Semi-Annual Report
June 30, 1999
Legg Mason
Global
Trust, Inc.
International Equity Trust
Navigator Shares
LEGG
MASON
FUNDS
[LOGO APPEARS HERE]
HOW TO INVEST(SM)
<PAGE>
To Our Shareholders,
We are pleased to provide you with Legg Mason Global Trust's semi-annual
report for the Navigator Class of the International Equity Trust ("Fund") for
the six months ended June 30, 1999.
Beginning on the next page, the portfolio managers responsible for the Fund
portfolio discuss results for the first half of 1999 and the investment outlook.
The Fund's total returns since inception are shown later in this report. We
remind you that, as always, 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.
During 1998 and into 1999, focus on the Year 2000 issue increased
significantly. As you know, the Year 2000 issue is a computer programming
problem that affects the ability of computers to correctly process dates of
January 1, 2000, and beyond. The Fund's Year 2000 project is well underway, and
is designed to ensure that the Year 2000 date change will have no adverse impact
on our ability to service our shareholders. The Fund is committed to taking
those steps necessary to protect our investors, including efforts to determine
that the Year 2000 problem will not affect such vital service functions as
shareholder transaction processing and recordkeeping. In addition, we are
continuously monitoring the Year 2000 efforts of our vendors, and will perform
tests with our critical vendors throughout 1999. Although the Fund is taking
steps to ensure that all of its systems will function properly before, during,
and after the Year 2000, the Fund could be adversely affected by
computer-related problems associated with the Year 2000. Contingency plans are
in place to ensure that functions critical to the Fund's operations will
continue without interruption. We are on target to complete this important
project and look forward to continuing extensive testing (including
industry-wide testing) with our industry peers, regulators and vendors
throughout 1999.
For several operational reasons, we have changed the ordinary income dividend
and capital gain distribution payment schedules for the fund. Our new schedule
is to make capital gain distributions, if any, in June and December. As a
result, the Fund paid an ordinary income dividend of $0.14 per share to
shareholders of record on June 2, 1999.
Sincerely,
/s/ Edward A. Taber, III
-----------------------------
Edward A. Taber, III
President
August 6, 1999
<PAGE>
Portfolio Managers' Comments
International Equity Trust
Performance
The year-to-date return for the International Equity Trust was +1.8%,
compared with +4.0% for the Morgan Stanley Capital International Europe,
Australia and Far East ("EAFE") Index.
EAFE index returns showed a divergence between the Pacific region which
rallied, up 21.9% for the year to date, and Europe which declined 2.3% for the
period. Most of the Fund's performance shortfall relative to the index was due
to the underweighted position in Japan from the beginning of the period. The
Japanese market outperformed the index, up 20.8% for the year to date.
The Fund began the year with a weighting of approximately 8% in Japan
compared with 21% for the index because we found that on most measures of value,
earnings growth, cash flow and earnings revisions, Japanese stocks were
overpriced compared with other international opportunities. During the first
quarter, the effect of government stimulation in Japan began hitting the
economic numbers, upgrading the economy from very negative to less negative, but
boosting investor confidence nevertheless. We bought selectively in Japan as we
expected the effect of government stimulation to wear off.
In the second quarter, a sea change in expectations took place in Japan, as
outlined in the Market Overview which follows. We accelerated building up the
Fund's holdings based on improving factors in our country model, particularly
earnings expectations revisions, which have now turned positive. By the end of
the second quarter, the Fund's weight in Japan was 20.2%, compared with 24.1%
for the index.
In contrast, at the beginning of the year we found valuations in continental
European countries compelling. Stock selection in a number of markets was
positive for the Fund, including Italy, Sweden, Switzerland, Austria and
Belgium. While we continued to underweight the U.K., we believe the Fund had
positive stock selection in this market for the year to date.
The Fund's exposure to emerging markets, although minimal, added
value--including Turkey, Korea, Israel and Mexico, all of which saw strong
returns for the six months. In addition, there was a small positive return for
our active hedging program.
Market Overview
Japan has now seen a convergence of good news. The government released
surprisingly positive GDP numbers, the pace of restructuring picked up sharply
at the corporate level, the recovery in Asia was confirmed, and China
aggressively moved to reflate.
The first quarter GDP figure was probably slightly inflated for political
reasons but the "feel good" factor it created had a substantial impact.
Sentiment improved, driven by a consumption pick-up in metropolitan Tokyo,
public sector spending filtering down to the support industries, and a better
export outlook.
The restructuring announced by Sony at the end of the first quarter set the
pace for corporate Japan to announce plans to reduce the cost base by reducing
head counts, disposals, mergers and outsourcing, although it will take time for
the positive effects to flow through.
2
<PAGE>
Portfolio Managers' Comments -- Continued
International Equity Trust -- Continued
There is still a caveat on Japan: the market remains expensive and the state
of government finances remains fragile. Debt as a percent of nominal GDP exceeds
120% with a substantial portion of the population now moving towards retirement,
which will hit on both sides--lower tax income and a heavy strain on the social
welfare budget.
