SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
LEGG MASON TAX EXEMPT TRUST, INC.
LEGG MASON INCOME TRUST, INC.
LEGG MASON CASH RESERVE TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
LEGG MASON CASH RESERVE TRUST
LEGG MASON TAX-EXEMPT TRUST, INC.
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
(A SERIES OF LEGG MASON INCOME TRUST, INC.)
[DATE]
Dear Shareholder:
The attached proxy materials describe a proposal to liquidate, dissolve,
and terminate Legg Mason Cash Reserve Trust ("Cash Reserve Fund"), Legg Mason
Tax-Exempt Trust, Inc. ("Tax-Exempt Fund"), and Legg Mason U.S. Government Money
Market Portfolio, a series of Legg Mason Income Trust, Inc. ("U.S. Government
Fund") (collectively, the "Funds"), in accordance with Plans of Liquidation and
Termination, Dissolution and Termination, and Liquidation, respectively
(collectively, the "Plan") adopted by each Fund's Board of Directors/Trustees
(collectively, the "Board"). The reason for the proposal to liquidate the Funds
is that they no longer function as "sweep" investment vehicles for the retail
brokerage clients of Legg Mason Wood Walker, Inc. as a result of the sale of
that firm to CitiGroup Inc.
As a shareholder, you are being asked to approve the Plan to liquidate your
Fund. THE BOARD BELIEVES THAT THIS PROPOSAL IS IN THE BEST INTEREST OF
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL. The
Board has concluded, after deliberation and consideration of other alternatives,
that the continued operation of each Fund is not economically feasible and that
it is improbable that sales of each Fund's shares can be increased to a viable
level.
We strongly urge you to approve the Plan at this time. Subject to
shareholder approval, shareholders remaining in the Funds will receive a final
distribution in liquidation of their Fund shares on or about February 27, 2006.
It is expected that the distribution will be in the amount of $1.00 per share
plus any accrued dividends. However, you may, at any time prior to the
liquidation of the Funds, redeem your Fund shares.
The proposal is discussed in greater detail in the attached proxy
statement. If you own shares of a Fund at the close of business on January 26,
2006, you are entitled to vote at the Special Meeting of Shareholders to be held
on February 24, 2006.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. Voting your
shares early will help prevent costly follow-up mail and telephone solicitation.
After reviewing the attached materials, simply complete the enclosed proxy card
and return it in the postage-paid envelope provided. PLEASE BE SURE TO SIGN YOUR
PROXY CARD. Thank you for taking the time to review these materials and for
voting your shares.
YOU MAY REDEEM YOUR FUND SHARES AT ANY TIME PRIOR TO THE FUND'S
LIQUIDATION.
Very truly yours,
Mark R. Fetting
President
Legg Mason Cash Reserve Trust
Legg Mason Income Trust, Inc.
Legg Mason Tax-Exempt Trust, Inc.
LEGG MASON CASH RESERVE TRUST
LEGG MASON TAX-EXEMPT TRUST, INC.
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
(A SERIES OF LEGG MASON INCOME TRUST, INC.)
------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY 24, 2006
------------
To the Shareholders:
Special meetings of shareholders of Legg Mason Cash Reserve Trust ("Cash
Reserve Fund"), Legg Mason Tax-Exempt Trust, Inc. ("Tax-Exempt Fund") and Legg
Mason U.S. Government Money Market Portfolio, a series of Legg Mason Income
Trust, Inc., ("U.S. Government Fund"), will be held on February 24, 2006 at
10:00 a.m., Eastern time, at 100 Light Street (34th Floor, Executive Briefing
Room), Baltimore, Maryland 21202 ("Special Meeting") for the following purposes:
(1) To approve the liquidation, dissolution, and termination of Cash
Reserve Fund, Tax-Exempt Fund, and U.S. Government Fund (the "Funds") in
accordance with the Plans of Liquidation and Termination, Dissolution and
Termination, and Liquidation, respectively (collectively, the "Plan") approved
by each Fund's Board of Directors/Trustees (the "Board"); and
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
You are entitled to vote at the Special Meeting and any adjournment thereof
if you held shares at the close of business on January 26, 2006. IF YOU ATTEND
THE SPECIAL MEETING, YOU MAY VOTE YOUR SHARES IN PERSON. Whether or not you
intend to attend the Special Meeting in person, please vote, sign, date and
return the enclosed proxy card in the enclosed postage-paid envelope.
By order of the Board,
RICHARD M. WACHTERMAN
SECRETARY
DATE
LEGG MASON CASH RESERVE TRUST
LEGG MASON TAX-EXEMPT TRUST, INC.
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
(A SERIES OF THE LEGG MASON INCOME TRUST, INC.)
100 LIGHT STREET
BALTIMORE, MD 21202
(800) 822-5544
PROXY STATEMENT
[DATE]
This proxy statement/prospectus ("Proxy Statement") is being furnished to
shareholders of Legg Mason Cash Reserve Trust ("Cash Reserve Fund"), Legg Mason
Tax-Exempt Trust, Inc. ("Tax-Exempt Fund"), and Legg Mason U.S. Government Money
Market Portfolio, a series of Legg Mason Income Trust, Inc. ("U.S. Government
Fund"), (collectively, the "Funds"), in connection with soliciting Fund
shareholder proxies by each Fund's Board of Directors/Trustees (the "Board") for
use at a special meeting of its shareholders to be held on February 24, 2006 at
10:00 a.m., Eastern time, and at any adjournment thereof ("Special Meeting") to
approve or disapprove for Cash Reserve Fund, Tax-Exempt Fund and U.S. Government
Fund, Plans of Liquidation and Termination, Dissolution and Termination, and
Liquidation, respectively (each a "Plan", and collectively, the "Plans") which
contemplate the liquidation of each Fund and distribution of the proceeds from
the sale of its assets to shareholders on or about February 27, 2006.
The Board approved the Plan on January 3, 2006. Approval of the proposal to
liquidate, dissolve and terminate the Fund as set forth in the Plan will require
the requisite approval of the Fund's shareholders.
Shareholders of record on January 26, 2006 (the "Record Date") will be
entitled to notice of and to vote at the Special Meeting. Each Fund has one
class of shares. As of the Record Date, Cash Reserve Fund, Tax-Exempt Fund, and
U.S. Government Fund each had [ ], [ ], and [ ] shares outstanding,
respectively. Each Fund shareholder will be entitled to one vote for each share
and a fractional vote for each fractional share held on the Record Date. It is
expected that this Proxy Statement will first be mailed to shareholders on or
about February 8, 2006. The investment manager's affiliates own Fund shares
entitled to vote at the Special Meeting. Those affiliates intend to vote FOR the
proposal.
The enclosed proxy card, if properly executed and returned, will be voted
in accordance with the choice specified thereon. Proxies properly executed and
returned, but which fail to specify how the shares are to be voted, will be
voted FOR the proposal.
GENERAL INFORMATION
FUND SERVICE PROVIDERS.
