INVESTMENT ADVISER
Legg Mason Fund Adviser, Inc.
Baltimore, MD
INVESTMENT SUB-ADVISER REPORT TO SHAREHOLDERS
Western Asset Management Company FOR THE YEAR ENDED
Pasadena, CA DECEMBER 31, 1995
BOARD OF DIRECTORS THE
John F. Curley, Jr., Chairman LEGG MASON
Edward A. Taber, III, President GLOBAL
Richard G. Gilmore GOVERNMENT
Charles F. Haugh TRUST
Arnold L. Lehman
Dr. Jill E. McGovern PUTTING YOUR FUTURE FIRST
T. A. Rodgers
TRANSFER AND SHAREHOLDER SERVICING AGENT
Boston Financial Data Services [LEGG MASON GLOBAL
Boston, MA INVESTMENT TRUST LOGO]
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
COUNSEL
Kirkpatrick & Lockhart LLP
Washington, D.C.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Baltimore, MD
THIS REPORT IS NOT TO BE DISTRIBUTED UNLESS PRECEDED OR
ACCOMPANIED BY A PROSPECTUS.
LEGG MASON WOOD WALKER, INCORPORATED
111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (Bullet) 539 (Bullet) 0000
[RECYCLED LOGO] PRINTED ON RECYCLED PAPER
LMF-042
<PAGE>
TO OUR SHAREHOLDERS,
The Legg Mason Global Government Trust's net asset value increased
from $9.54 to $10.33 per share during the year ended December 31,
1995. During 1995, the Fund paid ordinary income dividends totaling
$1.16 and its total return for the year (price appreciation plus
reinvested dividends) was 20.8%. As of December 31, 1995, the dollar
weighted average maturity of the Fund's investment portfolio was 7.8
years and its annualized 30-day SEC yield was 6.63%.
The Fund seeks to provide capital appreciation and income in order
to achieve a competitive total return by investing primarily in a
global portfolio of high quality debt securities of the U.S. and
foreign governments. The Fund is required to invest a minimum of 75%
of its assets in government debt obligations, as well as a minimum of
75% of its assets in investment grade securities. As of December 31,
1995, the securities held in the portfolio were categorized as
follows:
<TABLE>
<S> <C>
Government 84.0%
Non-Government 16.0
Investment Grade 82.0%
Non-Investment Grade 18.0
</TABLE>
On the following pages, Keith J. Gardner, the Fund's portfolio
manager, reviews the portfolio's structure and performance, and
comments on the investment outlook for global bonds.
Investments in global bonds should be considered as a core part of
any well-diversified investment portfolio. We hope you will consider
using the Global Government Trust for investment of additional funds
as they become available. Some shareholders regularly add to their
investment in the Fund by authorizing automatic, monthly transfers
from their bank checking accounts or Legg Mason money market funds.
Your Investment Executive will be happy to help you make these
arrangements if you would like to purchase additional shares in this
convenient manner.
Sincerely,
/s/ EDWARD A. TABER, III
Edward A. Taber, III
President
February 9, 1996
<PAGE>
PORTFOLIO MANAGER'S COMMENTS
1995 was a banner year for fixed income markets. Global bonds reversed
their poor 1994 performances, as substantial gains were posted by all
markets. The Legg Mason Global Government Trust was well positioned to
take advantage of these strong markets. Its return for the year was
20.80%, surpassing the return of its benchmark, the Salomon Brothers World
Government Bond Index, by 176 basis points (100 basis points is equivalent
to 1%). The Fund also continued to perform well against its competitor
funds. According to LIPPER ANALYTICAL SERVICES, the Fund outperformed the
average of all its competitor funds by 264 basis points. This placed the
Fund in the 21st percentile for all funds in its investment category.
UNITED STATES
The yield on the U.S. 30-year Treasury bond fell by almost 2
percentage points over the course of the year. The U.S. Federal Reserve
Bank ended its policy of rising interest rates, and lowered official rates
by 25 basis points in both the third and fourth quarters. The economy
decelerated over the year and inflation declined. The market is also
optimistic that continued progress will be made on fiscal policy.
CANADA
Fundamentals in Canada were very positive with weak growth and low
inflation. Fiscal improvement was also evident, with substantial
improvement seen in the provinces. Progress was also seen at the federal
level. Activity in the market was dominated by the issue of Quebec's
potential secession. In the end, Quebec voted not to leave Canada, but the
results were much closer than expected.
