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Previous: LEGG MASON GLOBAL TRUST INC, 497, 1998-02-25 |
Next: U S WIRELESS DATA INC, 10KSB/A, 1998-02-25 |
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
---------------------------------------
100 Light Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 o 539 o 0000
LMF-042
Annual Report
December 31, 1997
Legg Mason
Global
Trust, Inc.
Global Government Trust
International Equity Trust
Emerging Markets Trust
The Art of Investing
[Legg Mason Logo]
FUNDS
<PAGE>
To Our Shareholders,
We are pleased to provide you with the annual report for the Legg Mason
Global Trust.
Beginning on the next page, the portfolio managers responsible for the Global
Trust portfolios discuss 1997 results and the investment outlook. The Funds'
total returns in various periods since their inceptions are shown on pages 8 and
9. 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, 1997 are included in this report.
We hope you will consider using the 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 9, 1998
<PAGE>
Portfolio Managers' Comments
Global Government Trust
Global bond markets generally have benefited from declining yields for the
past several years, but they continue to struggle with volatile currency
markets. For US investors, much of the rewards of the global bond market rally
this past year have been dissipated by the rising value of the dollar, a
phenomenon which displayed considerable momentum in the first and third quarters
of 1997. The second half of the year brought an additional source of currency
risk, in the form of a series of devaluations which rocked the currencies of
Southeast Asia. The Global Government Trust was not immune to these risks,
generating a total return of -1.4% for the six months ended December 31, 1997,
reflecting a combination of income, capital gains and currency losses. This
represented a moderate degree of underperformance relative to the 1.5% total
return of the Fund's benchmark, the Salomon Brothers World Government Bond
Index.
The portfolio's diverse strategies produced mixed results during the period.
An overweight exposure to the dollar minimized currency losses relative to the
benchmark as the dollar rose, but the residual foreign currency exposure
detracted substantially from nominal returns. The portfolio's overweight
exposure to emerging market bonds produced positive returns for the year, even
though the Asian crisis resulted in wider spreads in the latter part of the
year. An emphasis on Italian bonds within Europe, and Canadian bonds within the
dollar bloc was also rewarded by the strong relative performance of these
sectors. On the negative side, the portfolio had a modest exposure to the Czech
koruna, which depreciated somewhat against the dollar. Although the portfolio
had only a small position in Indonesian and Philippine bonds, they were
substantially impacted by significant currency devaluations.
Looking ahead, we believe that 1998 is likely to see a gradual relaxation of
US monetary policy. A strong dollar, falling commodity prices and a flattening
of the yield curve all suggest that monetary policy was effectively tight last
year, and this undoubtedly aggravated the difficulties faced by Asian economies
which were heavily exposed to dollar debt. Given sound monetary fundamentals and
very low levels of inflation, our US exposure emphasizes long-maturity bonds,
and we are targeting a less barbelled exposure to the yield curve in
anticipation of a gradual steepening of the curve as the Fed begins to ease
short-term rates lower.
In Europe, market expectations for higher short rates have fallen sharply as
concerns over the negative impact on growth from the Asian crisis have
grown.Rates are now anticipated to converge at 4% immediately prior to the start
of European Monetary Union ("EMU") on January 1, 1999. This has occurred against
a background of gradually firming domestic demand growth, rising capacity
utilization and improving business confidence. Tight fiscal budgets have
improved the prospects for a broad initial EMU fuelling spread convergence to
levels consistent with pure credit differentials.
The firming of European currencies versus Asia could dampen export-related
growth this year. However, the sharp decline in long-term bond yields, the
upswing in business confidence and less tight fiscal policies, should ensure
that growth in Europe remains on course for 2.5-3%. Short rates are likely to
firm later in the year in line with market expectations. Bond yields are
unlikely to rise much from current levels given the excellent inflation outlook
and could decline modestly if Asia-related woes deepen. In Europe, we remain
long our duration benchmarks with a barbell yield curve exposure. Exposure to
the expanding European corporate bond market will be increased.
2
<PAGE>
In Japan, the Asian-related credit crunch, coming on top of an economy
failing to recover from consumer-oriented fiscal tightening, has raised the
prospects of recession despite recent modest tax cuts. Even export growth is
unlikely to rescue the economy with 40% of exports destined for Asia. Against
this background bond yields have declined only modestly given already very low
yields, fears of increased supply and a weaker yen. The outlook for the market
remains poor despite very accommodative monetary policies. Financial market
deregulation and the possibility of further fiscal easing would be more
supportive of the equity market while domestic savings should continue to be
diversified into non-Japanese markets. Japanese exposure will thus remain
severely underweight, as downside risks overwhelm upside potential.
Currency fundamentals continue to support the US dollar. The demand for
dollars from Asia will continue until banks and corporations in countries
impacted by the crisis have hedged their short-term dollar liabilities and
confidence returns as export earnings rise. We will seek opportunities to
increase foreign currency exposure, however, if evidence grows later in the year
of a slowing US economy coinciding with a policy-assisted bottoming in the
Japanese economy and firmer European growth. Finally, the substantial widening
of spreads in the emerging market arena and in Asia presents unique
opportunities on a selected basis, particularly in those countries with sound
monetary fundamentals and strong productive capacities.
Western Asset Management Company
February 9, 1998
3
<PAGE>
Portfolio Managers' Comments
International Equity Trust
For the twelve months ended December 31, 1997, the total return for the Legg
Mason International Equity Trust was 1.8% compared with 2.1% for the Morgan
Stanley Capital International Europe, Australia and the Far East Index ("MSCI
EAFE") Index. The Fund's total return for the last six months was -10.5%
compared with -8.4% for the index.
Global returns for the second half were influenced by investor concerns
regarding the unsettled events in Southeast Asia. Our preference for smaller
issues hurt the relative performance of the Fund, as the uncertain outlook
caused investors to favor larger, blue chip stocks. During 1997, large
capitalization stocks substantially outperformed mid- and small-cap stocks,
despite what we find are more attractive valuations for smaller stocks.
For the year, the return for the MSCI Pacific region declined 25.3%. The
Japanese market, with a 25% weight in the EAFE Index, was down 23.6%. Our
country selection added value by continuing to underweight exposure to Japan,
where valuations appear expensive and earnings estimate revisions are below
average. Stock selection also added value in Japan where we have avoided the
banks in favor of technology and export-related stocks. A negative influence on
the Fund's relative return was stock selection in Hong Kong, due to exposure to
banking and property stocks during the latter part of the year.
In contrast, the return for the MSCI Europe region was up 24.2%, led by
Switzerland with a return of 44.8%. The Fund benefited from good stock selection
in Switzerland. We continue to find better valuations and earnings estimate
revisions in the small European markets, while underweighting the large European
markets.
The Fund has a small position in emerging markets where returns were mixed.
Emerging markets in Europe and Latin America continued to be attractively priced
with good growth prospects at relatively low price/earnings multiples while
those in Asia continued to experience deteriorating earnings estimates and
significantly negative returns.
Market Commentary and Investment Outlook
Asia remains the major exception to an otherwise favorable global economy
which features low inflation and moderate growth. The economic outlook for much
of Asia is now being reflected in declining earnings estimates.
Recovery in Japan continues to be slow and painful. Allowing weak banks to
fail is a positive step but concrete plans for economic stimulation are in
question. Expectations for economic growth are being revised downward for next
year. Despite the fragile financial state, there are many well-managed
companies. With the yen at the 130 level, export companies are particularly
attractive.
In Europe, we continue to favor the smaller markets although our rating of
Germany is improving as earnings estimates have increased significantly. The
better estimate revisions throughout much of Europe reflect, in part, the
uncertain state of Asia.
4
<PAGE>
Emerging markets of Latin America and Europe have been dragged down by events
in Asia and represent excellent value today. We will continue to seek growth
opportunities in the more developed emerging markets at reasonable prices.
As analysts better assess the magnitude of the Asian crisis, earnings
estimates on securities connected with the region may be persistently revised
downward in developed and emerging markets. In such an environment, investors
would penalize both negative earnings surprises and excessive valuations. Stocks
and markets with low valuations would be favored. In such a volatile
environment, we will adhere to our disciplines of rigorous stock analysis and
effective risk control, focusing on our strengths in stock selection.