In Europe, EMU was initiated at the beginning of the year with much fanfare
and the promise of a "New Era." More recently, inherent contradictions in the
EMU arrangement came to light, as it appears France and Italy will not meet
fiscal targets for the coming year as specified by the Maastricht criteria. The
Euro, which started its life full of promise at 1.17 to the U.S. dollar, appears
to be marching inexorably towards par value.
The U.K.'s entry into the EMU appears to be at least two years away.
Conflicting political views in the U.K. and the relative overvaluation of the
currency make it unlikely that sterling will enter the EMU early. Although
inflation remains the primary focus of rate-setting policy, sterling strength
should help depress inflation. Further rate cuts are possible with the continued
reduction in inflation. This would benefit the market, which is the only major
European market to have an inverted yield curve.
Strategy
We emphasize stock selection, with a secondary focus on country and regional
selection. Our disciplined investment process remains oriented towards long-term
measures of value and growth. Our stock selection process ranks stocks daily
across earnings growth, cash flow, expectations, traditional value and technical
measures. We customize stock selection by market or region, based on which
attributes we feel are most predictive of excess return. We maintain a balance
among size, sector and country for the Fund within Japan, continental Europe and
the U.K. through the combination of sector scoring and portfolio construction
rules.
For Japan, the combination of a further supplementary budget and the recovery
in Asia should come together to show positive second half GDP growth, which
should lead to earnings expectations being further upgraded. The country rating
for Japan remains positive as earnings growth expectations are accelerating.
Our research indicates that Continental Europe currently represents fair
investment value. While the region appears cheap on earnings measures, its
attractiveness is offset by the sluggishness of economic growth, as represented
by our estimate revision measures. We decreased the Fund's exposure to smaller
stocks in favor of the larger "blue chip" names. We currently have a less
favorable ranking for the U.K. market, due to a combination of a neutral value,
growth and technical ratings.
Looking ahead, we believe the Fund is well positioned, with better value than
the benchmark and better growth potential. The Fund has a forward P/E of 15.9x
compared with 22.8x for the index, a 2-year growth rate of 18.9% compared with
16.9%, and a growth-to-P/E ratio of 1.2x compared with 0.7x for the index. We
feel that the Fund is well diversified across countries and industries.
Batterymarch Financial Management, Inc.
August 5, 1999
3
<PAGE>
Performance Information
Legg Mason Global Trust, Inc.
Total Return for One Year and Life of Class, as of June 30, 1999
The returns shown are based on historical results and are not intended
to indicate future performance. Total return measures investment
performance in terms of appreciation or depreciation in a Fund's net asset
value per share, plus dividends and any capital gain distributions. It
assumes that dividends and distributions were reinvested at the time they
were paid. The investment return and principal value of an investment in
the Fund will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Average annual returns
tend to smooth out variations in a Fund's return, so that they differ from
actual year-to-year results. No adjustment has been made for any income
taxes payable by shareholders.
The International Equity Trust has two classes of shares: Primary Class
and Navigator Class. Information about the Primary Class, offered only to
retail investors, is contained in a separate report to its shareholders.
The Fund's total returns as of June 30, 1999, were as follows:
<TABLE>
<CAPTION>
International
Equity
Trust(A)
--------------------------------------------------------------------------
<S><C>
Average Annual Total Return
--Navigator Class:
One Year -5.97%
Life of Class -6.81
Cumulative Total Return
--Navigator Class:
One Year -5.97%
Life of Class -7.83
--------------------------------------------------------------------------
</TABLE>
(A) Inception of Navigator Class -- May 5, 1998.
4
<PAGE>
Industry Diversification
Legg Mason Global Trust, Inc.
June 30, 1999 (Unaudited)
International Equity Trust
<TABLE>
<CAPTION>
% of Net
Assets Value
- ----------------------------------------------------
(000)
<S><C>
Aerospace 0.8% $ 2,097
Agriculture/Food 1.0 2,466
Air Transport 1.5 3,817
Aluminum 0.2 407
Apparel/Textiles 0.5 1,341
Banks 12.5 31,660
Business Machines 0.9 2,194
Chemicals 3.6 9,168
Construction 4.4 11,092
Consumer Durables N.M. 106
Containers 1.2 3,059
Cosmetics 0.6 1,573
Drugs/Medicine 3.7 9,308
Electric Utilities 1.6 4,147
Electronics 8.9 22,699
Entertainment and Leisure 0.8 2,014
Finance 10.7 27,135
Food, Beverage and Tobacco 2.5 6,271
Forest Products 0.4 1,043
Gas Utilities 1.8 4,651
Insurance 5.2 13,106
Iron and Steel 0.4 955
Miscellaneous 0.6 1,499
Motor Vehicles 4.8 12,282
Non-Ferrous Metals 2.3 5,655
Oil Distribution 5.7 14,521
Paper 1.2 3,033
Photo/Optical 0.3 783
Producer Goods 1.6 4,083
Publishing 1.3 3,220
Railroads/Transit 1.6 4,131
Real Estate 1.2 3,139
Retail (Non-Food) 1.1 2,812
Services 2.2 5,643
Telecommunications 7.6 19,228
Tire and Rubber 1.3 3,187
Trucking/Freight 0.7 1,878
Short-term Investments 0.7 1,794
----- --------
Total Investment Portfolio 97.4 247,197
Other Assets Less Liabilities 2.6 6,547
----- --------
NET ASSETS 100.0% $253,744
===== ========
</TABLE>
N.M. -- Not meaningful.