Legg Mason Fund Adviser, Inc., 100 Light Street, Baltimore, MD 21202
("LMFA") is the investment manager to each Fund. For each Fund, LMFA has
delegated certain investment advisory responsibilities to affiliated
sub-advisers, including the responsibility for making investment decisions and
placing orders to buy, sell or hold particular securities. Western Asset
Management Company, 385 E. Colorado Blvd., Pasadena, CA 91161, serves as
sub-adviser to Cash Reserve Fund and U.S. Government Fund, while Legg Mason
Trust Company, N.A., 100 Light Street, Baltimore, MD 21202, serves as
sub-adviser to Tax-Exempt Fund (collectively, Western Asset Management Company
1
and Legg Mason Trust Company, N.A., are the "Sub-Advisers"). Legg Mason Investor
Services, LLC, 100 Light Street, Baltimore, MD 21202 is each Fund's distributor.
Boston Financial Data Services, P.O. Box 953, Boston, MA 02103 is each Fund's
transfer agent and dividend disbursing agent, and also performs certain
administrative services.
EXPENSES OF THE SOLICITATION.
Legal and printing expenses and expenses of holding the Special Meeting
(such as proxy tabulation and the expense of a solicitor, if any) will be borne
by LMFA and its affiliates. In addition to the solicitation of proxies by mail,
the Funds' officers, a proxy solicitation firm, LMFA, the Sub-Advisers, and the
Funds' transfer agent may solicit proxies. Brokerage houses, banks, custodians,
nominees, fiduciaries and other financial intermediaries will be requested to
forward soliciting material to the beneficial owners of Fund shares to obtain
authorization for the execution of proxies. Such solicitations may be by
telephone or otherwise.
INFORMATION ABOUT VOTING.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your voting directions if your proxy card is received properly
executed by you or by your duly appointed agent or attorney-in-fact. If you
sign, date and return the proxy card, but give no voting instructions, your
shares will be voted FOR the proposal. In addition, if you sign, date and return
the proxy card, but give no voting instructions, the duly appointed proxies may,
in their discretion, vote upon any other matters that come before the Special
Meeting. You may revoke your proxy by executing and delivering a superceding
proxy or by written notice to the Secretary of the Fund revoking the initial
proxy. To be effective, revocation must be received by the Secretary of the
Funds prior to the Special Meeting and must indicate your name and account
number. If you attend the Special Meeting in person you may, if you wish, vote
by ballot at the Special Meeting, thereby canceling any proxy previously given.
One-quarter of Cash Reserve Fund's outstanding shares and one-third of
Tax-Exempt Fund and U.S. Government Fund's outstanding shares at the close of
business on the Record Date, represented in person or by proxy, shall constitute
a quorum and must be present for the transaction of business at the Special
Meeting. If a quorum is not present at the Special Meeting, or a quorum is
present but sufficient votes to approve the proposal are not received, or for
any other legal reason, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of those
shares represented at the Special Meeting in person or by proxy. The persons
named as proxies will vote those proxies that they are entitled to vote FOR the
proposal in favor of such an adjournment and will vote those proxies required to
be voted AGAINST the proposal against such adjournment.
Tax-Exempt Fund and U.S. Government Fund each requires the affirmative vote
of a majority of its outstanding voting securities to approve its respective
proposal. To approve its proposal, Cash Reserve Trust requires the affirmative
vote of the lesser of (1) 67% of its shares present at the Special Meeting if
the holders of more than 50% of its outstanding shares are present in person or
by proxy; or (2) more than 50% of its outstanding shares. Each outstanding full
share of a Fund is entitled to one vote, and each outstanding fractional share
thereof is entitled to a proportionate fractional share of one vote. If the
proposal is not approved by the requisite vote of shareholders of a Fund, the
Board will determine what subsequent actions would be in the best interests of
the Fund's shareholders. Each Fund's proposal to liquidate and terminate the
Fund is independent and is therefore not contingent on the liquidation and
termination of any other Fund.
2
Broker non-votes are shares held in "street name" for which the broker
indicates that instructions have not been received from the beneficial owners or
other persons entitled to vote and for which the broker does not have
discretionary voting authority. Abstentions and broker non-votes will be counted
as shares present for purposes of determining whether a quorum is present but
will not be (i) considered votes cast at the Special Meeting or (ii) voted for
or against any adjournment proposal. Thus, abstentions and broker non-votes are
effectively votes against the proposal.
APPROVAL OF THE LIQUIDATION, DISSOLUTION AND
--------------------------------------------
TERMINATION OF THE FUNDS
------------------------
THE LIQUIDATION IN GENERAL.
Each Fund proposes to liquidate its assets and dissolve or terminate its
existence pursuant to the provisions of the Plan as approved by the Board on
January 3, 2006, when the Board considered various alternatives and then
determined that an orderly liquidation of each Fund's assets was in the best
interests of each Fund and its shareholders. The Plan provides for the complete
liquidation of all of the assets of each Fund. If the Plan is approved by the
requisite shareholder vote, LMFA and each Sub-Adviser, as applicable, will
undertake to liquidate the Fund's assets at market prices and on such terms and
conditions as they shall determine to be reasonable and in the best interests of
each Fund and its shareholders. LMFA and its affiliates have agreed to bear all
expenses related to the liquidation and termination of the Funds (other than
transaction costs, taxes and extraordinary expenses).
In the event the Plan is not approved by the requisite shareholder vote,
the Board will consider what other action should be taken, which could include
re-soliciting shareholders.
REASONS FOR THE LIQUIDATION.
Cash Reserve Fund is an open-end investment management company organized as
a Massachusetts business trust on July 24, 1978. As of [DATE], the Fund's net
assets were approximately $[ ]. Tax-Exempt Fund is an open-end investment
management company organized as a Maryland corporation on July 26, 1982. As of
[DATE], the Fund's net assets were approximately $[ ]. U.S. Government Fund is a
series of Legg Mason Income Trust, Inc., an open-end investment management
company organized as a Maryland corporation on April 28, 1987. As of [DATE], the
Fund's net assets were approximately $[ ].
At a meeting of the Board held on January 3, 2006, the Board was advised by
LMFA that the continued operation of the Funds was not economically feasible or
in the best interests of each Fund or its shareholders considering all relevant
factors, which included, but were not limited to, the following:
1. The Funds were formed to serve primarily as cash sweep vehicles for
the retail brokerage customers of the Funds' previous distributor, Legg Mason
Wood Walker, Incorporated ("LMWW"), formerly an affiliate of LMFA. On December
1, 2005, LMWW was sold by the corporate parent of LMFA to an unaffiliated party
which, through its affiliates, operates a retail brokerage firm. LMWW, under its
new ownership, advised the Funds' distributor that LMWW would cease utilizing
the Funds as sweep vehicles for its brokerage accounts and instead would utilize
investment vehicles offered by a LMWW affiliate.
2. The Funds' distributor anticipated that once the Funds were no longer
sweep vehicles for retail brokerage accounts, the Funds would be unable to
attract and maintain sufficient investors to maintain a level of assets that
would enable the Funds to absorb all of the expenses of their operations and
3
offer a competitive return and that management of their portfolios in the face
of such declining assets would become less efficient. In anticipation of each
Fund's ceasing to function as a LMWW money market sweep vehicle, the distributor
arranged with LMWW to ask its retail brokerage customers to transfer their Fund
assets to other money market funds managed by LMFA affiliates in order to permit
these shareholders to be able to invest in money market funds with sweep
features. LMIS also asked its customers who held shares of the Fund to redeem
those shares and invest in other money market funds managed by LMFA affiliates.