We continue to find mid- and small capitalization stocks more attractive, on
average, than large cap, despite investor enthusiasm for the larger, blue chip
issues. The valuation gap between large and small capitalization stocks
continued to widen for markets outside the US - as it did within the US. Large
capitalization stocks outside the US signficantly outperformed smaller cap
stocks during the year.
The Fund's estimated EPS growth rate is 14.4% compared with 13.6% for the
EAFE Index, and the estimated P/E ratio is 11.1x, significantly lower than the
EAFE Index P/E ratio of 18.3x. Thus, the Fund's growth-to-P/E ratio is well
above that of the market. The Fund is well-diversified across countries and
industries and maintains its value and mid-capitalization characteristics.
Charles F. Lovejoy, CFA
February 9, 1998
5
<PAGE>
Portfolio Managers' Comments
Emerging Markets Trust
The return for the Legg Mason Emerging Markets Trust was -6.2% for the year
ended December 31, 1997, compared with -11.6% for the Morgan Stanley Capital
International Emerging Markets Free ("MSCI EMF") Index. For the six months ended
December 31, 1997, the return for the Fund was -22.5% compared with -24.9% for
the index.
Returns for the second half were influenced by the unsettled events in
Southeast Asia. Following the Thai baht devaluation in July, the turmoil spread
to Indonesia, Malaysia and the Philippines. While markets in Southeast Asia
continued to experience deteriorating earnings estimates and significantly
negative returns, emerging markets in Europe and Latin America continued to be
attractively priced with good growth prospects at relatively low price/earnings
multiples.
In Asia, the Fund benefited from its underweighted position as the index
return for the region declined 48.2% for 1997. The Fund favored Hong Kong and
China over Malaysia, Thailand and Indonesia which helped the relative return.
The Fund's exposure to companies in Latin America added value for the year as
this region continued to perform well. The MSCI Latin American return was up
31.6% for the period, led by Mexico which returned 53.9%.
The Fund also benefited from investments in the region of Europe, Middle East
and Africa; particularly from strong stock selection in Turkey, Israel and
Greece. Several markets in emerging Europe were particularly robust, led by
Turkey, up 118%; Russia, up 112%; and Poland, up 95%.
Market Commentary and Investment Outlook
In Latin America, despite the continued strong performance, valuations remain
attractive compared to other emerging markets. By our estimates, earnings growth
over 18% should be available over the next two years; yet Latin companies trade
at under 11x the coming year's earnings. The Mexican economy, seemingly
insulated from the problems in Asia, is growing at 6% annually. The domestic
consumer is back and exporters continue to do well despite the currency's
strength.
In Southeast Asia, while valuations are attractive, the impact of currency
devaluations on earnings expectations is still developing. It is difficult to
say when we will see recovery in these markets. As analysts better assess the
magnitude of the Asian crisis, we fear that earnings estimates may be
persistently revised downward, particularly in emerging markets. In such an
environment, investors would penalize both negative earnings surprises and
excessive valuations. Those stocks and markets with little global exposure and
low valuations would be favored. In such a volatile environment, we will adhere
to our disciplines of rigorous stock analysis and effective risk control.
Emerging Europe continues to offer exciting prospects. Russia was added to
the index in November in the Europe, Middle East and Africa region. The Fund
ended the year with a 4.1% position in Russia, along with exposure to
Kazakhstan, Romania and Ukraine.
6
<PAGE>
Companies in the emerging markets are still growing faster than anywhere else
in the world and at attractive valuations. 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.
The Fund is very attractively positioned with an estimated EPS growth rate of
21.6% compared with 17.7% for the index and a lower estimated P/E ratio of 8.5x
compared with 11.3x for the index. Thus, the Fund's growth-to-P/E ratio is well
above that of the market. The Fund is well-diversified across industry sectors
and invested in over 30 markets.
Stephen J. McCarthy, CFA
February 9, 1998
7
<PAGE>
Performance Information
Legg Mason Global Trust, Inc.
Performance Comparison of a $10,000 Investment as of December 31, 1997
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 -1.69% -1.69%
Life of Fund(dagger) +35.29 +6.62
- -----------------------------------------------------
(dagger) Fund Inception--April 15, 1993
- -----------------------------------------------------
[GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
Salomon Brothers
Global Government World Government
Trust Bond Index (1)
03/93 10,000 10,000
06/93 10,010 10,123
12/93 10,676 10,577
06/94 10,404 10,648
12/94 10,526 10,825
06/95 12,114 10,648
12/95 12,716 12,884
06/96 12,809 12,693
12/96 13,762 13,350
06/97 13,724 13,186
12/97 13,529 13,381
(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. Index returns are for the periods
beginning March 31, 1993.
8
<PAGE>
International Equity Trust
- -----------------------------------------------------
Cumulative Average Annual
Total Return Total Return
- -----------------------------------------------------
One Year +1.76% +1.76%
Life of Fund(dagger) +28.16 +9.02
- -----------------------------------------------------
(dagger) Fund Inception--February 17, 1995
- -----------------------------------------------------
[GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
Morgan Stanley
Capital International
Europe, Australia and International Equity
the Far East Index(1) 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 12,604
6/97 13,773 14,313
12/97 12,623 12,816
(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 Average Annual
Total Return Total Return
- -----------------------------------------------------
One Year -6.18% -6.18%
Life of Fund(dagger) -1.11 -0.70
- -----------------------------------------------------
(dagger) Fund Inception--May 28, 1996
- -----------------------------------------------------
[GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
Morgan Stanley
Capital International
Emerging Markets Emerging Markets
Free Index(1) Trust
5/28/96 10,000 10,000
6/96 10,062 10,020
12/96 9,641 10,330
6/97 11,352 12,767
12/97 8,524 9,889
(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.
9
<PAGE>
Industry Diversification
Legg Mason Global Trust, Inc.
December 31, 1997 (Unaudited)
International Equity Trust
% of Net Market
Assets Value
- --------------------------------------------------
(000)
Aerospace 1.6% $ 3,672
Agriculture/Food 0.3 752
Air Transport 2.1 4,832
Aluminum 0.3 591
Apparel/Textiles 0.1 186
Banks 7.5 16,993
Business Machines 1.2 2,821
Chemicals 0.5 1,049
Construction 5.8 13,314
Containers 0.9 2,024
Drugs/Medicine 1.0 2,270
Electric Utilities 1.9 4,311
Electronics 8.7 19,909
Finance 20.5 46,615
Gas Utilities 0.5 1,160
Health (Non-Drug) 0.4 839
Hotel/Restaurant 0.5 1,171
Insurance 5.2 11,781
Iron &Steel 0.3 650
Liquor 1.3 2,930
