INVESTMENT MANAGER
Legg Mason Fund Adviser, Inc.
Baltimore, MD
REPORT TO SHAREHOLDERS
INVESTMENT ADVISER FOR THE SIX MONTHS ENDED
Western Asset Management Company FEBRUARY 29, 1996
Pasadena, CA
BOARD OF TRUSTEES
John F. Curley, Jr., Chairman THE
Charles F. Haugh LEGG MASON
Arnold L. Lehman CASH
Dr. Jill E. McGovern RESERVE
TRUST
TRANSFER AND SHAREHOLDER SERVICING AGENT
Boston Financial Data Services
Boston, MA
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
PUTTING YOUR FUTURE FIRST
COUNSEL
Kirkpatrick & Lockhart LLP [LEGG MASON LOGO]
Washington, DC
INDEPENDENT AUDITORS
Ernst & Young LLP
Baltimore, MD
THIS FUND IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE
FUND WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE.
THIS REPORT IS NOT TO BE DISTRIBUTED UNLESS PRECEDED OR
ACCOMPANIED BY A PROSPECTUS.
LEGG MASON WOOD WALKER, INCORPORATED
111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (Bullet) 539 (Bullet) 0000
LMF-018
<PAGE>
TO OUR SHAREHOLDERS,
The Legg Mason Cash Reserve Trust now has $1.26 billion invested in a
diversified portfolio of high quality fixed income securities with
relatively short maturities.
As this letter is written, the Trust's annualized yield for the past 7
days is 4.56%* (an effective yield of 4.66% when the compounding effect of
dividend reinvestments is included). The average weighted maturity of our
portfolio is 60 days.
A complete listing of the Trust's portfolio holdings at February 29,
1996 appears in this report. You will note that approximately 60% of the
Trust's net assets are invested in U.S. government and government agency
securities, repurchase agreements fully secured by such securities, and
cash.
We are pleased to report that each of the proposals contained in the
proxy statement distributed to shareholders in January was approved at the
Special Meeting of Shareholders held on March 8, 1996. We appreciate your
cooperation in responding to the proxy mailing. Voting results are listed
on page 7.
You may add to your Cash Reserve Trust account at any time by sending
a check for $500 or more (made payable to Legg Mason Cash Reserve Trust)
to:
Legg Mason Cash Reserve Trust
P.O. Box 1476
Baltimore, Maryland 21203-1476
Please include your account number on any checks you send to us.
Sincerely,
/S/ John F. Curley, Jr.
John F. Curley, Jr.
Chairman
March 27, 1996
*The yields shown here are for past periods and are not intended to
indicate future performance.
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON CASH RESERVE TRUST
FEBRUARY 29, 1996
(AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Par Rate Value
<S> <C> <C>
BANK NOTES -- 3.9%
Bank One N.A.
$ 12,750 9/12/96 6.00% $ 12,748
Chase Manhattan Bank
12,000 8/26/96 4.95 11,706
Harris Bank
25,000 3/1/96 5.73 25,000
Total Bank Notes 49,454
CERTIFICATES OF DEPOSIT -- 12.6%
American Express
Centurian Bank
25,000 3/8/96 5.31 25,000
First Alabama Bank
27,000 6/25/96 5.13 27,000
National Bank of
Detroit
22,000 3/4/96 5.45 22,000
Northern Trust Corp.
30,000 3/28/96 5.21 30,000
U.S. National Bank of
Oregon
25,000 4/5/96 5.22 25,000
Wells Fargo Bank
30,000 3/14/96 5.21 30,000
Total Certificates of
Deposit 159,000
COMMERCIAL PAPER -- 7.5%
Automotive -- 0.3%
Ford Motor Credit Co.
3,850 7/5/96 9.07 3,891
Finance -- 4.8%
Corporate Asset
Funding Co. Inc.
36,000 3/5/96 to 3/15/96 5.40 to 5.58 35,947
First Chicago
Financial Corp.
25,000 3/11/96 to 3/27/96 5.21 to 5.22 24,929
60,876
Lease Rental
Obligations -- 2.4%
Hertz Corp.
30,000 4/5/96 5.20 29,848
Total Commercial Paper 94,615
MEDIUM-TERM NOTES -- 8.3%
Case Equipment
26,048 9/15/96 to 2/15/97 5.00 to 5.83 26,038
Caterpillar Financial
Asset Trust
5,773 8/25/96 5.85 5,773
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
MEDIUM-TERM NOTES -- (CONTINUED)
<S> <C> <C>
Caterpillar Financial
Services
$ 15,000 3/25/96 to 4/30/96 4.94 to 5.10% $ 14,981
General Electric
Capital Corp.
17,000 7/17/96 to 2/10/97 4.84 to 7.85 17,043
General Motors
Acceptance Corp.
