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Previous: LEGG MASON GLOBAL TRUST INC, 24F-2NT, 1997-02-27 |
Next: ITT HARTFORD LIFE & ANNUITY INSURANCE CO SEPARATE ACCOUNT ON, 24F-2NT, 1997-02-27 |
Annual Report
December 31, 1996
Legg Mason
Global
Trust, Inc.
Global Government Trust
International Equity Trust
Emerging Markets Trust
Putting Your Future First
[Legg Mason Logo]
FUNDS
Investment Advisers
For Global Government:
Western Asset Management Company
Pasadena, CA
For International Equity and
Emerging Markets Trusts:
Batterymarch Financial Management Inc.
Boston, MA
Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
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, 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 o 539 o 0000
[Recycle Logo] Printed on Recycled Paper
LMF-056
<PAGE>
To Our Shareholders,
We are pleased to provide you with a new format for your funds' annual
report. We have combined the three funds comprising Legg Mason Global Trust into
one report for a more consolidated view of our global funds.
Beginning on the next page, the portfolio managers responsible for the Global
Trust Portfolios discuss 1996 results and the investment outlook. The Funds'
total returns in various periods since their inceptions are shown on pages 6 and
7. For each of our funds, we remind you that historical performance is not
indicative of future results, and the principal value of our holdings will
continue to fluctuate so that shares, when redeemed, may be worth more or less
than their original cost.
Coopers & Lybrand, L.L.P., the Global Trust's independent accountants, have
completed their annual examination, and audited financial statements for the
fiscal year ended December 31, 1996 are included in this report.
We hope you consider using the funds in the Global Trust for investments of
additional funds as they become available. Some shareholders have chosen to
regularly add to their investment in the funds by authorizing automatic monthly
transfers from their bank checking or Legg Mason accounts. Your Financial
Advisor 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 7, 1997
<PAGE>
Portfolio Managers' Comments
Global Government Trust
Global bond markets suffered through a roller-coaster year in 1996, as yields
rose in most markets in the first half, only to decline in the second half. To
make matters worse for U.S. investors, the dollar appreciated against most
currencies, eroding the value of local currency returns. Despite this, non-U.S.
markets generally outperformed the U.S. market, rewarding global bond investors.
Emerging and high-yielding markets were the stars of the show, as policies and
politics stabilized and yields fell significantly.
We're pleased to report that the Legg Mason Global Government Trust produced
a total return of 8.2% for the year, substantially exceeding that of its
benchmark, the Salomon Brothers World Government Bond Index, which returned
3.6%. Over the past three years and since its inception, the Fund continues to
rank highly in the Lipper universe, in the 14th and 13th percentile,
respectively. Due to heavy competition from funds concentrating in emerging
markets, for the year ended December 31, 1996, it placed squarely in the middle,
ranking 67 of 131 world bond funds as ranked by Lipper Analytical Services. The
Fund's performance benefited from several factors, particularly its emphasis on
emerging market debt, its decision to hedge currency exposure, and its
pronounced underweighting to the Japanese bond market, which was one of the
worst performers of the year.
The Fund's directors have approved a change to Global Government's permitted
investments to include lower-rated debt securities of domestic issuers. This
change, effective September 27, 1996 will provide the Portfolio Manager with
more flexibility to further diversify the Fund and to take advantage of
opportunities in higher yielding assets. To date, we have not invested in such
securities.
Global bond markets have enjoyed, to varying degrees, the benefits of two
powerful, secular trends this past year. By gradually but inexorably tearing
down the barriers between markets, the forces of disinflation and fiscal
austerity have set a plethora of countries on a track to economic and political
convergence. Disinflation has resulted in an almost unprecedented lowering of
both the level and the volatility of inflation in an astonishing variety of
countries. As price stability has become the norm rather than the exception,
economic agents throughout the world have been forced to become more productive,
since the only way to improve one's bottom line in the absence of pricing power
is to work harder and smarter. As governments have gradually shrunk relative to
their economies, this too has contributed to greater economic efficiency and
productivity, as the private sector regains control over more of the economies'
resources. Thus, these trends have created an economic climate not seen for many
decades, one in which falling inflation has generated not only higher bond
prices but also stronger earnings.
Financial markets have largely applauded the success of these efforts with
higher debt and equity prices. Though valuations have improved dramatically in
most countries as a result, there is little reason to believe that an end to
either trend is in sight. "Convergence" is thus likely to remain a central
feature of the global economic and financial landscape throughout the coming
year.
Nevertheless, 1997 is more likely to be a year of incremental convergence
rather than the radical convergence we saw in 1996. There is still room left for
spreads of emerging market, non-core European and dollar-bloc bonds to narrow,
but markets will undoubtedly become more selective when bestowing their favors
in the future. Investors may rapidly lose patience with those countries that
fail to toe the line or otherwise "diverge" from the pack. Latin American
economies have clearly survived the devastation of the Mexican devaluation, but
countries like Brazil and Argentina will have to deliver on their promises of
reform in order to retain the confidence of global investors.
Furthermore, whereas "convergence" was a theme restricted largely to European
countries following the holy grail of the European Monetary Union ("EMU"), it
may take on a new meaning in the coming year. Convergence benefited the
outliers--e.g., Canada, Italy, Spain--relative to the "core" countries such as
Germany and France, as they demonstrated a new-found resolve to fight inflation
and redress fiscal imbalances. In the future, though, investors are more likely
to ponder the appropriateness of stock and bond valuations when compared to the
economic and political fundamentals of each country. In other words, it wasn't
so hard to see the value in Italy relative to Germany once Italy determined to
seek inclusion in the EMU, but it is more difficult to know if German yields are
attractive relative to German inflation, or whether U.S. yields should rise if
the economy picks up.
2
<PAGE>
Similarly, as positive convergence plays--where spreads narrow as all spreads
decline--become more difficult to find and more risky to attempt, we may also
see negative convergence, or "divergence" forces at work. With lower spreads
offering less protection against divergence, the solid core countries may
recover some of their former strength.
The most likely candidate for unpleasant convergence--i.e., narrower spreads
with higher rates--is the Japanese economy. Rather than enjoying the
productivity boost which is a by-product of disinflation, Japan is still
struggling to overcome the forces of deflation which have crippled its equity
and real estate markets for years. Moreover, and alone among the major
industrialized economies, Japan's fiscal situation has deteriorated
significantly in recent years, as its population ages and unfunded retirement
obligations loom even larger. With deteriorating economic fundamentals and a
relatively strong yen, there is little scope for monetary tightening, and
indeed, every reason for monetary policy to relax. As a consequence, the yen is
unlikely to appreciate relative to the dollar, and may well decline further. As
investors become increasingly aware of this fact, there will be a strong
tendency for Japanese yields to rise and the yen to weaken, as Japanese
investors prefer the higher yields available elsewhere.
Japan's weakness is likely to benefit most other core countries, but the U.S.
and other dollar-bloc markets may benefit the most. In local currency terms, all
non-dollar bond markets have outperformed the U.S. for the past year, leaving
U.S. yields relatively high. One reason for this is that there is a widespread
perception that the so-called "output gap" is greater in Europe than it is in
the U.S., and that consequently any upturn in the U.S. economy is more likely to
be met by tighter monetary policy. This conventional wisdom is likely to be
challenged, however, as suggested by the falling price of gold in dollars, the
lack of any signs of a pickup in U.S. inflation, and the merely average pace of
the current business cycle expansion. If U.S. growth is indeed the by-product of
a strong disinflationary trend, then the U.S. economy likely enjoys greater
efficiencies and capacity than many give it credit for, and inflation and
interest rates are unlikely to rise even if the economy picks up next year.
Likewise, the impressive gains against inflation and improving public finances
in Canada, Australia and New Zealand make these markets attractive given their
spreads to the U.S.
The risks to increased capital flows to the dollar bloc could derive from an
unexpected acceleration in the European and Japanese economies, as this would
remove an important barrier that makes it difficult for them to prevent a
gradual weakening of their currencies against the dollar. In the meantime,
positive interest rate differentials and weak growth abroad should continue to
support the dollar.
Western Asset Management Company
February 7, 1997
3
<PAGE>
Portfolio Manager's Comments
International Equity Trust
The return for the Legg Mason International Equity Trust was 4.5% for the
last six months of 1996 compared with the Morgan Stanley International Europe,
Australia and the Far East Index return of 1.6%. For the year ended December 31,
1996, the return for the Fund was 16.5% compared with 6.4% for the index.
The Fund outperformed the index for the six months and the year by a
significant margin. This positive excess return can be attributed to good
results in all areas of our investment process: stock selection, country
selection and currency hedging.
Stock selection for the Fund in 1996 was excellent, especially in Japan,
Switzerland, Finland, Italy and the Netherlands. In country selection, we added
value by overweighting the smaller markets and by underweighting Japan. At
year-end, the Fund's weight in Japan was 22% compared with 32% for the index.
Currency hedging made a positive contribution for the year. By year-end, the
long-term valuation model component of our currency hedging program signaled
that the dollar is no longer undervalued against major currencies.
