002 Newcrest Mining Limited 189,900.00 263,223.11 263,223.11
676842008 St. George Bank Limited 154,300.00 974,834.86 974,834.86
688692003 The News Corporation Limited 109,550.00 723,665.05 723,665.05
607614005 Westpac Banking Corporation Limited 310,450.00 2,077,403.03 2,077,403.03
-------------------------------------------------
11,200,298.61 2,869,279.97 14,069,578.58
AUSTRIA 1.43%
499962009 Bank Austria Ag 47,400.00 2,410,327.09 2,410,327.09
465145001 OMV AG 22,400.00 2,111,134.80 2,111,134.80
-------------------------------------------------
4,521,461.89 4,521,461.89
BELGIUM 3.70%
420720005 Compagnie Benelux Paribas SA 36,900.00 3,100,795.49 3,100,795.49
515029908 Dexia Belgium 8,600.00 1,430,431.01 1,430,431.01
424749000 D'leteren SA 890.00 487,865.20 487,865.20
400152005 Fortis AG 3,300.00 1,188,458.00
449774009 KBC Bancassurance Holding 34,500.00 2,714,492.33 2,714,492.33
528676901 Suez Lyonnaise des Eaux 12,900.00 2,679,259.47 2,679,259.47
549396901 Suez Lyonnaise des Eaux - Rights 12,900.00 74,631.18 74,631.18
551929904 Suez Lyonnaise des Eaux - Strip 12,900.00 373.16 373.16
-------------------------------------------------
11,676,306.04 0.00 11,676,306.04
BRAZIL 0.04%
21962100 Companhia Paulista de Forca e Luz - CPFL 1,900,000.00 136,803.77 136,803.77
-------------------------------------------------
136,803.77 0.00 136,803.77
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CANADA 0.37%
444204101 Hudson's Bay Co 44,800.00 0.00 567,144.26 567,144.26
73755l107 Potash Corporation of Saskatchewan, Inc. ADR 9.200.00 0.00 587,650.00 587,650.00
-------------------------------------------------
0.00 1,154,794.26 1,154,794.26
CHILE 0.41%
29274F104 Enersis S.A. ADR 50,500.00 1,303,531.25 1,303,531.25
-------------------------------------------------
1,303,531.25 0.00 1,303,531.25
DENMARK 0.57%
425304003 A/S Dampskibsselskabet Svendborg 10.00 101,346.57 101,346.57
540266905 Sophus Berendsen 9,750.00 338,568.26 338,568.26
488987900 Tele Danmark A/S 10,100.00 1,363,213.55 1,363,213.55
-------------------------------------------------
1,803,128.38 1,803,128.38
FINALND 1.66%
440274900 Finnlines OY 29,000.00 1,239,850.95 1,239,850,95
451361901 Kemira Oyj 99,500.00 0.00 712,247.50 712,247.50
449000900 Kesko Oyj 55,000.00 819,768.58 819,768.58
452518905 Metra Oyj 47,700.00 0.00 823,220.24 823,220.24
507143907 Metsa-Serla Oyj 201,000.00 1,635,909.00 1,635,909.00
-------------------------------------------------
3,695,528.53 1,535,467.74 5,230,996.27
FRANCE 7.50%
402692909 Axa 4,500.00 651,940.62 651,940.62
410941009 Bollore Technologies SA 6,500.00 1,326,506.89 1,326,506.89
506918903 Bouygues Offshore S.A. 22,700.00 523,346.45 523,346.45
476837000 Cie de Saint Gobain 9,134.00 0.00 1,288,986.94 1,288,986.94
419954003 Ciments Francais 36,887.00 2,058,441.07 2,058,441.07
408940005 Eridania Beghin-Say SA 1,200.00 207,547.84 207,547.84
435879002 Groupe GTM 12,600.00 1,307,100.70 1,307,100.70
450270004 Lafarge SA 33,400.00 3,172,133.79 3,172,133.79
458836004 Michelin 35,000.00 0.00 1,399,123.59 1,399,123.59
468382007 PSA Peugeot Citroen 18,000.00 2,784,832.77 2,784,832.77
471279901 Renault SA 78,100.00 3,506,188.52 3,506,188.52
479883902 SEITA 39,500.00 2,472,724.02 2,472,724.02
495826901 Strafor-Facom SA 4,900.00 354,945.45 354,945.45
89151E109 Total SA ADR 19,100.00 0.00 950,225.00 950,225.00
417592904 Vivendi 6,400.00 1,659,810.41 1,659,810.41
-------------------------------------------------
20,025,518.53 3,638,335.53 23,663,854.06
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GERMANY 8.79%
508657905 BASF AG 13,550.00 517,088.68 517,088.68
432541902 Bayerische Vereinsbank AG 47,500.00 3,719,398.78 3,719,398.78
415052000 Buderus AG 3,750.00 0.00 1,365,804.63
459858908 Continental AG 82,100.00 2,266,050.64 2,266,050.64
552902900 DaimlerChrysler AG 25,074.00 887,743.31 1,544,685.00 2,432,428.31
528748908 Deutsche Lufthansa AG 122,500.00 1,181,327.25 1,523,580.94 2,704,908.19
435506902 Deutsche Pfrandbrief-und Hypothekenbank AG 23,200.00 2,032,401.30 2,032,401.30
511938904 Deutsche Telekom AG 50.00 1,644.07 1,644.07
470170002 Preussag AG 8,500.00 3,840,453.62 3,840,453.62
533457909 Rheinmetall AG - Non-Voting Preferred 32,650.00 613,191.53 613,191.53
504773904 Siemens AG 58,950.00 3,802,427.10 3,802,427.10
549710903 Volkswagen AG 56,000.00 4,468,978.76 4,468,978.76
-------------------------------------------------
23,330,705.04 4,434,070.57 27,764,775.61
GREECE 0.81%
430307009 Ergo Bank S.A. 22,170.00 2,566,485.64 2,566,485.64
-------------------------------------------------
2,566,485.64 2,566,485.64
HONG KONG 1.76%
618799001 Champion Technology Holdings 20,118,000.00 332,374.41 332,374.41
609701909 CLP Holdings Limited 732,000.00 3,646,961.64 3,646,961.64
615967007 HKR International Ltd. 699,200.00 426,418.50 426,418.50
643646003 Hong Kong Telecommunications Ltd. 332,000.00 580,644.33 580,644.33
645549007 Innovative International Holdings 698,000.00 90,092.42 90,092.42
604263905 Innovative International Holdings - Warrants 69,800.00 90.09 90.09
668293905 Peregrine Investment Holdings Limited 256,000.00 0.00 0.00
685699902 Smartone Telecommunications 151,000.00 419,032.99 419,032.99
697720001 Wong's International Holdings Ltd. 501,000.00 57,552.02 57,552.02
697720001 Wong's International Holdings Ltd. - Warrants 100,200.00 336.26 336.26
-------------------------------------------------
5,553,502.66 0.00 5,553,502.66
INDIA 0.07%
61745C105 Morgan Stanley India Investment Fund 34,000.00 0.00 229,500.00 229,500.00
-------------------------------------------------
0.00 229,500.00 229,500.00
IRELAND 2.65%
019228402 Allied Irish Banks plc ADR 14,200.00 0.00 1,567,325.00 1,567,325.00
402068001 Allied Irish Banks plc 221,900.00 3,970,043.13 3,970,043.13
407617000 Bank of Ireland 91,800.00 2,041,061.87 2,041,061.87
481615003 Jefferson Smurfit Group Plc 431,200.00 775,954.79 775,954.79
-------------------------------------------------
6,787,059.79 1,567,325.00 8,354,384.79
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ISRAEL 0.43%
609803903 Bezeq Israeli Telecommunication 435,600.00 1,359,222.68 1,359,222.68
Corporation Ltd.
-------------------------------------------------
ITALY 7.99%
406398008 Autostrada Torino-Milano S.p.A. 86,200.00 455,124.74 455,124.74
409918901 Banca Agricola Mantovana 49,800.00 811,702.80 811,702.80
407294008 Banca Commerciale Itaiana 199,200.00 1,373,419.21 1,373,419.21
552860900 Banca Nazionale del Lavoro (BNL) 980,000.00 2,930,902.05 2,930,902.05
407205004 Banca Popolare di Bergamo Credito 122,600.00 2,973,334.54 2,973,334.54
Varesino SpA
407208008 Banca Popolare di Brescia 77,700.00 1,893,803.86 1,893,803.86
443639901 ENI SpA 353,200.00 2,307,030.75 2,307,030.75
465224103 Istituto Mobiliare ADR 52,981.00 0.00 1,894,070.75 1,894,070.75
449221001 Italmobiliare 53,600.00 1,672,720.67 1,672,720.67
436916001 Magneti Marelli 164,300.00 284,192.45 284,192.45
404904005 Mondadori (Arnoldo) Editore SpA 60,500.00 799,495.00 799,495.00
468990007 Pirelli S.p.A. 113,600.00 363,792.07 363,792.07
555657907 San Paolo IMI SpA 54,444.00 961,483.44 961,483.44
529750903 Telecom Italia SpA 764,144.00 6,516,332.76 6,516,332.76
-------------------------------------------------
23,343,334.34 1,894,070.75 25,237,405.09
JAPAN 9.89%
613210004 Bridgestone Corp. 125,000.00 2,836,134.45 2,836,134.45
617232004 Canon, Inc. 191,000.00 2,819,814.24 1,260,371.52 4,080,185.76
619730005 Citizen Watch Co. 329,000.00 1,978,947.37 1,978,947.37
625144001 Daiwa Securities Co. Ltd. 429,000.00 1,464,785.49 1,464,785.49
630720001 Eisai Company, Ltd. 150.00 2,919.06 2,919.06
635652001 Fuji Photo Film 8,000.00 297,213.62 297,213.62
635694003 Fujitsu Ltd. 124,000.00 0.00 1,650,773.99 1,650,773.99
635756000 Furukawa Electric Co. 572,000.00 1,947,987.62 1,947,987.62
465714301 Ito-Yokado ADR 20,300.00 0.00 1,400,700.00 1,400,700.00
646862003 Jaccs Co., Ltd. 99,000.00 446,616.54 446,616.54
648424000 Katokichi Co., Ltd. 3,000.00 45,908.89 45,908.89
648468007 Kawasaki Kisen Kaisha Ltd. 671,000.00 902,184.87 902,184.87
649354008 Kishu Paper Co., Ltd. 10,000.00 19,367.33 19,367.33
656946001 Marubeni Corporation 30,000.00 51,481.65 51,481.65
656962008 Maruzen Showa Unyu Co., Ltd. 6,000.00 11,410.88 11,410.88
657258901 Matsumotokiyoshi 41,000.00 0.00 1,584,873.95 1,584,873.95
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
657270005 Matsushita Electric Industrial 84,000.00 0.00 1,485,325.08 1,485,325.08
Company Ltd.
