UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22338
Legg Mason Global Asset Management Trust
(Exact name of registrant as specified in charter)
55 Water Street, New York, NY 10041
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: 1-877-721-1926
Date of fiscal year end: December 31
Date of reporting period: December 31, 2011
| ITEM 1. | REPORT TO STOCKHOLDERS. |
The Annual Report to Stockholders is filed herewith.
December 31, 2011
Annual Repor t
Legg Mason
BW
International
Opportunities
Bond Fund
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE
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| II | | Legg Mason BW International Opportunities Bond Fund |
Fund objective
The Fund’s objective is to maximize total return consisting of income and capital appreciation.
Letter to our shareholders
Dear Shareholder,
We are pleased to provide the annual report of Legg Mason BW International Opportunities Bond Fund for the twelve-month reporting period ended December 31, 2011. Please read on for a detailed look at prevailing economic and market conditions during the Fund’s reporting period and to learn how those conditions have affected Fund performance.
As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.leggmason.com/individualinvestors. Here you can gain immediate access to market and investment information, including:
| Ÿ | | Fund prices and performance, |
| Ÿ | | Market insights and commentaries from our portfolio managers, and |
| Ÿ | | A host of educational resources. |
Special shareholder notice
Effective February 22, 2012, the Fund’s Portfolio Managers are Stephen S. Smith, David F. Hoffman, CFA and John P. McIntyre, CFA. Brian R. Hess is the Fund’s Associate Portfolio Manager. The Fund’s portfolio managers are responsible for the day-to-day management of the Fund.
Messrs. Smith and Hoffman have been responsible for the day-to-day management of the Fund since 2009, and Mr. McIntyre has been a part of the Fund’s portfolio management team since 2009. Mr. Hess joined the portfolio management team in February 2012. Messrs. McIntyre and Hess are also Senior Research Analysts responsible for research and market insight for the Fund. Messrs. Smith, Hoffman, McIntyre and Hess are employed by Brandywine Global Investment Management, LLC.
We look forward to helping you meet your financial goals.
Sincerely,
| | |
 | |  |
| Mark R. Fetting | | R. Jay Gerken, CFA |
| Chairman | | President |
January 27, 2012
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | III | |
Investment commentary
Economic review
Economic growth in the U.S. accelerated over the twelve months ended December 31, 2011. However, the pace of the expansion was less robust than during most other periods exiting a severe recession. U.S. gross domestic product (“GDP”)i growth, as reported by the U.S. Department of Commerce, was 0.4% and 1.3% in the first and second quarters of 2011, respectively. Third quarter GDP growth then rose to 1.8%. The economy then gathered further momentum late in the year, as the Commerce Department’s initial estimate for fourth quarter GDP growth was 2.8% — the fastest pace since the second quarter of 2010. This was attributed, in part, to higher consumer spending, which rose 2.0% in the fourth quarter, versus 1.7% and 0.7% gains in the third and second quarters, respectively.
Two factors holding back the economy were the weak job market and continued strains in the housing market. While there was some improvement in early 2011 and late in the reporting period, unemployment remained elevated. When 2011 began, unemployment, as reported by the U.S. Department of Labor, was 9.4%. After dipping below 9.0% in March 2011 (to 8.9%), unemployment moved back to 9.0% in April. Unemployment stayed above 9.0% over the next five months before declining to 8.9% in October. Unemployment then fell to 8.6% in November and 8.5% in December, the latter being the lowest rate since February 2009. The housing market showed some encouraging signs, although home prices still appear to be searching for a bottom. Looking back, existing-home sales moved somewhat higher in January 2011, according to the National Association of Realtors (“NAR”). Existing-home sales then fluctuated over the next eight months before rising during each of the last three months of the year. In addition, the year ended with the lowest inventory of unsold homes since April 2006. However, existing-home prices remained weak versus a year ago, with the NAR reporting that the median existing-home price for all housing types was $164,500 in December 2011, down 2.5% from December 2010.
While the manufacturing sector continued to expand, it experienced a soft patch during a portion of the reporting period. Based on the Institute for Supply Management’s PMI (“PMI”)ii, in February 2011, the manufacturing sector expanded at its fastest pace since May 2004, with a reading of 61.4 (a reading below 50 indicates a contraction, whereas a reading above 50 indicates an expansion). The PMI then generally moderated over the next several months and was 50.6 in August 2011, its lowest reading in two years. However, the manufacturing sector gained some momentum late in the period and ended December at 53.9, its highest reading in the last six months.
Disappointing economic news was not limited to the U.S. In January 2012 (after the reporting period ended), the International Monetary Fund (“IMF”) lowered its growth projections for the global economy. This was due, in part, to the IMF’s expectation that the Eurozone would experience “a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of additional fiscal consolidation.” The IMF now anticipates 2012 growth will be -0.5% in the Eurozone and 1.7% in Japan. While growth in emerging market countries is expected to remain higher than in their developed country counterparts, the IMF reduced its 2012 projection for the former from 6.1% to 5.4%.
The Federal Reserve Board (“Fed”)iii took a number of actions as it sought to meet its dual mandate of fostering maximum employment and price stability. As has been the case since December 2008, the Fed kept the federal funds rateiv at a historically low range between zero and 0.25%. In addition, in August 2011, the Fed declared
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| IV | | Legg Mason BW International Opportunities Bond Fund |
Investment commentary (cont’d)
its intention to keep the federal funds rate steady until mid-2013. Then, in September 2011, the Fed announced its intention to purchase $400 billion of longer-term Treasury securities and to sell an equal amount of shorter-term Treasury securities by June 2012 (often referred to as “Operation Twist”). At its meeting in December, the Fed potentially opened the door to another round of quantitative easing in 2012, saying it is “prepared to employ its tools to promote a stronger economic recovery in a context of price stability.” Finally, in January 2012 (after the reporting period ended), the Fed extended the period it expects to keep rates on hold, saying “economic conditions — including low rates of resource utilization and a subdued outlook for inflation over the medium run — are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
Due to mounting economic challenges in the Eurozone, the European Central Bank (“ECB”) shifted its monetary policy during the reporting period. Citing inflationary pressures, the ECB raised interest rates in April 2011 from 1.00% to 1.25%, and then to 1.50% in July. However, with growth moderating and given the ongoing European sovereign debt crisis, the ECB lowered interest rates to 1.25% in November and 1.00% in December, equaling its all-time low. In other developed countries, the Bank of England kept rates on hold at 0.50% during the reporting period, as did Japan at a range of zero to 0.10%, the lowest level since 2006. Elsewhere, a number of emerging market countries, including China and India, raised interest rates during the reporting period in an effort to ward off inflation.
As always, thank you for your confidence in our stewardship of your assets.
Sincerely,
R. Jay Gerken, CFA
President
January 27, 2012
All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. Forecasts and predictions are inherently limited and should not be relied upon as an indication of actual or future performance.
| i | Gross domestic product (“GDP”) is the market value of all final goods and services produced within a country in a given period of time. |
| ii | The Institute for Supply Management’s PMI is based on a survey of purchasing executives who buy the raw materials for manufacturing at more than 350 companies. It offers an early reading on the health of the manufacturing sector. |
| iii | The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
| iv | The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day. |
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| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 1 | |
Fund overview
Q. What is the Fund’s investment strategy?
A. The Fund seeks to maximize total return consisting of income and capital appreciation. The Fund will normally invest its assets primarily in debt and fixed-income securities of foreign issuers located in developed countries. The Fund will invest in the sovereign debt and currencies of countries in the Citigroup World Government Bond Ex-U.S. Index (Unhedged)i (the “Index”). The Fund will invest in both investment grade and below investment grade securities, and intends to invest less than 35% of its total assets in below investment grade securities. Investment grade securities are securities rated, at the time of purchase, by a nationally recognized statistical ratings organization within one of the top four categories, or, if unrated, that we judge to be of comparable credit quality. The Fund will also normally invest a minimum of 80% of its total assets in debt securities of issuers located in developed market countries. In addition, under normal circumstances, the Fund will invest at least 80% of its net assets in debt securities. The Fund may invest up to 25% of its net assets in convertible debt securities.
The Fund will normally hold a portfolio of debt securities of issuers located in a minimum of six countries. We intend to maintain an average weighted portfolio quality of A or better, whether composed of rated securities or unrated securities deemed to be of comparable quality. The average weighted durationii of the Fund’s portfolio is expected to range from one to ten years, but for individual markets may be greater or lesser depending on our view of the prospects for lower interest rates and potential capital gains. The Fund may engage in a variety of transactions using derivatives such as futures, options, forward foreign currency transactions and swaps. The Fund may invest significantly in derivatives for both hedging and non-hedging purposes, including for purposes of enhancing returns.
We follow a value approach to investing and, therefore, seek to identify relative value in the international bond markets. We define as undervalued, those markets where we believe real interest rates are high and the currency is undervalued with the potential to appreciate. We will concentrate investments in those undervalued markets where we believe cyclical business conditions as well as secular economic and political trends provide the best opportunity for declining interest rates and a return to lower real rates over time. We believe that such economic conditions provide the best potential to achieve capital appreciation.
Q. What were the overall market conditions during the Fund’s reporting period?
A. The past year, 2011, was another year of living dangerously in what has become a way of life for investors. Last year’s challenges ranged from the fallout of a potential Greek debt default to anxiety that a catastrophic collapse of Europe would propel the world into a depression. Speculation has been rampant about the possible fracture of the Eurozone and fear that this may be the early stages of a global sovereign debt default contagion. Time magazine summed up sentiment in late August with a cover titled “The Decline and Fall of Europe (and maybe the west).” The Economist magazine showed a graphic on its cover depicting a black hole with the words “Be Afraid.”
Europe wasn’t the only concern. In China, the real estate bubble looks like it has burst. Non-performing bank loans and bankrupt municipalities are sure to be exposed as this tide goes out. On top of it all, this is a transition year for leadership in China, usually a negative during a period of turbulence. In the U.S., investor confidence is flimsy despite the year-end rally in equities. Political gridlock continues to prevent resti-
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| 2 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Fund overview (cont’d)
tution of America’s fiscal monstrosity while the administration’s anti-growth agenda is a continuous cold shower on the business sector struggling to overcome the forces of deleveraging.
The “old normal” pattern of the business cycle calls for 2012 to be an up year in the world economy. Typically, there is a tremendous amount of policy stimulus coming out of recession, just as there was in 2009. Once there is recovery, policy makers tend to take their foot off the gas pedal or even tap the brakes. This played out in 2011 with the European Central Bank (“ECB”) raising rates the first half of the year, the Chinese authorities draining their financial system of liquidity to fight inflation and the Federal Reserve Board (“Fed”)iii suspending QE2 on June 30th. Last year’s global economic slowdown fits the classic profile of previous business cycles’ mid-course correction.
Q. How did we respond to these changing market conditions?
A. We managed the portfolio in 2011 in anticipation of a mid-cycle correction and pause in global economic growth caused by higher oil prices and by the policy retreat from reflationiv observed in China and Europe. With uncertainty still at high levels throughout the year, we focused on capturing relative valuation differentials with incremental rotation in country and currency decisions.
Performance review
For the twelve months ended December 31, 2011, Class IS shares of Legg Mason BW International Opportunities Bond Fund returned 3.19%. The Fund’s unmanaged benchmark, the Citigroup World Government Bond Ex-U.S. Index (Unhedged), returned 5.17% for the same period. The Lipper International Income Funds Category Average1 returned 2.97% over the same time frame.
| | | | | | | | |
Performance Snapshot as of December 31, 2011
(unaudited) | |
| | | 6 months | | | 12 months | |
| Legg Mason BW International Opportunities Bond Fund: | |
Class IS | | | -0.93 | % | | | 3.19 | % |
| Citigroup World Government Bond Ex-U.S. Index (Unhedged) | | | 0.47 | % | | | 5.17 | % |
| Lipper International Income Funds Category Average1 | | | -1.67 | % | | | 2.97 | % |
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value, investment returns and yields will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please visit our website at www.leggmason.com/individualinvestors.