5
<PAGE>
Statement of Net Assets
Legg Mason Global Trust, Inc.
June 30, 1999 (Unaudited)
(Amounts in Thousands)
International Equity Trust
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
COMMON STOCKS AND EQUITY INTERESTS -- 96.7%
Australia -- 3.5%
Amcor Ltd. 193 $ 1,071
Australia & New Zealand Banking Group Limited 137 1,009
Comalco Limited 94 407
Commonwealth Bank of Australia 41 646
GIO Australia Holdings Limited 218 531
John Fairfax Holdings Limited 162 481
National Australia Bank Limited 124 2,053
Newcrest Mining Limited 190 426(A)
Pacific Dunlop Limited 487 702
Qantas Airways Limited 499 1,645
--------
8,971
--------
Austria -- 2.1%
Bank Austria AG 47 2,492
OMV AG 24 2,148
Va Technologie Ag 7 616
--------
5,256
--------
Belgium -- 1.8%
Compagnie Benelux Paribas SA 35 2,339
Dexia Belgium 9 1,280
Fortis AG 30 933
--------
4,552
--------
Brazil -- 0.5%
Tele Norte Leste Participacoes S.A. ADR 73 1,296
--------
Finland -- 0.8%
Kesko Oyj 40 531
Metsa-Serla Oyj 177 1,507
--------
2,038
--------
France -- 10.4%
AGF (Assurances Generales de France) 26 1,242
Axa 12 1,476
Banque Nationale de Paris (BNP) 19 1,608
Bollore Technologies SA 7 1,206
Bouygues Offshore S.A. 18 553
Ciments Francais 31 1,959
Elf Aquitaine SA 18 2,611
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
France -- Continued
Eridania Beghin-Say SA 1 $ 172
France Telecom S.A. 32 2,386
Groupe GTM 13 1,351
Lafarge SA 21 1,958
PSA Peugeot Citroen 12 1,908
Sanofi-Synthelabo SA 21 895(A)
SEITA 40 2,280
Societe Generale 6 1,039
Suez Lyonnaise des Eaux 4 649
Suez Lyonnaise des Eaux 12 2,188
Suez Lyonnaise des Eaux - Strip 13 N.M.(A)
Vivendi 11 883
--------
26,364
--------
Germany -- 7.2%
Allianz AG 2 596
BASF AG 28 1,235
Bayer AG 58 2,420
Continental AG 82 1,946
DaimlerChrysler AG 62 5,351
Deutsche Lufthansa AG 14 248
Deutsche Pfrandbrief-und Hypothekenbank AG 23 2,105
Deutsche Telekom AG 26 1,093
HypoVereinsbank 3 214
Preussag Ag 59 3,161
--------
18,369
--------
Greece -- 0.3%
Ergo Bank S.A. 7 711
--------
Hong Kong -- 1.8%
CLP Holdings Limited 423 2,055
Innovative International Holdings - Warrants 70 N.M.(A)
Peregrine Investment Holdings Limited 256 N.M.(B)
Sun Hung Kai Properties Ltd. 276 2,517
--------
4,572
--------
India -- 0.2%
ITC Limited GDR 16 448(C)
--------
Indonesia -- 0.4%
PT Indah Kiat Pulp & Paper Corporation Tbk 2,245 1,037
--------
</TABLE>
7
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
Ireland -- 1.7%
Allied Irish Banks plc 132 $ 1,735
Elan Corporation plc 48 1,384(A)
Jefferson Smurfit Group Plc 289 678
Kerry Group Plc 41 487
--------
4,284
--------
Italy -- 5.8%
Assicurazioni Generali 30 1,039
Banca Agricola Mantovana 7 83(A)
Banca Commerciale Italiana 199 1,454
Banca Popolare di Bergamo Credito Varesino SpA 83 1,827
Banca Popolare di Brescia 47 2,009
ENI SpA 353 2,108
Italmobiliare 25 670
Mondadori (Arnoldo) Editore SpA 61 1,048
Rolo Banca 1473 38 861(A)
San Paolo IMI SpA 54 741
Sirti S.p.A. 55 265
Telecom Italia Mobile (TIM) SpA 246 1,469
Unicredito Italiano SpA 250 1,097
--------
14,671
--------
Japan -- 20.2%
Asahi Chemical Industry Co., Ltd. 228 1,265
Asahi Glass Company, Limited 147 954
Chubu Electric Power Co., Inc. 84 1,399
Chugai Pharmaceutical Co., Ltd. 97 1,046
Citizen Watch Co. 242 2,100
Dai Nippon Printing Co., Ltd. 84 1,344
Denki Kagaku Kogyo Kabushiki Kaisha 533 1,167
Denso Corporation 74 1,505
East Japan Railway Company 1 3,063
Ebara Corporation 117 1,392
Eisai Company, Ltd. 60 1,186
Fujikura Ltd. 200 956
Fujitsu Limited 90 1,812