690030002 Mazda Motor Corporation 180,000.00 700,574.97 700,574.97
659586002 Minolta Co., Ltd. 75,000.00 369,526.76 369,526.76
659716005 Mitsubishi Rayon Company, Ltd. 215,000.00 587,660.33 587,660.33
659758007 Mitsui O.S.K. Lines 189,000.00 304,272.45 304,272.45
664154002 NSK Limited 146,000.00 544,997.79 544,997.79
665880001 Olympus Optical Co., Ltd. 53,000.00 608,996.02 608,996.02
674720008 Rohm Company Ltd. 12,000.00 0.00 1,092,260.06 1,092,260.06
673822003 Ricoh Company, Ltd. 110,000.00 1,013,887.66 1,013,887.66
677634008 Sanrio Company, Ltd. 24,000.00 309,739.05 309,739.05
679159004 Secom Co., Ltd. 22,000.00 0.00 1,821,494.91 1,821,494.91
685899007 Sumitomo Rubber Industries, Ltd. 76,000.00 362,352.94 362,352.94
685908006 Sumitomo Warehouse 121,000.00 0.00 530,880.14 530,880.14
646802009 The Bank of Iwate, Ltd. 17,820.00 914,250.33 914,250.33
689556009 Toho Zinc Co., Ltd. 246,000.00 598,407.78 598,407.78
698511003 Yakult Honsha Co., Ltd. 153,000.00 954,135.34 954,135.34
698526001 Yamaha Motor Co., Ltd. 47,000.00 303,078.28 303,078.28
-------------------------------------------------
20,396,921.71 10,826,679.65 31,223,601.36
MALAYSIA 0.12%
668166002 Perlis Plantations Bhd 545,500.00 0.00 391,795.58 391,795.58
-------------------------------------------------
0.00 391,795.58 391,795.58
NETHERLANDS 7.39%
525076907 ABN AMRO Holding NV 29,200.00 613,935.17 613,935.17
546230905 AEGON N.V. 36,300.00 4,455,623.57 4,455,623.57
545831901 Akzo Nobel N.V. 59,200.00 2,694,203.44 2,694,203.44
483590006 ASR Verzekeringsgroep N.V. 10,100.00 913,929.85 913,929.85
501427900 Fortis Amev NV 11,350.00 940,043.65 940,043.65
433289006 Fugro N.V. 22,600.00 529,302.18 529,302.18
522780907 Hollandsche Beton Groep N.V. 23,900.00 295,140.26 295,140.26
505887901 ING Groep N.V. 84,050.00 5,122,544.84 5,122,544.84
505158907 Internatio-Muller NV 45,500.00 1,126,177.68 1,126,177.68
523142909 Koninklijke Ahrend NV 3,000.00 68,504.82 68,504.82
465975001 Koninklijke Van Ommeren N.V. 43,300.00 1,348,299.36 1,348,299.36
462730003 NBM-Amstelland N.V. 55,600.00 1,305,136.53 1,305,136.53
N62648105 New Holland NV ADR 115,650.00 0.00 1,590,187.50 1,590,187.50
411969009 Roto Smeets de Boer N.V. 17,000.00 646,989.94 646,989.94
519969901 Royal Volker Wessels Stevin N.V. 56,468.00 1,103,090.22 1,103,090.22
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
535659908 Van der Moolen Holding N.V. 8,800.00 566,774.90 566,774.90
-------------------------------------------------
21,729,696.41 1,590,187.50 23,319,883.91
NEW ZEALAND 1.08%
634294904 Fletcher Callenge Energy 131,000.00 248,158.28 248,158.28
688143007 Telecom Corporation of New Zealand 731,000.00 3,173,410.86 3,173,410.86
Limited
-------------------------------------------------
3,421,569.14 0.00 3,421,569.14
NORWAY 0.60%
401110002 Aker RGI ASA - B Shares 3,540.00 31,679.94 31,679.94
521126904 Ekornes ASA 13,800.00 110,785.02 110,785.02
431038009 Elkem ASA 78,600.00 0.00 941,317.37 941,317.37
506756907 Hafslund ASA 3,900.00 16,629.60 16,629.60
656531605 Norsk Hydro ASA ADR 18,000.00 0.00 615,375.00 615,375.00
476802905 Saga Petroleum ASA 20,900.00 191,162.73 191,162.73
-------------------------------------------------
350,257.29 1,556,692.37 1,906,949.66
PORTUGAL 2.23%
059479303 Banco Comercial Portugues, SA ADR 37,000.00 0.00 1,123,875.00 1,123,875.00
417589900 Cimpor-Cimentos de Portugal, SGPS, SA 76,250.00 2,435,102.99 2,435,102.99
737265108 Portugal Fund Inc. 32,500.00 0.00 507,812.50 507,812.50
467620902 Portugal Telecom SA 62,467.00 2,865,381.48 2,865,381.48
485959902 Semapa 5,700.00 112,894.44 112,894.44
-------------------------------------------------
5,413,378.91 1,631,687.50 7,045,066.41
SINGAPORE 0.57%
625208905 Dairy Farm International Holdings Ltd. 1,040,300.00 345.00 1,196,000.00 1,196,000.00
666369004 Oversea-Chinese Banking Corporation 88,000.00 596,971.53 596,971.53
Ltd.
-------------------------------------------------
596,971.53 1,196,000.00 1,793,316.53
SOUTH KOREA 0.70%
500634100 Korea Fund, Inc. 31,525.00 0.00 291,606.25 291,606.25
7340450103 Pohang Iron & Steel Company Ltd. ADR 43,000.00 0.00 725,625.00 725,625.00
677172009 Samsung Electronics 8,230.00 552,087.28 552,087.28
677221905 Samsung Heavy Industries 112,780.00 641,242.89 641,242.89
-------------------------------------------------
1,193,330.17 1,017,231.25 2,210,561.42
SPAIN 4.75%
550190904 Banco Bilbao Vizcaya, S.A. 178,900.00 2,800,819.73 2,800,819.73
549859908 Banco Central Hispanoamericano 132,600.00 1,572,129.19 1,572,129.19
545426900 Banco Santander SA 158,100.00 3,137,081.34 3,137,081.34
540145901 Corporacion Banceria de Espana SA 110,400.00 2,854,770.62 2,854,770.62
473322006 Repsol SA 15,100.00 804,299.18 804,299.18
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
76026T205 Repsol SA ADR 29,300.00 0.00 1,600,522.60 1,600,522.60
544401904 Tabacalera S.A. 88,500.00 2,229,313.26 2,229,313.26
-------------------------------------------------
13,398,413.32 1,600,512.50 14,998,925.82
SWEDEN 3.11%
521274902 ABB AB 222,200.00 2,351,959.43 2,351,959.43
403462906 AGA AB 96,000.00 0.00 1,258,369.44 1,258,369.44
405157900 AssiDoman AB 43,900.00 0.00 691,610.87 691,610.87
419729900 Cardo AB 49,900.00 0.00 819,915.57 819,915.57
5466;78905 Electrolux AB 198,600.00 3,409,893.17 3,409,893.17
503606907 Mo och Domsjo AB 19,500.00 423,610.43 423,610.43
486301005 Sveda Industri 59,800.00 868,501.38 868,501.38
-------------------------------------------------
7,053,964.41 2,769,895.88 9,823,860.29
SWITZERLAND 4.93%
405274002 Ascom Holding AG 685.00 1,072,104.54 1,072,104.54
437991003 Banca del Gottardo 570.00 517,427.39 517,427.39
526122908 Danzas Holding AG 950.00 401,106.50 401,106.50
442639902 Fotolabo S.A. 900.00 275,169.25 275,169.25
434178000 Georg Fischer AG 400.00 135,255.15 135,255.15
442049003 Holderbank Financiere Glarus AG 2,485.00 2,941,406.42 2,941,406.42
504783903 Novartis 1,000.00 0.00 1,965,494.65 1,965,494.65
471615906 Rieter Holdings Ltd. 2,100.00 1,284,123.17 1,284,123.17
485002901 Schweizerische 2,290.00 5,969,636.75 5,969,636.75
Ruckvericherungs-Gesellschaft
492909007 Verwaltungs - und Privat - Bank AG 275.00 1,015,960.54 1,015,960.54
-------------------------------------------------
13,612,819.71 1,965,494.65 15,577,684.36
TAIWAN 0.20%
874036106 Taiwan Fund Inc.
50,700.00 0.00 633,750.00 633,750.00
-------------------------------------------------
0.00 633,750.00 633,750.00
TURKEY 0.27%
401112008 Akbank T.A.S. 22,178,000.00 449,943.57 449,943.57
498674001 Yapi ve Kredi Bankasi A.S. 34,138,179.00 394,992.56 394,992.56
-------------------------------------------------
UNITED KINGDOM 16.77%
5720008 ASDA Group plc 236,900.00 635,642.96 635,642.96
7645005 Bank of Scotland 181,500.00 2,171,124.77 2,171,124.77
-------------------------------------------------
7820004 Barclays PLC 157,500.00 3,414,811.43 3,414,811.43
8118002 Barratt Developments plc 237,800.00 912,639.97 912,639.97
26349902 British Aerospace PLC 143,600.00 1,223,904.30 1,223,904.30
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
14084008 British Telecommunications plc 46,600.00 705,309.85 705,309.85
14216006 British Vita plc 25,000.00 88,885.20 88,885.20
127209302 Cadbury Schweppes PLC ADR 25,000.00 0.00 1,731,250.00 1,732,250.00
21623004 CGU PLC 45,900.00 723,693.30 723,693.30
252243Q205 Diageo PLC ADR 37,441.00 0.00 1,731,646.25 1,731,646.25
31670003 English China Clays plc 159,000.00 430,586.48 430,586.48
36533008 General Electric Company plc 171,300.00 1,551,063.30 1,551,063.30
76764000 J Sainsbury plc 377,000.00 3,050,323.97 3,050,323.97
50025006 Ladbroke Group plc 508,200.00 2,043,269.65 2,043,269.65
51111904 Legal & General Group plc 89,,100.00 1,162,045.19 1,162,045.19
87061008 Lloyds TSB Group plc 237,500.00 1,519,147.70 1,519,147.70
38578902 Misys plc 333,896.00 4,754,093.24 4,754,093.24
62589002 National Westminster Bank PLC 120,855.00 887,488.12 887,433.12
44374908 PowerGen plc 183,800.00 2,412,394.09 2,412,294.09
70995006 Prudential Corporation PLC 244,800.00 3,734,308.29 3,734,308.29
73271900 Rentokil Initial PLC 528,400.00 3,994,384.45 3,994,384.45
23691900 Reuters Group PLC 16,890.00 178,188.24 178,188.24
42504902 Rexam plc 169,633.00 470,654.78 470,654.78
767204100 Rio Tinto plc ADR 24,000.00 0.00 1,087,500.00 1,087,500.00
78396009 Scottish & Newcastle plc 102,700.00 1,194,384.45 1,194,384.45
86119906 Sun Life and Provincial Holdings plc 103,500.00 925,120.45 925,120.45
29303906 Thames Water plc 41,300.00 795,946.17 705,946.17
890030208 Tomkins PLC ADR 77,000.00 0.00 1,540,000.00 1,540,000.00
13427901 Uniliver plc 95,500.00 1,074,156.84 1,074,156.84
97404008 WPP Group plc 584,500.00 3,544,484.13 3,544,484.13
-------------------------------------------------
46,842,012.11 6,090,396.25 52,932,408.36
TOTAL COMMON STOCK AND EQUITY INTERESTS 305,557,722.27
CORPORATE BONDS AND NOTES 0.41%
559222AE4 Magna International 5.0% 10/15/02 1,120,000.00 0.00 1,285,200.00 1,285,200.00
-------------------------------------------------
0.00 1,285,200.00 1,285,200.00
REPURCHASE AGREEMENTS 2.67%
Goldman, Sachs & Company 0.00
5%, dated 12/31/98, to be repurchased at $4,328 on 1/4/99
(Collateral: $4,406 Fannie Mae Mortgage-backed securities, 6.5%
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
(UNAUDITED) LM INTERNATIONAL BARTLETT PRO FORMA
EQUITY VALUE INTERNATIONAL COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
CUSIP DESCRIPTION SHARES/PAR MARKET VALUE MARKET VALUE MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
due to 8/1/02. Value $4,471) 4,325,527.00 4,325,527.00 0.00 4,325,527.00
State Street Bank & Trust Co.
3.5%, dated 12/31/98, to be repurchased at
$4,093 on 1/4/99
(Collateral: $4,180 Freddie Mac Mortgage
-backed securities,
5.02% due 11/5/99, value $4,247) 4,091,000.00 0.00 4,091,000.00 4,091,000.00
---------------------------------------------
4,325,527.00 4,091,000.00 8,416,527.00
-----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS 99.85% 258,318,312 56,941,137 315,259,449
</TABLE>
9
<PAGE>
Note to Pro Forma Combined Financial Statements
(Unaudited)
Basis of Presentation:
Subject to approval of the Agreement and Plan of Reorganization and Termination
by the shareholders of Bartlett Value International Fund ("Value
International"), Legg Mason International Equity Trust, a series of Legg Mason
Global Trust, Inc. ("International Equity") would acquire the assets of Value
International in exchange solely for shares of beneficial interest in
International Equity and the assumption of Value International liabilities.
Shares of International Equity will be distributed to Value International
shareholders at the net asset value per share of International Equity for the
value acquired and Value International will be terminated as soon as practicable
thereafter. Each shareholder of Value International will receive the number of
full and fractional shares of each Class of shares of International Equity equal
in value to such shareholder's holdings in Value International as of the closing
date of the merger.
On or before the closing date of the merger, Value International will declare a
distribution of substantially all of its net investment income, net capital gain
and net short-term capital gain, if any. On or before the closing date,
International Equity also may declare and distribute as a dividend substantially
all of any previously undistributed net investment income.
The pro forma combined financial statements reflect the financial position of
International Equity and Value International at December 31, 1998 and the
combined results of operations of International Equity and Value International
for the twelve months ended December 31, 1998. Certain expenses have been
adjusted to reflect the expected operations of the combined entity. Pro forma
operating expenses include the actual expenses of the Funds and the combined
Fund, adjusted for certain items.
International Equity currently offers two classes of shares, Primary Shares and
Navigator Shares. Navigator Shares are currently offered for sale only to
certain institutional clients. On the closing date of the merger, International
Equity will begin offering a third class of shares, Class A.
If the Reorganization is approved, Value International will sell any assets that
are inconsistent with International Equity investment policies prior to the
effective time of the Reorganization. The proceeds of any such sales will be
held in temporary investments or reinvested in assets that qualify to be held by
International Equity. The possible need for Value International to dispose of
assets prior to the effective time of the Reorganization could result in selling
securities at a disadvantagious time and could result in Value International
realizing losses that would not otherwise have been realized.
The pro forma combined financial statements are presented for the information of
the reader and may not necessarily be representative of what the actual combined
financial statements would have been had the Reorganization occurred at December
31, 1998. The pro forma combined financial statements should be read in
conjunction with the historical financial statements of the constituent Funds
incorporated by reference into the statement of additional information.
<PAGE>
LEGG MASON GLOBAL TRUST, INC.
PART C
<PAGE>
OTHER INFORMATION
Item 15. Indemnification
---------------
Article ELEVENTH of the Registrant's Articles of Incorporation provides
that to the maximum extent permitted by applicable law (including Maryland law
and the 1940 Act) the directors and officers of the Registrant shall not be
liable to the Registrant or to any of its stockholders for monetary damages.
Article ELEVENTH also provides that no repeal or modification of the contents
contained in the preceding sentence or the adoption or modification of any other
provision of the Articles or By-Laws inconsistent with Article ELEVENTH shall
repeal or narrow any limitation of liability of any director or officer of the
Registrant with respect to any act or failure to act which occurred prior to
such repeal, adoption, or modification.