Market Commentary
Although the strong U.S. market garnered the headlines, many markets around
the world turned in returns for the year above 30%, including Spain, Sweden,
Finland, Hong Kong and Ireland. In Japan, the market declined 15.4%.
Markets in 1996 generally performed better in their local currencies than
they did for unhedged dollar investors, with the major exception of the United
Kingdom. The dollar rose more than 10% versus the yen and 7% versus the deutsche
mark in 1996.
Investment Outlook
Globalization of trade is forcing the industrialized world to restructure in
the face of mounting competition. Restructuring has led to the increased
competitiveness of the U.S. and is being undertaken in various forms around the
world, such as merger activity in the U.K. and France, deregulation in Japan and
privatization in Germany. We expect more of the same in 1997.
We continue to find better value and more attractive growth-to-value ratios
in companies in the smaller European markets than in the large markets of France
and Germany. Smaller countries are better able to reform their regulatory
structures to accommodate the coming opportunities of a unified currency. The
economic recovery in Japan, while weak, is attributable in large measure to
government pump-priming. Monetary policy has little room for further interest
rate cuts. Earnings revisions are strong in Japan, but valuations remain high.
The Fund's estimated EPS growth rate is higher than the index, with a lower
estimated P/E ratio. It is well diversified and maintains its value and
smaller-capitalization characteristics.
Charles F. Lovejoy, CFA
February 7, 1997
4
<PAGE>
Portfolio Manager's Comments
Emerging Markets Trust
The total return for the Fund for the second half of 1996 was 5.2% (excluding
the 2% redemption fee assessed on shares redeemed within one year of purchase)
compared with -4.2% for the Morgan Stanley Capital International-Emerging
Markets Free Index.
The Fund's performance benefited from good stock selection and country
weighting decisions since its inception on May 28, 1996, with particularly good
stock selection in Mexico, China, Hong Kong and Malaysia.
In selecting stocks, we research our universe of stocks for attractive growth
opportunities at reasonable valuations and use proprietary measures of growth
and valuation that we tailor to each market. We use both fundamental analysis
(review of management, competitive resources, market position and financial
condition to develop qualitative stock opinions) and quantitative valuation
(earnings expectations, growth, valuation and technical factors).
Market Commentary
The emerging markets index did not fare well over the last six months of the
year. Latin America was the strongest region, up 4%. Asian returns were negative
on average, with the notable exceptions of China and Hong Kong, which returned
20% and 18%, respectively.
While markets of the Europe, Middle East and African regions were generally
strong for the six months, the index return was negative, due to the heavy index
weighting of South Africa, which declined nearly 12%.
Investment Outlook
Our investment strategy is to seek well-managed, high quality companies which
are expected to participate in the rapid economic growth of emerging markets, at
reasonable prices.
Our investment outlook revolves around the relative valuations and prospects
for Latin America and Asia. Despite the continued divergence in returns, we are
retaining our overweight position in Latin America, a strategy that has been
beneficial for the Fund. Looking ahead, we expect the region's economies to
experience higher economic growth (with the exception of Chile), accelerated
corporate earnings momentum and increased money flow into the region's equity
markets.
We continue to use careful stock selection in Asia.
Emerging markets continue to be a very attractive asset class, based on
higher growth rates and lower valuations or "growth-at-a-price." The ratio of
estimated growth in earnings-per-share to forward P/E compares very favorably
for emerging markets relative to developed markets, including the U.S.
Overall, emerging markets companies are still growing faster than anywhere
else in the world and at attractive valuations. On average, the companies in the
Fund have higher growth rates than the index and even more attractive
valuations. The Fund is well diversified across industry sectors and is invested
in 27 markets.
Stephen J. McCarthy, CFA
February 7, 1997
5
<PAGE>
Performance Information
Legg Mason Global Trust, Inc.
Performance Comparison of a $10,000 Investment as of December 31, 1996
The returns shown on these pages are based on historical results and
are not intended to indicate future performance. The investment return and
principal value of an investment in each of these funds will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Average annual returns tend to smooth out variations
in a fund's return, so they differ from actual year-to-year results. No
adjustment has been made for any income taxes payable by shareholders.
The following graphs compare each Fund's total returns against that of
the most closely matched broad-based securities market index. The lines
illustrate the cumulative total return of an initial $10,000 investment
for the periods indicated. The line for each Legg Mason Fund represents
the total return after deducting all Fund investment management expenses
and the transaction costs of buying and selling securities. The line
representing the securities market index does not include any transaction
costs associated with buying and selling securities in the index or other
administrative expenses.
Global Government Trust
Cumulative Average Annual
Total Return Total Return
- ------------------------------------------------------
One Year +8.22% +8.22%
Life of Fund(dagger) +37.62 +8.97
- ------------------------------------------------------
(dagger) Fund Inception--April 15, 1993
[Graph appears here--plot points are listed below]
Salomon Brothers
Global Government Trust World Government Bond Index(1)
3/93 10,000 10,000
6/93 10,010 10,123
12/93 10,676 10,577
6/94 10,404 10,648
12/94 10,526 10,825
6/95 12,114 10,648
12/95 12,716 12,884
6/96 12,809 12,693
12/96 13,762 13,350
(1) The Salomon Brothers World Government Bond Index measures the
total return, in U.S. dollar terms, of a portfolio of the most liquid and
highest quality bonds of each of fourteen countries.
6
<PAGE>
Global Equity Trust
Cumulative Average Annual
Total Return Total Return
- ------------------------------------------------------
One Year +16.49% +16.49%
Life of Fund(dagger) +25.94 +13.10
- ------------------------------------------------------
(dagger) Fund Inception--February 17, 1995
[Graph appears here--plot points are listed below]
Morgan Stanley
Capital International Europe,
Australia and the Far East Index(1) International Equity Trust
2/95 10,000 10,000
6/95 10,712 10,400
12/95 11,628 10,811
6/96 12,171 12,054
12/96 12,368 12,594
(1) The Morgan Stanley Capital International Europe, Australia and the Far East
Index is an unmanaged index based on share prices of approximately 1100
companies listed on stock exchanges around the world. Twenty countries are
included in the index's portfolio. Index returns are for the periods
beginning February 28,1995.
Emerging Markets Trust
Cumulative Total Return
- ---------------------------------------------
Life of Fund(dagger)
- ---------------------------------------------
+3.30%*
- ---------------------------------------------
(dagger) Fund Inception--May 28, 1996
* Net of 2.0% redemption fee assessed within twelve
months of purchase.
[Graph appears here--plot points are listed below]
Morgan Stanley
Capital International Emerging
Markets Free Index(1) Emerging Markets Trust
5/28/96 10,000 10,000
6/30/96 10,062 10,020
9/30/96 9,698 9,771
12/31/96 9,641 10,330
(1) The Morgan Stanley Capital International Emerging Markets Free index is a
market weighted aggregate of 26 individual emerging country indices and
takes into account local and market restrictions on share ownership by
foreigners. Index returns are for the periods beginning May 31, 1996.
7
<PAGE>
Industry Diversification
Legg Mason Global Trust, Inc.