Miscellaneous 1.5 3,493
Motor Vehicles 5.6 12,736
Non-Ferrous Metals 2.9 6,561
Oil Refining/Distribution 1.0 2,295
Oil Service 1.6 3,659
Paper 1.5 3,497
Photo/Optical 1.6 3,628
Producer Goods 2.1 4,701
Publishing 0.5 1,201
Railroads/Transit N.M. 9
Real Property 1.1 2,410
Retail (Food) 0.1 220
Retail (Non-Food) 0.4 821
Services 4.7 10,790
Telecommunications 9.0 20,420
Tire & Rubber 1.1 2,503
Tobacco 0.6 1,434
Trucking/Freight 2.2 5,041
Short-term Investments 1.4 3,167
----- --------
Total Investment Portfolio 99.5 226,456
Other Assets Less Liabilities 0.5 1,199
----- --------
NET ASSETS 100.0% $227,655
----- --------
N.M. Not meaningful
Emerging Markets Trust
% of Net Market
Assets Value
- --------------------------------------------------
(000)
Aerospace 0.4% $ 244
Agriculture/Food 0.7 464
Air Transport 1.3 827
Apparel/Textiles 1.3 837
Banks 5.3 3,428
Beverages 2.6 1,688
Business Machines 1.5 1,000
Chemicals 1.7 1,077
Coal & Uranium 0.2 155
Construction 6.7 4,394
Consumer Durables 2.6 1,730
Domestic Oil Reserves 3.5 2,316
Drugs/Medicine 1.4 917
Electric Utilities 8.7 5,702
Electronics 2.5 1,631
Finance 1.8 1,156
Forest Products 0.2 124
Gas Utilities 0.8 524
Iron & Steel 4.8 3,135
Media 0.5 338
Miscellaneous 10.9 7,139
Motor Vehicles 1.9 1,242
Non-Ferrous Metals 0.8 496
Oil Service 3.1 2,004
Paper 0.8 522
Precious Metals 1.6 1,053
Producer Goods 0.5 357
Railroads/Transit 0.4 264
Real Property 1.0 640
Retail (Food) 0.5 308
Retail (Non-Food) 1.8 1,188
Services 3.4 2,198
Telecommunications 19.5 12,736
Tobacco 1.7 1,114
Water Transport 0.6 406
Short-term Investments 2.2 1,450
----- -------
Total Investment Portfolio 99.2 64,804
Other Assets Less Liabilities 0.8 498
----- -------
NET ASSETS 100.0% $65,302
----- -------
10
<PAGE>
Statement of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1997
(Amounts in Thousands)
Global Government Trust
<TABLE>
<CAPTION>
Maturity
Rate Date Currency Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Long-Term Debt Securities -- 90.1%
British Sterling -- 15.7%
BAT International Finance PLC 9.25% 10/27/20 GBP 1,000 $ 2,037
Bayerische Hypotheken Bank 7% 2/25/00 880 1,438
Daimler-Benz UK, PLC 7% 2/25/00 500 815
Harvard University 6.875% 2/25/00 550 898
Lloyd's Bank PLC 9.625% 4/6/23 900 1,880
United Kingdom Treasury Stock 10.25% 11/22/99 3,800 6,610
United Kingdom Treasury Stock 8% 6/7/21 3,200 6,381
Welcome Break Financial PLC 8.284% 9/1/17 800 1,455
-------
21,514
-------
Canadian Dollar -- 1.4%
Shaw Communications, Inc. 8.54% 9/30/27 CAD 3,000 1,947
-------
Danish Krone -- 10.0%
Kingdom of Denmark 9% 11/15/00 DKK 17,000 2,752
Kingdom of Denmark 8% 3/15/06 65,000 10,990
-------
13,742
-------
French Franc -- 1.6%
Republic of Ivory Coast
Restructured Loan 0% FRF 23,304 1,539(A,B)
Unstructured Loan 6.875% 9,200 592(A,B)
-------
2,131
-------
German Deutschmark -- 7.9%
Bundesobligation 5.75% 8/22/00 DEM 14,300 8,215
Exide Holding Europe SA 9.125% 4/15/04 2,500 1,417(E)
Geberit International SA 10.125% 4/15/07 1,000 611
Netia Holdings, B.V. 0% 11/1/07 1,650 527(E,G)
-------
10,770
-------
Italian Lira -- 8.5%
Buoni del Tesoro Poliennali 10% 8/1/03 ITL 16,800,000 11,586
-------
New Zealand Dollar -- 2.0%
Fannie Mae 7% 9/26/00 NZD 2,300 1,300
International Bank for
Reconstruction and Development 7% 9/18/00 2,500 1,420
-------
2,720
-------
</TABLE>
11
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
Global Government Trust--Continued
<TABLE>
<CAPTION>
Maturity
Rate Date Currency Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Philippine Peso -- 0.7%
International Finance Corporation 10.25% 4/10/02 PHP 50,000 $ 963
--------
Slovakian Koruna -- 1.7%
International Finance Corporation 11.75% 8/15/99 SKK 95,000 2,327
--------
South African Rand -- 2.4%
Republic of South Africa 13% 8/31/10 ZAR 16,900 3,308
--------
Swedish Krona -- 9.4%
Kingdom of Sweden 13% 6/15/01 SEK 83,000 12,839
--------
United States Dollar -- 28.8%
Corporate -- 0.4%
Interamericas Communications 14% 10/27/07 USD 500 495(E)
--------
Currency Exchange-Linked Securities -- 0.9%
Morgan Guaranty Trust
Indonesian Rupiah-Linked Note 14% 11/21/01 3,000 1,191(D)
--------
Emerging Markets -- 16.3%
Republic of Argentina 9.75% 9/19/27 1,158 1,101
Argentina Bonos de Consolidacion
Previsionales 5.6875% 4/1/01 5,536 5,256(C)
Republic of Argentina Floating Rate Bond 6.6875% 3/31/05 1,200 1,073(C)
Government of Jamaica 9.625% 7/2/02 1,500 1,429(E)
Kingdom of Morocco 6.6563% 1/1/09 6,000 5,100(C)
Republic of Brazil 6.8125% 1/1/01 1,256 1,178(C)
Petroleos Mexicanos 8.85% 9/15/07 2,750 2,723
United Mexican States 9.50% 7/16/01 462 481
United Mexican States 11.375% 9/15/16 3,500 4,015
--------
22,356
--------
U.S. Government Obligations -- 11.2%
United States Treasury Bonds 6% 2/15/26 5,000 4,994
United States Treasury Bonds 6.125% 11/15/27 10,000 10,277
--------
15,271
--------
Total Long-term Debt Securities (Identified Cost-- $125,249) 123,160
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Maturity
Rate Date Currency Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Short-Term Investments -- 7.4%
Foreign Treasury Bill-Linked Securities -- 2.9%
Bankers Trust Company
Russian GKO-Linked Note 0% 1/14/98 USD 2,500 $ 2,498(F)
Russian GKO-Linked Note 0% 2/4/98 1,500 1,484(F)
--------
3,982
--------
Repurchase Agreement -- 4.4%
Merrill Lynch Securities Corp.
6.60%, dated 12/31/97, to be repurchased at $6,062
on 1/2/98 (Collateral: $6,005 Fannie Mae Medium Term Notes,
6.98%, due 10/1/12, value $6,292) 6,060 6,060
--------
Actual
Contracts
---------
Options Purchased -- 0.1%
Kingdom of Denmark 7% 11/07 Euro Call
January 98, Strike Price $109.64 DKK 92 5
United Kingdom Treasury Stock 8/21 Euro Put
January 98, Strike Price $120.625 GBP 5 16
Government of Japan #190 Euro Call
January 98, Strike Price $108.426 JPY 4,800 56
--------
77
--------
Total Short-term Investments (Identified Cost-- $10,120) 10,119
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments-- 97.5% (Identified Cost-- $135,369) 133,279
Other Assets Less Liabilities-- 2.5% 3,453
--------
Net Assets Consisting Of:
Accumulated paid-in capital applicable to 14,242
shares outstanding $143,762
Overdistributions of net investment income (5,134)
Unrealized depreciation of investments and currency transactions (1,896)
--------
Net Assets-- 100.0% $136,732
========
Net Asset Value Per Share $9.60
=====
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Illiquid Security -- A security that cannot be disposed of within seven days
for approximately the price at which the Fund values it.
(B) Non-income producing -- Issuer is in default of interest and principal
payments.
(C) Indexed Security -- The rate of interest earned on each security is tied to
the London Interbank Offered Rate (LIBOR). The coupon rate for each is the
rate as of December 31, 1997.
(D) Total maturity value is linked to the value of the indicated currency at
maturity.
(E) 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.
(F) Total maturity value is linked to the value of the Treasury bills of the
indicated country at maturity.
(G) Stepped coupon security -- A bond or preferred stock which amortizes to par
by a specific date at which time it begins to accrue interest or pay
dividends.
See notes to financial statements.
