UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22338
Legg Mason Global Asset Management Trust
(Exact name of registrant as specified in charter)
620 Eighth Avenue, 47th Floor, New York, NY 10018
(Address of principal executive offices) (Zip code)
Marc A. De Oliveira
Franklin Templeton
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant’s telephone number, including area code: 877-6LM-FUND/656-3863
Date of fiscal year end: July 31
Date of reporting period: July 31, 2022
| ITEM 1. | REPORT TO STOCKHOLDERS |
The Annual Report to Stockholders is filed herewith.
| | |
| Annual Report | | July 31, 2022 |
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, 2022. 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
Effective June 1, 2022, Aimee Truesdale, CFA, joined the Fund’s portfolio management team.
As always, thank you for your confidence in our stewardship of your assets.
Sincerely,
Jane Trust, CFA
President and Chief Executive Officer
August 31, 2022
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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 (NR) (USD)i, 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.
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 and environmental, social, and governance risks and opportunities when deciding whether to buy or sell investments. The Fund may invest in companies of any size and market capitalization.
At Martin Currie, the Fund’s subadvisors, we assess environmental, social and governance (“ESG”) risks and opportunities that could impact the ability of an issuer to generate future sustainable returns. These may include such factors as: shareholder rights, accounting standards, remuneration, board structure, supply chain, data protection, pollution/hazardous waste policies, water usage, and climate change policies. We assess these factors both quantitatively and qualitatively, through our direct research and engagement process. We consider sustainability risks tied to ESG factors relevant to the returns of the Fund. Because
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 1 | |
Fund overview (cont’d)
investing on the basis of ESG criteria involves qualitative and subjective analysis, there can be no assurance that the methodology utilized by, or determinations made by, us will align with the beliefs or values of a particular investor, and other managers may make a different assessment of a company’s ESG criteria. In addition, the Fund seeks to avoid investing in companies that we have determined, based on our exclusionary criteria, to be significantly involved in certain business activities or industries, including the production of tobacco, production of weapons, coal-based power generation, the mining of thermal coal, the production, sale or distribution of dedicated and key components of antipersonnel mines and cluster munitions or we have assessed as ‘fail’ under the principles set forth in the UN Global Compact.
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 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.
The fund is classified as “non-diversified,” which means it may invest a larger percentage of its assets in a smaller number of issuers than a diversified fund.
Q. What were the overall market conditions during the Fund’s reporting period?
A. The twelve-month reporting period ended July 31, 2022 was difficult not only for emerging markets but for global markets. The latter half of 2021 was dominated by news flow around regulatory changes in China and the rise of new COVID-19 variants. In China, proposals around regulation impacted several sectors, including the education sector, the internet space sector and healthcare sector. The subsequent market pessimism was relatively impactful to emerging markets broadly, given China’s dominance in the asset class. This permeated through to the real estate sector following the Evergrande scandal and was exacerbated by general macro weakness.
Going into 2022, the conflict between Russia and Ukraine played a central role, initially sparking volatility and market uncertainty as tensions rose, followed by sanctions and illiquidity upon Russia’s invasion at the end of February. As markets came to terms with the trading suspensions, sanctions and broad market volatility, further concerns arose over supply chain disruption risk, particularly in the energy and commodities sectors due to Russia being a key producer and exporter. Alongside these concerns, both further domestic and international regulatory news negatively impacted Chinese equity markets. This was due to continued proposals for additional domestic regulation as well as further pressure being placed by the U.S. regulator on Chinese companies to disclose audited financial statements or risk being forced to de-list. This downward pressure in new economy stocks and Chinese U.S.-listed stocks continued into March before rallying when the Chinese authorities spoke out in support of these names.
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2 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
As the year progressed, concerns persisted over slower economic growth, rising inflation and tightening monetary policy. In June, the U.S. Federal Reserve Board (the “Fed”) increased interest rates by 0.75%, the largest hike since 1994, to combat increasing inflationary pressure. Central banks in other developed markets announced similar tightening measures. The strength of the U.S. dollar was reflected in a significant sell-off in several emerging market currencies. The conflict in Ukraine continued to exacerbate inflation through rising energy and commodity prices (notably food), which had a negative impact on both business and consumer confidence. While some emerging markets were adopting similar fiscal tightening policies to developed markets, China instead announced fiscal expansion in May and June. This, alongside some easing of COVID-19 related restrictions, resulted in a small recovery in market sentiment. After several months of drawdowns in emerging markets as an asset class, the end of the period saw some small improvement, with the MSCI Emerging Markets Index (NR) (USD) roughly flat in July.
Q. How did we respond to these changing market conditions?
A. Emerging market equities have experienced one of their most difficult periods during the first half of 2022. The build-up of geopolitical tension, culminating with the invasion of Ukraine by Russian troops in late February, was addressed as early as Spring 2021 but we took further measures to manage our exposure to the region in January 2022. We took a cautious approach to the Russia-Ukraine situation by limiting the Fund’s overall exposure to the region. We were underweight Russia at the start of the invasion compared to the benchmark. We succeeded in exiting all but one position at this time, though we did reduce the Fund’s position in the remaining stock, Russian digital bank TCS Group, during March. We successfully exited TCS Group during April (we were unable to exit earlier due to trading suspensions). Our positioning in Russian companies was intentionally private sector to avoid exposure to state-directed sanctions.
While we have not changed our strategy as a result of the conflict, we have adjusted some positions due to the impact on individual companies’ business practices. We reduced the Fund’s exposure to the region more broadly, trimming Hungarian bank OTP which has significant exposure within Eastern Europe and Russia and initiated a position in the Middle East, by adding Al Rajhi Bank. We continue to have high conviction in the long-term transition to cleaner forms of energy, buying LG Energy Solution for the portfolio, an electric vehicle battery manufacturer which was spun out of LG Chem (also held) in late 2021. We also purchased Shenzhen Inovance. The company has emerged as the leading industrial automation player in China. It has grown consistently over several years at a multiple of the wider industry. Its growth has primarily been driven by automation growth in China, market share gains (import substitution) and the development of new business areas — we expect these three drivers to continue going forward.
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 3 | |
Fund overview (cont’d)
Our strategy has remained geographically balanced, with a focus towards highly profitable companies with sustainable balance sheets. This quality growth bias should help us in periods of economic stress, although we remain vigilant at a company level to emerging stresses.
In the long term (our investment horizon), 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 companies with a high return on equity, operating in structurally growing industries. We continue to have confidence in the growth drivers that we are accessing in key thematic areas. These areas include sustainable planet; cloud-based data; financial inclusion; digital disruption. We think the case for an acceleration of these trends is strong and, in many cases, already evident.
Performance review
For the twelve months ended July 31, 2022, Martin Currie SMASh Series EM Fund returned -26.21%. The Fund’s unmanaged benchmark, the MSCI Emerging Markets Index (NR) (USD), returned -20.09% for the same period.
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Performance Snapshot as of July 31, 2022
(unaudited) | |
| | | 6 months | | | 12 months | |
| Martin Currie SMASh Series EM Fund | | | -21.74 | % | | | -26.21 | % |
| MSCI Emerging Markets Index (NR) (USD) | | | -16.24 | % | | | -20.09 | % |
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value, investment returns and yields will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost. To obtain performance data current to the most recent month-end, please call the Fund at 1-877-721-1926.
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 and extraordinary expenses and acquired fund fees and expenses) were reimbursed by the manager.
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4 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
|
| Total Annual Operating Expenses (unaudited) |
As of the Fund’s current prospectus dated November 29, 2021, the gross total annual fund operating expense ratio was 0.09%.
Actual expenses may be higher. For example, expenses may be higher than those shown if average net assets decrease. Net assets are more likely to decrease and Fund expense ratios are more likely to increase when markets are volatile.
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, 2023, 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 performers in relative terms were Indian companies, bolstered by the growth we saw in that market during the reporting period. Luxury jewelry and watch retailer Titan performed well over the reporting period with consistently strong results and recovery in demand across the business following the pandemic. Auto company Maruti Suzuki saw strength during the reporting period with new product launches and the expansion of its manufacturing operations. Classified as an Indian energy company, Reliance Industries is in fact dominated by three businesses — a leading telecom/digital franchise, a leading omnichannel retail business and an established refining and chemicals business. The company faced difficulty in 2021, after having reached all-time highs in late 2020. During the reporting period, the share price has recovered alongside positive quarterly earnings releases and a supportive domestic backdrop.
