Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Western Asset Management Company Semi-Annual Report
Pasadena, CA February 28, 1998
Board of Trustees
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr.
Richard G. Gilmore Legg Mason
Charles F. Haugh Cash
Arnold L. Lehman Reserve
Dr. Jill E. McGovern Trust
T. A. Rodgers
Edward A. Taber, III
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
The Art of Investing
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel [LEGG MASON LOGO]
Kirkpatrick & Lockhart LLP
Washington, D.C. FUNDS
Independent Auditors
Ernst &Young LLP
Philadelphia, PA
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
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100 Light 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 $1.29 billion invested in a
diversified portfolio of high quality fixed income securities with relatively
short maturities.
As this letter is written on March 31, the Trust's annualized yield for the
past 7 days is 4.82%* (an effective yield of 4.94% when the compounding effect
of dividend reinvestments is included). The average weighted maturity of our
portfolio is 65 days.
A complete listing of the Trust's portfolio holdings at February 28, 1998
appears in this report. You will note that approximately 60% of the Trust's
portfolio is invested in U.S. government and government agency securities and
repurchase agreements fully secured by such securities.
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 31, 1998
- ---------
*The yields shown here are for past periods and are not intended to indicate
future performance. An investment in this fund is neither insured nor guaranteed
by the U.S. Government and there can be no assurance that the fund will be able
to maintain a stable net asset value of $1.00 per share.
<PAGE>
Statement of Net Assets
Legg Mason Cash Reserve Trust
February 28, 1998
(Amounts in Thousands) (Unaudited)
Par Rate Value
- -------------------------------------------------------------------------------
Asset-backed Securities -- 4.4%
Associates Corporation N.A.
$ 1,000 5/15/98 7.25% $ 1,003
Associates Corporation N.A.
15,000 8/15/98 6.375 15,031
Associates Corporation N.A.
1,000 10/13/98 6.04 1,003
ContiMortgage
15,469 12/15/98 5.906 15,469
Liberty Mutual Capital
Corporation
4,000 6/1/98 5.96 4,001(A)
Merrill Lynch STEERS
20,000 1/25/99 5.632 20,000(A)
Norwest Financial
Incorporated
1,000 4/15/98 5.50 1,000
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Total Asset-backed Securities 57,507
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Bank Notes -- 2.7%
First USA Bank
4,000 10/9/98 6.25 4,009
Key Bank
6,000 10/7/98 6.00 6,005
Key Bank
5,000 2/3/99 6.125 5,024
Mellon Bank
10,000 6/16/98 5.846 10,001
Morgan Guaranty
Trust Company
10,000 2/4/99 5.55 9,994
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Total Bank Notes 35,033
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CERTIFICATES OF DEPOSIT -- 7.3%
Bankers Trust
Company
10,000 3/4/98 5.89 10,000
Bankers Trust
Company
5,000 1/8/99 5.60 4,998
Barclays Bank PLC
10,000 4/22/98 5.50 10,000
Bayerische Landesbank
1,000 12/17/98 5.81 1,002
Deutsche Bank
5,000 10/26/98 5.94 4,998
Harris Trust
10,000 3/6/98 5.50 10,000
Par Rate Value
- -------------------------------------------------------------------------------
Certificates of Deposit -- Continued
Harris Trust
$ 10,000 3/9/98 5.51% $ 10,000
Societe General
5,000 5/19/98 6.16 5,000
Societe General
20,000 10/15/98 5.91 19,996
Societe General
15,000 1/7/99 5.70 15,019
Toronto Bank
3,000 6/18/98 5.80 3,002
----------
Total Certificates of Deposit 94,015
------------------------------------------------------------------------
Commercial Paper -- 15.3%
Allstate Corporation
5,000 6/15/98 5.875 5,001
Bellsouth Telecom
2,661 6/8/98 5.25 2,656
CAFCO
30,000 3/4/98 5.46 29,988
CIT Group Holdings
8,000 7/31/98 6.35 8,016
Carolina Power & Light
8,000 7/1/98 5.375 7,986
Caterpillar Financial
Services Corporation
1,500 6/11/98 6.41 1,502
First Chicago NBD
Corporation
3,600 6/1/98 8.50 3,623
Ford Capital
10,000 8/15/98 9.00 10,132
Ford Motor Credit Company
400 3/25/98 9.00 401
Ford Motor Credit Company
3,000 6/15/98 9.25 3,029
Ford Motor Credit Company
1,215 1/15/99 8.00 1,239
Fountain Square
Commercial Funding
10,914 3/17/98 5.50 10,887(A)
GE Capital Corporation
4,000 3/12/98 8.625 4,003
GE Capital Corporation
2,000 3/27/98 7.05 2,002
GE Capital Corporation
1,060 4/8/98 5.50 1,059
2
<PAGE>
Par Rate Value
- -------------------------------------------------------------------------------
Commercial Paper -- Continued
GE Capital Corporation
$ 6,000 4/17/98 5.50% $ 5,957
GE Capital Corporation
2,000 11/10/98 5.75 1,996
General Motors
Acceptance Corp.