Funds returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Returns have not been adjusted to include the deduction of taxes that a shareholder would pay on Fund distributions. Performance figures for periods shorter than one year represent cumulative figures and are not annualized.
Fund performance figures reflect fee waivers and/or expense reimbursements, without which the performance would have been lower.
Performance of Class A, Class C, Class FI, Class R and Class I shares is not shown because these share classes commenced operations on October 31, 2011.
The 30-Day SEC Yields for the period ended December 31, 2011 for Class A, Class C, Class FI, Class R, Class I and Class IS shares were 3.53%, 3.24%, 3.69%, 3.44%, 3.95% and 4.03%, respectively. Absent fee waivers and/or expense reimbursements, the 30-Day SEC Yields for Class A, Class C, Class FI, Class R, Class I and Class IS shares would have been 3.51%, 3.22%, 3.67%, 3.42%, 3.93% and
| 1 | Lipper, Inc., a wholly-owned subsidiary of Reuters, provides independent insight on global collective investments. Returns are based on the period ended December 31, 2011, including the reinvestment of all distributions, including returns of capital, if any, calculated among the 102 funds for the six-month period and among the 100 funds for the twelve-month period in the Fund’s Lipper category, and excluding sales charges. |
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| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 3 | |
4.02%, respectively. The 30-Day SEC Yield is subject to change and is based on the yield to maturity of the Fund’s investments over a 30-day period and not on the dividends paid by the Fund, which may differ.
|
| Total Annual Operating Expenses (unaudited) |
As of the Fund’s current prospectus dated May 1, 2011, the gross total annual operating expense ratios for Class A, Class C, Class FI, Class R, Class I and Class IS shares were 1.92%, 2.37%, 1.92%, 2.17%, 1.67% and 1.57%, respectively.
Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.
As a result of expense limitation arrangements, the ratio of expenses, other than brokerage, interest, dividend expense on short sales, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets is not expected to exceed 1.00% for Class A shares, 1.45% for Class C shares, 1.00% for Class FI shares, 1.25% for Class R shares, 0.75% for Class I shares and 0.65% for Class IS shares. These expense limitation arrangements cannot be terminated prior to December 31, 2013 without the Board of Directors’ consent.
The manager is permitted to recapture amounts waived or reimbursed to a class within three years after the year in which the manager earned the fee or incurred the expense if the class’ total annual operating expenses have fallen to a level below the expense limitation in effect at the time the fees were earned or the expenses incurred.
Q. What were the leading contributors to performance?
A. Our currency underperformance was offset to a large degree by strong relative performance within our bond holdings. Overweight positions in the safe-haven government bond markets of the United Kingdom and Australia provided the largest contributions to relative performance within our bond holdings.
Q. What were the leading detractors from performance?
A. Modest underperformance in the Fund was primarily attributable to currency exposures. An underweight position in the Japanese yen, combined with overweight positions in several cyclical currencies such as the Mexican peso and Polish zloty, hurt relative performance as global growth began to slow. Cyclical currencies also underperformed when investors positioned for a potential collapse of the Eurozone during the third quarter of 2011.
Derivatives detracted from absolute performance during the twelve-month period ended December 31, 2011. Foreign currency forwards that acted as hedges against a fall in the Australian dollar during the first few months of the year were primary detractors from performance. We owned the local currency sovereign debt but were concerned about a possible decline in the commodity-linked currency against the dollar. A short euro position against the dollar during the first few months of the year detracted substantially from performance as well, although subsequent short euro forwards contributed to performance later in the year.
Q. Were there any significant changes to the Fund during the reporting period?
A. By the end of the year, high quality sovereigns were becoming fully valued relative to many metrics we follow. For that reason, at the end of the period, we began selectively trimming holdings of long-term bonds including British Gilts. At the same time, however, other bond markets like Mexico and South Africa offered good value and the prospect for global policy reflation should benefit these markets. We have been adding to these positions as valuations became attractive at the end of the year.
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| 4 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Fund overview (cont’d)
One major change to the portfolio during the year occurred in the second quarter as we prepared for a possible “risk reset” in the second half of 2011. This included: maintaining long-duration exposure in high-quality sovereigns and hedging currency risk associated with richly valued, commodity-linked currencies.
Thank you for your investment in Legg Mason BW International Opportunities Bond Fund. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund’s investment goals.
Sincerely,
David F. Hoffman, CFA
Portfolio Manager
Brandywine Global Investment Management, LLC
Stephen S. Smith
Portfolio Manager
Brandywine Global Investment Management, LLC
January 17, 2012
RISKS: The Fund is non-diversified and may be more susceptible to economic, political or regulatory events than a diversified fund. Foreign securities involve special risks such as currency fluctuations and changes in political and economic conditions. These risks are magnified in emerging markets. The Fund’s share price will decline as interest rates rise. Below investment grade debt securities involve greater volatility than higher-rated securities. The Fund may engage in derivative transactions, which involve special risks and costs and may increase losses and may have a potentially large impact on Fund performance. Please see the Fund’s prospectus for a more complete discussion of these and other risks, and the Fund’s investment strategies.
All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.
| i | The Citigroup World Government Bond Ex-U.S. Index (Unhedged) encompasses an all-inclusive universe of institutionally traded bonds, including all fixed-rate bonds with remaining maturities of one year or longer with amounts outstanding of at least the equivalent of $25 million. |
| ii | Duration is the measure of the price sensitivity of a fixed-income security to an interest rate change of 100 basis points. Calculation is based on the weighted average of the present values for all cash flows. |
| iii | The Federal Reserve Board (“Fed”) is responsible for the formulation of policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
| iv | Reflation is a fiscal or monetary policy, designed to expand a country’s output and curb the effects of deflation. Reflation policies can include reducing taxes, changing the money supply and lowering interest rates. |
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| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 5 | |
Fund at a glance† (unaudited)
Investment breakdown (%) as a percent of total investments
| † | The bar graph above represents the composition of the Fund’s investments as of December 31, 2011 and December 31, 2010 and does not include derivatives, such as forward foreign currency contracts. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time. |
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| 6 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Fund expenses (unaudited)
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or distribution (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on July 1, 2011 and held for the six months ended December 31, 2011, unless otherwise noted.
Actual expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Hypothetical example for comparison purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as front-end or back-end sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
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| Based on actual total return1 | | | | | Based on hypothetical total return1 | |
| | | Actual
Total Return
Without
Sales
Charges2 | | | Beginning
Account
Value | | | Ending
Account
Value | | | Annualized
Expense
Ratio | | | Expenses
Paid
During
the
Period | | | | | | | Hypothetical
Annualized
Total Return | | | Beginning
Account
Value | | | Ending
Account
Value | | | Annualized
Expense
Ratio | | | Expenses
Paid
During
the
Period5 | |
| Class A3 | | | -1.40 | % | | $ | 1,000.00 | | | $ | 986.00 | | | | 1.00 | % | | $ | 1.66 | 4 | | | | Class A | | | 5.00 | % | | $ | 1,000.00 | | | $ | 1,020.16 | | | | 1.00 | % | | $ | 5.09 | |
| Class C3 | | | -1.47 | | | | 1,000.00 | | | | 985.30 | | | | 1.45 | | | | 2.41 | 4 | | | | Class C | | | 5.00 | | | | 1,000.00 | | | | 1,017.90 | | | | 1.45 | | | | 7.37 | |
| Class FI3 | | | -1.40 | | | | 1,000.00 | | | | 986.00 | | | | 1.00 | | | | 1.66 | 4 | | | | Class FI | | | 5.00 | | | | 1,000.00 | | | | 1,020.16 | | | | 1.00 | | | | 5.09 | |
| Class R3 | | | -1.45 | | | | 1,000.00 | | | | 985.50 | | | | 1.25 | | | | 2.07 | 4 | | | | Class R | | | 5.00 | | | | 1,000.00 | | | | 1,018.90 | | | | 1.25 | | | | 6.36 | |
| Class I3 | | | -1.36 | | | | 1,000.00 | | | | 986.40 | | | | 0.75 | | | | 1.24 | 4 | | | | Class I | | | 5.00 | | | | 1,000.00 | | | | 1,021.42 | | | | 0.75 | | | | 3.82 | |
| Class IS | | | -0.93 | | | | 1,000.00 | | | | 990.70 | | | | 0.65 | | | | 3.26 | 5 | | | | Class IS | | | 5.00 | | | | 1,000.00 | | | | 1,021.93 | | | | 0.65 | | | | 3.31 | |
| 1 | For the six months ended December 31, 2011, unless otherwise noted. |
| 2 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. Total return is not annualized, as it may not be representative of the total return for the year. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. |
| 3 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 4 | Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (61), then divided by 365. |
| 5 | Expenses (net of compensating balance arrangements, fee waivers and/or expense reimbursements) are equal to each class’ respective annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (184), then divided by 365. |
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| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 7 | |
Fund performance (unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| Average annual total returns | |
| Without sales charges1 | | Class A† | | | Class C† | | | Class FI† | | | Class R† | | | Class I† | | | Class IS | |
| Twelve Months Ended 12/31/11 | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3.19 | % |
| Inception* through 12/31/11 | | | -1.40 | % | | | -1.47 | % | | | -1.40 | % | | | -1.45 | % | | | -1.36 | % | | | 5.33 | |
| | | | | | |
| With sale charges2 | | Class A† | | | Class C† | | | Class FI† | | | Class R† | | | Class I† | | | Class IS | |
| Twelve Months Ended 12/31/11 | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | N/A | | | | 3.19 | % |
| Inception* through 12/31/11 | | | -5.59 | % | | | -2.44 | % | | | -1.40 | % | | | -1.45 | % | | | -1.36 | % | | | 5.33 | |
| | | | |
| Cumulative total returns1 | | | |
| Class A (Inception date of 10/31/11 through 12/31/11) | | | -1.40 | % |
| Class C (Inception date of 10/31/11 through 12/31/11) | | | -1.47 | |
| Class FI (Inception date of 10/31/11 through 12/31/11) | | | -1.40 | |
| Class R (Inception date of 10/31/11 through 12/31/11) | | | -1.45 | |
| Class I (Inception date of 10/31/11 through 12/31/11) | | | -1.36 | |
| Class IS (Inception date of 12/28/09 through 12/31/11) | | | 11.00 | |
All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.
| 1 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. |
| 2 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. In addition, Class A shares reflect the deduction of the maximum initial sales charge of 4.25%. Class C shares reflect the deduction of a 1.00% CDSC, which applies if shares are redeemed within one year from purchase payment. |
| * | Inception dates for Class A, C, FI, R, I and IS shares are October 31, 2011 and December 28, 2009, respectively. |
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| 8 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Fund performance (unaudited) (cont’d)
Historical performance
Value of $1,000,000 invested in
Class IS Shares of Legg Mason BW International Opportunities Bond Fund vs. Citigroup World Government Bond Ex-U.S. Index (Unhedged)† — December 28, 2009 - December 2011
All figures represent past performance and are not a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower.