Q. What were the leading detractors from performance?
A. Looking at stocks that were held in the Fund’s portfolio during the reporting period, the biggest drag on portfolio returns was Shanghai Fosun Pharmaceuticals. The company struggled initially in the general slowdown we began to see in China, alongside regulatory changes in the healthcare sector. The domestic macro backdrop continued to be unsupportive of the name going into 2022, despite the sector’s defensive properties and the announcement that Fosun will be entering a joint venture to manufacture a COVID-19 vaccine. OTP Bank has exposure in the Russia-Ukraine region, which impacted its business due to its local banking presence. Historically, roughly 15% of the Hungarian bank’s profit before tax comes from Russia and Ukraine, which together also represent 8% of its gross loan book. It detracted from performance given the negative sentiment relating to its exposure to the region. Global Wafers suffered from some sentiment weakness concerning
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 5 | |
Fund overview (cont’d)
raw wafer demand following the build-up of general semiconductor inventory, particularly toward the end of the reporting period. However, the company itself, as of now, has not seen any significant change in demand, and continues to see a strong pull from automotive, industrial and server demand.
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6 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
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,
Andrew Mathewson, CFA
Portfolio Manager
Martin Currie Inc.
Aimee Truesdale, 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.
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 7 | |
Fund overview (cont’d)
Paul Sloane
Portfolio Manager
Martin Currie Inc.
Colin Dishington, CFA
Portfolio Manager
Martin Currie Inc.
August 12, 2022
RISKS: Equity securities are subject to market and price fluctuations. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. As a non-diversified fund, the Fund is permitted to invest a higher percentage of its assets in any one issuer than a diversified fund, which may magnify the Fund’s losses from events affecting a particular issuer. The Fund may be significantly overweight to 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. Emerging market countries tend to have economic, political and legal systems that are less developed and are less stable than those of more developed countries. 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. The Fund may invest in real estate investment trusts (“REITs”), which are closely linked to the performance of the real estate markets. The Fund is subject to the illiquidity, credit and interest rate risks of REITs. 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.
Portfolio holdings and breakdowns are as of July 31, 2022 and are subject to change and may not be representative of the portfolio managers’ current or future investments. Please refer to pages 15 through 17 for a list and percentage breakdown of the Fund’s holdings.
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
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8 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
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, 2022 were: information technology (34.1%), financials (15.8%), materials (15.4%), industrials (8.9%) and consumer discretionary (8.7%). 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 MSCI Emerging Markets Index (NR) (USD) is a free float adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets. Net Returns (NR) include income net of tax withholding when dividends are paid. |
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 9 | |
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, 2022 and July 31, 2021. The Fund is actively managed. As a result, the composition of the Fund’s investments is subject to change at any time. |
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10 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
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, 2022 and held for the six months ended July 31, 2022.
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 |
| -21.74% | | $1,000.00 | | $782.60 | | 0.00% | | $0.00 | | | | 5.00% | | $1,000.00 | | $1,024.79 | | 0.00% | | $0.00 |
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 11 | |
Fund expenses (unaudited) (cont’d)
| 1 | For the six months ended July 31, 2022. |
| 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 subadvisers. 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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12 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Fund performance (unaudited)
| | | | |
| Average annual total returns1 | |
| Twelve Months Ended 7/31/22 | | | -26.21 | % |
| Inception date of 1/10/18 through 7/31/22 | | | 0.13 | |
| | | | | |
| Cumulative total returns1 | |
| Inception date of 1/10/18 through 7/31/22 | | | 0.59 | % |
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, 2023 without the Board of Trustees’ consent.
| 1 | Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value. |
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 13 | |
Fund performance (unaudited) (cont’d)
Value of $10,000 invested in
Martin Currie SMASh Series EM Fund vs. MSCI Emerging Markets Index† — January 10, 2018 - July 31, 2022
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, 2023 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, 2022. The hypothetical illustration also assumes a $10,000 investment in the MSCI Emerging Markets Index. The MSCI Emerging Markets Index (the “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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14 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Schedule of investments
July 31, 2022
Martin Currie SMASh Series EM Fund
(Percentages shown based on Fund net assets)
| | | | | | | | |
| Security | | Shares | | | Value | |
| Common Stocks — 99.0% | | | | | | | | |
| Communication Services — 2.5% | | | | | | | | |
Interactive Media & Services — 2.5% | | | | | | | | |
NAVER Corp. | | | 136,403 | | | | $27,286,237 | (a) |
| Consumer Discretionary — 8.7% | | | | | | | | |
Automobiles — 3.3% | | | | | | | | |
Maruti Suzuki India Ltd. | | | 328,036 | | | | 36,503,610 | (a) |
Textiles, Apparel & Luxury Goods — 5.4% | | | | | | | | |
Titan Co. Ltd. | | | 1,984,513 | | | | 59,102,189 | (a) |
Total Consumer Discretionary | | | | | | | 95,605,799 | |
| Consumer Staples — 2.3% | | | | | | | | |
Food & Staples Retailing — 1.1% | | | | | | | | |
Robinsons Retail Holdings Inc. | | | 12,662,740 | | | | 12,736,240 | |
Personal Products — 1.2% | | | | | | | | |
LG H&H Co. Ltd. | | | 21,243 | | | | 12,767,673 | (a) |
Total Consumer Staples | | | | | | | 25,503,913 | |
| Energy — 6.7% | | | | | | | | |
Oil, Gas & Consumable Fuels — 6.7% | | | | | | | | |
Reliance Industries Ltd. | | | 2,298,817 | | | | 73,112,349 | *(a) |
| Financials — 15.8% | | | | | | | | |
Banks — 12.7% | | | | | | | | |
Al Rajhi Bank | | | 2,288,985 | | | | 55,153,383 | (a) |
Kotak Mahindra Bank Ltd. | | | 1,947,423 | | | | 44,724,333 | (a) |
OTP Bank Nyrt | | | 825,063 | | | | 17,032,921 | (a) |
Ping An Bank Co. Ltd., Class A Shares | | | 12,236,861 | | | | 23,072,297 | (a) |
Total Banks | | | | | | | 139,982,934 | |
Capital Markets — 3.1% | | | | | | | | |
B3 SA - Brasil Bolsa Balcao | | | 15,643,700 | | | | 33,560,440 | |
Total Financials | | | | | | | 173,543,374 | |
| Health Care — 4.6% | | | | | | | | |
Health Care Providers & Services — 1.9% | | | | | | | | |
Odontoprev SA | | | 10,702,720 | | | | 20,519,700 | |
Pharmaceuticals — 2.7% | | | | | | | | |
Shanghai Fosun Pharmaceutical Group Co. Ltd., Class H Shares | | | 8,324,000 | | | | 30,165,728 | (a) |
Total Health Care | | | | | | | 50,685,428 | |
| Industrials — 8.9% | | | | | | | | |
Electrical Equipment — 5.5% | | | | | | | | |
Contemporary Amperex Technology Co. Ltd., Class A Shares | | | 712,516 | | | | 54,138,527 | *(a) |
LG Energy Solution Ltd. | | | 21,041 | | | | 6,861,115 | *(a) |
Total Electrical Equipment | | | | | | | 60,999,642 | |
See Notes to Financial Statements.