7,725 6/4/98 6.50 7,734
General Motors
Acceptance Corp.
1,100 7/13/98 6.00 1,100
Heller Financial
28,900 3/15/98 9.375 28,941
KFW International
Finance
3,000 3/12/98 8.25 3,002
Manitoba Province
9,000 3/15/99 9.625 9,359
NationsBank
Corporation
25,000 12/15/98 6.02 25,000
Norwest Financial
Incorporated
6,555 9/1/98 6.23 6,567
Norwest Financial
Incorporated
7,000 10/13/98 6.00 7,003
Old Kent Bank
4,500 4/15/98 6.875 4,506
Toyota Motor Group
2,000 3/17/98 5.62 2,000
Virginia Electric & Power
4,000 6/1/98 9.375 4,033
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Total Commercial Paper 198,722
------------------------------------------------------------------------
Medium-term Notes -- 2.5%
Albertsons' Inc.
3,000 3/26/98 5.65 2,999
Associates Corporation N.A.
2,000 5/20/98 8.81 2,013
General Motors
Acceptance Corp.
1,000 9/2/98 5.70 998
General Motors
Acceptance Corp.
2,000 3/1/99 5.45 1,997
John Deere Credit Inc.
5,000 9/14/98 5.928 5,003
Par Rate Value
- -------------------------------------------------------------------------------
Medium-term Notes -- Continued
John Deere Credit Inc.
$ 3,000 2/1/99 6.00% $ 3,011
Merrill Lynch and
Company
10,000 8/10/98 5.88 10,000
NationsBank
Corporation
1,500 9/15/98 5.125 1,494
PHH Corporation
5,000 5/26/98 5.592 5,001
----------
Total Medium-term Notes 32,516
------------------------------------------------------------------------
Time Deposits -- 5.4%
American Express
Centurion Bank
20,000 3/16/98 5.53 20,000
American Express
Centurion Bank
20,000 3/19/98 5.53 20,000
Bank of Hawaii
20,000 3/9/98 5.54 20,000
Mellon Bank
10,000 3/6/98 5.70 10,000
----------
Total Time Deposits 70,000
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U.S. GOVERNMENT AGENCY OBLIGATIONS -- 39.0%
Fannie Mae
14,739 3/12/98 5.48 14,714
Fannie Mae
40,450 3/19/98 5.40 40,341
Fannie Mae
15,000 3/30/98 5.57 14,933
Fannie Mae
12,000 6/30/98 5.75 12,003
Federal Agricultural
Mortgage Corp.
46,000 3/16/98 5.42 45,896
Federal Farm Credit
Bank
50,000 4/1/98 5.62 50,000
Freddie Mac
5,000 3/2/98 5.61 4,999
Freddie Mac
4,028 3/4/98 5.44 4,026
Freddie Mac
50,000 3/6/98 5.439 49,962
3
<PAGE>
Statement of Net Assets--Continued
Legg Mason Cash Reserve Trust
February 28, 1998
(Amounts in Thousands) (Unaudited)
Par Rate Value
- -------------------------------------------------------------------------------
U.S. Government Agency Obligations -- Continued
Freddie Mac
$ 50,000 3/12/98 5.44% $ 49,916
Freddie Mac
35,000 3/13/98 5.42 34,937
Freddie Mac
40,000 3/20/98 5.37 39,886
Freddie Mac
50,000 3/31/98 5.35 49,777
Freddie Mac
20,000 3/31/98 5.34 19,911
Freddie Mac
24,000 3/31/98 5.34 23,893
Freddie Mac
50,000 4/13/98 5.35 49,680
----------
Total U.S. Government
Agency Obligations 504,874
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REPURCHASE AGREEMENT -- 20.6%
