SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant :
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Solicitation Material Pursuant to 240.14a-11(c) or 240.14a-12
Focus Trust, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which
transaction applies:
.........................................................
2) Aggregate number of securities to which transaction
applies:
.........................................................
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
.........................................................
4) Proposed maximum aggregate value of transaction:
.........................................................
5) Total fee paid:
.........................................................
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY PROXY MATERIALS -- FOR SEC USE ONLY
FOCUS TRUST, INC.
FOCUS TRUST
100 West Lancaster Avenue
Wayne, Pennsylvania 19087
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held June 26, 1998 at 10:00 a.m.
A Special Meeting of the Shareholders of Focus Trust (the
"Fund"), a series of Focus Trust, Inc. (the "Company"), will be held
at the offices of the Fund's administrator, First Data Investor
Services Group, Inc., 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406, on June 26, 1998 at 10:00 a.m. Eastern Time, or
at such adjourned time as may be necessary to vote for the following
purposes (the "Meeting"):
PROPOSAL 1. To approve a new Investment Advisory and Management
Agreement for the Fund with Legg Mason Fund
Adviser, Inc.;
PROPOSAL 2. To approve a Distribution Plan for the Fund;
PROPOSAL 3. To elect Directors of the Fund;
PROPOSAL 4. To ratify the selection of Coopers & Lybrand L.L.P. as
independent public accountants for the fiscal year
ending December 31, 1998; and
PROPOSAL 5. To transact such other business as may properly come
before the Meeting.
Shareholders of record of the Fund at the close of business on
May 15, 1998 (the "Record Date") will be entitled to vote at the
Meeting. Each share of the Fund is entitled to one vote and
fractional shares have pro-rata voting rights.
We urge you to sign, date and return your proxy in the enclosed
addressed envelope, which requires no postage and is intended for
your convenience. Your prompt return of your proxy or proxies may
save the necessity and expense of further solicitations to ensure a
quorum at the Meeting. You may vote your shares in person at the
Meeting.
By Order of the Board of
Directors
___________________________
Robert G. Hagstrom, Jr.
Chairman
<PAGE>
IMPORTANT PROXY MATERIALS
THEY CONCERN CERTAIN PENDING CHANGES INVOLVING
FOCUS TRUST
PLEASE REVIEW AND CAST YOUR VOTE TODAY!
Dear Fellow Shareholder:
We are pleased to enclose a proxy statement and notice for the
Special Meeting of Shareholders of Focus Trust to be held on June 26,
1998. Shareholders who cannot attend this meeting are strongly
encouraged to vote by proxy. The enclosed proxy materials contain
information you should read carefully regarding several important
proposals regarding your Fund.
These proposals are made necessary in connection with a
proposed change in control of Focus Capital Advisory, L.P., the
investment adviser to your Fund. Focus Capital has entered into an
agreement to be acquired by Legg Mason Fund Adviser, Inc. Legg Mason
Fund Adviser is a wholly-owned subsidiary of Legg Mason, Inc., a
publicly-traded financial services holding company based in
Baltimore, Maryland that provides a wide range of financial services
to institutional and retail clients and currently has over 110
brokerage offices and more than 1,000 Financial Advisors. Legg Mason
Fund Adviser and its affiliates currently act as investment adviser,
manager or consultant to 17 investment companies which have aggregate
assets under management of approximately $11 billion.
The completion of the transaction between Focus Capital and
Legg Mason Fund Adviser will cause the current investment advisory
agreement between Focus Capital and the Fund (the "Current
Agreement") to terminate, and for this reason, shareholders are being
asked to approve a new Investment Advisory and Management Agreement
between the Fund and Legg Mason Fund Adviser (the "New Agreement").
The New Agreement and the Current Agreement are substantially similar
and they both have the same annual investment advisory fee rate of
0.70% of the Fund's average daily net assets.
As a result of this proposed transaction, Robert G. Hagstrom,
Jr., who has served as Portfolio Manager of the Fund since its
inception on April 17, 1995, will become an employee of Legg Mason
Fund Adviser and he will continue to serve as Portfolio Manager to
the Fund after the transaction is completed. Mr. Hagstrom intends to
continue, without interruption, the investment strategy referred to
as "Focus Investing" on behalf of the Fund.
Another proposal that you are being asked to consider and
approve is the adoption of a Distribution Plan (the "Plan") under
Rule 12b-1 of the Investment Company Act of 1940. If approved, the
Plan would allow the Fund to pay directly for the distribution and
servicing of its shares in an aggregate amount not in excess, on an
annual basis, of 1.00% of the Fund's average daily net assets. If
the Plan is approved, it is proposed that Legg Mason Wood Walker,
Inc., (the "Distributor") an affiliate of Legg Mason Fund Adviser and
also a wholly-owned subsidiary of Legg Mason, Inc., would become the
new principal underwriter and distributor of the Fund's shares and
would be entitled to receive compensation under the Plan in order to
promote and distribute the Fund and to provide on-going services to
Fund shareholders. The Board of Directors of the Fund carefully
considered the merits of approving the Plan and submitting it to
shareholders for approval and the Board concluded that there was a
reasonable likelihood that the Plan would benefit the Fund and its
shareholders because it is anticipated that the implementation of the
Plan will lead to greater distribution and promotion of the Fund and,
it is hoped, to an increase in assets and a resultant decrease in
expenses. It is worth noting, in connection with the topic of
expenses and the proposed adoption of the New Agreement and Plan,
that Legg Mason Fund Adviser has indicated that, for the two-year
period following its transaction with Focus Capital, it will limit
the total annual operating expenses of the Fund (with certain
exceptions) to a maximum rate of 1.90% of the Fund's average daily
net assets, which amount is, in fact, lower than the Fund's current
voluntary expense limit of 2.00% of the Fund's average daily net
assets as is currently maintained by Focus Capital.
Finally, you are also being asked to elect all new Directors of
the Fund. Each of the current Directors have served since the Fund
was created. Now, however, with the proposal to have Legg Mason Fund
Adviser and its affiliates take a more active role with respect to
the Fund, the current Board determined that it would be prudent to
have the Fund served by a Board of Directors that is more intimately
familiar with the operations and personnel of Legg Mason Fund Adviser
and its affiliates. Accordingly, the full slate of nominees consists
of four individuals who serve on various funds already advised and
managed by Legg Mason Fund Adviser and its affiliates but who
themselves are independent of Legg Mason, Inc., and one nominee is an
individual who is currently employed by Legg Mason, Inc. It is hoped
that by having Directors who have such a high degree of familiarity
with the proposed new investment adviser to the Fund that the
interests of the Fund and its shareholders will be even better
served.