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| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 15 | |
Schedule of investments (cont’d)
July 31, 2022
Martin Currie SMASh Series EM Fund
(Percentages shown based on Fund net assets)
| | | | | | | | |
| Security | | Shares | | | Value | |
Machinery — 3.4% | | | | | | | | |
Shenzhen Inovance Technology Co. Ltd., Class A Shares | | | 2,101,846 | | | | $20,644,368 | (a) |
Wuxi Lead Intelligent Equipment Co. Ltd., Class A Shares | | | 1,839,150 | | | | 16,294,500 | (a) |
Total Machinery | | | | | | | 36,938,868 | |
Total Industrials | | | | | | | 97,938,510 | |
| Information Technology — 34.1% | | | | | | | | |
Electronic Equipment, Instruments & Components — 6.0% | | | | | | | | |
Delta Electronics Inc. | | | 4,135,000 | | | | 35,962,611 | (a) |
Samsung SDI Co. Ltd. | | | 68,214 | | | | 29,983,433 | (a) |
Total Electronic Equipment, Instruments & Components | | | | | | | 65,946,044 | |
Semiconductors & Semiconductor Equipment — 9.3% | | | | | | | | |
Globalwafers Co. Ltd. | | | 2,827,000 | | | | 42,824,352 | (a) |
SK Hynix Inc. | | | 789,974 | | | | 59,719,533 | (a) |
Total Semiconductors & Semiconductor Equipment | | | | | | | 102,543,885 | |
Technology Hardware, Storage & Peripherals — 18.8% | | | | | | | | |
Samsung Electronics Co. Ltd. | | | 2,875,803 | | | | 136,126,597 | (a) |
Samsung Electronics Co. Ltd., Registered Shares, GDR | | | 60,265 | | | | 70,673,458 | (a) |
Total Technology Hardware, Storage & Peripherals | | | | | | | 206,800,055 | |
Total Information Technology | | | | | | | 375,289,984 | |
| Materials — 15.4% | | | | | | | | |
Chemicals — 9.6% | | | | | | | | |
Asian Paints Ltd. | | | 901,027 | | | | 38,063,738 | (a) |
LG Chem Ltd. | | | 99,607 | | | | 46,392,435 | (a) |
Orbia Advance Corp. SAB de CV | | | 9,357,100 | | | | 20,719,604 | |
Total Chemicals | | | | | | | 105,175,777 | |
Construction Materials — 2.3% | | | | | | | | |
UltraTech Cement Ltd. | | | 307,106 | | | | 25,455,473 | (a) |
Metals & Mining — 3.5% | | | | | | | | |
Antofagasta PLC | | | 2,710,340 | | | | 38,564,584 | (a) |
Total Materials | | | | | | | 169,195,834 | |
Total Investments — 99.0% (Cost — $1,209,303,205) | | | | | | | 1,088,161,428 | |
Other Assets in Excess of Liabilities — 1.0% | | | | | | | 11,381,667 | |
Total Net Assets — 100.0% | | | | | | | $1,099,543,095 | |
| * | Non-income producing security. |
| (a) | Security is valued in good faith in accordance with procedures approved by the Board of Trustees (Note 1). |
| | |
Abbreviation(s) used in this schedule: |
| |
| GDR | | — Global Depositary Receipts |
See Notes to Financial Statements.
| | | | |
16 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Martin Currie SMASh Series EM Fund
| | | | |
| Summary of Investments by Country** (unaudited) | | | |
| South Korea | | | 35.8 | % |
| India | | | 25.4 | |
| China | | | 13.3 | |
| Taiwan | | | 7.2 | |
| Saudi Arabia | | | 5.1 | |
| Brazil | | | 5.0 | |
| Chile | | | 3.5 | |
| Mexico | | | 1.9 | |
| Hungary | | | 1.6 | |
| Philippines | | | 1.2 | |
| | | | 100.0 | % |
| ** | As a percentage of total investments. Please note that the Fund holdings are as of July 31, 2022 and are subject to change. |
See Notes to Financial Statements.
| | | | | | |
| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 17 | |
Statement of assets and liabilities
July 31, 2022
| | | | |
| |
| Assets: | | | | |
Investments, at value (Cost — $1,209,303,205) | | $ | 1,088,161,428 | |
Foreign currency, at value (Cost — $16,924,381) | | | 17,003,333 | |
Receivable for securities sold | | | 7,218,356 | |
Receivable for Fund shares sold | | | 5,125,491 | |
Dividends receivable | | | 1,942,308 | |
Receivable from investment manager | | | 271,725 | |
Prepaid expenses | | | 33,433 | |
Total Assets | | | 1,119,756,074 | |
| |
| Liabilities: | | | | |
Due to custodian | | | 14,220,604 | |
Accrued foreign capital gains tax | | | 3,496,959 | |
Payable for securities purchased | | | 1,113,939 | |
Payable for Fund shares repurchased | | | 1,111,412 | |
Trustees’ fees payable | | | 5,389 | |
Accrued expenses | | | 264,676 | |
Total Liabilities | | | 20,212,979 | |
| Total Net Assets | | $ | 1,099,543,095 | |
| |
| Net Assets: | | | | |
Par value (Note 5) | | $ | 1,162 | |
Paid-in capital in excess of par value | | | 1,342,477,619 | |
Total distributable earnings (loss) | | | (242,935,686) | |
| Total Net Assets | | $ | 1,099,543,095 | |
| |
| Shares Outstanding | | | 116,154,391 | |
| |
| Net Asset Value | | | $9.47 | |
See Notes to Financial Statements.
| | | | |
18 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Statement of operations
For the Year Ended July 31, 2022
| | | | |
| |
| Investment Income: | | | | |
Dividends | | $ | 19,059,270 | |
Less: Foreign taxes withheld | | | (2,273,375) | |
Total Investment Income | | | 16,785,895 | |
| |
| Expenses: | | | | |
Custody fees | | | 431,108 | |
Registration fees | | | 244,397 | |
Fund accounting fees | | | 86,049 | |
Trustees’ fees | | | 81,106 | |
Legal fees | | | 72,801 | |
Audit and tax fees | | | 30,192 | |
Shareholder reports | | | 11,024 | |
Transfer agent fees | | | 8,091 | |
Insurance | | | 5,098 | |
Commitment fees (Note 6) | | | 4,208 | |
Interest expense | | | 3,218 | |
Miscellaneous expenses | | | 24,015 | |
Total Expenses | | | 1,001,307 | |
Less: Fee waivers and/or expense reimbursements (Note 2) | | | (1,001,307) | |
Net Expenses | | | — | |
| Net Investment Income | | | 16,785,895 | |
| |
| Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions (Notes 1 and 3): | | | | |
Net Realized Loss From: | | | | |
Investment transactions | | | (116,769,955) | † |
Foreign currency transactions | | | (1,592,566) | |
Net Realized Loss | | | (118,362,521) | |
Change in Net Unrealized Appreciation (Depreciation) From: | | | | |
Investments | | | (276,624,771) | ‡ |
Foreign currencies | | | 92,989 | |
Change in Net Unrealized Appreciation (Depreciation) | | | (276,531,782) | |
| Net Loss on Investments and Foreign Currency Transactions | | | (394,894,303) | |
| Decrease in Net Assets From Operations | | $ | (378,108,408) | |
| † | Net of foreign capital gains tax of $4,078,686. |
| ‡ | Net of change in accrued foreign capital gains tax of $(774,450). |
See Notes to Financial Statements.
| | | | | | |
| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 19 | |
Statements of changes in net assets
| | | | | | | | |
| For the Years Ended July 31, | | 2022 | | | 2021 | |
| | |
| Operations: | | | | | | | | |
Net investment income | | $ | 16,785,895 | | | $ | 8,428,904 | |
Net realized gain (loss) | | | (118,362,521) | | | | 17,994,051 | |
Change in net unrealized appreciation (depreciation) | | | (276,531,782) | | | | 131,758,075 | |
Increase (Decrease) in Net Assets From Operations | | | (378,108,408) | | | | 158,181,030 | |
| | |
| Distributions to Shareholders From (Note 1): | | | | | | | | |
Total distributable earnings | | | (36,358,875) | | | | (2,200,035) | |
Decrease in Net Assets From Distributions to Shareholders | | | (36,358,875) | | | | (2,200,035) | |
| | |
| Fund Share Transactions (Note 5): | | | | | | | | |
Net proceeds from sale of shares | | | 973,730,187 | | | | 847,964,906 | |
Cost of shares repurchased | | | (467,079,396) | | | | (181,106,791) | |
Increase in Net Assets From Fund Share Transactions | | | 506,650,791 | | | | 666,858,115 | |
Increase in Net Assets | | | 92,183,508 | | | | 822,839,110 | |
| | |
| Net Assets: | | | | | | | | |
Beginning of year | | | 1,007,359,587 | | | | 184,520,477 | |
End of year | | $ | 1,099,543,095 | | | $ | 1,007,359,587 | |
See Notes to Financial Statements.
