NAVIGATOR GLOBAL FUNDS:
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NAVIGATOR CLASS OF LEGG MASON GLOBAL GOVERNMENT TRUST
NAVIGATOR CLASS OF LEGG MASON INTERNATIONAL EQUITY TRUST
NAVIGATOR CLASS OF LEGG MASON EMERGING MARKETS TRUST
NAVIGATOR SHARES PROSPECTUS May 1, 1999
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HOW TO INVEST(SM)
As with all mutual funds, the Securities and Exchange Commission has not
passed upon the adequacy of this prospectus, nor has it approved or
disapproved these securities. It is a criminal offense to state otherwise.
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TABLE OF CONTENTS
ABOUT THE FUNDS:
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<TABLE>
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1 Investment objectives
4 Principal risks
7 Performance
10 Fees and expenses of the funds
11 Management
</TABLE>
ABOUT YOUR INVESTMENT:
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<TABLE>
<S> <C>
13 How to invest
14 How to sell your shares
15 Account policies
16 Services for investors
17 Dividends and taxes
18 Financial highlights
</TABLE>
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LEGG MASON GLOBAL TRUST, INC.
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INVESTMENT OBJECTIVES
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Legg Mason Global Trust, Inc. offers three series: Legg Mason Global
Government Trust, Legg Mason International Equity Trust and Legg Mason
Emerging Markets Trust.
GLOBAL GOVERNMENT TRUST
INVESTMENT OBJECTIVE: capital appreciation and current income in order
to achieve an attractive total return consistent with prudent investment
risk
PRINCIPAL INVESTMENT STRATEGIES:
The fund invests at least 75% of its total assets in debt securities
issued or guaranteed by the U.S. Government or foreign governments,
their agencies, instrumentalities or political subdivisions. The fund
normally will invest at least 75% of its total assets in debt securities
issued or guaranteed by the U.S. Government or foreign governments, the
agencies or instrumentalities of either, supranational organizations and
foreign or domestic corporations, trusts, or financial institutions
rated investment grade by Moody's Investors Service, Inc. or Standard &
Poor's or, if unrated by Moody's or S&P, judged by Western Asset
Management Company, the fund's adviser, to be of comparable quality,
certain money market instruments, and repurchase agreements involving
any of the foregoing. These are considered investment grade securities.
The fund may invest in bonds of any maturity.
Under normal circumstances, the fund will invest no more than 40% of its
total assets in any one country other than the United States. There is
no other limit on the percentage of assets that may be invested in any
one country or currency.
Up to 25% of the fund's assets may be invested in below investment grade
securities of foreign and domestic issuers, loans of banks and other
financial institutions (which may be below investment grade),
convertible securities, and common and preferred stock.
The adviser has a number of proprietary tools which attempt to define
the interrelationship between bond markets, sectors and maturities.
Target ranges and prices are established as part of the adviser's
strategy process, monitored daily and re-balanced if necessary as
dictated by macro-economic or company-specific events. This ongoing
screening derives the adviser's discipline for buying, selling or
holding any security or currency position. The adviser deviates from the
discipline only if exceptional circumstances disrupt the orderly
functioning of the markets. The adviser's management style favors
"sector rotation," which may result in high portfolio turnover.
The adviser sells securities when they have realized what the adviser
believes is their potential value or when the adviser believes that they
are not likely to achieve that value in a reasonable period of time.
For temporary defensive purposes, the Fund may borrow money or invest
without limit in cash and U.S. dollar-denominated money market
instruments including repurchase agreements. The fund may not achieve
its investment objective when so invested.
Legg Mason Global Trust
1
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INTERNATIONAL EQUITY TRUST
INVESTMENT OBJECTIVE: maximum long-term total return
PRINCIPAL INVESTMENT STRATEGIES:
Batterymarch Financial Management, Inc., the fund's adviser, currently
intends to invest substantially all of the fund's assets in non-U.S.
equity securities.
The primary focus of the adviser is stock selection, with a secondary
focus on country allocation. The adviser uses a bottom-up, quantitative
stock selection process for the developed markets portion of the fund's
portfolio. The cornerstone of this process is a proprietary stock
selection model that ranks the 2,800 stocks in the fund's principal
investable universe by relative attractiveness on a daily basis. The
quantitative factors within this model are intended to measure growth,
value, fundamental expectations and technical indicators (I.E., supply
and demand). Because the same quantitative factors are not effective
across all markets due to individual market characteristics, the adviser
adjusts the stock selection model to include factors that its research
indicates are effective, eliminating factors that are not valid in a
particular market. The adviser runs the stock selection model and
re-balances the portfolio daily, purchasing all stocks ranked "buys" by
the model and selling all stocks ranked "sells." Stocks are sold when
the original reason for purchase no longer pertains, the fundamentals
have deteriorated or portfolio re-balancing warrants.
Country allocation for the developed markets portion of the fund is
based on rankings generated by the adviser's proprietary country model.
The adviser examines securities from over 20 international stock
markets, with emphasis on several of the largest: Japan, the United
Kingdom, France, Canada and Germany.
The fund may invest up to 35% of its total assets in emerging market
securities. The adviser's investment strategy for the emerging markets
portion of the fund represents a distinctive combination of tested
quantitative methodology and traditional fundamental analysis. The
emerging markets allocation focuses on higher-quality, dominant
companies which the adviser believes to have strong growth prospects and
reasonable valuations. Country allocation for the emerging markets
portion of the portfolio also combines quantitative and fundamental
approaches.