I urge you to carefully read and review the enclosed proxy
materials and join the management of the Fund and the Board of
Directors in approving all of the Proposals. It is the hope of all
involved that the Fund will be greatly enhanced through its proposed
relationship with Legg Mason, Inc. and its dedicated group of
financial and investment professionals who look forward to advancing
the interests of the Fund and its shareholders.
Thank you for carefully considering these important matters
relating to your Fund and please do not hesitate to contact us at
(800) 665-2250 with any questions you might have regarding these
matters.
Sincerely,
Robert G. Hagstrom, Jr.
Chairman
<PAGE>
PROXY STATEMENT
FOCUS TRUST, INC.
FOCUS TRUST
100 West Lancaster Avenue
Wayne, Pennsylvania 19087
SPECIAL MEETING OF SHAREHOLDERS
To be held June 26, 1998 at 10:00 a.m.
This Proxy Statement and enclosed form of proxy are furnished
in connection with the solicitation of proxies by and on behalf of
the Directors of the Fund to be used at a Special Meeting of
Shareholders of the Fund to be held at the offices of the Fund's
administrator, First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania 19406, on June 26, 1998, at
10:00 a.m. Eastern Time or at any adjournment or adjournments thereof
(the "Meeting"), for the purposes set forth in the accompanying
Notice.
This Proxy Statement and the form of proxy are being mailed to
shareholders on or about May 26, 1998. Any shareholder giving a
proxy has the power to revoke it by mail (addressed to the Secretary
of the Fund at the principal executive office of the Fund, 100 West
Lancaster Avenue, Wayne, Pennsylvania 19087) or in person at the
Meeting, by executing a superseding proxy or by submitting a notice
of revocation to the Fund. All properly executed and unrevoked
proxies received in time for the Meeting will be voted as specified
in the proxy or, if no specification is made, for each proposal
referred to in the proxy statement.
Holders of record of the shares of common stock of the Fund at
the close of business on May 15, 1998 (the "Record Date") will be
entitled to one vote per share on each proposal presented at the
Meeting and fractional shares have pro-rata voting rights.
A copy of the Fund's most recent annual report is available
upon request and without charge by calling the Fund at (800) 665-2250
at its principal executive office, 100 West Lancaster Avenue, Wayne,
Pennsylvania 19087.
Focus Capital Advisory, L.P., 100 West Lancaster Avenue, Wayne
Pennsylvania 19087, currently serves as the Fund's investment
adviser. First Data Investor Services Group, Inc., 3200 Horizon
Drive, King of Prussia, Pennsylvania 19406, currently serves as the
Fund's principal underwriter and administrator.
PROPOSAL 1
APPROVAL OF A NEW
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
The Board of Directors of the Fund is proposing that
shareholders approve a new Investment Advisory and Management
Agreement (the "New Agreement") to be entered into between the Fund
and Legg Mason Fund Adviser, Inc. (the "New Adviser"). The New
Adviser has proposed to acquire control of the Fund's current
investment adviser, Focus Capital Advisory, L.P. ("Focus Capital"),
through an asset purchase transaction as more fully discussed below
(the "Transaction"). A form of the New Agreement is attached hereto
as Exhibit A.
Focus Capital has served as investment adviser for the Fund
since June 28, 1997 pursuant to the Fund's existing Investment
Advisory Agreement with Focus Capital (the "Current Agreement"). In
connection with a proposed change in control of the ownership of
Focus Capital pursuant to which the New Adviser intends to acquire
all of the assets and certain liabilities of Focus Capital, this
change in control of Focus Capital would constitute an assignment (as
that term is defined in the Investment Company Act of 1940 (the "1940
Act")) of the Current Agreement. As required under the 1940 Act, the
Current Agreement provides for its automatic termination in the event
of an "assignment."
Because the Current Agreement will be terminated upon the
completion of the change in control of Focus Capital, which is
currently expected to occur on or about June 29, 1998, it is
necessary to adopt a new investment advisory and management agreement
for the Fund. Management of the Fund made a proposal to the
Directors at a meeting held on May 11, 1998, for the adoption of the
New Agreement. The New Agreement is substantially similar to the
Current Agreement and differs only with respect to certain non-
material matters. The Directors at this meeting accepted this
recommendation for the adoption of the New Agreement and the
Directors are recommending that shareholders approve the New
Agreement. In addition, as more fully discussed below under Proposal
2, the Directors have considered and are also recommending that
shareholders approve a new distribution plan for the Fund pursuant to
which the Fund would pay for the distribution of its shares.
The Directors were advised that, in connection with carrying
out the Transaction, Focus Capital intends to rely on Section 15(f)
of the 1940 Act which provides a non-exclusive safe harbor for an
investment adviser to an investment company, and any of the
investment adviser's affiliated persons (as defined in the 1940 Act)
to receive any amount or benefit in connection with a change in
control of the investment adviser so long as two conditions are met.
First, for a period of three years after the Transaction, at least
75% of the Directors must be persons who are not "interested persons"
of the predecessor or successor adviser. Focus Capital and the New
Adviser have indicated that they intend to comply with this 75%
requirement with respect to the Directors of the Fund for the three
year period following the Transaction and the nominees for Director
included herein under Proposal Three would satisfy this requirement
if elected. The second condition of Section 15(f) is that, for a
period of two years following an acquisition, there must not be
imposed on the Fund any "unfair burden" as a result of the
acquisition or any express or implied terms, conditions or
understandings related to it. An "unfair burden" would include any
arrangement whereby an adviser, or any interested person of the
adviser, would receive or be entitled to receive any compensation,
directly or indirectly, from the Fund or its shareholders (other than
fees for bona fide investment advisory or other services) or from any
person in connection with the purchase or sale of securities or other
property to, from or on behalf of the Fund (other than bona fide
ordinary compensation as principal underwriter for the Fund). In
this regard, the Directors noted that no special compensation
arrangements were contemplated in connection with the Transaction.
1. The Proposed Change in Control of Focus Capital
Presently, Focus Capital is organized as a Delaware limited
partnership and Focus Capital Holdings, Inc. ("Focus Holdings"), a
Delaware corporation, serves as its general partner. Robert G.
Hagstrom, Jr., the current Portfolio Manager for the Fund, is the
controlling shareholder of Focus Holdings and the controlling partner
of Focus Capital.