| | | | |
20 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Financial highlights
| | | | | | | | | | | | | | | | | | | | |
| For a share of beneficial interest outstanding throughout each year ended July 31, unless otherwise noted: | |
| | | 20221 | | | 20211 | | | 20201 | | | 20191 | | | 20181,2 | |
| | | | | |
| Net asset value, beginning of year | | | $13.23 | | | | $9.03 | | | | $8.14 | | | | $9.25 | | | | $10.00 | |
| | | | | |
| Income (loss) from operations: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | 0.16 | | | | 0.18 | | | | 0.16 | | | | 0.27 | | | | 0.11 | |
Net realized and unrealized gain (loss) | | | (3.54) | | | | 4.08 | | | | 0.81 | | | | (1.26) | | | | (0.86) | |
Total income (loss) from operations | | | (3.38) | | | | 4.26 | | | | 0.97 | | | | (0.99) | | | | (0.75) | |
| | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | |
Net investment income | | | (0.11) | | | | (0.06) | | | | (0.08) | | | | (0.12) | | | | — | |
Net realized gains | | | (0.27) | | | | — | | | | — | | | | — | | | | — | |
Total distributions | | | (0.38) | | | | (0.06) | | | | (0.08) | | | | (0.12) | | | | — | |
| | | | | |
| Net asset value, end of year | | | $9.47 | | | | $13.23 | | | | $9.03 | | | | $8.14 | | | | $9.25 | |
Total return3 | | | (26.21) | % | | | 47.25 | % | | | 11.92 | % | | | (10.58) | % | | | (7.50) | % |
| | | | | |
| Net assets, end of year (000s) | | | $1,099,543 | | | | $1,007,360 | | | | $184,520 | | | | $22,551 | | | | $2,780 | |
| | | | | |
| Ratios to average net assets: | | | | | | | | | | | | | | | | | | | | |
Gross expenses4 | | | 0.09 | % | | | 0.09 | % | | | 0.35 | % | | | 3.68 | % | | | 10.42 | %5 |
Net expenses6,7 | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.01 | | | | 0.09 | 5 |
Net investment income | | | 1.43 | | | | 1.48 | | | | 2.03 | | | | 3.33 | | | | 2.13 | 5 |
| | | | | |
| Portfolio turnover rate | | | 27 | % | | | 33 | % | | | 27 | % | | | 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, 2023 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 2022 Annual Report | | | | | 21 | |
Notes to financial statements
1. Organization and significant accounting policies
Martin Currie SMASh Series EM Fund (the “Fund”) is a separate non-diversified investment series of Legg Mason Global Asset Management Trust (the “Trust”). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company.
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 subadvisers 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 typically 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 in open-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
| | | | |
22 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund’s Board of Trustees. This may include using an independent third party pricing service to adjust the value of such securities to the latest indications of fair value at 4:00 p.m. (Eastern Time).
The Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Global 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 2022 Annual Report | | | | | 23 | |
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 — unadjusted 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 Staples | | $ | 12,736,240 | | | $ | 12,767,673 | | | | — | | | $ | 25,503,913 | |
Financials | | | 33,560,440 | | | | 139,982,934 | | | | — | | | | 173,543,374 | |
Health Care | | | 20,519,700 | | | | 30,165,728 | | | | — | | | | 50,685,428 | |
Materials | | | 20,719,604 | | | | 148,476,230 | | | | — | | | | 169,195,834 | |
Other Common Stocks | | | — | | | | 669,232,879 | | | | — | | | | 669,232,879 | |
| Total Investments | | $ | 87,535,984 | | | $ | 1,000,625,444 | | | | — | | | $ | 1,088,161,428 | |
| * | As a result of the fair value pricing procedures for international equities utilized by the Fund, which account for events occurring after the close of the principal market of the security but prior to the calculation of the Fund’s net asset value, certain securities were classified as Level 2 within the fair value hierarchy. |
| † | 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.
| | | | |
24 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
(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 may 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 from payment-in-kind securities), adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.
(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 the ex-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.
| | | | | | |
| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 25 | |
Notes to financial statements (cont’d)
(g) 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, 2022, 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. Realized gains upon disposition of securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. As of July 31, 2022, there were $3,496,959 of capital gains tax liabilities accrued on unrealized gains.
(h) 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 indirect, wholly-owned subsidiaries of Franklin Resources, Inc. (“Franklin Resources”).
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 the day-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, 2023 without the Board of Trustees’ consent.
| | | | |
26 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
During the year ended July 31, 2022, fees waived and/or expenses reimbursed amounted to $1,001,307.
Franklin Distributors, LLC (“Franklin Distributors”) serves as the Fund’s sole and exclusive distributor. Franklin Distributors is an indirect, wholly-owned broker-dealer subsidiary of Franklin Resources.
All officers and one Trustee of the Trust are employees of Franklin Resources or its affiliates and do not receive compensation from the Trust.
3. Investments
During the year ended July 31, 2022, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments) were as follows:
| | | | |
| Purchases | | $ | 795,338,552 | |
| Sales | | | 311,628,305 | |
At July 31, 2022, 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 | | $ | 1,263,207,559 | | | $ | 10,967,382 | | | $ | (186,013,513) | | | $ | (175,046,131) | |
4. Derivative instruments and hedging activities
During the year ended July 31, 2022, the Fund did not invest in derivative instruments.
5. Shares of beneficial interest
At July 31, 2022, 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, 2022 | | | Year Ended
July 31, 2021 | |
| Shares sold | | | 83,538,416 | | | | 70,765,451 | |
| Shares repurchased | | | (43,518,548) | | | | (15,062,508) | |
| Net increase | | | 40,019,868 | | | | 55,702,943 | |
6. Redemption facility
On February 4, 2022, the Fund, together with other U.S. registered and foreign investment funds (collectively, the “Borrowers”) managed by Franklin Resources or its affiliates, became a borrower in a joint syndicated senior unsecured credit facility totaling $2.675 billion (the “Global Credit Facility”). The Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet
| | | | | | |
| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 27 | |
Notes to financial statements (cont’d)
future unanticipated or unusually large redemption requests. Unless renewed, the Global Credit Facility will terminate on February 3, 2023.
Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in the Statement of Operations. The Fund did not utilize the Global Credit Facility during the year ended July 31, 2022.
7. Income tax information and distributions to shareholders
The tax character of distributions paid during the fiscal years ended July 31, was as follows:
| | | | | | | | |
| | | 2022 | | | 2021 | |
| Distributions paid from: | | | | | | | | |
| Ordinary income | | $ | 35,824,435 | | | $ | 2,200,035 | |
| Net long-term capital gains | | | 534,440 | | | | — | |
| Total distributions paid | | $ | 36,358,875 | | | $ | 2,200,035 | |
As of July 31, 2022, the components of distributable earnings (loss) on a tax basis were as follows:
| | | | |
| Undistributed ordinary income — net | | $ | 507,475 | |
| Deferred capital losses* | | | (64,985,814) | |
| Unrealized appreciation (depreciation)(a) | | | (178,457,347) | |
| Total distributable earnings (loss) — net | | $ | (242,935,686) | |
| * | 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 and tax-basis unrealized appreciation (depreciation) is attributable to the tax deferral of losses on wash sales and the realization for tax purposes of unrealized gains on investments in passive foreign investment companies. |
8. Recent accounting pronouncements
In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2022-03, Fair Value Measurement (Topic 820) — Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in the ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, should not be considered in measuring fair value. The ASU is effective for interim and annual reporting periods beginning after December 15, 2023, with the option of early adoption. Management is currently evaluating the impact, if any, of applying this ASU.
* * *
| | | | |
28 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting. In January 2021, the FASB issued ASU No. 2021-01, with further amendments to Topic 848. The amendments in the ASUs provide optional temporary accounting recognition and financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered based reference rates as of the end of 2021 and 2023. The ASUs are effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
9. Other matters
The outbreak of the respiratory illness COVID-19 (commonly referred to as “coronavirus”) has continued to rapidly spread around the world, causing considerable uncertainty for the global economy and financial markets. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, are not known. The COVID-19 pandemic could adversely affect the value and liquidity of the Fund’s investments, impair the Fund’s ability to satisfy redemption requests, and negatively impact the Fund’s performance. In addition, the outbreak of COVID-19, and measures taken to mitigate its effects, could result in disruptions to the services provided to the Fund by its service providers.