| † | Hypothetical illustration of $1,000,000 invested in Class IS shares of Legg Mason BW International Opportunities Bond Fund on December 28, 2009 (commencement of operations), assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through December 31, 2011. The hypothetical illustration also assumes a $1,000,000 investment in the Citigroup World Government Bond Ex-U.S. Index (Unhedged). The Citigroup World Government Bond Ex-U.S. Index (Unhedged) encompasses an all-inclusive universe of institutionally traded bonds, including all fixed-rate bonds with remaining maturities of one year or longer with amounts outstanding of at least the equivalent of $25 million. The Index is unmanaged and is not subject to the same management and trading expenses of a mutual fund. Please note that an investor cannot invest directly in an index. The performance of the Fund’s other classes may be greater or less than Class IS shares’ performance indicated on this chart, depending on whether greater or lesser charges and fees were incurred by shareholders investing in the other classes. |
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 9 | |
Schedule of investments
December 31, 2011
Legg Mason BW International Opportunities Bond Fund
| | | | | | | | | | | | | | |
| Security | | Rate | | | Maturity
Date | | Face
Amount† | | | Value | |
| Sovereign Bonds — 84.9% | | | | | | | | | | | | | | |
Australia — 12.3% | | | | | | | | | | | | | | |
New South Wales Treasury Corp. | | | 6.000 | % | | 4/1/19 | | | 1,290,000 | AUD | | $ | 1,462,103 | |
New South Wales Treasury Corp., Senior Notes | | | 6.000 | % | | 4/1/16 | | | 7,345,000 | AUD | | | 8,055,259 | |
Queensland Treasury Corp., Senior Bonds | | | 6.250 | % | | 2/21/20 | | | 865,000 | AUD | | | 958,334 | |
Total Australia | | | | | | | | | | | | | 10,475,696 | |
Brazil — 3.3% | | | | | | | | | | | | | | |
Brazil Nota do Tesouro Nacional, Notes | | | 10.000 | % | | 1/1/21 | | | 5,607,000 | BRL | | | 2,801,324 | |
Hungary — 2.7% | | | | | | | | | | | | | | |
Hungary Government Bond | | | 5.500 | % | | 2/12/16 | | | 643,400,000 | HUF | | | 2,311,496 | |
Indonesia — 2.8% | | | | | | | | | | | | | | |
Government of Indonesia, Senior Bond | | | 10.000 | % | | 9/15/24 | | | 16,324,000,000 | IDR | | | 2,334,801 | |
Ireland — 2.3% | | | | | | | | | | | | | | |
Republic of Ireland | | | 5.000 | % | | 10/18/20 | | | 1,860,000 | EUR | | | 1,991,396 | |
Italy — 9.9% | | | | | | | | | | | | | | |
Italy Buoni Poliennali Del Tesoro | | | 5.000 | % | | 8/1/39 | | | 8,225,000 | EUR | | | 8,458,758 | |
Malaysia — 4.4% | | | | | | | | | | | | | | |
Government of Malaysia | | | 3.718 | % | | 6/15/12 | | | 11,140,000 | MYR | | | 3,526,260 | |
Government of Malaysia, Senior Bonds | | | 3.702 | % | | 2/25/13 | | | 700,000 | MYR | | | 222,805 | |
Total Malaysia | | | | | | | | | | | | | 3,749,065 | |
Mexico — 6.4% | | | | | | | | | | | | | | |
Mexican Bonos, Bonds | | | 8.500 | % | | 5/31/29 | | | 67,950,000 | MXN | | | 5,405,547 | |
New Zealand — 4.9% | | | | | | | | | | | | | | |
Government of New Zealand | | | 5.500 | % | | 4/15/23 | | | 4,725,000 | NZD | | | 4,187,304 | |
Norway — 4.6% | | | | | | | | | | | | | | |
Government of Norway, Bonds | | | 6.500 | % | | 5/15/13 | | | 21,990,000 | NOK | | | 3,930,599 | |
Poland — 4.5% | | | | | | | | | | | | | | |
Republic of Poland | | | 5.750 | % | | 9/23/22 | | | 13,425,000 | PLN | | | 3,855,536 | |
South Africa — 3.4% | | | | | | | | | | | | | | |
Republic of South Africa, Bonds | | | 6.750 | % | | 3/31/21 | | | 20,495,000 | ZAR | | | 2,344,938 | |
Republic of South Africa, Bonds | | | 6.500 | % | | 2/28/41 | | | 5,930,000 | ZAR | | | 552,778 | |
Total South Africa | | | | | | | | | | | | | 2,897,716 | |
South Korea — 4.4% | | | | | | | | | | | | | | |
Korea Treasury Bond | | | 5.750 | % | | 9/10/18 | | | 2,839,100,000 | KRW | | | 2,774,676 | |
Korea Treasury Bond, Senior Bonds | | | 3.000 | % | | 12/10/13 | | | 1,162,700,000 | KRW | | | 1,004,005 | |
Total South Korea | | | | | | | | | | | | | 3,778,681 | |
See Notes to Financial Statements.
| | |
| 10 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Schedule of investments (cont’d)
December 31, 2011
Legg Mason BW International Opportunities Bond Fund
| | | | | | | | | | | | | | |
| Security | | Rate | | | Maturity
Date | | Face
Amount† | | | Value | |
United Kingdom — 19.0% | | | | | | | | | | | | | | |
United Kingdom Gilt | | | 4.250 | % | | 3/7/36 | | | 6,105,000 | GBP | | $ | 11,643,554 | |
United Kingdom Gilt, Bonds | | | 4.500 | % | | 3/7/13 | | | 2,802,000 | GBP | | | 4,566,157 | |
Total United Kingdom | | | | | | | | | | | | | 16,209,711 | |
Total Sovereign Bonds (Cost — $73,399,120) | | | | 72,387,630 | |
| Corporate Bonds & Notes — 5.9% | | | | | | | | | | | | | | |
| Financials — 5.9% | | | | | | | | | | | | | | |
Capital Markets — 2.8% | | | | | | | | | | | | | | |
Merrill Lynch & Co. Inc., Senior Notes | | | 1.201 | % | | 2/21/12 | | | 1,550,000 | GBP | | | 2,396,173 | (a) |
Diversified Financial Services — 1.5% | | | | | | | | | | | | | | |
Kreditanstalt fuer Wiederaufbau, Senior Notes | | | 6.250 | % | | 12/4/19 | | | 1,200,000 | AUD | | | 1,273,993 | |
Insurance — 1.6% | | | | | | | | | | | | | | |
Metropolitan Life Global Funding I, Senior Secured Notes | | | 2.625 | % | | 12/3/12 | | | 1,345,000 | CAD | | | 1,328,101 | |
Total Corporate Bonds & Notes (Cost — $5,010,543) | | | | 4,998,267 | |
Total Investments before Short-Term Investments (Cost — $78,409,663) | | | | 77,385,897 | |
| Short-Term Investments — 7.1% | | | | | | | | | | | | | | |
Time Deposits — 7.1% | | | | | | | | | | | | | | |
State Street Corp.; (Cost — $6,037,000) | | | 0.010 | % | | 1/3/12 | | | 6,037,000 | | | | 6,037,000 | |
Total Investments — 97.9% (Cost — $84,446,663#) | | | | 83,422,897 | |
Other Assets in Excess of Liabilities — 2.1% | | | | 1,790,065 | |
Total Net Assets — 100.0% | | | $ | 85,212,962 | |
| † | Face amount denominated in U.S. dollars, unless otherwise noted. |
| (a) | Variable rate security. Interest rate disclosed is as of the most recent information available. |
| # | Aggregate cost for federal income tax purposes is $85,097,997. |
| | |
Abbreviations used in this schedule: |
| AUD | | — Australian Dollar |
| BRL | | — Brazilian Real |
| CAD | | — Canadian Dollar |
| EUR | | — Euro |
| GBP | | — British Pound |
| HUF | | — Hungarian Forint |
| IDR | | — Indonesian Rupiah |
| KRW | | — South Korean Won |
| MXN | | — Mexican Peso |
| MYR | | — Malaysian Ringgit |
| NOK | | — Norwegian Krone |
| NZD | | — New Zealand Dollar |
| PLN | | — Polish Zloty |
| ZAR | | — South African Rand |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 11 | |
Statement of assets and liabilities
December 31, 2011
| | | | |
| |
| Assets: | | | | |
Investments, at value (Cost — $84,446,663) | | $ | 83,422,897 | |
Foreign currency, at value (Cost — $225,134) | | | 209,256 | |
Cash | | | 42 | |
Interest receivable | | | 1,371,667 | |
Unrealized appreciation on forward foreign currency contracts | | | 1,151,083 | |
Receivable for securities sold | | | 412,434 | |
Prepaid expenses | | | 23,535 | |
Total Assets | | | 86,590,914 | |
| |
| Liabilities: | | | | |
Unrealized depreciation on forward foreign currency contracts | | | 1,024,502 | |
Distributions payable | | | 181,113 | |
Accrued foreign capital gains tax | | | 74,770 | |
Investment management fee payable | | | 22,572 | |
Payable for Fund shares repurchased | | | 1,153 | |
Service and/or distribution fees payable | | | 404 | |
Accrued expenses | | | 73,438 | |
Total Liabilities | | | 1,377,952 | |
| Total Net Assets | | $ | 85,212,962 | |
| |
| Net Assets: | | | | |
Par value (Note 7) | | $ | 72 | |
Paid-in capital in excess of par value | | | 86,870,648 | |
Overdistributed net investment income | | | (1,217,767) | |
Undistributed net realized gain on investments and foreign currency transactions | | | 626,266 | |
Net unrealized depreciation on investments and foreign currencies | | | (1,066,257) | |
| Total Net Assets | | $ | 85,212,962 | |
See Notes to Financial Statements.
| | |
| 12 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Statement of assets and liabilities (cont’d)
December 31, 2011
| | | | |
| |
| Shares Outstanding: | | | | |
Class A | | | 838 | |
Class C | | | 838 | |
Class FI | | | 199,826 | |
Class R | | | 838 | |
Class I | | | 839 | |
Class IS | | | 7,046,812 | |
| |
| Net Asset Value: | | | | |
Class A (and redemption price) | | | $11.76 | |
Class C* | | | $11.76 | |
Class FI (and redemption price) | | | $11.76 | |
Class R (and redemption price) | | | $11.76 | |
Class I (and redemption price) | | | $11.76 | |
Class IS (and redemption price) | | | $11.75 | |
| Maximum Public Offering Price Per Share: | | | | |
Class A (based on maximum initial sales charge of 4.25%) | | | $12.28 | |
| * | Redemption price per share is NAV of Class C shares reduced by a 1.00% CDSC if shares are redeemed within one year from purchase payment (See Note 2). |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 13 | |
Statement of operations
For the Year Ended December 31, 2011
| | | | |
| |
| Investment Income: | | | | |
Interest | | $ | 4,107,751 | |
Less: Foreign taxes withheld | | | (70,926) | |
Total Investment Income | | | 4,036,825 | |
| |
| Expenses: | | | | |
Investment management fee (Note 2) | | | 419,586 | |
Custody fees | | | 75,846 | |
Audit and tax | | | 44,549 | |
Shareholder reports | | | 36,523 | |
Registration fees | | | 35,799 | |
Trustees’ fees | | | 28,694 | |
Legal fees | | | 28,596 | |
Fund accounting fees | | | 23,747 | |
Fees recaptured by investment manager (Note 2) | | | 10,494 | |
Transfer agent fees (Note 5) | | | 8,419 | |
Insurance | | | 2,128 | |
Service and/or distribution fees (Notes 2 and 5) | | | 504 | |
Miscellaneous expenses | | | 8,265 | |
Total Expenses | | | 723,150 | |
Less: Fee waivers and/or expense reimbursements (Notes 2 and 5) | | | (178,695) | |
Net Expenses | | | 544,455 | |
| Net Investment Income | | | 3,492,370 | |
| |
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions (Notes 1, 3 and 4): | | | | |
Net Realized Gain (Loss) From: | | | | |
Investment transactions | | | 2,161,413 | |
Foreign currency transactions | | | (1,248,952) | |
Net Realized Gain | | | 912,461 | |
Change in Net Unrealized Appreciation (Depreciation) From: | | | | |
Investments | | | (2,034,364) | |
Foreign currencies | | | 368,398 | |
Change in Net Unrealized Appreciation (Depreciation) | | | (1,665,966) | |
| Net Loss on Investments and Foreign Currency Transactions | | | (753,505) | |
| Increase in Net Assets from Operations | | $ | 2,738,865 | |
See Notes to Financial Statements.