December 31, 1996
International Equity Trust
% of Net Market
Assets Value
- ---------------------------------------------------
(000)
Aerospace 1.9% $ 3,260
Agriculture/Food 0.7 1,127
Air Transport 1.1 1,917
Aluminum 0.8 1,282
Apparel/Textiles 0.4 660
Banks 7.2 12,058
Beverage 2.4 4,030
Business Machines 2.3 3,789
Chemicals 4.7 7,966
Coal & Uranium 0.5 763
Construction 6.4 10,812
Consumer Durables 0.5 760
Containers 0.4 604
Domestic Oil Reserves 0.9 1,487
Drugs/Medicine 2.8 4,712
Electric Utilities 1.0 1,741
Electronics 7.9 13,174
Finance 12.4 20,807
Gas Utilities 0.6 1,025
Health (Non-Drug) 0.1 241
Hotel/Restaurant 0.9 1,568
Iron & Steel 1.6 2,633
Life Insurance 5.2 8,648
Miscellaneous 1.1 1,903
Motor Vehicles 3.5 5,821
Non-Ferrous Metals 2.2 3,738
Oil Refining/Distribution 2.0 3,434
Oil Service 0.5 857
Paper 0.1 154
Photo/Optical 1.0 1,670
Producer Goods 4.2 7,056
Publishing 0.1 111
Railroads/Transit 0.4 740
Real Property 1.5 2,553
Retail (Food) 0.2 335
Retail (Non-Food) 3.0 5,001
Services 3.4 5,703
Soap/Housewares 0.1 148
Telecommunications 5.4 9,139
Tire & Rubber 2.6 4,434
Tobacco 0.4 589
Trucking/Freight 2.3 3,868
Water Transport 0.2 315
Short-Term Investments 4.4 7,439
----- --------
Total Investment Portfolio 101.3 170,072
Other Assets Less Liabilities (1.3) (2,146)
----- --------
Net Assets 100.0% $167,926
----- --------
Emerging Markets Trust
% of Net Market
Assets Value
- ---------------------------------------------------
(000)
Agriculture/Food 1.6% $ 334
Apparel/Textiles 2.6 563
Banks 11.4 2,407
Beverage 1.1 239
Chemicals 0.8 168
Coal & Uranium 0.4 75
Construction 8.3 1,760
Consumer Durables 1.4 300
Domestic Oil Reserves 2.2 458
Drugs/Medicine 1.0 215
Electric Utilities 4.9 1,040
Electronics 1.3 276
Finance 6.1 1,305
Gas Utilities 2.1 437
Hotel/Restaurant 1.5 323
Iron & Steel 6.1 1,301
Leisure/Luxury 1.0 204
Media 0.8 177
Miscellaneous 8.3 1,765
Motor Vehicles 5.4 1,140
Non-Ferrous Metals 1.3 276
Oil Service 1.7 363
Paper 1.6 338
Producer Goods 0.6 132
Railroads/Transit 0.6 119
Real Property 1.7 369
Retail (Food) 1.1 234
Retail (Non-Food) 2.9 618
Telecommunications 11.2 2,370
Tobacco 2.0 427
Water Transport 0.8 161
Short-Term Investments 6.9 1,464
----- -------
Total Investment Portfolio 100.7 21,358
Other Assets Less Liabilities (0.7) (152)
----- -------
Net Assets 100.0% $21,206
----- -------
8
<PAGE>
Statements of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1996
(Amounts in Thousands)
Global Government Trust
<TABLE>
<CAPTION>
Maturity
Rate Date Currency Par Value
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Long-Term Debt Securities(A) -- 90.2%
Australian Dollar -- 4.8%
Commonwealth of Australia 10% 10/15/07 AUD 8,300 $ 7,815
--------
British Sterling -- 4.8%
United Kingdom Treasury Stock 7.50% 12/7/06 GBP 3,500 6,000
United Kingdom Treasury Stock 8% 6/12/21 1,000 1,785
--------
7,785
--------
Canadian Dollar -- 8.0%
Government of Canada 8.00% 6/1/23 CAD 16,000 13,011
--------
Czech Koruna -- 8.8%
ABN-Amro Bank N.V. 11% 12/15/97 CZK 205,000 7,492
Ceska Sporitelna A/S 14.375% 1/27/01 175,000 6,653
--------
14,145
--------
Danish Krone -- 7.5%
Kingdom of Denmark 8% 3/15/06 DKK 65,000 12,137
--------
French Franc -- 1.4%
Republic of Ivory Coast
Restructured Loan 0% FRF 23,304 1,572(B,C)
Unstructured Loan 6.875% 9,200 621(B,C)
--------
2,193
--------
German Deutschmark -- 9.0%
Deutsche Bundesrepublik 6.25% 4/26/06 DEM 10,500 7,053
German Unity Fund 8% 1/21/02 10,000 7,399
--------
14,452
--------
Greek Drachma -- 6.3%
Hellenic Republic Bond 11% 11/26/99 GRD 1,000,000 4,082
Hellenic Republic Floating Rate Bond 15.30% 2/14/03 500,000 2,036(D)
Hellenic Republic Floating Rate Bond 14.20% 9/30/03 500,000 2,051
Hellenic Republic Floating Rate Bond 12.60% 12/31/03 500,000 2,049
--------
10,218
--------
Hungarian Forint -- 0.8%
Hungary Ministry of Finance 0% 1/3/97 HUF 200,000 1,225
--------
Italian Lira -- 6.0%
Buoni del Tesoro Poliennali 9.50% 2/1/01 ITL 13,500,000 9,772
--------
</TABLE>
9
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
Global Government Trust--Continued
<TABLE>
<CAPTION>
Maturity
Rate Date Currency Par Value
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Japanese Yen -- 3.1%
Government of Japan #177 4.6% 3/21/05 JPY 500,000 $ 4,982
--------
New Zealand Dollar -- 3.0%
Government of New Zealand 8% 11/15/06 NZD 6,500 4,838
--------
Spanish Peseta -- 2.2%
Bonos del Estado 11.45% 8/30/98 ESP 200,000 1,674
Bonos del Estado 10.15% 1/31/06 200,000 1,880
--------
3,554
--------
Swedish Krona -- 1.2%
Kingdom of Sweden #1030 13% 6/15/01 SEK 10,000 1,890
--------
Slovak Koruna -- 1.8%
International Finance Corporation 11.75% 8/15/99 SKK 95,000 2,949
--------
United States Dollar -- 21.5%
Emerging Markets -- 16.9%
Argentina Bonos de Consolidacion
Previsionales 5.688% 4/1/01 USD 5,000 4,632(D)
Kingdom of Morocco 6.375% 1/1/09 6,000 4,928(D)
Republic of Argentina Floating Rate Bond 6.625% 3/31/05 9,801 8,515(D)
Republic of Poland Past Due Interest 3.75% 10/27/14 4,000 3,375
United Mexican States 9.75% 2/6/01 1,500 1,549
United Mexican States 9.50% 7/16/01 553 558
United Mexican States 11.375% 9/15/16 3,500 3,684
--------
27,241
--------
U. S. Government Obligations -- 4.6%
United States Treasury Bonds 6% 2/15/26 2,100 1,911
United States Treasury Notes 6.375% 9/30/01 5,500 5,533
--------
7,444
--------
Total Long-term Debt Securities (Identified Cost-- $139,956) 145,651
- ------------------------------------------------------------------------------------------------------------------------
Short Term Investments -- 6.8%
Currency Exchange-Linked Securities(E) -- 4.3%
Canadian Imperial Bank of Commerce
Hungarian Forint-Linked CD 24.6% 2/26/97 USD 2,000 1,940
Indonesian Rupiah-Linked Note 14% 11/21/01 3,000 2,979(F)
Bankers Trust Company Russian
GKO-Linked Note 0% 2/12/97 2,000 1,955
--------
6,874
--------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Par Value
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Repurchase Agreement -- 2.5%
Prudential Securities, Inc.
7.15% dated 12/31/96, to be repurchased at $4,109
on 1/2/97 (Collateral: $4,586 Federal National
Mortgage Association Mortgage-backed Securities,
8% due 12/1/24, value $4,209) $ 4,108 $ 4,108
--------
Total Short-term Investments (Identified Cost-- $11,075) 10,982
- ------------------------------------------------------------------------------------------------------------------------
Total Investments-- 97.0% (Identified Cost-- $151,031) 156,633
Other Assets Less Liabilities-- 3.0% 4,916
--------
Net assets consisting of:
Accumulated paid-in capital
applicable to 15,512 shares outstanding $156,839
Accumulated net investment loss (469)
Accumulated net realized loss on
investments and currency transactions (51)
Net unrealized appreciation of investments and
foreign currency transactions 5,230
Net assets-- 100.0% $161,549
--------
Net asset value per share $10.41
------
</TABLE>
- -----------------
(A) Listed by currency denomination.
(B) Illiquid Security--A security that cannot be disposed of within seven days
for approximately the price at which the Fund values it.
(C) Non-income producing--Issuer is in default of interest and principal
payments.
(D) Indexed Security--The rate of interest earned on each security is tied
to either the London Interbank Offered Rate (LIBOR) or the Global Telecom
Basket (GTB) index. The coupon rate for each is the rate as of December
31, 1996.
(E) Total maturity value is linked to the value of the indicated currency
at maturity.
(F) Yield-to-maturity.
See notes to financial statements.