The fund's investment portfolio will normally be diversified across a
broad range of industries and across a number of countries, consistent
with the objective of maximum total return. The adviser may also seek to
enhance portfolio returns through active currency hedging strategies.
More than 25% of the fund's total assets may be denominated in a single
currency or invested in securities of issuers located in a single
country.
When cash is temporarily available, or for temporary defensive purposes,
when the adviser believes such action is warranted by abnormal market or
economic situations, the fund may invest without limit in cash and U.S.
dollar-denominated money market instruments, including repurchase
agreements of domestic issuers. Such securities will be rated investment
grade or, if unrated, will be determined by the adviser to be investment
grade. The fund may not achieve its investment objective when so
invested.
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Legg Mason Global Trust
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EMERGING MARKETS TRUST
INVESTMENT OBJECTIVE: long-term capital appreciation
PRINCIPAL INVESTMENT STRATEGIES:
Batterymarch Financial Management, Inc., the fund's adviser, intends to
invest substantially all of the fund's assets in equity securities and
convertible securities of emerging market issuers.
The fund intends to invest in Asia, Latin America, the Indian
Subcontinent, Southern and Eastern Europe, the Middle East and Africa,
although it may not invest in all these markets at all times and may not
invest in any particular market when it deems investment in that country
or region to be inadvisable.
More than 25% of the fund's total assets may be denominated in a single
currency or invested in securities of issuers located in a single
country.
The adviser focuses on higher-quality, dominant emerging markets
companies which the adviser believes to have strong growth prospects and
reasonable valuations, selected from a principal investable universe of
approximately 1,000 stocks. The adviser's emerging markets investment
strategy represents a distinctive combination of quantitative
methodology and traditional fundamental analysis. Traditional
"on-the-ground" fundamental research is combined by the adviser with
tested quantitative valuation disciplines in those markets where
reliable data is available. In determining country allocation, the
adviser also merges quantitative and fundamental approaches. In markets
with reliable historical data, buy and sell decisions are driven by a
combination of quantitative valuations and the adviser's fundamental
opinions. Stocks are sold when the original reason for purchase no
longer pertains, the fundamentals have deteriorated or portfolio
re-balancing warrants.
When cash is temporarily available, or for temporary defensive purposes,
when the adviser believes such action is warranted by abnormal market or
economic situations, the fund may invest without limit in cash and U.S.
dollar-denominated money market instruments, including repurchase
agreements of domestic issuers. Such securities will be rated investment
grade or, if unrated, will be determined by the adviser to be investment
grade. The fund may not achieve its investment objective when so
invested.
Legg Mason Global Trust
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PRINCIPAL RISKS
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IN GENERAL-
As with all mutual funds, an investment in any of these funds is not
insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency; investors can lose money by investing in
the funds. There is no assurance that a fund will meet its investment
objective.
MARKET RISK -
International Equity Trust and Emerging Markets Trust invest primarily
in foreign equity securities. Prices of equity securities generally
fluctuate more than those of other securities. A fund may experience a
substantial or complete loss on an individual stock. Market risk may
affect a single issuer, industry or section of the economy or may affect
the market as a whole.
FOREIGN SECURITIES RISK -
Investments in foreign securities (including those denominated in U.S.
dollars) involve certain risks not typically associated with investments
in domestic issuers. The values of foreign securities are subject to
economic and political developments in the countries and regions where
the companies operate, such as changes in economic or monetary policies,
and to changes in exchange rates. Values may also be affected by foreign
tax laws and restrictions on receiving the investment proceeds from a
foreign country.
In general, less information is publicly available about foreign
companies than about U.S. companies. Foreign companies are generally not
subject to the same accounting, auditing and financial reporting
standards as are U.S. companies. Some foreign governments have defaulted
on principal and interest payments.
Some securities issued by foreign governments or their subdivisions,
agencies and instrumentalities may not be backed by the full faith and
credit of the foreign government. Even where a security is backed by the
full faith and credit of a foreign government, it may be difficult for a
fund to pursue its rights against a foreign government in that country's
courts.
EMERGING MARKETS RISK -
The risks of foreign investment are greater for investments in emerging
markets. Emerging market countries typically have economic and political
systems that are less fully developed, and can be expected to be less
stable than those of more advanced countries. Low trading volumes may
result in a lack of liquidity and in price volatility. Emerging market
countries may have policies that restrict investment by foreigners, or
that prevent foreign investors from withdrawing their money at will.
Because International Equity Trust and Emerging Markets Trust may invest
a significant amount of their total assets in emerging market
securities, investors should be able to tolerate sudden, sometimes
substantial fluctuations in the value of their investments. An
investment in any fund that invests in emerging market securities should
be considered speculative.
CURRENCY RISK -
Because each fund invests significantly in securities denominated in
foreign currencies, its value can be affected by changes in the rates of
exchange between those currencies and the U.S. dollar. Currency exchange
rates can be volatile and affected by, among other factors, the general
economics of a country, the actions of the U.S and foreign governments
or central banks, the imposition of currency controls, and speculation.
A security may be denominated in a currency that is different from the
currency where the issuer is domiciled.
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Legg Mason Global Trust
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The funds may from time to time hedge a portion of their currency risk,
using currency futures, forwards, or options. However, these instruments
may not always work as intended, and in specific cases a fund may be
worse off than if it had not used a hedging instrument. For most
emerging market currencies, there are not suitable hedging instruments
available.
On January 1, 1999, the conversion of European currencies into the Euro
began and is expected to continue into 2002. Full implementation of the
Euro may be delayed and difficulties with the conversion may
significantly impact European capital markets resulting in increased
volatility in world capital markets. Individual issuers may suffer
substantial losses if they or their suppliers are not adequately
prepared for the transition.