13
<PAGE>
Statement of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1997
(Amounts in Thousands)
International Equity Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 97.7%
Argentina -- 1.1%
Telefonica de Argentina S.A. 644 $ 2,414
-------
Australia -- 3.6%
Australia & New Zealand Bank Group Ltd. 222 1,465
Boral Limited 808 2,043
Comalco Limited 97 401
Commonwealth Bank of Australia 25 288
M.I.M. Holdings Ltd. 1,741 1,067
Westpac Banking Corporation Ltd. 454 2,902
-------
8,166
-------
Austria -- 1.0%
OMV AG 17 2,300
-------
Belgium -- 2.7%
Compagnie Belge de Participations Paribas SA 37 1,678
Cie Financiere Europeene et d'Outre-Mer SA 3 323
Fortis AG 2 501
Groupe Bruxelles Lambert SA 5 781
Kredietbank NV 3 1,343
Societe Generale de Belgique 13 1,180
Solvay 7 440
-------
6,246
-------
Brazil -- 0.1%
Companhia Paulista de Forca e Luz-- CPFL 1,900 250
-------
Chile -- 1.0%
Enersis S.A. ADR 79 2,291
-------
Denmark -- 1.8%
Den Danske Bank 12 1,639
SAS Danmark A/S 32 460
Sophus Berendsen A/S 10 1,608
Superfos A/S 20 505
-------
4,212
-------
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Finland -- 2.1%
Kesko Oyj 35 $ 553
Metsa-Serla Oyj 48 371
Outokumpu Oyj 89 1,080
Rautaruukki OY 80 650
UPM-Kymmene Oyj 106 2,126
-------
4,780
-------
France -- 4.0%
Alcatel Alsthom 20 2,517
Bertrand Faure 9 633
Compagnie Generale de Geophysique SA 4 499(A)
Compagnie Generale d'Industrie et de Participations 2 682
PSA Peugeot Citroen 6 769
Renault SA 77 2,157(A)
Suez Lyonnaise des Eaux 15 1,671
Vallourec SA 2 137
-------
9,065
-------
Germany -- 7.8%
Bayerische Vereinsbank AG 34 2,212
Commerzbank AG 100 3,953
Continental AG 82 1,812
Deutsche Pfandbrief-und Hypothekenbank AG 5 284
Dresdner Bank AG 71 3,267
FAG Kugelfischer Georg Schaefer AG 50 661
IWKA AG 3 741
Schmalbach Lubeca AG N.M. 33
Thyssen AG 7 1,562
Volkswagen AG 6 3,150
-------
17,675
-------
Greece -- 0.3%
Ergo Bank S.A. 14 727
-------
Hong Kong -- 3.2%
Champion Technology Holdings 8,034 860
Cheung Kong Holdings 297 1,945
CLP Holdings Limited 164 910
</TABLE>
15
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Hong Kong -- Continued
Dickson Concepts International Ltd. 215 $ 314
FPB Bank Holding Company Limited 253 63
Hon Kwok Land Investment Limited 788 142
HSBC Holdings plc 81 2,009
Innovative International Holdings 698 125
Peregrine Investment Holdings Limited 256 182
Sun Hung Kai Properties Ltd. 39 272
Wing Hang Bank Ltd. 131 370
Wong's International Holdings Ltd. 501 123
Wong's International Holdings Ltd. - Warrants 100 4(A)
-------
7,319
-------
Ireland -- 1.7%
Allied Irish Banks plc 117 1,134
Bank of Ireland 85 1,315
Irish Life Plc 67 386
Jefferson Smurfit Group Plc 401 1,129
-------
3,964
-------
Israel -- 0.4%
Bezeq Israeli Telecommunication Corporation Ltd. 354 977
-------
Italy -- 4.6%
Banca Commerciale Italiana 199 692
Banca Popolare di Bergamo Credito Varesino SpA 112 1,955
ENI 316 1,790
Mondadori (Arnoldo) Editore SpA 60 475
Telecom Italia SpA 862 5,510
-------
10,422
-------
Japan -- 12.6%
Canon Incorporated 48 1,118
Citizen Watch Company 208 1,394
Daiichi Pharmaceutical Company Ltd. 60 675
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Japan-- Continued
Daiwa Kosho Lease Company Ltd. 101 $ 410
Daiwa Securities Company Ltd. 579 1,995
Eisai Company Ltd. N.M. 2
Fuji Heavy Industries Ltd. 121 326
Furukawa Electric 572 2,449
Hitachi Ltd. 110 784
Hitachi Cable 105 674
Iwate (Bank of) Limited 18 792
Jaccs Company 105 643
Katokichi Company 16 197
Kawasaki Kisen Kaisha Ltd. 44 53(A)
Kishu Paper Company 10 16
Kitz Corporation 9 10
Konica Corporation 707 3,249
Kyowa Hakko Kogyo Co. Ltd. 366 1,584
Marubeni Corporation 118 207
Maruzen Showa Unyu Co. 6 9
Matsushita Electric Industrial Company 143 2,092
Mitsui O.S.K. Lines 206 286
Mitsui Trust & Banking 415 804
NEC Corporation 74 788
Nichicon Corporation 43 399
Nissan Motor Company, Ltd. 224 926
NTN Corp. 94 217
Olympus Optical Co., Ltd. 53 366
Onward Kashiyama Company Ltd. 16 185
Ricoh Company 110 1,365
Rohm Company 14 1,426
Sanwa Shutter Corporation 53 266
Shikoku Electric Power 20 288
Sony Corporation 10 888
Sumitomo Trust & Banking Corporation 53 275
TDK Corporation 19 1,432
-------
28,590
-------
</TABLE>
17
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Malaysia -- 0.7%
Edaran Otomobil Nasional 88 $ 180
Hicom Holdings Berhad 428 246
Jaya Tiasa Holdings Bhd 168 309
Malayan Cement Bhd 520 354
Malaysian Resources Corporation Bhd 223 52
Tan Chong Motor Holding Berhad 974 426
-------
1,567
-------
Mexico -- 2.0%
ALFA, S.A. de C.V. 316 2,144
Desc S.A. de C.V. 141 1,347
Telefonos de Mexico SA 280 789
Vitro SA 66 291
-------
4,571
-------
Netherlands -- 7.1%
ABN Amro Holding N.V. 29 569
Aegon N.V. 18 1,616
Assurantiecomcern Stad Rotterdam N.V. 5 245
Fortis Amev NV 7 316
Fugro N.V. 9 277
Hollandsche Beton Groep N.V. 21 391
ING Groep NV 42 1,775
Internatio - Muller NV 46 1,432
KLM Royal Dutch Air Lines NV 36 1,343
Koninklijke Ahrend Groep NV 11 330
Koninklijke Boskalis Westminster N.V. 50 881
Koninklijke Ten Cate NV 3 142
Koninklijke Van Ommeren N.V. 43 1,452
NBM-Amstelland N.V. 31 807
Philips Electronics N.V. 7 438
Roto Smeets D Boerd 17 570
Twentsche Kabel Holding 11 535
Van der Moolen Holding N.V. 13 392
Volker Wessels Stevin N.V. 84 2,621
-------
16,132
-------
New Zealand -- 1.9%
Fletcher Challenge Energy 161 564
Fletcher Challenge Paper 350 457
Telecom Corporation of New Zealand Limited 668 3,241
-------
4,262
-------
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Norway -- 2.3%
Aker RGI ASA - AShares 13 $ 240
Aker RGI ASA - B Shares 4 58
Den Norske Bank A/S 479 2,257
Elkem ASA 17 228
Hafslund ASA 11 52
Norsk Hydro AS 13 608
Nycomed Amersham plc 21 760(A)
Saga Petroleum AS 57 985
-------
5,188
-------
Philippines -- 0.5%
Philippine Long Distance Telephone Company 49 1,057
-------
Portugual -- 1.6%
Cimpor-Cimentos de Portugal, SGPS, SA 35 931
Portugal Telecom S.A. 59 2,722
-------
3,653
-------
Singapore -- 1.3%
Singapore Airlines Ltd. 311 2,030
United Overseas Bank Ltd. 31 172
Wing Tai Holdings Ltd. 739 864
-------
3,066
-------
South Korea -- 0.2%
Yukong Ltd. 48 383
-------
Spain -- 4.8%
Banco Bilbao Vizcaya 151 4,873
Banco Central Hispanoamericano 41 1,008
Corporacion Bancaria de Espana SA 22 1,363
Iberdrola S.A. 140 1,837
Tabacalera SA 18 1,435
Telefonica de Espana 16 443
-------
10,959
-------
Sweden -- 2.1%
Granges AB 12 191(A)
Haldex AB 22 321
Mo och Domsjo AB 21 542
SKF AB 5 105
Volvo AB 139 3,734
-------
4,893
-------
</TABLE>
19
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Switzerland -- 7.9%
Ascom Holding AG N.M $ 450(A)
Credit Suisse Holding AG 11 1,671
Danzas Holding AG 1 157
Georg Fischer AG 1 1,177
Holderbank Financiere Glarus AG 2 1,831
Kuoni Reisen Holdings AG N.M. 1,169
Rieter Holdings Ltd. 2 651
Sairgroup 1 999(A)
Schweizerische Bankgesells 4 5,601
Schweizerische Ruckvericherungs-Gesellschaft 2 4,282
-------
17,988
-------
Thailand -- 0.3%
Bangkok Bank Company Ltd. 241 602
-------
Turkey -- 0.3%
Yapi ve Kredi Bankasi, A.S. 15,380 586
-------
United Kingdom -- 16.7%
Abbey National 26 461
Anglian Water plc 147 2,007
Asda Group plc 237 697
Bank of Scotland 182 1,649
Barclays PLC 39 1,036
Barratt Developments plc 238 906
Bass PLC 108 1,674
British Aerospace PLC 72 2,060
British Telecommunications plc 250 1,970
Daily Mail and General Trust 4 154
English China Clays plc 159 700
Ladbroke Group plc 508 2,204
Lex Service plc 215 1,645
Lloyds TSB Group plc 515 6,695
Marley PLC 573 885
Misys plc 24 730
Pilkington plc 280 586
PowerGen plc 306 3,987
Prudential Corporation 232 2,830
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
United Kingdom -- Continued
Royal & Sun Alliance Insurance Group plc 35 $ 350
Rugby Group plc 148 330
Scottish & Newcastle PLC 103 1,257
Siebe plc 31 614
George Wimpey plc 14 24
WPP Group plc 585 2,602
--------
38,053
--------
Total Common Stocks and Equity Interests (Identified Cost-- $210,320) 222,358
- ---------------------------------------------------------------------------------------------------------------------------
Preferred Stocks -- 0.4%
Brazil -- 0.4%
Telecomunicacoes Brasileiras 7,300 833
--------
Italy -- N.M.