| | |
| 14 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Statements of changes in net assets
| | | | | | | | |
| For the Years Ended December 31, | | 2011 | | | 2010 | |
| | |
| Operations: | | | | | | | | |
Net investment income | | $ | 3,492,370 | | | $ | 759,333 | |
Net realized gain | | | 912,461 | | | | 894,568 | |
Change in net unrealized appreciation (depreciation) | | | (1,665,966) | | | | 581,576 | |
Increase in Net Assets From Operations | | | 2,738,865 | | | | 2,235,477 | |
| | |
| Distributions to Shareholders From (Notes 1 and 6): | | | | | | | | |
Net investment income | | | (4,182,626) | | | | (1,716,723) | |
Net realized gains | | | (654,787) | | | | (138,097) | |
Decrease in Net Assets From Distributions to Shareholders | | | (4,837,413) | | | | (1,854,820) | |
| | |
| Fund Share Transactions (Note 7): | | | | | | | | |
Net proceeds from sale of shares | | | 56,774,105 | | | | 33,331,535 | |
Reinvestment of distributions | | | 3,593,717 | | | | 470,715 | |
Cost of shares repurchased | | | (6,452,599) | | | | (5,804,488) | |
Increase in Net Assets From Fund Share Transactions | | | 53,915,223 | | | | 27,997,762 | |
Increase in Net Assets | | | 51,816,675 | | | | 28,378,419 | |
| | |
| Net Assets: | | | | | | | | |
Beginning of year | | | 33,396,287 | | | | 5,017,868 | |
End of year* | | $ | 85,212,962 | | | $ | 33,396,287 | |
* Includes overdistributed net investment income of: | | | $(1,217,767) | | | | $(50,158) | |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 15 | |
Financial highlights
| | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class A Shares | | 20111,2 | |
| |
| Net asset value, beginning of period | | | $12.16 | |
| |
| Income (loss) from operations: | | | | |
Net investment income | | | 0.08 | |
Net realized and unrealized loss | | | (0.25) | |
Total loss from operations | | | (0.17) | |
| |
| Less distributions from: | | | | |
Net investment income | | | (0.14) | |
Net realized gains | | | (0.09) | |
Total distributions | | | (0.23) | |
| |
| Net asset value, end of period | | | $11.76 | |
Total return3 | | | (1.40) | % |
| |
| Net assets, end of period (000s) | | | $10 | |
| |
| Ratios to average net assets: | | | | |
Gross expenses | | | 1.35 | %4 |
Net expenses5,6,7 | | | 1.00 | 4 |
Net investment income | | | 3.96 | 4 |
| |
| Portfolio turnover rate | | | 53 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 3 | Performance figures, exclusive of sales charges, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A shares did not exceed 1.00%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | |
| 16 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Financial highlights (cont’d)
| | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class C Shares | | 20111,2 | |
| |
| Net asset value, beginning of period | | | $12.16 | |
| |
| Income (loss) from operations: | | | | |
Net investment income | | | 0.07 | |
Net realized and unrealized loss | | | (0.25) | |
Total loss from operations | | | (0.18) | |
| |
| Less distributions from: | | | | |
Net investment income | | | (0.13) | |
Net realized gains | | | (0.09) | |
Total distributions | | | (0.22) | |
| |
| Net asset value, end of period | | | $11.76 | |
Total return3 | | | (1.47) | % |
| |
| Net assets, end of period (000s) | | | $10 | |
| |
| Ratios to average net assets: | | | | |
Gross expenses | | | 1.79 | %4 |
Net expenses5,6,7 | | | 1.45 | 4 |
Net investment income | | | 3.51 | 4 |
| |
| Portfolio turnover rate | | | 53 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 3 | Performance figures, exclusive of CDSC, may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class C shares did not exceed 1.45%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 17 | |
| | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class FI Shares | | 20111,2 | |
| |
| Net asset value, beginning of period | | | $12.16 | |
| |
| Income (loss) from operations: | | | | |
Net investment income | | | 0.08 | |
Net realized and unrealized loss | | | (0.25) | |
Total loss from operations | | | (0.17) | |
| |
| Less distributions from: | | | | |
Net investment income | | | (0.14) | |
Net realized gains | | | (0.09) | |
Total distributions | | | (0.23) | |
| |
| Net asset value, end of period | | | $11.76 | |
Total return3 | | | (1.40) | % |
| |
| Net assets, end of period (000s) | | | $2,350 | |
| |
| Ratios to average net assets: | | | | |
Gross expenses | | | 1.32 | %4 |
Net expenses5,6,7 | | | 1.00 | 4 |
Net investment income | | | 4.07 | 4 |
| |
| Portfolio turnover rate | | | 53 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 3 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class FI shares did not exceed 1.00%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | |
| 18 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Financial highlights (cont’d)
| | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class R Shares | | 20111,2 | |
| |
| Net asset value, beginning of period | | | $12.16 | |
| |
| Income (loss) from operations: | | | | |
Net investment income | | | 0.07 | |
Net realized and unrealized loss | | | (0.25) | |
Total loss from operations | | | (0.18) | |
| |
| Less distributions from: | | | | |
Net investment income | | | (0.13) | |
Net realized gains | | | (0.09) | |
Total distributions | | | (0.22) | |
| |
| Net asset value, end of period | | | $11.76 | |
Total return3 | | | (1.45) | % |
| |
| Net assets, end of period (000s) | | | $10 | |
| |
| Ratios to average net assets: | | | | |
Gross expenses | | | 1.58 | %4 |
Net expenses5,6,7 | | | 1.25 | 4 |
Net investment income | | | 3.71 | 4 |
| |
| Portfolio turnover rate | | | 53 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 3 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class R shares did not exceed 1.25%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 19 | |
| | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class I Shares | | 20111,2 | |
| |
| Net asset value, beginning of period | | | $12.16 | |
| |
| Income (loss) from operations: | | | | |
Net investment income | | | 0.08 | |
Net realized and unrealized loss | | | (0.25) | |
Total loss from operations | | | (0.17) | |
| |
| Less distributions from: | | | | |
Net investment income | | | (0.14) | |
Net realized gains | | | (0.09) | |
Total distributions | | | (0.23) | |
| |
| Net asset value, end of period | | | $11.76 | |
Total return3 | | | (1.36) | % |
| |
| Net assets, end of period (000s) | | | $10 | |
| |
| Ratios to average net assets: | | | | |
Gross expenses | | | 1.09 | %4 |
Net expenses5,6,7 | | | 0.75 | 4 |
Net investment income | | | 4.22 | 4 |
| |
| Portfolio turnover rate | | | 53 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| 3 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 5 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class I shares did not exceed 0.75%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 6 | Reflects fee waivers and/or expense reimbursements. |
| 7 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | |
| 20 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Financial highlights (cont’d)
| | | | | | | | | | | | |
For a share of each class of beneficial interest outstanding throughout each year ended December 31,
unless otherwise noted: | |
| Class IS Shares | | 20111 | | | 2010 | | | 20092 | |
| | | |
| Net asset value, beginning of year | | | $12.06 | | | | $12.04 | | | | $12.00 | |
| | | |
| Income (loss) from operations: | | | | | | | | | | | | |
Net investment income (loss) | | | 0.50 | | | | 0.41 | | | | (0.00) | 3 |
Net realized and unrealized gain (loss) | | | (0.12) | | | | 0.44 | | | | 0.04 | |
Total income from operations | | | 0.38 | | | | 0.85 | | | | 0.04 | |
| | | |
| Less distributions from: | | | | | | | | | | | | |
Net investment income | | | (0.60) | | | | (0.78) | | | | — | |
Net realized gains | | | (0.09) | | | | (0.05) | | | | — | |
Total distributions | | | (0.69) | | | | (0.83) | | | | — | |
| | | |
| Net asset value, end of year | | | $11.75 | | | | $12.06 | | | | $12.04 | |
Total return4 | | | 3.19 | % | | | 7.21 | % | | | 0.33 | % |
| | | |
| Net assets, end of year (000s) | | | $82,823 | | | | $33,396 | | | | $5,018 | |
| | | |
| Ratios to average net assets: | | | | | | | | | | | | |
Gross expenses | | | 0.86 | % | | | 2.04 | % | | | 111.81 | %5 |
Net expenses6,7,8 | | | 0.65 | | | | 0.65 | | | | 0.65 | 5 |
Net investment income (loss) | | | 4.16 | | | | 3.40 | | | | (0.64) | 5 |
| | | |
| Portfolio turnover rate | | | 53 | % | | | 49 | % | | | 0 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period December 28, 2009 (commencement of operations) to December 31, 2009. |
| 3 | Amount represents less than $0.01 per share. |
| 4 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
| 6 | As a result of an expense limitation arrangement, the ratio of expenses, other than brokerage, interest, taxes, dividend expense on short sales, extraordinary expenses and acquired fund fees and expenses, to average net assets of Class IS shares did not exceed 0.65%. This expense limitation arrangement cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent. |
| 7 | Reflects fee waivers and/or expense reimbursements. |
| 8 | The impact of compensating balance arrangements, if any, was less than 0.01%. |
See Notes to Financial Statements.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 21 | |
Notes to financial statements
1. Organization and significant accounting policies
Legg Mason BW International Opportunities Bond Fund (the “Fund”) is a separate non-diversified investment series of Legg Mason Global Asset Management Trust (the “Trust”). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.
(a) Investment valuation. The valuations for fixed income securities and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of fair valuation techniques and methodologies. Short-term fixed income securities that will mature in 60 days or less are valued at amortized cost, unless it is determined that using this method would not reflect an investment’s fair value. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Trustees.
The Fund has adopted Financial Accounting Standards Board Codification Topic 820 (“ASC Topic 820”). ASC Topic 820 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value. The hierarchy of inputs is summarized below.
| Ÿ | | Level 1 — quoted prices in active markets for identical investments |
| Ÿ | | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Ÿ | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
| | |
| 22 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
The following is a summary of the inputs used in valuing the Fund’s assets and liabilities carried at fair value:
| | | | | | | | | | | | | | | | |
| ASSETS | |
| Description | | Quoted Prices
(Level 1) | | | Other Significant
Observable Inputs
(Level 2) | | | Significant
Unobservable
Inputs
(Level 3) | | | Total | |
| Long-term investments†: | | | | | | | | | | | | | | | | |
Sovereign bonds | | | — | | | $ | 72,387,630 | | | | — | | | $ | 72,387,630 | |
Corporate bonds & notes | | | — | | | | 4,998,267 | | | | — | | | | 4,998,267 | |
| Total long-term investments | | | — | | | $ | 77,385,897 | | | | — | | | $ | 77,385,897 | |
| Short-term investments† | | | — | | | | 6,037,000 | | | | — | | | | 6,037,000 | |
| Total investments | | | — | | | $ | 83,422,897 | | | | — | | | $ | 83,422,897 | |
| Other financial instruments: | | | | | | | | | | | | | | | | |
Forward foreign currency contracts | | | — | | | $ | 1,151,083 | | | | — | | | $ | 1,151,083 | |
| Total | | | — | | | $ | 84,573,980 | | | | — | | | $ | 84,573,980 | |
|
| LIABILITIES | |
| Description | | Quoted Prices
(Level 1) | | | Other Significant
Observable Inputs
(Level 2) | | | Significant
Unobservable
Inputs
(Level 3) | | | Total | |
| Other financial instruments: | | | | | | | | | | | | | | | | |
Forward foreign currency contracts | | | — | | | $ | 1,024,502 | | | | — | | | $ | 1,024,502 | |
| † | See Schedule of Investments for additional detailed categorizations. |
(b) Repurchase agreements. The Fund may enter into repurchase agreements with institutions that its investment adviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Fund acquires a debt security subject to an obligation of the seller to repurchase, and of the Fund to resell, the security at an agreed-upon price and time, thereby determining the yield during the Fund’s holding period. When entering into repurchase agreements, it is the Fund’s policy that its custodian or a third party custodian, acting on the Fund’s behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 23 | |
an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Fund generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Fund seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Fund may be delayed or limited.