CONCENTRATION AND NON-DIVERSIFICATION -
A fund concentrating a significant portion of its investments in a
single country, currency or industry will be more susceptible to factors
adversely affecting issuers within that country, currency or industry
than would a less concentrated portfolio of securities.
Global Government is a non-diversified fund. The percentage of its
assets invested in any single issuer is not limited by the Investment
Company Act of 1940. When the fund's assets are invested in the
securities of a limited number of issuers, the value of its shares will
be more susceptible to any single economic, political or regulatory
event than shares of a diversified fund.
RISKS OF FIXED-INCOME SECURITIES -
Global Government Trust invests substantially all of its assets in
fixed-income securities. International Equity Trust and Emerging Markets
Trust may also invest in fixed-income securities to a lesser extent.
INTEREST RATE RISK -
Fixed-income securities are subject to interest rate risk, which is the
possibility that the market prices of the funds' investments may decline
due to an increase in market interest rates. Generally, the longer the
maturity of a fixed-income security, the greater is the effect on its
value when rates increase.
Certain securities pay interest at variable or floating rates. Variable
rate securities reset at specified intervals, while floating rate
securities reset whenever there is a change in a specified index rate.
In most cases, these reset provisions reduce the effect of market
interest rates on the value of the security. However, some securities do
not track the underlying index directly, but reset based on formulas
that can produce an effect similar to leveraging; others may provide for
interest payments that vary inversely with market rates. The market
prices of these securities may fluctuate significantly when interest
rates change.
CREDIT RISK -
Fixed-income securities are also subject to credit risk, I.E., the risk
that an issuer of securities will be unable to pay principal and
interest when due, or that the value of the security will suffer because
investors believe the issuer is less able to pay. This is broadly gauged
by the credit ratings of the securities in which each fund invests.
However, ratings are only the opinions of the agencies issuing them and
are not absolute guarantees as to quality.
Moody's considers debt securities rated in the lowest investment grade
category (Baa) to have speculative characteristics. Debt securities
rated below investment grade are deemed by the ratings agencies to be
speculative and may involve major risk or exposure to adverse
conditions. Those in the lowest rating categories may involve a
substantial risk of default or may be in default. Changes in economic
conditions or developments regarding the individual issuer are more
likely to cause price volatility and weaken the capacity of such
securities to make principal and interest payments than is the case for
higher grade debt securities.
CALL RISK -
Many fixed-income securities, especially those issued at high interest
rates, provide that the issuer may repay them early. Issuers often
exercise this right when interest rates are low. Accordingly, holders of
callable securities may not
Legg Mason Global Trust
5
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benefit fully from the increase in value that other fixed-income
securities experience when rates decline. Furthermore, the fund
reinvests the proceeds of the payoff at current yields, which are lower
than those paid by the security that was paid off.
INVESTMENT MODELS -
The proprietary models used by the advisers to evaluate securities or
securities markets are based on the advisers' understanding of the
interplay of market factors and do not assure successful investment. The
markets, or the prices of individual securities, may be affected by
factors not foreseen in developing the models.
YEAR 2000 -
Like other mutual funds (and most organizations around the world), the
funds could be adversely affected by computer problems related to the
year 2000. These could interfere with operations of the funds, their
adviser, distributor or subadviser, or could impact companies in which
the funds invest. The year 2000 poses an even greater risk for foreign
securities.
While no one knows if these problems will have any impact on the funds
or on financial markets in general, the manager and its affiliates are
taking steps to protect fund investors. These include efforts to
determine that the problem will not directly affect the systems used by
major service providers.
Whether these steps will be effective can only be known for certain in
the year 2000.
PORTFOLIO TURNOVER-
Global Government may have an annual portfolio turnover rate
significantly in excess of 100%. High turnover rates can result in
increased trading costs and higher levels of realized capital gains.
6
Legg Mason Global Trust
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PERFORMANCE
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The information below provides an indication of the risks of investing
in a fund by showing changes in the fund's performance from year to
year. Annual returns assume reinvestment of dividends and distributions.
Historical performance of a fund does not necessarily indicate what will
happen in the future. As of the date of this prospectus, the Navigator
Class of shares of Global Government Trust and Emerging Markets Trust
have not yet commenced operations. The Navigator Class of shares of
International Equity Trust commenced operations on May 5, 1998. The
returns presented are for the funds' Primary Shares, which are not
offered in this prospectus. The annual returns for Primary Shares and
Navigator Shares would differ only to the extent that the Navigator
Shares would pay lower expenses, and therefore would have higher
returns. Primary Shares and Navigator Shares are invested in the same
portfolio of securities.
GLOBAL GOVERNMENT TRUST -- PRIMARY SHARES
YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)
[BAR CHART APPEARS HERE]
1994 1995 1996 1997 1998
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(1.40) 20.80 8.22 (1.69) 11.50
DURING THE LAST FIVE CALENDAR YEARS
FOR PRIMARY SHARES:
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QUARTER ENDED TOTAL RETURN
- -------------------- ------------------- -------------------
BEST QUARTER: MARCH 31, 1995 +7.86%
WORST QUARTER: MARCH 31, 1997 -3.28%
</TABLE>
In the following table, average annual returns as of December 31, 1998
are compared with the Salomon Brothers World Government Bond Index.