Furukawa Electric Co. 449 2,060
Honda Motor Co., Ltd. 27 1,145
Jaccs Co., Ltd. 99 453
Kao Corporation 56 1,574
Kawasaki Kisen Kaisha Ltd. 683 1,474
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
Japan -- Continued
Kishu Paper Co., Ltd. 10 $ 21
Kubota Corporation 305 913
Maruzen Showa Unyu Co., Ltd. 6 12
Matsushita Electric Industrial Company, Ltd. 237 4,604
Minolta Co., Ltd. 75 384
Mitsubishi Rayon Company, Ltd. 215 613
Mitsui O.S.K. Lines 189 406
Nippon Sheet Glass Company Ltd. 395 1,407
Nippon Telegraph & Telephone Corporation (NTT) N.M. 489
Olympus Optical Co., Ltd. 53 784
Rohm Company Ltd. 18 2,820
Sharp Corporation 168 1,986
Shin-Etsu Chemical Co., Ltd. 71 2,377
Sumitomo Realty & Development Co., Ltd. 166 623
Sumitomo Rubber Industries, Ltd. 76 538
Takeda Chemical Industries 26 1,206
The Bank of Iwate, Ltd. N.M. 1
The Bank of Tokyo-Mitsubishi, Ltd. 107 1,524
The Sailor Pen Co., Ltd. 134 975
Tokyo Electric Power 65 1,377
Toyota Motor Corporation 75 2,374
--------
51,329
--------
Mexico -- 1.0%
Telefonos de Mexico SA 602 2,426
--------
Netherlands -- 4.8%
ABN AMRO Holding NV 29 632
AEGON N.V. 20 1,465
ING Groep N.V. 34 1,832
Koninklijke (Royal) Philips Electronics N.V. 24 2,349
Koninklijke Ahold NV 17 575
Koninklijke Van Ommeren N.V. 30 891
NBM-Amstelland N.V. 44 796
Roto Smeets de Boer N.V. 4 126
Royal Dutch Petroleum Company 58 3,402
--------
12,068
--------
New Zealand -- 0.7%
Telecom Corporation of New Zealand Limited 429 1,838
--------
Norway -- N.M.
Ekornes ASA 14 106
--------
</TABLE>
9
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
Portugal -- 1.2%
BPI-SGPS, SA 54 $ 1,133
Cimpor-Cimentos de Portugal, SGPS, SA 76 1,965
--------
3,098
--------
Singapore -- 2.0%
Oversea-Chinese Banking Corporation Ltd. 88 734
Singapore Airlines Ltd. 202 1,923
TIBS Holdings Limited 589 1,059
United Overseas Bank Ltd. 184 1,287
--------
5,003
--------
South Korea -- 0.7%
Korea Electric Power Corporation 15 608
Samsung Electronics 9 1,030
--------
1,638
--------
Spain -- 3.6%
Argentaria, Caja Postal y Banco Hipotecario de Espana, SA 22 507
Banco Bilbao Vizcaya S.A. 43 617
Banco Santander Central Hispano, SA 286 2,973
Endesa S.A. 37 797
Iberdrola S.A. 74 1,124
Tabacalera S.A. 89 1,788
Telefonica S.A. 27 1,318
--------
9,124
--------
Sweden -- 1.7%
Electrolux AB 93 1,940
Hennes & Mauritz AB (H&M) 54 1,343
Mo och Domsjo AB 20 455
Svanska Handelsbanken AB 56 668
--------
4,406
--------
Switzerland -- 6.6%
Credit Suisse Group 24 4,074
Georg Fischer AG N.M. 130
Holderbank Financiere Glarus AG 1 1,764
Nestle SA 1 1,810
Novartis N.M. 263(A)
Rieter Holdings Ltd. 1 676
Schweizerische Ruckvericherungs-Gesellschaft 1 1,189
Swisscom AG 1 536(A)
UBS AG 16 4,804
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
Switzerland -- Continued
Verwaltungs-und Privat-Bank AG N.M. $ 151
Zurich Allied AG 3 1,421(A)
--------
16,818
--------
Turkey -- 0.8%
Akbank T.A.S. 44,356 652
Aksigorta A.S. 20,193 562
Yapi ve Kredi Bankasi A.S. 61,449 888
--------
2,102
--------
United Kingdom -- 16.9%
Abbey National plc 36 670
Amvescap Plc 108 962
AstraZeneca Group plc 63 2,417
Barclays PLC 81 2,359
Barratt Developments plc 38 211
BG plc 337 2,054
BP Amoco Plc 91 1,637
British Energy PLC 113 966
British Telecommunications plc 233 3,897
British Vita plc 25 95
Centrica plc 847 1,989(A)
CGU PLC 121 1,744
Diageo plc 75 790
George Wimpey plc 455 1,084
Hilton Group plc 508 2,031
Lex Service plc 190 1,744
Lloyds TSB Group plc 216 2,937
Misys plc 80 680