The transfers of assets that followed these actions substantially reduced the
assets of and number of shareholders in the Funds.
3. In connection with the proposed liquidation of the Funds, LMFA has
agreed to waive advisory isory fees and/or pay other expenses of the Funds to
the extent necessary to ensure that the annualized expense ratios of the Funds
do not increase over their respective rates as of December 1, 2005 ("Expense
Cap"). The Expense Cap will continue until at least December 31, 2006 and may be
continued thereafter. The purpose of the Expense Cap is to maintain the Funds'
performance. The Expense Caps for Cash Reserve Fund, Tax-Exempt Fund, and U.S.
Government Fund, are 0.68%, 0.69%, and 0.72%, respectively.
LMFA informed the Board that it and its affiliates saw no alternatives to
increase cash flow into the Funds to reach the asset size necessary to achieve
competitve performance over the longer term. Accordingly, LMFA recommended that
the Board consider the liquidation of the Funds pursuant to the Plan attached to
this Proxy Statement as Appendix A. Based upon LMFA's presentation and
recommendation and other relevant factors, the Board concluded that a
liquidation of the Funds was in the best interests of the Funds and their
shareholders.
The Board, including the Board members who are not "interested persons" of
each applicable Fund, as that term is defined in the Investment Company Act of
1940, as amended (the "1940 Act"), then unanimously adopted resolutions
approving the Plan, declaring the proposed liquidation and dissolution advisable
and directing that it be submitted to Fund shareholders for consideration. LMFA
or its affiliates will bear all costs associated with the liquidation and
termination of the Funds (other than transaction costs, taxes and extraordinary
expenses).
In the event that the shareholders of a Fund do not approve the Plan, its
Board will continue to search for other alternatives for the Fund, which could
include re-soliciting shareholders.
THE BOARD RECOMMENDS AND ADVISES THAT SHAREHOLDERS VOTE FOR THE PROPOSED
LIQUIDATION OF ASSETS, DISSOLUTION AND TERMINATION OF EACH FUND PURSUANT TO THE
PLAN.
PLANS OF LIQUIDATION AND TERMINATION, DISSOLUTION AND TERMINATION, AND
LIQUIDATION OF THE FUNDS.
The Plan provides for the complete liquidation of all of the assets of each
Fund. If the Plan is approved by Fund shareholders, LMFA and its affiliates will
undertake to liquidate each Fund's assets at market prices and on such terms and
conditions as LMFA and the applicable Sub-Adviser shall determine to be
reasonable and in the best interests of each Fund and its shareholders.
LIQUIDATION VALUE.
If the Plan is approved by Fund shareholders at the Special Meeting, as
soon as practicable after the consummation of the sale of all of the Fund's
portfolio securities and the payment of all of the Fund's known liabilities and
obligations, each Fund shareholder will receive a distribution in an amount
equal to the net asset value per share, as determined in accordance with the
Fund's current registration statement (the "NAV Liquidation Distribution").
4
Shareholders may also receive previously declared and unpaid dividends and
distributions, together with the NAV Liquidation Distribution, with respect to
each of the shareholder's Fund shares.
Each Fund will pay the NAV Liquidation Distribution and any capital gain or
dividend distribution (together, the "Liquidating Distribution") on the
Liquidation Date (as defined below). The amount of these distributions actually
paid will vary depending on a number of factors, such as changes in value of the
Fund's holdings and net redemptions of Fund shares.
Affiliates of LMFA may purchase Fund shares in connection with the
liquidation of each Fund or otherwise hold Fund shares. No NAV Liquidation
Distributions will be made to such affiliates until shareholders not affiliated
with the LMFA have received NAV Liquidation Distributions of $1.00 per share.
FEDERAL INCOME TAX CONSEQUENCES.
The following summarizes general information with regard to the federal
income tax consequences to shareholders on receipt of the distribution from the
Funds pursuant to the provisions of the Plan. This summary also discusses the
effect of federal income tax provisions on each Fund resulting from its
liquidation and termination. This summary is based on the tax laws and
regulations in effect on the date of this Proxy Statement, all of which are
subject to change by legislative or administrative action, possibly with
retroactive effect. The Funds have not sought a ruling from the Internal Revenue
Service with respect to the tax consequences described herein.
This summary does not address the particular federal income tax
consequences which may apply to certain shareholders such as trusts, estates,
non-resident aliens or other foreign investors. This summary does not address
state or local tax consequences. The tax consequences discussed herein may
affect shareholders differently depending on their particular tax situations
unrelated to the Liquidating Distribution, and accordingly, this summary is not
a substitute for careful tax planning on an individual basis. SHAREHOLDERS
SHOULD CONSULT THEIR PERSONAL TAX ADVISERS CONCERNING THEIR PARTICULAR TAX
SITUATIONS AND THE IMPACT THEREON OF RECEIVING THE LIQUIDATING DISTRIBUTION AS
DISCUSSED HEREIN. The receipt of the Liquidating Distribution may result in tax
consequences that are unanticipated by shareholders.
For federal income tax purposes, the Liquidating Distribution received
pursuant to the Plan by a U.S. shareholder (I.E., a Fund shareholder who is
subject to U.S. federal taxation on a net income basis) may consist of three
elements: (i) a capital gain dividend to the extent of any net long-term capital
gains recognized by the Fund during its final tax year; (ii) an income dividend
to the extent the amount of the Fund's investment income and net short-term
capital gains earned during its final tax year that have not previously been
distributed exceed the Fund's expenses for the year; and (iii) a distribution
treated as payment for the U.S. shareholder's shares. With respect to Tax-Exempt
Fund, the portion of the distribution described in clause (ii) allocable to
exempt interest should be an exempt-interest dividend to the shareholders, if so
designated by the Fund.
Since each Fund is a money market fund, it is not anticipated that any
portion of the Liquidating Distribution will consist of long-term capital gains.
The composition of the actual Liquidating Distribution may vary due to changes
in market conditions and the composition of the Fund's portfolio at the time its
assets are sold. Prior to the last day of a Fund's final taxable year, the Board
must authorize any capital gain dividend and income dividend to be distributed
as part of the Liquidating Distribution. Within 60 days after the close of the
Fund's final taxable year (which will be deemed to close on the Liquidation
5
Date), the Fund will notify U.S. shareholders as to the portion, if any, of the
Liquidating Distribution that constitutes a capital gain dividend and that
constitutes an income dividend (including, with respect to ax-Exempt Fund, the
portion of the income dividend that qualifies as an exempt-interest dividend).
Since a Fund would seek to retain its qualification as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
(the "Code") during the liquidation period, it would not expect to be taxed on
any of its net capital gains realized from the sale of its assets or ordinary
income earned. In the unlikely event that a Fund should lose its status as a RIC
during the liquidation process, the Fund would be subject to taxes which would
reduce the amount of Liquidating Distributions, and, in the case of Tax-Exempt
Fund, result in the inability to pay exempt-interest dividends to its U.S.
shareholders.
Any portion of a Liquidating Distribution paid under the Plan out of
ordinary income or net realized long-term capital gains will be taxed under the
Code in the same manner as any other distribution of the Fund. Accordingly, such
amounts will be treated as ordinary income or long-term capital gains, if so
designated. As described above, with respect to Tax-Exempt Fund, the portion of
a Liquidating Distribution that qualifies as an exempt-interest dividend will be
exempt from federal income tax, if so designated.