<TABLE>
<S> <C> <C> <C>
1 YEAR 5 YEARS LIFE OF CLASS
- ----------------------------- ------------ ----------- --------------------
GLOBAL GOVERNMENT TRUST +11.50% +7.16% +7.45%(A)
SALOMON BROTHERS WORLD
GOVERNMENT BOND INDEX +15.31% +7.85% +7.87%(B)
</TABLE>
These figures include changes in principal value, reinvested dividends
and capital gain distributions, if any. A fund's yield is its net income
over a recent 30-day period, expressed as an annualized rate of return.
For the fund's current yield, call toll-free 1-800-822-5544.
(a) April 15, 1993 (commencement of operations) to December 31, 1998.
(b) For the period April 30, 1993 to December 31, 1998.
Legg Mason Global Trust
7
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INTERNATIONAL EQUITY TRUST -- PRIMARY SHARES
YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)
[BAR CHART APPEARS HERE]
1996 1997 1998
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16.49 1.76 8.49
DURING THE LAST THREE CALENDAR YEARS
FOR PRIMARY SHARES:
<TABLE>
<S> <C> <C>
QUARTER ENDED TOTAL RETURN
- -------------------- ---------------------- -------------------
BEST QUARTER: MARCH 31, 1998 +15.70%
WORST QUARTER: SEPTEMBER 30, 1998 -20.06%
</TABLE>
In the following table, average annual total returns as of December 31,
1998 are compared with the Morgan Stanley Capital International Europe,
Australia and the Far East (EAFE) Index.
<TABLE>
<S> <C> <C>
1 YEAR LIFE OF CLASS
- -------------------------------------------------- ------------ ----------------------
INTERNATIONAL EQUITY TRUST -- PRIMARY SHARES +8.49% +8.88%(A)
MSCI EAFE INDEX +20.00% +11.18%(B)
</TABLE>
These figures include changes in principal value, reinvested dividends
and capital gain distributions, if any.
(a) February 17, 1995 (commencement of operations) to December 31, 1998.
(b) For the period February 28, 1995 to December 31, 1998.
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Legg Mason Global Trust
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EMERGING MARKETS TRUST -- PRIMARY SHARES
YEAR BY YEAR TOTAL RETURN AS OF DECEMBER 31 OF EACH YEAR (%)
[BAR CHART APPEARS HERE]
1997 1998
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(6.18) (29.34)
DURING THE LAST TWO CALENDAR YEARS
FOR PRIMARY SHARES:
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<S> <C> <C>
QUARTER ENDED TOTAL RETURN
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BEST QUARTER: DECEMBER 31, 1998 +16.19%
WORST QUARTER: SEPTEMBER 30, 1998 -28.18%
</TABLE>
In the following table, average annual total returns as of December 31,
1998 are compared with the Morgan Stanley Capital International Emerging
Markets Free (MSCI EM Free) Index.
<TABLE>
<S> <C> <C>
1 YEAR LIFE OF CLASS
- ---------------------------- -------------- ----------------------
EMERGING MARKETS TRUST -29.34% -12.89%(A)
MSCI EM FREE INDEX -25.34% -16.07%(B)
</TABLE>
These figures include changes in principal value, reinvested dividends
and capital gain distributions, if any.
(a) May 28, 1996 (commencement of operations) to December 31, 1998.
(b) For the period May 31, 1996 to December 31, 1998.
Legg Mason Global Trust
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FEES AND EXPENSES OF THE FUNDS
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The table below describes the fees and expenses you will incur directly
or indirectly as an investor in a fund. Each fund pays operating
expenses directly out of its assets so they lower that fund's share
price and dividends. Other expenses include transfer agency, custody,
professional and registration fees. The Navigator Shares have no sales
charge and are not subject to a 12b-1 fee. Emerging Markets imposes a 2%
redemption fee on all redemptions, including exchanges, of fund shares
held for less than one year.
The fees shown are current fees, and the expenses shown are based on
expenses for the fiscal year ended December 31, 1998. The fees and
expenses are calculated as a percentage of average net assets.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Emerging Markets Trust Redemption fee: 2.00%
Proceeds of shares redeemed or exchanged within one year of purchase
will be subject to a 2% redemption fee. The fee is paid directly to the
fund and not to the manager or distributor.
<TABLE>
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ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
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GLOBAL INTERNATIONAL EMERGING
GOVERNMENT EQUITY MARKETS
NAVIGATOR SHARES OF: TRUST TRUST TRUST
- -------------------------- --------- ------------- ---------
MANAGEMENT FEES (A) 0.75% 0.75% 1.00%
DISTRIBUTION AND/OR
SERVICE (12B-1) FEES NONE NONE NONE
OTHER EXPENSES 0.37% 0.29% 0.78%
- -------------------------- --------- ------------- ---------
TOTAL ANNUAL FUND
OPERATING EXPENSES (A) 1.12% 1.04% 1.78%
</TABLE>
(a) The manager has a voluntary agreement to waive fees so that
Navigator Share expenses (exclusive of taxes, interest, brokerage and
extraordinary expenses) do not exceed annual rates of each fund's
average daily Navigator Share net assets as follows: for Global
Government Trust, 1.15% indefinitely; for International Equity Trust,
1.25% indefinitely; and for Emerging Markets Trust, 1.50% until May 1,
2000. No fee waivers were necessary for Global Government Trust and
International Equity Trust. These voluntary waivers may be terminated at
any time.
EXAMPLE:
This example helps you compare the cost of investing in a fund with the
cost of investing in other mutual funds. Although your actual costs may
be higher or lower, you would pay the following expenses on a $10,000
investment in a fund, assuming (1) a 5% return each year, (2) the fund's
operating expenses remain the same as shown in the table above, and (3)
you redeem all of your shares at the end of the time periods shown.