It is proposed that, as a result of the Transaction, the New
Adviser will acquire control of the assets of Focus Capital. Under
the terms of the Transaction, Mr. Hagstrom and the non-controlling
partners of Focus Capital will receive payment from the New Adviser
in exchange for the assets of Focus Capital in an amount mutually
agreed upon by the parties to the Transaction that is deemed to be
equitable. It is also proposed that Mr. Hagstrom will become an
employee of the New Adviser and he will be retained by the New
Adviser to continue to serve as Portfolio Manager for the Fund. As
an employee of the New Adviser, Mr. Hagstrom will receive
compensation and benefits from the New Adviser in an amount that is
commensurate with his experience and capabilities as an investment
manager. Mr. Hagstrom has served as the Fund's Portfolio Manager
since the Fund commenced operations on April 17, 1995.
The New Adviser is a wholly owned subsidiary of Legg Mason,
Inc., 100 Light Street, Baltimore, Maryland 21202, which is a
publicly-traded financial services holding company providing, through
its wholly-owned subsidiaries, a wide range of services including
investment banking, broker-dealer, asset-management and mutual fund
administration services. The New Adviser currently acts as adviser,
manager or consultant to 17 investment company portfolios which had
aggregate assets under management in excess of $11 billion as of
April 30, 1998. The New Adviser's address is 100 Light Street,
Baltimore, Maryland 21202.
2. The Current Agreement and the New Agreement
Under the terms of the Current Agreement, which is dated June
28, 1997, Focus Capital manages the Fund's investments and the Fund
pays Focus Capital investment advisory fees at an annual rate of
0.70% of the Fund's average daily net assets. Focus Capital began
providing investment advisory services to the Fund on June 28, 1997.
Prior to that date, Lloyd, Leith & Sawin, Inc. ("LLS") served as
investment adviser to the Fund since the Fund's inception on
April 17, 1995. At a meeting held on June 27, 1997, shareholders of
the Fund approved the Current Agreement with Focus Capital in
connection with the resignation of LLS as investment adviser. Mr.
Hagstrom had been a principal of LLS, but he left that position when
he organized Focus Capital. For the period from June 28, 1997
through December 31, 1997, Focus Capital was entitled to receive
advisory fees of $26,721, all of which fees were waived by Focus
Capital. For the period from January 1, 1997 through June 27, 1997,
LLS was entitled to receive advisory fees of $26,527, all of which
fees were waived by LLS.
The investment advisory fee will not change under the New
Agreement and will therefore remain payable at an annual rate of
0.70% of the Fund's average daily net assets. In addition, the New
Adviser has voluntarily agreed for a period of two years following
the approval of the New Agreement, to limit the Fund's total
operating expenses, (exclusive of taxes, brokerage commissions,
interest and extraordinary expenses) to a maximum rate of 1.90% per
annum.
The New Adviser serves as investment adviser to the following
two investment companies that have similar investment objectives to
the Fund's investment objective of seeking maximum long-term capital
appreciation:
Total Assets as Investment
of April 30, 1998 Advisory Fee Rate
Legg Mason Value $5.2 billion 1.00% of the Fund's
Trust, Inc. average daily net assets
for the first $100 million
net assets; 0.75% of
average daily net assets
between $100 million and $1
billion; and 0.65% of
average daily net assets
exceeding $1 billion.
Legg Mason Special $1.6 billion 1.00% of the Fund's
Investment Trust, Inc. average daily net assets
for the first $100 million
net assets; 0.75% of
average daily net assets
between $100 million and $1
billion; and 0.65% of
average daily net assets
exceeding $1 billion.
3. The Directors' Considerations and Recommendations
In approving the New Agreement and determining to submit it to
shareholders for approval, the Directors concluded that the
compensation to be paid by the Fund to the New Adviser under the New
Agreement is fair and reasonable. In making this determination, the
Directors considered several factors. The factors considered by the
Directors included: (1) the investment management fees payable under
the Current Agreement and those payable under the New Agreement; (2)
the efforts and expenses of Focus Capital in rendering its services
to the Fund and the proposed efforts and expenses of the New Adviser
in rendering services to the Fund; (3) the nature, quality and extent
of the services as currently provided by Focus Capital to the Fund
and as to be provided by the New Adviser under the New Agreement; (4)
the experience, background, capabilities and general reputation of
the New Adviser and its affiliates in the mutual fund and broker-
dealer fields; and (5) the fees charged by investment managers
operating funds with similar investment objectives.
In addition, in considering whether to approve the New
Agreement, the Board placed special emphasis on the fact that Mr.
Hagstrom will be retained by the New Adviser to continue serving as
the Portfolio Manager of the Fund. The Board was informed by Mr.
Hagstrom that he and the New Adviser intend to continue, without
interruption, the investment strategy referred to as "Focus
Investing," on behalf of the Fund. The New Adviser will acquire from
Focus Capital in connection with the Transaction Focus Capital's
rights and interests in the name "Focus Trust." The New Adviser has
indicated that in the event the Proposals herein are approved by
shareholders, the New Adviser intends to change the name of the
Company to "Legg Mason Focus Trust, Inc." in order to better identify
the role that the New Adviser and its affiliates will play in the
future and the New Adviser's continuing commitment to the concept of
"Focus Investing" as described in the Fund's current Prospectus.
Management of the Fund and the New Adviser also informed the
Board of, and the Board agreed with, a proposal to eliminate the
1.00% redemption fee which is currently charged by the Fund on
redemptions made within the first two years of a purchase. This was
done in keeping with the fee structures of most of the other funds
managed by the New Adviser. The elimination of the redemption fee
would take place immediately upon the effectiveness of the New
Agreement.
In the event that the New Agreement is not approved by the
shareholders of the Fund, the Directors will consider what other
action is appropriate based upon their determination of the best
interests of the shareholders of the Fund. Similarly, in the event
that the New Adviser and Focus Capital fail to complete the
Transaction for any reason even though the requisite votes sought
hereunder are received, the Directors will consider various options
available to them with respect to the continued operation of the
Fund. The New Adviser and Focus Capital have each reserved the right
to not proceed with the completion of the Transaction even if the
necessary shareholder approvals under consideration herein have been
obtained.
Required Vote
The approval of the New Agreement requires the affirmative vote
of a majority of the Fund's outstanding voting securities, which is
defined in the 1940 Act to mean the vote (i) of 67 percent or more of
the voting securities present at the Meeting, if the holders of more
than 50 percent of the outstanding voting securities of the Fund are
present or represented by proxy, or (ii) of more than 50 percent of
the outstanding voting securities of the Fund, whichever is less.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE NEW INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT, AND ANY
SIGNED BUT UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL 2
APPROVAL OF A NEW
DISTRIBUTION PLAN
At its meeting held on May 11, 1998, the Board of Directors,
including a majority of the Independent Directors, approved and voted
to submit to shareholders of the Fund a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. A copy of the
Plan is attached hereto as Exhibit B. In the event that each of the
proposals hereunder is approved by shareholders, the Board intends to
appoint Legg Mason Wood Walker, Incorporated (the "Distributor") as
the new principal underwriter and distributor of the Fund's shares.
