Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Batterymarch Financial Management, Inc.
Boston, MA
Board of Directors
John F. Curley, Jr., Chairman
Edward A. Taber, III, President
Richard G. Gilmore
Charles F. Haugh
Arnold L. Lehman
Dr. Jill E. McGovern
T. A. Rodgers
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel
Kirkpatrick & Lockhart LLP
Washington, DC
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
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111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (bullet) 539 (bullet) 0000
[recycled logo] Printed on Recycled Paper
LMF-108
Report to Shareholders
For the Period Ended
June 30, 1996
The
Legg Mason
Emerging
Markets
Trust
Putting Your Future First
[Legg Mason Funds logo]
FUNDS
<PAGE>
To Our Shareholders,
Welcome to the Legg Mason Emerging Markets Trust! The Fund, which was
launched on May 28, 1996, has grown to over $10 million in net assets, and its
net asset value per share has appreciated from $10.00 at launch to $10.03 as of
June 30, 1996.
The Fund seeks to obtain maximum long-term total return through investments
of at least 65% of its assets in the common equity securities of emerging market
companies.
On the following pages, the Fund's portfolio manager, Stephen McCarthy,
reviews the portfolio's structure and performance and comments on the investment
outlook for emerging market equities.
Investments in emerging market equities should be considered a core part of
any well-diversified investment portfolio. We hope you will consider using the
Emerging Markets Trust for investments of additional funds as they become
available. Some shareholders take advantage of Legg Mason's Future First
Systematic Investment Plan. Under this plan, you may arrange for automatic
monthly investments in the Fund of $50 or more by authorizing the Fund's
transfer agent, Boston Financial Data Services, to prepare a check each month
drawn on your checking account. Please contact your Investment Executive for
further information.
Once again, welcome to the Legg Mason Emerging Markets Trust.
Sincerely,
/s/ Edward A. Taber, III
Edward A. Taber, III
President
August 15, 1996
<PAGE>
Portfolio Manager's Comments
Since its inception on May 28, 1996, the Fund's return was 0.2%
compared with 0.8% for the Morgan Stanley Capital International Emerging
Markets Free (MSCI EMF) Index. Most of this underperformance can be
explained by the cost of investing the portfolio at its start-up.
All new funds have start-up costs which hold back initial
performance. The startup costs for the Legg Mason Emerging Markets Fund
were low. During May, our traders had observed that emerging markets
trading activity was lower than normal. That observation allowed us to
focus on liquid names and to follow strict price discipline for purchases.
As a result, we were able to keep the impact of initial investments to a
minimum.
Costs of additional investing during June were similarly well
controlled and were able to be absorbed into the performance of the stocks
in the portfolio. During the month of June, the total return for the Fund
was 0.6%, in line with the MSCI EMF Index and ahead of the Lipper Emerging
Markets Index average of .2%.
By quarter-end, we had invested in 21 emerging markets. The growth
rates for companies in the Fund are higher than those found in the MSCI
EMF Index and valuations for companies in the Fund are equally as
attractive as those in the index.
Market Commentary
Latin America was the strongest region in June, up 2.6%, despite the
lack of money flows from US investors. It appears that local investors,
particularly in Brazil and Argentina, became convinced of the improving
prospects for their economies and continued the rally of the first
quarter.
In Asia, Taiwan returned 13.7% for the month, the result of the
easing of war threats from mainland China, followed by news of Morgan
Stanley's intention to include Taiwan in the MSCIEMF Index, the index of
shares freely available to non-local investors. Investors were served
notice in June that this benchmark would change at the beginning of
September when Morgan Stanley proposes to add Taiwan and mainland China
and to increase exposure to Korea and Eastern Europe. The result will be a
broader index in which the spread between the heaviest country
concentrations and the lightest ones is significantly reduced compared to
the index structure today.
Investment Outlook
We plan to continue our greater exposure to Latin America than the
index as opportunities in the region continue to be sufficiently
compelling compared with companies elsewhere.
South Africa has a significant 13.5% weight in the index and it is
tempting to invest more of the portfolio in that market. Nevertheless, we
will only do so when the stocks offer potential returns which are
equivalent to those available in other countries. At the moment, there
seems to be a limited number of good values.
The case for emerging markets remains valid. We are finding excellent
opportunities for growth and profitability, and values remain compelling.