Section 11.2 of Article ELEVENTH of the Registrant's Articles of
Incorporation provides that the Registrant shall indemnify and advance expenses
to its present and past directors, officers, employees and agents, and persons
who are serving or have served at the Registrant's request in similar capacities
for other entities to the maximum extent permitted by applicable law (including
Maryland law and the 1940 Act). Section 2-418(b) of the Maryland Corporations
and Associations Code ("Maryland Code") permits the Registrant to indemnify its
directors unless it is established that the act or omission of the director was
material to the matter giving rise to the proceeding, and (a) the act or
omission was committed in bad faith or was the result of active and deliberate
dishonesty; (b) the director actually received an improper personal benefit in
money, property or services; or (c) in the case of any criminal proceeding, the
director had reasonable cause to believe the act or omission was unlawful.
Indemnification may be made against judgments, penalties, fines, settlements and
reasonable expenses actually incurred in connection with a proceeding, in
accordance with the Maryland Code. Pursuant to Section 2-418(j)(2) of the
Maryland Code, the Registrant is permitted to indemnify its officers, employees
and agents to the same extent. The provisions set forth above apply insofar as
consistent with Section 17(h) of the 1940 Act, which prohibits indemnification
of any director or officer of the Registrant against any liability of the
Registrant or its shareholders to which such director or officer otherwise would
be subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office.
Section 10.01 of Article X of the Registrant's By-Laws sets forth the
procedures by which the Registrant will indemnify its directors, officers,
employees and agents. Section 10.02 of Article X of the By-Laws provides that
the Registrant may purchase and maintain insurance on behalf of the
above-mentioned persons to the extent permitted by law. Registrant undertakes to
carry out all indemnification provisions of its Articles of Incorporation and
By-Laws in accordance with Investment Company Act Release No. 11330 (September
4, 1980) and successor releases. Under the Underwriting Agreement, the Fund
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
<PAGE>
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 the Underwriting 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 reckless disregard of its obligations and duties
under the Underwriting Agreement.
Item 16. Exhibits
--------
(1) (a) Articles of Incorporation.(4)
(b) Articles Supplementary.(4)
(c) Articles of Amendment.(4)
(d) Articles Supplementary.(2)
(e) Articles of Amendment.(4)
(f) Articles of Amendment.(7)
(2) By-Laws.(4)
(3) Voting trust agreement - none.
(4) Agreement and Plan of Reorganization and Termination is attached
hereto as Appendix B to the Prospectus/Proxy Statement.
(5) Instruments defining the rights of shareholders - none.
(6) (a) Investment Advisory Agreement - International Equity Trust.(1)
(b) Management Agreement - International Equity Trust.(1)
(c) Amended Investment Advisory Agreement - Global Government Trust.(4)
(i) Investment Sub-Advisory Agreement - Global Government Trust.(5)
(ii) Sub-Administration Agreement - Global Government Trust.(5)
(d) Management Agreement - Global Government Trust.(1)
(e) Investment Advisory Agreement - Emerging Markets Trust.(3)
(f) Management Agreement - Emerging Markets Trust.(3)
(7) (a) Underwriting Agreement - Global Government Trust.(4)
(b) Underwriting Agreement - International Equity Trust.(4)
(c) Underwriting Agreement - Emerging Markets Trust.(3)
(8) Bonus, profit sharing or pension plans - none.
(9) (a) Custodian Agreement.(4)
(b) Amendment to Custodian Agreement.(4)
(10) (a) Plan pursuant to Rule 12b-1 - Global Government Trust.(4)
(b) Plan pursuant to Rule 12b-1 concerning Primary Class shares -
International Equity Trust.(4)
(c) Form of Plan pursuant to Rule 12b-1 concerning Class A shares
International Equity Trust - filed herewith.
(d) Plan pursuant to Rule 12b-1 - Emerging Markets Trust.(3)
<PAGE>
(e) Form of Plan pursuant to Rule 18f-3 - International Equity Trust -
filed herewith.
(f) Form of Plan pursuant to Rule 18f-3 - Global Government Trust -
filed herewith.
(g) Form of Plan pursuant to Rule 18f-3 - Emerging Markets Trust - filed
herewith.
(11) Opinion and consent of Kirkpatrick & Lockhart LLP regarding the
legality of securities being registered - filed herewith.
(12) Opinion and consent of Kirkpatrick & Lockhart LLP regarding certain
tax matters in connection with Legg Mason International Equity Trust
and Bartlett Value International Fund - filed herewith.
(13) (a) Transfer Agency and Service Agreement.(4)
(b) Credit Agreement.(5)
(c) Credit Agreement Amendment.(6)
(14) Consent of PricewaterhouseCoopers LLP - filed herewith.
(15) Financial statements omitted from Part B - none.
(16) Manually signed copy of power of attorney - filed herewith.
(17) Additional Exhibits.
(a) Form of Proxy Card - filed herewith.
- ---------------------------
(1) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 7 to the registration statement, SEC File No. 33-56672, filed
August 31, 1995.
(2) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 8 to the registration statement, SEC File No. 33-56672, filed
February 16, 1996.
(3) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 9 to the registration statement, SEC File No. 33-56672, filed
November 18, 1996.
(4) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 12 to the registration statement, SEC File No. 33-56672, filed
April 30, 1997.
(5) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 13 to the registration statement, SEC File No. 33-56672, filed
April 30, 1998.
(6) Incorporated by reference to corresponding Exhibit of Bartlett Capital
Trust's Registration Statement, Post-Effective Amendment No. 27, SEC File No.
2-80648, filed March 2, 1999.
(7) Incorporated by reference to corresponding Exhibit of Post-Effective
Amendment No. 16 to the registration statement, SEC File No. 33-56672, filed
July 2, 1999.
<PAGE>
Item 17. Undertakings
------------
(1) The undersigned Registrant agrees that prior to any public re-offering
of the securities registered through the use of the prospectus which is a part
of this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act of 1933, the
re-offering prospectus will contain the information called for by the applicable
registration form for re-offering by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant, Legg Mason Global Trust, Inc., has duly caused this 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 30th day of
June, 1999.
LEGG MASON GLOBAL TRUST, INC.
By: /s/ Marie K. Karpinski
---------------------------------------
Marie K. Karpinski
Vice President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ John F. Curley, Jr.* Chairman of the Board and June 30, 1999
- -------------------------------- Director
John F. Curley, Jr.
/s/ Edward A. Taber, III* President and Director June 30, 1999
- --------------------------------
Edward A. Taber, III
/s/ Richard G. Gilmore* Director June 30, 1999
- --------------------------------
Richard G. Gilmore
/s/ Arnold L. Lehman* Director June 30, 1999
- --------------------------------
Arnold L. Lehman
/s/ Jill E. McGovern* Director June 30, 1999
- --------------------------------
Jill E. McGovern
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ T. A. Rodgers* Director June 30, 1999
- --------------------------------
T.A. Rodgers
/s/ Marie K. Karpinski Vice President and June 30, 1999
- -------------------------------- Treasurer
Marie K. Karpinski
*Signature affixed by Marie K. Karpinski pursuant to a power of attorney, dated
May 8, 1998, filed as an exhibit to this Registration Statement.
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
(10) (c) - Form of Plan pursuant to Rule 12b-1 concerning Class A
shares - International Equity Trust.
(10) (e) - Form of Plan pursuant to Rule 18f-3 - International Equity
Trust.
(10) (f) - Form of Plan pursuant to Rule 18f-3 - Global Government
Trust filed herewith.
(10) (g) - Form of Plan pursuant to Rule 18f-3 - Emerging Markets Trust
filed herewith.
(11) - Opinion and consent of Kirkpatrick & Lockhart LLP regarding
the legality of securities being registered.
(12) - Opinion and Consent of Kirkpatrick & Lockhart LLP regarding
certain tax matters in connection with Legg Mason International
Equity Trust and Bartlett Value International Fund.
(14) - Consent of PricewaterhouseCoopers LLP.
(16) - Manually signed copy of power of attorney.
(17) (a) - Form of Proxy Card.
EXHIBIT 10(c)
FORM OF
DISTRIBUTION PLAN OF
LEGG MASON GLOBAL TRUST, INC.
CLASS A SHARES
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 has offered, and intends to continue
offering, for public sale distinct series of shares of common stock ("Series"),
each corresponding to a distinct portfolio;
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;
WHEREAS, the Corporation's Board of Directors has established a Series of
shares of common stock of the Corporation: Legg Mason International Equity Trust
(the "Fund");
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. The Fund shall pay to Legg Mason, as compensation for ongoing
services provided to the investors in Class A Shares of the Fund, a service fee
at the rate of 0.25% on an annualized basis of the average daily net assets
attributable to Class A Shares of the Fund, such fees to be calculated and
accrued daily and paid monthly or at such other intervals as the Board shall
determine.
B. The Corporation may pay a service fee to Legg Mason at a lesser
rate than the fee specified in paragraph 1.A of this Plan, as agreed upon by the
Board and Legg Mason and as approved in the manner specified in paragraph 3 of
this Plan. The service fee payable hereunder is payable without regard to the
aggregate amount that may be paid over the years, provided that, so long as the
limitations set forth in Conduct Rule 2830 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, other
<PAGE>
broker-dealers and other entities that engage in or support the distribution of
shares or who service shareholder accounts or provide sub-accounting and
recordkeeping services; expenses of Legg Mason and such other broker-dealers and
other entities, 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 _________ ___, 1999 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 "service activities," as defined in this
paragraph 4, to the Board in support of the service fee payable hereunder.
For purposes of this Plan, "service activities" shall mean activities
covered by the definition of "service fee" contained in Conduct Rule 2830 of the
NASD, 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 "service activities," including telephone and other
communications expenses, may be included in the information regarding amounts
expended for such service activities.
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. After the issuance of Class A Shares of the Fund, this Plan may not be
amended to increase materially the amount of service fees provided for in
paragraph 1.A. 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 Fund,
and no material amendment to the Plan shall be made unless such amendment is
approved in the manner provided for continuing approval in paragraph 3 hereof.
7. 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.
<PAGE>
8. 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 4 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: _________ ___, 1999 LEGG MASON GLOBAL TRUST, INC.
Attest: _________________________ By:___________________________________
By: ____________________________
Agreed and assented to by
LEGG MASON WOOD WALKER, INCORPORATED
By: ________________________________
EXHIBIT 10(e)
FORM OF MULTIPLE CLASS PLAN
LEGG MASON GLOBAL TRUST, INC.
Legg Mason Global Trust, Inc. (the "Corporation") hereby adopts this
Multiple Class Plan pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), on behalf of Legg Mason International Equity
Trust (the "Fund").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
-----------------------------------------------
1. CLASS A SHARES. Class A shares of the Fund are generally offered and
sold subject to an initial sales charge. This initial sales charge may be waived
for certain eligible purchasers and reduced for certain other eligible
purchasers.
Class A shares of the Fund are available to all investors except those
qualified to purchase Navigator Class shares.
The maximum sales charge is 4.75% of the public offering price for Class A
shares of the Fund.
Class A shares of the Fund that were purchased pursuant to the sale charge
waiver for purchases of $1 million or more are subject to a contingent deferred
sales charge ("CDSC") of 1.00% of net asset value of the Class A shares of the
Fund at the time of the purchase or sale, whichever is less, on shares redeemed
within one year of such purchase. Class A shares of the Fund held one year or
longer and Class A shares of the Fund acquired through reinvestment of dividends
or capital gains distributions on shares otherwise subject to this Class A CDSC
are not subject to the CDSC.
Class A shares of the Fund are subject to an annual service fee of 0.25%
of the average daily net assets of the Class A shares of the Fund under a plan
of distribution adopted pursuant to Rule 12b-1 under the 1940 Act.
2. PRIMARY CLASS SHARES. Primary Class shares of the Fund are offered and
sold without imposition of an initial sales charge or a CDSC.
Primary Class shares of the Fund are available to all investors except
those qualified to purchase Navigator Class shares.
Primary Class shares of the Fund are subject to an annual distribution fee
of up to 0.75% of the average daily net assets of the Primary Class shares of
the Fund and an annual service fee of 0.25% of the average daily net assets of
the Primary Class shares of the Fund under a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
3. NAVIGATOR CLASS SHARES. Navigator Class shares are offered and sold
without imposition of an initial sales charge or a CDSC and are not subject to
any distribution or service fees.
Navigator Class shares of the Fund are available for purchase only by: (i)
institutional clients of Legg Mason Trust Company ("Trust Company") for which
Trust Company exercises discretionary investment management responsibility and
accounts of the customers with such Institutional Clients; (ii) qualified
retirement plans managed on a discretionary basis and having net assets of at
least $200 million; (iii) clients of Bartlett & Co. who, as of December 19,
1996, were shareholders of Bartlett Short Term Bond Fund or Bartlett Fixed
Income Fund and for whom Bartlett acts as an ERISA fiduciary; (iv) certain
institutions that were clients of Fairfield Group, Inc. as of February 28, 1999
for investment of their own monies and monies for which they act in a fiduciary
capacity; (v) Class Y shareholders of the Bartlett Funds as of September __,
1999; and (vi) any qualified retirement plan of Legg Mason, Inc. or any of its
affiliates. Navigator Class shares are also available for purchase by exchange,
as described below.