(c) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.
The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(d) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge exposure of bond positions or to gain currency exposure where the Fund did not hold that country’s bonds. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
| | |
| 24 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
(e) Redemption fee. The Fund had imposed a 2% redemption fee on certain redemptions, including exchanges, of Fund shares redeemed or exchanged within 60 days of the date of their purchase. The fee was payable to the Fund.
Effective, October 1, 2011, the 2% redemption fee assessed on redemptions and exchanges within 60 days of subscription was eliminated.
(f) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund’s investment in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund’s investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.
(g) Foreign investment risks. The Fund’s investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.
(h) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions, where the Fund is exposed to counterparty credit risk in addition to broader market risks. The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund’s investment manager attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the investment manager. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.
The Fund has entered into master agreements with certain of its derivative counterparties that provide for general obligations, representations, agreements, collateral, events of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 25 | |
the Fund’s net assets or NAV over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.
As of December 31, 2011, the Fund held forward foreign currency contracts with credit related contingent features which had a liability position of $1,024,502. If a contingent feature in the master agreements would have been triggered, the Fund would have been required to pay this amount to its derivatives counterparties.
(i) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
(j) Distributions to shareholders. Distributions from net investment income of the Fund are declared each business day to shareholders of record, and are paid monthly. Distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(k) Share class accounting. Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.
(l) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian’s fees is paid indirectly by credits earned on the Fund’s cash on deposit with the bank.
(m) Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.
Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of December 31, 2011, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by Internal Revenue Service and state departments of revenue.
| | |
| 26 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates. Realized gains upon disposition of Indonesian and Korean securities held by the Fund are subject to capital gains tax in those countries. As of December 31, 2011, there were $74,770 of deferred capital gains tax liabilities accrued on unrealized gains.
(n) Reclassification. GAAP requires that certain components of net assets be reclassified to reflect permanent differences between financial and tax reporting. These reclassifications have no effect on net assets or net asset values per share. During the current year, the following reclassifications have been made:
| | | | | | | | |
| | | Overdistributed Net
Investment Income | | | Undistributed Net
Realized Gain | |
| (a) | | $ | (477,353) | | | $ | 477,353 | |
| (a) | Reclassifications are primarily due to foreign currency transactions treated as ordinary income for tax purposes, book/tax differences in the treatment of distributions and differences between book and tax amortization of premium on fixed income securities. |
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (“LMPFA”) is the Fund’s investment manager and Brandywine Global Investment Management, LLC (“Brandywine Global”) is the Fund’s subadviser. LMPFA and Brandywine Global are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).
LMPFA provides administrative and certain oversight services to the Fund. The Fund pays LMPFA an investment management fee, calculated daily and paid monthly, at an annual rate of 0.50% of the Fund’s average daily net assets. LMPFA has delegated to Brandywine Global the day–to-day portfolio management of the Fund. For its services, for the first year of fund operations, LMPFA paid Brandywine Global 100% of the net management fee it received from the Fund. Thereafter, LMPFA pays Brandywine Global 70% of the net management fee.
As a result of expense limitation arrangements between the Fund and LMPFA, the ratio of expenses other than brokerage, interest, taxes, dividend expense on short sales and extraordinary expenses and acquired fund fees and expenses, to average net assets of Class A, C, FI, R, I and IS shares did not exceed 1.00%, 1.45%, 1.00%, 1.25%, 0.75% and 0.65%, respectively. These expense limitation arrangements cannot be terminated prior to December 31, 2013 without the Board of Trustees’ consent.
During the year ended December 31, 2011, fees waived and/or expenses reimbursed amounted to $178,695.
The investment manager is permitted to recapture amounts previously waived or reimbursed to a class within three years after the year in which the manager earned the fee or incurred the expense if the class’ total annual operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will the investment manager recapture any amount that would result, on any particular business day of the Fund, in the class’ total annual operating expenses exceeding the expense cap or any other lower limit then in effect.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 27 | |
Pursuant to these agreements, at December 31, 2011, the Fund had remaining fee waivers and/or expense reimbursements subject to recapture by LMPFA and respective dates of expiration as follows:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Class A | | | Class C | | | Class FI | | | Class R | | | Class I | | | Class IS | |
| Expires December 31, 2012 | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 35,187 | |
| Expires December 31, 2013 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 311,242 | |
| Expires December 31, 2014 | | $ | 6 | | | $ | 6 | | | $ | 618 | | | $ | 6 | | | $ | 6 | | | | 178,053 | |
| Fee waivers/expense reimbursements subject to recapture | | $ | 6 | | | $ | 6 | | | $ | 618 | | | $ | 6 | | | $ | 6 | | | $ | 524,482 | |
For the year ended December 31, 2011, LMPFA recaptured $10,494 for Class IS shares.
Legg Mason Investor Services, LLC (“LMIS”), a wholly-owned broker-dealer subsidiary of Legg Mason, serves as the Fund’s sole and exclusive distributor.
There is a maximum initial sales charge of 4.25% for Class A shares. There is a contingent deferred sales charge (“CDSC”) of 1.00% on Class C shares, which applies if redemption occurs within one year from purchase payment. In certain cases, Class A shares have a 1.00% CDSC, which applies if redemption occurs within one year from purchase payment. This CDSC only applies to those purchases of Class A shares, which, when combined with current holdings of other shares of funds sold by LMIS, equal or exceed $1,000,000 in the aggregate. These purchases do not incur an initial sales charge.
For the year ended December 31, 2011, LMIS and its affiliates did not receive any sales charges on sales of the Fund’s Class A shares. In addition, for the year ended December 31, 2011, there were no CDSCs paid to LMIS and its affiliates.
Under a Deferred Compensation Plan (the “Plan”), Trustees may elect to defer receipt of all or a specified portion of their compensation. A participating Trustee may select one or more funds managed by affiliates of Legg Mason in which his or her deferred trustee’s fees will be deemed to be invested. Deferred amounts remain in the Fund until distributed in accordance with the Plan.
All officers and two Trustees of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.
3. Investments
During the year ended December 31, 2011, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
| | | | |
| Purchases | | $ | 88,509,480 | |
| Sales | | | 41,663,921 | |
At December 31, 2011, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
| | | | |
| Gross unrealized appreciation | | $ | 3,771,886 | |
| Gross unrealized depreciation | | | (5,446,986) | |
| Net unrealized depreciation | | $ | (1,675,100) | |
| | |
| 28 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
At December 31, 2011, the Fund had the following open forward foreign currency contracts:
| | | | | | | | | | | | | | | | | | |
| Foreign Currency | | Counterparty | | Local
Currency | | | Market
Value | | | Settlement
Date | | | Unrealized
Gain (Loss) | |
| Contracts to Buy: | | | | | | | | | | | | | | | | |
| Yuan Renminbi | | Barclays Bank PLC | | | 11,850,000 | | | $ | 1,882,147 | | | | 1/11/12 | | | $ | 23,615 | |
| Yuan Renminbi | | UBS AG | | | 6,800,000 | | | | 1,079,994 | | | | 1/13/12 | | | | 27,818 | |
| Yuan Renminbi | | UBS AG | | | 4,417,000 | | | | 701,519 | | | | 1/13/12 | | | | 13,835 | |
| Chilean Peso | | HSBC Bank USA, N.A. | | | 816,790,000 | | | | 1,565,698 | | | | 1/26/12 | | | | (37,612) | |
| Chilean Peso | | HSBC Bank USA, N.A. | | | 453,250,000 | | | | 868,831 | | | | 1/26/12 | | | | (14,508) | |
| Euro | | Citibank, N.A. | | | 381,000 | | | | 493,228 | | | | 2/3/12 | | | | (25,165) | |
| Euro | | Citibank, N.A. | | | 234,000 | | | | 302,927 | | | | 2/3/12 | | | | (19,630) | |
| Turkish Lira | | Barclays Bank PLC | | | 5,977,000 | | | | 3,125,286 | | | | 2/10/12 | | | | (164,329) | |
| Canadian Dollar | | Morgan Stanley & Co. Inc. | | | 2,026,000 | | | | 1,986,610 | | | | 2/15/12 | | | | 9,166 | |
| Singapore Dollar | | HSBC Bank USA, N.A. | | | 3,201,000 | | | | 2,467,630 | | | | 2/23/12 | | | | (8,965) | |
| | | | | | | | | | | | | | | | | | (195,775) | |
| Contracts to Sell: | | | | | | | | | | | | | | | | |
| Norwegian Krone | | Citibank, N.A. | | | 22,907,000 | | | $ | 3,828,455 | | | | 1/11/12 | | | $ | 57,315 | |
| Australian Dollar | | HSBC Bank USA, N.A. | | | 11,495,000 | | | | 11,736,556 | | | | 1/13/12 | | | | (754,233) | |
| Brazilian Real | | Barclays Bank PLC | | | 4,854,000 | | | | 2,580,789 | | | | 2/2/12 | | | | 199,120 | |
| Euro | | Citibank, N.A. | | | 7,842,000 | | | | 10,151,948 | | | | 2/3/12 | | | | 819,010 | |
| British Pound | | HSBC Bank USA, N.A. | | | 639,000 | | | | 991,788 | | | | 3/1/12 | | | | (60) | |
| New Zealand Dollar | | Citibank, N.A. | | | 4,760,000 | | | | 3,687,796 | | | | 3/9/12 | | | | 1,204 | |
| | | | | | | | | | | | | | | | | | 322,356 | |
| Net unrealized gain on open forward foreign currency contracts | | | $ | 126,581 | |
4. Derivative instruments and hedging activities
Financial Accounting Standards Board Codification Topic 815 requires enhanced disclosure about an entity’s derivative and hedging activities.
Below is a table, grouped by derivative type, that provides information about the fair value and the location of derivatives within the Statement of Assets and Liabilities at December 31, 2011.
| | | | |
| ASSET DERIVATIVES1 | |
| | | Foreign
Exchange Risk | |
| Forward foreign currency contracts | | $ | 1,151,083 | |
| | | | |
| LIABILITY DERIVATIVES1 | |
| | | Foreign
Exchange Risk | |
| Forward foreign currency contracts | | $ | 1,024,502 | |
| 1 | Generally, the balance sheet location for asset derivatives is receivables/net unrealized appreciation (depreciation) and for liability derivatives is payables/net unrealized appreciation (depreciation). |
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 29 | |
The following tables provide information about the effect of derivatives and hedging activities on the Fund’s Statement of Operations for the year ended December 31, 2011. The first table provides additional detail about the amounts and sources of gains (losses) realized on derivatives during the period. The second table provides additional information about the change in unrealized appreciation (depreciation) resulting from the Fund’s derivatives and hedging activities during the period.
| | | | |
| AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED | |
| | | Foreign
Exchange Risk | |
| Forward foreign currency contracts | | $ | (1,060,055) | |
| | | | |
| CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED | |
| | | Foreign
Exchange Risk | |
| Forward foreign currency contracts | | $ | 471,821 | |
During the year ended December 31, 2011, the volume of derivative activity for the Fund was as follows:
| | | | |
| | | Average Market
Value | |
| Forward foreign currency contracts (to buy) | | $ | 22,911,589 | |
| Forward foreign currency contracts (to sell) | | | 40,899,127 | |
5. Class specific expenses, waivers and/or expense reimbursements
The Fund has adopted a Rule 12b-1 distribution plan and under that plan the Fund pays a service fee with respect to its Class A, C, FI and R shares calculated at the annual rate of 0.25% of the average daily net assets of each respective class. The Fund also pays a distribution fee with respect to its Class C and R shares calculated at the annual rate of 0.45% and 0.25% of the average daily net assets of each class, respectively. Service and distribution fees are accrued daily and paid monthly.
For the year ended December 31, 2011, class specific expenses were as follows:
| | | | | | | | |
| | | Service and/or
Distribution Fees | | | Transfer Agent
Fees | |
| Class A† | | $ | 4 | | | $ | 4 | |
| Class C† | | | 12 | | | | 4 | |
| Class FI† | | | 480 | | | | 428 | |
| Class R† | | | 8 | | | | 4 | |
| Class I† | | | — | | | | 4 | |
| Class IS | | | — | | | | 7,975 | |
| Total | | $ | 504 | | | $ | 8,419 | |
| † | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| | |
| 30 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
For the year ended December 31, 2011, waivers and/or expense reimbursements by class were as follows:
| | | | |
| | | Waivers/Expense
Reimbursements | |
| Class A† | | $ | 6 | |
| Class C† | | | 6 | |
| Class FI† | | | 618 | |
| Class R† | | | 6 | |
| Class I† | | | 6 | |
| Class IS | | | 178,053 | |
| Total | | $ | 178,695 | |
| † | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
6. Distributions to shareholders by class
| | | | | | | | |
| | | Year Ended
December 31, 2011 | | | Year Ended
December 31, 2010 | |
| Net Investment Income: | | | | | | | | |
| Class A† | | $ | 113 | | | | — | |
| Class C† | | | 106 | | | | — | |
| Class FI† | | | 17,760 | | | | — | |
| Class R† | | | 108 | | | | — | |
| Class I† | | | 117 | | | | — | |
| Class IS | | | 4,164,422 | | | $ | 1,716,723 | |
| Total | | $ | 4,182,626 | | | $ | 1,716,723 | |
| | |
| Net Realized Gains | | | | | | | | |
| Class A† | | $ | 77 | | | | — | |
| Class C† | | | 77 | | | | — | |
| Class FI† | | | 13,207 | | | | — | |
| Class R† | | | 77 | | | | — | |
| Class I† | | | 77 | | | | — | |
| Class IS | | | 641,272 | | | $ | 138,097 | |
| Total | | $ | 654,787 | | | $ | 138,097 | |
| † | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
7. Shares of beneficial interest
At December 31, 2011, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. The Fund has the ability to issue multiple classes of shares. Each class of shares represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 31 | |
Transactions in shares of each class were as follows:
| | | | | | | | | | | | | | | | |
| | | Year Ended
December 31, 2011 | | | Year Ended
December 31, 2010 | |
| | | Shares | | | Amount | | | Shares | | | Amount | |
| Class A† | | | | | | | | | | | | | | | | |
| Shares sold | | | 822 | | | $ | 10,000 | | | | — | | | | — | |
| Shares issued on reinvestment | | | 16 | | | | 190 | | | | — | | | | — | |
| Net increase | | | 838 | | | $ | 10,190 | | | | — | | | | — | |
| | | | |
| Class C† | | | | | | | | | | | | | | | | |
| Shares sold | | | 823 | | | $ | 10,000 | | | | — | | | | — | |
| Shares issued on reinvestment | | | 15 | | | | 183 | | | | — | | | | — | |
| Net increase | | | 838 | | | $ | 10,183 | | | | — | | | | — | |
| | | | |
| Class FI† | | | | | | | | | | | | | | | | |
| Shares sold | | | 200,207 | | | $ | 2,371,220 | | | | — | | | | — | |
| Shares issued on reinvestment | | | 1,122 | | | | 13,318 | | | | — | | | | — | |
| Shares repurchased | | | (1,503) | | | | (17,850) | | | | — | | | | — | |
| Net increase | | | 199,826 | | | $ | 2,366,688 | | | | — | | | | — | |
| | | | |
| Class R† | | | | | | | | | | | | | | | | |
| Shares sold | | | 822 | | | $ | 10,000 | | | | — | | | | — | |
| Shares issued on reinvestment | | | 16 | | | | 185 | | | | — | | | | — | |
| Net increase | | | 838 | | | $ | 10,185 | | | | — | | | | — | |
| | | | |
| Class I† | | | | | | | | | | | | | | | | |
| Shares sold | | | 823 | | | $ | 10,000 | | | | — | | | | — | |
| Shares issued on reinvestment | | | 16 | | | | 194 | | | | — | | | | — | |
| Net increase | | | 839 | | | $ | 10,194 | | | | — | | | | — | |
| | | | |
| Class IS | | | | | | | | | | | | | | | | |
| Shares sold | | | 4,513,883 | | | $ | 54,362,885 | | | | 2,794,217 | | | $ | 33,331,535 | |
| Shares issued on reinvestment | | | 295,901 | | | | 3,579,647 | | | | 38,538 | | | | 470,715 | |
| Shares repurchased | | | (532,696) | | | | (6,434,749) | | | | (479,698) | | | | (5,804,488) | |
| Net increase | | | 4,277,088 | | | $ | 51,507,783 | | | | 2,353,057 | | | $ | 27,997,762 | |
| † | For the period October 31, 2011 (commencement of operations) to December 31, 2011. |
| | |
| 32 | | Legg Mason BW International Opportunities Bond Fund 2011 Annual Report |
Notes to financial statements (cont’d)
8. Income tax information and distributions to shareholders
Subsequent to the fiscal year end, the Fund has made the following distributions:
| | | | | | | | | | | | | | | | | | | | | | | | |
Record Date
Payable Date | | Class A | | | Class C | | | Class FI | | | Class R | | | Class I | | | Class IS | |
Daily 1/31/2012 | | $ | 0.036906 | | | $ | 0.032758 | | | $ | 0.037043 | | | $ | 0.034646 | | | $ | 0.039428 | | | $ | 0.040302 | |
The tax character of distributions paid during the fiscal year ended December 31, 2011 and fiscal period ended December 31, 2010 were as follows:
| | | | | | | | |
| | | 2011 | | | 2010 | |
| Distributions Paid From: | | | | | | | | |
| Ordinary Income | | $ | 4,724,526 | | | $ | 1,854,820 | |
| Net long-term capital gains | | | 112,887 | | | | — | |
| Total Distributions Paid | | $ | 4,837,413 | | | $ | 1,854,820 | |
As of December 31, 2011, the components of accumulated earnings on a tax basis were as follows:
| | | | |
| Undistributed ordinary income — net | | $ | 440,691 | |
| Undistributed long-term capital gains — net | | | 786,595 | |
| Total undistributed earnings | | $ | 1,227,286 | |
| Other book/tax temporary differences(a) | | | (1,167,453) | |
| Unrealized appreciation (depreciation)(b) | | | (1,717,591) | |
| Total accumulated earnings (losses) — net | | $ | (1,657,758) | |
| (a) | Other book/tax temporary differences are attributable primarily to the tax deferral of losses on straddles, the realization for tax purposes of unrealized gains on certain foreign currency contracts and book/tax differences in the timing of the deductibility of various expenses. |
| (b) | The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales and the difference between book and tax amortization methods for premiums on fixed income securities. |
9. Line of credit
The Fund, along with certain other Legg Mason Funds, participates in a $200 million line of credit (“Credit Agreement”) to be used for temporary or emergency purposes. This 364-day revolving Credit Agreement matures on March 1, 2012. Pursuant to the Credit Agreement, each participating fund is liable only for principal and interest payments related to borrowings made by that fund. Borrowings under the Credit Agreement bear interest at a rate equal to the prevailing LIBOR rate plus the LIBOR rate margin. The Fund did not utilize the line of credit during the year ended December 31, 2011.
10. Recent accounting pronouncement
In May 2011, the Financial Accounting Standards Board issued Accounting Standard Update No. 2011-04, Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU No. 2011-04”). ASU No. 2011-04 establishes common requirements for measuring fair value and for disclosing information about fair value measurements. ASU No. 2011-04 is effective during interim and annual periods beginning after December 15, 2011. Management is currently evaluating the impact the adoption of ASU No. 2011-04 will have on the Fund’s financial statements and related disclosures.
| | | | |
| Legg Mason BW International Opportunities Bond Fund 2011 Annual Report | | | 33 | |
Report of independent registered public accounting firm
To the Board of Trustees of Legg Mason Global Asset Management Trust and to the Shareholders of Legg Mason BW International Opportunities Bond Fund:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Legg Mason BW International Opportunities Bond Fund (one of the portfolios comprising Legg Mason Global Asset Management Trust the “Fund”) at December 31, 2011, the results of its operations, the changes in its net assets, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2011 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 21, 2012
| | |
| 34 | | Legg Mason BW International Opportunities Bond Fund |
Board approval of management and subadvisory agreements (unaudited)
At its November 2011 meeting, the Fund’s Board of Trustees (the “Board”), the Board approved the management agreement (the “Management Agreement”) with Legg Mason Partners Fund Advisor, LLC (the “Manager”) and the subadvisory agreement (the “Subadvisory Agreement”) with Brandywine Global Investment Management, LLC (the “Subadviser”). The trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) (the “Independent Trustees”), met on October 12, 2011, with the assistance of their independent legal counsel and their contract review consultant, to review and evaluate the materials provided by the Manager and the Subadviser to assist the Board, and in particular the Independent Trustees, in considering renewal of the Management and Subadvisory Agreements. At such October meeting the Independent Trustees reviewed the information provided, as well as a memorandum from their independent legal counsel and materials from the contract review consultant. The Independent Trustees further discussed renewal of the Agreements in executive session held on November 16, 2011.
In voting to approve continuance of the Agreements, the Board, including the Independent Trustees, considered whether continuance of the Agreements would be in the best interests of the Fund and its shareholders. No single factor or item of information reviewed by the Board was identified as the principal factor in determining whether to approve the Management Agreement and the Subadvisory Agreement. Based upon its evaluation of all material factors, including those described below, the Board concluded that the terms of each Agreement are reasonable and fair and that it was in the best interest of the Fund and its shareholders to approve the Agreements.
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Subadviser under the Management Agreement and Subadvisory Agreements, respectively. The Board also considered the Manager’s supervisory activities over the Subadviser. In addition, the Board received and considered other information regarding the administrative and other services rendered to the Fund and its shareholders by the Manager. The Board noted information received at meeting throughout the year related to the services rendered by the Manager in the management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Subadviser and the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and the Subadviser took into account the Board’s knowledge and familiarity gained as Board members of funds in the Legg Mason fund complex, including the scope and quality of the investment management and other capabilities of the Manager and the Subadviser and the quality of the Manager’s administrative and other services.
The Board reviewed the qualifications, backgrounds and responsibilities of the senior personnel serving the Fund and the portfolio management team primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered, based on its knowledge of the Manager and the Manager’s affiliates, the financial resources available through the Manager’s parent organization, Legg Mason, Inc.
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | 35 | |
The Board considered the division of responsibilities among the Manager and the Subadviser and the oversight provided by the Manager. The Board also considered information the Subadviser’s brokerage policies and practices, including the standards applied in seeking best execution, policies and practices regarding soft dollars, and the existence of quality controls applicable to brokerage allocation procedures.
The Board received and reviewed performance information for the Fund and for a group of funds (the “Performance Universe”) selected by Lipper, Inc. (“Lipper”), an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in the Performance Universe. The Lipper data also included a comparison of the Fund’s performance to a benchmark index selected by Lipper. The Board also received from the independent contract consultant analysis of the risk adjusted performance of the Fund compared with its corresponding Lipper benchmark index. The Board also reviewed performance information for the Fund showing rolling returns based upon trailing performance. In addition, the Trustees noted that they also had received and discussed at periodic intervals information comparing the Fund’s performance to that of its benchmark index.
The Board noted the Fund’s underperformance for the one-year period ended June 30, 2011, which placed it in the fifth quintile. The Board noted that the Fund had a limited history, having begun operations on December 28, 2009, and concluded that given the volatility of the market, there was not a sufficient period of time on which to judge performance. The Board noted that its evaluation of the factors of the nature, extent and quality of services and investment performance led it to conclude that it was in the best interest of the Fund to approve renewal of the Agreement.
The Board reviewed and considered the contractual management fee (the “Contractual Management Fee”) payable by the Fund to the Manager in light of the nature, extent and quality of the management and subadvisory services provided by the Manager and the Subadviser, respectively. The Board noted that the Manager, and not the Fund, pays the subadvisory fees to the Subadviser. In addition, the Board reviewed and considered the actual management fee rate (after taking into account fees foregone and expense reimbursements by the Manager which reduced the management fee paid to the Manager to zero) (“Actual Management Fee”).
The Board also reviewed information regarding the fees the Manager and the Subadviser charged any of their U.S. clients investing primarily in an asset class similar to that of the Fund including, where applicable, separate accounts. The Manager reviewed with the Board the significant differences in the scope of services provided to the Fund and to such other clients, and that the Manager coordinates and oversees the provision of services to the Fund by other fund service providers, including the Adviser and the Subadviser. The Board considered the fee comparisons in light of the scope of services required to manage these different types of accounts.
The Board received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out the range of fees based on asset
| | |
| 36 | | Legg Mason BW International Opportunities Bond Fund |
Board approval of management and subadvisory agreements (unaudited) (cont’d)
classes. In addition, the Manager provided and discussed with the Board a comparison with the fees of other registered investment companies managed in the same investment style. Management also discussed with the Board the Fund’s distribution arrangements, including how amounts received by the Fund’s distributors are expended.
Additionally, the Board received and considered information comparing the Fund’s Contractual Management Fee and Actual Management Fee and the Fund’s overall expense ratio with those of a group of funds selected by Lipper as comparable to the Fund and a broader universe of funds also selected by Lipper. With respect to the Fund, the Board noted that Contractual and Actual Management Fees were lower than average (first quintile) and that actual expenses were lower than the Lipper expense group and expense universe averages.
The Board was provided an overview of the process followed in conducting the profitability study and received a report on the profitability of Legg Mason in providing services to the Fund, based on financial information and business data for the 12 months ended March 31, 2011, which corresponds to Legg Mason’s most recently completed fiscal year. The Board considered the profitability study along with the other materials previously provided to the Board and determined that the profitability was not excessive in light of the nature, extent and quality of the services provided to the Fund.
The Board received and considered information regarding whether there have been economies of scale with respect to the management of the Fund as the Fund’s assets grow, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of any further economies of scale. The Board noted that as a result of market conditions and net redemptions, the Fund complex had suffered a substantial decline in assets over its historic highs. Given the asset size of the Fund and the complex, the Board concluded that although there are currently no breakpoints, any economies of scale currently being realized were appropriately being reflected in the Management Fee paid by the Fund.
The Board considered other benefits received by the Manager and its affiliates, including the Subadviser, as a result of the Manager’s relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders. The Board also considered the information provided by the Manager regarding intermediary arrangements.
In light of the structure of the fees, the costs of providing investment management and other services to the Fund, the Manager’s ongoing commitment to the Fund and the ancillary benefits received, the Board concluded that the Management Fees were reasonable.
After evaluation of all material factors, the Board concluded that the continuation of each Agreement is in the best interest of the Fund.
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | 37 | |
Additional information (unaudited)
Information about Trustees and Officers
The business and affairs of Legg Mason BW International Opportunities Bond Fund (the “Fund”) are conducted by management under the supervision and subject to the direction of its Board of Trustees. The business address of each Trustee is 100 International Drive, Attn: Fund Secretary, Baltimore, Maryland 21202. Information pertaining to the Trustees and officers of the Fund is set forth below.
The Statement of Additional Information includes additional information about Trustees and is available, without charge, upon request by calling the Fund at 1-877-721-1926.
| | |
| Independent Trustees1 |
| Ruby P. Hearn |
| Year of birth | | 1940 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Senior Vice President Emerita of The Robert Wood Johnson Foundation (non-profit) since 2001; Trustee of the New York Academy of Medicine since 2004; Director of the Institute for Healthcare Improvement since 2002; Member of the Institute of Medicine since 1982; formerly: Senior Vice President of The Robert Wood Johnson Foundation (1996 to 2001); Fellow of The Yale Corporation (1992 to 1998). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | None |
| Arnold L. Lehman |
| Year of birth | | 1944 |
| Position(s) with Trust | | Lead Independent Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Director of the Brooklyn Museum since 1997; Trustee of American Federation of Arts since 1998. Formerly: Director of The Baltimore Museum of Art (1979 to 1997). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | None |
| Robin J.W. Masters |
| Year of birth | | 1955 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Retired; formerly: Chief Investment Officer of ACE Limited (insurance) (1986 to 2000). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | Director of Cheyne Capital International Limited (investment advisory firm). Director/Trustee of Legg Mason Institutional Funds plc, WA Fixed Income Funds plc and Western Asset Debt Securities Fund plc. |
| | |
| 38 | | Legg Mason BW International Opportunities Bond Fund |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| | |
| Independent Trustees1 cont’d |
| Jill E. McGovern |
| Year of birth | | 1944 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Senior Consultant, American Institute for Contemporary German Studies (AICGS) since 2007; formerly: Chief Executive Officer of The Marrow Foundation (non-profit) (1993 to 2007); Executive Director of the Baltimore International Festival (1991 to 1993); Senior Assistant to the President of The Johns Hopkins University (1986 to 1990). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | Director of International Biomedical Research Alliance; Director of Lois Roth Endowment |
| Arthur S. Mehlman |
| Year of birth | | 1942 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Retired. Director, The University of Maryland Foundation since 1992; Director, The League for People with Disabilities since 2003; formerly: Partner, KPMG LLP (international accounting firm) (1972 to 2002). |
| Number of funds in fund complex overseen by Trustee | | Director/Trustee of all Legg Mason Funds consisting of 16 portfolios; Director/Trustee of the Royce Family of Funds consisting of 35 portfolios. |
| Other directorships held by Trustee during past five years | | Director of Municipal Mortgage & Equity, LLC. |
| G. Peter O’Brien |
| Year of birth | | 1945 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Retired. Trustee Emeritus of Colgate University; Board Member, Hill House, Inc. (residential home care); Board Member, Bridges School (pre- school); formerly: Managing Director, Equity Capital Markets Group of Merrill Lynch & Co. (1971-1999). |
| Number of funds in fund complex overseen by Trustee | | Director/Trustee of all Legg Mason funds consisting of 16 portfolios; Director/Trustee of the Royce Family of Funds consisting of 35 portfolios. |
| Other directorships held by Trustee during past five years | | Director of Technology Investment Capital Corp. |
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | 39 | |
| | |
| Independent Trustees1 cont’d |
| S. Ford Rowan |
| Year of birth | | 1943 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Chairman, National Center for Critical Incident Analysis, National Defense University Foundation, since 2004; Trustee, St. John’s College, since 2006; formerly: Consultant, Rowan & Blewitt Inc. (management consulting) (1984 to 2007); Lecturer in Journalism, Northwestern University (1980 to 1993); Lecturer in Organizational Sciences, George Washington University (2000 to 2008); Director, Sante Fe Institute (1999 to 2008). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | None |
| Robert M. Tarola |
| Year of birth | | 1950 |
| Position(s) with Trust | | Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | President of Right Advisory LLC (corporate finance and governance consulting) since 2008; Member, Investor Advisory Group of the Public Company Accounting Oversight Board since 2009; Senior Vice President and Chief Financial Officer of The Howard University since 2010 (higher education and health care); formerly: Senior Vice President and Chief Financial Officer of W.R. Grace & Co. (specialty chemicals) (1999 to 2008) and MedStar Health, Inc. (healthcare) (1996 to 1999); Partner, Price Waterhouse, LLP (accounting and auditing) (1984 to 1996). |
| Number of funds in fund complex overseen by Trustee | | 16 |
| Other directorships held by Trustee during past five years | | Director of TeleTech Holdings, Inc. (business process outsourcing); Director of American Kidney Fund (renal disease assistance) |
| | |
| 40 | | Legg Mason BW International Opportunities Bond Fund |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| | |
| Interested Trustees3 |
| Mark R. Fetting |
| Year of birth | | 1954 |
| Position(s) with Trust | | Chairman and Trustee |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | President, CEO, Chairman and Director of Legg Mason, Inc. and Chairman of Legg Mason Funds since 2008; formerly: President of all Legg Mason Funds (2001 to 2008). Senior Executive Vice President of Legg Mason, Inc., Director and/or officer of various Legg Mason, Inc. affiliates (2000 to 2008). Division President and Senior Officer of Prudential Financial Group, Inc. and related companies, including fund boards and consulting services to subsidiary companies (1991 to 2000) |
| Number of funds in fund complex overseen by Trustee | | Chairman and Director/Trustee of all Legg Mason Funds consisting of 16 portfolios; Director/Trustee of the Royce Family of Funds consisting of 35 portfolios. |
| Other directorships held by Trustee during past five years | | None |
R. Jay Gerken Legg Mason 620 Eighth Avenue, New York NY 10018 | | |
| Year of birth | | 1951 |
| Position(s) with Trust | | President and Trustee |
| Term of office and length of time served2 | | Since 2011 |
| Principal occupation(s) during past five years | | Managing Director of Legg Mason & Co., LLC (“Legg Mason & Co.”) (since 2005); Officer and Trustee/Director of 161 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006); President and Chief Executive Officer (“CEO”) of LMPFA (since 2006); President and CEO of Smith Barney Fund Management LLC (“SBFM”) (formerly a registered investment adviser) (since 2002) |
| Number of funds in fund complex overseen by Trustee | | 161 |
| Other directorships held by Trustee during past five years | | None |
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | 41 | |
| | |
| Executive Officers |
Richard F. Sennett Legg Mason 55 Water Street, New York, NY 10041 | | |
| Year of birth | | 1970 |
| Position(s) with Trust | | Principal Financial Officer |
| Term of office and length of time served2 | | Since 2011 |
| Principal occupation(s) during past five years | | Principal Financial Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011); Managing Director of Legg Mason & Co. and Senior Manager of the Treasury Policy group for Legg Mason & Co.’s Global Fiduciary Platform (since 2011); formerly, Chief Accountant within the SEC’s Division of Investment Management (2007 to 2011); formerly, Assistant Chief Accountant within the SEC’s Division of Investment Management (2002 to 2007) |
Robert I. Frenkel Legg Mason 100 First Stamford Place, Stamford, CT 06902 | | |
| Year of birth | | 1954 |
| Position(s) with Trust | | Secretary and Chief Legal Officer |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Vice President and Deputy General Counsel of Legg Mason (since 2006); Managing Director and General Counsel of Global Mutual Funds for Legg Mason & Co. (since 2006) and Legg Mason & Co. predecessors (since 1994); Secretary and Chief Legal Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006) |
Ted P. Becker Legg Mason 620 Eighth Avenue, New York, NY 10018 | | |
| Year of birth | | 1951 |
| Position(s) with Trust | | Vice President and Chief Compliance Officer |
| Term of office and length of time served2 | | Since 2009 |
| Principal occupation(s) during past five years | | Director of Global Compliance at Legg Mason (since 2006); Chief Compliance Officer of LMPFA (since 2006); Managing Director of Compliance of Legg Mason & Co. (since 2005); Chief Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006) |
| | |
| 42 | | Legg Mason BW International Opportunities Bond Fund |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| | |
| Executive Officers cont’d |
Christopher Berarducci Legg Mason 55 Water Street, New York, NY 10041 | | |
| Year of birth | | 1974 |
| Position(s) with Trust | | Treasurer |
| Term of office and length of time served2 | | Since 2010 |
| Principal occupation(s) during past five years | | Vice President of Legg Mason & Co. (since 2011); Treasurer of certain mutual funds associated with LMPFA (since 2010); formerly: Assistant Vice President of Legg Mason & Co. (2007 to 2011); Assistant Controller of certain mutual funds associated with LMPFA (2007 to 2010); Manager of Fund Administration at UBS Global Asset Management (prior to 2007); Assistant Vice President and Manager of Fund Administration at JP Morgan Chase & Co. (prior to 2005) |
| 1 | Trustees who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the 1940 Act. Each of the Independent Trustees serves on the standing committees of the Board of Trustees, which include the Audit Committee (chair: Arthur S. Mehlman), the Nominating Committee (co-chairs: G. Peter O’Brien and Jill E. McGovern), and the Independent Trustees Committee (chair: Arnold L. Lehman). |
| 2 | Officers of the Fund are elected to serve until their successors are elected and qualified. Trustees of the Fund serve a term of indefinite length until their retirement, in accordance with the Board’s retirement policy, resignation or removal, and stand for re-election by shareholders only as and when required by the 1940 Act. |
| 3 | Mr. Fetting and Mr. Gerken are considered to be interested persons, as defined in the 1940 Act, of the Fund on the basis of their current employment with the Fund’s investment adviser or its affiliated entities (including the Fund’s principal underwriter) and Legg Mason, Inc., the parent holding company of these entities as well as their ownership of Legg Mason, Inc. stock. |
| | | | |
| Legg Mason BW International Opportunities Bond Fund | | | 43 | |
Important Tax Information (Unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended December 31, 2011:
| | | | |
| Record date: | | | 12/8/2011 | |
| Payable date: | | | 12/9/2011 | |
| Long-term capital gain dividend | | $ | 0.016130 | |
Please retain this information for your records.