11
<PAGE>
Statements of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1996
(Amounts in Thousands)
International Equity Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 96.0%
Argentina -- 0.3%
Inversiones y Representacion 151 $ 486
--------
Australia -- 1.8%
Advance Bank Australia Limited 53 297
Commonwealth Bank of Australia 58 551
QCT Resources Ltd. 357 482
Santos Limited 230 934
Southcorp Holdings Limited 212 676
--------
2,940
--------
Austria -- 1.1%
Bohler-Uddeholm AG 10 730
OMV AG 11 1,184
--------
1,914
--------
Belgium -- 2.8%
Banque Bruxelles Lambert SA 2 318
Cie Financiere Europeenne et d'Outre-Mer SA 3 292
Compagnie Belge de Participations Paribas SA 32 1,220
Fortis AG 2 305
Groupe Bruxelles Lambert SA 4 554
Societe Generale de Belgique 7 565
Solvay 3 1,531
--------
4,785
--------
Brazil -- 1.3%
Telecomunicacoes Brasileiras S/A ADR 21 1,630
Usinas Siderurgicas de Minas Gerais S/A ADS 56 568(A)
--------
2,198
--------
Chile -- 0.8%
Companhia de Telecomunicacoes ADR 8 779
Enersis S.A. ADR 18 494
--------
1,273
--------
Denmark -- 2.3%
Danisco A/S 8 486
Den Danske Bank 12 992
FLS Industries A/S Manufactures 5 641
Sophus Berendsen A/S 9 1,190
Superfos AS 4 506
--------
3,815
--------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Finland -- 1.9%
Kemira OY 106 $ 1,333
Kesko 30 416
Outokumpu OY 17 289
Rautaruukki OY 26 240
UPM-Kymmene Corporation 7 155
Valmet Corporation 45 792
--------
3,225
--------
France -- 4.6%
Assurances Generales de France 15 497
Compagnie Francaise d'Etudes et de Construction Technip 7 708
Compagnie Generale de Geophysique SA 4 270(B)
Compagnie Generale des Eaux 17 2,132
Elf Gabon 2 562
Michelin 24 1,306
Moulinex 9 200(B)
Rhone-Poulenc 38 1,313
SEITA 11 436
Total SA 3 228
Vallourec SA 2 122
--------
7,774
--------
Germany -- 4.6%
Bayer AG 17 692
Bayerische Hypotheken Wechsel-Bank AG 21 637
Commerzbank AG 16 406
Continental AG 68 1,220
Deutsche Telekom 6 127
Dresdner Bank AG 69 2,075
IWKA AG 3 628
Preussag AG 3 623
Viag AG 1 392
Volkswagen AG 2 853
--------
7,653
--------
Greece -- 0.5%
Ergo Bank S.A. 16 812
--------
Hong Kong -- 4.2%
Cathay Pacific Airways 439 692
Dickson Concepts International Ltd. 215 807
Guoco Group Ltd. 121 677
Henderson Land Development Company Ltd. 150 1,513(B)
Hong Kong Telecommunications Ltd. 183 294
</TABLE>
13
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Hong Kong -- Continued
HSBC Holdings plc 78 $ 1,667
Kumagai Gumi (Hong Kong) Limited 379 441
Peregrine Investment Holdings Limited 123 211
Sun Hung Kai Properties Ltd. 39 478
Wheelock &Company, Ltd. 102 292
--------
7,072
--------
India -- 1.0%
Great Eastern Shipping GDR 56 318
Hindalco Industries Ltd. GDR 24 595
India Cements Ltd. GDR 30 78
Steel Authority of India Ltd. GDR 43 408(A)
Tata Engineering & Locomotive Company Limited GDR 19 200
--------
1,599
--------
Indonesia -- 1.0%
PT Bank Internasional Indonesia 575 566
PT Gudang Garam 122 527
PT Indocement Tunggal Prakarsa 223 340
PT Mulia Industrindo 175 181
--------
1,614
--------
Ireland -- 2.1%
Allied Irish Banks plc 256 1,723
Bank of Ireland 197 1,795
--------
3,518
--------
Italy -- 2.1%
Banca Popolare di Bergamo 2 31
Stet Societa' Finanziaria Telefonica S.p.A. 82 373
Telecom Italia 876 2,276
Telecom Italia Mobile S.p.A. 371 937
--------
3,617
--------
Japan -- 21.7%
Aoyama Trading Company 21 564
Best Denki Company 2 23
Bridgestone Corporation 55 1,045
Canon Incorporated 48 1,061
Citizen Watch Company 181 1,297
Cosmo Oil Company 170 818
Dai-Tokyo Fire & Marine Insurance Co. 6 32
Daiichi Pharmaceutical Company Ltd. 60 964
Daiwa Kosho Lease Company Ltd. 77 592
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Japan -- Continued
Daiwa Securities Company Ltd. 101 $ 898
Denso Corporation 2 48
Eisai Company Ltd. 52 1,027
Fuji Photo Film Company 29 957
Furukawa Electric 236 1,119
Hitachi Cable 105 712
Hitachi Koki Company 95 680
Inabata & Company 7 43
Ishikawajima Har 95 422
Iwate (Bank of) Limited 16 821
Jaccs Company 105 816
Katokichi Company 16 311
Kawasaki Heavy Industries 168 695
Kishu Paper Company 162 607
Kitz Corporation 9 33
Konica Corporation 109 723
Koyo Seiko 18 149
Kurimoto Company 33 296
Kyudenko Corporation 4 41
Lion Corporation 30 149
Maruzen Showa Unyu Co. 24 102
Matsushita Electric Industrial Company 27 441
Matsushita Electric Works 45 387
Mitsubishi Heavy Industries Ltd. 119 945
Mitsubishi Materials Corporation 68 275
Mitsui Trust & Banking 28 219
National House Industrial Co. 33 439
New Japan Securities 97 327(B)
NGK Insulators 51 484
Nichicon Corporation 69 798
Nichimen Corporation 111 407
Nippon Credit Bank 167 440
Nippon Densetsu 47 438
Nippon Metal Industry 16 49
Nippon Oil Company 238 1,223
Nippon Shinpan Company 17 95
Nippon Valqua Industries 40 140
Nishimatsu Construction 40 349
NTN Corp. 94 511
Okuma Corporation 62 495(B)
Onward Kashiyama Company Ltd. 16 225
Ricoh Company 110 1,263
Rohm Company 14 919
Sankyo Aluminium Industry Co. 36 142
</TABLE>
15
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Japan -- Continued
Sanwa Shutter Corporation 92 $ 687
Sekisui Chemical Co. 57 576
Shikoku Electric Power 20 394
Showa Electric Wire 53 196
Sony Corporation 10 655
Sumitomo Electric Industries 3 42
Taiyo Yuden Co. 12 168
Takeda Chemical Industries 83 1,742
Tatsuta Electric Wire & Cable 16 63
TDK Corporation 19 1,239
Teijin 74 323
Toagosei Co. Ltd. 7 25
Toda Corporation 5 38
Tokico Ltd. 36 122
Toyota Motor Corporation 24 690
Tsubakimoto Chain Co. 18 96
Ube Industries, Ltd. 12 34(B)
Yamaichi Securities Company 29 129
Yamanouchi Pharmaceutical 49 1,007
Yokohama Rubber Company 29 135
--------
36,417
--------
Malaysia -- 3.9%
AFFIN Holdings Bhd 120 330
AMMB Holdings Bhd 95 796
Arab Malaysian Corporation Berhad 173 863
Edaran Otomobil Nasional 88 880
Malayan Cement Bhd 224 514
Malaysian Airline System Bhd 112 290
Oriental Holdings Bhd 22 150
Rashid Hussain Bhd 88 582
Tan Chong Motor Holdings Berhad 974 1,651
UMW Holdings Bhd 113 528
--------
6,584
--------
Mexico -- 1.5%
ALFA, S.A. de C.V. 312 1,456
Apasco S.A. de C.V. 88 604
Industrias Penoles SA 83 294
GPO Financial Banamex 95 201(B)
--------
2,555
--------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Netherlands -- 7.1%
ABN Amro Holding N.V. 7 $ 475
Aegon N.V. 17 1,062
Ahrend Groep N.V. 10 541
Assurantiecomcern Stad Rotterdam N.V. 5 178(B)
DSM NV 10 1,007
Fortis Amev NV 7 254
Hollandsche Beton Groep N.V. 1 249
ING Groep NV 42 1,518
International Miller 19 465
Kon Ten Cate NV 3 158
Kondor Wessels Groep NV 6 227
Koninklijke Boskalis Westiminster N.V. 50 1,005
Koninklijke Nedlloyd 7 187
Koninklijke Van Ommeren N.V. 33 1,504
Koninklijke Volker Stevin N.V. 15 1,366
NBM-Amstelland N.V. 31 638
Roto Smeets D Boerd 11 455
Twentsche Kabel Holding NV 11 563
--------
11,852
--------
New Zealand -- 0.5%
Fletcher Challenge Paper 164 477(B)
Lion Nathon Limited 167 400(B)
--------
877
--------
Norway -- 2.1%
Aker AS 4 81
Den Norske Bank A/S 406 1,536
Hafslund ASA 11 74
Norsk Hydro AS 19 1,028
Nycomed ASA 11 166(B)
Saga Petroleum AS 35 585
--------
3,470
--------
Philippines -- 0.9%
Fortune Cement Corp. 246 124(B)
Philippine Long Distance Telephone Company 24 1,337
--------
1,461
--------
Portugal -- 0.6%
Portugal Telecom S.A. 37 1,048(B)
--------
Singapore -- 1.1%
Goldtron Ltd. 240 140
</TABLE>
17
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Singapore -- Continued
Jardine Strategic Holdings Ltd. 84 $ 304
Singapore Airlines Ltd. 53 481
Wing Tai Holdings Ltd. 336 961
--------
1,886
--------
Spain -- 4.7%
Autopistas del Mare Nostrum SA 5 85
Banco Bilbao Vizcaya 25 1,345
Banco Central Hispanoamericano 10 249
Banco Santander SA 13 851
Fuerzas Electricas de Cataluna, SA 49 480
Gas y Electridad SA 9 550
Iberdrola S.A. 140 1,979
Sevillana de Electricidad SA 27 305
Tabacalera SA 2 65
Union Electrica Fenosa SA 185 1,995
--------
7,904
--------
Sweden -- 1.1%
Electrolux AB 24 1,414
Skane-Gripen AB 12 517
--------
1,931
--------
Switzerland -- 4.8%
Alusuisse-Lonza Holding AG 2 1,291
CS Holding AG 9 976
Holderbank Financiere Glarus AG N.M. 271
Kuoni Reisen AG 1 1,579
Rieter Holdings Ltd. 1 138
Schweizerischer Bankverein 8 1,578
Schweizerische Rueckversicherungs-Gesellschaft 2 1,772
Swissair AG 1 461(B)
--------
8,066
--------
Thailand -- 0.5%
Bangkok Bank Company Ltd. 33 320
Charoen Pokphand Feedmill Public Company Limited 45 163
Siam Cement Public Company Limited 3 81
TelecomAsia Corporation 106 220(B)
--------
784
--------
Turkey -- 0.3%
Eregli Demir Ve Celik Fabrikalari T.A.S. 2,906 349
Yapi Kredi Bank 6,601 164
--------
513
--------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
United Kingdom -- 12.8%
Abbey National 45 $ 586
Anglian Water plc 84 848
Asda Group plc 353 744
Barclays PLC 39 667
Bass PLC 131 1,849
British Aerospace PLC 72 1,583
Burton Group plc 575 1,546
Daily Mail and General Trust 5 108
General Electric 84 548
Ladbroke Group plc 263 1,045
Legal & General Group plc 115 736
Lloyds TSB Group plc 394 2,914
Lucas Varity plc 64 244
Marley PLC 633 1,361
Misys plc 18 358
Ocean Group plc 11 88
PowerGen plc 24 237
Prudential Corporation 101 854
Racal Electronic plc 106 467
RJB Mining 39 282
Scottish & Newcastle PLC 130 1,528
Thames Water plc 177 1,854
United Utilities plc 16 174
W.H. Smith Group plc 98 718
Yorkshire Water PLC 18 215
--------
21,554
--------
Total Common Stocks and Equity Interests (Identified Cost-- $148,561) 161,197
- ---------------------------------------------------------------------------------------------------------------------------
Preferred Stocks-- 0.9%
Brazil -- 0.4%
Companhia de Tecidos Norte de Minas 1,370 437
Telecomunicacoes Brasileiras 2,100 162
--------
599
--------
Italy -- 0.5%
Autostrade Concessioni E Construzioni
Autostrade S.p.A. 237 466
IFI (ISTIFFIN) 32 359
--------
825
--------
United Kingdom -- N.M.