The Distributor, which is an affiliate of the New Adviser and a
wholly owned subsidiary of Legg Mason, Inc., currently serves as the
principal underwriter and distributor for all of the funds advised by
the New Adviser.
Under the Plan, the Fund would pay the Distributor for its
services related to the sales and distribution of the Fund and the
provision of ongoing services to the Fund's shareholders. Under the
Plan, the aggregate fee may not exceed an annual rate of 1.00% of the
Fund's average daily net assets. A portion of these fees in an
amount not to exceed 0.75% of the Fund's average daily net assets may
be paid to the Distributor or others for distribution services.
Distribution activities for which such payments may be made include,
but are not necessarily limited to, compensation to persons,
including employees of the Distributor and its affiliates, who engage
in or support distribution of Fund shares or provide sub-accounting
and recordkeeping services; printing of prospectuses, statements of
additional information and reports for persons other than existing
shareholders, preparation and distribution of sales literature and
advertising materials, overhead, travel and telephone and other
communication expenses. In addition, payments may be made to the
Distributor and its affiliates and others for providing on-going
shareholder services to shareholders of the Fund in an amount not to
exceed 0.25% of the Fund's average daily net assets.
Under the terms of the Plan, the Fund is obligated to pay the
full amount of the distribution and service fees to the Distributor
whether or not the Distributor had incurred distribution and service
related expenses in that amount during the applicable period, such
that the Distributor may realize a benefit under the Plan to the
extent that the fees received are in excess of the costs and expenses
incurred by the Distributor. Conversely, in the event that the
Distributor incurs distribution or service related expenses in excess
of the maximum amount payable by the Fund under the Plan for the
applicable period, the Fund is not obligated to pay the Distributor
for these excess amounts in any future periods. The Plan may be
terminated at any time upon a majority vote of the outstanding shares
of the Fund, or upon a majority vote of those Directors who are not
"interested persons" of the Fund, as defined in the 1940 Act, and who
have no direct or indirect financial interest in the Plan or any
agreements related to it.
Set forth below is comparative information regarding the fees
payable under (i) the Current Agreement and (ii) the New Agreement
and the Plan, for the fiscal year ended December 31, 1997, assuming
for illustrative purposes only that the New Agreement and the Plan
had been in effect for the full fiscal year:
Fees for the fiscal year
ended December 31, 1997
(as a % of net assets)
Actual Fees Pro Forma
New Fees
Management Fees (after fee waivers) 0.00%* 0.70%
12b-1 Fees 0.00% 1.00%
Other Expenses (after fee waivers
and expense reimbursement) 2.00%* 0.20%**
Total Fund Operating Expenses
(after fee waivers and expense
reimbursement) 2.00%* 1.90%**
* Focus Capital has voluntarily undertaken to limit the Fund's total
annual operating expenses so that they will not exceed 2.00% of
the Fund's average daily net assets. Had Focus Capital not
voluntarily agreed to this waiver, "Management Fees" would have
been 0.70%, "Other Expenses" would have been 3.34% and "Total Fund
Operating Expenses" would have been 4.04% for the fiscal year
ended December 31, 1997.
** The New Adviser has voluntarily undertaken for the two year period
following the Transaction to limit the Fund's total annual
operating expenses (exclusive of taxes, brokerage commissions,
interest and extraordinary expenses) so that they will not exceed
1.90% of the Fund's average daily net assets.
Example
The following example illustrates the expenses an investor
would pay on a $1,000 investment over various time periods under the
current fee structure for the Fund and under the proposed fee
structure if the New Agreement and the Plan are adopted assuming
(1) a 5% annual rate of return and (2) redemption at the end of each
time period. (The "One Year" illustration of the Current Fee
Structure includes the effect of the Fund's 1% redemption fee, which
would be eliminated under the Proposed Fee Structure).
Current Fee Structure Proposed Fee Structure
One Year $31 $ 19
Three Years 63 60
Five Years 108 103
Ten Years 233 222
The purpose of this example is to help investors understand the
various costs and expenses of investing in the Fund. The example
should not be considered a representation of past or future expenses
of the Fund. Actual expenses may vary from year to year and may be
different than those shown above.
The Directors' Considerations and Recommendations
In approving the Distribution Plan and determining to submit it
to shareholders for approval, the Directors concluded that there was
a reasonable likelihood that the Plan would benefit the Fund and its
shareholders. The Directors considered, among other things: (1) the
level and quality of distribution and shareholder services that the
Fund will receive under the Plan; (2) the amounts to be expended
under the Plan; (3) the extent to which the potential benefits of the
Plan could outweigh the costs of the Plan; (4) the likelihood that
the Plan would succeed in producing such potential benefits; and
(5) the extent to which the Fund's overall operating expense ratio
would be impacted by the Plan. The Directors considered the fact
that the assets of the Fund have not sufficiently increased over the
Fund's three year operating history and determined that the adoption
of the Plan might potentially lead to a growth in assets because the
use of the Plan could lead to greater distribution and promotion of
the Fund by the Distributor and dealers with which it has selling
arrangements. The Directors also considered the fact that the other
funds currently offered by the Distributor are subject to similar
distribution fee arrangements. The Board also took notice of the
fact that the New Adviser intends to limit the total operating
expenses of the Fund (with certain exceptions) for the two year
period following the completion of the transaction to a maximum rate
of 1.90% of the Fund's average daily net assets, which amount is
lower than the Fund's current voluntary expense limit of 2.00% of
total net assets as is currently maintained by Focus Capital.
Required Vote
The approval of the Distribution Plan requires the affirmative
vote of a majority of the Fund's outstanding voting securities, which
is defined in the 1940 Act to mean the vote (i) of 67 percent or more
of the voting securities present at the Meeting, if the holders of
more than 50 percent of the outstanding voting securities of the Fund
are present or represented by proxy, or (ii) of more than 50 percent
of the outstanding voting securities of the Fund, whichever is less.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE DISTRIBUTION PLAN, AND ANY SIGNED BUT UNMARKED PROXIES WILL BE
SO VOTED.
PROPOSAL 3
ELECTION OF DIRECTORS
It is being proposed that all new Directors be elected for the
Fund. The current Directors of the Fund do not intend to remain
serving as Directors in the event the Proposals set forth herein are
approved. The current Directors have considered the qualifications
of the candidates identified below and have concluded it would be in
the best interests of the Fund and its shareholders if these
candidates were elected. All of the candidates currently serve as
Directors/Trustees of mutual funds advised by the New Adviser or its
affiliates, and all of the candidates with the exception of Mr.