* * *
On February 24, 2022, Russia engaged in military actions in the sovereign territory of Ukraine. The current political and financial uncertainty surrounding Russia and Ukraine may increase market volatility and the economic risk of investing in securities in these countries and may also cause uncertainty for the global economy and broader financial markets. The ultimate fallout and long-term impact from these events are not known. The Fund will continue to assess the impact on valuations and liquidity and will take any potential actions needed in accordance with procedures approved by the Board of Trustees.
| | | | | | |
| Martin Currie SMASh Series EM Fund 2022 Annual Report | | | | | 29 | |
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, 2022, the related statement of operations for the year ended July 31, 2022, the statement of changes in net assets for each of the two years in the period ended July 31, 2022, including the related notes, and the financial highlights for each of the four years in the period ended July 31, 2022, and for the period January 10, 2018 (inception date) through July 31, 2018 (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, 2022, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended July 31, 2022 and the financial highlights for each of the four years in the period ended July 31, 2022, and for the period January 10, 2018 (inception date) 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, 2022 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Baltimore, Maryland
September 20, 2022
We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.
| | | | |
30 | | | | Martin Currie SMASh Series EM Fund 2022 Annual Report |
Board approval of management and subadvisory agreements (unaudited)
At an in-person meeting of the Board of Trustees of Legg Mason Global Asset Management Trust (the “Trust”) held on May 4 and 5, 2022, the Board, including the Trustees who are not considered to be “interested persons” of the Trust (the “Independent Trustees”) under the Investment Company Act of 1940, as amended (the “1940 Act”), approved for an annual period the continuation of the management agreement (the “Management Agreement”) between the Trust and Legg Mason Partners Fund Advisor, LLC (the “Manager”) with respect to Martin Currie SMASh Series EM Fund, a series of the Trust (the “Fund”), and the sub-advisory agreement pursuant to which Martin Currie Inc. (“Martin Currie”) provides day-to-day management of the Fund’s portfolio, and the sub-advisory agreement pursuant to which Western Asset Management Company, LLC (“Western Asset” and, together with Martin Currie, the “Sub-Advisers”) provides day-to-day management of the Fund’s cash and short-term instruments allocated to it by the Manager. The management agreement and sub-advisory agreements are collectively referred to as the “Agreements.”
Background
The Board received extensive information in advance of the meeting to assist it in its consideration of the Agreements and asked questions and requested additional information from management. Throughout the year the Board (including its various committees) had met with representatives of the Manager and the Subadvisers, and had received information relevant to the renewal of the Agreements. Prior to the meeting the Independent Trustees met with their independent legal counsel to discuss and consider the information provided and submitted questions to management, and they considered the responses provided. The Board received and considered a variety of information about the Manager and the Subadvisers, as well as the management, advisory and sub-advisory arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The information received and considered by the Board both in conjunction with the May 2022 meeting and throughout the year was both written and oral. The contractual arrangements discussed below are the product of multiple years of review and negotiation and information received and considered by the Board during those years.
The information provided and presentations made to the Board encompassed the Fund and all funds for which the Board has responsibility. The discussion below covers both the advisory and the administrative functions being rendered by the Manager, both of which functions are encompassed by the Management Agreement, as well as the advisory functions rendered by the Subadvisers pursuant to the Sub-Advisory Agreements.
Board approval of management agreement and sub-advisory agreements
The Independent Trustees were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Trustees received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements. The Independent Trustees also reviewed the
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 31 | |
Board approval of management and subadvisory agreements (unaudited) (cont’d)
proposed continuation of the Management Agreement and the Sub-Advisory Agreements in private sessions with their independent legal counsel at which no representatives of the Manager and Subadvisers were present. The Independent Trustees considered the Management Agreement and each Sub-Advisory Agreement separately in the course of their review. In doing so, they noted the respective roles of the Manager and the Subadvisers in providing services to the Fund.
In approving the Agreements, the Board, including the Independent Trustees, considered a variety of factors, including those factors discussed below. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement and the Sub-Advisory Agreements. Each Trustee may have attributed different weight to the various factors in evaluating the Management Agreement and each Sub-Advisory Agreement.
After considering all relevant factors and information, the Board, exercising its business judgment, determined that the continuation of the Agreements was in the best interests of the Fund and its shareholders and approved the continuation of each such agreement for another year.
Nature, extent and quality of the services under the management agreement and sub-advisory agreements
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Subadvisers under the Management Agreement and the Sub-Advisory Agreements, respectively, during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Fund’s affairs and the Manager’s role in coordinating the activities of the Fund’s other service providers. The Board’s evaluation of the services provided by the Manager and the Subadvisers took into account the Board’s knowledge gained as Trustees of funds in the fund complex overseen by the Trustees, including knowledge gained regarding the scope and quality of the investment management and other capabilities of the Manager and the Subadvisers, and the quality of the Manager’s administrative and other services. The Board observed that the scope of services provided by the Manager and the Subadvisers, and of the undertakings required of the Manager and Subadvisers in connection with those services, including maintaining and monitoring their own and the Fund’s compliance programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board also noted that on a regular basis it received and reviewed information from the Manager regarding the Fund’s compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the risks associated with the Fund borne by the Manager and its affiliates (such as entrepreneurial,
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32 | | | | Martin Currie SMASh Series EM Fund |
operational, reputational, litigation and regulatory risk), as well as the Manager’s and each Subadviser’s risk management processes.
The Board reviewed the qualifications, backgrounds and responsibilities of the Manager’s and each Subadviser’s senior personnel and the team of investment professionals primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered, based on its knowledge of the Manager and the Manager’s affiliates, the financial resources of Franklin Resources, Inc., the parent organization of the Manager and the Subadvisers. The Board recognized the importance of having a fund manager with significant resources.
The Board considered the division of responsibilities among the Manager and the Subadvisers and the oversight provided by the Manager. The Board also considered the policies and practices of the Manager and the Subadvisers regarding the selection of brokers and dealers and the execution of portfolio transactions. The Board considered management’s periodic reports to the Board on, among other things, its business plans, any organizational changes and portfolio manager compensation.
The Board received and considered performance information for the Fund as well as for a group of funds (the “Performance Universe”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, based on classifications provided by Thomson Reuters Lipper (“Lipper”). The Board was provided with a description of the methodology used to determine the similarity of the Fund with the funds included in the Performance Universe. It was noted that while the Board found the Broadridge data generally useful, they recognized its limitations, including that the data may vary depending on the end date selected and that the results of the performance comparisons may vary depending on the selection of the peer group and its composition over time. In considering the Fund’s performance, the Board took into account that the Fund is not intended as a complete investment program and is offered only to participants in separately managed account programs who pay costs and expenses, including fees for advice and portfolio execution, at the level of such programs rather than at the Fund level. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing the Fund’s performance against its benchmark and against the Fund’s peers. The Board also considered the Fund’s performance in light of overall financial market conditions.
The information comparing the Fund’s performance to that of its Performance Universe, consisting of all retail and institutional funds (including the Fund) classified as emerging markets funds by Lipper, showed, among other data, that the performance of the Fund shares for the 1- and 3-year periods ended December 31, 2021 and since inception of the Fund (January 10, 2018) through December 31, 2021 was above the median performance of
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 33 | |
Board approval of management and subadvisory agreements (unaudited) (cont’d)
the funds in the Performance Universe and the Fund’s shares were ranked in the first quintile of the funds in the Performance Universe for the 3-year period and since inception.
The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided), including performance, under the Management Agreement and each Sub-Advisory Agreement were sufficient for renewal.
Management fees and expense ratios
The Board noted that the Fund does not pay a management fee. The Board also recognized that the Manager had agreed to pay all operating expenses of the Fund, except interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses. The Board considered that this arrangement is expected to continue until and expire on December 31, 2023. The Board recognized that shareholders of the Fund are participants in separately managed account programs and pay fees to the program sponsors for the costs and expenses of the program, including fees for advice and portfolio execution. When a program participant, alone or with his or her program sponsor, elects to allocate assets to the investment strategy managed or advised by an affiliate of the Manager, that affiliate receives a fee from the program sponsor for managing or advising those assets, including assets that may be invested in the Fund. In certain cases, a participant will pay a fee for investment advice directly to an affiliate of the Manager in its capacity as adviser or subadviser to the participant’s account.
