Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Western Asset Management Company
Pasadena, CA
Board of Trustees
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr.
Richard G. Gilmore
Charles F. Haugh
Arnold L. Lehman
Dr. Jill E. McGovern
T. A. Rodgers
Edward A. Taber, III
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel
Kirkpatrick & Lockhart LLP
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 o 539 o 0000
[Recycled Logo] Printed on Recycled Paper
LMF-018
Report to Shareholders
For the Six Months Ended
February 28, 1997
The
Legg Mason
Cash
Reserve
Trust
Putting Your Future First
[Legg Mason Logo]
FUNDS
<PAGE>
To Our Shareholders,
The Legg Mason Cash Reserve Trust now has $1.29 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 4.60%* (an effective yield of 4.70% 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 28, 1997
appears in this report. You will note that approximately 69% 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.
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 26, 1997
- ------------------
*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 28, 1997
(Amounts in Thousands) (Unaudited)
Par Rate Value
- -------------------------------------------------------------
Asset-Backed Securities -- 2.9%
ATT Capita Equipment
Receivables Trust 96-1 A1
$17,762 10/15/97 5.60% $ 17,762
Case Equipment Loan Trust
96-B A1
1,676 9/15/97 5.56 1,676
Ford Credit Trust 96-B
5,859 10/15/97 5.51 5,859
Norwest Auto 96-A A1
12,186 12/5/97 5.47 12,186
--------
Total Asset-Backed Securities 37,483
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Bank Note -- 0.2%
Bank of Hawaii
2,000 11/7/97 5.63 2,000
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Certificates of Deposit -- 5.6%
Bank One
25,000 3/17/97 5.34 25,000
First Alabama Bank
27,000 3/25/97 5.62 27,000
Northern Automobile Trust
20,000 8/21/97 5.40 20,000
--------
Total Certificates of Deposit 72,000
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Commercial Paper -- 17.0%
Corporate Asset Funding Corp.
25,000 4/7/97 5.30 24,865
Cargill Incorporated
24,000 3/25/97 5.28 23,915
CIESCO
25,000 3/3/97 5.28 24,993
CRC
25,000 4/11/97 5.35 24,848
CRC
20,000 4/2/97 5.28 19,906
General Motors
Acceptance Corp.
20,000 3/12/97 5.63 19,965
International Lease Finance
25,000 4/10/97 5.30 24,853
Pitney Bowes Credit Corp.
25,000 4/10/97 5.29 24,853
Pitney Bowes Credit Corp.
22,000 3/11/97 5.58 21,966
Sherwin Williams Co.
10,000 3/14/97 5.39 9,980
--------
Total Commercial Paper 220,144
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Par Rate Value
- -------------------------------------------------------------
Medium-term Notes -- 2.7%
Commercial Credit
Group, Inc.
$ 5,250 3/1/97 8.13% $ 5,250
General Motors
Acceptance Corp.
5,000 10/30/97 5.63 4,996
Philip Morris
15,240 3/15/97 7.50 15,250
Sears Roebuck
9,115 8/1/97 9.25 9,239
--------
Total Medium-term Notes 34,735
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Time Deposits -- 5.8%
American Express
30,000 4/25/97 5.33 30,000
Bank of Hawaii
18,000 3/27/97 5.28 18,000
Bank of Hawaii
12,000 5/27/97 5.33 12,000
Mellon Bank
15,000 4/8/97 5.50 15,000
--------
Total Time Deposits 75,000
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U.S. Government Securities -- 1.2%
United States
Treasury Notes
16,000 5/31/97 to 8/31/97 6.00 to 6.13 16,036
- -------------------------------------------------------------
U.S. Government Agency Obligations -- 46.7%
Federal Farm Credit Bank
168,500 3/3/97 to 9/2/97 5.18 to 5.45 168,371
Federal Home Loan Mortgage
Corporation
165,620 3/13/97 to 5/12/97 5.17 to 5.24 165,136
Federal National Mortgage
Association
245,000 3/3/97 to 8/14/97 5.24 to 5.39 244,336
Student Loan Marketing
Association
25,165 3/21/97 to 2/25/98 5.22 to 5.34 25,110
--------
Total U.S. Government
Agency Obligations 602,953
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2
<PAGE>
Par Rate Value
- ---------------------------------------------------------------
Repurchase Agreement -- 21.5%
J.P. Morgan Securities, Inc.
dated 2/28/97, to be
repurchased at $277,991 on
3/3/97 (Collateral:
$283,785 Federal
National Mortgage
Association Discount Notes
due 3/7/97, value
$283,430)
$277,867 3/3/97 5.36% $ 277,867
- ---------------------------------------------------------------
Total Investments,
at amortized cost
and value -- 103.6% 1,338,218(A)
Management Fee Payable -- (N.M.)% (471)
Other Assets Less
Liabilities-- (3.6)% (45,715)
----------
Net assets applicable to
1,292,284 shares
outstanding-- 100.00% $1,292,032
==========
Net asset value per share $1.00
=====
(A) Also represents cost for federal income tax purposes.