As part of our research effort, we are exploring markets such as Egypt and
Eastern Europe where we find companies very attractively priced for the
growth opportunities they offer.
Stephen J. McCarthy, CFA
August 15, 1996
2
<PAGE>
Industry Diversification
Legg Mason Global Trust, Inc.
Emerging Markets Trust
June 30, 1996
% of Net Market
Assets Value
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(000)
Apparel/Textiles 1.6% $ 158
Banks 15.2 1,518
Beverages 1.6 156
Chemicals 1.7 168
Construction 10.7 1,070
Consumer Durables 1.7 170
Containers 3.6 358
Domestic Oil Reserves 1.7 174
Electric Utilities 3.2 318
Finance 4.5 453
Gas Utilities 2.0 204
Iron & Steel 8.8 885
Miscellaneous 7.9 788
Motor Vehicles 6.4 645
Non-ferrous Metals 1.6 161
Oil Service 0.8 82
Producer Goods 1.7 175
Retail (Food) 1.7 167
Retail (Non-Food) 4.3 435
Telecommunications 6.4 642
Tobacco 1.6 158
Short-Term Investments 13.6 1,360
Total Investment Portfolio 102.3 10,245
Other Assets Less Liabilities (2.3) (226)
Net Assets 100.0% $10,019
3
<PAGE>
Statement of Net Assets
Legg Mason Global Trust, Inc.
Emerging Markets Trust
June 30, 1996 (Unaudited)
(Amounts in Thousands) Shares Value
- --------------------------------------------------------------------------------
Common Stocks and Equity Interests -- 83.8%
Argentina -- 3.1%
Banco Frances del Rio de la Plata S.A. 17 $ 157
Ciadea S.A. 22 153(A)
310
Brazil -- 8.5%
Companhia Energetica De Minas ADR 6 171
Petrobras Distribuidora S/A ADR 16 172(A,B)
Refrigeracao Parana S.A. ADR 14 174
Telecomunicacoes Brasileiras S/A ADR 3 174
Usinas Siderurgicas
de Minas Gerais S/A ADS 15 163(B)
854
Chile -- 3.4%
Banco Bhif ADR 8 169(A)
Sociedad Quimica Y Minera De Chile ADR 3 168
337
China -- 2.5%
Huaxin Cement Co. Ltd. 400 98
Qingling Motors Company 460 155
253
Colombia -- 1.9%
Cementos Diamante S.A. ADR 10 188(B)
Croatia -- 1.3%
Zagrebacka Banka GDR 15 128(A,B)
Czech Republic -- 1.0%
Ceska Sporitelna A.S. GDR 10 104(A,B)
Egypt -- 1.5%
Egypt Investment Company Ltd. 15 149(A,B)
Greece -- 3.1%
Ergo Bank S.A. 3 160
Hellenic Bottling Co., S.A. 5 156
316
Hungary -- 3.6%
Cie Financiere Pour L'Europe
Centrale GDR 8 358A
(Amounts in Thousands) Shares Value
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India -- 6.3%
Larsen & Toubro Ltd. GDS 12 $ 226
Steel Authority of India Ltd. GDR 17 246(A,B)
Tata Engineering & Locomotive
Company Limited GDR 9 162
634
Indonesia -- 5.8%
PT Bank Internasional Indonesia 32 158
PT Hanjaya Mandala Sampoerna 14 154(A)
PT Matahari Putra Prima 65 119
PT Telekomunikasi Indonesia 100 151
582
Malaysia -- 6.4%
DCB Holdings Berhad 47 161
Rothmans of Pall Mall Berhad 15 158
Telekom Malaysia Bhd 17 151
UMW Holdings Berhad 48 171
641
Mexico -- 9.5%
ALFA, S.A. de C.V. 35 156
Apasco S.A. de CV 29 160
Desc S.A. de C.V. 28 151(A)
Grupo Financiero Inbursa, S.A. de C.V. 40 166
Grupo Industrial Maseca SA de CV 160 167
Tubos De Acero De Mexico SA ADR 16 151(A)
951
Peru -- 1.6%
Minsur S.A. 18 161
Philippines -- 6.6%
Manila Electric Company 15 158
Metropolitan Bank and Trust Company 7 195
Philippine Long Distance Telephone
Company 3 165
Southeast Asia Cement Holdings, Inc. 1,100 143(A)
661
Portugal -- 1.8%
Cimpor Cimentos de Portugal S.A. 9 181
South Africa -- 3.3%
Southern Africa Fund, Inc. 20 335
South Korea -- 4.3%
Dong-Ah Construction Industrial
Company EDR 4 72(A)
Korea Electric Power Corporation ADR 8 204
Pohang Iron & Steel Company Ltd. ADR 6 151
427
4
<PAGE>
(Amounts in Thousands) Shares Value