EUROPE
The best returns in 1995 were posted in the European markets. The
German Bundesbank led other central banks in lowering short-term interest
rates. Official rates were cut by 50 basis points in both the third and
fourth quarters. Economic growth was much weaker than expected and
inflation came in below expectations. The issue of European Monetary Union
will continue to be monitored for its progress, particularly in the non-
core markets that are experiencing difficulty in moving towards the
necessary parameters for inclusion in the Union.
JAPAN
Japan closed the year as the worst performing bond market. Bond yields
declined sharply, but its returns were overshadowed by sharp moves
elsewhere. The Bank of Japan adopted an easy monetary policy by twice
dropping its official discount rate. The first cut in April dropped the
rate by 75 basis points to 1% and again in September by another 50 basis
points, leaving the rate at just 0.50%. These measures, along with an
accommodative fiscal policy, were intended to revive a stagnant economy.
Inflation levels remained very low throughout the year.
EMERGING MARKETS
Emerging market bonds posted strong recoveries following the Mexican
peso crisis at the end of 1994. The markets stabilized in the second
quarter, following the U.S. loan package to Mexico and a more prudent
monetary policy adopted by the Bank of Mexico. Both these measures
provided a return of investor confidence to these markets.
CURRENCY
The dollar suffered sharp losses in the first quarter of the year,
providing a sharp boost to currency holdings in the portfolio. It was
particularly weak against the yen, where it lost about 20% of its value,
and traded as low as 80 yen to the dollar. However, it started to recover
in the second quarter and made up all of its lost ground by year-end. It
also recovered against other major currencies, but not to the same extent.
The end result was that the overall value of the dollar weakened over the
course of the year.
OUTLOOK
The outlook for global fixed income markets remains positive for 1996.
We certainly do not expect to be able to duplicate the extraordinary gains
of last year, but fundamentals remain mostly constructive. We are not
expecting a robust recovery in worldwide growth, and inflation levels
should remain modest. An emphasis on tight fiscal policies is expected to
be balanced by an easier monetary stance.
Keith J. Gardner
February 9, 1996
2
<PAGE>
PERFORMANCE INFORMATION
LEGG MASON GLOBAL TRUST, INC.
GLOBAL GOVERNMENT TRUST
[INSERT GRAPH HERE]
<TABLE>
<CAPTION>
SAL BROS WORLD GOV'T. BOND INDEX
<S> <C>
03/31/93 0
04/15/93 10,000
06/30/93 10,123
09/30/93 10,581
12/31/93 10,577
03/31/94 10,577
06/30/94 10,648
09/30/94 10,773
12/31/94 10,825
03/31/95 12,008
06/30/95 12,648
09/30/95 12,515
12/31/95 12,884
</TABLE>
The returns shown above are based on historical results and are not intended
to indicate future performance. The investment return and principal value of an
investment in the fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. No adjustment has
been made for any income taxes payable by shareholders.
3
<PAGE>
PORTFOLIO OF INVESTMENTS
LEGG MASON GLOBAL TRUST , INC.
GLOBAL GOVERNMENT TRUST
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C>
LONG-TERM DEBT SECURITIES A -- 86.4%
Australian Dollar -- 1.1%
Commonwealth of Australia
9.5% 8/15/03 AUD 2,000 $ 1,605
British Sterling -- 10.2%
United Kingdom Conversion
Stock
9.5% 10/25/04 GBP 6,500 11,438
United Kingdom Treasury Stock
7.25% 3/30/98 1,500 2,372
Vnesheconombank Loan 3,500 1,956E,F
15,766
Canadian Dollar -- 2.5%
Government of Canada
7.75% 9/1/99 CAD 2,000 1,533
10.25% 2/1/04 1,000 878
6.5% 6/1/04 2,000 1,416
3,827
Czech Koruna -- 9.6%
ABN-Amro Bank N.V.