Wessex Water Plc 14 12
--------
Total Preferred Stocks (Identified Cost-- $1,264) 1,436
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Repurchase Agreement -- 4.4%
Prudential Securities, Inc.
7.15% dated 12/31/96, to be repurchased at $7,442
on 1/2/97 (Collateral: $7,702 Federal Home Loan
Mortgage Corporation Mortgage-backed securities,
7% due 6/1/04, value $7,600) (Identified Cost-- $7,439) $ 7,439 $ 7,439
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments-- 101.3% (Identified Cost-- $157,264) 170,072
Other Assets Less Liabilities-- (1.3%) (2,146)
--------
Net assets consisting of:
Accumulated paid-in capital applicable to 13,888 shares outstanding $153,513
Accumulated net investment loss (136)
Undistributed net realized gain on investments and currency transactions 1,758
Unrealized appreciation of investments and foreign currency transactions 12,791
--------
Net assets-- 100.0% $167,926
--------
Net asset value per share $12.09
------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) 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 investors.
(B) Non-income producing
N.M. Not meaningful
See notes to financial statements.
20
<PAGE>
Statements of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1996
(Amounts in Thousands)
Emerging Markets Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 81.7%
Argentina -- 3.3%
Banco Frances del Rio de la Plata S.A. 19 $ 177
Capex S.A. 26 213
CIADEA S.A. 36 170(A)
Siderca S.A. 82 150
-------
710
-------
Brazil -- 4.2%
Brazil Realty S.A. 10 190(A,B)
Companhia Paulista de Forca e Luz 1,800 213(A)
Companhia Siderurgica Nacional 4,000 112
Telecomunicacoes Brasileiras S/A 2,500 179
Telecomunicacoes Brasileiras S/A ADR 3 192
-------
886
-------
Chile -- 2.2%
Banco Bhif ADR 7 116(A)
Chilectra S.A. ADR 4 186
Sociedad Quimica Y Minera De Chile ADR 3 168
-------
470
-------
China -- 5.0%
The Guangshen Railway Company Limited 276 119(A)
Huaneng Power International, Inc. ADR 5 112(A)
Huaxin Cement Co. Ltd. 560 157(A)
Inner Mongolia Erdos Cashmere Products Co. Ltd. 298 188
Maanshan Iron and Steel Company 394 85
Qingling Motors Company 604 334
Shanghai New Asia Group Co. Ltd. 160 70
-------
1,065
-------
Croatia -- 1.4%
Zagrebacka Banka GDR 15 306(A,B)
-------
Czech Republic -- 0.8%
SPT Telekom a.s. 1 171(A)
-------
Egypt -- 2.8%
Commercial International Bank Egypt GDR 14 190(A,B)
Egypt Investment Company Ltd. 15 187(A,B)
Suez Cement Company 14 211(A,B)
-------
588
-------
</TABLE>
21
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Greece -- 1.0%
Alpha Credit Bank 1 $ 75
Intracom S.A. 3 69
National Bank of Greece S.A. 1 70
-------
214
-------
Hong Kong -- 6.1%
Cheung Kong (Holdings) Ltd. 18 160
China Resources Enterprise Limited 120 270
Citic Pacific Ltd. 22 128
Guangdong Investments 206 198
Guangdong Tannery 10 3
Hang Seng Bank Limited 10 121
New World Development Company Ltd. 20 135
Shanghai Industrial Holdings Limited 74 270(A)
-------
1,285
-------
Hungary -- 1.0%
Richter Gedeon Rt GDR 4 215
-------
India -- 4.8%
Crompton Greaves Ltd. GDR 24 94(A,B)
Hindalco Industries Ltd. GDR 10 245
Larsen & Toubro Ltd. GDS 15 206
Steel Authority of India Ltd. GDR 17 158(A,B)
Steel Authority of India Ltd. GDR 3 28(A,B)
Tata Engineering & Locomotive Company Limited GDR 11 112(A,B)
Tata Engineering & Locomotive Company Limited GDR 15 163
-------
1,006
-------
Indonesia -- 3.1%
PT Bank Internasional Indonesia 196 193
PT Hanjaya Mandala Sampoerna 27 144
PT Matahari Putra Prima 130 151
PT Telekomunikasi Indonesia 100 173(A)
-------
661
-------
Israel -- 0.6%
Zag Industries Ltd. 8 132(A)
-------
Malaysia -- 9.2%
Arab Malaysian Corporation Berhad 45 224
Berjaya Sports Toto Bhd 41 205
DCB Holdings Berhad 47 161
Kian Joo Can Factory Bhd 25 139
Malayan Banking BHD 20 222
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Malaysia -- Continued
Perusahaan Otomobil Nasional Bhd 22 $ 139
Rashid Hussain Bhd 47 311
Rothmans of Pall Mall (Malaysia) Berhad 15 157
Sime Darby Berhad 45 177
UMW Holdings Berhad 48 224
-------
1,959
-------
Mexico -- 10.2%
ALFA, S.A. de C.V. 43 198
Apasco S.A. de CV 34 233
Carso Global Telecom 92 219(A)
Desc S.A. de C.V. 34 186(A)
Fomento Economico Mexicana, SA de C.V. 70 240
Grupo Financiero Banamex Accival, SA de CV 95 201(A)
Grupo Industrial Durango, S.A. 34 181(A)
Grupo Industrial Maseca SA de CV 185 234
Grupo Televisa S.A. GDR 7 175(A)
Tubos De Acero De Mexico SA ADR 19 302(A)
-------
2,169
-------
Peru -- 0.6%
Minsur S.A. 9 30
Telefonica del Peru S.A. ADR 5 100
-------
130
-------
Philippines -- 4.1%
Belle Corporation 531 148(A)
Manila Electric Company 20 160
Metropolitan Bank and Trust Company 9 215
Philippine Long Distance Telephone Company 3 152
SM Prime Holdings 240 62
Southeast Asia Cement Holdings, Inc. 1,166 135(A)
-------
872
-------
Portugal -- 3.5%
Cimpor Cimentos de Portugal S.A. 15 323
Portugal Telecom SA 7 185
Telecel-Comunicacaoes Pessoais, SA 4 227(A)
-------
735
-------
Russia -- 3.0%
Lukoil Holding ADR 4 202
Tatneft ADR 4 192(A,B)
Vimpel-Communications ADR 10 235(A,B)
-------
629
-------
</TABLE>
23
<PAGE>
Statements of Net Assets--Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
South Africa -- 4.6%
Anglo American Corporation of South Africa Limited 1 $ 94
Sasol Limited 6 75
Southern Africa Fund, Inc. 55 798
-------
967
-------
South Korea -- 3.3%
Cho Hung Bank GDR 9 69(A)
Dong-Ah Construction Industrial Company EDR 4 40(A)
Dong-Ah Construction Industrial Company EDR N.M. 3(A)
Dong-Ah Construction Industrial Company EDR 6 67(A)
Hana Bank GDR 5 76(A)
Korea Electric Power Corporation ADR 11 225
Pohang Iron & Steel Company Ltd. ADR 6 126
Yukong Ltd. GDR 15 94
-------
700
-------
Taiwan -- 1.7%
Asia Cement Corporation GDR 3 50
President Enterprises GDR 9 157(A,B)
Yang Ming Marine Transport GDR 13 161(A,B)
-------
368
-------
Thailand -- 2.1%
Bangkok Bank Public Company Ltd. 11 104
Phatra Thanakit Company, Ltd. 18 51
PTT Exploration and Production Public Company Limited 6 81
Siam Makro Public Company Ltd. 32 133
Thai Farmers Bank Public Company Limited 13 81
-------
450
-------
Turkey -- 0.8%
Sasa Sun I Ve Senetik Ejyaf 2,660 179(A)
-------
Venezuela -- 1.1%
Compania Anonima Nacional Telefonos de Venezuela ADR 8 224(A)
-------
Zimbabwe -- 1.2%
Meikles Africa Limited 170 243(A)
-------
Total Common Stocks and Equity Interests (Identified Cost-- $16,287) 17,334
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Preferred Stocks -- 11.4%
Brazil -- 10.4%
Brasmotor S.A. 550 $ 153
Centrais Electricas Braseiras S/A 750 278
Companhia de Tecidos Norte de Minas 620 198
Companhia Energetica De Minas ADR 6 204
Globex Utilidades S.A. 12 191
Industrias Klabin de Papel e Celulose S/A 160 148
Petroleo Brasileiro S/A 1,640 261
Telecomunicacoes Brasileiras S/A ADR 1,400 108
Telecomunicacoes de Minas Gerais 1,680 208
Uniao de Bancos Brasileiros 7,630 249
Usinas Siderurgicas de Minas Gerais S/A 195,000 199
-------
2,197
-------
Colombia -- 1.0%
Banco Ganadero S.A. ADR 10 215
-------
Total Preferred Stocks (Identified Cost-- $2,277) 2,412
- ---------------------------------------------------------------------------------------------------------------------------
Convertible Bonds -- 0.7%
Taiwan -- 0.7%
Far Eastern Department Stores
3% 7-06-01 (Identified Cost-- $148) $ 140 148
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement -- 6.9%
Prudential Securities, Inc.