National Westminster Bank PLC 90 1,897
PowerGen plc 184 1,979
Reuters Group PLC 17 222
Royal Bank of Scotland Group plc 95 1,951
Scottish & Newcastle plc 103 1,073
Scottish and Southern Energy plc 20 203
SmithKline Beecham Plc 70 914
Tesco plc 636 1,650
Thames Water plc 41 655
Vodafone Group plc 110 2,156
WPP Group plc 226 1,911
--------
42,878
--------
Total Common Stocks and Equity Interests (Identified Cost -- $234,222) 245,403
-------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Statement of Net Assets -- Continued
Legg Mason Global Trust, Inc.
International Equity Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
-------------------------------------------------------------------------------------------------------------------
<S><C>
REPURCHASE AGREEMENTS -- 0.7%
Goldman, Sachs & Company
5%, dated 6/30/99, to be repurchased at
$1,794 on 7/1/99 (Collateral: $1,984 Fannie
Mae mortgage-backed securities, 6%, due 2/1/29,
value $1,862) (Identified Cost-- $1,794) $ 1,794 $ 1,794
-------------------------------------------------------------------------------------------------------------------
Total Investments-- 97.4% (Identified Cost-- $236,016) 247,197
Other assets less liabilities-- 2.6% 6,547
--------
NET ASSETS CONSISTING OF:
Accumulated paid-in capital applicable to:
19,908 Primary Class shares outstanding $233,251
4 Navigator Class shares outstanding 50
Overdistributions of net investment income (4,582)
Accumulated net realized gain on investments
and currency transactions 13,820
Unrealized appreciation of investments
and currency transactions 11,205
--------
NET ASSETS -- 100.0% $253,744
========
NET ASSET VALUE PER SHARE:
PRIMARY CLASS $12.74
======
NAVIGATOR CLASS $12.72
======
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Non-income producing.
(B) In bankruptcy proceedings and non-income producing.
(C) 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. This security
represents 0.2% of net assets.
ADR - American Depository Receipt.
GDR - Global Depository Receipt.
N.M. - Not meaningful.
See notes to financial statements.
12
<PAGE>
Statements of Operations
Legg Mason Global Trust, Inc.
(Amounts in Thousands) (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended 6/30/99
------------------------
International
Equity
Trust
--------------------------------------------------------------------------------------------------
<S><C>
Investment Income:
Interest $ 175
Dividends 3,996
Less: Foreign tax withheld (483)
--------
Total income 3,688
--------
Expenses:
Management fee 948
Distribution and service fees 1,263
Transfer agent and shareholder servicing expense 146
Audit and legal fees 33
Custodian fee 272
Directors' fees 5
Organization expense 7
Registration fees 11
Reports to shareholders 17
Other expenses 5
--------
Total expenses 2,707
--------
NET INVESTMENT INCOME 981
--------
Net Realized and Unrealized Gain (Loss) on Investments:
Realized gain (loss) on:
Investments, options and futures 28,728
Foreign currency transactions (28)
--------
28,700
--------
Change in unrealized appreciation (depreciation) of:
Investments, options and futures (26,693)
Assets and liabilities denominated in foreign currencies 57
--------
(26,636)
-----------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 2,064
-----------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 3,045
-----------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
13
<PAGE>
Statements of Changes in Net Assets
Legg Mason Global Trust, Inc.