N.M. Not meaningful
See notes to financial statements.
3
<PAGE>
Statement of Operations
Legg Mason Cash Reserve Trust
For the Six Months Ended February 28, 1997 (Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment Income:
Interest $33,536
Expenses:
Management fee $2,968
Distribution fee 177
Transfer agent and shareholder servicing expense 927
Custodian fee 106
Reports to shareholders 86
Audit and legal fees 77
Registration fees 49
Trustees' fees 3
Other expenses 3
------
Total expenses 4,396
-------
Net Investment Income 29,140
Net Realized Gain on Investments 55
- ---------------------------------------------------------------------------------------------------------------------------
Increase in Net Assets Resulting from Operations $29,195
=======
</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 28, 1997 August 31, 1996
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S><C>
Change in Net Assets:
Net investment income $ 29,140 $ 59,008
Net realized gain on investments 55 114
---------- ----------
Increase in net assets resulting from operations 29,195 59,122
Distributions to shareholders from net investment income (29,140) (59,008)
Contribution from Manager -- 400
Increase in net assets from Trust share transactions 67,496 70,837
---------- ----------
Increase in net assets 67,551 71,351
Net Assets:
Beginning of period 1,224,481 1,153,130
- ---------------------------------------------------------------------------------------------------------------------------
End of period $1,292,032 $1,224,481
========== ==========
</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 For the Years Ended August 31,
Months Ended --------------------------------------------------------
February 28, 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S><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 .05 .03 .03 .04
Net realized gain (loss) on investments Nil Nil Nil (Nil) -- Nil
---------------------------------------------------------------------------
Total from investment operations .02 .05 .05 .03 .03 .04
---------------------------------------------------------------------------
Dividends paid from:
Net investment income (.02) (.05) (.05) (.03) (.03) (.04)
Realized gain on investments -- -- -- -- -- (Nil)
---------------------------------------------------------------------------
Total distributions (.02) (.05) (.05) (.03) (.03) (.04)
---------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================================
Total return 4.76%(A) 4.92% 5.08% 3.08% 2.85% 4.37%
Ratios/Supplemental Data:
Ratios to average net assets:
Expenses .71%(A) .70% .71% .72% .76% .75%
Net investment income 4.69%(A) 4.81% 5.03% 3.05% 2.82% 4.11%
Net assets, end of period (in millions) $1,292.0 $1,224.5 $1,153.1 $786.3 $755.0 $733.8
</TABLE>
(A) Annualized
See notes to financial statements.
5
<PAGE>
Notes to Financial Statements
Legg Mason Cash Reserve Trust
(Amounts in Thousands) (Unaudited)
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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 ex-dividend date. Net investment income for dividend
purposes consists of interest accrued plus original issue and market
discount earned, less amortization of market premium and accrued expenses.
At February 28, 1997, dividends payable of $1,670 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 28, 1997, $60,000 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
28, 1997, net assets consisted of paid-in capital of $1,292,284 and
accumulated net realized losses of $252. 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
Months Ended Year Ended
February 28, 1997 August 31, 1996
- -----------------------------------------------------------------
Shares sold $ 2,623,956 $ 4,744,925
Shares reinvested 29,225 57,357
Shares repurchased (2,585,685) (4,731,444)
- -----------------------------------------------------------------
Net increase $ 67,496 $ 70,837
=================================================================
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 28,
1997, the management fee was $2,968.
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 28, 1997, the advisory fee was $890.
6
<PAGE>
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Effective January 10, 1997, Cash Reserve Trust began compensating
Legg Mason for distribution costs and services at an annual rate equal to
0.10% of its average daily net assets. Legg Mason has agreed to limit such
fees paid by the Fund to 0.10% for the next two years. If this voluntary
limit is not extended beyond January 10, 1999, Cash Reserve Trust may pay
Legg Mason a fee for its distribution services in an amount not to exceed
an annual rate of 0.15% of the Fund's average daily net assets.
During the year ended August 31, 1996, Legg Mason contributed $400 to
offset a portion of the Trust's net realized losses.
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 $286
by the transfer agent for the six months ended February 28, 1997.
7