11% 12/15/97 CSK 205,000 7,745
Ceska Sporitelna A/S
14.375% 1/27/01 175,000 7,019
14,764
Danish Krone -- 8.3%
Kingdom of Denmark
9% 11/15/98 DKK 15,000 2,951
7% 12/15/04 55,000 9,855
12,806
French Franc -- 3.5%
Bons du Tresor a Taux Fixe et
Interet Annuel
7.25% 8/12/97 FRF 20,000 4,223
Republic of Ivory Coast
Restructured Loan 23,304 834E,F
Unstructured Loan 9,200 329E,F
5,386
German Deutschmark -- 14.4%
Deutsche Bundesrepublic
6% 6/20/16 DEM 10,000 6,440
German Unity Fund
8% 1/21/02 20,000 15,748
22,188
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C>
Italian Lira -- 3.5%
Buoni del Tesoro Poliennali
8.5% 8/1/99 ITL 9,000,000 $ 5,380
Japanese Yen -- 4.3%
Government of Japan #151
5% 9/20/02 JPY 600,000 6,633
Spanish Peseta -- 2.2%
Bonos del Estado
11.45% 8/30/98 ESP 200,000 1,731
10.15% 1/31/06 200,000 1,680
3,411
Swedish Krona -- 1.5%
Kindgom of Sweden #1020
10.75% 1/23/97 SEK 15,000 2,319
United States Dollar -- 25.3%
Emerging Markets -- 11.1%
Argentina Bonos del Tesoro
5.90% 9/1/97
Indexed to 3-month LIBOR USD 3,000 1,159C
Argentina Bonos de Consolidacion
Previsionales
5.86% 4/1/01
Indexed to 1-month LIBOR 2,000 1,468C
Argentina Discount Bond
6.56% 3/31/23
Indexed to 6-month LIBOR 2,000 1,300C
Argentina Floating Rate Bond
6.81% 3/31/05
Indexed to 6-month LIBOR 4,000 2,825C
Argentina Par Bond
5% 3/31/23 4,000 2,260C,D
Celulosa Arauco Company
7.25% 6/11/98 1,950 2,004
Kingdom of Morocco
6.59% 1/1/09
Indexed to 6-month LIBOR 6,000 4,020C
Republic of Poland Discount
Bond
6.875% 10/27/24
Indexed to 6-month LIBOR 2,000 1,510C
United Mexican States
9.5% 7/16/01 635 589
17,135
</TABLE>
4
<PAGE>
PORTFOLIO OF INVESTMENTS -- CONTINUED
LEGG MASON GLOBAL TRUST , INC.
GLOBAL GOVERNMENT TRUST
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C>
U.S. Government Obligations
-- 14.2% United States
Treasury Bonds
7.625% 2/15/25 USD 3,000 $ 3,672
United States Treasury
Notes
4.75% 9/30/98 6,000 5,929
5.75% 8/15/03 1,500 1,520
6.5% 8/15/05 10,000 10,669
21,790
Total Long-term Debt
Securities (Identified Cost
-- $130,268) 133,010
SHORT-TERM INVESTMENTS A -- 7.8%
United States
Dollar -- 6.2%
Currency Exchange-Linked
Securities B,G -- 5.3%
Bankers Trust
International Polish
Zloty-Linked Note
24.1% 9/25/96 3,000 2,507
Internationale
Nederlanden (U.S.)
Corporation Slovakian
Koruna-
Linked Note
16.5% 5/30/96 3,827 3,785
Morgan Stanley Group
Global Indian Rupee-
Linked Note
14.75% 6/26/96 2,000 1,825
8,117
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C>
Emerging Markets -- 0.9%
Republic of Venezuela
9% 5/27/96 USD 1,500 $ 1,478
REPURCHASE AGREEMENT -- 1.6%
Morgan Stanley & Co. Incorporated
5.9% dated 12/29/95, to be
repurchased at $2,445 on 1/2/96
(Collateral: $2,391 Federal
National Mortgage Association
Mortgage-backed securities, 8%
due 10/1/24, value $2,492) 2,443 2,443
Total Short-term Investments
(Identified Cost -- $12,012) 12,038
Total Investments -- 94.2%
(Identified Cost -- $142,280) $ 145,048
</TABLE>
A LISTED BY CURRENCY DENOMINATION.
B TOTAL MATURITY VALUE IS LINKED TO THE VALUE OF THE INDICATED
CURRENCY AT MATURITY.
C INDEXED SECURITY -- THE RATE OF INTEREST EARNED ON EACH SECURITY
IS TIED TO THE LONDON INTERBANK OFFERED RATE (LIBOR) INDEX. THE
COUPON RATE FOR EACH IS THE RATE AS OF DECEMBER 31, 1995.
D STEP-UP SECURITY -- A SECURITY WHOSE INTEREST RATE INCREASES AT
SPECIFIED TIMES OVER THE LIFE OF THE SECURITY. THIS SECURITY'S
COUPON INCREASES 0.25% ANNUALLY UNTIL MARCH 31, 1999, AND
THEREAFTER REMAINS FIXED AT 6% UNTIL MATURITY.