IFI Istituto Finanziario 8 86
--------
United Kingdom -- N.M.
Wessex Water plc 14 12
--------
Total Preferred Stocks (Identified Cost-- $921) 931
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement -- 1.4%
Prudential Securities, Inc.
6.75%, dated 12/31/97, to be repurchased at $3,168 on 1/2/98
(Collateral: $3,255 Government National Mortgage Association
Mortgage-backed securities, 8.00%, due 2/15/23, value $3,255)
(Identified Cost-- $3,167) $3,167 3,167
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments-- 99.5% (Identified Cost-- $214,408) 226,456
Other Assets Less Liabilities-- 0.5% 1,199
--------
NET ASSETS CONSISTING OF:
Accumulated paid-in capital applicable to 19,328 shares outstanding $223,318
Overdistributions of net investment income (1,523)
Accumulated net realized loss on investments and currency transactions (6,122)
Unrealized appreciation of investments and currency transactions 11,982
--------
NET ASSETS -- 100.0% $227,655
========
NET ASSET VALUE PER SHARE $11.78
======
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing
N.M. Not meaningful
See notes to financial statements.
21
<PAGE>
Statement of Net Assets
Legg Mason Global Trust, Inc.
December 31, 1997
(Amounts in Thousands)
Emerging Markets Trust
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Common Stocks and Equity Interests -- 90.0%
Argentina -- 3.8%
IRSA Inversiones y Representaciones S.A. 142 $ 529
Quilmes Industrial SA ADR 24 326
Siderca S.A. 232 646
YPF Sociedad Anonima ADR 29 981
-------
2,482
-------
Brazil -- 11.8%
Brazil Realty S.A. GDS 16 310(B)
Centrais Electricas Braseiras S/A 28,533 1,419
Companhia de Eletricidade do Estado do Rio de Janeiro 1,055,900 681(A)
Companhia Energetica de Minas ADR 14 617
Companhia Siderurgica Nacional 11,190 311
Espirito Santo Centrais Eletricas SA 2 226(A)
Gerdau Metalurgica S/A 79 2
Rossi Residencial S.A. GDS 36 161(A,B)
Telecomunicacoes Brasileiras S/A ADR 15 1,772
Telecomunicacoes Brasileiras S/A 13,847 1,408
Uniao de Bancos Brasileiros SA GDS 24 763(A)
-------
7,670
-------
Chile -- 4.5%
Chilectra S.A. ADR 26 660
CIA de Telecomunicaciones de Chile S.A. ADR 23 699
Laboratorios Chile SA ADR 28 627
Linea Aerea Nacional Chile SA ADR 51 699(A)
Sociedad Quimica y Minera de Chile ADR 6 282
-------
2,967
-------
China -- 5.4%
Bengang Steel Plates Co., Ltd. 1,000 222(A)
Brilliance China Automotive Holdings, Ltd. 140 1,050
China International Marine Containers Ltd. 147 132(A)
Guangdong Kelon Electric Holding 300 308
Guangshen Railway 1,000 265(A)
Heilongjiang Electric Power Co. Ltd. 200 153
Huaneng Power International, Inc. ADR 10 241(A)
Huaxin Cement Co. Ltd. 380 34(A)
Shandong Huaneng Power Company Ltd. ADR 30 206
Shenzhen Expressway Company Limited 1,000 194(A,B)
Shenzhen Konka Electronics Group Limited 200 216(A)
Zhejiang Southeast Electric Power Co., Ltd. 1,500 483(A)
-------
3,504
-------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Colombia -- 1.0%
Banco Ganadero S.A. ADR 13 $ 314
Cementos Diamante S.A. ADR 28 316(B)
-------
630
-------
Czech Republic -- 0.7%
Komercni Banka a.s. 12 243(A)
Sporitelni Privatizacni If Cesky 18 200(A)
-------
443
-------
Egypt -- 1.3%
Arabian International Construction 8 226(A)
Egypt Investment Company Ltd. 14 221(A,B)
International Food Egypt 5 112(A)
Miraco International B.V. N.M. 39(A)
Oriental Weavers 14 247(A)
-------
845
-------
Ghana -- 0.4%
Ashanti Goldfields Company Ltd. GDR 35 263
-------
Greece -- 2.2%
Hellenic Telecommunication Organization S.A. 34 692
Heracles General Cement S.A. 34 714
-------
1,406
-------
Hong Kong -- 1.7%
China Pharmaceutical Enterprise and Investment Corporation Limited 1,053 107
China Resources Enterprise Limited 50 112
China Telecom (Hong Kong) Limited 150 257(A)
Citic Pacific Ltd. 40 159
Pacific Ports Company Ltd. 1,000 183(A)
Sa Sa International Holdings Limited 376 78
Shanghai Industrial Holdings Limited 40 149
Vanda Systems &Communication Holdings Ltd. 400 83
-------
1,128
-------
Hungary -- 1.4%
BorsodChem Rt. 9 336
Magyar Olaj Es Gazipari KT 11 276
Richter Gedeon Rt. 3 307
-------
919
-------
India -- 4.9%
Gujarat Ambuja Cements Ltd. GDR 51 355
Hindalco Industries Ltd. GDR 20 398
</TABLE>
23
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
India -- Continued
India Access 25 $ 234(A)
Indian Petrochemicals Corp. Ltd. GDS 27 135
ITC Limited GDR 35 698(A)
Larsen & Toubro Ltd. GDS 15 164
Manhanagar Tel Nigam Ltd. 17 258(A,B)
Ranbaxy Laboratories Limited GDR 15 384
Reliance Industries GDR 70 591(A)
-------
3,217
-------
Indonesia -- 1.0%
PT Bank Internasional Indonesia 446 26
PT Bimantara Citra 800 153
PT Hanjaya Mandala Sampoerna 57 43
PT Indah Kiat Pulp &Paper Corporation Tbk 700 124
PT Lippo Bank 320 35
PT Matahari Putra Prima 2,760 226
PT Telekomunikasi Indonesia 100 53
-------
660
-------
Israel -- 2.5%
Agis Industries Limited 15 122
Bank Leumi Le - Israel 83 139
Electric Fuel Corporation 25 89(A)
Formula Systems (1985) Ltd. 13 397(A)
Israel Chemicals Limited 120 162
Makhteshim Chemical Works Limited 23 171(A)
NICE - Systems Ltd. ADR 6 246(A)
Orbotech, Ltd. 5 159(A)
Teva Pharmaceutical Industries Ltd. ADR 3 123
-------
1,608
-------
Kazakhstan -- 1.3%
Regent Central Asia Fund 97 870(A)
-------
Malaysia -- 2.0%
Malayan Cement Bhd 223 152
Malaysian Pacific Industries Bhd 64 154
Puncak Niaga Holdings Berhad 140 104(A)
Rothmans of Pall Mall (Malaysia) Berhad 34 264
Telekom Malaysia Bhd 90 266
Tenaga Nasional Berhad 159 339
-------
1,279
-------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Mexico -- 15.8%
ALFA, S.A. de C.V. 46 $ 314
Biper S.A. de C.V. 910 410(A)
Carso Global Telecom 168 684
Corporation GEO, S.A. de C.V. 101 618(A)
Desc S.A. de C.V. (Series B) 72 689
Empaques Ponderosa, S.A. de C.V. 865 746(A)
Fomento Economico Mexicana, SA de C.V. 94 747
Grupo Financiero Banamex Accival, SA de CV 221 661(A)
Grupo Financiero Bancomer, S.A. de C.V. 249 160(A)
Grupo Industrial Maseca SA de CV 298 308
Organizacion Soriana SA de CV 238 1,048
Panamerica Beverages, Inc. 19 617
Sanluis Corporacion S.A. de C.V. 83 686