J. P. Morgan Securities, Inc.
5.66%, dated 2/27/98, to
be repurchased at $266,988
on 3/2/98 (Collateral:
$195,855 Fannie Mae Medium-
term Notes, 6.57%-6.89% due
9/2/02-2/14/08, value
$207,657; $41,883 Tennessee
Valley Authority, 6.875%-
7.25% due 7/15/43-
12/15/43, value $43,046;
$28,210 Student Loan Marketing
Association, 0%-5.88%
due 8/20/98-2/6/01,
266,862 value $27,318) 266,862
------------------------------------------------------------------------
------------------------------------------------------------------------
Total Investments, at amortized
cost and value -- 97.2% $1,259,529(B)
Other Assets Less
Liabilities-- 2.8% 35,875
----------
Net assets applicable to
1,295,340 shares
outstanding-- 100.0% $1,295,404
==========
Net asset value per share $1.00
=====
---------
(A) 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 buyers.
(B) Also represents cost for federal income tax purposes.
See notes to financial statements.
4
<PAGE>
Statement of Operations
Legg Mason Cash Reserve Trust
For the Six Months Ended February 28, 1998
(Amounts in Thousands) (Unaudited)
--------------------------------------------------------------------------
Investment Income:
Interest $36,625
Expenses:
Management fee $3,089
Distribution fee 645
Transfer agent and shareholder servicing expense 955
Custodian fee 114
Reports to shareholders 87
Audit and legal fees 63
Registration fees 34
Trustees' fees 9
Other expenses 28
------
Total expenses 5,024
-------
Net Investment Income 31,601
Net Realized Gain on Investments 47
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Increase in Net Assets Resulting from Operations $31,648
=======
-------------------------------------------
Statement of Changes in Net Assets
Legg Mason Cash Reserve Trust
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
February 28, 1998 August 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S><C>
Change in Net Assets:
Net investment income $ 31,601 $ 60,327
Net realized gain on investments 47 324
---------- ----------
Increase in net assets resulting from operations 31,648 60,651
Distributions to shareholders from net investment income (31,601) (60,327)
Change in net assets from Trust share transactions (47,282) 117,834
---------- ----------
Change in net assets (47,235) 118,158
Net Assets:
Beginning of period 1,342,639 1,224,481
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End of period $1,295,404 $1,342,639
========== ==========
</TABLE>
See notes to financial statements.
5
<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, 1998 1997 1996 1995 1994 1993
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(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 .05 .03 .03
Net realized gain (loss) on investments Nil Nil Nil Nil (Nil) --
-----------------------------------------------------------------------------
Total from investment operations .02 .05 .05 .05 .03 .03
-----------------------------------------------------------------------------
Dividends Paid From:
Net investment income (.02) (.05) (.05) (.05) (.03) (.03)
-----------------------------------------------------------------------------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================================
Total return 4.94%(A) 4.84% 4.92% 5.08% 3.08% 2.85%
Ratios/Supplemental Data:
Ratios to average net assets:
Expenses .78%(A) .75% .70% .71% .72% .76%
Net investment income 4.90%(A) 4.73% 4.81% 5.03% 3.05% 2.82%
Net assets, end of period (in millions) $1,295 $1,343 $1,224 $1,153 $786 $755
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Annualized
See notes to financial statements.
-------------------------------------------
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, plus original issue and market
discount earned, less amortization of market premium and accrued expenses.
At February 28, 1998, dividends payable of $1,915 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.
6
<PAGE>
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.
Use of Estimates
The 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. 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, 1998, net assets consisted of paid-in capital of $1,295,340 and
accumulated net realized gain of $64. 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, 1998 August 31, 1997
- -------------------------------------------------------------------------
Shares sold $ 2,136,429 $ 4,783,717
Shares reinvested 31,432 58,446
Shares repurchased (2,215,143) (4,724,329)
- -------------------------------------------------------------------------
Net change $ (47,282) $ 117,834
=========================================================================
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. Management fees of $470 were payable to
the manager at February 28, 1998.
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, 1998, the advisory fee was $927.
Legg Mason, as distributor of the Trust, may receive an annual
distribution fee of up to 0.15% of the Trust's average daily net assets.
Legg Mason has agreed to limit such fees paid by the Trust to 0.10%
through January 10, 1999. Distribution and service fees of $119 were
payable to the distributor at February 28, 1998.
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 $273
by the transfer agent for the six months ended February 28, 1998.
7