E ILLIQUID SECURITY -- A SECURITY THAT CANNOT BE DISPOSED OF WITHIN
SEVEN DAYS FOR APPROXIMATELY THE PRICE AT WHICH THE FUND VALUES
IT.
F NON-INCOME PRODUCING -- ISSUER IS IN DEFAULT OF INTEREST AND
PRINCIPAL PAYMENTS.
G THE INTEREST RATE SHOWN IS EACH SECURITY'S YIELD-TO-MATURITY.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
LEGG MASON GLOBAL TRUST, INC.
GLOBAL GOVERNMENT TRUST
DECEMBER 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C>
ASSETS:
Investments at value (Identified Cost -- $142,280) $145,048
Foreign currency at value (Identified Cost -- $5,213) 5,122
Receivable for:
Foreign income taxes recoverable 233
Fund shares sold 388
Forward currency contracts closed 125
Interest receivable 4,437
Other assets 65
Total assets 155,418
LIABILITIES:
Payable for:
Fund shares repurchased 70
Income distribution 1,083
Due to adviser and distributor 195
Accrued expenses 116
Total liabilities 1,464
NET ASSETS $153,954
ANALYSIS OF NET ASSETS:
Accumulated paid-in capital $150,559
Undistributed net investment income 1,167
Accumulated net realized loss on investments and currency (545)
Unrealized appreciation of investments and currency transactions 2,773
Net assets applicable to 14,907 shares outstanding $153,954
NET ASSET VALUE PER SHARE $10.33
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON GLOBAL TRUST, INC.
GLOBAL GOVERNMENT TRUST
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $11,257
EXPENSES:
Investment advisory fee $1,120
Distribution and service fees 1,120
Custodian fee 185
Transfer agent and shareholder servicing expense 94
Legal and audit fees 75
Registration fees 38
Reports to shareholders 31
Organization expense 26
Directors' fees 6
Other expenses 11
Total expenses 2,706
NET INVESTMENT INCOME 8,551
NET REALIZED AND UNREALIZED GAIN (LOSS):
Realized gain on:
Investments, options and futures 3,514
Foreign currency transactions 7,810
Unrealized gain (loss):
Investments 8,300
Assets and liabilities denominated in foreign currencies (72)
NET REALIZED AND UNREALIZED GAIN 19,552
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $28,103
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON GLOBAL TRUST, INC.
GLOBAL GOVERNMENT TRUST
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Amounts in Thousands) 1995 1994
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 8,551 $ 9,092
Net realized gain (loss) on investments, options, futures and foreign currency
transactions 11,324 (3,081)
Change in unrealized appreciation of investments and assets and liabilities
denominated in foreign currencies 8,228 (8,607)
Change in net assets resulting from operations 28,103 (2,596)
Distributions to shareholders from net investment income (16,542) (9,402)
Decrease in net assets from Fund share transactions (3,022) (3,659)
Change in net assets 8,539 (15,657)
NET ASSETS:
Beginning of year 145,415 161,072
End of year (including undistributed net investment income of $1,167 and $1,349,
respectively) $153,954 $145,415
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON GLOBAL TRUST , INC.
GLOBAL GOVERNMENT TRUST
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net
assets and other supplemental data. This information has been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1995 1994
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 9.54 $10.27
Net investment income B 0.63 0.57
Net realized and unrealized gain (loss) on investments,
options, futures and foreign currency transactions 1.32 (0.71)
Total from investment operations 1.95 (0.14)
Distributions to shareholders from:
Net investment income (1.16) (0.59)
Net realized gain on investments -- --
Total distributions (1.16) (0.59)
Net asset value, end of period $10.33 $ 9.54
Total return 20.80% (1.40)%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses B 1.81% 1.34%
Net investment income B 5.72% 5.71%
Portfolio turnover rate 169.48% 127.00%
Net assets, end of period (in thousands) $153,954 $145,415
</TABLE>
<TABLE>
<CAPTION>
1993 A
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
Net investment income B 0.36
Net realized and unrealized gain (loss) on investments,
options, futures and foreign currency transactions 0.31
Total from investment operations 0.67
Distributions to shareholders from:
Net investment income (0.36)
Net realized gain on investments (0.04)
Total distributions (0.40)
Net asset value, end of period $10.27
Total return 6.76%C
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses B 0.27%D
Net investment income B 5.41%D
Portfolio turnover rate 127.80%D
Net assets, end of period (in thousands) $161,072
</TABLE>
A For the period april 15, 1993 (commencement of operations) to
December 31, 1993.