Telefonos de Mexico SA 577 1,627
Tubos de Acero de Mexico SA ADR 31 677(A)
TV Azteca, S.A. de C.V. ADR 15 338(A)
-------
10,330
-------
Namibia -- 0.5%
Namibian Minerals Corporation 111 332(A)
-------
Pakistan -- 0.3%
The Hub Power Company Limited GDR 7 212(A,B)
-------
Peru -- 1.4%
Cementos Lima, S.A. 18 399
Telfonica del Peru S.A. ADR 21 490
-------
889
-------
Philippines -- 1.2%
Belle Corporation 1,531 59(A)
C&PHomes, Inc. 580 34
Fil-Estate Land, Inc. 600 17(A)
Manila Electric Company 25 84
Metropolitan Bank & Trust Company 11 73
Philippine Long Distance Telephone Company 10 229
Philippine National Bank 80 176(A)
Southeast Asia Cement Holdings, Inc. 9,816 128(A)
-------
800
-------
</TABLE>
25
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Poland -- 1.0%
Kredyt Bank S.A. GDR 21 $ 262(A,B)
NFI Hetman S.A. 11 24(A)
NFI Jedenasty S.A. 14 40(A)
NFI Octave S.A. 15 28(A)
NFI Piast S.A. 43 117(A)
NFI Progress S.A. 13 32(A)
NFI Trezeci S.A. 16 41(A)
NFI Zachodni S.A. 13 31(A)
Sokolowskie Zaklady Miesne S.A. 11 13
Zaklady Plyt Wiorowych Grajewo 2 79(A)
-------
667
-------
Portugal -- 1.7%
Cimpor Cimentos de Portugal S.A. 23 590
Portugal Telecom S.A. 11 501
-------
1,091
-------
Romania -- 0.7%
Societe Generale Romania Fund 5 453(A)
-------
Russia -- 4.1%
Lukoil Holding ADR 6 515
AO Surgutneftegaz ADR 71 710
AO Taftneft ADR 8 1,083(B)
Unified Energy Systems GDR 12 381(A)
-------
2,689
-------
Saudi Arabia -- 1.6%
Saudi Arabian Investment Fund 125 1,047(A)
-------
South Africa -- 4.5%
Barlow Limited 22 187
Billiton Plc 28 72(A)
De Beers Centenary AG 9 193
Driefontein Consolidated 63 427
Free State Consolidated Gold Mines Limited 25 114
Gencor Limited 16 27
Rembrandt Group Limited 65 474
Sasol Limited 15 155
Southern Africa Fund, Inc. 55 689
Western Area Gold Mining 30 165(A)
Western Deep Levels 25 462
-------
2,965
-------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
South Korea -- 1.2%
Cho Hung Bank GDR 16 $ 24(A,B)
Daewoo Electronic Components Co. 30 80
Dong-Ah Construction Industrial Company EDR 10 12
Hana Bank GDR 23 136(A)
Kookmin Bank Ltd. GDS 18 84(B)
Kookmin Bank Ltd. 7 36
Korea Electric Power Corporation 20 185
Pohang Iron & Steel Company Ltd. 3 74(A)
SK Telecom Co. Ltd. N.M. 38
Samsung Electronics Co. 1 25
Yukong Ltd. GDR 27 29(A,B)
Yukong Ltd. GDR 36 38(A)
-------
761
-------
Taiwan -- 2.1%
Asia Cement Corporation GDS 17 194(B)
Asustek Computer Inc. GDR 22 366(A,B)
China Steel Corporation GDR 14 209(A,B)
Evergreen Marine Corporation GDR 11 119(B)
President Enterprises GDS 11 127(A,B)
Teco Electric & Machinery GDR 18 253(A,B)
Yang Ming Marine Transport GDR 13 105(A,B)
-------
1,373
-------
Thailand -- 2.1%
Advanced Info Service Public Co., Ltd. 50 239
Bangkok Bank Public Company Limited 46 114
Electricity Generating Public Company Limited 160 299
First Bangkok City Bank Public Company Limited 421 82
PTT Exploration & Production Public Company Limited 14 161
Siam Cement Public Company Limited 18 142
Siam Makro Public Company Ltd. 146 121
Thai Airways International Public Co., Ltd. 220 240
-------
1,398
-------
Turkey -- 2.1%
Aselsan Askeri Elektronik A.S. 1,968 119
Borusan Birlesik Boru Fabrikalari A.S. 2,439 114
Eczacibasi Ilac Sanayi ve Ticaret A.S. 2,813 128(A)
Haci Omer Sabanci Holding A.S. 4,647 286(A)
Klimasan Klima Sanayi ve Ticaret A.S. 2,270 164(A)
Kordsa Kord Bezi Sanayi ve Ticaret A.S. 2,226 193
Turkiye Garanti Bankasi A.S. 3,403 168
Yapi ve Kredi Bankasi A.S. 5,695 217
-------
1,389
-------
</TABLE>
27
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
Emerging Markets Trust--Continued
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Ukraine -- 0.7%
Societe Generale Laden Thal Ukraine Fund 5 $ 463(A)
-------
United States -- 1.5%
Global Telesystems Holdings Ltd. 43 1,001(A)
-------
Venezuela -- 1.6%
Compania Anonima Nacional Telefonos de Venezuela ADS 17 724
Venepal S.A. 191 300
-------
1,024
-------
Total Common Stocks and Equity Interests (Identified Cost-- $65,692) 58,775
- ---------------------------------------------------------------------------------------------------------------------------
Preferred Shares-- 6.8%
Argentina -- 0.5%
Nortel Inversora S.A. ADR 13 339
-------
Brazil -- 6.3%
Banco Votorantim SA 11,597 223
Cataguazes Leopold 151,492 305(B)
Companhia Energetica de Sao Paulo 4,300 258(A)
Companhia Riograndense Telecom 653 805(A)
Companhia Vale do Rio Doce 7 143(A)
Ericsson Telecomunicacoes S/A 9,300 298
Gerdau Metalurgica S/A 7,576 227
Gerdau Siderugica SA 18,265 229
Itausa Investimentos Itau S/A 754 588
Petroleo Brasileiro S/A 3,509 821
Sadia - Concordia S/A Industria E Comercio 325 213
Telecomunicacoes de Minas Gerais 42 5
-------
4,115
-------
Total Preferred Shares (Identified Cost-- $5,129) 4,454
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Convertible Bond -- 0.2%
Taiwan -- 0.2%
Far Eastern Department Stores, 3%, 7/6/01 (Identified Cost-- $146) $ 140 $ 125
- ---------------------------------------------------------------------------------------------------------------------------
Repurchase Agreement -- 2.2%
Prudential Securities, Inc.
6.75%, dated 12/31/97, to be repurchased at
$1,451 on 1/2/98 (Collateral: $1,477
Federal Home Loan Mortgage Corporation
Mortgage-backed securities, 7.00%, due
8/1/27, value $1,498)
(Identified Cost-- $1,450) 1,450 1,450
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments-- 99.2% (Identified Cost-- $72,417) 64,804
Other Assets Less Liabilities-- 0.8% 498
-------
NET ASSETS CONSISTING OF:
Accumulated paid-in capital applicable to 6,626 shares outstanding $74,837
Overdistributions of net investment income (232)
Accumulated net realized loss on investments and currency transactions (1,692)
Unrealized depreciation of investments and currency transactions (7,611)
-------
NET ASSETS-- 100.0% $65,302
=======
NET ASSET VALUE PER SHARE $9.85
=====
- ---------------------------------------------------------------------------------------------------------------------------
</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 buyers.