(Amounts in Thousands)
<TABLE>
<CAPTION>
International
Equity
Trust
----------------------
Six Months Year
Ended Ended
6/30/99 12/31/98
-----------------------------------------------------------------------------------------------
(Unaudited)
<S><C>
Change in Net Assets:
Net investment income (loss) $ 981 $ 144
Net realized gain (loss) on
investments, options, futures
and foreign currency transactions 28,700 (9,181)
Change in unrealized appreciation
(depreciation) of investments and
assets and liabilities denominated
in foreign currencies (26,636) 25,859
-----------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 3,045 16,822
Distributions to shareholders:
From net investment income:
Primary Class (992) (2,768)
Navigator Class (1) (1)
From net realized gain on investments:
Primary Class -- --
Navigator Class -- --
Change in net assets from Fund share transactions:
Primary Class (6,874) 16,808
Navigator Class -- 50
-----------------------------------------------------------------------------------------------
Change in net assets (4,822) 30,911
Net Assets:
Beginning of period 258,566 227,655
-----------------------------------------------------------------------------------------------
End of period $253,744 $258,566
Under/(over) distributed
net investment income $ (4,582) $ (4,570)
-----------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
14
<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
------------------------------------------ ----------------------------------------
Net Realized and
Unrealized Gain
(Loss) on Invest- From
Net Asset Net ments, Options, Total From Net
Value, Investment Futures and From Net Realized
Beginning Income Foreign Currency Investment Investment Gain on Total
of Period (Loss) Transactions Operations Income Investments Distributions
-------------------------------------------------------------------------------------------------------------------------
<S><C>
International Equity Trust
Six Months Ended
June 30, 1999* $12.64 $ .12 $ .10 $ .22 $ (.14) $ -- $ (.14)
Period Ended Dec. 31,
1998(A) 14.21 .10 (1.44) (1.34) (.23) -- (.23)
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Ratios/Supplemental Data
----------------------------------------------------------------
Net
Net Asset Investment Net Assets,
Value, Expenses Income (Loss) Portfolio End of
End of Total to Average to Average Turnover Period
Period Return Net Assets Net Assets Rate (in thousands)
-------------------------------------------------------------------------------------------------------
<S><C>
International Equity Trust
Six Months Ended
June 30, 1999* $12.72 1.76%(B) 1.04%(C) 1.90%(C) 138%(C) $45
Period Ended Dec. 31,
1998(A) 12.64 (9.42)%(B) 1.04%(C) 1.17%(C) 72%(C) 45
-------------------------------------------------------------------------------------------------------
</TABLE>
(A) For the period May 5, 1998 (commencement of sale of Navigator Shares)
to December 31, 1998.
(B) Not annualized.
(C) Annualized.
* Unaudited.
See notes to financial statements.
15
<PAGE>
Notes to Financial Statements
Legg Mason Global Trust, Inc.
(Amounts in Thousands) (Unaudited)
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1. Significant Accounting Policies:
The Legg Mason Global Trust, Inc. ("Corporation"), consisting of the
Global Government Trust, the International Equity Trust ("Fund"), and the
Emerging Markets Trust, is registered under the Investment Company Act of
1940, as amended, as an open-end investment company. International Equity
and Emerging Markets are diversified; Global Government is
non-diversified.
Each series of the Corporation consists of two classes of shares:
Primary Class, offered since April 15, 1993, for Global Government; since
February 17, 1995, for International Equity; and since May 28, 1996, for
Emerging Markets; and Navigator Class, offered to certain institutional
investors since May 5, 1998, for International Equity. The Navigator Class
of Global Government and Emerging Markets has not commenced operations.
Information about the Primary Class, offered only to retail investors, is
contained in a separate report to its shareholders. The income and
expenses of International Equity are allocated proportionately to the two
classes of shares based on daily net assets, except for Rule 12b-1
distribution fees, which are charged only on Primary Class shares, and
transfer agent and shareholder servicing expenses, which are determined
separately for each class.
Security Valuation
The 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 the Fund's adviser to be
the primary market. The Fund will value its foreign securities in U.S.
dollars on the basis of the then-prevailing exchange rates.
Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars.
Foreign currency amounts are translated into U.S. dollars on the following
basis:
(i) market value of investment securities, assets and liabilities at
the closing daily rate of exchange; and
(ii) purchases and sales of investment securities, interest income
and expenses at the rate of exchange prevailing on the
respective date of such transactions.
The effect of changes in foreign exchange rates on realized and
unrealized security gains or losses is reflected as a component of such
gains or losses.
Investment Income and Distributions to Shareholders
Interest income and expenses are recorded on the accrual basis. Bond
premiums are amortized for financial reporting and federal income tax
purposes. Bond discounts, other than original issue and zero-coupon bonds,
are not amortized for financial reporting and federal income tax purposes.
Dividend income and distributions to shareholders are allocated at the
class level and are recorded on the ex-dividend date. Dividends from net
investment income, if available, will be paid annually for the Fund. Net
capital gain distributions, which are calculated at the composite level,
are declared and paid after the end of the tax year in which the gain is
realized. At June 30, 1999, there were no dividends or capital gains
distributions payable for the Fund. Distributions are determined in
accordance with federal income tax regulations, which may differ from
those determined in accordance with generally accepted accounting
principles; accordingly, periodic reclassifications are made within the
Fund's capital accounts to reflect income and gains available for
distribution under federal income tax regulations.