Taking all of the above into consideration, as well as the factors identified below, the Board determined that the fee and expense arrangements for the Fund were reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement and the Sub-Advisory Agreements.
Manager profitability
The Board received and considered an analysis of the profitability of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason Funds complex as a whole. The Board received information with respect to the Manager’s allocation methodologies used in preparing this profitability data. It was noted that the allocation methodologies had been reviewed by an outside consultant. The profitability of the Manager and its affiliates was considered by the Board not excessive in light of the nature, extent and quality of the services provided to the Fund.
Economies of scale
The Board received and discussed information concerning whether the Manager realizes economies of scale with respect to the management of the Fund as the Fund’s assets grow. The Board considered that the Fund pays no management fee to the Manager and that the Manager has agreed to pay all operating expenses of the Fund, except interest, brokerage, taxes, and extraordinary expenses.
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34 | | | | Martin Currie SMASh Series EM Fund |
The Board determined that the management fee structure for the Fund was reasonable.
Other benefits to the manager and the subadvisers
The Board considered other benefits received by the Manager, the Subadvisers and their affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders, including the recent appointment of an affiliate of the Manager as the transfer agent of the Fund.
In light of the costs of providing investment management and other services to the Fund and the ongoing commitment of the Manager and the Subadvisers to the Fund, the Board considered that the ancillary benefits that the Manager, the Subadvisers and their affiliates received were reasonable.
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 35 | |
Statement regarding liquidity risk management program (unaudited)
Each Fund has adopted and implemented a written Liquidity Risk Management Program (the “LRMP”) as required by Rule 22e-4 under the Investment Company Act of 1940 (the “Liquidity Rule”). The LRMP is designed to assess and manage each Fund’s liquidity risk, which is defined as the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interests in the Fund. In accordance with the Liquidity Rule, the LRMP includes policies and procedures that provide for: (1) assessment, management, and review (no less frequently than annually) of each Fund’s liquidity risk; (2) classification of each Fund’s portfolio holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid, and Illiquid); (3) for Funds that do not primarily hold assets that are Highly Liquid, establishing and maintaining a minimum percentage of the Fund’s net assets in Highly Liquid investments (called a “Highly Liquid Investment Minimum” or “HLIM”); and (4) prohibiting the Fund’s acquisition of Illiquid investments that would result in the Fund holding more than 15% of its net assets in Illiquid assets. The LRMP also requires reporting to the Securities and Exchange Commission (“SEC”) (on a non-public basis) and to the Board if the Fund’s holdings of Illiquid assets exceed 15% of the Fund’s net assets. Funds with HLIMs must have procedures for addressing HLIM shortfalls, including reporting to the Board and, with respect to HLIM shortfalls lasting more than seven consecutive calendar days, reporting to the SEC (on a non-public basis).
The Director of Liquidity Risk within the Investment Risk Management Group (the “IRMG”) is the appointed Administrator of the LRMP. The IRMG maintains the Investment Liquidity Committee (the “ILC”) to provide oversight and administration of policies and procedures governing liquidity risk management for Franklin Templeton and Legg Mason products and portfolios. The ILC includes representatives from Franklin Templeton’s Risk, Trading, Global Compliance, Legal, Investment Compliance, Investment Operations, Valuation Committee, Product Management and Global Product Strategy.
In assessing and managing each Fund’s liquidity risk, the ILC considers, as relevant, a variety of factors, including the Fund’s investment strategy and the liquidity of its portfolio investments during both normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources including the Funds’ interfund lending facility and line of credit. Classification of the Fund’s portfolio holdings in the four liquidity categories is based on the number of days it is reasonably expected to take to convert the investment to cash (for Highly Liquid and Moderately Liquid holdings) or sell or dispose of the investment (for Less Liquid and Illiquid investments), in current market conditions without significantly changing the investment’s market value.
Each Fund primarily holds liquid assets that are defined under the Liquidity Rule as “Highly Liquid Investments,” and therefore is not required to establish an HLIM. Highly Liquid
| | | | |
36 | | | | Martin Currie SMASh Series EM Fund |
Investments are defined as cash and any investment reasonably expected to be convertible to cash in current market conditions in three business days or less without the conversion to cash significantly changing the market value of the investment.
At meetings of the Funds’ Board of Trustees/Directors held in May 2022, the Program Administrator provided a written report to the Board addressing the adequacy and effectiveness of the program for the year ended December 31, 2021. The Program Administrator report concluded that (i.) the LRMP, as adopted and implemented, remains reasonably designed to assess and manage each Fund’s liquidity risk; (ii.) the LRMP, including the Highly Liquid Investment Minimum (“HLIM”) where applicable, was implemented and operated effectively to achieve the goal of assessing and managing each Fund’s liquidity risk; and (iii.) each Fund was able to meet requests for redemption without significant dilution of remaining investors’ interests in the Fund.
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 37 | |
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, Franklin Templeton, 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 at 877-6LM-FUND/656-3863.
| | |
| Independent Trustees† |
| Paul R. Ades | | |
| |
| Year of birth | | 1940 |
| |
| Position(s) with Trust | | Trustee |
| |
| Term of office1 and length of time served2 | | Since 1983 |
| |
| Principal occupation(s) during the past five years | | Paul R. Ades, PLLC (law firm) (since 2000) |
| |
| Number of funds in fund complex overseen by Trustee | | 59 |
| |
| Other board memberships held by Trustee during the past five years | | None |
|
| Andrew L. Breech |
| |
| Year of birth | | 1952 |
| |
| Position(s) with Trust | | Trustee |
| |
| Term of office1 and length of time served2 | | Since 1991 |
| |
| Principal occupation(s) during the past five years | | President, Dealer Operating Control Service, Inc. (automotive retail management) (since 1985) |
| |
| Number of funds in fund complex overseen by Trustee | | 59 |
| |
| Other board memberships held by Trustee during the past five years | | None |
|
| Althea L. Duersten |
| |
| Year of birth | | 1951 |
| |
| Position(s) with Trust | | Trustee and Chair of the Board |
| |
| Term of office1 and length of time served2 | | Since 2014 (Chair of the Board since 2021) |
| |
| Principal occupation(s) during the past five years | | Retired (since 2011); formerly, Chief Investment Officer, North America, JPMorgan Chase (investment bank) and member of JPMorgan Executive Committee (2007 to 2011) |
| |
| Number of funds in fund complex overseen by Trustee | | 59 |
| |
| Other board memberships held by Trustee during the past five years | | Formerly, Non-Executive Director, Rokos Capital Management LLP (2019 to 2020) |
| | | | |
38 | | | | Martin Currie SMASh Series EM Fund |
| | |
| Independent Trustees† (cont’d) |
|
| Stephen R. Gross |
| |
| Year of birth | | 1947 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1986 |
| Principal occupation(s) during the past five years | | Chairman Emeritus (since 2011) and formerly, Chairman, HLB Gross Collins, P.C. (accounting and consulting firm) (1979 to 2011); Executive Director of Business Builders Team, LLC (since 2005); Principal, Gross Consulting Group, LLC (since 2011); CEO, Gross Capital Partners, LLC (since 2014); CEO, Trusted CFO Solutions, LLC (since 2011) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| Other board memberships held by Trustee during the past five years | | None |
|
| Susan M. Heilbron |
| |
| Year of birth | | 1945 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1991 |
| Principal occupation(s) during the past five years | | Retired; formerly, President, Lacey & Heilbron (communications consulting) (1990 to 2002); General Counsel and Executive Vice President, The Trump Organization (1986 to 1990); Senior Vice President, New York State Urban Development Corporation (1984 to 1986); Associate, Cravath, Swaine & Moore LLP (1980 to 1984 and 1977 to 1979) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| |