B. EXPENSE ALLOCATIONS OF EACH CLASS:
---------------------------------
Certain expenses may be attributable to a particular Class of shares of
the Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a PRO RATA basis by the
outstanding shares of that Class.
In addition to the distribution and service fees described above, each
Class may also pay a different amount of the following other expenses:
(1) legal, printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, and proxies to current shareholders of a
specific Class;
(2) Blue Sky fees incurred by a specific Class of shares;
(3) SEC registration fees incurred by a specific Class of shares;
(4) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(5) Directors' fees incurred as a result of issues relating to a
specific Class of shares;
(6) litigation expenses or other legal expenses relating to a
specific Class of shares;
(7) transfer agent fees and shareholder servicing expenses
identified as being attributable to a specific Class; and
<PAGE>
(8) such other expenses actually incurred in a different amount by
a Class or related to a Class' receipt of services of a
different kind or to a different degree than another Class.
C. EXCHANGE PRIVILEGES:
-------------------
Class A, Primary Class and Navigator Class shares of the Fund may be
exchanged for shares of the corresponding Class of other Legg Mason funds, or
may be acquired through an exchange of shares of the corresponding Class of
other Legg Mason funds.
Legg Mason U.S. Government Money Market Portfolio, Legg Mason Cash Reserve
Trust and Legg Mason Tax Exempt Trust (collectively referred to as "Legg Mason
Money Market Funds") currently offer only one class of shares. So long as the
Legg Mason Money Market Funds offers only a single class of shares, Class A,
Primary Class and Navigator Class shares of the Fund may be exchanged for shares
of those Legg Mason Money Market Funds, or may be acquired through an exchange
of shares of those Legg Mason Money Market Funds. An investor exchanging from a
Legg Mason Money Market Fund may exchange only into the class of shares the
investor is eligible to purchase.
These exchange privileges may be modified or terminated by the Fund in
certain instances, and exchanges may be made only into funds that are legally
available for sale in the investor's state of residence.
D. CLASS DESIGNATION:
-----------------
Subject to approval by the Board of Directors, the Fund may alter the
nomenclature for the designations of one or more of its Classes of shares.
E. ADDITIONAL INFORMATION:
----------------------
This Multiple Class Plan is qualified by and subject to the terms of the
then current prospectus for the applicable Classes; provided, however, that none
of the terms set forth in any such prospectus shall be inconsistent with the
terms of the Classes contained in this Plan. The prospectus for the Fund
contains additional information about the Classes and the Fund's multiple class
structure.
F. DATE OF EFFECTIVENESS:
---------------------
This Multiple Class Plan is effective on _______________, 1999, provided
that this Plan shall not become effective with respect to the Fund unless such
action has first been approved by the vote of a majority of the Board of
Directors of Legg Mason Global Trust, Inc. and by vote of a majority of those
directors who are not interested persons.
IN WITNESS WHEREOF, the Corporation has executed this Multiple Class Plan
on the day and year set forth below:
Date: _________________ ___, 1999 LEGG MASON GLOBAL TRUST, INC.
Attest: By:
------------------------- ------------------------------
By:
-----------------------------
EXHIBIT 10(f)
FORM OF MULTIPLE CLASS PLAN
LEGG MASON GLOBAL TRUST, INC.
Legg Mason Global Trust, Inc. (the "Corporation") hereby adopts this
Multiple Class Plan pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), on behalf of Legg Mason Global
Government Trust (the "Fund").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
1. PRIMARY CLASS SHARES. Primary Class shares of the Fund are offered and
sold without imposition of an initial sales charge or a CDSC.
Primary Class shares of the Fund are available to all investors except
those qualified to purchase Navigator Class shares.
Primary Class shares of the Fund are subject to an annual distribution fee
of up to 0.75% of the average daily net assets of the Primary Class shares of
the Fund and an annual service fee of 0.25% of the average daily net assets of
the Primary Class shares of the Fund under a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
2. NAVIGATOR CLASS SHARES. Navigator Class shares are offered and sold
without imposition of an initial sales charge or a CDSC and are not subject to
any distribution or service fees.
Navigator Class shares of the Fund are available for purchase only by: (i)
institutional clients of Legg Mason Trust Company ("Trust Company") for which
Trust Company exercises discretionary investment management responsibility and
accounts of the customers with such Institutional Clients; (ii) qualified
retirement plans managed on a discretionary basis and having net assets of at
least $200 million; (iii) clients of Bartlett & Co. who, as of December 19,
1996, were shareholders of Bartlett Short Term Bond Fund or Bartlett Fixed
Income Fund and for whom Bartlett acts as an ERISA fiduciary; (iv) certain
institutions that were clients of Fairfield Group, Inc. as of February 28, 1999
for investment of their own monies and monies for which they act in a fiduciary
capacity; (v) Class Y shareholders of the Bartlett Funds as of September __,
1999; and (vi) any qualified retirement plan of Legg Mason, Inc. or any of its
affiliates. Navigator Class shares are also available for purchase by exchange,
as described below.
B. EXPENSE ALLOCATIONS OF EACH CLASS:
Certain expenses may be attributable to a particular Class of shares of
the Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a PRO RATA basis by the
outstanding shares of that Class.
In addition to the distribution and service fees described above, each
Class may also pay a different amount of the following other expenses:
(1) legal, printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, and proxies to current shareholders of a
specific Class;
(2) Blue Sky fees incurred by a specific Class of shares;
(3) SEC registration fees incurred by a specific Class of shares;
(4) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(5) Directors' fees incurred as a result of issues relating to a
specific Class of shares;
(6) litigation expenses or other legal expenses relating to a
specific Class of shares;
(7) transfer agent fees and shareholder servicing expenses
identified as being attributable to a specific Class; and
- 2 -
<PAGE>
(8) such other expenses actually incurred in a different amount by
a Class or related to a Class' receipt of services of a
different kind or to a different degree than another Class.
C. EXCHANGE PRIVILEGES:
Primary Class and Navigator Class shares of the Fund may be exchanged for
shares of the corresponding Class of other Legg Mason funds, or may be acquired
through an exchange of shares of the corresponding Class of other Legg Mason
funds.
Legg Mason U.S. Government Money Market Portfolio, Legg Mason Cash Reserve
Trust and Legg Mason Tax Exempt Trust (collectively referred to as "Legg Mason
Money Market Funds") currently offer only one class of shares. So long as the
Legg Mason Money Market Funds offer only a single class of shares, Primary Class
and Navigator Class shares of the Fund may be exchanged for shares of those Legg
Mason Money Market Funds, or may be acquired through an exchange of shares of
those Money Market Funds. An investor exchanging from a Legg Mason Money Market
Fund may exchange only into the class of shares the investor is eligible to
purchase.
These exchange privileges may be modified or terminated by the Fund in
certain instances, and exchanges may be made only into funds that are legally
available for sale in the investor's state of residence.
D. CLASS DESIGNATION:
Subject to approval by the Board of Directors, the Fund may alter the
nomenclature for the designations of one or more of its Classes of shares.
E. ADDITIONAL INFORMATION:
This Multiple Class Plan is qualified by and subject to the terms of the
then current prospectus for the applicable Classes; provided, however, that none
of the terms set forth in any such prospectus shall be inconsistent with the
terms of the Classes contained in this Plan. The prospectus for the Fund
contains additional information about the Classes and the Fund's multiple class
structure.
F. DATE OF EFFECTIVENESS:
This Multiple Class Plan is effective on ___________ 1997, provided that
this Plan shall not become effective with respect to the Fund unless such action
has first been approved by the vote of a majority of the Board of Directors of
Legg Mason Global Trust, Inc. and by vote of a majority of those directors who
are not interested persons.
IN WITNESS WHEREOF, the Corporation has executed this Multiple Class Plan
on the day and year set forth below:
Date: _________________ ___, 1999 LEGG MASON GLOBAL TRUST, INC.
Attest: By:
------------------------- ------------------------------
By:
-----------------------------
- 3 -
EXHIBIT 10(g)
FORM OF MULTIPLE CLASS PLAN
LEGG MASON GLOBAL TRUST, INC.
Legg Mason Global Trust, Inc. (the "Corporation") hereby adopts this
Multiple Class Plan pursuant to Rule 18f-3 under the Investment Company Act of
1940, as amended (the "1940 Act"), on behalf of Legg Mason Emerging Markets
Trust (the "Fund").
A. GENERAL DESCRIPTION OF CLASSES THAT ARE OFFERED:
------------------------------------------------
1. PRIMARY CLASS SHARES. Primary Class shares of the Fund are offered and
sold without imposition of an initial sales charge or a CDSC.
Primary Class shares of the Fund are available to all investors except
those qualified to purchase Navigator Class shares.
Primary Class shares of the Fund are subject to an annual distribution fee
of up to 0.75% of the average daily net assets of the Primary Class shares of
the Fund and an annual service fee of 0.25% of the average daily net assets of
the Primary Class shares of the Fund under a plan of distribution adopted
pursuant to Rule 12b-1 under the 1940 Act.
<PAGE>
2. NAVIGATOR CLASS SHARES. Navigator Class shares are offered and sold
without imposition of an initial sales charge or a CDSC and are not subject to
any distribution or service fees.
Navigator Class shares of the Fund are available for purchase only by: (i)
institutional clients of Legg Mason Trust Company ("Trust Company") for which
Trust Company exercises discretionary investment management responsibility and
accounts of the customers with such Institutional Clients; (ii) qualified
retirement plans managed on a discretionary basis and having net assets of at
least $200 million; (iii) clients of Bartlett & Co. who, as of December 19,
1996, were shareholders of Bartlett Short Term Bond Fund or Bartlett Fixed
Income Fund and for whom Bartlett acts as an ERISA fiduciary; (iv) certain
institutions that were clients of Fairfield Group, Inc. as of February 28, 1999
for investment of their own monies and monies for which they act in a fiduciary
capacity; (v) Class Y shareholders of the Bartlett Funds as of September __,
1999; and (vi) any qualified retirement plan of Legg Mason, Inc. or any of its
affiliates. Navigator Class shares are also available for purchase by exchange,
as described below.
B. EXPENSE ALLOCATIONS OF EACH CLASS:
----------------------------------
Certain expenses may be attributable to a particular Class of shares of
the Fund ("Class Expenses"). Class Expenses are charged directly to the net
assets of the particular Class and, thus, are borne on a PRO RATA basis by the
outstanding shares of that Class.
In addition to the distribution and service fees described above, each
Class may also pay a different amount of the following other expenses:
(1) legal, printing and postage expenses related to preparing and
distributing materials such as shareholder reports,
prospectuses, and proxies to current shareholders of a
specific Class;
(2) Blue Sky fees incurred by a specific Class of shares;
(3) SEC registration fees incurred by a specific Class of shares;
(4) expenses of administrative personnel and services required to
support the shareholders of a specific Class of shares;
(5) Directors' fees incurred as a result of issues relating to a
specific Class of shares;
(6) litigation expenses or other legal expenses relating to a
specific Class of shares;
(7) transfer agent fees and shareholder servicing expenses
identified as being attributable to a specific Class; and
- 2 -
<PAGE>
(8) such other expenses actually incurred in a different amount by
a Class or related to a Class' receipt of services of a
different kind or to a different degree than another Class.
C. EXCHANGE PRIVILEGES:
--------------------
Primary Class and Navigator Class shares of the Fund may be
exchanged for shares of the corresponding Class of other Legg Mason funds, or
may be acquired through an exchange of shares of the corresponding Class of
other Legg Mason funds.
Legg Mason U.S. Government Money Market Portfolio, Legg Mason Cash Reserve
Trust and Legg Mason Tax Exempt Trust (collectively referred to as "Legg Mason
Money Market Funds") currently offer only one class of shares. So long as the
Legg Mason Money Market Funds offer only a single class of shares, Primary Class
and Navigator Class shares of the Fund may be exchanged for shares of those
Legg Mason Money Market Funds, or may be acquired through an exchange of shares
of those Legg Mason Money Market Funds. An investor exchanging from a Legg Mason
Money Market Fund may exchange only into the class of shares the investor is
eligible to purchase.
These exchange privileges may be modified or terminated by the Fund in
certain instances, and exchanges may be made only into funds that are legally
available for sale in the investor's state of residence.
D. CLASS DESIGNATION:
------------------
Subject to approval by the Board of Directors, the Fund may alter the
nomenclature for the designations of one or more of its Classes of shares.
E. ADDITIONAL INFORMATION:
-----------------------
This Multiple Class Plan is qualified by and subject to the terms of the
then current prospectus for the applicable Classes; provided, however, that none
of the terms set forth in any such prospectus shall be inconsistent with the
terms of the Classes contained in this Plan. The prospectus for the Fund
contains additional information about the Classes and the Fund's multiple class
structure.
F. DATE OF EFFECTIVENESS:
----------------------
This Multiple Class Plan is effective on _________ ___, provided that this
Plan shall not become effective with respect to the Fund unless such action has
first been approved by the vote of a majority of the Board of Directors of Legg
Mason Global Trust, Inc. and by vote of a majority of those directors who are
not interested persons.
IN WITNESS WHEREOF, the Corporation has executed this Multiple Class Plan
on the day and year set forth below:
Date: _________________ ___, 1999 LEGG MASON GLOBAL TRUST, INC.