Curley have no interest in or affiliation with the New Adviser or any
of its affiliates. All Directors are elected to serve indefinitely
until his or her resignation or removal or until his or her successor
is duly elected and qualified.
Proxies which do not contain specific instructions to the
contrary will be voted in favor of the election of the nominees shown
below. Set forth below is certain information about each nominee:
Position Principal Occupation
Name and Age with the Fund During the Past Five Years
Richard G. Gilmore None Independent Director of ___
948 Kennett Way Funds in the Legg Mason
West Chester, Pennsylvania Funds Complex; Independent
[6/9/27] Consultant; Director of CSS
Industries, Inc.; Director
of PECO Energy Company
(formerly Philadelphia
Electric Company);
Formerly: Senior Vice
President and Chief
Financial Officer of
Philadelphia Electric
Company (now PECO Energy
Company).
Arnold L. Lehman None Independent Director of ___
c/o Brooklyn Museum of Art Funds in the Legg Mason
200 Eastern Parkway Funds Complex; Director of
Brooklyn, New York [7/18/44] the Brooklyn Museum of Art;
Formerly: Director of The
Baltimore Museum of Art.
Jill E. McGovern None Independent Director of____
1500 Wilson Boulevard Funds in the Legg Mason
Arlington, Virginia Funds Complex; Chief
[8/29/44] Executive Officer of the
Marrow Foundation;
Formerly: Executive
Director of the Baltimore
International Festival and
Senior Assistant to the
President of the Johns
Hopkins University.
T. A. Rodgers None* Independent Director of____
2901 Boston Street Funds in the Legg Mason
Baltimore, Maryland Funds Complex; Principal,
[10/22/34] T. A. Rodgers & Associates
(management consulting).
Formerly: Director and
Vice President of Corporate
Development, Polk Audio,
Inc. (manufacturer of audio
components).
John F. Curley, Jr.* None* Retired Vice Chairman and
100 Light Street Director of Legg Mason
Baltimore, Maryland 21202 Inc. and Legg Mason Wood
[7/24/39] Walker, Incorporated;
Formerly: Director of Legg
Mason Fund Adviser, Inc.;
Director of __ Funds in
the Legg Mason Funds
Complex.
___________________________
* If elected Mr. Curley would be considered an "interested
person" of the Fund (as defined in the Investment Company Act of
1940) due to his position with the New Adviser or its affiliates.
Current Directors of the Fund other than those affiliated with
the Fund's adviser are entitled to receive an annual retainer of
$4,000 per annum and $200 per Board meeting and committee meeting
attended, as well as reimbursement for all out-of-pocket expenses
relating to attendance at such meetings.
The Fund has an Audit Committee, presently consisting of
current Directors Ms. Lamm-Tennant and Mr. Coleman, neither of whom
are "interested persons" as defined in the 1940 Act. The Audit
Committee reviews both the audit and non-audit work of the Fund's
independent public accountants and submits a recommendation to the
Directors as to the selection of independent public accountants. The
Audit Committee of the Fund held two meetings in the last fiscal
year.
The Fund has a Nominating Committee also consisting of Ms.
Lamm-Tennant and Mr. Coleman. The Nominating Committee reviews and
recommends to the full Board candidates and nominees for election as
Director. The Nominating Committee did not convene any meetings
during the Fund's most recent fiscal year. The Nominating Committee
will consider nominees recommended by securities holders of the Fund.
Securities holders interested in nominating candidates for election
should submit written information to the Secretary of the Fund for
consideration by the Nominating Committee.
For the fiscal year ended December 31, 1997, the Directors of
the Fund (none of whom are seeking re-election) received the
following compensation:
Pension or
Retirement Total
Aggregate Benefits Accrued Est Annual Compensation
Name of Compensation as part of Fund Benefits Upon From the
Director From the Fund Expenses Retirement Fund Complex
Robert G.
Hagstrom, Jr.*$ 0 N/A N/A $ 0
Allan S.
Mostoff, Esq.*$4,800 N/A N/A $4,800
Robert J.
Coleman$ $5,000 N/A N/A $5,000
Joan Lamm-
Tennant$ $4,800 N/A N/A $4,800
_________________________
* This Director is considered an "interested person" as defined
under the 1940 Act.
For the twelve months ended March 31, 1998, the Nominees
received the following compensation in connection with their service
as Directors/Trustees of funds in the Legg Mason Complex:
Pension or
Retirement Total
Aggregate Benefits Accrued Est Annual Compensation
Name of Compensation as part of Fund Benefits Upon From the
Nominee fromthe Fund Expenses Retirement Fund Complex
Richard G.
Gilmore$ 0 N/A N/A $
Arnold L.
Lehman$ 0 N/A N/A $
Jill E.
McGovern$ 0 N/A N/A $
T.A.
Rodgers$ 0 N/A N/A $
John F.
Curley,
Jr.**$ 0 N/A N/A $
_________________________
* None of the nominees served as a Director of Focus Trust during
the applicable time period.
** This nominee is considered an "interested person" as defined under
the 1940 Act of the Legg Mason Funds, and, if elected, and if
Proposal One and Proposal Two are approved, would be considered an
"interested person" of the Fund due to his position with the New
Adviser and its affiliates.
As of the Record Date, the Directors and officers of the Fund
as a group owned ____% of the outstanding shares of common stock of
the Fund. It is anticipated that the Directors and officers will
vote their shares in favor of each of the Proposals.
Required Vote
The election of each of the above nominees requires the
affirmative vote of a majority of the votes cast at the Meeting by
shareholders of the Fund.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES, AND ANY SIGNED BUT UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL 4
RATIFICATION OF THE SELECTION
OF INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P., 2400 Eleven Penn Center,
Philadelphia, Pennsylvania 19103, currently serves as independent
public accountants for the Fund. In order to comply with certain
provisions of the 1940 Act regarding the selection and ratification
of a mutual fund's independent public accountants, the Directors are
now seeking shareholder ratification of the Board's previous
selection of Coopers & Lybrand L.L.P. as independent public
accountants for the Fund for the fiscal year ending December 31,
1998.
Neither Coopers & Lybrand L.L.P. nor any of its members have
any material direct or indirect financial interest in the Fund.
Representatives of Coopers & Lybrand L.L.P. are not expected to be
present at the Meeting but will be available by telephone to respond
to questions in the event the need arises. Coopers & Lybrand L.L.P.
will remain as independent public accountants to the Fund if all of
the Proposals herein are approved because the firm serves as the
independent public accountants for many of the funds currently
advised by the New Adviser.