| Other board memberships held by Trustee during the past five years | | Formerly, Director, Lincoln Savings Bank FSB (1991 to 1994); Director, Trump Shuttle, Inc. (air transportation) (1989 to 1990); Director, Alexander’s Inc. (department store) (1987 to 1990) |
|
| Howard J. Johnson |
| |
| Year of birth | | 1938 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | From 1981 to 1998 and since 2000 |
| Principal occupation(s) during the past five years | | Retired; formerly, Chief Executive Officer, Genesis Imaging LLC (technology company) (2003 to 2012) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| Other board memberships held by Trustee during the past five years | | None |
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 39 | |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| | |
| Independent Trustees† (cont’d) |
| Arnold L. Lehman |
| |
| Year of birth | | 1944 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1982 |
| 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 | | 59 |
| 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 office1 and 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 | | 59 |
| Other board memberships held by Trustee during the past five years | | Director of HSBC Managed Portfolios Limited and HSBC Specialist Funds Limited (since 2020); formerly, Director of Cheyne Capital International Limited (investment advisory firm) (2005 to 2020); Director/ Trustee of Legg Mason Institutional Funds plc, Western Asset Fixed Income Funds plc and Western Asset Debt Securities Fund plc. (2007 to 2011) |
|
| Jerome H. Miller |
| |
| Year of birth | | 1938 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1995 |
| Principal occupation(s) during the past five years | | Retired; formerly, President, Shearson Lehman Asset Management (1991 to 1993), Vice Chairman, Shearson Lehman Hutton Inc. (1989 to 1992) and Senior Executive Vice President, E.F. Hutton Group Inc. (1986 to 1989) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| Other board memberships held by Trustee during the past five years | | None |
|
| Ken Miller |
| |
| Year of birth | | 1942 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1983 |
| Principal occupation(s) during the past five years | | Retired; formerly, President, Young Stuff Apparel Group, Inc. (apparel manufacturer), division of Li & Fung (1963 to 2012) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| Other board memberships held by Trustee during the past five years | | None |
| | | | |
40 | | | | Martin Currie SMASh Series EM Fund |
| | |
| Independent Trustees† (cont’d) |
| G. Peter O’Brien |
| |
| Year of birth | | 1945 |
| Position(s) with Trust | | Trustee |
| Term of office1 and 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 Legg Mason funds consisting of 59 portfolios; Director/Trustee of the Royce Family of Funds consisting of 16 portfolios |
| Other board memberships held by Trustee during the past five years | | Formerly, Director of TICC Capital Corp. (2003 to 2017) |
|
| Thomas F. Schlafly |
| |
| Year of birth | | 1948 |
| Position(s) with Trust | | Trustee |
| Term of office1 and length of time served2 | | Since 1983 |
| Principal occupation(s) during the past five years | | Chairman, The Saint Louis Brewery, LLC (brewery) (since 2012); formerly, President, The Saint Louis Brewery, Inc. (1989 to 2012); Senior Counsel (since 2017) and formerly, Partner (2009 to 2016), Thompson Coburn LLP (law firm) |
| Number of funds in fund complex overseen by Trustee | | 59 |
| Other board memberships held by Trustee during the past five years | | Director, CNB St. Louis Bank (since 2020); formerly, Director, Citizens National Bank of Greater St. Louis (2006 to 2020) |
| | |
| Interested Trustee and Officer |
| Jane Trust, CFA3 |
| |
| Year of birth | | 1962 |
| Position(s) with Trust | | Trustee, President and Chief Executive Officer |
| Term of office1 and length of time served2 | | Since 2015 |
| Principal occupation(s) during the past five years | | Senior Vice President, Fund Board Management, Franklin Templeton (since 2020); Officer and/or Trustee/Director of 130 funds associated with LMPFA or its affiliates (since 2015); President and Chief Executive Officer of LMPFA (since 2015); formerly, Senior Managing Director (2018 to 2020) and Managing Director (2016 to 2018) of Legg Mason & Co., LLC (“Legg Mason & Co.”); Senior Vice President of LMPFA (2015) |
| Number of funds in fund complex overseen by Trustee | | 130 |
| Other board memberships held by Trustee during the past five years | | None |
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 41 | |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| | |
| Additional Officers |
|
Ted P. Becker
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018 |
| Year of birth | | 1951 |
| Position(s) with Trust | | Chief Compliance Officer |
| Term of office1 and length of time served2 | | Since 2007 |
| Principal occupation(s) during the past five years | | Vice President, Global Compliance of Franklin Templeton (since 2020); Chief Compliance Officer of LMPFA (since 2006); Chief Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Director of Global Compliance at Legg Mason, Inc. (2006 to 2020); Managing Director of Compliance of Legg Mason & Co. (2005 to 2020) |
|
Susan Kerr
Franklin Templeton 620 Eighth Avenue, 47th Floor, New York, NY 10018 |
| Year of birth | | 1949 |
| Position(s) with Trust | | Chief Anti-Money Laundering Compliance Officer |
| Term of office1 and length of time served2 | | Since 2013 |
| Principal occupation(s) during the past five years | | Senior Compliance Analyst, Franklin Templeton (since 2020); Chief Anti-Money Laundering Compliance Officer of certain funds associated with Legg Mason & Co. or its affiliates (since 2013) and Anti-Money Laundering Compliance Officer (since 2012), Senior Compliance Officer (since 2011) and Assistant Vice President (since 2010) of Franklin Distributors, LLC; formerly, Assistant Vice President of Legg Mason & Co. (2010 to 2020) |
|
Marc A. De Oliveira
Franklin Templeton 100 First Stamford Place, 6th Floor, Stamford, CT 06902 |
| Year of birth | | 1971 |
| Position(s) with Trust | | Secretary and Chief Legal Officer |
| Term of office1 and length of time served2 | | Since 2020 |
| Principal occupation(s) during the past five years | | Associate General Counsel of Franklin Templeton (since 2020); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); formerly, Managing Director (2016 to 2020) and Associate General Counsel of Legg Mason & Co. (2005 to 2020) |
| | | | |
42 | | | | Martin Currie SMASh Series EM Fund |
| | |
| Additional Officers (cont’d) |
Thomas C. Mandia
Franklin Templeton
100 First Stamford Place, 6th Floor, Stamford, CT 06902 |
| |
| Year of birth | | 1962 |
| Position(s) with Trust | | Senior Vice President |
| Term of office1 and length of time served2 | | Since 2020 |
| Principal occupation(s) during the past five years | | Senior Associate General Counsel of Franklin Templeton (since 2020); Secretary of LMPFA (since 2006); Assistant Secretary of certain funds associated with Legg Mason & Co. or its affiliates (since 2006); Secretary of LM Asset Services, LLC (“LMAS”) (since 2002) and Legg Mason Fund Asset Management, Inc. (“LMFAM”) (since 2013) (formerly registered investment advisers); formerly, Managing Director and Deputy General Counsel of Legg Mason & Co. (2005 to 2020) |
|
Christopher Berarducci
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018 |
| |
| Year of birth | | 1974 |
| Position(s) with Trust | | Treasurer and Principal Financial Officer |
| Term of office1 and length of time served2 | | Since 2010 and 2019 |
| Principal occupation(s) during the past five years | | Vice President, Fund Administration and Reporting, Franklin Templeton (since 2020); Treasurer (since 2010) and Principal Financial Officer (since 2019) of certain funds associated with Legg Mason & Co. or its affiliates; formerly, Managing Director (2020), Director (2015 to 2020), and Vice President (2011 to 2015) of Legg Mason & Co. |
|
Jeanne M. Kelly
Franklin Templeton
620 Eighth Avenue, 47th Floor, New York, NY 10018 |
| |
| Year of birth | | 1951 |
| Position(s) with Trust | | Senior Vice President |
| Term of office1 and length of time served2 | | Since 2007 |
| Principal occupation(s) during the past five years | | U.S. Fund Board Team Manager, Franklin Templeton (since 2020); Senior Vice President of certain 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); formerly, Managing Director of Legg Mason & Co. (2005 to 2020); 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”). |
| 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. |
| 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. |
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 43 | |
Additional information (unaudited) (cont’d)
Information about Trustees and Officers
| 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. |
| | | | |
44 | | | | Martin Currie SMASh Series EM Fund |
Important tax information (unaudited)
By mid-February, tax information related to a shareholder’s proportionate share of distributions paid during the preceding calendar year will be received, if applicable. Please also refer to www.franklintempleton.com for per share tax information related to any distributions paid during the preceding calendar year. Shareholders are advised to consult with their tax advisors for further information on the treatment of these amounts on their tax returns.
The following tax information for the Fund is required to be furnished to shareholders with respect to income earned and distributions paid during its fiscal year.
The Fund hereby reports the following amounts, or if subsequently determined to be different, the maximum allowable amounts, for the fiscal year ended July 31, 2022:
| | | | | | | | |
| | | Pursuant to: | | | Amount Reported | |
| Long-Term Capital Gain Dividends Distributed | | § | 852(b)(3)(C) | | | | $534,440 | |
| Qualified Dividend Income Earned (QDI) | | § | 854(b)(1)(B) | | | | $11,189,451 | |
| Short-Term Capital Gain Dividends Distributed | | § | 871(k)(2)(C) | | | | $19,493,860 | |
Under Section 853 of the Internal Revenue Code, the Fund intends to elect to pass through to its shareholders the following amounts, or amounts as finally determined, of foreign taxes paid and foreign source income earned by the Fund during the fiscal year ended July 31, 2022: | |
| Foreign Taxes Paid | | | | | | | $2,272,620 | |
| Foreign Source Income Earned | | | | | | | $15,588,565 | |
| | | | | | |
| Martin Currie SMASh Series EM Fund | | | | | 45 | |
Martin Currie
SMASh Series EM Fund
Trustees
Paul R. Ades
Andrew L. Breech
Althea L. Duersten
Chair
Stephen R. Gross
Susan M. Heilbron
Howard J. Johnson
Arnold L. Lehman
Robin J. W. Masters
Jerome H. Miller
Ken Miller
G. Peter O’Brien
Thomas F. Schlafly
Jane Trust
Investment manager
Legg Mason Partners Fund Advisor, LLC
Subadviser
Martin Currie Inc.
Distributor
Franklin Distributors, LLC
Custodian
The Bank of New York Mellon
Transfer agent#
Franklin Templeton Investor Services, LLC
3344 Quality Drive
Rancho Cordova, CA 95670-7313
Independent registered public accounting firm
PricewaterhouseCoopers LLP
Baltimore, MD
| # | Effective February 22, 2022, Franklin Templeton Investor Services, LLC replaced BNY Mellon Investment Servicing (US) Inc. as Transfer Agent. |
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, 47th 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 Form N-PORT. The Fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov. To obtain information on Form N-PORT, shareholders can call the Fund at 877-6LM-FUND/656-3863.
Information on how the Fund voted proxies relating to portfolio securities during the prior 12-month period ended June 30th of each year and a description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio transactions are available (1) without charge, upon request, by calling the Fund at 877-6LM-FUND/656-3863, (2) at www.franklintempleton.com 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.franklintempleton.com
© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.
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, Franklin Distributors, LLC, as well as Legg Mason-sponsored closed-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.franklintempleton.com, or contact the Fund at 877-6LM-FUND/656-3863.
Revised April 2018
Legg Mason California Consumer Privacy Act Policy
Although much of the personal information we collect is “nonpublic personal information” subject to federal law, residents of California may, in certain circumstances, have additional rights under the California Consumer Privacy Act (“CCPA”). For example, if you are a broker,
|
| NOT PART OF THE ANNUAL REPORT |
Legg Mason Funds Privacy and Security Notice (cont’d)
dealer, agent, fiduciary, or representative acting by or on behalf of, or for, the account of any other person(s) or household, or a financial advisor, or if you have otherwise provided personal information to us separate from the relationship we have with personal investors, the provisions of this Privacy Policy apply to your personal information (as defined by the CCPA).
| • | | In addition to the provisions of the Legg Mason Funds Security and Privacy Notice, you may have the right to know the categories and specific pieces of personal information we have collected about you. |
| • | | You also have the right to request the deletion of the personal information collected or maintained by the Funds. |
If you wish to exercise any of the rights you have in respect of your personal information, you should advise the Funds by contacting them as set forth below. The rights noted above are subject to our other legal and regulatory obligations and any exemptions under the CCPA. You may designate an authorized agent to make a rights request on your behalf, subject to the identification process described below. We do not discriminate based on requests for information related to our use of your personal information, and you have the right not to receive discriminatory treatment related to the exercise of your privacy rights.
We may request information from you in order to verify your identity or authority in making such a request. If you have appointed an authorized agent to make a request on your behalf, or you are an authorized agent making such a request (such as a power of attorney or other written permission), this process may include providing a password/passcode, a copy of government issued identification, affidavit or other applicable documentation, i.e. written permission. We may require you to verify your identity directly even when using an authorized agent, unless a power of attorney has been provided. We reserve the right to deny a request submitted by an agent if suitable and appropriate proof is not provided.
For the 12-month period prior to the date of this Privacy Policy, the Legg Mason Funds have not sold any of your personal information; nor do we have any plans to do so in the future.
Contact Information
Address: Data Privacy Officer, 100 International Dr., Baltimore, MD 21202
Email: DataProtectionOfficer@franklintempleton.com
Phone: 1-800-396-4748
Revised October 2020
|
| NOT PART OF THE ANNUAL REPORT |
www.franklintempleton.com
© 2022 Franklin Distributors, LLC, Member FINRA/SIPC. All rights reserved.
MCXX466309 9/22 SR22-4492
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 Stephen R. Gross possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an “audit committee financial expert,” and has designated Stephen R. Gross as the Audit Committee’s financial expert. Stephen R. Gross is an “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a) Audit Fees. The aggregate fees billed in the last two fiscal years ending July 31, 2021 and July 31, 2022 (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 $25,500 in July 31, 2021 and $25,500 in July 31, 2022.
(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, 2021 and $0 in July 31, 2022.
(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, 2021 and $10,000 in July 31, 2022. 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 required pre-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, 2021 and $0 in July 31, 2022, other than the services reported in paragraphs (a) through (c) of this item for the Legg Mason Global Asset Management Trust.
All Other Fees. There were no other non-audit services rendered by the Auditor to Legg Mason Partners Fund Advisors, LLC (“LMPFA”), and any entity controlling, controlled by or under common control with LMPFA that provided ongoing services to Legg Mason Global Asset Management Trust requiring pre-approval by the Audit Committee in the Reporting Period.
(e) Audit Committee’s pre–approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X.
(1) The Charter for the Audit Committee (the “Committee”) of the Board of each registered investment company (the “Fund”) advised by LMPFA or one of their affiliates (each, an “Adviser”) requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund’s independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The
Committee may implement policies and procedures by which such services are approved other than by the full Committee.
The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund (“Covered Service Providers”) constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit.
(2) For the Legg Mason Global Asset Management Trust, the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for July 31, 2021 and July 31, 2022; Tax Fees were 100% and 100% for July 31, 2021 and July 31, 2022; and Other Fees were 100% and 100% for July 31, 2021 and July 31, 2022.
(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 $773,011 in July 31, 2021 and $446,226 in July 31, 2022.
(h) Yes. Legg Mason Global Asset Management Trust’s Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Accountant’s independence. All services provided by the Auditor to the Legg Mason Global Asset Management Trust or to Service Affiliates, which were required to be pre-approved, were pre-approved as required.
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
| | a) | The independent board members are acting as the registrant’s audit committee as specified in Section 3(a)(58)(B) of the Exchange Act. The Audit Committee consists of the following Board members: |
Paul R. Ades
Andrew L. Breech
Althea L. Duersten
Stephen R. Gross
Susan M. Heilbron
Howard J. Johnson
Arnold L. Lehman
Robin J. W. Masters
Jerome H. Miller
Ken Miller
G. Peter O’Brien
Thomas F. Schlafly
| ITEM 6. | SCHEDULE OF INVESTMENTS. |
Included herein under Item 1.
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable.
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable.
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. |
Not applicable.
| ITEM 11. | CONTROLS AND PROCEDURES. |
| | (a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934. |
| | (b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting. |
| ITEM 12. | DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-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, 2022 |
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, 2022 |
| | |
| By: | | /s/ Christopher Berarducci |
| | Christopher Berarducci |
| | Principal Financial Officer |
| |
| Date: | | September 23, 2022 |