Attest: By:
------------------------- ------------------------------
By:
-----------------------------
- 3 -
EXHIBIT 11
KIRKPATRICK & LOCKHART LLP
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
www.kl.com
ARTHUR J. BROWN
(202) 778-9046
[email protected]
July 2, 1999
Legg Mason Global Trust, Inc.
100 Light Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
You have requested our opinion, as counsel to Legg Mason Global Trust,
Inc. (the "Company"), a Maryland corporation, and Legg Mason International
Equity Trust (the "Acquiring Fund"), a series thereof, as to certain matters
regarding the issuance of Shares of the Acquiring Fund in connection with the
reorganization of Bartlett Value International Fund (the "Acquired Fund"), a
series of Bartlett Capital Trust (the "Trust"), a Massachusetts business trust,
into the Acquiring Fund, as provided for in the Agreement and Plan of
Reorganization and Termination between the Company, on behalf of the Acquiring
Fund, and the Trust, on behalf of the Acquired Fund (the "Agreement"). The
Agreement provides for the Acquired Fund to transfer its assets to the Acquiring
Fund in exchange solely for the issuance of Shares and the Acquiring Fund's
assumption of the liabilities of the Acquired Fund. (As used in this letter, the
term "Shares" means the newly-designated Class A, and redesignated Primary Class
and Navigator Class, shares of common stock of the Acquiring Fund issued in
connection with the Agreement.)
As such counsel, we have examined certified or other copies, believed by
us to be genuine, of the Company's Articles of Incorporation, dated December 31,
1992, as supplemented November 4, 1994 and February 15, 1996, and amended April
11, 1995, June 6, 1996 and June 30, 1999, and Bylaws, dated December 31, 1992,
and such other documents relating to its organization and operation as we have
deemed relevant to our opinion, as set forth herein. Our opinion is limited to
the laws and facts in existence on the date hereof, and it is further limited to
the laws (other than the conflict of law rules) of the State of Maryland that in
our experience are normally applicable to the issuance of shares by corporations
and to the Securities Act of 1933, as amended (the "1933 Act"), the Investment
Company Act of 1940, as amended (the "1940 Act") and the rules and regulations
of the Securities and Exchange Commission (the "SEC") thereunder.
<PAGE>
Based on the foregoing, we are of the opinion that the issuance of the
Shares has been duly authorized by the Company and that, when issued and sold in
accordance with the terms contemplated by the Company's registration statement
on Form N-14 ("Registration Statement"), including receipt by the Company of
full payment for the Shares and compliance with the 1933 Act and the 1940 Act,
the Shares will have been legally issued, fully paid, and non-assessable.
We hereby consent to this opinion accompanying the Registration Statement
when it is filed with the SEC and to the reference to our firm in the
Registration Statement.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Arthur J. Brown
-------------------
Arthur J. Brown
EXHIBIT 12
-----------------------------
KIRKPATRICK & LOCKHART LLP
-----------------------------
1800 MASSACHUSETTS AVENUE, N.W.
2ND FLOOR
WASHINGTON, D.C. 20036-1800
TELEPHONE (202) 778-9000
FACSIMILE (202) 778-9100
July 2, 1999
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
100 Light Street
Baltimore, Maryland 21202
Re: REORGANIZATION TO COMBINE A SERIES OF A MASSACHUSETTS
BUSINESS TRUST AND A SERIES OF A MARYLAND CORPORATION
Ladies and Gentleman:
Bartlett Capital Trust, a Massachusetts business trust ("Trust"), on
behalf of Bartlett Value International Fund, a segregated portfolio of assets
("series") thereof ("Target"), and Legg Mason Global Trust, Inc., a Maryland
corporation ("Corporation"), on behalf of its Legg Mason International Equity
Trust series ("Acquiring Fund"), have requested our opinion as to certain
federal income tax consequences of the proposed acquisition of Target by
Acquiring Fund pursuant to an Agreement and Plan of Reorganization and
Termination between them dated as of July 2, 1999 ("Plan").(1) Specifically,
each Investment Company has requested our opinion --
(1) that Acquiring Fund's acquisition of Target's assets in
exchange solely for voting shares of common stock of Acquiring Fund
("Acquiring Fund Shares") and Acquiring Fund's assumption of Target's
liabilities, followed by Target's distribution of those shares PRO
RATA to its shareholders of record determined as of the Effective Time
(as herein defined) ("Shareholders") constructively in exchange for
the Shareholders' shares of beneficial interest in Target ("Target
Shares") (such transactions sometimes being referred to herein
collectively as the "Reorganization"), will qualify as a
reorganization within the meaning of section 368(a)(1)(C), (2) and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b);
- ----------
(1) Target and Acquiring Fund are sometimes referred to herein individually as a
"Fund" and collectively as the "Funds," and Trust and Corporation are sometimes
referred to herein individually as an "Investment Company" and collectively as
the "Investment Companies."
(2) All "section" references are to the Internal Revenue Code of 1986, as
amended ("Code"), unless otherwise noted, and all "Treas. Reg. ss." references
are to the regulations under the Code ("Regulations").
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 2
(2) that neither the Funds nor the Shareholders will recognize
gain or loss on the Reorganization; and
(3) regarding the basis and holding period after the
Reorganization of the transferred assets and the Acquiring Fund Shares
issued pursuant thereto.
In rendering this opinion, we have examined (1) the Plan, (2) the proposed
Prospectus/Proxy Statement to be furnished in connection with the solicitation
of proxies by Trust's board of trustees for use at a special meeting of Target's
shareholders to be held in September 1999, and at any adjournment thereof
("Proxy Statement"), included in the registration statement on Form N-14 filed
by Corporation with the Securities and Exchange Commission ("SEC") on or about
the date hereof, (3) each Fund's currently effective prospectuses and statement
of additional information ("SAI"), and (4) other documents we have deemed
necessary or appropriate for the purposes hereof. As to various matters of fact
material to this opinion, we have relied, exclusively and without independent
verification, on statements of responsible officers of each Investment Company
and the representations described below and made in the Plan (as contemplated in
paragraph 6.6 thereof) (collectively, "Representations").
FACTS
Trust is a Massachusetts business trust; Target is a series thereof.
Before January 1, 1997, Trust claimed to be classified for federal income tax
purposes as an association taxable as a corporation and will not elect not to be
so classified. Corporation is a Maryland corporation; Acquiring Fund is a series
thereof. Each Investment Company is registered with the SEC as open-end
management investment company under the Investment Company Act of 1940, as
amended ("1940 Act").
The Target Shares are divided into three classes, designated Class A,
Class C, and Class Y shares ("Class A Target Shares," "Class C Target Shares,"
and "Class Y Target Shares," respectively). The Acquiring Fund Shares also are
divided into three classes, designated Class A, Primary Class, and Navigator
Class shares ("Class A Acquiring Fund Shares," "Primary Class Acquiring Fund
Shares," and "Navigator Class Acquiring Fund Shares," respectively). Each class
of Acquiring Fund Shares is substantially similar to the corresponding class of
Target Shares (the Funds' Class A Shares correspond to each other, Class C
Target Shares correspond to Primary Class Acquiring Fund Shares, and Class Y
Target Shares correspond to Navigator Class Acquiring Fund Shares), except that
Class C Target Shares are subject to a contingent deferred sales charge, while
Primary Class Acquiring Fund Shares are not subject to such a charge.
The Reorganization, together with related acts necessary to consummate the
same ("Closing"), will take place on or about September 30, 1999, or such other
date as to which the Investment Companies agree. All acts taking place at the
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 3
Closing shall be deemed to take place simultaneously as of the close of business
on the date thereof or at such other time as to which the Investment Companies
agree ("Effective Time").
The Funds' investment objectives, policies, and restrictions (which are
described in the Proxy Statement and the Funds' prospectuses and SAIs) are
substantially similar. For the reasons, and after consideration of the factors,
described in the Proxy Statement, each Investment Company's board of
trustees/directors approved the Plan, subject to approval of Target's
shareholders. In doing so, each board, including a majority of its members who
are not "interested persons" (as that term is defined in the 1940 Act) of either
Investment Company or their respective investment manager or investment
advisers, determined that (1) the Reorganization is in its Fund's best
interests, (2) the terms of the Reorganization are fair and reasonable, and (3)
the interests of its Fund's shareholders will not be diluted as a result of the
Reorganization.
The Plan, which specifies that it is intended to be a "plan of
reorganization" for federal income tax purposes, provides in relevant part for
the following:
1. The acquisition by Acquiring Fund of all assets, including all
cash, cash equivalents, securities, receivables (including interest and
dividends receivable), claims and rights of action, rights to register
shares under applicable securities laws, books and records, deferred and
prepaid expenses shown as assets on Target's books, and other property,
owned by Target at the Effective Time (collectively "Assets"), in exchange
solely for the following:
(a) the number of full and fractional (rounded to the third
decimal place) (i) Class A Acquiring Fund Shares determined by
dividing the net value of Target (computed as set forth in paragraph
2.1 of the Plan) ("Target Value") attributable to the Class A Target
Shares by the net asset value ("NAV") of a Class A Acquiring Fund
Share (computed as set forth in paragraph 2.2 of the Plan), (ii)
Primary Class Acquiring Fund Shares determined by dividing the
Target Value attributable to the Class C Target Shares by the NAV of
a Primary Class Acquiring Fund Share (as so computed), and (iii)
Navigator Class Acquiring Fund Shares determined by dividing the
Target Value attributable to the Class Y Target Shares by the NAV of
a Navigator Class Acquiring Fund Share (as so computed), and
(b) Acquiring Fund's assumption of all of Target's liabilities,
debts, obligations, and duties of whatever kind or nature, whether
absolute, accrued, contingent, or otherwise, whether or not arising
in the ordinary course of business, whether or not
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 4
determinable at the Effective Time, and whether or not specifically
referred to in the Plan (collectively "Liabilities"),
2. The constructive distribution of such Acquiring Fund Shares to
the Shareholders,(3) and
3. The subsequent termination of Target.
The distribution described in 2. will be accomplished by Acquiring Fund's
transfer agent's opening accounts on Acquiring Fund's share transfer books in
the Shareholders' names and transferring such Acquiring Fund Shares thereto.
Each Shareholder's account will be credited with the respective PRO RATA number
of full and fractional (rounded to the third decimal place) Acquiring Fund
Shares due that Shareholder, by class (I.E., the account for a Shareholder of
Class A Target Shares shall be credited with the respective PRO RATA number of
Class A Acquiring Fund Shares due that Shareholder, the account for a
Shareholder of Class C Target Shares shall be credited with the respective PRO
RATA number of Primary Class Acquiring Fund Shares due that Shareholder, and the
account for a Shareholder of Class Y Target Shares shall be credited with the
respective PRO RATA number of Navigator Class Acquiring Fund Shares due that
Shareholder). All outstanding Target Shares, including those represented by
certificates, simultaneously will be canceled on Target's share transfer books.
REPRESENTATIONS
Trust has represented and warranted to us as follows:
1. Trust is a trust operating under a written declaration of trust
("Declaration of Trust"), the beneficial interest in which is divided into
transferable shares, that is duly organized and validly existing under the
laws of the Commonwealth of Massachusetts, and a copy of the Declaration of
Trust is on file with the Secretary of the Commonwealth of Massachusetts.
It is duly registered as an open-end management investment company under
- ----------
(3) The Plan provides that, at the time of the Reorganization, the Target Shares
will in effect be constructively exchanged for Acquiring Fund Shares,
certificates for which will not be issued. Accordingly, Shareholders will not be
required to and will not make physical delivery of their Target Shares, nor will
they receive certificates for Acquiring Fund Shares, pursuant to the
Reorganization. Target Shares nevertheless will be treated as having been
exchanged for Acquiring Fund Shares, and the tax consequences to the
Shareholders will be unaffected by the absence of Acquiring Fund Share
certificates. SEE discussion at V. under "Analysis," below.
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 5
the 1940 Act, and such registration will be in full force and effect at the
Effective Time. Target is a duly established and designated series thereof;
2. Target is a "fund" as defined in section 851(g)(2); it qualified
for treatment as a regulated investment company under Subchapter M of the
Code ("RIC") for each past taxable year since it commenced operations and
will continue to meet all the requirements for such qualification for its
current taxable year; and it has no earnings and profits accumulated in any
taxable year in which the provisions of Subchapter M did not apply to it.
The Assets will be invested at all times through the Effective Time in a
manner that ensures compliance with the foregoing;
3. The Liabilities were incurred by Target in the ordinary course of
its business and are associated with the Assets;
4. Target is not under the jurisdiction of a court in a proceeding
under Title 11 of the United States Code or similar case within the meaning
of section 368(a)(3)(A);
5. Not more than 25% of the value of Target's total assets (excluding
cash, cash items, and U.S. government securities) is invested in the stock
and securities of any one issuer, and not more than 50% of the value of
such assets is invested in the stock and securities of five or fewer
issuers; and
6. Target will be terminated as soon as reasonably practicable after
the Effective Time, but in all events within twelve months thereafter.