Actual returns may be higher or lower than 5% per year.
<TABLE>
<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------- ---------- ----------- ----------- -----------
GLOBAL GOVERNMENT TRUST $ 114 $ 356 $ 617 $ 1,363
INTERNATIONAL EQUITY TRUST $ 106 $ 331 $ 574 $ 1,271
EMERGING MARKETS TRUST $ 387 $ 560 $ 964 $ 2,095
EMERGING MARKETS TRUST
(ASSUMING NO REDEMPTION) $ 181 $ 560 $ 964 $ 2,095
</TABLE>
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Legg Mason Global Trust
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MANAGEMENT
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MANAGEMENT AND ADVISERS:
Legg Mason Fund Adviser, Inc., 100 Light Street, Baltimore, Maryland
21202, is the funds' manager. The manager is responsible for investment
management and administrative services and for overseeing the funds'
relationships with outside service providers, such as the custodian,
transfer agent, accountants, and lawyers.
For its services during the fiscal year ended December 31, 1998, each
fund paid the manager a percentage of its average net assets as follows:
<TABLE>
<S> <C>
GLOBAL GOVERNMENT TRUST 0.75%
INTERNATIONAL EQUITY TRUST 0.75%
EMERGING MARKETS TRUST 0.72%
</TABLE>
The manager acts as manager or adviser to investment companies with
aggregate assets of $18.1 billion as of March 31, 1999.
Batterymarch Financial Management, Inc., 200 Clarendon Street, Boston,
Massachusetts 02116, is investment adviser to International Equity Trust
and Emerging Markets Trust. The adviser is responsible for the actual
investment management of these funds which includes making investment
decisions and placing orders to buy or sell a particular security.
The manager pays the adviser a monthly fee of 66 2/3% of the fee it
receives from International Equity Trust and a monthly fee of 75% of the
fee it receives from Emerging Markets Trust. Fees paid to the adviser
are net of any waivers.
Batterymarch acts as investment adviser to institutional accounts, such
as corporate pension plans, mutual funds and endowment funds, as well as
to individual investors. Total assets under management by Batterymarch
were approximately $4.5 billion as of March 31, 1999.
Western Asset Management Company, 117 East Colorado Boulevard, Pasadena,
California 91105, is investment adviser to Global Government Trust. The
adviser is responsible for the actual investment management of the fund
which includes making investment decisions and placing orders to buy or
sell a particular security.
The manager pays the adviser a monthly fee of 53 1/3% of the fee it
receives, net of any waivers.
Western Asset acts as investment adviser to investment companies and
private accounts with aggregate assets of $49.2 billion as of March 31,
1999.
Western Asset Global Management Limited, 155 Bishopsgate, London,
England, serves as investment sub-adviser to Global Government Trust.
The sub-adviser is responsible for providing research, analytical and
trading support for the fund's investment program, as well as exercising
investment discretion for part of the portfolio, subject to the
supervision of Western Asset Management Company and Legg Mason Fund
Adviser, Inc.
For its services and for expenses borne by Western Asset Global under
its sub-advisory agreement, the adviser pays the sub-adviser a fee at an
annual rate of 0.20% of the fund's average daily net assets, net of any
waivers.
The manager also pays the sub-adviser a sub-administration fee at an
annual rate of 0.10% of the fund's average daily net assets, net of any
waivers, for certain administrative services performed.
Western Asset Global renders investment advice to institutional, private
and commingled fund portfolios with assets of over $3.3 billion as of
March 31, 1999. Western Asset Global has managed global fixed-income
assets for U.S. and non-U.S. clients since 1984.
PORTFOLIO MANAGEMENT:
Batterymarch investment teams have been responsible for the day-to-day
management of International Equity Trust and Emerging Markets Trust
since their inception.
An investment committee at Western Asset Management Company is
responsible for the day-to-day management of Global Government Trust.
Legg Mason Global Trust
11
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DISTRIBUTOR OF THE FUND'S SHARES:
Legg Mason Wood Walker, Incorporated, 100 Light Street, Baltimore,
Maryland 21202, is the distributor of each fund's shares under separate
Underwriting Agreements. Each Underwriting Agreement obligates Legg
Mason to pay certain expenses in connection with offering fund shares,
including compensation to its financial advisors, the printing and
distribution of prospectuses, statements of additional information and
shareholder reports (after these have been printed and mailed to
existing shareholders at the funds' expense), supplementary sales
literature and advertising materials.
Legg Mason and the manager may pay others out of their own assets to
support the distribution of Navigator Shares and shareholder servicing.
The manager, advisers, sub-adviser and distributor are wholly owned
subsidiaries of Legg Mason, Inc., a financial services holding company.
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Legg Mason Global Trust
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HOW TO INVEST
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Navigator Shares are currently offered for sale only to:
- Institutional Clients of Legg Mason Trust Company for which they
exercise discretionary investment management responsibility and
accounts of the customers with such Institutional Clients
("Customers").
- qualified retirement plans managed on a discretionary basis and
having net assets of at least $200 million
- clients of Bartlett & Co. who, as of December 19, 1996, were
shareholders of Bartlett Short Term Bond Fund or Bartlett Fixed
Income Fund and for whom Bartlett acts as an ERISA fiduciary
- any qualified retirement plan of Legg Mason, Inc. or of any of
its affiliates
Eligible investors may purchase Navigator Shares through a brokerage
account at Legg Mason. The minimum initial investment is $50,000 and the
minimum for each purchase of additional shares is $100. Institutional
Clients may set different minimums for their Customers' investments in
accounts invested in Navigator Shares.