18,500 12/6/96 to 12/10/96 5.25 to 7.75 18,689
General Motors Corp.
10,000 3/15/96 8.38 10,010
Pepsico Inc.
5,000 11/15/96 7.00 5,047
The Money Store
6,371 9/15/96 5.80 6,371
Total Medium-term Notes 103,952
TIME DEPOSITS -- 6.4%
Bank of America
30,000 4/24/96 5.38 30,000
Bank of Hawaii
30,000 4/22/96 5.50 30,000
Mellon Bank
20,000 4/5/96 5.20 20,000
Total Time Deposits 80,000
U.S. GOVERNMENT SECURITIES -- 3.5%
United States Treasury
Bills
19,922 3/28/96 to 2/6/97 4.85 to 5.28 19,211
United States Treasury
Notes
25,000 9/30/96 6.50 25,227
Total U.S. Government Securities 44,438
U.S. GOVERNMENT AGENCY OBLIGATIONS -- 43.9%
Federal Farm Credit
Bank
181,000 3/1/96 to 6/3/96 5.10 to 5.45 180,848
Federal Home Loan Bank
65,700 3/21/96 to 3/28/96 5.10 to 5.56 65,473
Federal Home Loan
Mortgage Corporation
189,000 3/1/96 to 5/3/96 4.97 to 5.48 188,248
Federal National
Mortgage Association
118,000 3/6/96 to 8/19/96 5.11 to 8.00 117,953
Total U.S. Government
Agency Obligations 552,522
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Par Rate Value
<S> <C> <C>
REPURCHASE AGREEMENT -- 9.1%
Merrill Lynch Government
Securities, Inc.
dated 2/29/96, to be
repurchased at $113,877 on
3/1/96 (Collateral: $50,000
Student Loan Marketing
Association, 6% due 1/16/01,
value $50,000; $50,000
Student Loan Marketing
Association, 5.9%
due 2/20/01, value $49,500;
$16,890 Federal Home Loan
Mortgage Corporation, 6.22%
due 2/13/03, value $16,637)
$ 113,860 3/1/96 5.45 $ 113,860
Total Investments, at
amortized cost and
value -- 95.2% 1,197,841(A)
Other Assets Less
Liabilities -- 4.8% 59,771
Net assets applicable
to 1,258,053 shares
outstanding --
100.0% $1,257,612
Net asset value per
share $1.00
</TABLE>
(A)ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON CASH RESERVE TRUST
FOR THE SIX MONTHS ENDED FEBRUARY 29, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 33,620
EXPENSES:
Management fee $ 2,859
Transfer agent and shareholder servicing expense 928
Reports to shareholders 133
Custodian fee 87
Registration fees 72
Audit and legal fees 67
Trustees' fees 4
Other expenses 18
Total expenses 4,168
NET INVESTMENT INCOME 29,452
NET REALIZED GAIN ON INVESTMENTS 131
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 29,583
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON CASH RESERVE TRUST
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
(Amounts in Thousands) February 29, 1996 August 31, 1995
(Unaudited)
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 29,452 $ 47,830
Net realized gain on investments 131 108
Increase in net assets resulting from operations 29,583 47,938
Distributions to shareholders from net investment income (29,452) (47,830)
Contribution from Manager 240 480
Increase in net assets from Trust share transactions 104,111 366,221
Increase in net assets 104,482 366,809
NET ASSETS:
Beginning of period 1,153,130 786,321
End of period $ 1,257,612 $ 1,153,130
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON CASH RESERVE TRUST
Contained below is per share operating performance data for a share of
beneficial interest 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>
For the Six
Months Ended For the Years Ended August 31,
February 29, 1996 1995 1994 1993 1992 1991
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income .02 .05 .03 .03 .04 .06
Net realized gain (loss) on investments Nil Nil (Nil) -- Nil --
Total from investment operations .02 .05 .03 .03 .04 .06
Dividends paid from:
Net investment income (.02) (.05) (.03) (.03) (.04) (.06)
Realized gain on investments -- -- -- -- (Nil) --
Total distributions (.02) (.05) (.03) (.03) (.04) (.06)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return 5.01%(A) 5.08% 3.08% 2.85% 4.37% 6.41%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses .70%(A) .71% .72% .76% .75% .74%
Net investment income 4.96%(A) 5.03% 3.05% 2.82% 4.11% 6.26%
Net assets, end of period (in thousands) $ 1,257,612 $1,153,130 $786,321 $754,996 $733,789 $860,954
</TABLE>
(A) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON CASH RESERVE TRUST
(AMOUNTS IN THOUSANDS) (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Cash Reserve Trust ("Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end, diversified
management investment company. The policies set forth below are in
conformity with generally accepted accounting principles.