7.15% dated 12/31/96, to be repurchased at $1,464
on 1/2/97 (Collateral: $1,486 Federal Home Loan
Mortgage Corporation Mortgage-backed Securities,
7.5% due 7/1/24, value $1,497) (Identified Cost-- $1,464) 1,464 1,464
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments-- 100.7% (Identified Cost-- $20,176) 21,358
Other Assets Less Liabilities-- (0.7)% (152)
-------
Net assets consisting of:
Accumulated paid-in capital applicable to 2,018 shares outstanding $20,153
Accumulated net investment loss (118)
Accumulated net realized loss on investments and currency transactions (11)
Unrealized appreciation of investments and foreign currency transactions 1,182
-------
Net assets-- 100.0% $21,206
-------
Net asset value per share $10.51
------
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 investors.
N.M. Not meaningful
See notes to financial statements.
25
<PAGE>
Statements of Operations
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended 12/31/96
--------------------------------------------------
Global International Emerging
Government Equity Markets
Trust Trust Trust(A)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment Income:
Interest $11,752 $ 344 $ 43
Dividends -- 3,111 121
Less: Foreign tax expense -- (392) (10)
------- ------- ------
Total income 11,752 3,063 154
------- ------- ------
Expenses:
Management fee 1,150 934 84
Distribution and service fees 1,150 1,245 84
Custodian fee 244 377 68
Transfer agent and shareholder servicing expense 104 138 13
Audit and legal fees 82 53 29
Reports to shareholders 46 57 11
Registration fees 36 48 8
Organization expense 26 14 7
Other expenses 10 23 1
Directors' fees 5 5 8
------- ------- ------
2,853 2,894 313
Less fees waived -- (92) (102)
------- ------- ------
Total expenses, net of waivers 2,853 2,802 211
------- ------- ------
Net Investment Income 8,899 261 (57)
------- ------- ------
Net Realized and Unrealized Gain (Loss) on Investments:
Realized gain (loss) on:
Investments, options and futures 3,344 6,487 (4)
Foreign currency transactions (2,620) 226 (9)
------- ------- ------
724 6,713 (13)
------- ------- ------
Change in unrealized appreciation of:
Investments 2,465 11,002 1,182
Assets and liabilities denominated in foreign currencies (8) (48) --
------- ------- ------
2,457 10,954 1,182
------- ------- ------
Net Realized and Unrealized Gain (Loss) on Investments 3,181 17,667 1,169
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $12,080 $17,928 $1,112
------- ------- ------
</TABLE>
(A) For the period May 28 (Fund's inception)-December 31, 1996.
See notes to financial statements.
26
<PAGE>
Statements of Changes in Net Assets
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
Global International Emerging
Government Equity Markets
Trust Trust Trust
-------------------------------------------------------------------------
Year Year Year Feb. 17, 1995(A) May 28, 1996(A)
Ended Ended Ended to to
12/31/96 12/31/95 12/31/96 Dec. 31, 1995 Dec. 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Change in Net Assets:
Net investment income $ 8,899 $ 8,551 $ 261 $ 158 $ (57)
Net realized gain (loss)
on investments, options, and futures
and foreign currency transactions 724 11,324 6,713 (89) (13)
Change in unrealized
appreciation of investments
and assets and liabilities
denominated in foreign currency 2,457 8,228 10,954 1,837 1,182
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets
resulting from operations 12,080 28,103 17,928 1,906 1,112
Distributions to shareholders from:
Net investment income (9,293) (16,542) (620) (158) (59)
Net realized gain on investments (1,528) -- (4,209) -- --
In excess of net realized gain on
investments and currency transactions -- -- -- (434) --
Change in net assets
from Fund share transactions 6,336 (3,022) 88,880 64,632 20,152
- ---------------------------------------------------------------------------------------------------------------------------------
Change in net assets 7,595 8,539 101,979 65,946 21,205
Net Assets:
Beginning of period 153,954 145,415 65,947 1 1
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $161,549 $153,954 $167,926 $65,947 $21,206
- ---------------------------------------------------------------------------------------------------------------------------------
Under/(over) distributions of
net investment income $ (469) $ 1,167 $ (136) $ -- $ (118)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Commencement of operations
See notes to financial statements.
27
<PAGE>
Financial Highlights
Legg Mason Global Trust, Inc.
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>
Investment Operations Distributions From:
--------------------------------------- -----------------------------------
Net Realized and
Unrealized Gain
(Loss) on Invest- In Excess
Net Asset Net ments, Options Total Net of Net Net Asset
Value, Investment and Futures and From Net Realized Realized Value
Beginning Income foreign currency Investment Investment Gain on Gain on Total End of
of Period (Loss) transactions Operations Income Investments Investments Distributions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
Global Government Trust
Years Ended Dec. 31,
1996 $10.33 $0.59 $ 0.21 $ 0.80 $(0.62) $(0.10) $ -- $(0.72) $10.41
1995 9.54 0.63(A) 1.32 1.95 (1.16) -- -- (1.16) 10.33
1994 10.27 0.57(A) (0.71) (0.14) (0.59) -- -- (0.59) 9.54
April 15, 1993(B)-
Dec. 31, 1993 10.00 0.36(A) 0.31 0.67 (0.36) (0.04) -- (0.40) 10.27
International Equity Trust
Year Ended Dec. 31,
1996(E) $10.70 $0.02(F) $ 1.74 $ 1.76 $(0.05) $(0.32) $ -- $(0.37) $12.09
Feb. 17, 1995(B)-
Dec. 31, 1995 10.00 0.04(F) 0.77 0.81 (0.04) -- (0.07) (0.11) 10.70
Emerging Markets Trust
May 28, 1996(B)-
Dec. 31, 1996(E) $10.00 $(0.03)(G) $ 0.57 $ 0.54 $(0.03) $ -- $ -- $(0.03) $10.51
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------------
Net
Investment Net Assets
Expenses Income (Loss) Portfolio End of
Total to Average to Average Turnover Period
Return Net Assets Net Assets Rate (in thousands)
----------------------------------------------------------------------
<S><C>
Global Government Trust
Years Ended Dec. 31,
1996 8.22% 1.86% 5.80% 172% $161,549
1995 20.80% 1.81%(A) 5.72%(A) 169% 153,954
1994 (1.40)% 1.34%(A) 5.71%(A) 127% 145,415
April 15, 1993(B)-
Dec. 31, 1993 6.76%(C) 0.27%(A,D) 5.41%(A,D) 128%(D) 161,072
International Equity Trust
Year Ended Dec. 31,
1996(E) 16.49% 2.25%(F) 0.21%(F) 83% $167,926
Feb. 17, 1995(B)-
Dec. 31, 1995 8.11%(C) 2.25%(D,F) 0.52%(D,F) 58%(D) 65,947
Emerging Markets Trust
May 28, 1996(B)-
Dec. 31, 1996(E) 5.40%(C) 2.50%(D,G) (.68)%(D,G) 46%(D) $ 21,206
</TABLE>
(A) 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.
(B) Commencement of operations.