Customers of certain Institutional Clients that have omnibus accounts
with the funds' transfer agent can purchase shares through those
Institutions. The distributor may pay such Institutional Clients for
account servicing. Institutional Clients may charge their Customers for
services provided in connection with the purchase and redemption of
shares. Information concerning these services and any applicable charges
will be provided by the Institutional Clients. This Prospectus should by
read by Customers in connection with any such information received by
Institutional Clients. Any such fees, charges or requirements imposed by
Institutional Clients will be in addition to the fees and requirements
of this Prospectus.
Certain institutions that have agreements with Legg Mason or the funds
may be authorized to accept purchase and redemption orders on their
behalf. Once the authorized institution accepts the order, you will
receive the next determined net asset value. You should consult with
your institution to determine the time by which it must receive your
order to get that day's share price. It is the institution's
responsibility to transmit your order to the fund in a timely fashion.
Purchase orders received by Legg Mason before the close of the New York
Stock Exchange (normally 4:00 p.m., Eastern time) will be processed at
the fund's net asset value as of the close of the exchange on that day.
Orders received after the close of the exchange will be processed at the
fund's net asset value as of the close of the exchange on the next day
the exchange is open. Payment must be made within three business days to
the selling organization.
You will begin to earn dividends on shares of Global Government Trust as
of settlement date, which is normally the third business day after your
order is placed.
Legg Mason Global Trust
13
<PAGE>
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HOW TO SELL YOUR SHARES
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To redeem your shares by telephone:
- Legg Mason clients may call 1-800-822-5544
Please have available the number of shares (or dollar amount) to be
redeemed and the account number.
The funds will follow reasonable procedures to ensure the validity of
any telephone redemption request, such as requesting identifying
information from callers or employing identification numbers. Unless you
specify that you do not wish to have telephone redemption privileges,
you may be held responsible for any fraudulent telephone order.
Customers of Institutional Clients may redeem only in accordance with
instructions and limitations pertaining to their account at the
Institution.
Redemption orders received by Legg Mason before the close of the
exchange will be transmitted to the funds' transfer agent. Your order
will be processed at that day's net asset value. Redemption orders
received by Legg Mason after the close of the exchange will be processed
at the closing net asset value on the next day the exchange is open.
Your order will be processed promptly and you will generally receive the
proceeds by mail to the name and address on the account registration
within a week. You may also have your telephone redemption requests paid
by a direct wire to a previously designated domestic commercial bank
account
Redemptions of shares that were recently purchased by check or acquired
through reinvestment of dividends on such shares may be delayed for up
to 10 days from the purchase date in order to allow for the check to
clear.
EMERGING MARKETS TRUST REDEMPTION FEE:
The fund is intended for long-term investors. Short-term "market timers"
who engage in frequent purchases and redemptions affect the fund's
investment planning and create additional transaction costs. For this
reason, the fund imposes a 2% redemption fee on all redemptions,
including exchanges, of fund shares held for less than one year. The fee
will be paid directly to the fund to help offset the costs imposed on it
by short-term trading in emerging markets.
The fund will use the "first-in, first-out" method to determine the one
year holding period. The date of redemption or exchange will be compared
with the earliest purchase date of shares held in the account. The fee
will not apply to any shares purchased through reinvestment of dividends
or other distributions or to shares held in retirement plans; however,
it will apply to shares held in IRA accounts (including IRA-based
plans).
14
Legg Mason Global Trust
<PAGE>
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ACCOUNT POLICIES
----------------------------------------------------------------------------
CALCULATION OF NET ASSET VALUE:
Net asset value per Navigator Share is determined daily as of the close
of the New York Stock Exchange, on every day the exchange is open. To
calculate each fund's Navigator Share price, the fund's assets
attributable to Navigator Shares are valued and totaled, liabilities are
subtracted, and the resulting net assets are divided by the number of
Navigator Shares outstanding. 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.
Securities with remaining maturities of 60 days or less are valued at
amortized cost.
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 Trust are valued on the basis of valuations furnished by a
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.
OTHER:
Fund shares may not be held in, or transferred to, an account with any
firm that does not have an agreement with Legg Mason or its affiliates.
If your account falls below $500, the fund may ask you to increase your
balance. If, after 60 days, your account is still below $500, the fund
may close your account and send you the proceeds.
Each fund reserves the right to:
- reject any order for shares or suspend the offering of shares for
a period of time
- change its minimum investment amounts
- delay sending out redemption proceeds for up to seven days. This
generally applies only in cases of very large redemptions,
excessive trading or during unusual market conditions. The funds
may delay redemptions beyond seven days, or suspend redemptions,
only as permitted by the SEC.
Legg Mason Global Trust
15
<PAGE>
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SERVICES FOR INVESTORS
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CONFIRMATIONS AND ACCOUNT STATEMENTS:
Confirmations will be sent to Institutional Clients after each
transaction involving Navigator Shares which will include the total
number of shares being held in safekeeping by the transfer agent. The
transfer agent will send confirmations of each purchase and redemption
transaction (except a reinvestment of dividends or capital gain
distributions). Beneficial ownership of shares by Customer accounts will
be recorded by the Institutional Client and reflected in their regular
account statements.
EXCHANGE PRIVILEGE:
Navigator Shares of a fund may be exchanged for Navigator Shares of any
of the other Legg Mason funds or the Legg Mason Cash Reserve Trust,
provided these funds are eligible for sale in your state of residence.
You can request an exchange in writing or by phone. Be sure to read the
current prospectus for any fund into which you are exchanging.