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Thailand -- 6.6%
Bangkok Bank Public Company Ltd. 11 $ 145
Phatra Thanakit Company, Ltd. 18 126
PTT Exploration and Production
Public Company Limited 6 82
Siam Makro Public Company Ltd. 32 162
Thai Farmers Bank Public
Company Limited 13 142
657
Turkey -- 1.7%
Eregli Demir Ve Celik Fabrikalari
T.A.S. 1,560 173
Total Common Stocks and Equity
Interests
(Identified Cost-- $8,353) 8,400
Preferred Stocks -- 4.9%
Brazil -- 4.9%
Companhia de Tecidos Norte
de Minas -- Coteminas 400 158
Lojas Americanas S.A. 8,600 169
Uniao de Bancos Brasileiros 5,830 158
Total Preferred Stocks
(Identified Cost-- $477) 485
Principal
(Amounts in Thousands) Amount Value
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Repurchase Agreement -- 13.6%
Prudential Securities, Inc.
5.48% dated 6-28-96, to be
repurchased at $1,361
on 7-1-96 (Collateral: $1,486
Federal Home Loan
Mortgage Corporation
Mortgage-backed securities,
5.5% due 4-1-01, value $1,408)
(Identified Cost-- $1,360) $1,360 $ 1,360
Total Investments -- 102.3%
(Identified Cost -- $10,190) 10,245
Other Assets Less Liabilities -- (2.3)% (226)
Net assets consisting of:
Accumulated paid-in capital
applicable to 999 shares
outstanding 9,947
Undistributed net investment
income 19
Accumulated net realized loss on
currency transactions (1)
Unrealized appreciation of
investments and currency
transactions 54
Net assets-- 100.0% $10,019
Net asset value per share $10.03
(A) Non-income producing.
(B) Rule 144a Security -- a security purchased pursuant to Rule 144a
under the Securities Act of 1933 which may not be resold subject to
that rule except to qualified institutional buyers.
See notes to financial statements.
5
<PAGE>
Statement of Operations
Legg Mason Global Trust, Inc.
Emerging Markets Trust
<TABLE>
<CAPTION>
May 28, 1996(A)
to
(Amounts in Thousands) June 30, 1996
- -------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Investment Income:
Dividends $ 23
Interest 13
$36
Expenses:
Management fee 7
Distribution and service fees 7
Registration fees 5
Legal and audit fees 5
Transfer agent and shareholder servicing expense 4
Custodian fee 3
Reports to shareholders 2
33
Less fees waived (16)
Total expenses, net of waivers 17
Net Investment Income 19
Net Realized and Unrealized Gain (Loss):
Realized loss on foreign currency transactions (1)
Unrealized appreciation of investments and assets and liabilities
denominated in foreign currencies 54
Net Realized and Unrealized Gain 53
Increase in Net Assets Resulting from Operations $72
</TABLE>
(A) Commencement of operations.
See notes to financial statements.
6
<PAGE>
Statement of Changes in Net Assets
Legg Mason Global Trust, Inc.
Emerging Markets Trust
<TABLE>
<CAPTION>
May 28, 1996(A)
to
(Amounts in Thousands) June 30, 1996
- -------------------------------------------------------------------------------------------
(Unaudited)
<S> <C>
Increase in Net Assets:
Net investment income $ 19
Net realized loss on foreign currency transactions (1)
Unrealized appreciation of investments and assets and liabilities
denominated in foreign currencies 54
Increase in net assets resulting from operations 72
Increase in net assets from Fund share transactions 9,946
Increase in net assets 10,018
Net Assets:
Beginning of period 1
End of period (including undistributed net investment income of $19) $10,019
</TABLE>
(A) Commencement of operations.
See notes to financial statements.
7
<PAGE>
Financial Highlights
Legg Mason Global Trust, Inc.