N.M. Not meaningful
See notes to financial statements.
29
<PAGE>
Statements of Operations
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Ended 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------
Global International Emerging
Government Equity Markets
Trust Trust Trust
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment Income:
Interest $ 11,229 $ 294 $ 190
Dividends -- 5,401 856
Less: Foreign tax expense (68) (660) (83)
------- ------ --------
Total income 11,161 5,035 963
------- ------ --------
Expenses:
Management fee 1,156 1,616 554
Distribution and service fees 1,156 2,155 554
Custodian fee 286 458 255
Transfer agent and shareholder servicing expense 100 238 80
Audit and legal fees 77 53 56
Reports to shareholders 40 67 20
Registration fees 4 45 41
Organization expense 26 14 15
Directors' fees 6 6 6
Other expenses 10 15 4
------- ------ --------
2,861 4,667 1,585
Less fees waived -- -- (198)
------- ------ --------
Total expenses, net of waivers 2,861 4,667 1,387
------- ------ --------
Net Investment Income 8,300 368 (424)
------- ------ --------
Net Realized and Unrealized Gain (Loss) on Investments:
Realized gain (loss) on:
Investments (3,543) 287 (1,569)
Foreign currency transactions (345) (272) (160)
------- ------ --------
(3,888) 15 (1,729)
------- ------ --------
Change in unrealized appreciation (depreciation) of:
Investments, options, and futures (7,099) (760) (8,794)
Assets and liabilities denominated in foreign currencies (27) (49) 1
------- ------ --------
(7,126) (809) (8,793)
------- ------ --------
Net Realized and Unrealized Gain (Loss) on Investments (11,014) (794) (10,522)
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting from Operations $ (2,714) $ (426) $(10,946)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
30
<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
---------------------- --------------------- -----------------------
Years Ended Years Ended Years Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96(A)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Change in Net Assets:
Net investment income $ 8,300 $ 8,899 $ 368 $ 261 $ (424) $ (57)
Net realized gain (loss) on
investments, options, futures
and foreign currency transactions (3,888) 724 15 6,713 (1,729) (13)
Change in unrealized appreciation
(depreciation) of investments and
assets and liabilities denominated
in foreign currencies (7,126) 2,457 (809) 10,954 (8,793) 1,182
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations (2,714) 12,080 (426) 17,928 (10,946) 1,112
Distributions to shareholders:
From net investment income (7,473) (9,293) (1,483) (620) (66) (59)
In excess of net investment income (641) -- -- -- -- --
From net realized gain on investments (1,553) (1,528) (8,167) (4,209) -- --
Change in net assets from
Fund share transactions (12,436) 6,336 69,805 88,880 55,108 20,152
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets (24,817) 7,595 59,729 101,979 44,096 21,205
Net Assets:
Beginning of year 161,549 153,954 167,926 65,947 21,206 1
- ---------------------------------------------------------------------------------------------------------------------------
End of year $136,732 $161,549 $227,655 $167,926 $ 65,302 $21,206
- ---------------------------------------------------------------------------------------------------------------------------
Under/(over) distributed
net investment income $ (5,134) $ (469) $ (1,523) $ (136) $ (232) $ (118)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) For the period May 28, 1996 (commencement of operations) to December 31,
1996.
See notes to financial statements.
31
<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 In Excess Net of Net
Value, Investment Futures and From Net of Net Realized Realized
Beginning Income Foreign Currency Investment Investment Investment Gain on Gain on
of Year (Loss) Transactions Operations Income Income Investments Investments
------------------------------------------------------------------------------------------------------------------------
<S><C>
Global Government Trust
Years Ended Dec. 31,
1997 $10.41 $ .54 $(.71) $(.17) $ (.48) $ (.05) $(.11) $ --
1996 10.33 .59 .21 .80 (.62) -- (.10) --
1995 9.54 .63 1.32 1.95 (1.16) -- -- --
1994 10.27 .57(A) (.71) (.14) (.59) -- -- --
1993(D) 10.00 .36(A) .31 .67 (.36) -- (.04) --
International Equity Trust
Years Ended Dec. 31,
1997 $12.09 $ .02 $ .19 $ .21 $ (.08) $ -- $ (.44) $ --
1996 10.70 .02(B) 1.74 1.76 (.05) -- (.32) --
1995(E) 10.00 .04(B) .77 .81 (.04) -- -- (.07)
Emerging Markets Trust
Years Ended Dec. 31,
1997 $10.51 $(.02)(C) $(.63) $ (.65) $ (.01) $ -- $ -- $ --
1996(F) 10.00 (.03)(C) .57 .54 (.03) -- -- --
<CAPTION>
Ratios/Supplemental Data
---------------------------------------------------------------------------------
Net
Net Asset Investment Average Net Assets,
Value, Expenses Income (Loss) Portfolio Commission End of
Total End of Total to Average to Average Turnover Rate Year
Distributions Year Return Net Assets Net Assets Rate Paid(G) (in thousands)
----------------------------------------------------------------------------------------------------------------------
<S><C>
Global Government Trust
Years Ended Dec. 31,
1997 $ (.64) $ 9.60 (1.69)% 1.86% 5.39% 241% $ -- $136,732
1996 (.72) 10.41 8.22% 1.86% 5.80% 172% -- 161,549
1995 (1.16) 10.33 20.80% 1.81% 5.72% 169% -- 153,954
1994 (.59) 9.54 (1.40)% 1.34%(A) 5.71%(A) 127% -- 145,415
1993(D) (.40) 10.27 6.76%(H) .27%(A,I) 5.41%(A,I) 128%(I) -- 161,072
International Equity Trust
Years Ended Dec. 31,
1997 $ (.52) $11.78 1.76% 2.17% .17% 59% $.0082 $227,655
1996 (.37) 12.09 16.49% 2.25%(B) .21%(B) 83% .0083 167,926
1995(E) (.11) 10.70 8.11%(H) 2.25%(B,I) .52%(B,I) 58%(I) -- 65,947
Emerging Markets Trust
Years Ended Dec. 31,
1997 $ (.01) $ 9.85 (6.18)% 2.50%(C) (.76)%(C) 63% $.0054 $ 65,302
1996(F) (.03) 10.51 5.40%(H) 2.50%(C,I) (.68)%(C,I) 46%(I) .0061 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. If no fees
had been waived or expenses reimbursed by the Adviser, the annualized
ratio of expenses to average daily net assets for each period would
have been as follows: 1994, 1.82%; and 1993, 1.93%.
(B) Net of fees waived and/or expenses reimbursed pursuant to a voluntary
expense limitation of 2.25%. If no fees had been waived or expenses
reimbursed by the Adviser, the annualized ratio of expenses to
average daily net assets for each period would have been as follows:
1996, 2.32%; and 1995, 2.91%.
(C) Net of fees waived and/or expenses reimbursed pursuant to a voluntary
expense limitation of 2.50%. If no fees had been waived or expenses
reimbursed by the Adviser, the annualized ratio of expenses to
average daily net assets for each period would have been as follows:
1997, 2.86%; and 1996, 3.71%.
(D) For the period April 15,1993 (commencement of operations) to December
31, 1993.
(E) For the period February 17, 1995 (commencement of operations) to
December 31, 1995.
(F) For the period May 28, 1996 (commencement of operations) to December
31, 1996.
(G) Pursuant to SEC regulations effective for fiscal years beginning
after September 1, 1995, this is the average commission rate paid on
securities purchased and sold by the Funds. The regulations for
average commission rates are not applicable to non-equity funds.
(H) Not annualized
(I) Annualized
See notes to financial statements.
32
<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. Fixed income
securities with 60 days or less remaining to maturity are valued using the
amortized cost method, which approximates current market value.
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 Distributions to Shareholders
Income and expenses are recorded on the accrual basis. Bond premiums
are amortized using the yield-to-maturity method for financial reporting
and tax purposes. Bond discounts, other than original issue, are 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 ex-dividend date. At December 31, 1997, there were no dividends
payable for any of the Funds in the Trust.
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, 1997, 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:
Receivable for Payable for
Securities Sold Securities Purchased
- --------------------------------------------------------------------
Global Government $ -- $ --
International Equity 3,257 1,450
Emerging Markets 793 604
33
<PAGE>
Notes to Financial Statements -- Continued
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
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 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 the
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, the 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.