Other than the redemption fee imposed on exchanges of shares of Emerging
Markets Trust, there is currently no fee for exchanges; however, you may
be subject to a sales charge when exchanging into a fund that has one.
An exchange of a fund's shares will be treated as a sale of the shares
and any gain on the transaction may be subject to tax.
Each fund reserves the right to:
- terminate or limit the exchange privilege of any shareholder who
makes more than four exchanges from a fund in one calendar year
- terminate or modify the exchange privilege after 60 days' notice
to shareholders
Some Institutional Clients may not offer all of the Navigator Funds for
exchange.
16
Legg Mason Global Trust
<PAGE>
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DIVIDENDS AND TAXES
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Global Government Trust declares and pays dividends from its net
investment income monthly. International Equity Trust and Emerging
Markets Trust each declares and pays these dividends annually.
Dividends from net short-term capital gain and distributions of
substantially all net capital gain (the excess of net long-term capital
gain over net short-term capital loss) and any net realized gain from
foreign currency transactions generally are declared and paid after the
end of the taxable year in which the gain is realized. A second
distribution of net capital gain may be necessary in some years to avoid
imposition of a federal excise tax.
Your dividends and distributions will be automatically reinvested in
additional Navigator Shares of the fund. If you wish to receive
dividends and/or distributions in cash, you must notify the fund at
least 10 days before the next dividend and/or distribution is to be
paid.
If the postal or other delivery service is unable to deliver your check,
your distribution option will automatically be converted to having all
dividends and distributions reinvested in fund shares. No interest will
accrue on amounts represented by uncashed distribution or redemption
checks.
Fund dividends and other distributions are taxable to investors (other
than retirement plans and other tax-exempt investors) whether received
in cash or reinvested in additional Navigator Shares of the fund.
Dividends of net investment income and any net short-term capital gains
will be taxable as ordinary income. Distributions of a fund's net
capital gain will be taxable as long-term capital gain, regardless of
how long you have held your fund shares.
The sale or exchange of fund shares may result in a taxable gain or
loss, depending on whether the proceeds are more or less than the cost
of your shares.
Each fund's dividend and interest income, and gains realized from the
disposition of foreign securities, may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions.
A tax statement is sent to you at the end of each year detailing the tax
status of your distributions.
Each fund will withhold 31% of all dividends, capital gain distributions
and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the fund with a valid
taxpayer identification number. Each fund will also withhold 31% of all
dividends and capital gain distributions payable to such shareholders
who are otherwise subject to backup withholding.
Because each investor's tax situation is different, please consult your
tax advisor about federal, state and local tax considerations.
Legg Mason Global Trust
17
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FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------
The financial highlights table is intended to help you understand each
fund's financial performance for the past 5 years or since inception.
Total return represents the rate that an investor would have earned (or
lost) on an investment in a fund, assuming reinvestment of all dividends
and distributions. This information has been audited by the funds'
independent accountants, PricewaterhouseCoopers LLP, whose report, along
with the funds' financial statements, is incorporated by reference into
the Statement of Additional Information (see back cover) and is included
in the annual report. The annual report is available upon request by
calling toll-free 1-800-822-5544.
<TABLE>
<S> <C> <C> <C> <C>
INCOME FROM
INVESTMENT OPERATIONS
------------------------------------------------------------
NET REALIZED &
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS,
OPTIONS, FUTURES
FOR THE NET ASSET NET AND FOREIGN TOTAL FROM
YEARS ENDED VALUE, INVESTMENT CURRENCY INVESTMENT
DEC. 31, BEGINNING OF YEAR INCOME TRANSACTIONS OPERATIONS
- ------------------ --------------------- -------- ----------- -----------
GLOBAL GOVERNMENT TRUST -- PRIMARY SHARES
1998 $ 9.60 $ .37 $ .70 $ 1.07
1997 10.41 .54 (.71) (.17)
1996 10.33 .59 .21 .80
1995 9.54 .63 1.32 1.95
1994 10.27 .57(a) (.71) (.14)
- ------ ----------- --------------- ----------- -----------
INTERNATIONAL EQUITY TRUST -- PRIMARY SHARES
1998 $ 11.78 $ .01 $ .99 $ 1.00
1997 12.09 .02 .19 .21
1996 10.70 .02(c) 1.74 1.76
1995 (b) 10.00 .04(c) .77 .81
- ------ ----------- --------------- ----------- -----------
INTERNATIONAL EQUITY TRUST -- NAVIGATOR SHARES
1998(h) $ 14.21 $ .10 $ (1.44) $ (1.34)
- ------ ----------- --------------- ----------- -----------
EMERGING MARKETS TRUST -- PRIMARY SHARES