Emerging Markets 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>
May 28, 1996(A)
to
June 30, 1996
(Unaudited)
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period $10.00
Net investment income 0.02(B)
Net realized and unrealized gain on investments and currency transactions 0.01
Total from investment operations 0.03
Net asset value, end of period $10.03
Total return 0.20%(C)
Ratios/Supplemental Data:
Ratios to average net assets:
Expenses 2.50%(B,D)
Net investment income 2.79%(B,D)
Portfolio turnover rate --
Average commission rate paid(E) $.0020
Net assets, end of period (in thousands) $10,019
</TABLE>
(A) Commencement of operations.
(B) Net of fees waived and expenses reimbursed pursuant to a
voluntary expense limitation of 2.25%.
(C) Not annualized
(D) Annualized
(E) Pursuant to SEC regulations adopted for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on
securities purchased and sold by the Fund.
See notes to financial statements.
8
<PAGE>
Notes to Financial Statements
Legg Mason Global Trust, Inc.
Emerging Markets Trust
(Amounts in Thousands) (Unaudited)
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1. Significant Accounting Policies:
The Legg Mason Global Trust, Inc. ("Corporation"), consisting of the
Emerging Markets Trust ("Fund"), the International Equity Trust and the
Global Government Trust, is registered under the Investment Company Act of
1940, as amended, as a diversified, open-end management investment
company. The financial statements of the other portfolios of the
Corporation are included in separate reports to shareholders.
Security Valuation
All securities for which market quotations are readily available are
valued at the last sales price, or if no sales price is available at that
time, at the mean between the latest bid and asked prices. Securities that
are traded over-the-counter are valued at the mean between the latest bid
and asked prices. If market or bid and asked quotations are not available,
securities will be valued as determined in good faith by the Board of
Directors.
Currency Transactions
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 and
unrealized security gains or losses is reflected as a component of such
gains or losses.
Investment Income and Dividends to Shareholders
Income and expenses are recorded on the accrual basis. Dividends are
declared and paid annually. Dividends payable are recorded on the dividend
ex-date.
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 $67 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 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 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.
Emerging Markets
The Fund has investments in securities denominated in the currencies
of emerging market countries, as well as in securities issued by companies
located in emerging market countries. Future economic or political
developments could adversely affect the liquidity and value of such
securities.
Repurchase Agreements
All repurchase agreements are fully collateralized by obligations
issued by the U.S. government 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.
9
<PAGE>
Notes to Financial Statements--Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust
(Amounts in Thousands) (Unaudited)
- --------------------------------------------------------------------------------
Forward currency contracts are valued using the forward rate. As of June
30, 1996 the Fund had not entered into any forward currency
contracts.
3. Investment Transactions:
Investment transactions for the period ended June 30, 1996 (excluding
short-term securities) were as follows:
Purchases $8,830
Proceeds from sales --
At June 30, 1996, the cost of securities for federal income tax
purposes was $10,190. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $266
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $211.
4. Fund Share Transactions:
At June 30, 1996, there were 1,000,000 shares authorized at $.001 par
value for all portfolios of the Corporation (including the Fund).
Transactions in Fund shares were as follows.
May 28, 1996(A)
to
June 30, 1996
Shares Amount
Sold 1,000 $9,955
Repurchased (1) (9)
Net increase 999 $9,946
(A) Commencement of operations.
5. Transactions with Affiliates:
The Fund has a management agreement with Legg Mason Fund Adviser,
Inc. ("Manager"), 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 Manager provides
the Fund with management and administrative services for which the Fund
pays a fee at an annual rate of 1.00% of average daily net assets of the
Fund. 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) to the extent necessary to
limit total operating expenses to 2.50%, until December 31, 1996. At June
30, 1996, management fees of $7 were waived.
Batterymarch Financial Management, Inc. ("Adviser"), a wholly owned
subsidiary of Legg Mason, Inc., serves as the Fund's adviser. The Adviser
is responsible for the actual investment activity of the Fund. The Manager
pays the Adviser a fee for its services at an annual rate equal to 75% of
the fee received by the Manager.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.75% and an annual service fee of 0.25% of the Fund's
average daily net assets, calculated daily and payable monthly. At June
30, 1996, distribution and service fees totalling $7 were waived. 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 $1 by
the transfer agent for the period ended June 30, 1996.
10