(C) Not annualized
(D) Annualized
(E) Pursuant to SEC regulations adopted for fiscal years beginning after
September 1, 1995, the average commission rate paid on securities
purchased and sold during the year ended December 31, 1996 for
International Equity Trust and Emerging Markets Trust were $.0083 and
$.0061, respectively.
(F) Net of fees waived and/or expenses reimbursed pursuant to a voluntary
expense limitation of 2.25%.
(G) Net of fees waived and/or expenses reimbursed pursuant to voluntary
expenses limitation of 2.50%.
See notes to financial statements.
28
<PAGE>
Notes to Financial Statements
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies:
The Legg Mason Global Trust, Inc. ("Trust"), consisting of the Global
Government Trust ("Global Government"), the International Equity Trust
("International Equity"), and the Emerging Markets Trust ("Emerging
Markets") (each separately referred to as a "Fund" and collectively as the
"Funds"), is registered under the Investment Company Act of 1940, as
amended, as an open-end, diversified investment company.
Security Valuation
Each Fund's securities are valued on the basis of market quotations
or, lacking such quotations, at fair value as determined under the
guidance of the Board of Directors. Securities for which market quotations
are readily available are valued at the last sale price of the day for a
comparable position, or, in the absence of any such sales, the last
available bid price for a comparable position. Where a security is traded
on more than one market, which may include foreign markets, the securities
are generally valued on the market considered by each Fund's adviser to be
the primary market. Each Fund will value its foreign securities in U.S.
dollars on the basis of the then-prevailing exchange rates.
Most securities held by Global Government are valued on the basis of
valuations furnished by an independent service which utilizes both
dealer-supplied valuations and electronic data processing techniques which
take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other data. Securities with
remaining maturities of 60 days or less are valued at amortized cost.
Currency Transactions
The books and records of the Funds 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 are reflected as a component of such
gains or losses.
Investment Income and Dividends to Shareholders
Income and expenses are recorded on the accrual basis. 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. Dividends from net investment income are declared and paid
monthly for Global Government; and are declared and paid annually for
International Equity and Emerging Markets. Dividends payable are recorded
on the dividend ex-date. At December 31, 1996, dividends payable of $38
were accrued for Global Government.
Investment Transactions
Security transactions are recorded on the trade date. Realized gains
and losses from security transactions are reported on an identified cost
basis for both financial reporting and federal income tax purposes. At
December 31, 1996, receivables for securities sold and not yet delivered
and payables for securities purchased and not yet received for each of the
Funds were as follows:
Payable for
Receivable for Securities
Securities Sold Purchased
- ----------------------------------------------------------------------
Global Government $ -- $ --
International Equity 1,091 4,520
Emerging Markets -- 506
29
<PAGE>
Notes to Financial Statements--Continued
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
Deferred Organizational Expense
Deferred organizational expenses of $128 for Global Government, $71
for International Equity, and $73 for Emerging Markets are being amortized
on a straight-line basis over 5 years beginning on the date each
respective fund began operations.
Federal Income Taxes
No provision for federal income or excise taxes is required since
Global Government and International Equity intend to continue and Emerging
Markets intends to qualify as regulated investment companies and
distribute all of their taxable income to their shareholders.
Use of Estimates
The preparation of the financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
2. Financial Instruments:
As part of its investment program, each 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
Each 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 and, with respect to Global
Government, 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
Upon the purchase of a put option or a call option by a Fund, the
premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the Fund will
realize a loss in the amount of the cost of the option. When a Fund enters
into a closing sale transaction, the Fund will realize a gain or loss
depending on whether the sales proceeds from the closing sale transaction
are greater or less than the cost of the option. When a Fund exercises a
put option, it will realize a gain or loss from the sale of the underlying
security and the proceeds from such sale will be decreased by the premium
originally paid. When a Fund exercises a call option, the cost of the
security which the Fund purchases upon exercise will be increased by the
premium originally paid.
When a Fund writes a call option or a put option, an amount equal to
the premium received by the Fund is recorded as a liability, the value of
which is marked-to-market daily. When a written option expires, the Fund
realizes a gain equal to the amount of the premium received. When a Fund
enters into a closing purchase transaction, the Fund realizes a gain (or
loss if the cost of the closing purchase transaction exceeds the premium
received when the option was sold) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such
option is eliminated. When a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received.
When a written put option is exercised, the amount of the premium
originally received will reduce the cost of the security that the Fund
purchased upon exercise.
Upon entering into a futures contract, a Fund is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin."
Subsequent payments ("variation margin") are made or received by the Fund
each day, depending on the daily fluctuation of the value of the contract.
The daily changes in contract value are recorded as unrealized gains or
losses and the Fund recognizes a realized gain or loss when the contract
is closed. Futures contracts are valued daily at the settlement price
established by the board of trade or exchange on which they are traded.
30
<PAGE>
- --------------------------------------------------------------------------------
2. Financial Instruments--Continued
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 Funds' 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.
The Funds' investment adviser acting under the supervision of the
Board of Directors, reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Funds enter
into repurchase agreements to evaluate potential risks.
Forward Currency Exchange Contracts
Forward foreign currency contracts are marked-to-market daily using
foreign currency exchange rates supplied by an independent pricing
service. The change in a contract's market value is recorded by a Fund as
an unrealized gain or loss. When the contract is closed or delivery is
taken, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's securities, but it
does establish a rate of exchange that can be achieved in the future.
These forward foreign currency contracts involve market risk in excess of
amounts reflected in the Financial Statements. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to
a decline in the value of the hedged currency, they also limit any
potential gain that might result should the value of the currency
increase. In addition, the Funds could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their
contracts. Each Fund's adviser will enter into forward foreign currency
contracts only with parties approved by the Board of Directors because
there is a risk of loss to the Funds if the counterparties do not complete
the transaction.
At December 31, 1996, open forward currency exchange contracts were
as follows:
Global Government:
Contract to
Settlement ------------------------------ Unrealized
Date Receive Deliver Gain/(Loss)
- ----------------------------------------------------------------
2/28/97 USD 6,476 AUD 8,000 $ 122
2/28/97 DEM 13,002 DKK 50,000 (32)
2/28/97 DEM 9,116 USD 6,000 (53)
2/28/97 DEM 4,784 GBP 1,850 (44)
2/28/97 GBP 1,866 JPY 350,000 145
2/28/97 JPY 2,700,000 DEM 36,835 (520)
2/28/97 NZD 6,386 JPY 500,000 144
2/28/97 AUD 4,000 USD 3,214 (37)
2/28/97 USD 3,192 AUD 4,000 15
2/28/97 JPY 500,000 NZD 6,294 (80)
-----
$(340)
-----
International Equity:
Contract to
Settlement ------------------------------ Unrealized
Date Receive Deliver Gain/(Loss)
- ----------------------------------------------------------------
02/06/97 USD 1,477 CHF 1,862 $ 81
CHF 1,862 USD 1,499 (102)
02/20/97 USD 1,550 CHF 1,956 81
CHF 1,956 USD 1,527 (58)
03/05/97 USD 1,576 CHF 2,075 15
CHF 2,075 USD 1,606 (46)
-----
$ (29)
-----
As of December 31, 1996, Emerging Markets had not entered into any
forward currency contracts.
31
<PAGE>
Notes to Financial Statements--Continued
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
3. Options and Futures:
As part of its investment program, Global Government may utilize
options and futures. The risk associated with purchasing options is
limited to the premium originally paid. Options written by a Fund involve,
to varying degrees, risk of loss in excess of the option value reflected
in the Statements of Net Assets. The risk in writing a covered call option
is that a Fund may forego the opportunity for profit if the market price
of the underlying security increases and the option is exercised. The risk
in writing a covered put option is that a Fund may incur a loss if the
market price of the underlying security decreases and the option is
exercised. In addition, there is the risk a Fund may not be able to enter
into a closing transaction because of an illiquid secondary market or, for
over-the-counter options, because of the counterparty's inability to
perform. Call and put options written by Global Government and related
premiums received during the year were as follows:
Calls Puts
- ----------------------------------------------------------------------
Actual Actual
Contracts Premiums Contracts Premiums
- ----------------------------------------------------------------------
Options outstanding
December 31, 1995 -- $-- -- $ --
Options written -- -- 200 84
Options closed -- -- (200) (84)
- ----------------------------------------------------------------------
Options outstanding
December 31, 1996 -- -- -- --
- ----------------------------------------------------------------------
The Funds enter into futures contracts as a hedge against anticipated
changes in interest rates. There are several risks in connection with the
use of futures contracts as a hedging device. Futures contracts involve,
to varying degrees, risk of loss in excess of amounts reflected in the
financial statements. The change in the value of futures contracts
primarily corresponds with the value of their underlying instruments,
which may not correlate with the change in the value of the hedged
instruments. In addition, there is the risk that a Fund may not be able to
enter into a closing transaction because of an illiquid secondary market.
There were no open long or short futures contracts at December 31,
1996.