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Security 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
June 30, 1999, receivables for securities sold and payables for securities
purchased for the Fund were as
follows:
<TABLE>
<CAPTION>
Receivable for Payable for
Securities Sold Securities Purchased
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<S><C>
International Equity $8,354 $3,154
</TABLE>
Deferred Organizational Expense
Deferred organizational expenses of $71 for the Fund are being
amortized on a straight-line basis over 5 years beginning on the date the
Fund began operations. Legg Mason Fund Adviser, Inc. ("LMFA") has agreed
that in the event it redeems any of its shares during such period, it will
reimburse the Fund for any unamortized organization costs in the same
proportion as the number of shares to be redeemed bears to the number of
shares that were initially purchased by LMFA and remain outstanding at the
time of redemption.
Federal Income Taxes
No provision for federal income or excise taxes is required since the
Fund intends to continue to qualify as a regulated investment company and
distribute substantially all of its taxable income to its shareholders.
Use of Estimates
Preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
2. Investment Transactions:
For the six months ended June 30, 1999, investment transactions
(excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
Purchases Proceeds From Sales
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<S><C>
International Equity $166,840 $177,283
</TABLE>
At June 30, 1999, cost, gross unrealized appreciation and gross
unrealized depreciation based on the cost of securities for federal income
tax purposes for the Fund were as follows:
<TABLE>
<CAPTION>
Net
Appreciation/
Cost Appreciation Depreciation (Depreciation)
------------------------------------------------------------------------------------------------
<S><C>
International Equity $236,016 $24,317 $(13,136) $11,181
</TABLE>
Unused capital loss carryforwards for federal income tax purposes at
June 30, 1999, were $14,099, which expire in December 2006.
17
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Notes to Financial Statements -- Continued
Legg Mason Global Trust, Inc.
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3. Repurchase Agreements:
All repurchase agreements are fully collateralized by obligations
issued by the U.S. Government or its agencies, and such collateral is in
the possession of the Fund's custodian. The value of such collateral
includes accrued interest. Risks arise from the possible delay in recovery
or potential loss of rights in the collateral should the issuer of the
repurchase agreement fail financially. The Fund's 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 Fund enters into repurchase agreements to evaluate potential
risks.
4. Options and Futures:
As part of its investment program, the Fund may utilize options and
futures to a limited extent. Options may be written (sold) or purchased by
the Fund. When the Fund purchases a put or call option, the premium paid
is recorded as an investment and its value is marked-to-market daily. When
the Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability and its value is
marked-to-market daily.
When options, whether written or purchased, expire, are exercised or
are closed (by entering into a closing purchase or sale transaction), the
Fund realizes a gain or loss as described in the chart below:
<TABLE>
<CAPTION>
<S><C>
PURCHASED OPTION: IMPACT ON THE FUND:
The option expires Realize a loss in the amount of the cost of the option.
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The option is closed through a Realize a gain or loss depending on whether the proceeds from the closing sale
closing sale transaction transaction are greater or less than the cost of the option.
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The Fund exercises a call option The cost of the security purchased through the exercise of the option will be
increased by the premium originally paid to purchase the option.
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The Fund exercises a put option Realize a gain or loss from the sale of the underlying security. The proceeds of that
sale will be reduced by the premium originally paid to purchase the put option.
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WRITTEN OPTION: IMPACT ON THE FUND:
The option expires Realize a gain equal to the amount of the premium received.
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The option is closed through a Realize a gain or loss without regard to any unrealized gain or loss on the
closing purchase transaction underlying security and eliminate the option liability. The Fund will realize a
loss in this transaction if the cost of the closing purchase exceeds the premium
received when the option was written.
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A written call option is exercised Realize a gain or loss from the sale of the underlying security. The proceeds of that
by the option purchaser sale will be increased by the premium originally received when the option was
written.
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A written put option is exercised The amount of the premium originally received will reduce the cost of the security
by the option purchaser that the Fund purchased when the option was exercised.
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</TABLE>
There were no options written during the six months ended June 30,
1999.
Upon entering into a futures contract, the Fund is required to
deposit with the broker cash or cash equivalents in an amount equal to a
certain percentage of the contract amount. This is known as the "initial
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margin." Subsequent payments ("variation margin") are made or received by
the Fund each day, depending on the daily fluctuation in 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.
The risk associated with purchasing options is limited to the premium
originally paid. Options written by the 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 the Fund may
forego the opportunity of profit if the market price of the underlying
security increases and the option is exercised. The risk in writing a put
option is that the 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 the 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.
The Fund enters 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, the 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 the Fund may not be able
to enter into a closing transaction because of an illiquid secondary
market.
There were no open futures contracts at June 30, 1999.
5. Financial Instruments:
Emerging Market Securities
The Fund has investments in securities denominated in the currencies
of emerging market countries, as well as in securities issued by companies
located in emerging market countries. Future economic or political
developments could adversely affect the liquidity or value, or both, of
such securities.