The balance of any amount (after accounting for the capital gain dividend
and income dividend portions of the Liquidating Distribution) received upon
liquidation will be treated for federal income tax purposes as a payment in
exchange for a U.S. shareholder's shares in the Fund. A U.S. shareholder will
recognize a taxable gain or loss on such exchange equal to the difference
between the amount of the payment and the U.S. shareholder's tax basis in its
Fund shares. Because each Fund is a money market fund, it is not anticipated
that a shareholder will recognize any gain or loss on such exchange. Any such
gain or loss will be a capital gain or capital loss if the U.S. shareholder
holds its shares as capital assets. Any recognized gain or loss will constitute
a long-term capital gain or long-term capital loss, as the case may be, if a
Fund's shares were held for more than one year by the U.S. shareholder at the
time of the exchange. Under current law, long-term capital gains are taxed to
individual U.S. shareholders at a maximum tax rate of 15%. If the U.S.
shareholder held its Fund shares for not more than one year at the time of the
deemed exchange, any gain or loss will be a short-term capital gain or loss.
Short-term capital gains are taxed to individual U.S. shareholders at the
graduated income tax rates applicable to ordinary income. All income recognized
by a corporate U.S. shareholder pursuant to the liquidation of the Fund (other
than Tax-Exempt Fund's properly designated exempt-interest dividends),
regardless of its character as capital gain or ordinary income, will be subject
to tax at the regular graduated federal corporate income tax rates.
LIQUIDATING DISTRIBUTION.
At present, the date on which the Funds will be liquidated and on which
each Fund will pay Liquidating Distributions to its shareholders is uncertain,
but it is anticipated that if Fund shareholders adopt the Plan, such liquidation
would occur on February 27, 2006 (the "Liquidation Date"). Shareholders holding
Fund shares as of the close of business on the day prior to the Liquidation Date
will automatically be sent their Liquidating Distribution on the Liquidation
Date.
The liquidation of the assets and termination of the Fund will have the
effect of permitting the Fund's shareholders to invest the distributions to be
received by them upon the Fund's liquidation in investment vehicles of their own
choice. Investors who desire the continued use of a managed investment may
obtain prospectuses for other Legg Mason Funds by calling 800-822-5544.
6
The right of a shareholder to redeem his or her shares of a Fund at any
time will not be affected by the proposal to liquidate the assets and dissolve
the Funds or by the approval of the Plan. Therefore, a shareholder may redeem
shares in accordance with redemption procedures set forth in each Fund's current
Prospectus and Statement of Additional Information without waiting for the Fund
to take any action. The Funds do not impose any redemption charges.
IMPACT OF THE PLAN ON THE FUNDS' STATUS UNDER THE 1940 ACT.
The Plan provides for the eventual cessation of Cash Reserve Fund's and
Tax-Exempt Fund's activities as an investment company and its deregistration
under the 1940 Act. On the Liquidation Date, the Fund will cease doing business
as a registered investment company and, as soon as practicable, will apply for
deregistration under the 1940 Act. It is expected that the U.S. Securities and
Exchange Commission ("SEC") will issue orders approving the deregistration of
Cash Reserve Fund and Tax-Exempt Fund on the basis that each is no longer doing
business as an investment company, although there can be no assurance given that
the SEC will issue such an order. A vote in favor of the Plan will constitute a
vote in favor of such a course of action. Until the Fund's deregistration
becomes effective, Cash Reserve Fund and Tax-Exempt Fund will each continue to
be subject to and will comply with the 1940 Act as a registered investment
company.
PROCEDURES FOR THE FUNDS' DISSOLUTION UNDER THE APPLICABLE STATE LAW.
With respect to Cash Reserve Fund and pursuant to applicable Massachusetts
law governing business trusts, a copy of the Board's resolution to terminate the
Fund will be filed with Massachusetts at which time Cash Reserve Fund will be
legally dissolved.
With respect to Tax-Exempt Fund and pursuant to the Maryland General
Corporation Law (the "MGCL") and the Fund's Articles of Incorporation, after the
Liquidation Date, Articles of Dissolution will be executed, acknowledged and
filed in accordance with the MGCL. Upon the effective date of such Articles of
Dissolution, Tax-Exempt Fund will be legally dissolved
With respect to U.S. Government Fund and pursuant to the MGCL and the
Articles of Incorporation of Legg Mason Income Trust, Inc., after the
Liquidation Date, Articles of Amendment to amend the Articles of Incorporation
of Legg Mason Income Trust, Inc. will be executed, acknowledged and filed in
accordance with the MGCL to cancel the outstanding shares of the Fund, liquidate
the Fund's assets, and reclassify such shares of stock as unissued stock of Legg
Mason Income Trust, Inc. Upon the effective date of such Articles of Amendment,
U.S. Government Fund will cease to be a series of Legg Mason Income Trust, Inc.
and the Fund's existence will terminate.
ADDITIONAL INFORMATION
----------------------
ANNUAL AND SEMI-ANNUAL REPORTS.
Each Fund's most recent annual report and semi-annual report are available
upon request, without charge, by writing to the Legg Mason Funds, c/o Boston
Financial Data Services, P.O. Box 55214, Boston, Massachusetts 02205-8504, from
the Funds' website at www.leggmasonfunds.com, or by calling 1-800-822-5544.
SHAREHOLDER PROPOSALS.
As a general matter, the Funds do not hold annual meetings of shareholders.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
a subsequent meeting of shareholders (assuming that the Funds are not liquidated
7
as proposed) should send their written proposals to the Secretary of the Legg
Mason Funds, 100 Light Street, Baltimore, MD 21202. Proposals must be received
at a reasonable time prior to the date of a meeting of shareholders to be
considered for inclusion in the materials for any such meeting. Timely
submission of a proposal does not, however, necessarily mean that such proposal
will be included.
OTHER MATTERS TO COME BEFORE THE MEETING.
The Board is not aware of any other matters that will come before the
Special Meeting. Should any other matter properly come before the Special
Meeting, the persons named on the accompanying proxy card shall be entitled to
vote the shares represented by such proxy in accordance with their judgment on
such matters.
SHAREHOLDERS SHARING THE SAME ADDRESS.
If two or more shareholders share the same address, only one copy of this
Proxy Statement is being delivered to that address, unless a Fund has received
contrary instructions from one or more of the shareholders at that shared
address. Upon request, the Funds will deliver a separate copy of this Proxy
Statement to a shareholder at a shared address. Please note that each
shareholder will receive a separate proxy card, regardless of whether he or she
resides at a shared address. Please call 800-822-5544 or forward a written
request to the Funds c/o Boston Financial Data Services, P.O. Box 55214, Boston,
Massachusetts 02205-8504 if you would like to (1) receive a separate copy of
this Proxy Statement; (2) receive your annual reports or proxy statements
separately in the future; or (3) request delivery of a single copy of annual
reports or proxy statements if you are currently receiving multiple copies at a
shared address.
BENEFICIAL OWNERS.
As of the close of business on the Record Date, [Legg Mason, Inc., 100
Light Street, Baltimore, MD 21202, an affiliate of LMFA, owned [ ]%, [ ]% and [
]% of the shares of Cash Reserve Fund, Tax-Exempt Fund, and U.S. Government
Fund, respectively. It is currently expected that these shares will be voted FOR
the proposal.