B Net of fees waived and reimbursements made by the manager for
expenses in excess of voluntary expense limitations of: 0.2% until
september 30, 1993; 0.35% until December 31, 1993; 0.5% until
January 31, 1994; 0.7% until february 28, 1994; 0.9% until March 31,
1994; 1.1% until April 30, 1994; 1.3% until May 31, 1994; 1.5% until
June 30, 1994; 1.7% until July 31, 1994; and 1.9% indefinitely.
C Not annualized.
D Annualized.
See notes to financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON GLOBAL TRUST, INC.
GLOBAL GOVERNMENT TRUST
(Amounts in Thousands)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Global Trust, Inc. ("Trust"), consisting of the Global
Government Trust ("Fund") and the Global Equity Trust, is registered under
the Investment Company Act of 1940, as amended, as an open-end,
diversified investment company. The financial statements of the other
portfolio of the Trust is included in a separate report to shareholders.
Security Valuation
Portfolio securities are valued based upon market quotations. When
market quotations are not readily available, securities are valued based
on prices received from recognized broker-dealers in the same or similar
securities. The amortized cost method of valuation is used for debt
obligations with 60 days or less remaining to maturity.
Currency Translations
The books and records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis:
(i) market value of investment securities, assets and liabilities at
the closing daily rate of exchange, and
(ii) purchases and sales of investment securities, interest income and
expenses at the rate of exchange prevailing on the respective
date of such transactions.
The effect of changes in foreign exchange rates on realized security
gains or losses is segregated and reflected as a component of gains or
losses on foreign currency transactions.
Investment Income and Dividends to Shareholders
Income and expenses are recorded on the accrual basis. Dividends are
declared and paid monthly. Dividends payable are recorded on the dividend
ex-date. Bond premium is amortized using the yield-to-maturity method for
financial reporting and tax purposes. Bond discount, other than original
issue, is not amortized.
Security Transactions
Security transactions are recorded on the trade date. Realized gains
and losses from security transactions are reported on an identified cost
basis.
Deferred Organizational Expense
Deferred organizational expenses of $128 are being amortized on a
straight-line basis over 5 years beginning on the date operations began.
Federal Income Taxes
No provision for federal income or excise taxes is required since the
Fund intends to continue to qualify as a regulated investment company and
distribute all of its taxable income to its shareholders.
2. FINANCIAL INSTRUMENTS:
As part of the Fund's investment program, the Fund may utilize forward
currency exchange contracts and repurchase agreements. The nature and
risks of these financial instruments and the reasons for using them are
set forth more fully in the Trust's Prospectus and Statement of Additional
Information.
Emerging Markets
The Fund has investments in securities denominated in the currencies
of emerging market countries, as well as in securities issued by
governments of emerging market countries. Future economic or political
developments could adversely affect the liquidity or value, or both, of
such securities.
Options and Futures
The current market value of a traded option is the last sale price or,
in the absence of a sale, the mean between the closing bid and asked
price. Futures contracts are marked to market daily using the closing
price on the principal exchange where the contracts are traded. Payments
(variation margin) are made or received daily in relation to market
fluctuations.
Repurchase Agreements
All repurchase agreements are fully collateralized by obligations
issued by the U.S. government
10
<PAGE>
(Amounts in Thousands)
or its agencies and such collateral is in the possession of the Fund's
custodian. The value of such collateral includes accrued interest. Risks
arise from the possible delay in recovery or potential loss of rights in
the collateral should the issuer of the repurchase agreement fail
financially.
Forward Currency Exchange Contracts
The Fund may enter into foreign forward currency exchange contracts to
hedge against adverse changes in the relationship of the U.S. dollar to
foreign currencies. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
currency values. Forward currency contracts are valued using the forward
exchange rate. There were no outstanding forward currency contracts at
December 31, 1995.
3. OPTIONS AND FUTURES:
As part of the Fund's investment program, the Fund may utilize options
and futures. The nature and risk of these financial instruments and the
reasons for using them are set forth more fully in the Fund's Prospectus
and Statement of Additional Information.
