LEGG MASON CASH RESERVE TRUST
Supplement to the Prospectus dated December 31, 1995
At a meeting held on March 8, 1996, the shareholders of Legg Mason Cash
Reserve Trust ("Trust") voted to approve certain changes to the Trust's
fundamental investment policies and limitations and to approve a distribution
plan.
Shareholders have voted to redesignate as non-fundamental certain
investment policies described in the current Prospectus as fundamental, which
means the Trust's Board of Trustees in the future can change these policies as
circumstances require, without a further vote of the shareholders.
Specifically, the current Prospectus, as a fundamental policy, limits the Trust
to instruments with a remaining maturity of not more than one year. The Trust
is changing this policy to permit investment in instruments with a remaining
maturity of not more than 397 days, as permitted by SEC Rule 2a-7. In addition,
the current Prospectus sets forth, as a fundamental policy, the types of money
market instruments in which the Trust may invest. This policy is now non-
fundamental, and the Trust is adding to the list of permissible investments high
grade corporate bonds and U.S. dollar-denominated debt securities of foreign
issuers.
Shareholders also approved a distribution plan to compensate Legg Mason
Wood Walker, Incorporated ("Legg Mason") for its distribution-related
activities. As described in the Prospectus, under the section entitled "The
Trust's Distributor," Legg Mason currently receives no fee from the Trust for
distribution services. Under the plan approved by shareholders, Legg Mason may
receive from the Trust a distribution fee at an annual rate of up to 0.15% of
the Trust's average daily net assets. Legg Mason has agreed to limit any
request for payment to not more than 0.10% annually from the Trust during the
first two years of operation of the distribution plan.
THESE CHANGES WILL BECOME EFFECTIVE ON APRIL 1, 1996.
March 11, 1996
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LEGG MASON CASH RESERVE TRUST
Supplement to the Statement of Additional Information dated December 31, 1995
At a meeting held on March 8, 1996, the shareholders of Legg Mason Cash
Reserve Trust ("Trust") voted to approve certain changes to the Trust's
fundamental investment policies and limitations and to elect a Board of
Trustees. These changes will become effective on April 1, 1996.
Under the section entitled "Additional Information about Investment
Limitations and Policies" in the Statement of Additional Information, the
following changes have been made:
The fundamental investment limitation which prohibits the Trust from
pledging any securities has been eliminated. The Trust is now permitted to
pledge its assets subject only to the limitations in the Declaration of Trust,
which provides that the Trust may not pledge its assets except in connection
with any borrowing (i) as a temporary measure for extraordinary or emergency
purposes, or (ii) in order to meet redemption requests without immediately
selling any portfolio instruments. The Trust may not pledge assets in excess
of the lesser of the dollar amounts borrowed or 10% of the value of the Trust's
total assets at the time of such borrowing;
The fundamental investment limitation regarding investment in new issuers
has been replaced with an identical non-fundamental investment limitation in
order to conform to state requirements;
The fundamental investment limitation which prohibits the Trust from
investing in foreign securities has been eliminated. Because U.S. dollar-
denominated obligations of foreign banks comprise a substantial and increasing
portion of the market for money market instruments, the Trust would now be able
to take advantage of certain desirable investment opportunities. In an effort
to minimize certain risks involving investments in obligations of banking
entities located outside the U.S., the Adviser will purchase foreign-issued
money market instruments only from the branches of those banks that are among
the largest and most highly rated in various industrialized nations. The
Adviser will monitor the credit risk of such foreign banks by using third
party services and the Adviser will not purchase obligations that it believes,
at the time of purchase, will be subject to exchange controls or withholding
taxes; and
The fundamental investment limitation regarding the purchase of restricted
securities has been replaced with a non-fundamental investment limitation on
illiquid securities, as mandated by the Securities and Exchange Commission
("SEC"). Specifically, the Trust will not enter into repurchase agreements and
certain time deposits of more than seven days' duration if more than 10% of its
total assets would be invested in such agreements, deposits and other illiquid
investments. The Trust's Board of Trustees has delegated to the Adviser the
authority to determine whether Rule 144A securities and Section 4(2) paper held
by the Trust is liquid, subject to the standards established by the SEC.
Under the section entitled "The Trust's Trustees and Officers" in the
Statement of Additional Information, John F. Curley, Jr., Edmund J. Cashman,
Jr., Richard G. Gilmore, Charles F. Haugh, Arnold L. Lehman, Dr. Jill E.
McGovern, T. A. Rodgers and Edward A. Taber have been elected to serve as
trustees of the Trust.
March 11, 1996