As of the close of business on the Record Date, the persons named in the
following table owned, to the knowledge of management, more than 5% of the
outstanding shares of each Fund in the amounts indicated:
NAME AND ADDRESS OF APPROXIMATE NUMBER DOLLAR VALUE OF PERCENTAGE OF
SHAREHOLDER OF SHARES OWNED SHARES OWNED SHARES OWNED
Cash Reserve Fund:
- ------------------
Tax-Exempt Fund:
- ----------------
U.S. Government
- ---------------
Fund:
- -----
As of the Record Date, all Directors/Trustees and Officers of each Fund as
a group [owned less than 1% of each Fund.]
8
APPENDIX A
PLAN OF LIQUIDATION AND TERMINATION
LEGG MASON CASH RESERVE TRUST
THIS PLAN OF LIQUIDATION AND TERMINATION ("PLAN") is made by Legg Mason
Cash Reserve Trust ("TRUST"), a Massachusetts business trust that is registered
with the Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 ACT"). This
Plan is intended to effect the complete liquidation and termination of the Trust
in conformity with applicable provisions of Massachusetts law and the Trust's
Declaration of Trust.
R E C I T A L S
---------------
A. The Trust's board of trustees ("BOARD"), has determined, based on the
representations and recommendations of Legg Mason Fund Adviser, Inc., Western
Asset Management Company and Legg Mason Investor Services, LLC, the Trust's
investment manager, adviser and distributor, respectively, that the Trust's
continuation is not in the best interests of the Trust or the Trust's
shareholders as a result of factors or events adversely affecting the Trust's
ability to conduct its business and operations in an economically viable manner.
B. Pursuant to Article XII, Sections 4(c) and (d) of the Trust's
Declaration of Trust dated July 24, 1978, as amended ("DECLARATION"), the Board
may liquidate the Trust and terminate its existence, subject to the affirmative
vote of the lesser of (1) 67% of the Trust's shares present at a meeting of its
shareholders if the holders of more than 50% of its outstanding shares are
present in person or by proxy or (2) more than 50% of the Trust's outstanding
shares ("REQUIRED VOTE").
C. Based on the foregoing, the Board has unanimously adopted this Plan
and has directed that this Plan be submitted to the Trust's shareholders
for approval.
P R O V I S I O N S
-------------------
This Plan, as set forth below, shall be effective from and after the date
the Required Vote is certified at a meeting called for that purpose.
ARTICLE 1. LIQUIDATION AND TERMINATION; BOARD POWERS
(a) The Trust is hereby liquidated and terminated, and its affairs shall
be wound up as the Board authorizes and directs.
(b) All powers of the Board under the Declaration and the Trust's by-laws
shall continue with respect to the Trust, including the powers to (1) fulfill
and/or discharge the Trust's contracts, (2) collect the Trust's assets, (3)
sell, convey, assign, exchange, transfer, and/or otherwise dispose of all or any
part of the Trust's remaining property to one or more persons at public or
private sale for consideration that may consist in whole or in part of cash,
securities, or other property of any kind, (4) discharge and/or pay the Trust's
liabilities, (5) prosecute, settle, and/or compromise claims of the Trust or to
which it is subject, (6) file final state and federal tax returns for the Trust,
(7) mail notice to all known creditors and employees, if any, of the Trust, at
their respective addresses shown on the Trust's records, and (8) do all other
acts necessary or appropriate to wind up the Trust's business. In addition, the
Board has the power to abandon the Plan if doing so would be in the best
interest of the Trust's shareholders.
A-1
ARTICLE 2. FILINGS WITH GOVERNMENTAL AUTHORITIES
(a) The Board shall authorize the appropriate persons to (i) file for and
obtain any necessary tax clearance certificates and/or other documents required
from any applicable governmental authority and (ii) timely file any other
documents required by any such authority, including Internal Revenue Service
Form 966 (titled "Corporate Dissolution or Liquidation").
(b) The Board shall authorize the appropriate persons to file any document
required by the state of Massachusetts to dissolve the Trust's existence as a
Massachusetts business trust.
(c) The Board shall authorize the appropriate persons to file Form N-8F
with the Securities and Exchange Commission to deregister the Trust as an
investment company under the 1940 Act.
ARTICLE 3. LIQUIDATION PROCEDURES
(a) Subject to certification of the Required Vote, the assets of the
Trust shall be sold and converted to money.
(b) The Board shall authorize all actions to be taken such that the Trust
will provide for payment of all outstanding obligations, taxes and other
liabilities of the Trust, including necessary expenses of its liquidation and
termination, subject to Article 5 below.
(c) As soon as reasonably practicable after (1) certification of the
Required Vote, (2) paying or adequately providing for the payment of the Trust's
liabilities, and (3) receiving releases, indemnities, and refunding agreements
the Board deems necessary for its protection, the Board shall cause the Trust's
remaining assets to be distributed in one or two (if necessary) distributions of
cash to its shareholders of record as of a date the Board designates (each a
"SHAREHOLDER") in redemption and cancellation of their Trust shares. On such
date, each Shareholder's interest in the Trust shall be fixed and the Trust's
books shall be closed. The amount of the liquidating distribution to each
Shareholder shall be in proportion to the number of Trust shares held thereby on
such date, except insofar as any Shareholder which is an affiliated person of
Legg Mason Fund Adviser, Inc. or its affiliated persons shall accept a lesser
amount for a portion or all of its shares, in which case the difference between
the proportionate amount and the amount otherwise due the "affiliated"
Shareholder(s) shall be reallocated among all other Shareholders.
(d) If the Board is unable to locate any Shareholder(s) to whom
distributions pursuant to paragraph (c) are payable, the Board may create, in
the name of the Trust, a trust with a financial institution and, subject to
applicable abandoned property laws, deposit any remaining Trust assets in such
trust for the benefit of such Shareholder(s). The expenses of such trust shall
be charged against the assets therein.
ARTICLE 4. AMENDMENT OF THIS PLAN
The Board may authorize variations from, or amendments of, the provisions
of this Plan (other than the terms of the liquidating distributions) that it
deems necessary or appropriate to effect such distributions and the Trust's
liquidation and termination.
A-2
ARTICLE 5. EXPENSES
The Trust shall bear the expenses, if any, incurred in connection with
carrying out this Plan, including the cost of liquidating the Trust's assets and
terminating its existence, other than those expenses that Legg Mason Fund
Adviser, Inc. and its affiliates have agreed to bear and those expenses
referenced in Article 3, paragraph (d) hereof.
A-3
PLAN OF DISSOLUTION AND TERMINATION
LEGG MASON TAX EXEMPT TRUST, INC.
THIS PLAN OF DISSOLUTION AND TERMINATION ("PLAN") is made by Legg Mason Tax
Exempt Trust, Inc. ("CORPORATION"), a Maryland corporation that is registered
with the Securities and Exchange Commission as an open-end management investment
company under the Investment Company Act of 1940, as amended ("1940 ACT"). This
Plan is intended to effect the complete dissolution and termination of the
Corporation in conformity with applicable provisions of Maryland law and the
Corporation's Articles of Incorporation.