Required Vote
The ratification of the selection of Coopers & Lybrand L.L.P.
requires the affirmative vote of a majority of the votes cast at the
Meeting by shareholders of the Fund.
THE DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P., AND ANY
SIGNED BUT UNMARKED PROXIES WILL BE SO VOTED.
OTHER INFORMATION
Share Ownership of the Fund
The following table sets forth the information concerning
beneficial ownership, as of the Record Date, of the Fund's shares by
each person who beneficially owns more than five percent of the
voting securities of the Fund:
Name and Shares Percentage of
Address of Shareholder Beneficially Owned Outstanding Shares Owned
Charles Schwab
& Co. Inc.
San Francisco, CA
___________________________
(1) "Beneficial ownership" is defined under Section 13(d) of the
Securities Exchange Act of 1934.
Manner of Voting Proxies
All proxies received by the Management of the Fund will be
voted on all matters presented at the Meeting, and if not limited to
the contrary, will be voted FOR Proposals 1 through 3.
Management knows of no other matters to be brought before the
Meeting. If, however, any other matters properly come before the
Meeting, it is Management's intention that proxies not limited to the
contrary will be voted in accordance with the judgment of the persons
named in the enclosed form of proxy.
Broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares on a
particular matter with respect to which the brokers or nominees do
not have discretionary power) will have the same effect as
abstentions in determining whether an issue has received the
requisite approval. Where the broker or nominee has no discretion to
vote the shares as to one or more proposals before the Meeting, the
non-voted shares will be excluded from the pool of shares voted on
such issues. Thus, abstentions and non-votes will have the same
effect as a negative vote on issues requiring the affirmative vote of
a specified portion of the Fund's outstanding shares, but will not be
considered votes cast and thus will have no effect on matters
requiring approval of a specified percentage of votes cast.
In the event that at the time any session of the Meeting is
called to order a quorum is not present in person or by proxy, the
persons named as proxies may vote those proxies which have been
received to adjourn the Meeting to a later date. In the event that a
quorum is present but sufficient votes in favor of any of Proposals 1
through 3 set forth in the Notice of Meeting have not been received,
the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitations of proxies with respect
to those items. Any such adjournment will require the affirmative
vote of a majority of the shares present in person or by proxy at the
session of the Meeting to be adjourned. The persons named as proxies
will vote those proxies which they are entitled to vote for any such
item in favor of such an adjournment, and will vote those proxies
required to be voted against any such item against any such
adjournment. A shareholder vote may be taken on one or more of the
items in this Proxy Statement prior to such adjournment if sufficient
votes for its approval have been received and it is otherwise
appropriate.
Submission of Certain Proposals
Proposals of shareholders which are intended to be presented at
a future shareholders' meeting must be received by the Fund by a
reasonable time prior to the Fund's solicitation of proxies relating
to such future meeting. Shareholder proposals must meet certain
requirements and there is no guarantee that any proposal will be
presented at a Shareholder meeting.
Additional Information
The expense of the preparation, printing and mailing of the
enclosed form of proxy, this Notice and Proxy Statement and other
expenses relating to the Meeting will be borne jointly by Focus
Capital and Legg Mason. To obtain the necessary representation at
the Meeting, supplementary solicitations may be made by mail,
telephone, or interview by officers of the Fund and/or employees of
Focus Capital.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY
May 26, 1998
PRELIMINARY PROXY MATERIALS -- FOR SEC USE ONLY
PROXY
FOCUS TRUST, INC.
FOCUS TRUST
SPECIAL MEETING OF SHAREHOLDERS
June 26, 1998
The undersigned hereby appoints Carolyn F. Mead, Esq. and
Eileen Caligiuri and each of them, his attorneys and proxies with
full power of substitution to vote and act with respect to all shares
of Focus Trust (the "Fund") held by the undersigned at the Special
Meeting of Shareholders of the Fund to be held at 10:00 a.m., Eastern
Time, on June 26, 1998, at the offices of the Fund's administrator,
First Data Investor Services Group, Inc., 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406, and at any adjournment thereof (the
"Meeting"), and instructs them to vote as indicated on the matters
referred to in the Proxy Statement for the Meeting, receipt of which
is hereby acknowledged, with discretionary power to vote upon such
other business as may properly come before the Meeting.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE FUND.
The Board of Directors recommends that you vote FOR each of the
Nominees and FOR each of the following proposals:
1. Approve a new Investment Advisory and Management
Agreement for the Fund.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
2. Approve a Distribution Plan for the Fund.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. Election of Directors:
Richard G. Gilmore Jill E. McGovern
T. A. Rodgers Arnold L. Lehman
John F. Curley, Jr.
[ ]FOR ALL [ ]AGAINST ALL [ ]FOR ALL
EXCEPT:
_________________________________________________________
(Only use to withhold authority to vote on
individual Nominees)
4. Ratification of the selection of Coopers & Lybrand L.L.P.
as independent public accountants for the fiscal year
ending December 31, 1998.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
This proxy will be voted as specified. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL OF THE NOMINEES AND FOR ALL OF THE
PROPOSALS.
Receipt of the Notice of Special Meeting and Proxy Statement is
hereby acknowledged.
Dated _____________________, 1998
_________________________________
Name of Shareholder(s) -- Please
print or type
_________________________________
Signature(s) of Shareholder(s)
_________________________________
Signature(s) of Shareholder(s)
This proxy must be signed by the beneficial owner of Fund shares.
Please sign exactly as your name appears on this proxy. If signing
as attorney, executor, guardian or in some representative capacity or
as an officer of a corporation, please add title as such.
PLEASE VOTE, SIGN AND DATE THIS PROXY AND RETURN IT IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
EXHIBIT A
INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT
LEGG MASON FOCUS TRUST, INC.
This INVESTMENT ADVISORY AND MANAGEMENT AGREEMENT ("Agreement")
is made this ____ day of _______, 1998, by and between Legg Mason
Focus Trust, Inc., a Maryland corporation (the "Fund"), and Legg
Mason Fund Adviser, Inc., a Maryland corporation (the "Adviser").
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended ("1940 Act") and has registered its shares of common stock
for sale to the public under the Securities Act of 1933 and various
state securities laws; and
WHEREAS, the Fund wishes to retain the Adviser to provide
investment advisory, management, and administrative services to the
Fund; and
WHEREAS, the Adviser is willing to furnish such services on the
terms and conditions hereinafter set forth;
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. The Fund hereby appoints Legg Mason Fund Adviser, Inc. as
Adviser of the Fund for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. The Fund shall at all times keep the Adviser fully
informed with regard to the securities owned by it, its funds
available, or to become available, for investment, and generally as
to the condition of its affairs. It shall furnish the Adviser with
such other documents and information with regard to its affairs as
the Adviser may from time to time reasonably request.