Security Valuation
Portfolio securities are valued under the amortized cost method, which
approximates current market value. Under this method, securities are
valued at cost when purchased and, thereafter, a constant proportionate
amortization of any discount or premium is recorded until maturity of the
security.
Dividends to Shareholders
Dividends are declared daily and paid monthly. Dividends payable are
recorded on the dividend record date. Net investment income for dividend
purposes consists of interest accrued, original issue and market discount
earned, less amortization of market premium and accrued expenses. At
February 29, 1996, dividends payable of $2,252 were accrued.
Security Transactions
Security transactions are accounted for on the trade date and the cost
of investments sold is determined by use of the specific identification
method for both financial reporting and income tax purposes. At February
29, 1996, $15,000 was payable for securities purchased but not yet
received.
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 Trust's custodian. The value of such collateral
includes accrued interest.
Federal Income Taxes
No provision for federal income or excise taxes is
required since the Trust intends to continue to qualify as a regulated
investment company and distribute all of its taxable income to its
shareholders.
2. TRUST SHARE TRANSACTIONS:
The Trust is authorized to issue an unlimited number of full and
fractional shares of beneficial interest (without par value). At February
29, 1996, net assets consisted of paid-in capital of $1,258,053 and
accumulated net realized losses of $441. Since the Trust has sold and
redeemed shares at a constant net asset value of $1.00 per share, the
number of shares represented by such sales and redemptions is the same as
the amounts shown below for such transactions:
For the Six For the Year
Months Ended Ended August
February 29, 1996 31, 1995
Shares sold $ 2,324,032 $ 4,083,397
Shares reinvested 28,924 45,368
Shares repurchased (2,248,845) (3,762,544)
Net increase $ 104,111 $ 366,221
3. TRANSACTIONS WITH AFFILIATES:
The Trust has a management agreement with Legg Mason Fund Adviser,
Inc. ("Manager"), a corporate affiliate of Legg Mason Wood Walker,
Incorporated ("Legg Mason"), a member of the New York Stock Exchange and
the distributor for the Trust. Under this agreement, the Manager provides
the Trust with management and administrative services for which the Trust
pays a fee at an annual rate ranging from 0.50% of the first $500 million
of average daily net assets of the Trust to 0.40% of average daily net
assets in excess of $2 billion. For the six months ended February 29,
1996, the management fee was $2,859.
Administrative personnel and services are provided by Legg Mason at no
additional expense to the Trust.
Western Asset Management Company ("Adviser"), a corporate affiliate of
the Manager and Legg Mason, serves as investment adviser to the Trust. The
Adviser is responsible for the actual investment activity of the Trust,
for which the Manager pays the Adviser a fee at an annual rate equal to
30% of the fee received by the Manager. For the six months ended February
29, 1996, the advisory fee was $858.
6
<PAGE>
During the year ended August 31, 1995, Legg Mason contributed $480 to
offset a portion of the Trust's net realized losses. During the six months
ended February 29, 1996, Legg Mason contributed $240 and plans to
contribute an additional $160 over the next four months, with such
contributions subject to reduction by the amount of any net gains
realized.
Legg Mason has an agreement with the Trust's transfer agent to assist
with certain of its duties. For this assistance, Legg Mason was paid $290
by the transfer agent for the six months ended February 29, 1996.
SHAREHOLDER MEETING RESULTS:
A special meeting of the Fund's shareholders was held on March 8, 1996.
Of the 1,244,662,536 shares outstanding, the following shares (in
thousands) were voted at the meeting:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
Election of Trustees
John F. Curley, Jr. 614,739 -- 26,553
Edmund J. Cashman, Jr. 613,801 -- 27,491
Richard G. Gilmore 612,154 -- 29,138
Charles F. Haugh 613,890 -- 27,402
Arnold L. Lehman 613,172 -- 28,120
Jill E. McGovern 614,181 -- 27,111
T. A. Rodgers 611,791 -- 29,499
Edward A. Taber, III 613,758 -- 27,534
1.
To approve a Distribution Plan. 539,070 61,140 41,081
2.
To approve changes to the Trust's fundamental investment
limitations and policies by:
3.
a. designating as non-fundamental certain investment policies
currently deemed fundamental; 556,902 40,457 43,933
b. eliminating the fundamental limitation regarding the
purchase of foreign securities; 545,315 54,876 41,101
c. replacing the fundamental limitation regarding the purchase
of restricted securities with a non-fundamental limitation; 545,102 52,423 43,767
d. eliminating the fundamental limitation restricting the
pledging of assets; and 540,238 57,559 43,495
e. replacing the fundamental limitation regarding investment
in new issuers with a non-fundamental limitation. 547,031 49,571 44,690
4. To ratify the selection of Ernst & Young LLP as independent
auditors of the Trust for the fiscal year ending August 31,
1996. 600,625 13,526 27,141
</TABLE>
7