Forward Currency Exchange Contracts
As part of its investment program, the Fund may utilize forward
currency exchange contracts. The nature and risks of these financial
instruments and the reasons for using them are set forth more fully in the
Corporation's Prospectus and Statement of Additional Information.
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 the 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 Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their
contracts. The 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 Fund if the counterparties do not complete
the transaction.
19
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Notes to Financial Statements -- Continued
Legg Mason Global Trust, Inc.
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At June 30, 1999, open forward currency exchange contracts were as
follows:
<TABLE>
<CAPTION>
Contract to
Settlement --------------------------------------------------- Unrealized
Date Receive Deliver Gain/(Loss)
-----------------------------------------------------------------------------------------
<S><C>
7/26/99 USD 5,057 EUR 4,766 $ 134
7/26/99 USD 2,488 EUR 2,411 (3)
7/27/99 USD 2,532 EUR 2,380 74
7/27/99 EUR 2,380 USD 2,576 (117)
7/27/99 USD 2,601 JPY 311,208 18
7/28/99 USD 1,781 JPY 218,716 (34)
7/28/99 USD 742 JPY 91,124 (14)
------
$ 58
======
</TABLE>
Euro Conversion
On January 1, 1999, the Euro became the official currency of the
countries in the European Economic and Monetary Union (EEMU). EEMU member
countries include Austria, Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, the Netherlands, Portugal and Spain. Government bonds
issued by member countries were redenominated into Euro on January 1,
1999. Corporations based in member countries have until 2002 to
redenominate their existing bonds. New issuances of corporate and
government bonds from member countries will be denominated in Euro. The
redenomination into Euro has not had and is not expected to have a
material impact on the Fund's operations.
6. Transactions With Affiliates:
The Fund has a management agreement with LMFA. Pursuant to this
agreement, LMFA provides the Fund with management and administrative
services for which the Fund pays a fee, computed daily and payable monthly
at annual rates of the Fund's average daily net assets. LMFA has agreed to
waive its fees in any month (exclusive of taxes, interest, brokerage and
extraordinary expenses) as shown in the following chart:
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999 At June 30, 1999
--------------------------------------
Management Management
Management Expense Expense Limitation Fees Fees
Fund Fee Limitation Expiration Date Waived Payable
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<S><C>
International Equity
--Primary 0.75% 2.25% Indefinite $-- $ 157
--Navigator 0.75% 1.25% Indefinite $-- N.M.
</TABLE>
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N.M. -- Not meaningful.
Batterymarch Financial Management, Inc. ("Batterymarch") serves as
investment adviser to the Fund. Batterymarch is responsible for the actual
investment activity of the Fund. LMFA pays Batterymarch a fee for its
services at an annual rate equal to 66 2/3% of the fee received by LMFA.
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Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the
New York Stock Exchange, serves as distributor of the Fund. Legg Mason
receives an annual distribution fee and an annual service fee based on the
Fund's Primary Class's average daily net assets, calculated daily and
payable monthly as follows:
<TABLE>
<CAPTION>
At June 30, 1999
------------------------
Distribution Service Distribution and Service
Fee Fee Fees Payable
-----------------------------------------------------------------------------
<S><C>
International Equity .75% .25% $209
</TABLE>
Legg Mason also has an agreement with the Fund's transfer agent to
assist with some of its duties. For this assistance, the transfer agent
paid Legg Mason $39 for the six months ended June 30, 1999.
LMFA, Batterymarch, the Adviser, WAGM and Legg Mason are corporate
affiliates and are wholly owned subsidiaries of Legg Mason, Inc.
7. Line of Credit:
The Fund, along with certain other Legg Mason Funds, participates in
a $200 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 six
months ended June 30, 1999, the Fund had no borrowings under the line of
credit.
8. Fund Share Transactions:
At June 30, 1999, there were 1,000,000 shares authorized at $.001 par
value for all portfolios of the Corporation. Share transactions were as
follows:
<TABLE>
<CAPTION>
Reinvestment
Sold of Distributions Repurchased Net Change
------------------ ---------------- ------------------ ------------------
Shares Amount Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------------------
<S><C>
International Equity
--Primary Class
Six Months Ended June 30, 1999 2,032 $25,837 77 $ 972 (2,655) $(33,683) (546) $(6,874)
Year Ended Dec. 31, 1998 5,900 77,550 221 2,717 (4,995) (63,459) 1,126 16,808
--Navigator Class
Six Months Ended June 30, 1999 -- -- -- -- -- -- -- --
May 5, 1998(A) to Dec. 31, 1998 4 50 -- -- -- -- 4 50
</TABLE>
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(A) Commencement of sale of Navigator Class shares.
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Investment Advisers
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
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
PricewaterhouseCoopers LLP
Baltimore, MD
This report is not to be distributed unless preceded or
accompanied by a prospectus.
Legg Mason Wood Walker, Incorporated
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100 Light Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 o 539 o 0000
LMF-042