3. (a) Subject to the supervision of the Fund's Board of
Directors, the Adviser shall regularly provide the Fund with
investment research, advice, management and supervision and shall
furnish a continuous investment program for the Fund's portfolio of
securities consistent with the Fund's investment goals and policies.
The Adviser shall determine from time to time what securities will
be purchased, retained or sold by the Fund, and shall implement those
decisions, all subject to the provisions of the Fund's Articles of
Incorporation and Bylaws, the 1940 Act, the applicable rules and
regulations of the Securities and Exchange Commission, and other
applicable federal and state law, as well as the investment goals and
policies of the Fund. The Adviser will place orders pursuant to its
investment determinations for the Fund either directly with the
issuer or with any broker or dealer. In placing orders with brokers
and dealers the Adviser will attempt to obtain the best net price and
the most favorable execution of its orders; however, the Adviser may,
in its discretion, purchase and sell portfolio securities through
brokers who provide the Fund with research, analysis, advice and
similar services, and the Adviser may pay to these brokers, in return
for research and analysis, a higher commission or spread than may be
charged by other brokers. The Adviser is authorized to combine
orders on behalf of the Fund with orders on behalf of other clients
of the Adviser, consistent with guidelines adopted by the Board of
Directors of the Fund. The Adviser shall also provide advice and
recommendations with respect to other aspects of the business and
affairs of the Fund, and shall perform such other functions of
management and supervision as may be directed by the Board of
Directors of the Fund.
(b) The Fund hereby authorizes any entity or person
associated with the Adviser which is a member of a national
securities exchange to effect any transaction on the exchange for the
account of the Fund which is permitted by Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and
the Fund hereby consents to the retention by such person associated
with the Adviser of compensation for such transactions in accordance
with Rule 11a2-2(T)(2)(iv).
4. The Adviser may enter into a contract ("Advisory
Agreement") with an investment adviser in which the Adviser delegates
to such investment adviser any or all its duties specified in
Paragraph 3 hereunder, provided that such Advisory Agreement imposes
on the investment adviser bound thereby all duties and conditions to
which the Adviser is subject hereunder, and further provided that
such Advisory Agreement meets all requirements of the 1940 Act and
rules thereunder.
5. (a) The Adviser, at its expense, shall supply the Board
of Directors and officers of the Fund with all statistical
information and reports reasonably required by them and reasonably
available to the Adviser and shall furnish the Fund with office
facilities, including space, furniture and equipment and all
personnel reasonably necessary for the operation of the Fund. The
Adviser shall oversee the maintenance of all books and records with
respect to the Fund's securities transactions and the keeping of the
Fund's books of account in accordance with all applicable federal and
state laws and regulations. In compliance with Rule 31a-3 under
the1940 Act, the Adviser hereby agrees that any record which it
maintains for the Fund are the property of the Fund, and further
agrees to surrender promptly to the Fund any of such records upon the
Fund's request. The Adviser further agrees to arrange for the
preservation of the records required to be maintained by Rule 31a-1
under the 1940 Act for the periods prescribed by Rule 31a-2 under the
1940 Act. The Adviser shall authorize and permit any of its
directors, officers and employees, who may be elected as directors or
officers of the Fund, to serve in the capacities in which they are
elected.
(b) Other than as herein specifically indicated, the Adviser
shall not be responsible for the Fund's expenses. Specifically, the
Adviser will not be responsible, except to the extent of the
reasonable compensation of employees of the Fund whose services may
be used by the Adviser hereunder, for any of the following expenses
of the Fund, which expenses shall be borne by the Fund: advisory
fees; distribution fees; interest, taxes, governmental fees, fees,
voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; the cost (including
brokerage commissions or charges, if any) of securities purchased or
sold by the Fund and any losses in connection therewith; fees of
custodians, transfer agents, registrars or other agents; legal
expenses; expenses relating to the redemption or repurchase of the
Fund's shares; expenses of registering and qualifying shares of the
Fund for sale under applicable federal and state law; expenses of
preparing, setting in print, printing and distributing prospectuses,
reports, notices and dividends to Fund shareholders; costs of
stationery; costs of stockholders' and other meetings of the Fund;
directors' fees; audit fees; travel expenses of officers, directors
and employees of the Fund, if any; and the Fund's pro rata portion of
premiums on any fidelity bond and other insurance covering the Fund
and its officers and directors.
6. No director, officer or employee of the Fund shall
receive from the Fund any salary or other compensation as such
director, officer or employee while he or she is at the same time a
director, officer, or employee of the Adviser or any affiliated
company of the Adviser. This paragraph shall not apply to directors,
executive committee members, consultants and other persons who are
not regular members of the Adviser's or any affiliated company's
staff.
7. As compensation for the services performed and the
facilities furnished and expenses assumed by the Adviser, including
the services of any consultants or sub-advisers retained by the
Adviser, the Fund shall pay the Adviser, as promptly as possible
after the last day of each month, a fee, computed daily at an annual
rate of 0.70% of the Fund's average daily net assets. The first
payment of the fee shall be made as promptly as possible at the end
of the month succeeding the effective date of this Agreement. If
this Agreement is terminated as of any date not the last day of the
month, such fee shall be paid as promptly as possible after such date
of termination, shall be based on the average daily net assets of the
Fund in that period from the beginning of such month to such date of
termination, and shall be based on that proportion of such average
daily net assets as the number of business days in such period bears
to the number of business days in such month. The average daily net
assets of the Fund shall in all cases be based only on business days
and be computed as of the time of the regular close of business of
the New York Stock Exchange, or such other time as may be determined
by the Board of Directors of the Fund. Each such payment shall be
accompanied by a report prepared either by the Fund or by a reputable
firm of independent accountants, which shall show the amount properly
payable to the Adviser under this Agreement and the detailed
computation thereof.
8. The Adviser assumes no responsibility under this
Agreement other than to render the services called for hereunder, in
good faith, and shall not be responsible for any action of the Board
of Directors of the Fund in following or declining to follow any
advice or recommendations of the Adviser; provided, that nothing in
this Agreement shall protect the Adviser against any liability to the
Fund or its shareholders to which it would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the
performance to its duties or by reason of its reckless disregard of
its obligations and duties hereunder.
9. Nothing in this Agreement shall limit or restrict the
right of any director, officer, or employee of the Adviser who may
also be a director, officer, or employee of the Fund, to engage in
any other business or to devote his time and attention in part to the
management or other aspects of any other business, whether of a
similar nature or a dissimilar nature, or to limit or restrict the
right of the Adviser to engage in any other business or to render
services of any kind, including investment advisory and management
services, to any other corporation, firm, individual or association.