CORPORATION has represented and warranted to us as follows:
1. Corporation is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Maryland, and a copy of its
Articles of Incorporation is on file with the Secretary of State of
Maryland. It is duly registered as an open-end management investment
company under the 1940 Act, and such registration will be in full force and
effect at the Effective Time. Acquiring Fund is a duly established and
designated series thereof;
2. Acquiring Fund is a "fund" as defined in section 851(g)(2); it
qualified for treatment as a RIC for each past taxable year since it
commenced operations and will continue to meet all the requirements for
such qualification for its current taxable year; Acquiring Fund intends to
continue to meet all such requirements for the next taxable year; and it
has no earnings and profits accumulated in any taxable year in which the
provisions of Subchapter M did not apply to it;
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3. No consideration other than Acquiring Fund Shares (and Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for the
Assets in the Reorganization;
4. Acquiring Fund has no plan or intention to issue additional
Acquiring Fund Shares following the Reorganization except for shares issued
in the ordinary course of its business as a series of an open-end
investment company; nor does Acquiring Fund have any plan or intention to
redeem or otherwise reacquire any Acquiring Fund Shares issued to the
Shareholders pursuant to the Reorganization, except to the extent it is
required by the 1940 Act to redeem any of its shares presented for
redemption at NAV in the ordinary course of that business;
5. Following the Reorganization, Acquiring Fund (a) will continue
Target's "historic business" (within the meaning of Treas. Reg.ss.
1.368-1(d)(2)), (b) use a significant portion of Target's historic business
assets (within the meaning of Treas. Reg.ss. 1.368-1(d)(3)) in a business,
(c) has no plan or intention to sell or otherwise dispose of any of the
Assets, except for dispositions made in the ordinary course of that
business and dispositions necessary to maintain its status as a RIC, and
(d) expects to retain substantially all the Assets in the same form as it
receives them in the Reorganization, unless and until subsequent investment
circumstances suggest the desirability of change or it becomes necessary to
make dispositions thereof to maintain such status;
6. There is no plan or intention for Acquiring Fund to be dissolved or
merged into another corporation or a business trust or any "fund" thereof
(within the meaning of section 851(g)(2)) following the Reorganization;
7. Immediately after the Reorganization, (a) not more than 25% of the
value of Acquiring Fund's total assets (excluding cash, cash items, and
U.S. government securities) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets will
be invested in the stock and securities of five or fewer issuers; and
8. Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it at any time
during the past five years directly or indirectly owned, any shares of
Target.
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EACH INVESTMENT COMPANY has represented and warranted to us as follows:
1. The fair market value of the Acquiring Fund Shares received by each
Shareholder will be approximately equal to the fair market value of its
Target Shares constructively surrendered in exchange therefor;
2. Its management (a) is unaware of any plan or intention of
Shareholders to redeem, sell, or otherwise dispose of (i) any portion of
their Target Shares before the Reorganization to any person related (within
the meaning of Treas. Reg.ss. 1.368-1(e)(3)) to either Fund or (ii) any
portion of the Acquiring Fund Shares to be received by them in the
Reorganization to any person related (as so defined) to Acquiring Fund, (b)
does not anticipate dispositions of those Acquiring Fund Shares at the time
of or soon after the Reorganization to exceed the usual rate and frequency
of dispositions of shares of Target as a series of an open-end investment
company, (c) expects that the percentage of Shareholder interests, if any,
that will be disposed of as a result of or at the time of the
Reorganization will be DE MINIMIS, and (d) does not anticipate that there
will be extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization;
3. The Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization;
4. Immediately following consummation of the Reorganization, Acquiring
Fund will hold substantially the same assets and be subject to the same
liabilities that Target held or was subject to immediately prior thereto
(in addition to the assets and liabilities Acquiring Fund held or was
subject to), plus any liabilities and expenses of the Funds incurred in
connection with the Reorganization;
5. The fair market value of the Assets on a going concern basis will
equal or exceed the Liabilities to be assumed by Acquiring Fund and those
to which the Assets are subject;
6. There is no intercompany indebtedness between the Funds that was
issued or acquired, or will be settled, at a discount;
7. Pursuant to the Reorganization, Target will transfer to Acquiring
Fund, and Acquiring Fund will acquire, at least 90% of the fair market
value of the net assets, and at least 70% of the fair market value of the
gross assets, held by Target immediately before the Reorganization. For
purposes of this representation, any amounts used by Target to pay its
Reorganization expenses and to make redemptions and distributions
immediately before the Reorganization (except (a) redemptions not made as
part of the Reorganization and (b) distributions made to conform to its
policy of distributing all or substantially all of its income and gains to
avoid the obligation to pay federal income tax and/or the excise tax under
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section 4982) will be included as assets thereof held immediately before
the Reorganization;
8. None of the compensation received by any Shareholder who is an
employee of or service provider to Target will be separate consideration
for, or allocable to, any of the Target Shares held by such Shareholder;
none of the Acquiring Fund Shares received by any such Shareholder will be
separate consideration for, or allocable to, any employment agreement,
investment advisory agreement, or other service agreement; and the
consideration paid to any such Shareholder will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services;
9. Immediately after the Reorganization, the Shareholders will not own
shares constituting "control" of Acquiring Fund within the meaning of
section 304(c); and
10. Neither Fund will be reimbursed for any expenses incurred by it or
on its behalf in connection with the Reorganization unless those expenses
are solely and directly related to the Reorganization (determined in
accordance with the guidelines set forth in Rev. Rul. 73-54, 1973-1 C.B.
187).
OPINION
Based solely on the facts set forth above, and conditioned on the
Representations being true at the time of the Closing and the Reorganization
being consummated in accordance with the Plan, our opinion (as explained more
fully in the next section of this letter) is as follows:
1. Acquiring Fund's acquisition of the Assets in exchange solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities,
followed by Target's distribution of those shares PRO RATA to the
Shareholders constructively in exchange for their Target Shares, will
qualify as a reorganization within the meaning of section 368(a)(1)(C), and
each Fund will be "a party to a reorganization" within the meaning of
section 368(b) of the Code;
2. Target will recognize no gain or loss on the transfer of the Assets
to Acquiring Fund in exchange solely for Acquiring Fund Shares and
Acquiring Fund's assumption of the Liabilities or on the subsequent
distribution of those shares to the Shareholders in constructive exchange
for their Target Shares;
3. Acquiring Fund will recognize no gain or loss on its receipt of the
Assets in exchange solely for Acquiring Fund Shares and its assumption of
the Liabilities;
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4. Acquiring Fund's basis for the Assets will be the same as Target's
basis therefor immediately before the Reorganization, and Acquiring Fund's
holding period for the Assets will include Target's holding period
therefor;
5. A Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares pursuant
to the Reorganization; and
6. A Shareholder's aggregate basis for the Acquiring Fund Shares to be
received by it in the Reorganization will be the same as the aggregate
basis for its Target Shares to be constructively surrendered in exchange
for those Acquiring Fund Shares, and its holding period for those Acquiring
Fund Shares will include its holding period for those Target Shares,
provided they are held as capital assets by the Shareholder at the
Effective Time.
The foregoing opinion (1) is based on, and is conditioned on the continued
applicability of, the provisions of the Code and the Regulations, judicial
decisions, and rulings and other pronouncements of the Internal Revenue Service
("Service") in existence on the date hereof and (2) is applicable only to the
extent each Fund is solvent. We express no opinion about the tax treatment of
the transactions described herein if either Fund is insolvent.
ANALYSIS
I. THE REORGANIZATION WILL QUALIFY AS A C REORGANIZATION, AND EACH FUND WILL
BE A PARTY TO A REORGANIZATION.
A. EACH FUND IS A SEPARATE CORPORATION.
A reorganization under section 368(a)(1)(C) (a "C Reorganization")
involves the acquisition by one corporation, in exchange solely for all or a
part of its voting stock, of substantially all of the properties of another
corporation. For a transaction to qualify under that section, therefore, both
entities involved therein must be corporations (or associations taxable as
corporations). Trust, however, is a Massachusetts business trust, not a
corporation, and each Fund is a separate series of an Investment Company.
Treasury Regulation section 301.7701-4(b) provides that certain
arrangements known as trusts (because legal title is conveyed to trustees for
the benefit of beneficiaries) will not be classified as trusts for purposes of
the Code because they are not simply arrangements to protect or conserve the
property for the beneficiaries. That section of the Regulations states that
these "business or commercial trusts" generally are created by the beneficiaries
simply as devices to carry on profit-making businesses that normally would have
been carried on through business organizations classified as corporations or
partnerships under the Code and concludes that the fact that any organization is
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Page 10
technically cast in the trust form will not change its real character if it "is
more properly classified as a business entity under [Treas. Reg.] ss.
301.7701-2."(4) Furthermore, pursuant to Treas. Reg. ss. 301.7701-4(c), "[a]n
`investment' trust will not be classified as a trust if there is a power under
the trust agreement to vary the investment of the certificate holders. SEE
COMMISSIONER V. NORTH AMERICAN BOND TRUST, 122 F.2d 545 (2d Cir. 1941), CERT.
DENIED, 314 U.S. 701 (1942)."
Based on these criteria, Trust does not qualify as a trust for federal
income tax purposes.(5) Trust is not simply an arrangement to protect or
conserve property for the beneficiaries but is designed to carry on a
profit-making business. Furthermore, while Trust is an "investment trust," there
is a power under the Declaration of Trust to vary its shareholders' investment
therein. Trust does not have a fixed pool of assets -- each series thereof
(including Acquiring Fund) is a managed portfolio of securities, and each
series' investment adviser has the authority to buy and sell securities for it.
Trust is not simply an arrangement to protect or conserve the property for the
beneficiaries but is designed to carry on a profit-making business. Accordingly,
we believe that Trust should not be classified as a trust, and instead should be
classified as a business entity, for federal income tax purposes.
Treasury Regulation section 301.7701-2(a) provides that "[a] business
entity with two or more members is classified for federal tax purposes as either
a corporation or a partnership." The term "corporation" is defined for those
purposes (in Treas. Reg. ss. 301.7701(2)(b)) to include corporations denominated
as such under the federal or state statute pursuant to which they were organized
and certain other entities. Any business entity that is not classified as a
corporation under that section of the Regulations (an "eligible entity") and has
at least two members can elect to be classified as either an association (and
thus a corporation) or a partnership. Treas. Reg. ss. 301.7701-3(a).
An eligible entity in existence before January 1, 1997, the effective date
of the check-the-box Regulations, "will have the same classification that the
entity claimed under [the prior Regulations]," unless it elects otherwise.
Treas. Reg. ss. 301.7701-3(b)(3)(i). Based on the reasoning stated in the second
preceding paragraph -- and the fact that under the law that existed before the
- ----------
(4) On December 10, 1996, the Service adopted Regulations for classifying
business organizations (Treas. Reg. ss.ss. 301.7701-1 through -3 and parts of
- -4, the so-called "check-the-box" regulations) to replace the provisions in the
then-existing Regulations that "have become increasingly formalistic. [The
check-the-box Regulations replace] those rules with a much simpler approach that
generally is elective." T.D. 8697, 1997-1 C.B. 215. Treasury Regulation section
301.7701-2(a) provides that "a BUSINESS ENTITY is any entity recognized for
federal tax purposes . . . that is not properly classified as a trust under
[Treas. Reg.] ss. 301.7701-4 or otherwise subject to special treatment under the
. . . Code." Trust is not subject to any such special treatment.
(5) Because Acquiring Fund is considered separate from each other series of
Trust for federal income tax purposes (see the discussion in the last paragraph
of I.A. below), the analysis in the accompanying text applies equally to
Acquiring Fund.
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the check-the-box Regulations, the word "association" had been held to include a
Massachusetts business trust (SEE HECHT V. MALLEY, 265 U.S. 144 (1924)) -- Trust
"claimed" classification under the prior Regulations as an association taxable
as a corporation. Moreover, Trust will not elect not to be so classified.
Accordingly, we believe that Trust will continue to be classified as an
association (and thus a corporation) for federal income tax purposes.
The Investment Companies as such, however, are not participating in the
Reorganization, but rather two separate series thereof (the Funds) are the
participants. Ordinarily, a transaction involving segregated pools of assets
such as the Funds could not qualify as a reorganization, because the pools would
not be separate taxable entities that constitute corporations. Under section
851(g), however, each Fund is treated as a separate corporation for all purposes
of the Code save the definitional requirement of section 851(a) (which is
satisfied by the respective Investment Companies). Accordingly, we believe that
each Fund is a separate corporation, and their shares are treated as shares of
corporate stock, for purposes of section 368(a)(1)(C).
B. TRANSFER OF "SUBSTANTIALLY ALL" OF TARGET'S PROPERTIES.
For an acquisition to qualify as a C Reorganization, the acquiring
corporation must acquire "substantially all of the properties" of the transferor
corporation in exchange solely for all or part of the acquiring corporation's
stock. For purposes of issuing private letter rulings, the Service considers the
transfer of at least 90% of the fair market value of the transferor's net
assets, and at least 70% of the fair market value of its gross assets, held
immediately before the reorganization to satisfy the "substantially all"
requirement. Rev. Proc. 77-37, 1977-2 C.B. 568. The Reorganization will involve
such a transfer. Accordingly, we believe that the Reorganization will involve
the transfer to Acquiring Fund of substantially all of Target's properties.