4. Investment Transactions:
Investment transactions for the year ended December 31, 1996,
(excluding short-term securities) were as follows:
Proceeds
Purchases from Sales
- -------------------------------------------------------------
Global Government $253,039 $249,526
International Equity 185,023 98,944
Emerging Markets 22,445 3,608
At December 31, 1996 the cost of securities and aggregate gross
unrealized appreciation and depreciation for each Fund based on the cost
of securities for federal income tax purposes was as follows:
Cost Appreciation (Depreciation)
- ---------------------------------------------------------------------
Global Government $151,031 $ 7,061 $(1,459)
International Equity 157,650 20,032 (7,610)
Emerging Markets 20,339 2,358 (1,339)
Emerging Markets Trust has unused capital loss carryforwards for
federal income tax purposes of $11 which expire in December 2004.
32
<PAGE>
- --------------------------------------------------------------------------------
5. Transactions with Affiliates:
Each 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 each Fund. Under this agreement, the Manager provides
each Fund with management and administrative services for which each Fund
pays a fee at annual rates based on its average daily net assets as
follows: Global Government and International Equity, 0.75%; and Emerging
Markets, 1.00%.
The agreement with the Manager provides that expense reimbursements
be made to each Fund for expenses (exclusive of taxes, interest, brokerage
and extraordinary expenses) which in any month are in excess of the
following: 1.90% of average net assets for Global Government; 2.25% for
International Equity and 2.50% for Emerging Markets. Fees in excess of
these limits will be waived indefinitely for Global Government and through
May 1, 1997 for International Equity and Emerging Markets. For the year
ended December 31, 1996 management fees of $92 for International Equity
and $84 for Emerging Markets were waived. No fees were waived for Global
Government. At December 31, 1996 amounts due to the Manager were as
follows: Global Government, $102 and International Equity, $96.
Western Asset Management Company ("Adviser"), a wholly owned
subsidiary of Legg Mason, Inc., and an affiliate of the Manager and Legg
Mason, serves as investment adviser to Global Government. The Adviser is
responsible for the actual investment activity of the Fund, for which the
Manager pays a fee at an annual rate equal to 531/3% of the fee received
by the Manager.
Batterymarch Financial Management, Inc. ("Batterymarch"), a wholly
owned subsidiary of Legg Mason, Inc., and an affiliate of the Manager and
Legg Mason, serves as the adviser to International Equity and Emerging
Markets. Batterymarch is responsible for the actual investment activity of
these Funds. The Manager pays Batterymarch a fee for its services at an
annual rate equal to 66% of the fee received by the Manager from
International Equity and 75% of the fee received from Emerging Markets.
Legg Mason, as distributor of each Fund, receives an annual
distribution fee of 0.50% for Global Government and 0.75% for
International Equity and Emerging Markets, and an annual service fee of
0.25% of each Fund's average daily net assets, calculated daily and
payable monthly. At December 31, 1996, distribution and service fees due
to the distributor were as follows:Global Government, $102, International
Equity, $136 and Emerging Markets, $66. Distribution and service fees of
$17 were waived for Emerging Markets.
Legg Mason also has an agreement with the Funds' transfer agent to
assist with certain of its duties. For this assistance, Legg Mason was
paid the following amounts by the transfer agent for the year ended
December 31, 1996: $31 for Global Government; $43 for International
Equity; and $4 for Emerging Markets.
6. Line of Credit:
In November 1995, the Funds, along with certain other Legg Mason
Funds, entered into a $75 million line of credit ("Credit Agreement") to
be utilized as an emergency source of cash in the event of unanticipated,
large redemption requests by shareholders. Pursuant to the Credit
Agreement, each participating Fund is liable only for principal and
interest payments related to borrowings made by that Fund. Borrowings
under the line of credit bear interest at prevailing short-term interest
rates. For the year ended December 31, 1996, the Funds had no borrowings
under the line of credit.
7. Fund Share Transactions:
At December 31, 1996, there were 1,000,000 shares authorized at $.001
par value for all portfolios of the Trust.
Share transactions were as follows:
<TABLE>
<CAPTION>
Reinvestment
Sold of Distributions Repurchased Net Change
----------------- ---------------- ----------------- ----------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S><C>
Global Government
Year Ended December 31, 1996 3,220 $ 33,097 936 $ 9,577 (3,551) $(36,338) 605 $ 6,336
Year Ended December 31, 1995 2,328 24,311 1,395 14,427 (4,059) (41,760) (336) (3,022)
International Equity
Year Ended December 31, 1996 8,861 102,294 404 4,782 (1,540) (18,196) 7,725 88,880
Feb. 17, 1995(dagger) to Dec. 31, 1995 6,453 67,708 55 587 (345) (3,663) 6,163 64,632
Emerging Markets
May 28, 1996(dagger) through Dec. 31, 1996 2,092 20,888 5 59 (79) (793) 2,018 20,154
</TABLE>
(dagger) Commencement of operations.
33
<PAGE>
Report of Independent Accountants
To the Shareholders and Directors of Legg Mason Global Trust, Inc.:
We have audited the accompanying statements of net assets of the Legg Mason
Global Government Trust, International Equity Trust and Emerging Markets Trust
("the Funds") as of December 31, 1996, and the related statements of operations,
the statements of changes in net assets and the financial highlights for each of
the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' 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 31,1996 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 the
Legg Mason Global Government Trust, International Equity Trust and Emerging
Markets Trust as of December 31, 1996, and the results of their operations,
their changes in net assets and their financial highlights for each of the
periods therein, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
February 5, 1997
34
<PAGE>
Legg Mason Family of Funds
Equity Funds
Legg Mason Balanced Trust
Growth and Income--An equity mutual fund which seeks long-term capital
appreciation and current income in order to achieve an attractive total
investment return consistent with reasonable risk.
Legg Mason Total Return Trust
Growth and Income--An equity mutual fund with investment objectives of capital
appreciation and current income.
Legg Mason American Leading Companies Trust
Growth--A large capitalization equity mutual fund which seeks long-term capital
appreciation and current income consistent with prudent investment management.
Legg Mason Value Trust
Growth--An equity mutual fund which seeks long-term growth of capital using the
"Value Approach" to investing.
Legg Mason Special Investment Trust
Aggressive Growth--An equity mutual fund which seeks capital appreciation.
It invests principally in securities of companies that are involved in
restructurings or other special situations, or are out of favor with, or not
closely followed by the market.
Global Funds
Legg Mason Emerging Markets Trust
Aggressive Growth--A mutual fund which is designed for investors seeking
long-term growth possibilities available in emerging markets.(dagger)
Legg Mason International Equity Trust
Aggressive Growth--A diversified, professionally managed portfolio seeking
maximum long-term total return by investing primarily in common stocks of
companies located outside the United States.(dagger)
Legg Mason Global Government Trust
Growth and Income--A global bond fund which seeks to provide a competitive total
return by investing primarily in a global portfolio of high quality debt
securities of U.S. and foreign governments, their agencies and
instrumentalities, denominated in various currencies.(dagger)
Taxable Bond Funds
Legg Mason U.S. Government Intermediate-Term Portfolio
Conservative Income--A mutual fund which seeks to achieve high current income
consistent with prudent investment risk and liquidity needs.
Legg Mason Investment Grade Income Portfolio
Income--A mutual fund which seeks to provide investors with a high level of
current income through a diversified portfolio of debt instruments.
Legg Mason High Yield Portfolio
Growth and Income--A fund which seeks to provide high current income, and as a
secondary objective, seeks capital appreciation. Under normal circumstances, the
Fund will invest a majority of its total assets in high yield fixed income
securities commonly known as "junk" bonds. The Fund may invest up to 25% of
total assets in foreign securities.
Tax-Free Bond Funds
Legg Mason Tax-Free Intermediate-Term Income Trust
Tax-Free Income--A fund which seeks a high level of current income exempt from
federal income tax consistent with prudent investment risk.(double dagger)
Legg Mason Maryland Tax-Free Income Trust
Tax-Free Income--A fund whose objective is a high level of current income exempt
from federal, Maryland state, and local income taxes.(double dagger)
Legg Mason Pennsylvania Tax-Free Income Trust
Tax-Free Income--A fund which seeks a high level of current income exempt from
federal income tax and Pennsylvania personal income tax.(double dagger)
Money Market Funds
Legg Mason U.S. Government Money Market Portfolio
A professionally managed portfolio seeking high current income consistent with
liquidity and conservation of principal.*
Legg Mason Cash Reserve Trust
A diversified management investment company investing in money market
instruments to achieve stability of principal and current income consistent
with stability of principal.*
Legg Mason Tax Exempt Trust
A money market fund seeking to produce high current income exempt from
federal income tax, to preserve capital and to maintain liquidity.*
(dagger) Investment in foreign securities involves increased risks, such
as currency rate fluctuations, foreign taxation and political
changes.
(double dagger) Income produced from the tax-free funds may be subject to state
and local taxes. Long-term capital gain distributions generally
are taxable. A portion of each Fund's dividends may be subject
to the federal alternative minimum tax.
* An investment in any of these Funds is neither insured nor
guaranteed by the U.S. Government and there can be no guarantee
that these Funds will maintain a stable $1 share price.
For a prospectus containing more complete information, including charges and
expenses on any of the Legg Mason funds, call 1-800-577-8589. Please read it
carefully before investing or sending money.
35
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