A written call option gives an option holder the right to purchase the
underlying security at a specified price until a specified date. A written
put option gives an option holder the right to sell the underlying
security at a specified price until a specified date. Risks arise from the
possible illiquidity of the options market and from movements in security
values. Call and put options written by the Fund and related premiums
received during the year were as follows:
<TABLE>
<CAPTION>
Calls Puts
Face Face
Amount Premiums Amount Premiums
<S> <C> <C> <C> <C>
Options outstanding
December 31, 1994 -- $ -- -- $ --
Options written 10,000 109 10,000 100
Options closed (5,000) (58) (5,000) (50)
Options exercised (5,000) (51) (5,000) (50)
Options outstanding
December 31, 1995 -- -- -- --
<CAPTION>
</TABLE>
The Fund enters into futures contracts as a hedge against anticipated
changes in foreign currency exchange rates. Risks arise from the possible
illiquidity of the futures market and from the possibility that a change
in the value of a contract may not correlate with changes in foreign
currency exchange rates. There were no open long or short futures
contracts at December 31, 1995.
4. INVESTMENT TRANSACTIONS:
Investment transactions for the year ended December 31, 1995,
(excluding short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $ 230,473
Proceeds from sales 238,126
</TABLE>
At December 31, 1995, the cost of securities for federal income tax
purposes was $142,280. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $4,374
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $1,606. The Fund has unused
capital loss carryforwards for federal income tax purposes of $545 which
expire in 2002.
5. REALIZED GAINS:
The components of net realized gain on investments, options and
futures for the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Amount
<S> <C>
Investments $3,447
Options 79
Futures (12)
Net realized gain $3,514
</TABLE>
The components of net realized gain on foreign currency transactions
for the year ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Amount
<S> <C>
Securities $4,064
Forward contracts 2,711
Currency 1,035
Net realized gain $7,810
</TABLE>
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
LEGG MASON GLOBAL TRUST , INC.
GLOBAL GOVERNMENT TRUST
(Amounts in Thousands)
6. FUND SHARE TRANSACTIONS:
At December 31, 1995, there were 1,000,000 shares authorized at $.001
par value for all portfolios of the Trust (including the Fund).
Transactions in Fund shares were as follows:
For the Years Ended December 31,
1995 1994
Shares Amount Shares Amount
Sold 2,328 $ 24,311 5,165 $ 51,645
Reinvestment of
distributions 1,395 14,427 872 8,584
Repurchased (4,059) (41,760) (6,471) (63,888)
Net decrease (336) $ (3,022) (434) $ (3,659)
7. TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management agreement with Legg
Mason Fund Adviser, Inc. ("Adviser"), a corporate affiliate of Legg Mason
Wood Walker, Incorporated ("Legg Mason"), a member of the New York Stock
Exchange and the distributor for the Fund. Under this agreement, the
Adviser provides the Fund with investment advisory, management and
administrative services for which the Fund pays a fee at an annual rate of
0.75% of average daily net assets of the Fund. At December 31, 1995, $98
was due to the Adviser.
Western Asset Management Company ("Sub-adviser"), a corporate
affiliate of the Adviser and Legg Mason, serves as investment adviser to
the Fund. The Sub-adviser is responsible for the actual investment
activity of the Fund, for which the Adviser pays a fee at an annual rate
equal to 53 1/3% of the fee received by the Adviser.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.50% and an annual service fee of 0.25% of the Fund's
average daily net assets, calculated daily and payable monthly. Legg Mason
and the Adviser have voluntarily agreed to waive their fees and to
reimburse the Fund for its expenses (exclusive of taxes, interest,
brokerage and extraordinary expenses) in excess of the following rates of
the Fund's average net assets: 0.50% of the Fund's average net assets
until January 31, 1994; 0.70% until February 28, 1994; 0.90% until March
31, 1994; 1.10% until April 30, 1994; 1.30% until May 31, 1994; 1.50%
until June 30, 1994; 1.70% until July 31, 1994; and 1.90% indefinitely. No
fees were waived or expenses reimbursed during 1995. At December 31, 1995,
distribution and service fees of $97 were due to the distributor.
Legg Mason also has an agreement with the Fund's transfer agent to
assist with certain of its duties. For this assistance, Legg Mason was
paid $31 by the transfer agent for the year ended December 31, 1995.
12
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF LEGG MASON INCOME TRUST, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Legg Mason Global Government
Trust, a series of Legg Mason Global Trust, Inc., as of December 31, 1995,
and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and financial highlights for each of the two years in the
period then ended and for the period from April 15, 1993 (commencement of
operations) to December 31, 1993. These financial statements and financial
highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Legg Mason Global Government Trust as of December 31, 1995,
the results of its operations for the year then ended, the changes in its
net assets, and financial highlights for each of the respective periods
stated in the first paragraph, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
February 1, 1996
13