R E C I T A L S
---------------
A. The Corporation's board of directors ("BOARD"), has determined, based
on the representations and recommendations of Legg Mason Fund Adviser, Inc.,
Legg Mason Trust, Company, N.A., and Legg Mason Investor Services, LLC, the
Corporation's investment manager, adviser and distributor, respectively, that
the Corporation's continuation is not in the best interests of the Corporation
or the Corporation's shareholders as a result of factors or events adversely
affecting the Corporation's ability to conduct its business and operations in a
viable manner.
B. Pursuant to Maryland General Corporate Law Sections 2-104(b)(5) and
3-403 and Article Eighth of the Corporation's Articles of Incorporation, the
Board may dissolve the Corporation and terminate its existence, subject to the
affirmative vote of a majority of the Corporation's outstanding shares entitled
to vote thereon ("REQUIRED VOTE").
C. Based on the foregoing, the Board has unanimously adopted this Plan,
has advised its approval by shareholders, and has directed that this Plan be
submitted to the Corporation's shareholders for approval.
P R O V I S I O N S
-------------------
This Plan, as set forth below, shall be effective from and after the date
the Required Vote is certified at a meeting called for that purpose.
ARTICLE 1. DISSOLUTION AND TERMINATION; BOARD POWERS
(a) The Corporation is hereby dissolved and terminated, and its affairs
shall be wound up as the Board authorizes and directs.
(b) All powers of the Board under the Corporation's Articles of
Incorporation and by-laws shall continue with respect to the Corporation,
including the powers to (1) fulfill and/or discharge the Corporation's
contracts, (2) collect the Corporation's assets, (3) sell, convey, assign,
exchange, transfer, and/or otherwise dispose of all or any part of the
Corporation's remaining property to one or more persons at public or private
sale for consideration that may consist in whole or in part of cash, securities,
or other property of any kind, (4) discharge and/or pay the Corporation's
liabilities, (5) prosecute, settle, and/or compromise claims of the Corporation
or to which it is subject, (6) file final state and federal tax returns for the
Corporation, (7) mail notice to all known creditors and employees, if any, of
the Corporation, at their respective addresses shown on the Corporation's
records, and (8) do all other acts necessary or appropriate to wind up the
Corporation's business. In addition, the Board has the power to abandon the Plan
if doing so would be in the best interest of the Corporation's shareholders.
A-4
ARTICLE 2. FILINGS WITH GOVERNMENTAL AUTHORITIES
(a) The Board shall authorize the appropriate persons to file for and
obtain (i) a tax clearance certificate from the Comptroller of the Treasury of
Maryland or the collector of taxes stating that all taxes payable by the
Corporation have been paid or provided for and (ii) if the Corporation has
employees, a certificate from the Secretary of Economic and Employment
Development of Maryland stating that all unemployment insurance contributions,
reimbursement payments, and interest have been paid or provided for.
(b) The Board shall authorize the appropriate persons to file articles of
dissolution with the Maryland Department of Assessments and Taxation to dissolve
the Corporation.
(c) The Board shall authorize the appropriate persons to file Form N-8F
with the Securities and Exchange Commission to deregister the Corporation as an
investment company under the 1940 Act.
ARTICLE 3. DISSOLUTION PROCEDURES
(a) Subject to certification of the Required Vote, the assets of the
Corporation shall be converted to money.
(b) The Board shall authorize all actions to be taken such that the
Corporation will provide for the payment of all outstanding obligations, taxes
and other liabilities of the Corporation, including necessary expenses of its
dissolution and termination, subject to Article 5 below.
(c) As soon as reasonably practicable after (1) certification of the
Required Vote, (2) paying or adequately providing for the payment of the
Corporation's liabilities, and (3) receiving releases, indemnities, and
refunding agreements the Board deems necessary for its protection, the Board
shall cause the Corporation's remaining assets to be distributed in one or two
(if necessary) distributions of cash to its shareholders of record as of a date
the Board designates (each a "SHAREHOLDER") in redemption and cancellation of
their Corporation shares. On such date, each Shareholder's interest in the
Corporation shall be fixed and the Corporation's books shall be closed. The
amount of the liquidating distribution to each Shareholder shall be in
proportion to the number of Corporation shares held thereby on such date, except
insofar as any Shareholder which is an affiliated person of Legg Mason Fund
Adviser, Inc. or its affiliated persons shall accept a lesser amount for a
portion or all of its shares, in which case the difference between the
proportionate amount and the amount otherwise due the "affiliated"
Shareholder(s) shall be reallocated among all other Shareholders.
(d) If the Board is unable to locate any Shareholder(s) to whom
distributions pursuant to paragraph (c) are payable, the Board may create, in
the name of the Corporation, a trust with a financial institution and, subject
to applicable abandoned property laws, deposit any remaining Corporation assets
in such trust for the benefit of such Shareholder(s). The expenses of such trust
shall be charged against the assets therein.
ARTICLE 4. AMENDMENT OF THIS PLAN
The Board may authorize variations from, or amendments of, the provisions
of this Plan (other than the terms of the liquidating distributions) that it
deems necessary or appropriate to effect such distributions in cancellation and
redemption of the Corporation's shares and the Corporation's dissolution and
termination.
A-5
ARTICLE 5. EXPENSES
The Corporation shall bear the expenses, if any, incurred in connection
with carrying out this Plan, including the cost of liquidating the Corporation's
assets and dissolving and terminating its existence, other than those expenses
that Legg Mason Fund Adviser, Inc. and its affiliates have agreed to bear and
those expenses referenced in Article 3, paragraph (d) hereof.
A-6
PLAN OF LIQUIDATION
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO
(a series of Legg Mason Income Trust, Inc.)
THIS PLAN OF LIQUIDATION ("PLAN") is made by Legg Mason Income Trust, Inc.
("CORPORATION"), a Maryland corporation that is registered with the Securities
and Exchange Commission as an open-end management investment company under the
Investment Company Act of 1940, as amended ("1940 ACT"), with respect to Legg
Mason U.S. Government Money Market Portfolio, a series of shares and a
segregated portfolio of assets thereof ("FUND"). This Plan is intended to effect
the complete liquidation of the Fund and the cancellation of all of the
outstanding shares thereof ("SHARES"), in conformity with applicable provisions
of Maryland law and the Corporation's Articles of Incorporation.
R E C I T A L S
---------------
A. The Corporation's board of directors ("BOARD"), has determined, based
on the representations and recommendations of Legg Mason Fund Adviser, Inc.,
Western Asset Management Company and Legg Mason Investor Services, LLC, the
Fund's investment manager, adviser and distributor, respectively, that the
Fund's continuation is not in the best interests of the Fund or the Fund's
shareholders as a result of factors or events adversely affecting the Fund's
ability to conduct its business and operations in a viable manner.
B. Pursuant to Maryland General Corporate Law Sections 2-104(b)(5), 2-602
and 2-604, and Article Eighth of the Corporation's Articles of Incorporation,
the Board may amend the Corporation's charter to cancel the Fund's outstanding
shares and liquidate the Fund, subject to the affirmative vote of a majority of
the Fund's outstanding shares entitled to vote thereon ("REQUIRED VOTE").
C. Based on the foregoing, the Board has unanimously adopted this Plan,
has advised its approval by shareholders, and has directed that this Plan be
submitted to the Fund's shareholders for approval.