C. QUALIFYING CONSIDERATION.
The acquiring corporation in an acquisition intended to qualify as a C
Reorganization must acquire at least 80% (by fair market value) of the
transferor's property solely for voting stock. Section 368(a)(2)(B)(iii). The
assumption of liabilities by the acquiring corporation or its acquisition of
property subject to liabilities normally are disregarded (section 368(a)(1)(C)),
but the amount of any such liabilities will be treated as money paid for the
transferor's property if the acquiring corporation exchanges any money or
property (other than its voting stock) therefor. Section 368(a)(2)(B). Because
Acquiring Fund will exchange only Acquiring Fund Shares, and no money or other
property, for the Assets, we believe that the Reorganization will satisfy the
solely-for-voting-stock requirement to qualify as a C Reorganization.
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D. DISTRIBUTION BY TARGET.
Section 368(a)(2)(G)(i) provides that a transaction will not qualify as a
C Reorganization unless the corporation whose properties are acquired
distributes the stock it receives and its other property in pursuance of the
plan of reorganization. Under the Plan -- which we believe constitutes a "plan
of reorganization" within the meaning of Treas. Reg. ss. 1.368-2(g) -- Target
will distribute all the Acquiring Fund Shares it receives to the Shareholders in
constructive exchange for their Target Shares; as soon as is reasonably
practicable thereafter, Target will be terminated. Accordingly, we believe that
the requirements of section 368(a)(2)(G)(i) will be satisfied.
E. REQUIREMENTS OF CONTINUITY.
Treasury Regulation section 1.368-1(b) sets forth two prerequisites to a
valid reorganization: (1) a continuity of the business enterprise through the
issuing corporation -- defined in the Regulation as "the acquiring corporation
(as that term is used in section 368(a))," with an exception not relevant here
- -- under the modified corporate form as described in Treas. Reg. ss. 1.368-1(d)
("continuity of business enterprise") and (2) a continuity of interest as
described in Treas. Reg. ss. 1.368-1(e) ("continuity of interest").
1. CONTINUITY OF BUSINESS ENTERPRISE.
To satisfy the continuity of business enterprise requirement of Treas.
Reg. ss. 1.368-1(d)(1), the issuing corporation must either (i) continue the
target corporation's historic business ("business continuity") or (ii) use a
significant portion of the target corporation's historic business assets in a
business ("asset continuity").
While there is no authority that deals directly with the continuity of
business enterprise requirement in the context of a transaction such as the
Reorganization, Rev. Rul. 87-76, 1987-2 C.B. 84, deals with a somewhat similar
situation. In that ruling, P was a RIC that invested exclusively in municipal
bonds. P acquired the assets of T in exchange for P common stock in a
transaction that was intended to qualify as a C Reorganization. Prior to the
exchange, T sold its entire portfolio of corporate stocks and bonds and
purchased a portfolio of municipal bonds. The Service held that this transaction
did not qualify as a reorganization for the following reasons: (1) because T had
sold its historic assets prior to the exchange, there was no asset continuity;
and (2) the failure of P to engage in the business of investing in corporate
stocks and bonds after the exchange caused the transaction to lack business
continuity as well.
The Funds' investment objectives, policies, and restrictions are
substantially similar. Moreover, after the Reorganization Acquiring Fund will
continue Target's historic business (within the meaning of Treas. Reg. ss.
1.368-1(d)(2)). Accordingly, there will be business continuity.
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Acquiring Fund not only will continue Target's historic business, but it
also will use in that business a significant portion of Target's historic
business assets (within the meaning of Treas. Reg. ss. 1.368-1(d)(3)).
Accordingly, there will be asset continuity as well.
For all the foregoing reasons, we believe that the Reorganization will
satisfy the continuity of business enterprise requirement.
2. CONTINUITY OF INTEREST.
Treasury Regulation section 1.368-1(e)(1)(i) provides that "[c]ontinuity
of interest requires that in substance a substantial part of the value of the
proprietary interests in the target corporation be preserved in the
reorganization. A proprietary interest in the target corporation is preserved
if, in a potential reorganization, it is exchanged for a proprietary interest in
the issuing corporation . . . ." That section of the Regulations goes on to
provide that "[h]owever, a proprietary interest in the target corporation is not
preserved if, in connection with the potential reorganization, . . . stock of
the issuing corporation furnished in exchange for a proprietary interest in the
target corporation in the potential reorganization is redeemed. All facts and
circumstances must be considered in determining whether, in substance, a
proprietary interest in the target corporation is preserved."
For purposes of issuing private letter rulings, the Service considers the
continuity of interest requirement satisfied if ownership in an acquiring
corporation on the part of a transferor corporation's former shareholders is
equal in value to at least 50% of the value of all the formerly outstanding
shares of the transferor corporation. Rev. Proc. 77-37, SUPRA; BUT SEE Rev. Rul.
56-345, 1956-2 C.B. 206 (continuity of interest was held to exist in a
reorganization of two RICs where immediately after the reorganization 26% of the
shares were redeemed to allow investment in a third RIC); SEE ALSO REEF CORP. V.
COMMISSIONER, 368 F.2d 125 (5th Cir. 1966), CERT. DENIED, 386 U.S. 1018 (1967)
(a redemption of 48% of a transferor corporation's stock was not a sufficient
shift in proprietary interest to disqualify a transaction as a reorganization
under section 368(a)(1)(F) ("F Reorganization"), even though only 52% of the
transferor's shareholders would hold all the transferee's stock); AETNA CASUALTY
AND SURETY CO. V. U.S., 568 F.2d 811, 822-23 (2d Cir. 1976) (redemption of a
38.39% minority interest did not prevent a transaction from qualifying as an F
Reorganization); Rev. Rul. 61-156, 1961-2 C.B. 62 (a transaction qualified as an
F Reorganization even though the transferor's shareholders acquired only 45% of
the transferee's stock, while the remaining 55% of that stock was issued to new
shareholders in a public underwriting immediately after the transfer). Although
shares of both Funds held by Shareholders that are disposed of before or after
the Reorganization will be considered in determining satisfaction of the 50%
standard, the Service has recently issued private letter rulings that excepted
from that determination "shares which are required to be redeemed at the demand
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of shareholders by . . . Target or by Acquiring in the ordinary course of their
businesses as open-end investment companies (or series thereof) pursuant to
Section 22(e) of the 1940 Act." Priv. Ltr. Ruls. 9823018 (Mar. 5, 1998) and
9822053 (Mar. 3, 1998).(6)
No minimum holding period for shares of an acquiring corporation is
imposed under the Code on the acquired corporation's shareholders. Rev. Rul.
66-23, 1966-1 C.B. 67, provides generally that "unrestricted rights of ownership
for a period of time sufficient to warrant the conclusion that such ownership is
definite and substantial" will suffice and that "ordinarily, the Service will
treat five years of unrestricted . . . ownership as a sufficient period" for
continuity of interest purposes. A preconceived plan or arrangement by or among
an acquired corporation's shareholders to dispose of more than 50% of an
acquiring corporation's shares could be problematic. Shareholders with no such
preconceived plan or arrangement, however, are basically free to sell any part
of the shares received by them in the reorganization without fear of breaking
continuity of interest, because the subsequent sale will be treated as an
independent transaction from the reorganization.
There is no plan or intention of Shareholders to redeem, sell, or
otherwise dispose of (i) any portion of their Target Shares before the
Reorganization to any person related (within the meaning of Treas. Reg. ss.
1.368-1(e)(3)) to either Fund or (ii) any portion of the Acquiring Fund Shares
to be received by them in the Reorganization to any person related (as so
defined) to Acquiring Fund. Moreover, each Investment Company anticipates that
(a) dispositions of those Acquiring Fund Shares at the time of or soon after the
Reorganization will not exceed the usual rate and frequency of dispositions of
shares of Target as a series of an open-end investment company, (b) the
percentage of Shareholder interests, if any, that will be disposed of as a
result of or at the time of the Reorganization will be DE MINIMIS, and (c) there
will not be extraordinary redemptions of Acquiring Fund Shares immediately
following the Reorganization. Although Acquiring Fund's shares will be offered
for sale to the public on an ongoing basis after the Reorganization, sales of
those shares will arise out of a public offering separate and unrelated to the
Reorganization and not as a result thereof. SEE REEF CORP. V. COMMISSIONER, 368
F.2d at 134; Rev. Rul. 61-156, SUPRA. Similarly, although Shareholders may
redeem Acquiring Fund Shares pursuant to their rights as shareholders of a
series of an open-end investment company (SEE Priv. Ltr. Ruls. 9823018 and
9822053, SUPRA, and 8816064 (Jan. 28, 1988)), those redemptions will result from
- ----------
(6) Although, under section 6110(j)(3), a private letter ruling may not be cited
as precedent, tax practitioners look to such rulings as generally indicative of
the Service's views on the proper interpretation of the Code and the
Regulations. CF. ROWAN COMPANIES, INC. V. COMMISSIONER, 452 U.S. 247 (1981).
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July 2, 1999
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the exercise of those rights in the course of Acquiring Fund's business as an
open-end series and not from the C Reorganization as such.
Accordingly, we believe that the Reorganization will satisfy the
continuity of interest requirement of Treas. Reg. ss. 1.368-1(b).
F. BUSINESS PURPOSE.
All reorganizations must meet the judicially imposed requirements of the
"business purpose doctrine," which was established in GREGORY V. HELVERING, 293
U.S. 465 (1935), and is now set forth in Treas. Reg. ss.ss. 1.368-1(b), -1(c),
and -2(g) (the last of which provides that, to qualify as a reorganization, a
transaction must be "undertaken for reasons germane to the continuance of the
business of a corporation a party to the reorganization"). Under that doctrine,
a transaction must have a BONA FIDE business purpose (and not a purpose to avoid
federal income tax) to qualify as a valid reorganization. The substantial
business purposes of the Reorganization are described in the Proxy Statement.
Accordingly, we believe that the Reorganization is being undertaken for BONA
FIDE business purposes (and not a purpose to avoid federal income tax) and
therefore meets the requirements of the business purpose doctrine.
G. SATISFACTION OF SECTION 368(A)(2)(F).
Under section 368(a)(2)(F), if two or more parties to a transaction
described in section 368(a)(1) (with an exception not relevant here) were
"investment companies" immediately before the transaction, then the transaction
shall not be considered a reorganization with respect to any such investment
company and its shareholders. But that section does not apply to a participating
investment company if, among other things, it is a RIC or --
(1) not more than 25% of the value of its total assets is invested in
the stock and securities of any one issuer and
(2) not more than 50% of the value of its total assets is invested in
the stock and securities of five or fewer issuers.
In determining total assets for these purposes, cash and cash items (including
receivables) and U.S. government securities are excluded. Section
368(a)(2)(F)(iv). Each Fund will meet the requirements to qualify for treatment
as a RIC for its respective current taxable year and will satisfy the foregoing
percentage tests. Accordingly, we believe that section 368(a)(2)(F) will not
cause the Reorganization to fail to qualify as a C Reorganization with respect
to either Fund.
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For all the foregoing reasons, we believe that the Reorganization will
qualify as a C Reorganization.
H. EACH FUND WILL BE A PARTY TO A REORGANIZATION.
Section 368(b)(2) provides, in pertinent part, that in the case of a
reorganization involving the acquisition by one corporation of properties of
another -- and Treas. Reg. ss. 1.368-2(f) further provides that if one
corporation transfers substantially all its properties to a second corporation
in exchange for all or a part of the latter's voting stock (I.E., a C
Reorganization) -- the term "a party to a reorganization" includes each
corporation. Pursuant to the Reorganization, Target is transferring all its
properties to Acquiring Fund in exchange for Acquiring Fund Shares. Accordingly,
we believe that each Fund will be "a party to a reorganization."
II. TARGET WILL RECOGNIZE NO GAIN OR LOSS.
Under sections 361(a) and (c), no gain or loss shall be recognized to a
corporation that is a party to a reorganization if, pursuant to the plan of
reorganization, (1) it exchanges property solely for stock or securities in
another corporate party to the reorganization and (2) distributes that stock or
securities to its shareholders. (Such a distribution is required by section
368(a)(2)(G)(i) for a reorganization to qualify as a C Reorganization.) Section
361(c)(4) provides that sections 311 and 336 (which require recognition of gain
on certain distributions of appreciated property) shall not apply to such a
distribution.
Section 357(a) provides in pertinent part that, except as provided in
section 357(b), if a taxpayer receives property that would be permitted to be
received under section 361 without recognition of gain if it were the sole
consideration and, as part of the consideration, another party to the exchange
assumes a liability of the taxpayer or acquires from the taxpayer property
subject to a liability, then that assumption or acquisition shall not be treated
as money or other property and shall not prevent the exchange from being within
section 361. Section 357(b) applies where the principal purpose of the
assumption or acquisition was a tax avoidance purpose or not a BONA FIDE
business purpose.
As noted above, it is our opinion that the Reorganization will qualify as
a C Reorganization, each Fund will be a party to a reorganization, and the Plan
constitutes a plan of reorganization. Target will exchange the Assets solely for
Acquiring Fund Shares and Acquiring Fund's assumption of the Liabilities and
then will be terminated pursuant to the Plan, distributing those shares to its
shareholders in constructive exchange for their Target Shares. As also noted
above, it is our opinion that the Reorganization is being undertaken for BONA
FIDE business purposes (and not a purpose to avoid federal income tax); we also
do not believe that the principal purpose of Acquiring Fund's assumption of the
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Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 17
Liabilities is avoidance of federal income tax on the proposed transaction.