10. As used in this Agreement, the terms "assignment,"
"interested person," and "majority of the outstanding voting
securities" shall have the meanings given to them by Section 2(a) of
the 1940 Act, subject to such exemptions as may be granted by the
Securities and Exchange Commission by any rule, regulation or order.
11. This Agreement will become effective on the date first
written above, provided that it shall have been approved by the
Fund's Board of Directors and by the shareholders of the Fund in
accordance with the requirements of the 1940 Act and, unless sooner
terminated as provided herein, will continue in effect for two years
from the above written date. Thereafter, if not terminated, this
Agreement shall continue in effect for successive annual periods
ending on the same date of each year, provided that such continuance
is specifically approved at least annually (i) by the Fund's Board of
Directors or (ii) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act), provided that in
either event the continuance is also approved by a majority of the
Fund's Board of Directors who are not interested persons (as defined
in the 1940 Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such
approval.
12. This Agreement is terminable without penalty by the
Fund's Board of Directors, by vote of a majority of the outstanding
voting securities of the Fund (as defined in the1940 Act), or by the
Adviser, on not less than 60 days' notice to the other party and will
be terminated upon the mutual written consent of the Adviser and the
Fund. This Agreement shall terminate automatically in the event of
its assignment by the Adviser and shall not be assignable by the Fund
without the consent of the Adviser.
13. In the event this Agreement is terminated by either party
or upon written notice from the Adviser at any time, the Fund hereby
agrees that it will eliminate from its corporate name any reference
to the name of "Legg Mason." The Fund shall have the non-exclusive
use of the name "Legg Mason" in whole or in part only so long as this
Agreement is effective or until such notice is given.
14. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers thereunto duly authorized.
Attest: LEGG MASON FOCUS TRUST,
INC.
By:__________________________ By:______________________________
Attest: LEGG MASON FUND ADVISER,
INC.
By:___________________________By:________________________________
EXHIBIT B
DISTRIBUTION PLAN OF
LEGG MASON FOCUS TRUST, INC.
WHEREAS, Legg Mason Focus 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 one Series of shares of common stock of the Corporation:
Legg Mason Focus Trust ;
WHEREAS, the Corporation desires to adopt a Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act and the Board of
Directors has determined that there is a reasonable likelihood that
adoption of the Distribution Plan will benefit the Corporation and
its shareholders;
WHEREAS, the Corporation intends to employ Legg Mason
Wood Walker, Incorporated ("Legg Mason") as principal underwriter of
the shares of the Corporation;
NOW, THEREFORE, the Corporation hereby adopts this
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under
the 1940 Act on the following terms and conditions:
1. A. Legg Mason Focus Trust shall pay to Legg Mason,
as compensation for Legg Mason's services as principal underwriter of
the Series' shares, a distribution fee at the rate of 0.75% on an
annualized basis of the average daily net assets of the Corporation's
shares, such fee to be calculated and accrued daily and paid monthly
or at such other intervals as the Board shall determine.
B. The Corporation shall pay to Legg Mason, as
compensation for ongoing services provided to the Corporation's
shareholders, a service fee at the rate of 0.25% on an annualized
basis of the average daily net assets of the Corporation's shares,
such fee to be calculated and accrued daily and paid monthly or at
such other intervals as the Board shall determine.
C. The Corporation may pay a distribution or
service fee to Legg Mason at a lesser rate than the fees specified in
paragraphs 1.A. and 1.B., respectively, of this Plan, in either case
as agreed upon by the Board and Legg Mason and as approved in the
manner specified in paragraph 4 of this Plan. The distribution and
service fees payable hereunder are payable without regard to the
aggregate amount that may be paid over the years, provided that, so
long as the limitations set forth in Conduct Rule 2830(d) 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 Series 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 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 not take effect with respect to any
additional Series until it has been approved by a vote of at least a
majority of the outstanding voting securities, as defined in the 1940
Act, of that Series.
4. This Plan shall take effect on __________, 1998 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.
5. Any person authorized to direct the disposition of
monies paid or payable by any Series pursuant to this Plan or any
related agreement shall provide to the Corporation's Board of
Directors and the Board shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made. Legg Mason shall submit only information
regarding amounts expended for "distribution activities," as defined
in this paragraph 5, to the Board in support of the distribution fee
payable hereunder and shall submit only information regarding amounts
expended for "service activities," as defined in this paragraph 5, to
the Board in support of the service fee payable hereunder.
For purposes of this Plan, "distribution activities"
shall mean any activities in connection with Legg Mason's performance
of its obligations under the underwriting agreement, dated
__________, 1998, by and between the Corporation and Legg Mason, that
are not deemed "service activities." As used herein, "distribution
activities" also includes sub-accounting or recordkeeping services
provided by an entity if the entity is compensated, directly or
indirectly, by the Fund or Legg Mason for such services. Such entity
may also be paid a service fee if it provides appropriate services.
Nothing in the foregoing is intended to or shall cause there to be
any implication that compensation for such services must be made only
pursuant to a plan of distribution under Rule 12b-1. "Service
activities" shall mean activities covered by the definition of
"service fee" contained in Conduct Rule 2830(b) 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 "distribution activities"
or "service activities," including telephone and other communications
expenses, may be included in the information regarding amounts
expended for such distribution or service activities, respectively.
6. This Plan may be terminated with respect to any
Series 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 that
Series.
7. This Plan may not be amended to increase materially
the amount of distribution fees provided for in paragraph 1.A. hereof
or the amount of service fees provided for in paragraph 1.B. hereof
unless such amendment is approved by a vote of at least a majority of
the outstanding securities, as defined in the 1940 Act, of the
Corporation, and no material amendment to the Plan shall be made
unless such amendment is approved in the manner provided for
continuing approval in paragraph 4 hereof.
8. While this Plan is in effect, the selection and
nomination of directors who are not interested persons of the
Corporation, as defined in the 1940 Act, shall be committed to the
discretion of directors who are themselves not interested persons.
9. The Corporation shall preserve copies of this Plan
and any related agreements for a period of not less than six years
from the date of expiration of the Plan or agreement, as the case may
be, the first two years in an easily accessible place; and shall
preserve copies of each report made pursuant to paragraph 5 hereof
for a period of not less than six years from the date of such report,
the first two years is an easily accessible place.
IN WITNESS WHEREOF, the Corporation has executed this
Distribution Plan as of the day and year set forth below:
Date: LEGG MASON FOCUS TRUST, INC.
Attest:
By: By:
Agreed and assented to by
LEGG MASON WOOD WALKER, INC.
By:
