UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number811-22338
Legg Mason Global Asset Management Trust
(Exact name of registrant as specified in charter)
620 Eighth Avenue, 49th Floor, New York, NY 10018
(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: July 31
Date of reporting period: July 31, 2019
| ITEM 1. | REPORT TO STOCKHOLDERS |
TheAnnual Report to Stockholders is filed herewith.
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| Annual Report | | July 31, 2019 |
MARTIN CURRIE
SMASh SERIES EM FUND
|
| INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE |
Fund objective
The Fund seeks long-term capital appreciation.
Letter from the president
Dear Shareholder,
We are pleased to provide the annual report of Martin Currie SMASh Series EM Fund for the twelve-month reporting period ended July 31, 2019. 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.
Special shareholder notice
The Fund is managed by a broad team of portfolio managers. Kim Catechis, Andrew Mathewson, Alastair Reynolds, Divya Mathur, Paul Desoisa, Paul Sloane and Colin Dishington are the Fund’s portfolio managers and each is responsible for theday-to-day management of the Fund. Kim Catechis and Andrew Mathewson, CFA have been the Fund’s portfolio managers since inception. Alastair Reynolds has been the Fund’s portfolio manager since 2018. Divya Mathur, Paul Desoisa, CFA, Paul Sloane and Colin Dishington, CFA, have been the Fund’s portfolio managers since June 2019. These portfolio managers, all of whom are employed by Martin Currie Inc., the Fund’s subadviser, work together to make portfolio management decisions. Effective December 28, 2019, Kim Catechis will no longer serve as a portfolio manager for the Fund. For more information on the Fund’s portfolio managers, please see the Fund’s prospectus.
As always, thank you for your confidence in our stewardship of your assets.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
August 30, 2019
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| II | | Martin Currie SMASh Series EM Fund |
Fund overview
Q. What is the Fund’s investment strategy?
A.The Fund seeks long-term capital appreciation. Under normal market conditions, the Fund pursues its objective by investing at least 80% of its net assets plus borrowings for investment purposes, if any, in securities of issuers with substantial economic ties to one or more emerging market countries and other investments with similar economic characteristics. The material factors that we consider when determining whether an issuer has substantial economic ties to an emerging market country include whether the issuer: is included in the MSCI Emerging Markets Index; is organized or headquartered in an emerging market country, or maintains most of its assets in one or more such countries; has a primary listing for its securities on a stock exchange of an emerging market country; or derives a majority of its exposure (e.g. percentage of sales, income or other material factors) from one or more emerging market countries. Emerging market countries are predominantly found currently in regions including Asia, the Indian subcontinent, South and Central America, the Middle and Near East, Eastern and Central Europe and Africa.
The Fund will invest primarily in equity and equity-related securities, which may include common stocks, preferred stock, convertible bonds, other securities convertible into common stock, depositary receipts, real estate investment trusts, securities of other investment companies including, exchange-traded funds (ETFs), and synthetic foreign equity securities, including international warrants. The Fund will primarily invest in securities directly in foreign markets, but may gain exposure to foreign markets indirectly through depositary receipts and synthetic foreign equity securities. The Fund will use synthetic foreign equity securities to obtain market exposure where direct access is not otherwise available. The Fund may also enter into index futures contracts, a form of derivative contract, as a substitute for buying or selling securities, to obtain market exposure, in an attempt to enhance returns and to manage cash.
Our overarching investment philosophy is that building stock-focused portfolios, driven by fundamental research, can help to exploit market inefficiencies with the goal of generating consistent outperformance. Our global emerging markets team aims to build long-term, high conviction stock-focused portfolios, driven by fundamental research within its risk framework.
Within an emerging market country, we select securities that we believe have favorable investment potential. For example, the Fund may purchase stocks of companies with prices that reflect a value lower than that which we place on the company. We may also consider factors we believe will cause the stock price to rise. In general, we will consider, among other factors, an issuer’s valuation, financial strength, competitive position in its industry, projected future earnings, cash flows and dividends when deciding whether to buy or sell investments. The Fund may invest in companies of any size and market capitalization.
The Fund may invest in companies domiciled in any country that we believe to be appropriate to the Fund’s investment objective. Subject to the Fund’s 80% investment policy, the Fund may invest a substantial amount of assets (i.e. more than 25%) in issuers
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 1 |
Fund overview (cont’d)
located in a single country or a limited number of countries but will always be invested in or have exposure to no less than three different emerging market countries. The Fund may invest in securities denominated in foreign currencies or in U.S. dollars.
Q. What were the overall market conditions during the Fund’s reporting period?
A.After a disappointing second half of 2018, when emerging markets struggled against the weight of negative earnings revisions and rising trade tensions, the first half of 2019 proved broadly more supportive. There were two big drivers of this sentiment change, namely a lowering of interest rate expectations and U.S.-China trade talks.
From around November 2018 onwards, we saw a reversal in U.S. interest rate rise expectations, continuing the indecisive pattern that has prevailed during the post-financial crisis era. The U.S. Federal Reserve Board’s (the “Fed”)i communications highlighted slower growth in major economies and heightened political uncertainty, including trade tensions and Brexit. Indeed, this theme continued into 2019 with central banks around the world turning notably more dovish in the second quarter of 2019 on the back ofsub-par inflation releases and in response to the potentialknock-on effects from trade tensions on global growth. The Federal Open Market Committee (“FOMC”)iimeeting in the U.S. inmid-June 2019 boosted emerging market sentiment, signalling the prospect of U.S. interest-rate cuts which saw almost all emerging market currencies finishing the period strongly.
Meanwhile, U.S.-China trade tensions remained a topic of intense interest throughout the twelve months ended July 31, 2019. Markets became notably jittery in the second part of 2018 as trade talks deteriorated, but concerns subsided on the back of positive pronouncements following the meeting of President Xi Jinping and President Donald J. Trump in early December 2018, prompting a short-lived rally. However, markets were then overwhelmed by negativity following the arrest of Huawei’s CEO on the request of the U.S. By June 2019, hopes grew of a thawing in relations: the countries did agree to restart trade talks, and although no current tariffs were reduced, the U.S. administration indicated it would hold off on 25% tariffs on U.S. $300 billion of Chinese imports. That said, the uncertain outcomes of the trade wars are likely to stay at forefront of investors’ minds for some time come.
Q. How did we respond to these changing market conditions?
A.As long-term, fundamentalbottom-up investors with a focus on quality growth companies, we look to deliver strong stockdriven performance over multi-year periods. Broadly speaking, the Fund’s positioning towards highly profitable and growing companies has served it well in relative terms against a backdrop of uncertainty in the markets. The Fund benefited from strong stock selection in the Consumer Discretionary and Energy sectors – most notably through MRV Engenharia e Participacoes SA (“MRV”) and Lukoil PJSC, respectively. The Health Care sector, by contrast, was a negative with Aspen Pharmacare Holdings, Ltd. and Shanghai Fosun Pharmaceutical Group Co., Ltd. particularly weighing on performance.
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| 2 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
The recent shift in global interest-rate policy from tightening towards a resumption of rate cuts should provide a boost to confidence and aid stability. It should also provide support to the intrinsic value of high-growth companies. While our strategy is typically exposed to companies with above-average earnings growth prospects and stronger-than-average balance sheets, an improvement in the overall corporate backdrop would help build confidence that the long-term growth drivers for emerging markets remain intact.
We remain excited by the powerful combination of technology adoption, urbanization and services sector growth that is evident in emerging markets. We expect our highly selective, stock-focused approach will continue to prosper through accessing highreturn-on-equity companies, operating in structurally growing industries.
Performance review
For the twelve months ended July 31, 2019, Martin Currie SMASh Series EM Fund returned-10.58%. The Fund’s unmanaged benchmark, the MSCI Emerging Markets Indexiii, returned-2.18% for the same period.
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Performance Snapshotas of July 31, 2019
(unaudited) | |
| | | 6 months | | | 12 months | |
| Martin Currie SMASh Series EM Fund | | | -3.67 | % | | | -10.58 | % |
| MSCI Emerging Markets Index | | | 0.44 | % | | | -2.18 | % |
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 recentmonth-end, please call the Fund at1-877-721-1926.
Fund 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.
Investors should understand that the Fund is managed within the context of a separately managed account and not with the objective of matching or exceeding the Fund’s stated benchmark, which is used for Fund reporting purposes. As such, comparisons of the Fund’s performance to that of the indicated benchmark are not likely to be meaningful. Additionally, performance figures do not reflect the effect of fees and expenses associated with a separately managed account or the management fee or other operating expenses of the Fund. Such management fees are paid directly or indirectly by the separately managed account sponsor to the Fund’s manager or subadviser. All operating expenses of the Fund (other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses) were reimbursed by the manager.
|
| Total Annual Operating Expenses(unaudited) |
As of the Fund’s current prospectus dated November 30, 2018, as supplemented March 7, 2019, the gross total annual fund operating expense ratio was 6.52%.
Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 3 |
Fund overview (cont’d)
more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.
The Fund’s manager has entered into an expense reimbursement arrangement with the Fund, pursuant to which the Fund’s manager has agreed to reimburse 100% of the Fund’s operating expenses. The expense reimbursement arrangement does not cover interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses. This expense reimbursement arrangement cannot be terminated prior to December 31, 2020, without the Board of Trustees’ consent. However, all Fund shareholders are participating in separately managed account programs and pay fees to program sponsors for the costs and expenses of the program, including fees for investment advice and portfolio execution, some of which are used to compensate the Fund’s manager or subadviser for managing the Fund and to reimburse the Fund for all operating expenses.
Q. What were the leading contributors to performance?
A.In terms of Fund holdings, the top contributor to relative performance during the reporting period was Brazilian housebuilder MRV. Strong earnings results during the reporting period with robust sales figures were well received by the market and positively impacted the share price. In addition, fears that the Brazilian government might fundamentally change housebuilding programs (the company operates within a government supported program to help address the structural shortage of housing in the country) have also proved unfounded. MRV is awell-run company exposed to the structural undersupply of housing in Brazil. It has strategically built up a land bank over the last couple of years and stands to benefit from increased sales and profits as it utilizes these assets. A combination of rising energy and commodity prices was another theme in the asset class over the reporting period and Russian energy firm Lukoil PJSC fared well as a result. The company also announced plans during the reporting period to distribute cash to shareholders via a progressive dividend policy and a share buyback. Furthermore, its results showed strong improvement in key profit and cash flow metrics. OTP Bank PLC was another notable positive during the reporting period. Fundamentals for OTP Bank PLC are very sheltered from global trade issues. In the short term, the stock can have periods where the share price is inversely correlated to broader emerging markets sentiment, while outperforming over the longer term. Results showed that benign asset quality and high loan growth trends are intact for the company.
Q. What were the leading detractors from performance?
A.Within the Fund, the Health Care sector was the biggest drag on relative performance during the reporting period. Specifically, the South African pharma firm Aspen Pharmacare Holdings Ltd. reported half-year results that drew renewed attention to the company’s unsustainable balance sheet leverage, built up through numerous acquisitions over the past decade. Having faced weaker underlying operations in both its legacy business and in recently acquired businesses, the company will have to sell assets and consider cutting its dividend to convince the market that it has its finances under control. Aspen’s troubles are reflected in its below-average valuation, but we continue to monitor its progress to sell assets, assessing the impact on its growth potential. Shanghai Fosun Pharmaceutical Group Co., Ltd. was another notable detractor.
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| 4 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
The diversified Chinese healthcare firm reported earnings that highlighted elevated selling and research & development costs. Uncertainty over healthcare reform and (in particular) Chinese drug pricing has also weighed heavily on the sector and the stock over the last year or so; however, in our opinion, little credit has been given to Fosun’s diversified set of business drivers. Indeed, we believe its prospects, as one of the clear long-term beneficiaries of China’s healthcare reform, are excellent. Elsewhere, Mexican-based, integrated speciality chemical company Mexichem SAB de CV also struggled over the period. Having previously focused on upstream expansion (joint ventures with Pemex and Occidental) the company signalled a change in capital deployment focus with the acquisition of Netafim (irrigation systems) in 2018. This latest acquisition once again stretches the balance sheet, but with strong cash generation from its underlying businesses the company should be able tode-lever quickly to further enable its next leg of growth.
Thank you for your investment in Martin Currie SMASh Series EM 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,
Kim Catechis
Portfolio Manager
Martin Currie Inc.
Andrew Mathewson, CFA
Portfolio Manager
Martin Currie Inc.
Alastair Reynolds
Portfolio Manager
Martin Currie Inc.
Divya Mathur
Portfolio Manager
Martin Currie Inc.
Paul Desoisa, CFA
Portfolio Manager
Martin Currie Inc.
Paul Sloane
Portfolio Manager
Martin Currie Inc.
Colin Dishington, CFA
Portfolio Manager
Martin Currie Inc.
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 5 |
Fund overview (cont’d)
RISKS: Equity securities are subject to market and price fluctuations. Small- andmid-cap stocks involve greater risks and volatility thanlarge-cap stocks. The Fund is“non-diversified,” which may increase its vulnerability to the negative events affecting a particular issuer. The Fund may significantly overweight or underweight certain companies, industries or market sectors, which may cause the Fund’s performance to be more sensitive to developments affecting those companies, industries or sectors. International investments are subject to special risks including currency fluctuations as well as social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. To the extent the Fund focuses its investments in a single country or only a few countries in a particular geographic region, economic, political, regulatory or other conditions affecting such country or region may have a greater impact on fund performance relative to a more geographically diversified fund. Derivatives, such as futures, can be illiquid, may disproportionately increase losses and have a potentially large impact on Fund performance. In addition to the Fund’s operating expenses, the Fund will indirectly bear the operating expenses of any underlying funds it invests in. Please see the Fund’s prospectus for a more complete discussion of these and other risks and the Fund’s investment strategies.
The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. Portfolio holdings are subject to change at any time and may not be representative of the portfolio managers’ current or future investments. The Fund’s top five sector holdings (as a percentage of net assets) as of July 31, 2019 were: Information Technology (40.6%), Consumer Discretionary (11.4%), Financials (11.3%), Health Care (10.2%) and Materials (9.0%). The Fund’s portfolio composition is subject to change at any time.
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 Federal Reserve Board (the “Fed”) is responsible for the formulation of U.S. policies designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
| ii | The Federal Open Market Committee (“FOMC”) is a policy-making body of the Federal Reserve System responsible for the formulation of a policy designed to promote economic growth, full employment, stable prices and a sustainable pattern of international trade and payments. |
| iii | The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. |
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| 6 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
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 July 31, 2019 and July 31, 2018. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time. |
| * | As of September 28, 2018, the Telecommunication Services sector was broadened to include some companies previously classified in the Consumer Discretionary and Information Technology sectors and renamed the Communication Services sector. |
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 7 |
Fund expenses(unaudited)
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs 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 February 1, 2019 and held for the six months ended July 31, 2019.
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. 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
Return2,3 | | Beginning
Account
Value | | Ending
Account
Value | | Annualized
Expense
Ratio3 | | Expenses
Paid During
the Period3,4 | | | | Hypothetical
Annualized
Total Return | | Beginning
Account
Value | | Ending
Account
Value | | Annualized
Expense
Ratio3 | | Expenses
Paid During
the Period3,4 |
| | | -3.67% | | | | $ | 1,000.00 | | | | $ | 963.30 | | | | | 0.00 | % | | | $ | 0.00 | | | | | | | 5.00 | % | | | | $1,000.00 | | | | $ | 1,024.79 | | | | | 0.00 | % | | | $ | 0.00 | |
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| 8 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
| 1 | For the six months ended July 31, 2019. |
| 2 | Total return is not annualized, as it may not be representative of the total return for the year. Past performance is no guarantee of future results. Performance figures do not reflect any fees stated below in Note 3. If such fees were included, the return shown would have been lower. |
| 3 | All figures do not reflect the effect of fees and expenses associated with a separately managed account, nor a management fee or other operating expenses of the Fund. Such management fees are paid directly or indirectly by the separately managed account sponsor to the Fund’s manager or subadviser. All operating expenses of the Fund were reimbursed by the manager, pursuant to an expense reimbursement arrangement between the Fund and the manager. The expense reimbursement arrangement does not cover interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses. |
| 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 (181), then divided by 365. |
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 9 |
Fund performance(unaudited)
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| Average annual total returns1 | | | |
| Twelve Months Ended 7/31/19 | | | -10.58 | % |
| Inception* through 7/31/19 | | | -11.50 | |
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| Cumulative total returns1 | | | |
| Inception date of 1/10/18 through 7/31/19 | | | -17.28 | % |
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. Performance figures do not reflect the effect of fees and expenses associated with a separately managed account or the management fee or other operating expenses of the Fund. Such management fees are paid directly or indirectly by the separately managed account sponsor to the Fund’s manager or subadviser. All operating expenses of the Fund (other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses) were reimbursed by the manager due to an expense reimbursement arrangement between the Fund and the manager. This arrangement cannot be terminated prior to December 31, 2020 without the Board of Trustees’ consent.
| 1 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. |
| * | Inception date of the Fund is January 10, 2018. |
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| 10 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
Historical performance
Value of $10,000 invested in
Martin Currie SMASh Series EM Fund vs. MSCI Emerging Markets Index† — January 10, 2018 - July 2019
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. Performance figures do not reflect the effect of fees and expenses associated with a separately managed account or the management fee or other operating expenses of the Fund. Such management fees are paid directly or indirectly by the separately managed account sponsor to the Fund’s manager or subadviser. All operating expenses of the Fund (other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses) were reimbursed by the manager due to an expense reimbursement arrangement between the Fund and the manager. This arrangement cannot be terminated prior to December 31, 2020 without the Board of Trustees’ consent.
| † | Hypothetical illustration of $10,000 invested in shares of Martin Currie SMASh Series EM Fund on January 10, 2018 (inception date) assuming the reinvestment of all distributions, including returns of capital, if any, at net asset value through July 31, 2019. The hypothetical illustration also assumes a $10,000 investment in the MSCI Emerging Markets Index. The MSCI Emerging Markets Index is a free float adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. The index is calculated assuming the minimum possible dividend reinvestment. The index is unmanaged and not subject to the same management and trading expenses as a mutual fund. Please note that an investor cannot invest directly in an index. |
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 11 |
Schedule of investments
July 31, 2019
Martin Currie SMASh Series EM Fund
| | | | | | | | | | | | | | | | |
| Security | | | | | | | | Shares | | | Value | |
| Common Stocks — 97.8% | | | | | | | | | | | | | | | | |
| Communication Services — 2.0% | | | | | | | | | | | | | | | | |
Diversified Telecommunication Services — 2.0% | | | | | | | | | | | | | | | | |
PT Tower Bersama Infrastructure Tbk | | | | | | | | | | | 1,501,600 | | | $ | 447,549 | (a) |
| Consumer Discretionary — 11.4% | | | | | | | | | | | | | | | | |
Auto Components — 3.3% | | | | | | | | | | | | | | | | |
Minth Group Ltd. | | | | | | | | | | | 266,000 | | | | 746,545 | (a) |
Hotels, Restaurants & Leisure — 4.0% | | | | | | | | | | | | | | | | |
Genting Malaysia Berhad | | | | | | | | | | | 954,500 | | | | 894,447 | (a) |
Household Durables — 4.1% | | | | | | | | | | | | | | | | |
MRV Engenharia e Participacoes SA | | | | | | | | | | | 176,000 | | | | 931,571 | |
Total Consumer Discretionary | | | | | | | | | | | | | | | 2,572,563 | |
| Consumer Staples — 6.5% | | | | | | | | | | | | | | | | |
Food & Staples Retailing — 2.5% | | | | | | | | | | | | | | | | |
Robinsons Retail Holdings Inc. | | | | | | | | | | | 355,420 | | | | 552,862 | (a) |
Personal Products — 4.0% | | | | | | | | | | | | | | | | |
LG Household & Health Care Ltd. | | | | | | | | | | | 855 | | | | 905,463 | (a) |
Total Consumer Staples | | | | | | | | | | | | | | | 1,458,325 | |
| Energy — 6.8% | | | | | | | | | | | | | | | | |
Oil, Gas & Consumable Fuels — 6.8% | | | | | | | | | | | | | | | | |
Lukoil PJSC, ADR | | | | | | | | | | | 18,804 | | | | 1,546,020 | (a) |
| Financials — 11.3% | | | | | | | | | | | | | | | | |
Banks — 7.9% | | | | | | | | | | | | | | | | |
OTP Bank PLC | | | | | | | | | | | 42,774 | | | | 1,783,058 | (a) |
Insurance — 3.4% | | | | | | | | | | | | | | | | |
IRB Brasil Resseguros S/A | | | | | | | | | | | 31,500 | | | | 773,809 | |
Total Financials | | | | | | | | | | | | | | | 2,556,867 | |
| Health Care — 10.2% | | | | | | | | | | | | | | | | |
Health Care Equipment & Supplies — 2.5% | | | | | | | | | | | | | | | | |
St. Shine Optical Co. Ltd. | | | | | | | | | | | 34,000 | | | | 569,276 | (a) |
Health Care Providers & Services — 3.3% | | | | | | | | | | | | | | | | |
Odontoprev SA | | | | | | | | | | | 161,400 | | | | 748,563 | |
Pharmaceuticals — 4.4% | | | | | | | | | | | | | | | | |
Aspen Pharmacare Holdings Ltd. | | | | | | | | | | | 42,038 | | | | 264,131 | (a) |
Shanghai Fosun Pharmaceutical Group Co. Ltd., Class H Shares | | | | | | | | | | | 242,000 | | | | 721,233 | (a) |
Total Pharmaceuticals | | | | | | | | | | | | | | | 985,364 | |
Total Health Care | | | | | | | | | | | | | | | 2,303,203 | |
| Information Technology — 40.6% | | | | | | | | | | | | | | | | |
Electronic Equipment, Instruments & Components — 13.4% | | | | | | | | | | | | | | | | |
Delta Electronics Inc. | | | | | | | | | | | 125,000 | | | | 602,733 | (a) |
See Notes to Financial Statements.
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| 12 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
Martin Currie SMASh Series EM Fund
| | | | | | | | | | | | | | | | |
| Security | | | | | | | | Shares | | | Value | |
Electronic Equipment, Instruments & Components — continued | | | | | | | | | | | | | | | | |
Largan Precision Co. Ltd. | | | | | | | | | | | 5,684 | | | $ | 769,491 | (a) |
Samsung SDI Co. Ltd. | | | | | | | | | | | 3,983 | | | | 834,681 | (a) |
Sunny Optical Technology Group Co. Ltd. | | | | | | | | | | | 70,300 | | | | 820,867 | (a) |
Total Electronic Equipment, Instruments & Components | | | | | | | | | | | | | | | 3,027,772 | |
Semiconductors & Semiconductor Equipment — 7.3% | | | | | | | | | | | | | | | | |
Globalwafers Co. Ltd. | | | | | | | | | | | 47,000 | | | | 499,866 | (a) |
SK Hynix Inc. | | | | | | | | | | | 17,623 | | | | 1,137,500 | (a) |
Total Semiconductors & Semiconductor Equipment | | | | | | | | | | | | | | | 1,637,366 | |
Technology Hardware, Storage & Peripherals — 19.9% | | | | | | | | | | | | | | | | |
Samsung Electronics Co. Ltd. | | | | | | | | | | | 117,652 | | | | 4,488,812 | (a) |
Total Information Technology | | | | | | | | | | | | | | | 9,153,950 | |
| Materials — 9.0% | | | | | | | | | | | | | | | | |
Chemicals — 9.0% | | | | | | | | | | | | | | | | |
LG Chem Ltd. | | | | | | | | | | | 5,343 | | | | 1,515,091 | (a) |
Mexichem SAB de CV | | | | | | | | | | | 277,000 | | | | 506,192 | |
Total Materials | | | | | | | | | | | | | | | 2,021,283 | |
Total Investments — 97.8% (Cost — $22,607,896) | | | | | | | | | | | | | | | 22,059,760 | |
Other Assets in Excess of Liabilities — 2.2% | | | | | | | | | | | | | | | 491,176 | |
Total Net Assets — 100.0% | | | | | | | | | | | | | | $ | 22,550,936 | |
| (a) | Security is valued in good faith in accordance with procedures approved by the Board of Trustees (Note 1). |
| | |
Abbreviations used in this schedule: |
| |
| ADR | | — American Depositary Receipts |
| |
| PJSC | | — Private Joint Stock Company |
| | | | |
| Summary of Investments by Country*(unaudited) | | | |
| South Korea | | | 40.3 | % |
| Brazil | | | 11.1 | |
| Taiwan | | | 11.1 | |
| China | | | 10.4 | |
| Hungary | | | 8.1 | |
| Russia | | | 7.0 | |
| Malaysia | | | 4.0 | |
| Philippines | | | 2.5 | |
| Mexico | | | 2.3 | |
| Indonesia | | | 2.0 | |
| South Africa | | | 1.2 | |
| | | | 100.0 | % |
| * | As a percentage of total investments. Please note that the Fund holdings are as of July 31, 2019 and are subject to change. |
See Notes to Financial Statements.
| | |
| | |
| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 13 |
Statement of assets and liabilities
July 31, 2019
| | | | |
| |
| Assets: | | | | |
Investments, at value (Cost — $22,607,896) | | $ | 22,059,760 | |
Cash | | | 182,953 | |
Foreign currency, at value (Cost — $42,534) | | | 42,534 | |
Receivable for Fund shares sold | | | 383,225 | |
Dividends receivable | | | 87,033 | |
Receivable from investment manager | | | 10,953 | |
Prepaid expenses | | | 23,796 | |
Total Assets | | | 22,790,254 | |
| |
| Liabilities: | | | | |
Payable for securities purchased | | | 190,644 | |
Payable for Fund shares repurchased | | | 17,707 | |
Trustees’ fees payable | | | 169 | |
Accrued expenses | | | 30,798 | |
Total Liabilities | | | 239,318 | |
| Total Net Assets | | $ | 22,550,936 | |
| |
| Net Assets: | | | | |
Par value (Note 5) | | $ | 28 | |
Paid-in capital in excess of par value | | | 23,377,536 | |
Total distributable earnings (loss) | | | (826,628) | |
| Total Net Assets | | $ | 22,550,936 | |
| |
| Shares Outstanding | | | 2,772,045 | |
| |
| Net Asset Value | | | $8.14 | |
See Notes to Financial Statements.
| | |
| | |
| 14 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
Statement of operations
For the Year Ended July 31, 2019
| | | | |
| |
| Investment Income: | | | | |
Dividends | | $ | 218,865 | |
Less: Foreign taxes withheld | | | (29,552) | |
Total Investment Income | | | 189,313 | |
| |
| Expenses: | | | | |
Fund accounting fees | | | 73,929 | |
Offering costs (Note 1) | | | 53,316 | |
Audit and tax fees | | | 24,099 | |
Registration fees | | | 23,016 | |
Legal fees | | | 13,944 | |
Shareholder reports | | | 10,284 | |
Custody fees | | | 1,415 | |
Transfer agent fees | | | 934 | |
Trustees’ fees | | | 749 | |
Custody holdings charges | | | 543 | |
Insurance | | | 277 | |
Interest expense | | | 6 | |
Miscellaneous expenses | | | 6,319 | |
Total Expenses | | | 208,831 | |
Less: Fee waivers and/or expense reimbursements (Note 2) | | | (208,288) | |
Net Expenses | | | 543 | |
| Net Investment Income | | | 188,770 | |
| |
| Realized and Unrealized Loss on Investments and Foreign Currency Transactions (Notes 1 and 3): | | | | |
Net Realized Loss From: | | | | |
Investment transactions | | | (430,981) | |
Foreign currency transactions | | | (11,062) | |
Net Realized Loss | | | (442,043) | |
Change in Net Unrealized Appreciation (Depreciation) From: | | | | |
Investments | | | (313,279) | |
Foreign currencies | | | (287) | |
Change in Net Unrealized Appreciation (Depreciation) | | | (313,566) | |
| Net Loss on Investments and Foreign Currency Transactions | | | (755,609) | |
| Decrease in Net Assets From Operations | | $ | (566,839) | |
See Notes to Financial Statements.
| | |
| | |
| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 15 |
Statements of changes in net assets
| | | | | | | | |
For the Year Ended July 31, 2019
and the Period Ended July 31, 2018 | | 2019 | | | 2018† | |
| | |
| Operations: | | | | | | | | |
Net investment income | | $ | 188,770 | | | $ | 34,062 | |
Net realized loss | | | (442,043) | | | | (22,885) | |
Change in net unrealized appreciation (depreciation) | | | (313,566) | | | | (234,966) | |
Decrease in Net Assets From Operations | | | (566,839) | | | | (223,789) | |
| | |
| Distributions to Shareholders From (Note 1): | | | | | | | | |
Total distributable earnings | | | (36,000) | | | | — | |
Decrease in Net Assets From Distributions to Shareholders | | | (36,000) | | | | — | |
| | |
| Fund Share Transactions (Note 5): | | | | | | | | |
Net proceeds from sale of shares | | | 23,481,522 | | | | 3,077,103 | |
Cost of shares repurchased | | | (3,107,263) | | | | (73,798) | |
Increase in Net Assets From Fund Share Transactions | | | 20,374,259 | | | | 3,003,305 | |
Increase in Net Assets | | | 19,771,420 | | | | 2,779,516 | |
| | |
| Net Assets: | | | | | | | | |
Beginning of year | | | 2,779,516 | | | | — | |
End of year(a) | | $ | 22,550,936 | | | $ | 2,779,516 | |
| † | For the period January 10, 2018 (inception date) to July 31, 2018. |
| (a) | Parenthetical disclosure of undistributed net investment income is no longer required (Note 7). For the period ended July 31, 2018, end of period net assets included accumulated net investment income of $19,316. |
See Notes to Financial Statements.
| | |
| | |
| 16 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
Financial highlights
| | | | | | | | |
For a share of beneficial interest outstanding throughout each year ended July 31,
unless otherwise noted: | |
| | | 20191 | | | 20181,2 | |
| | |
| Net asset value, beginning of year | | | $9.25 | | | | $10.00 | |
| | |
| Income (loss) from operations: | | | | | | | | |
Net investment income | | | 0.27 | | | | 0.11 | |
Net realized and unrealized loss | | | (1.26) | | | | (0.86) | |
Total loss from operations | | | (0.99) | | | | (0.75) | |
| | |
| Less distributions from: | | | | | | | | |
Net investment income | | | (0.12) | | | | — | |
Total distributions | | | (0.12) | | | | — | |
| | |
| Net asset value, end of year | | | $8.14 | | | | $9.25 | |
Total return3 | | | (10.58) | % | | | (7.50) | % |
| | |
| Net assets, end of year (000s) | | | $22,551 | | | | $2,780 | |
| | |
| Ratios to average net assets: | | | | | | | | |
Gross expenses4 | | | 3.68 | % | | | 10.42 | %5 |
Net expenses6,7 | | | 0.01 | | | | 0.09 | 5 |
Net investment income | | | 3.33 | | | | 2.13 | 5 |
| | |
| Portfolio turnover rate | | | 29 | % | | | 11 | % |
| 1 | Per share amounts have been calculated using the average shares method. |
| 2 | For the period January 10, 2018 (inception date) to July 31, 2018. |
| 3 | Performance figures do not reflect the effect of fees and expenses associated with a separately managed account, nor a management fee or other operating expenses of the Fund. Such management fees are paid directly or indirectly by the separately managed account sponsor to the Fund’s manager or subadviser. All operating expenses of the Fund were reimbursed by the manager, pursuant to an expense reimbursement arrangement between the Fund and the manager. If such fees were included, 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. |
| 4 | Gross expenses do not include management fees paid to the manager and subadviser. Management fees are paid directly or indirectly by the separately managed account sponsor. |
| 6 | The Fund’s manager has entered into an expense reimbursement arrangement with the Fund, pursuant to which the Fund’s manager has agreed to reimburse 100% of the Fund’s ordinary operating expenses. The expense reimbursement arrangement does not cover interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses. This arrangement cannot be terminated prior to December 31, 2020 without the Board of Trustees’ consent. Prior to March 7, 2019, the expense reimbursement arrangement did not cover custody holdings charges. |
| 7 | Reflects fee waivers and/or expense reimbursements. |
See Notes to Financial Statements.
| | |
| | |
| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 17 |
Notes to financial statements
1. Organization and significant accounting policies
Martin Currie SMASh Series EM Fund (the “Fund”) is a separatenon-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 anopen-end management investment company.
Shares of the Fund may be purchased only by or on behalf of separately managed account clients where an affiliate of Legg Mason Partners Fund Advisor, LLC (“LMPFA”) has an agreement to serve as investment adviser or subadviser (each affiliate, a “Managed Account Adviser”) to the account with the managed account program sponsor (the “Program Sponsor”) (typically, a registered investment adviser or broker/dealer) or directly with the client. Shareholders of the Fund pay fees to their separately managed account sponsor, some of which are paid to affiliates of LMPFA. LMPFA and the subadviser do not charge investment management fees to the Fund.
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. 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. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed 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 valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments inopen-end funds are valued at the closing net asset value per share of each fund on the day of valuation. 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). 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 or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. 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
| | |
| | |
| 18 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
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 Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the “Valuation Committee”). The Valuation Committee, pursuant to the policies adopted by the Board of Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the Fund’s pricing policies, and reporting to the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer’s financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts’ research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.
For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Trustees quarterly.
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.
| | |
| | |
| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 19 |
Notes to financial statements (cont’d)
GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
| • | | Level 1 — quoted prices in active markets for identical investments |
| • | | Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | | Level 3 — significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments) |
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Fund’s assets 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†: | | | | | | | | | | | | | | | | |
Common Stocks: | | | | | | | | | | | | | | | | |
Consumer Discretionary | | $ | 931,571 | | | $ | 1,640,992 | | | | — | | | $ | 2,572,563 | |
Financials | | | 773,809 | | | | 1,783,058 | | | | — | | | | 2,556,867 | |
Health Care | | | 748,563 | | | | 1,554,640 | | | | — | | | | 2,303,203 | |
Materials | | | 506,192 | | | | 1,515,091 | | | | — | | | | 2,021,283 | |
Other Common Stocks | | | — | | | | 12,605,844 | | | | — | | | | 12,605,844 | |
| Total Investments | | $ | 2,960,135 | | | $ | 19,099,625 | | | | — | | | $ | 22,059,760 | |
| † | See Schedule of Investments for additional detailed categorizations. |
(b) 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
| | |
| | |
| 20 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
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.
(c) 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.
(d) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income frompayment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on theex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on theex-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.
(e) Distributions to shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on theex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.
(f) 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.
(g) Offering costs. Costs incurred by the Fund in connection with the commencement of the Fund’s operations are being amortized on a straight line basis over twelve months.
| | |
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 21 |
Notes to financial statements (cont’d)
(h) 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 July 31, 2019, 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 the Internal Revenue Service and state departments of revenue.
Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.
(i) 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 value per share. During the current year, the Fund had no reclassifications.
2. Investment management agreement and other transactions with affiliates
LMPFA is the Fund’s investment manager and Martin Currie Inc. (“Martin Currie”) is the Fund’s subadviser. Western Asset Management Company, LLC (“Western Asset”) manages the portion of the Fund’s cash and short-term instruments allocated to it. LMPFA, Martin Currie and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (“Legg Mason”).
LMPFA and the subadviser do not charge investment management fees to the Fund. However, the Fund is an integral part of the separately managed account program, and LMPFA and the subadviser will be compensated directly or indirectly by separately managed account program sponsors. LMPFA provides administrative and certain oversight services to the Fund. LMPFA delegates to the subadviser theday-to-day portfolio management of the Fund.
LMPFA has entered into an expense reimbursement arrangement with the Fund, pursuant to which LMPFA has agreed to reimburse 100% of the Fund’s ordinary operating expenses. The expense reimbursement arrangement does not cover interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses. This expense reimbursement arrangement cannot be terminated prior to December 31, 2020 without the Board of Trustees’ consent. Prior to March 7, 2019, the expense reimbursement arrangement did not cover custody holdings charges.
| | |
| | |
| 22 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
During the year ended July 31, 2019, fees waived and/or expenses reimbursed amounted to $208,288.
Legg Mason Investor Services, LLC, a wholly-owned broker-dealer subsidiary of Legg Mason, serves as the Fund’s sole and exclusive distributor.
All officers and one Trustee 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 July 31, 2019, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
| | | | |
| Purchases | | $ | 21,763,371 | |
| Sales | | | 1,669,103 | |
At July 31, 2019, the aggregate cost of investments and the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
| | | | | | | | | | | | | | | | |
| | | Cost | | | Gross
Unrealized
Appreciation | | | Gross
Unrealized
Depreciation | | | Net
Unrealized
Depreciation | |
| Securities | | $ | 22,975,961 | | | $ | 151,510 | | | $ | (1,067,711) | | | $ | (916,201) | |
4. Derivative instruments and hedging activities
During the year ended July 31, 2019, the Fund did not invest in derivative instruments.
5. Shares of beneficial interest
At July 31, 2019, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.00001 per share. Each share represents an identical interest and has the same rights.
Transactions in shares of the Fund were as follows:
| | | | | | | | |
| | | Year Ended
July 31, 2019 | | | Period Ended
July 31, 2018† | |
| Shares sold | | | 2,864,879 | | | | 307,833 | |
| Shares repurchased | | | (393,191) | | | | (7,476) | |
| Net increase | | | 2,471,688 | | | | 300,357 | |
| † | For the period January 10, 2018 (inception date) to July 31, 2018. |
6. Income tax information and distributions to shareholders
The tax character of distributions paid during the fiscal year ended July 31, 2019 and period ended July 31, 2018, was as follows:
| | | | | | | | |
| | | 2019 | | | 2018 | |
| Distributions paid from: | | | | | | | | |
| Ordinary income | | $ | 36,000 | | | | — | |
| | |
| | |
| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 23 |
Notes to financial statements (cont’d)
As of July 31, 2019, the components of accumulated earnings (losses) on a tax basis were as follows:
| | | | |
| Undistributed ordinary income — net | | $ | 162,564 | |
| Deferred capital losses* | | | (72,595) | |
| Unrealized appreciation (depreciation)(a) | | | (916,597) | |
| Total accumulated earnings (losses) — net | | $ | (826,628) | |
| * | These capital losses have been deferred in the current year as either short-term or long-term losses. The losses will be deemed to occur on the first day of the next taxable year in the same character as they were originally deferred and will be available to offset future taxable capital gains. |
| (a) | The difference between book-basis andtax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales and other book/tax differences. |
7. Recent accounting pronouncements
The Fund has adopted the disclosure provisions of the Financial Accounting Standards Board Accounting Standards UpdateNo. 2018-13,Fair Value Measurement (Topic 820)—Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”) which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. ASU2018-13 would be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years; however, management has elected to early adopt ASU2018-13. The impact of the Fund’s adoption was limited to changes in the Fund’s financial statement disclosures regarding fair value, primarily those disclosures related to transfers between levels of the fair value hierarchy.
In August 2018, the Securities and Exchange Commission released its Final Rule on Disclosure Update and Simplification (the “Final Rule”) which is intended to simplify an issuer’s disclosure compliance efforts by removing redundant or outdated disclosure requirements without significantly altering the mix of information provided to investors. Effective with the current reporting period, the Fund adopted the Final Rule with the most notable impacts being that the Fund is no longer required to present the components of distributable earnings on the Statement of Assets and Liabilities or the sources of distributions to shareholders and the amount of undistributed net investment income on the Statements of Changes in Net Assets. The tax components of distributable earnings and distributions to shareholders continue to be disclosed within the Notes to Financial Statements.
| | |
| | |
| 24 | | Martin Currie SMASh Series EM Fund 2019 Annual Report |
Report of independent registered public accounting firm
To the Board of Trustees of Legg Mason Global Asset Management Trust and Shareholders of Martin Currie SMASh Series EM Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Martin Currie SMASh Series EM Fund (one of the funds constituting Legg Mason Global Asset Management Trust, referred to hereafter as the “Fund”) as of July 31, 2019, the related statement of operations for the year ended July 31, 2019 and the statement of changes in net assets and the financial highlights for the year ended July 31, 2019 and for the period January 10, 2018 (commencement of operations) through July 31, 2018, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of July 31, 2019, the results of its operations for the year ended July 31, 2019, and the changes in its net assets and the financial highlights for the year ended July 31, 2019 and for the period January 10, 2018 (commencement of operations) through July 31, 2018 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of July 31, 2019 by correspondence with the custodian and brokers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Baltimore, Maryland
September 17, 2019
We have served as the auditor of one or more investment companies in Legg Mason investment company group since at least 1973. We have not been able to determine the specific year we began serving as auditor.
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| Martin Currie SMASh Series EM Fund 2019 Annual Report | | 25 |
Additional information(unaudited)
Information about Trustees and Officers
The business and affairs of Martin Currie SMASh Series EM 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 c/o Jane Trust, Legg Mason, 100 International Drive, 11th Floor, 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 at1-877-721-1926.
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| Independent Trustees† |
| |
| Ruby P. Hearn | | |
| |
| Year of birth | | 1940 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 2004 |
| Principal occupation(s) during the past five years | | Senior Vice President Emerita of The Robert Wood Johnson Foundation(non-profit) (since 2001); Member of the Institute of Medicine (since 1982); formerly, Trustee of the New York Academy of Medicine (2004 to 2012); Director of the Institute for Healthcare Improvement (2002 to 2012); 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 | | 19 |
| Other board memberships held by Trustee during the past five years | | None |
|
| Arnold L. Lehman |
| |
| Year of birth | | 1944 |
| Position(s) with Trust | | Trustee and Chairman |
| Term of office1and length of time served2 | | Since 1982 and since 2015 |
| Principal occupation(s) during the past five years | | Senior Advisor, Phillips (auction house) (since 2015); formerly, Fellow, Ford Foundation (2015 to 2016); Director of the Brooklyn Museum (1997 to 2015) |
| Number of funds in fund complex overseen by Trustee | | 19 |
| Other board memberships held by Trustee during the past five years | | Trustee of American Federation of Arts (since 2002) |
|
| Robin J.W. Masters |
| |
| Year of birth | | 1955 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 2002 |
| Principal occupation(s) during the past five years | | Retired; formerly, Chief Investment Officer of ACE Limited (insurance) (1986 to 2000) |
| Number of funds in fund complex overseen by Trustee | | 19 |
| Other board memberships held by Trustee during the past five years | | Director of Cheyne Capital International Limited (investment advisory firm) (since 2005); formerly, Director/Trustee of Legg Mason Institutional Funds plc, Western Asset Fixed Income Funds plc and Western Asset Debt Securities Fund plc. (2007 to 2011) |
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| 26 | | Martin Currie SMASh Series EM Fund |
| | |
| Independent Trustees†(cont’d) |
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| Jill E. McGovern |
| |
| Year of birth | | 1944 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 1989 |
| Principal occupation(s) during the 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 | | 19 |
| Other board memberships held by Trustee during the past five years | | Director of International Biomedical Research Alliance (2002 to 2010); Director of Lois Roth Endowment (2005 to 2012) |
|
| Arthur S. Mehlman |
| |
| Year of birth | | 1942 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 2002 |
| Principal occupation(s) during the past five years | | Retired. Director, The University of Maryland Foundation (since 1992); formerly, Director, The League for People with Disabilities (2003 to 2017); Director, Municipal Mortgage & Equity LLC (2004 to 2011); Partner, KPMG LLP (international accounting firm) (1972 to 2002) |
| Number of funds in fund complex overseen by Trustee | | Trustee of all Legg Mason Funds consisting of 19 portfolios; Director/Trustee of the Royce Family of Funds consisting of 22 portfolios |
| Other board memberships held by Trustee during the past five years | | Director of Municipal Mortgage & Equity, LLC. (2004 to 2011) |
|
| G. Peter O’Brien |
| |
| Year of birth | | 1945 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 1999 |
| Principal occupation(s) during the past five years | | Retired. Trustee Emeritus of Colgate University (since 2005); Board Member, Hill House, Inc. (residential home care) (since 1999); formerly, Board Member, Bridges School(pre-school) (2006 to 2017); Managing Director, Equity Capital Markets Group of Merrill Lynch & Co. (1971 to 1999) |
| Number of funds in fund complex overseen by Trustee | | Trustee of all Legg Mason funds consisting of 19 portfolios; Director/Trustee of the Royce Family of Funds consisting of 22 portfolios |
| Other board memberships held by Trustee during the past five years | | Director of TICC Capital Corp. (2003 to 2017) |
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| Martin Currie SMASh Series EM Fund | | 27 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
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| Independent Trustees†(cont’d) |
|
| S. Ford Rowan |
| |
| Year of birth | | 1943 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 2002 |
| Principal occupation(s) during the past five years | | Consultant to University of Maryland University College (since 2013); formerly, Chairman, National Center for Critical Incident Analysis (2004 to 2018); Lecturer in Organizational Sciences, George Washington University (2000 to 2014); Trustee, St. John’s College (2006 to 2012); Consultant, Rowan & Blewitt Inc. (management consulting) (1984 to 2007); Lecturer in Journalism, Northwestern University (1980 to 1993); Director, Santa Fe Institute (1999 to 2008) |
| Number of funds in fund complex overseen by Trustee | | 19 |
| Other board memberships held by Trustee during the past five years | | None |
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| Robert M. Tarola |
| |
| Year of birth | | 1950 |
| Position(s) with Trust | | Trustee |
| Term of office1and length of time served2 | | Since 2004 |
| Principal occupation(s) during the past five years | | President of Rights Advisory LLC (corporate finance and governance consulting) (since 2008); Member, Investor Advisory Group of the Public Company Accounting Oversight Board (since 2009); formerly, Chief Financial Officer, Little Company of Mary Hospital and Health Care Centers (healthcare provider network) (2018); Executive Vice President and Chief Financial Officer, Southcoast Health System, Inc. (healthcare provider network) (2015 to 2017); Senior Vice President and Chief Financial Officer of The Howard University (higher education and health care) (2009 to 2013); 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 | | 19 |
| Other board memberships held by Trustee during the past five years | | Director of American Kidney Fund (renal disease assistance) (since 2008); Director and Board Chair of XBRL International, Inc. (global data standard setting) (since 2015); Director of Vista Outdoor, Inc. (consumer recreation products) (since 2015); formerly, Director of TeleTech Holdings, Inc. (business processing outsourcing) (2008) |
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| 28 | | Martin Currie SMASh Series EM Fund |
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| Interested Trustee and Officer |
|
| Jane Trust, CFA3 |
| |
| Year of birth | | 1962 |
| Position(s) with Trust | | Trustee, President and Chief Executive Officer |
| Term of office1and length of time served2 | | Since 2015 |
| Principal occupation(s) during the past five years | | Senior Managing Director of Legg Mason & Co., LLC (“Legg Mason & Co.”) (since 2018); Managing Director of Legg Mason & Co. (2016 to 2018); Officer and/or Trustee/Director of 141 funds associated with Legg Mason Partners Fund Advisor, LLC (“LMPFA”) or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Vice President of LMPFA (2015); Director of ClearBridge, LLC (formerly, Legg Mason Capital Management, LLC) (2007 to 2014); Managing Director of Legg Mason Investment Counsel & Trust Co. (2000 to 2007) |
| Number of funds in fund complex overseen by Trustee | | 132 |
| Other board memberships held by Trustee during the past five years | | None |
| | |
| Executive Officers |
|
Richard F. Sennett
Legg Mason 100 International Drive, Baltimore, MD 21202 |
| |
| Year of birth | | 1970 |
| Position(s) with Trust | | Principal Financial Officer |
| Term of office1and length of time served2 | | Since 2011 |
| Principal occupation(s) during the past five years | | Principal Financial Officer and Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2011 and since 2013); 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); Assistant Chief Accountant within the SEC’s Division of Investment Management (2002 to 2007) |
|
Robert I. Frenkel
Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902 |
| |
| Year of birth | | 1954 |
| Position(s) with Trust | | Secretary and Chief Legal Officer |
| Term of office1and length of time served2 | | Since 2007 |
| Principal occupation(s) during the past five years | | Vice President and Deputy General Counsel of Legg Mason (since 2006); Managing Director and General Counsel — U.S. 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) |
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| Martin Currie SMASh Series EM Fund | | 29 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
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| Executive Officers (cont’d) |
|
Thomas C. Mandia
Legg Mason 100 First Stamford Place, 6th Floor, Stamford, CT 06902 |
| |
| Year of Birth | | 1962 |
| Position(s) with Trust | | Assistant Secretary |
| Term of office1and length of time served2 | | Since 2007 |
| Principal occupation(s) during the past five years | | Managing Director and Deputy General Counsel of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); Secretary of LMPFA (since 2006); Assistant Secretary of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2006) and Legg Mason & Co. predecessors (prior to 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers) |
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Ted P. Becker
Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 |
| |
| Year of birth | | 1951 |
| Position(s) with Trust | | Chief Compliance Officer |
| Term of office1and length of time served2 | | Since 2007 |
| Principal occupation(s) during the 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) |
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Christopher Berarducci
Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 |
| |
| Year of birth | | 1974 |
| Position(s) with Trust | | Treasurer |
| Term of office1and length of time served2 | | Since 2010 |
| Principal occupation(s) during the past five years | | Director of Legg Mason & Co. (since 2015); Treasurer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2010); formerly, Vice President of Legg Mason & Co. (2011 to 2015); Assistant Controller of certain mutual funds associated with Legg Mason & Co. or its affiliates (prior to 2010) |
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| 30 | | Martin Currie SMASh Series EM Fund |
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| Executive Officers (cont’d) |
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Susan Kerr
Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 |
| |
| Year of birth | | 1949 |
| Position(s) with Trust | | Chief Anti-Money Laundering Compliance Officer |
| Term of office1and length of time served2 | | Since 2013 |
| Principal occupation(s) during the past five years | | Assistant Vice President of Legg Mason & Co. and Legg Mason Investor Services, LLC (“LMIS”) (since 2010); Chief Anti-Money Laundering Compliance Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer of LMIS (since 2012); Senior Compliance Officer of LMIS (since 2011); formerly, AML Consultant, DTCC (2010); AML Consultant, Rabobank Netherlands, (2009); First Vice President, Director of Marketing & Advertising Compliance and Manager of Communications Review Group at Citigroup Inc. (1996 to 2008) |
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Jenna Bailey
Legg Mason 100 First Stamford Place, 5th Floor, Stamford, CT 06902 |
| |
| Year of birth | | 1978 |
| Position(s) with Trust | | Identity Theft Prevention Officer |
| Term of office1and length of time served2 | | Since 2015 |
| Principal occupation(s) during the past five years | | Identity Theft Prevention Officer of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2015); Compliance Officer of Legg Mason & Co. (since 2013); Assistant Vice President of Legg Mason & Co. (since 2011); formerly, Associate Compliance Officer of Legg Mason & Co. (2011 to 2013) |
|
Jeanne M. Kelly
Legg Mason 620 Eighth Avenue, 49th Floor, New York, NY 10018 |
| |
| Year of birth | | 1951 |
| Position(s) with Trust | | Senior Vice President |
| Term of office1and length of time served2 | | Since 2007 |
| Principal occupation(s) during the past five years | | Senior Vice President of certain mutual funds associated with Legg Mason & Co. or its affiliates (since 2007); Senior Vice President of LMPFA (since 2006); President and Chief Executive Officer of LMAS and LMFAM (since 2015); Managing Director of Legg Mason & Co. (since 2005) and Legg Mason & Co. predecessors (prior to 2005); formerly, Senior Vice President of LMFAM (2013 to 2015) |
| † | Trustees who are not “interested persons” of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940, as amended (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). |
| 1 | Each Trustee and officer serves until his or her respective successor has been duly elected and qualified or until his or her earlier death, resignation, retirement or removal. |
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| Martin Currie SMASh Series EM Fund | | 31 |
Additional information(unaudited) (cont’d)
Information about Trustees and Officers
| 2 | Indicates the earliest year in which the Trustee became a board member for a fund in the Legg Mason fund complex or the officer took such office. |
| 3 | Ms. Trust is an “interested person” of the Fund, as defined in the 1940 Act, because of her position with LMPFA and/or certain of its affiliates. |
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| 32 | | Martin Currie SMASh Series EM Fund |
Important tax information(unaudited)
The following information is provided with respect to the distributions paid during the taxable year ended July 31, 2019:
| | | | |
| Record date: | | | 12/18/2018 | |
| Payable date: | | | 12/19/2018 | |
| Ordinary income | | | | |
Qualified dividend income for individuals | | | 94.22 | % |
| Foreign source income | | | 100.00 | %* |
| Foreign taxes paid per share | | | $0.019583 | |
| * | Expressed as a percentage of the cash distributiongrossed-up for foreign taxes. |
The foreign taxes paid represent taxes incurred by the Fund on income received by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax adviser regarding the appropriate treatment of foreign taxes paid.
Please retain this information for your records.
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| Martin Currie SMASh Series EM Fund | | 33 |
Martin Currie
SMASh Series EM Fund
Trustees
Ruby P. Hearn
Arnold L. Lehman
Chairman
Robin J.W. Masters
Jill E. McGovern
Arthur S. Mehlman
G. Peter O’Brien
S. Ford Rowan
Robert M. Tarola
Jane Trust
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
Martin Currie Inc.
Distributor
Legg Mason Investor Services, LLC
Custodian
The Bank of New York Mellon
Transfer agent
BNYMellon Investment Servicing (US) Inc.
4400 Computer Drive
Westborough, MA 01581
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
Martin Currie SMASh Series EM Fund
The Fund is a separate investment series of Legg Mason Global Asset Management Trust, a Maryland statutory trust.
Martin Currie SMASh Series EM Fund
Legg Mason Funds
620 Eighth Avenue,
49th Floor
New York, NY 10018
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 as an exhibit to its reports on FormN-PORT. Previously, the Fund filed a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on FormN-Q. The Fund’s FormsN-PORT andN-Q are available on the SEC’s website at www.sec.gov. To obtain information on FormsN-PORT andN-Q, shareholders can call the Fund at1-877-721-1926.
Information on how the Fund voted proxies relating to portfolio securities during the prior12-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 at1-877-721-1926, (2) at www.leggmason.com/smashfunds and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of Martin Currie SMASh Series EM Fund and is not intended for distribution to prospective investors.
This report must be preceded or accompanied by a free 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
© 2019 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-sponsoredclosed-end funds. 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:
| • | | Personal information included on applications or other forms; |
| • | | Account balances, transactions, and mutual fund holdings and positions; |
| • | | Bank account information, legal documents, and identity verification documentation; |
| • | | Online account access user IDs, passwords, security challenge question responses; and |
| • | | 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:
| • | | Employees, agents, and affiliates on a “need to know” basis to enable the Funds to conduct ordinary business or to comply with obligations to government regulators; |
| • | | 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 statistical analysis, market research and marketing services solely for the Funds; |
| • | | Permit access to transfer, whether in the United States or countries outside of the United States to such Funds’ employees, agents and affiliates and service providers as required to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
| • | | The Funds’ representatives such as legal counsel, accountants and auditors to enable the Funds to conduct ordinary business, or to comply with obligations to government regulators; |
| • | | 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, including those outside the United States, 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, if you have questions about the Funds’ privacy practices, or our use of your nonpublic personal information, 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 Funds at1-877-721-1926.
Revised April 2018
|
| NOT PART OF THE ANNUAL REPORT |
www.leggmason.com
© 2019 Legg Mason Investor Services, LLC Member FINRA, SIPC
MCXX466309 9/19 SR19-3699
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 FormN-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 FormN-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
a)Audit Fees. The aggregate fees billed in the last two fiscal years ending July 31, 2018 and July 31, 2019 (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 $0 in July 31, 2018 and $25,000 in July 31, 2019.
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 July 31, 2018 and $3,000 in July 31, 2019.
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 anysub-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 requiredpre-approval by the Audit Committee for the Reporting Period.
(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 $0 in July 31, 2018 and $0 in July 31, 2019. 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 to the service affiliates during the Reporting Periods that requiredpre-approval by the Audit Auditors Committee.
d)All Other Fees. The aggregate fees for other fees billed in the Reporting Periods for products and services provided by the Auditor were $0 in July 31, 2018 and $0 in July 31, 2019, 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 othernon-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 requiringpre-approval by the Audit Committee in the Reporting Period.
(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c)
(7) of Rule2-01 of RegulationS-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 permissiblenon-audit services to be provided to the Fund and (b) all permissiblenon-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 approvenon-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, permissiblenon-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. Permissiblenon-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 orcontribution-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 permissiblenon-audit services is not required so long as: (i) the aggregate amount of all such permissiblenon-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 permissiblenon-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 permissiblenon-audit services were not recognized by the Fund at the time of the engagement to benon-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 July 31, 2018 and July 31, 2019; Tax Fees were 100% and 100% for July 31, 2018 and July 31, 2019; and Other Fees were 100% and 100% for July 31, 2018 and July 31, 2019.
(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 $472,645 in July 31, 2018 and $463,523 in July 31, 2019.
(h) Yes. Legg Mason Global Asset Management Trust’s Audit Committee has considered whether the provision ofnon-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiringpre-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 bepre-approved, werepre-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 FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OFCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BYCLOSED-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. |
| ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FORCLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
(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/ Jane Trust |
| | Jane Trust |
| | Chief Executive Officer |
| |
| Date: | | September 23, 2019 |
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/ Jane Trust |
| | Jane Trust |
| | Chief Executive Officer |
| |
| Date: | | September 23, 2019 |
| |
| By: | | /s/ Richard F. Sennett |
| | Richard F. Sennett |
| | Principal Financial Officer |
| |
| Date: | | September 23, 2019 |