Accordingly, we believe that Target will recognize no gain or loss on the
Reorganization.(7)
III. ACQUIRING FUND WILL RECOGNIZE NO GAIN OR LOSS.
Section 1032(a) provides that no gain or loss shall be recognized to a
corporation on the receipt by it of money or other property in exchange for its
stock. Acquiring Fund will issue Acquiring Fund Shares to Target in exchange for
the Assets, which consist of money and securities. Accordingly, we believe that
Acquiring Fund will recognize no gain or loss on the Reorganization.
IV. ACQUIRING FUND'S BASIS FOR THE ASSETS WILL BE A CARRYOVER BASIS, AND ITS
HOLDING PERIOD WILL INCLUDE TARGET'S HOLDING PERIOD.
Section 362(b) provides, in pertinent part, that the basis of property
acquired by a corporation in connection with a reorganization to which section
368 applies shall be the same as it would be in the hands of the transferor,
increased by the amount of gain recognized to the transferor on the transfer (a
"carryover basis"). As noted above, it is our opinion that the Reorganization
will qualify as such a reorganization and that Target will recognize no gain on
the Reorganization. Accordingly, we believe that Acquiring Fund's basis for the
Assets will be the same as Target's basis therefor immediately before the
Reorganization.
Section 1223(2) provides in general that the period for which a taxpayer
has held acquired property that has a carryover basis shall include the period
for which the property was held by the transferor. As noted above, it is our
opinion that Acquiring Fund's basis for the Assets will be a carryover basis.
Accordingly, we believe that Acquiring Fund's holding period for the Assets will
include Target's holding period therefor.
V. A SHAREHOLDER WILL RECOGNIZE NO GAIN OR LOSS.
Under section 354(a)(1), no gain or loss shall be recognized if stock in a
corporation that is a party to a reorganization is exchanged pursuant to a plan
of reorganization solely for stock in that corporation or another corporate
party to the reorganization. Pursuant to the Plan, the Shareholders will receive
- ----------
(7) Notwithstanding anything herein to the contrary, we express no opinion as to
the effect of the Reorganization on either Fund or any Shareholder with respect
to any Asset as to which any unrealized gain or loss is required to be
recognized for federal income tax purposes at the end of a taxable year (or on
the termination or transfer thereof) under a mark-to-market system of
accounting.
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 18
solely Acquiring Fund Shares for their Target Shares. As noted above, it is our
opinion that the Reorganization will qualify as a C Reorganization, each Fund
will be a party to a reorganization, and the Plan constitutes a plan of
reorganization. Although section 354(a)(1) requires that the transferor
corporation's shareholders exchange their shares therein for shares of the
acquiring corporation, the courts and the Service have recognized that the Code
does not require taxpayers to perform useless gestures to come within the
statutory provisions. SEE, E.G., EASTERN COLOR PRINTING CO., 63 T.C. 27, 36
(1974); DAVANT V. COMMISSIONER, 366 F.2d 874 (5th Cir. 1966). Therefore,
although Shareholders will not actually surrender Target Share certificates in
exchange for Acquiring Fund Shares, their Target Shares will be canceled on the
issuance of Acquiring Fund Shares to them (all of which will be reflected on
Acquiring Fund's books) and will be treated as having been exchanged therefor.
SEE Rev. Rul. 81-3, 1981-1 C.B. 125; Rev. Rul. 79-257, 1979-2 C.B. 136.
Accordingly, we believe that a Shareholder will recognize no gain or loss on the
constructive exchange of all its Target Shares solely for Acquiring Fund Shares
pursuant to the Reorganization.
VI. A SHAREHOLDER'S BASIS FOR ACQUIRING FUND SHARES WILL BE A SUBSTITUTED
BASIS, AND ITS HOLDING PERIOD THEREFOR WILL INCLUDE ITS HOLDING PERIOD FOR
ITS TARGET SHARES.
Section 358(a)(1) provides, in pertinent part, that in the case of an
exchange to which section 354 applies, the basis of the property permitted to be
received thereunder without the recognition of gain or loss shall be the same as
the basis of the property exchanged therefor, decreased by, among other things,
the fair market value of any other property and the amount of any money received
in the exchange and increased by the amount of any gain recognized on the
exchange by the shareholder ( a "substituted basis"). As noted above, it is our
opinion that the Reorganization will qualify as a C Reorganization and, under
section 354, a Shareholder will recognize no gain or loss on the constructive
exchange of all its Target Shares solely for Acquiring Fund Shares in the
Reorganization. No property will be distributed to the Shareholders other than
Acquiring Fund Shares, and no money will be distributed to them pursuant to the
Reorganization. Accordingly, we believe that a Shareholder's basis for the
Acquiring Fund Shares it receives in the Reorganization will be the same as the
basis for its Target Shares to be constructively surrendered in exchange for
those Acquiring Fund Shares.
Section 1223(1) provides in general that the period for which a taxpayer
has held property received in an exchange that has a substituted basis shall
include the period for which the taxpayer held the property exchanged therefor
if the latter property was a capital asset (as defined in section 1221) at the
time of the exchange. As noted above, it is our opinion that a Shareholder will
have a substituted basis for the Acquiring Fund Shares it receives in the
Reorganization. Accordingly, we believe that a Shareholder's holding period for
the Acquiring Fund Shares it receives in the Reorganization will include its
holding period for the Target Shares constructively surrendered in exchange
therefor, provided those Target Shares were capital assets on the Closing Date.
<PAGE>
Bartlett Capital Trust
Legg Mason Global Trust, Inc.
July 2, 1999
Page 19
We hereby consent to the references to our firm in the part of the Proxy
Statement entitled "The Reorganization" in (1) the section entitled "Synopsis"
under the caption "Federal Income Tax Consequences of the Reorganization" and
(2) the section entitled "The Proposed Transaction" under the caption "Federal
Income Tax Considerations."
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /s/ Theodore L. Press
----------------------------------
Theodore L. Press
EXHIBIT 14
PRICEWATERHOUSECOOPERS LLP
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP
250 West Pratt Street: Suite 2100
Baltimore, Maryland 21201-2304
Telephone (410) 783-7600
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Registration Statement on Form
N-14 (the "Registration Statement") of our report dated February 5, 1999
relating to the financial statements and financial highlights appearing in the
December 31, 1998 Annual Report to Shareholders of Legg Mason International
Equity Trust (one of the portfolios constituting Legg Mason Global Trust, Inc.)
and our report dated February 5, 1999 relating to the financial statements and
financial highlights appearing in the December 31, 1998 Annual Report to
Shareholders of Bartlett Value International Fund (one of the portfolios
constituting Bartlett Capital Trust), which are also incorporated by reference
into the Statement of Additional Information.
We also consent to the incorporation by reference of our report of Legg Mason
International Equity Trust as previously described into each Prospectus of Legg
Mason International Equity Trust, and the incorporation by reference of our
report of Bartlett Value International Fund as previously described in each
Prospectus of Barlett Value International Fund, which constitute parts of this
Registration Statement. We also consent to the references to us under the
headings "The Corporation's Independent Accountants" in the Statement of
Additional Information of Legg Mason International Equity Trust and to the
reference to us under the heading "Financial Highlights" in each Prospectus of
Legg Mason International Equity Trust. We also consent to the references to us
under the headings "The Trust's Independent Accountants" in the Statement of
Additional Information of Bartlett Value International Fund and to the reference
to us under the heading "Financial Highlights" in each Prospectus of Bartlett
Value International Fund.
We also consent to the references to us under the headings "Other Fund Service
Providers," "Financial Highlights" and "Experts" in the combined
Prospectus/Proxy Statement, constituting part of this Registration Statement.
/s/ PricewaterhouseCoopers LLP
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PricewaterhouseCoopers LLP
Baltimore, Maryland
July 2, 1999
EXHIBIT 16
POWER OF ATTORNEY
I, the undersigned Director/Trustee of the following investment companies:
Legg Mason Cash Reserve Trust Legg Mason Value Trust, Inc.
Legg Mason Income Trust, Inc. Legg Mason Total Return Trust, Inc.
Legg Mason Global Trust, Inc. Legg Mason Investors Trust, Inc.
Legg Mason Tax Exempt Trust, Inc. Legg Mason Special Investment
Legg Mason Tax-Free Income Fund Trust, Inc.
plus any other investment company for which Legg Mason Fund Adviser, Inc. acts
as investment adviser or manager and for which the undersigned individual serves
as Director/Trustee hereby severally constitute and appoint each of MARIE K.
KARPINSKI, KATHI D. BAIR, ARTHUR J. BROWN and ARTHUR C. DELIBERT my true and
lawful attorney-in-fact, with full power of substitution, and with full power to
sign for me and in my name in the appropriate capacity, any Registration
Statements on FORM N-14, all Pre-Effective Amendments to any Registration
Statements of the Funds, any and all subsequent Post-Effective Amendments to
said Registration Statements, any supplements or other instruments in connection
therewith, to file the same with the Securities and Exchange Commission and the
securities regulators of appropriate states and territories, and generally to do
all such things in my name and behalf in connection therewith as said
attorney-in-fact deems necessary or appropriate, to comply with the provisions
of the Securities Act of 1933 and the Investment Company Act of 1940, all
related requirements of the Securities and Exchange Commission and all
requirements of appropriate states and territories. I hereby ratify and confirm
all that said attorney-in-fact or their substitutes may do or cause to be done
by virtue hereof.
WITNESS my hand on the date set forth below.
SIGNATURE DATE
- --------- ----
/s/ Richard G. Gilmore May 8, 1999
- --------------------------------
Richard G. Gilmore
/s/ T. A. Rodgers May 8, 1999
- --------------------------------
T.A. Rodgers
/s/ Charles F. Haugh May 8, 1999
- --------------------------------
Charles F. Haugh
<PAGE>
SIGNATURE DATE
- --------- ----
/s/ Arnold L. Lehman May 8, 1999
- --------------------------------
Arnold L. Lehman
/s/ Jill E. McGovern May 8, 1999
- --------------------------------
Jill E. McGovern
/s/ Edward A. Taber, III May 8, 1999
- --------------------------------
Edward A. Taber, III
/s/ Edmund J. Cashman, Jr. May 8, 1999
- --------------------------------
Edmund J. Cashman, Jr.
/s/ John F. Curley, Jr. May 8, 1999
- --------------------------------
John F. Curley, Jr.
/s/ Raymond A. Mason May 8, 1999
- --------------------------------
Raymond A. Mason
EXHIBIT 17(a)
[Name and Address]
BARTLETT CAPITAL TRUST
BARTLETT VALUE INTERNATIONAL FUND
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
September 23, 1999
This proxy is being solicited on behalf of the Board of Trustees of
Bartlett Capital Trust ("Trust") and relates to a proposal with respect to the
Trust and to Bartlett Value International Fund, ("Fund") a series of the Trust.
The undersigned hereby appoints as proxies Marie K. Karpinski and Kathi D. Bair,
and each of them (with power of substitution), to vote all shares of common
stock of the undersigned in the Fund at the Special Meeting of Shareholders to
be held at 10:00 a.m., Eastern time, on September 23, 1999, at the offices of
the Fund and any at adjournment thereof ("Meeting"), with all the power the
undersigned would have if personally present.
The shares represented by this proxy will be voted as instructed. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" all proposals relating to the Trust and the Fund with discretionary power
to vote upon such other business as may properly come before the Meeting.
YOUR VOTE IS IMPORTANT. IF YOU ARE NOT VOTING BY PHONE, FACSIMILE, OR INTERNET,
PLEASE SIGN AND DATE THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
TO VOTE BY TOUCH-TONE PHONE OR THE INTERNET, PLEASE CALL 1-800-[ ] TOLL FREE OR
VISIT WWW.__________.COM. TO VOTE BY FACSIMILE TRANSMISSION, PLEASE FAX YOUR
COMPLETED PROXY CARD TO 1-___-____.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
[XXX] KEEP THIS PORTION FOR YOUR RECORDS
<PAGE>
<TABLE>
<CAPTION>
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
BARTLETT CAPITAL TRUST
Bartlett Value International Fund
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
1. Approval of an Agreement and Plan of Reorganization and Termination / / / / / /
under which Legg Mason International Equity Trust would acquire all of the
assets of Bartlett Value International Fund in exchange solely for shares
of Legg Mason International Equity Trust and the assumption by Legg Mason
International Equity Trust of all of Bartlett Value International Fund's
liabilities, followed by the distribution of those shares to the
shareholders of Bartlett Value International Fund.
YOUR VOTE IS IMPORTANT. IF YOU ARE NOT VOTING BY PHONE, FACSIMILE, OR INTERNET, PLEASE SIGN AND DATE THIS PROXY BELOW
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
TO VOTE BY TOUCH-TONE PHONE OR THE INTERNET, PLEASE CALL 1-800-[ ] TOLL FREE OR VISIT WWW.______________.COM. TO VOTE BY
FACSIMILE TRANSMISSION, PLEASE FAX YOUR COMPLETED PROXY CARD TO 1-___-____.
Please sign exactly as name appears hereon. If stock is held in the name of joint owners, each should sign.
Attorneys-in-fact, executors, administrators, etc. should so indicate. If shareholder is a corporation or partnership,
please sign in full corporate or partnership name by authorized person.
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Signature Date
- ----------------------------------------------------------------------- --------------------------------------------
Signature (Joint Owners) Date
</TABLE>