Legg Mason BW
International Opportunities Bond Fund
Trustees
Mark R. Fetting
Chairman
R. Jay Gerken
President
Ruby P. Hearn
Arnold L. Lehman
Robin J.W. Masters
Jill E. McGovern
Arthur S. Mehlman
G. Peter O’Brien
S. Ford Rowan
Robert M. Tarola
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
Brandywine Global Investment Management, LLC
Custodian
State Street Bank & Trust Company
Transfer agent
Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, MA 02169
Counsel
K&L Gates LLP
Washington, DC
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Legg Mason BW International Opportunities Bond Fund
The Fund is a separate investment series of Legg Mason Global Asset Management Trust, a Maryland statutory trust.
Legg Mason BW International Opportunities Bond Fund
Legg Mason Funds
55 Water Street
New York, NY 10041
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q, shareholders can call the Fund at 1-877-721-1926.
Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Fund at 1-877-721-1926, (2) on the Fund’s website at www.leggmason.com/individualinvestors and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of Legg Mason BW International Opportunities Bond Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by a current prospectus.
Investors should consider the Fund’s investment objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other important information about the Fund. Please read the prospectus carefully before investing.
www.leggmason.com/individualinvestors
©2012 Legg Mason Investor Services, LLC
Member FINRA, SIPC
Legg Mason Funds Privacy and Security Notice
Your Privacy and the Security of Your Personal Information is Very Important to the Legg Mason Funds
This Privacy and Security Notice (the “Privacy Notice”) addresses the Legg Mason Funds’ privacy and data protection practices with respect to nonpublic personal information the Funds receive. The Legg Mason Funds include any funds sold by the Funds’ distributor, Legg Mason Investor Services, LLC, as well as Legg Mason-sponsored closed-end funds and certain other closed-end funds managed or sub-advised by Legg Mason or its affiliates. The provisions of this Privacy Notice apply to your information both while you are a shareholder and after you are no longer invested with the Funds.
The Type of Nonpublic Personal Information the Funds Collect About You
The Funds collect and maintain nonpublic personal information about you in connection with your shareholder account. Such information may include, but is not limited to:
| Ÿ | | Personal information included on applications or other forms; |
| Ÿ | | Account balances, transactions, and mutual fund holdings and positions; |
| Ÿ | | Online account access user IDs, passwords, security challenge question responses; and |
| Ÿ | | Information received from consumer reporting agencies regarding credit history and creditworthiness (such as the amount of an individual’s total debt, payment history, etc.). |
How the Funds Use Nonpublic Personal Information About You
The Funds do not sell or share your nonpublic personal information with third parties or with affiliates for their marketing purposes, or with other financial institutions or affiliates for joint marketing purposes, unless you have authorized the Funds to do so. The Funds do not disclose any nonpublic personal information about you except as may be required to perform transactions or services you have authorized or as permitted or required by law. The Funds may disclose information about you to:
| Ÿ | | Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or comply with obligations to government regulators; |
| Ÿ | | Service providers, including the Funds’ affiliates, who assist the Funds as part of the ordinary course of business (such as printing, mailing services, or processing or servicing your account with us) or otherwise perform services on the Funds’ behalf, including companies that may perform marketing services solely for the Funds; |
| Ÿ | | The Funds’ representatives such as legal counsel, accountants and auditors; and |
| Ÿ | | Fiduciaries or representatives acting on your behalf, such as an IRA custodian or trustee of a grantor trust. |
|
| NOT PART OF THE ANNUAL REPORT |
Legg Mason Funds Privacy and Security Notice (cont’d)
Except as otherwise permitted by applicable law, companies acting on the Funds’ behalf are contractually obligated to keep nonpublic personal information the Funds provide to them confidential and to use the information the Funds share only to provide the services the Funds ask them to perform.
The Funds may disclose nonpublic personal information about you when necessary to enforce their rights or protect against fraud, or as permitted or required by applicable law, such as in connection with a law enforcement or regulatory request, subpoena, or similar legal process. In the event of a corporate action or in the event a Fund service provider changes, the Funds may be required to disclose your nonpublic personal information to third parties. While it is the Funds’ practice to obtain protections for disclosed information in these types of transactions, the Funds cannot guarantee their privacy policy will remain unchanged.
Keeping You Informed of the Funds’ Privacy and Security Practices
The Funds will notify you annually of their privacy policy as required by federal law. While the Funds reserve the right to modify this policy at any time they will notify you promptly if this privacy policy changes.
The Funds’ Security Practices
The Funds maintain appropriate physical, electronic and procedural safeguards designed to guard your nonpublic personal information. The Funds’ internal data security policies restrict access to your nonpublic personal information to authorized employees, who may use your nonpublic personal information for Fund business purposes only.
Although the Funds strive to protect your nonpublic personal information, they cannot ensure or warrant the security of any information you provide or transmit to them, and you do so at your own risk. In the event of a breach of the confidentiality or security of your nonpublic personal information, the Funds will attempt to notify you as necessary so you can take appropriate protective steps. If you have consented to the Funds using electronic communications or electronic delivery of statements, they may notify you under such circumstances using the most current email address you have on record with them.
In order for the Funds to provide effective service to you, keeping your account information accurate is very important. If you believe that your account information is incomplete, not accurate or not current, or if you have questions about the Funds’ privacy practices, write the Funds using the contact information on your account statements, email the Funds by clicking on the Contact Us section of the Funds’ website at www.leggmason.com, or contact the Fund at 1-877-721-1926.
Revised April 2011
|
| NOT PART OF THE ANNUAL REPORT |
www.leggmason.com/individualinvestors
©2012 Legg Mason Investor Services, LLC Member FINRA, SIPC
LMFX012200 2/12 SR12-1604
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller.
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT. |
The Board of Trustees of the registrant has determined that Arthur S. Mehlman the Chairman of the Board’s Audit Committee and Robert M. Tarola, possess the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as “audit committee financial experts,” and have designated Mr. Mehlman and Mr. Tarola as the Audit Committee’s financial experts. Mr. Mehlman and Mr. Tarola are “independent” Trustees pursuant to paragraph (a) (2) of Item 3 to Form N-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
a) Audit Fees. The aggregate fees billed in the last two fiscal years ending December 31, 2010and December 31, 2011 (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant (the “Auditor”) for the audit of the Registrant’s annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $27,833 in 2010 and $38,748 in 2011.
b) Audit-Related Fees. The aggregate fees billed in the Reporting Period for assurance and related services by the Auditor that are reasonably related to the performance of the Registrant’s financial statements were $0 in 2010 and $0 in 2011.
In addition, there were no Audit-Related Fees billed in the Reporting Period for assurance and related services by the Auditor to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Legg Mason Global Asset Management Trust (“service affiliates”), that were reasonably related to the performance of the annual audit of the service affiliates. Accordingly, there were no such fees that required pre-approval by the Audit Committee for the Reporting Periods.
(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning (“Tax Services”) were $2,925 in 2010 and $4,600 in 2011. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held.
There were no fees billed for tax services by the Auditors to service affiliates during the Reporting Periods that required pre-approval by the Audit Committee.
d) All Other Fees. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item for the Legg Mason Global Asset Management Trust.
All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common control with LMPFA that provided ongoing services to Legg Mason Global Asset Management Trust requiring pre-approval by the Audit Committee in the Reporting Period.
(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c)
(7) of Rule 2-01 of Regulation S-X.
(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee.
The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
(2) For the Legg Mason Global Asset Management Trust, the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for 2010 and 2011; Tax Fees were 100% and 100% for 2010 and 2011; and Other Fees were 100% and 100% for 2010 and 2011.
(f) N/A
(g) Non-audit fees billed by the Auditor for services rendered to Legg Mason Global Asset Management Trust, LMPFA and any entity controlling, controlled by, or under common control with LMPFA that provides ongoing services to Legg Mason Global Asset Management Trust during the reporting period were $0 in 2011.
(h) Yes. Legg Mason Global Asset Management Trust’s Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Legg Mason Global Asset Management Trust or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
| | a) | The independent board members are acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act .The Audit Committee consists of the following Board members: |
Ruby P. Hearn
Arnold L. Lehman
Robin J.W. Masters
Jill E. McGovern
Arthur S. Mehlman
G. Peter O’Brien
S. Ford Rowan
Robert M. Tarola
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM 11. | CONTROLS AND PROCEDURES. |
| | (a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934. |
| | (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. |
(a) (1) Code of Ethics attached hereto.
Exhibit 99.CODE ETH
(a) (2) Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.CERT
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto.
Exhibit 99.906CERT
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized.
Legg Mason Global Asset Management Trust
| | |
| By: | | /s/ R. Jay Gerken |
| | R. Jay Gerken |
| | President of |
| | Legg Mason Global Asset Management Trust |
Date: February 27, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | |
| By: | | /s/ R. Jay Gerken |
| | R. Jay Gerken |
| | President of |
| | Legg Mason Global Asset Management Trust |
Date: February 27, 2012
| | |
| By: | | /s/ Richard F. Sennett |
| | (Richard F. Sennett) |
| | Principal Financial Officer of |
| | Legg Mason Global Asset Management Trust |
Date: February 27, 2012