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 advisers,
acting under the supervision of the Board of Directors, review 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.
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 the
Funds intend to continue 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.
34
<PAGE>
- --------------------------------------------------------------------------------
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.
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, 1997, open forward currency exchange contracts were
as follows:
Global Government:
<TABLE>
<CAPTION>
Contract to
Settlement ---------------------------------------------- Unrealized
Date Receive Deliver Gain/(Loss)
- ---------------------------------------------------------------------------------
<S><C>
1/16/98 USD 4,992 AUD 7,152 $ 329
1/16/98 USD 4,730 AUD 6,409 552
1/16/98 AUD 13,561 USD 9,406 (564)
1/21/98 USD 6,150 DEM 10,816 130
1/21/98 DEM 1,201 USD 686 (18)
1/21/98 JPY 4,086,878 DEM 56,061 195
1/21/98 USD 1,297 DEM 2,295 20
1/21/98 DEM 11,802 USD 6,668 (99)
1/21/98 USD 7,003 DEM 12,059 291
1/21/98 DEM 38,874 USD 22,307 (670)
1/21/98 DEM 25,980 USD 14,922 (462)
1/21/98 USD 3,223 DEM 5,621 94
2/17/98 USD 38 ITL 65,679 1
2/17/98 ITL 65,679 USD 38 (1)
2/17/98 ITL 8,254,494 USD 4,810 (146)
2/17/98 NZD 5,172 USD 3,140 (148)
2/17/98 USD 3,028 NZD 4,869 212
</TABLE>
35
<PAGE>
Notes to Financial Statements-- Continued
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
Global Government (continued)
<TABLE>
<CAPTION>
Contract to
Settlement ---------------------------------------------- Unrealized
Date Receive Deliver Gain/(Loss)
- ---------------------------------------------------------------------------------
<S><C>
2/17/98 USD 5,800 JPY 727,691 188
2/17/98 USD 4,775 ITL 8,254,494 111
2/17/98 JPY 360,562 USD 2,906 (125)
2/17/98 JPY 928,195 USD 7,185 (27)
2/17/98 USD 7,300 JPY 928,195 142
2/17/98 USD 14,126 JPY 1,755,820 586
2/17/98 JPY 894,075 USD 7,000 (105)
2/17/98 JPY 902,144 USD 7,269 (313)
2/17/98 DEM 5,098 USD 2,900 (58)
2/17/98 USD 3,236 ZAR 16,112 (36)
2/17/98 USD 6,344 SEK 49,258 132
2/17/98 CAD 353 USD 250 (3)
2/17/98 USD 814 CAD 1,148 10
2/17/98 USD 1,632 CAD 2,310 13
2/17/98 USD 3,100 NZD 5,041 184
2/17/98 USD 2,593 GBP 1,573 16
2/17/98 USD 3,328 GBP 2,021 17
2/17/98 GBP 3,768 USD 6,211 (37)
2/17/98 USD 6,332 GBP 3,785 130
2/17/98 GBP 12,506 USD 21,023 (528)
2/17/98 USD 23,208 GBP 13,798 597
2/26/98 DEM 5,697 SEK 25,000 23
2/26/98 DEM 4,631 GBP 1,600 (38)
2/26/98 DEM 5,984 ITL 5,900,000 3
3/27/98 USD 2,800 JPY 361,004 (1)
3/27/98 USD 7,231 JPY 932,844 (6)
4/29/98 ZAR 17,028 USD 3,388 11
4/29/98 USD 428 ZAR 2,160 (3)
4/29/98 USD 3,000 ZAR 14,868 32
5/04/98 GRD 1,559,984 USD 5,481 (144)
5/04/98 USD 5,400 GRD 1,559,984 63
5/04/98 DEM 9,171 USD 5,400 (266)
-----
$ 284
=====
</TABLE>
International Equity:
<TABLE>
<CAPTION>
Contract to
Settlement ---------------------------------------------- Unrealized
Date Receive Deliver Gain/(Loss)
- ---------------------------------------------------------------------------------
<S><C>
3/18/98 USD 2,248 GBP 1,381 $ (12)
3/18/98 GBP 1,381 USD 2,296 (36)
-----
$ (48)
=====
</TABLE>
At December 31, 1997, Emerging Markets had no open forward currency
contracts.
36
<PAGE>
- --------------------------------------------------------------------------------
3. Investment Transactions:
For the year ended December 31, 1997, investment transactions
(excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds from Sales
-------------------------------------- --------------------------------------
U.S. Gov't Securities Other U.S. Gov't. Securities Other
- ------------------------------------------------------------------------------------------------------------------------
<S><C>
Global Government $49,123 $284,915 $45,023 $303,373
International Equity -- 184,687 -- 123,050
Emerging Markets -- 86,142 -- 32,136
</TABLE>
At December 31, 1997, cost, aggregate gross unrealized appreciation
and gross unrealized depreciation based on the cost of securities for
federal income tax purposes for each Fund were as follows:
Cost Appreciation (Depreciation)
- -------------------------------------------------------------------------------
Global Government $135,369 $ 4,078 $ (6,168)
International Equity 216,866 35,625 (26,035)
Emerging Markets 72,541 5,796 (13,533)
Emerging Markets Trust has unused capital loss carryforwards for
federal income tax purposes of $11 which expire in December 2004 and $606
which expire in December 2005.
4. 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 Statement 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. There were no options written during the year ended December 31,
1997.
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 futures contracts at December 31, 1997.
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 the Funds. Pursuant to their respective agreements,
the Manager provides the Funds with management and administrative services
for which each Fund pays a fee, computed daily and payable monthly at
annual rates of each Fund's average daily net assets as follows: Global
Government and International Equity, 0.75%; Emerging Markets, 1.00%.
The Manager has agreed to waive its fees to the extent each Fund's
expenses (exclusive of taxes, interest, brokerage and extraordinary
expenses) exceed during any month the following annual rates: 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, 1998, for
International Equity and Emerging Markets. For the year ended December 31,
1997, management fees of $198
37
<PAGE>
Notes to Financial Statements-- Continued
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
- --------------------------------------------------------------------------------
5. Transactions with Affiliates -- Continued
were waived for Emerging Markets. No fees were waived for Global
Government or International Equity. At December 31, 1997, amounts due to
the Manager were as follows: Global Government, $90, International Equity,
$145, and Emerging Markets, $35.
Western Asset Management Company ("Adviser"), a wholly owned
subsidiary of Legg Mason, Inc., and a corporate 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 40% of the Fund's
average daily net assets.
Western Asset Global Management, Ltd. ("WAGM") serves as investment
sub-adviser to Global Government. The Adviser (not the Fund) pays WAGMa
fee at an annual rate equal to 0.20% of the Fund's average daily net
assets.
Batterymarch Financial Management, Inc. ("Batterymarch"), a wholly
owned subsidiary of Legg Mason, Inc., and a corporate 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 the Funds, 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, 1997, distribution and service fees due
to the distributor were as follows:Global Government, $90, International
Equity, $193 and Emerging Markets, $54.
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, 1997: $31 for Global Government; $68 for International
Equity; and $23 for Emerging Markets.
6. Line of Credit:
The Funds, along with certain other Legg Mason Funds, participate in
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, 1997, the Funds had no borrowings under the line of
credit.
7. Fund Share Transactions:
At December 31, 1997, 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, 1997 2,423 $ 24,370 865 $8,609 (4,558) $(45,415) (1,270) $(12,436)
Year Ended December 31, 1996 3,220 33,097 936 9,577 (3,551) (36,338) 605 6,336
International Equity
Year Ended December 31, 1997 10,069 129,976 815 9,546 (5,444) (69,717) 5,440 69,805
Year Ended December 31, 1996 8,861 102,294 404 4,782 (1,540) (18,196) 7,725 88,880
Emerging Markets
Year Ended December 31, 1997 5,299 62,511 6 65 (697) (7,468) 4,608 55,108
Period Ended December 31, 1996(dagger) 2,092 20,877 5 58 (79) (783) 2,018 20,152
</TABLE>
(dagger) For the period May 28, 1996 (commencement of operations) to December
31, 1996.
38
<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, 1997, 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, 1997 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, 1997, 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
January 30, 1998
39
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