P R O V I S I O N S
-------------------
This Plan, as set forth below, shall be effective from and after the date
the Required Vote is certified at a meeting called for that purpose.
ARTICLE 1. LIQUIDATION; BOARD POWERS
(a) The Fund is hereby liquidated, and its affairs shall be wound up as
the Board authorizes and directs.
(b) All powers of the Board under the Corporation's Articles of
Incorporation and by-laws shall continue with respect to the Fund, including the
powers to (1) fulfill and/or discharge the Fund's contracts, (2) collect the
Fund's assets, (3) sell, convey, assign, exchange, transfer, and/or otherwise
dispose of all or any part of the Fund's remaining property to one or more
persons at public or private sale for consideration that may consist in whole or
in part of cash, securities, or other property of any kind, (4) discharge and/or
pay the Fund's liabilities, (5) prosecute, settle, and/or compromise claims of
the Fund or to which it is subject, (6) file final state and federal tax returns
for the Fund, (7) mail notice to all known creditors and employees, if any, of
the Fund, at their respective addresses shown on the Fund's records, and (8) do
all other acts necessary or appropriate to wind up the Fund's business. In
addition, the Board has the power to abandon the Plan if doing so would be in
A-7
the best interest of the Fund's shareholders.
ARTICLE 2. FILINGS WITH THE STATE OF MARYLAND
(a) The Board shall authorize the appropriate persons to (i) amend the
Corporation's Articles of Incorporation substantially as set forth in the
Articles of Amendment attached hereto as Appendix I ("Articles of Amendment") to
provide for, among other things, the liquidation of the assets of the Fund, the
distribution of the proceeds therefrom to its shareholders, and the cancellation
of the Shares and (ii) file the Articles of Amendment with the State Department
of Assessments and Taxation of Maryland. Certification of the Required Vote to
approve this Plan shall also constitute approval of the Articles of Amendment.
(b) The Board shall authorize the appropriate persons to file for and
obtain (i) a tax clearance certificate from the Comptroller of the Treasury of
Maryland or the collector of taxes stating that all taxes payable by the Fund
have been paid or provided for and (ii) if the Fund has employees, a certificate
from the Secretary of Economic and Employment Development of Maryland stating
that all unemployment insurance contributions, reimbursement payments, and
interest have been paid or provided for.
ARTICLE 3. LIQUIDATION PROCEDURES
(a) Subject to certification of the Required Vote, the assets of the Fund
shall be converted to money.
(b) The Board shall authorize all actions to be taken such that the
Corporation, out of the Fund's assets, will provide for the payment of all
outstanding obligations, taxes and other liabilities of the Fund, including
necessary expenses of canceling the Fund's shares and its liquidation, subject
to Article 5 below.
(c) As soon as reasonably practicable after (1) certification of the
Required Vote, (2) paying or adequately providing for the payment of the Fund's
liabilities, and (3) receiving releases, indemnities, and refunding agreements
the Board deems necessary for its protection, the Board shall cause the Fund's
remaining assets to be distributed in one or two (if necessary) distributions of
cash to its shareholders of record as of a date the Board designates (each a
"SHAREHOLDER") in redemption and cancellation of their Fund shares. On such
date, each Shareholder's interest in the Fund shall be fixed and the Fund's
books shall be closed. The amount of the liquidating distribution to each
Shareholder shall be in proportion to the number of Fund shares held thereby on
such date, except insofar as any Shareholder which is an affiliated person of
Legg Mason Fund Adviser, Inc. or its affiliated persons shall accept a lesser
amount for a portion or all of its shares, in which case the difference between
the proportionate amount and the amount otherwise due the "affiliated"
Shareholder(s) shall be reallocated among all other Shareholders.
(d) If the Board is unable to locate any Shareholder(s) to whom
distributions pursuant to paragraph (c) are payable, the Board may create, in
the name of the Fund, a trust with a financial institution and, subject to
applicable abandoned property laws, deposit any remaining Fund assets in such
trust for the benefit of such Shareholder(s). The expenses of such trust shall
be charged against the assets therein.
A-8
ARTICLE 4. AMENDMENT OF THIS PLAN
The Board may authorize variations from, or amendments of, the provisions
of this Plan (other than the terms of the liquidating distributions) that it
deems necessary or appropriate to effect such distributions in cancellation and
redemption of the Fund's shares, in accordance with the laws of the State of
Maryland and the purposes to be accomplished by this Plan.
ARTICLE 5. EXPENSES
The Fund shall bear the expenses, if any, incurred in connection with
carrying out this Plan, including the cost of liquidating the Fund's assets and
redeeming and canceling all of the Shares, other than those expenses that Legg
Mason Fund Adviser, Inc. and its affiliates have agreed to bear and those
expenses referenced in Article 3, paragraph (d) hereof.
A-9
APPENDIX I
LEGG MASON INCOME TRUST, INC.
ARTICLES OF AMENDMENT
LEGG MASON INCOME TRUST, INC., a Maryland corporation registered with the
Securities and Exchange Commission as an open-end management investment company
under the Investment Company Act of 1940, as amended, and having its principal
office in the City of Baltimore in the state of Maryland (the "CORPORATION"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
(the "DEPARTMENT") that:
FIRST: In connection with and in furtherance of a plan of liquidation of
Legg Mason U.S. Government Money Market Portfolio, a separate series of stock of
the Corporation (the "LIQUIDATING SERIES"), the Corporation hereby amends its
Amended and Restated Articles of Incorporation currently in effect (the
"ARTICLES OF INCORPORATION") to include the following:
A. As of the Effective Date (as defined below):
(i) each unissued share of the Liquidating Series, par value $0.001
per share, is hereby reclassified into, and shall become, one
unissued, unclassified share of capital stock of the
Corporation; and
(ii) the Corporation shall proceed to sell and liquidate all assets
belonging to the Liquidating Series and to pay from the proceeds
thereof all liabilities belonging to such Liquidating Series.
After payment of the liabilities belonging to the Liquidating Series, the
remaining proceeds from the sale and liquidation of the assets belonging to the
Liquidating Series shall be distributed as a liquidating distribution, as soon
as practicable following the Effective Date, but in any event within thirty days
thereafter, among the holders of the shares of the Liquidating Series. The date
that the liquidating distribution is paid shall be the "LIQUIDATION DATE."
Holders of the shares of the Liquidating Series shall receive a liquidating
distribution in proportion to the number of such shares held by them and
recorded on the books of the Corporation as of the close of business on the
Liquidation Date.
B. Upon payment by the Corporation of the liquidating distribution to the
shareholders of the Liquidating Series, each issued and outstanding share of the
Liquidating Series shall be cancelled and shall cease to be issued and
outstanding, and each such cancelled share shall be reclassified into, and shall
become, one unissued, unclassified share of capital stock of the Corporation.
C. Upon cancellation of the issued and outstanding shares of the
Liquidating Series, and the reclassification of such cancelled shares and all
unissued shares of such Liquidating Series to unissued, unclassified shares of
capital stock of the Corporation, the provisions of the Articles of
Incorporation designating and classifying shares of stock of the Corporation
into shares of the Liquidating Series, establishing and describing the
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of shares of the
Liquidating Series and the description, and terms and conditions, of various
classes of shares of the Liquidating Series, shall be deleted from the Articles
of Incorporation. Such deletions from the Articles of Incorporation shall
include only provisions of the Articles of Incorporation as they relate to
shares of the Liquidating Series, and to the extent which any provisions of the
I-1
Articles of Incorporation relate both to shares of the Liquidating Series and
one or more other series of stock of the Corporation, such provisions shall
remain in the Articles of Incorporation but shall be deemed to apply only to
such one or more other series of stock of the Corporation.
SECOND: The amendments to the Articles of Incorporation herein set forth
were duly advised by the Board of Directors of the Corporation and approved by a
majority of all the Liquidating Series' outstanding shares entitled to vote
thereon, as required by the Articles of Incorporation and applicable law.
THIRD: The amendments set forth herein do not increase the authorized
capital stock of the Corporation.
FOURTH: The amendments set forth herein shall become effective as of the
close of business on the date on which these Articles of Amendment, having been
duly advised, approved, signed, acknowledged and sealed by the Corporation as
required by the laws of the State of Maryland, and not having been abandoned
prior to the Liquidation Date by majority vote of the entire Board of Directors
of the Corporation, are filed for record with the Department (the "EFFECTIVE
DATE").
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed in its name and on its behalf by its undersigned [President] and
witnessed or attested to by its undersigned [Secretary] as of the____ day of
________________, 2006 and its undersigned [President] acknowledges that these
Articles of Amendment are the act and deed of the Corporation and, under
penalties of perjury, that the matters and facts set forth herein are true in
all material respects to the best of his knowledge, information and belief.
LEGG MASON INCOME TRUST, INC.
By: ___________________________________
Name:
Title:
ATTEST:
By: _______________________________
Name:
Title:
I-2
LEGG MASON CASH RESERVE TRUST
LEGG MASON TAX-EXEMPT TRUST, INC.
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO,
A SERIES OF LEGG MASON INCOME TRUST, INC.
(EACH, A "FUND")
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
February 24, 2006
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF LEGG MASON
CASH RESERVE TRUST AND THE BOARDS OF DIRECTORS OF LEGG MASON TAX-EXEMPT TRUST,
INC. AND LEGG MASON INCOME TRUST, INC. ON BEHALF OF LEGG MASON U.S. GOVERNMENT
MONEY MARKET PORTFOLIO.
The undersigned hereby appoints as proxies [Marie K. Karpinski,] [Richard
M. Wachterman] and [Mark R. Fetting,] and each of them (with power of
substitution), to vote all shares of the Fund(s) which the undersigned is
entitled to vote, at the Special Meeting of Shareholders to be held at 10:00
a.m., Eastern time, on February 24, 2006, at the offices of the Funds at 100
Light Street (34th Floor, Executive Briefing Room), Baltimore, Maryland 21202,
and any adjournment thereof ("Special Meeting"), with all the power the
undersigned would have if personally present.
The shares represented by this proxy will be voted as instructed. Unless
indicated to the contrary, this proxy shall be deemed to grant authority to vote
"FOR" the proposal relating to the Fund, as applicable, with discretionary power
to vote upon such other business as may properly come before the Special
Meeting. Whether or not you plan to attend the meeting, you are urged to execute
and return this proxy card, which may be revoked at any time prior to its use.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU HOLD. PLEASE INDICATE YOUR
VOTE ON THE REVERSE SIDE OF THIS PROXY CARD, SIGN AND DATE THE PROXY CARD BELOW
AND THEN RETURN THE PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
This proxy will not be valid unless it is dated and
signed exactly as instructed below.
If shares are held by an individual, sign your name
exactly as it appears on this proxy card. If shares
are held jointly, either party may sign, but the
name of the party signing should conform exactly to
the name shown on this proxy card. If shares are
held by a corporation, partnership or similar
account, the name and the capacity of the
individual signing the proxy card should be
indicated unless it is reflected in the form of
registration. For example: "ABC Corp., John Doe,
Treasurer."
---------------------------------------------------
Signature
---------------------------------------------------
Signature (if held jointly)
---------------------------------------------, 2006
Date
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS PROXY CARD.
LEGG MASON CASH RESERVE TRUST
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF LIQUIDATION AND
TERMINATION FOR LEGG MASON CASH RESERVE TRUST TO LIQUIDATE AND TERMINATE THE
FUND. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Liquidation and [ ] [ ] [ ]
Termination for Legg Mason Cash Reserve
Trust to liquidate and terminate the Fund.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU HOLD. PLEASE INDICATE YOUR
VOTE, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD.
LEGG MASON TAX-EXEMPT TRUST, INC.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF DISSOLUTION AND
TERMINATION FOR LEGG MASON TAX-EXEMPT TRUST, INC. TO DISSOLVE AND TERMINATE THE
FUND. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Dissolution and [ ] [ ] [ ]
Termination for Legg Mason Tax-Exempt
Trust, Inc. to dissolve and terminate
the Fund.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU HOLD. PLEASE INDICATE YOUR
VOTE, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD.
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO,
A SERIES OF LEGG MASON INCOME TRUST, INC.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF LIQUIDATION FOR
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO TO LIQUIDATE THE FUND. PLEASE
INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Liquidation for [ ] [ ] [ ]
Legg Mason U.S. Government Money Market
Portfolio to liquidate the Fund.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU HOLD. PLEASE INDICATE YOUR
VOTE, SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD AND RETURN THE PROXY
CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD.
LEGG MASON CASH RESERVE TRUST
BALLOT FOR THE SPECIAL MEETING OF SHAREHOLDERS
February 24, 2006
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF LIQUIDATION AND
TERMINATION FOR LEGG MASON CASH RESERVE TRUST TO LIQUIDATE AND TERMINATE THE
FUND. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Liquidation and [ ] [ ] [ ]
Termination for Legg Mason Cash Reserve
Trust to liquidate and terminate the Fund.
----------------------------
Signature
----------------------------
Signature (if held jointly)
_____________________ , 2006
Date
LEGG MASON TAX-EXEMPT TRUST, INC.
BALLOT FOR THE SPECIAL MEETING OF SHAREHOLDERS
February 24, 2006
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF DISSOLUTION AND
TERMINATION FOR LEGG MASON TAX-EXEMPT TRUST, INC. TO DISSOLVE AND TERMINATE THE
FUND. PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Dissolution and [ ] [ ] [ ]
Termination for Legg Mason Tax-Exempt Trust,
Inc. to dissolve and terminate the Fund.
----------------------------
Signature
----------------------------
Signature (if held jointly)
_____________________ , 2006
Date
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO,
A SERIES OF LEGG MASON INCOME TRUST, INC.
BALLOT FOR THE SPECIAL MEETING OF SHAREHOLDERS
February 24, 2006
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN OF LIQUIDATION FOR
LEGG MASON U.S. GOVERNMENT MONEY MARKET PORTFOLIO TO LIQUIDATE THE FUND. PLEASE
INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
VOTE ON PROPOSAL FOR AGAINST ABSTAIN
To approve the Plan of Liquidation for Legg [ ] [ ] [ ]
Mason U.S. Government Money Market Portfolio
to liquidate the Fund.
----------------------------
Signature
----------------------------
Signature (if held jointly)
_____________________ , 2006
Date