1998 $ 9.85 $ .01 (e) $ (2.90) $ (2.89)
1997 10.51 (.02)(e) (.63) (.65)
1996 (d) 10.00 (.03)(e) .57 .54
- ------ ----------- --------------- ----------- -----------
</TABLE>
18
Legg Mason Global Trust
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
DISTRIBUTIONS
------------------------------------------------------------------------
IN EXCESS
IN EXCESS FROM NET OF NET
FOR THE FROM NET OF NET REALIZED REALIZED NET ASSET
YEARS ENDED INVESTMENT INVESTMENT GAIN ON GAIN ON TOTAL VALUE,
DEC. 31, INCOME INCOME INVESTMENTS INVESTMENTS DISTRIBUTIONS END OF YEAR
- --------------- -------- ------- -------- ------- ------------- ------------
GLOBAL GOVERNMENT TRUST -- PRIMARY SHARES
1998 $ (.47) $ -- $ (.06) $ -- $ (.53) $ 10.14
1997 (.48) (.05) (.11) -- (.64) 9.60
1996 (.62) -- (.10) -- (.72) 10.41
1995 (1.16) -- -- -- (1.16) 10.33
1994 (.59) -- -- -- (.59) 9.54
- ------ -------- ------- -------- ------- ------------- ---------
INTERNATIONAL EQUITY TRUST -- PRIMARY SHARES
1998 $ (.14) $ -- $ -- $ -- $ (.14) $ 12.64
1997 (.08) -- (.44) -- (.52) 11.78
1996 (.05) -- (.32) -- (.37) 12.09
1995 (b) (.04) -- -- (.07) (.11) 10.70
- ------ -------- ------- -------- ------- ------------- ---------
INTERNATIONAL EQUITY TRUST -- NAVIGATOR SHARES
1998 (h) $ (.23) $ -- $ -- $ -- $ (.23) $ 12.64
- ------ -------- ------- -------- ------- ------------- ---------
EMERGING MARKETS TRUST -- PRIMARY SHARES
1998 $ -- $ -- $ -- $ -- $ -- $ 6.96
1997 (.01) -- -- -- (.01) 9.85
1996 (d) (.03) -- -- -- (.03) 10.51
- ------ -------- ------- -------- ------- ------------- ---------
</TABLE>
Legg Mason Global Trust
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
TO AVERAGE TO AVERAGE PORTFOLIO NET ASSETS,
TOTAL RETURN NET ASSETS NET ASSETS TURNOVER RATE END OF YEAR
(%) (%) (%) (%) (THOUSANDS -- $)
-- ------------- ------------- ---------- ------- ----------------
GLOBAL GOVERNMENT TRUST -- PRIMARY SHARES
1998 11.50 1.87 4.51 288 120,805
1997 (1.69) 1.86 5.39 241 136,732
1996 8.22 1.86 5.80 172 161,549
1995 20.80 1.81 5.72 169 153,954
1994 (1.40) 1.34(a) 5.71(a) 127 145,415
- ------ ------------ ------------ --------- ------ ----------
INTERNATIONAL EQUITY TRUST -- PRIMARY SHARES
1998 8.49 2.14 .06 72 258,521
1997 1.76 2.17 .17 59 227,655
1996 16.49 2.25(c) .21(c) 83 167,926
1995 (b) 8.11(g) 2.25(C,f) .52(c,f) 58(f) 65,947
- ------ ------------ ------------ --------- ------ ----------
INTERNATIONAL EQUITY TRUST -- NAVIGATOR SHARES
1998 (h) (9.42)(g) 1.04(f) 1.17(f) 72(f) 45
- ------ ------------ ------------ --------- ------ ----------
EMERGING MARKETS TRUST -- PRIMARY SHARES
1998 (29.34) 2.50(e) .09(e) 76 42,341
1997 (6.18) 2.50(e) (.76)(e) 63 65,302
1996 (d) 5.40(g) 2.50(e,f) (.68)(e,f) 46(f) 21,206
</TABLE>
(a) Net of fees waived by the manager for expenses in excess of voluntary
expense limitations of 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; and 1.9% indefinitely. If no fees
had been waived by the manager, the annualized ratio of expenses to
average daily net assets for 1994 would have been 1.82%.
(b) February 17, 1995 (commencement of operations) to December 31, 1995.
(c) Net of fees waived by the manager for expenses in excess of a voluntary
expense limitation of 2.25%. If no fees had been waived by the manager,
the annualized ratio of expenses to average daily net assets would have
been: 1996, 2.32% and 1995, 2.91%.
(d) May 28, 1996 (commencement of operations) to December 31, 1996.
(e) Net of fees waived by the manager for expenses in excess of a voluntary
expense limitation of 2.50%. If no fees had been waived by the manager,
the annualized ratio of expenses to average daily net assets would have
been: 1998, 2.78%, 1997, 2.86% and 1996, 3.71%.
(f) Annualized
(g) Not annualized
(h) May 5, 1998 (commencement of sale of Navigator Shares) to December 31,
1998.
20
Legg Mason Global Trust
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<PAGE>
LEGG MASON GLOBAL TRUST, INC.
---------------------------------------------------------------------
The following additional information about the funds is available upon
request and without charge:
STATEMENT OF ADDITIONAL INFORMATION - the SAI is filed with the
Securities and Exchange Commission (SEC) and is incorporated by
reference into (is considered part of) the prospectus. The SAI provides
additional details about each fund and their policies.
ANNUAL AND SEMIANNUAL REPORTS - additional information about each fund's
investments is available in the funds' annual and semiannual reports to
shareholders. These reports provide detailed information about each
fund's portfolio holdings and operating results.
TO REQUEST THE SAI OR ANY REPORTS TO SHAREHOLDERS, OR TO OBTAIN MORE
INFORMATION:
- call toll-free 1-800-822-5544
- visit us on the Internet via http://www.leggmason.com
- write to us at: Legg Mason Wood Walker, Incorporated
100 Light Street, P.O. Box 1476
Baltimore, Maryland 21203-1476
Information about the funds, including the SAI, can be reviewed and
copied at the SEC's public reference room in Washington, DC (phone
1-800-SEC-0330). Reports and other information about the funds are
available on the SEC's Internet site at http://www.sec.gov. Investors
may also write to: SEC, Public Reference Section, Washington, DC
20549-6009. A fee will be charged for making copies.
LMF-041 SEC file number 811-7418
