<PAGE>
INVESTMENT MANAGER
Legg Mason Fund Adviser, Inc.
Baltimore, MD
INVESTMENT ADVISER
Western Asset Management Company
Pasadena, CA
BOARD OF DIRECTORS
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr., Vice Chairman
Edward A. Taber, III, President
Richard G. Gilmore
Charles F. Haugh
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
Washington, D.C.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Baltimore, MD
THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
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
(recycle logo) PRINTED ON RECYCLED PAPER
LMF-020
REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
THE
LEGG MASON
U.S.
GOVERNMENT
MONEY
MARKET
PORTFOLIO
PUTTING YOUR FUTURE FIRST
(Legg Mason logo)
<PAGE>
TO OUR SHAREHOLDERS,
On June 30, 1995, the Legg Mason U.S. Government Money Market
Portfolio had $267 million invested in a diversified portfolio of high
quality government securities with an average weighted maturity of 47
days. Since the fund was formed in January of 1989, 13,300 investors
have become shareholders. The fund's 30-day yield as this letter is
written is 5.20%. A sizeable portion of the monthly dividends paid by
the fund is exempt from state income taxes in most states.
This report includes a complete listing of our portfolio holdings
as of June 30. We will continue to work hard to provide you with a
competitive investment return, consistent with high portfolio quality
and safety.
Sincerely,
(signature)
John F. Curley, Jr.
Chairman
August 1, 1995
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON INCOME TRUST, INC.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
JUNE 30, 1995 (UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 90.9%
Federal Home Loan Bank
$ 10,000 7/14/95 5.87% $ 9,979
Federal Home Loan
Mortgage Corporation
136,045 7/3/95 to 10/3/95 5.65 to 6.10 134,946
Federal National
Mortgage Association
50,000 7/19/95 to 8/8/95 5.60 to 5.88 49,805
Private Export Funding
Corporation
17,375 1/31/96 9.00 17,647
Student Loan Marketing
Association
25,000 7/3/95 6.10 24,992
Tennessee Valley
Authority
5,000 7/20/95 4.00 4,993
Total U.S. Government
and Agency
Obligations 242,362
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C> <C>
REPURCHASE AGREEMENT -- 7.6%
Salomon Brothers, Inc.
6.05% dated 6/30/95, to
be repurchased at $20,199
on 7/3/95 (Collateral:
$20,021 U.S. Treasury
Notes, 6.625% due
$ 20,189 3/31/97, value $20,614) 6.05% $ 20,189
Total Investments, at
amortized cost and
value -- 98.5% 262,551(A)
Other Assets Less
Liabilities -- 1.5% 3,966
NET ASSETS APPLICABLE TO
266,663 SHARES
OUTSTANDING -- 100.0% $266,517
NET ASSET VALUE PER SHARE $1.00
</TABLE>
(A) ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON INCOME TRUST, INC.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $6,988
EXPENSES:
Management fee $ 581
Transfer agent and shareholder servicing expense 110
Custodian fee 37
Registration fees 25
Audit and legal fees 20
Reports to shareholders 13
Directors' fees 3
Other expenses 5
Total expenses 794
NET INVESTMENT INCOME 6,194
NET REALIZED GAIN ON INVESTMENTS 30
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,224
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON INCOME TRUST , INC.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
For the Six
Months Ended For the
June 30, Year Ended
(Amounts in Thousands) 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 6,194 $ 7,384
Net realized gain (loss) on investments 30 (396)
Increase in net assets resulting from operations 6,224 6,988
Distributions to shareholders from net investment income (6,194) (7,384)
Contributions from Manager 120 100
Increase in net assets from Fund share transactions 51,791 42,339
Increase in net assets 51,941 42,043
NET ASSETS:
Beginning of period 214,576 172,533
End of period $266,517 $ 214,576
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON INCOME TRUST , INC.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
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>
For the Six
Months Ended For the Years Ended December 31,
June 30, 1995 1994 1993 1992 1991 1990
(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 .03 .04 .03 .03 .05 .07
Net realized gain (loss) on
investments Nil (Nil) -- -- Nil --
Total from investment operations .03 .04 .03 .03 .05 .07
Dividends paid from:
Net investment income (.03) (.04) (.03) (.03) (.05) (.07)
Realized gain on investments -- -- -- -- (Nil) --
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
Total return 5.29%(A) 3.66% 2.80% 3.49% 5.87% 7.56%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses .68%(A) .69% .71% .73% .73% .81%
Net investment income 5.32%(A) 3.66% 2.76% 3.45% 5.36% 7.29%
Net assets, end of period (in
thousands) $266,517 $214,576 $172,533 $170,910 $180,733 $132,408
</TABLE>
(A) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON INCOME TRUST, INC.
U.S. GOVERNMENT MONEY MARKET PORTFOLIO
(Amounts in Thousands) (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Income Trust, Inc. ("Trust"), consisting of the U.S.
Government Money Market Portfolio ("Fund"), the U.S. Government
Intermediate-Term Portfolio, the Investment Grade Income Portfolio and the
High Yield Portfolio, is registered under the Investment Company Act of
1940, as amended, as an open-end, diversified investment company. The
financial statements of the other portfolios of the Trust are included in
separate reports to shareholders.
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 June
30, 1995, dividends payable of $563 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.
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.
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 all of its taxable income to its shareholders. The Fund
has unused capital loss carryforwards for federal income tax purposes
of $296 which expire in 2002.
2. FUND SHARE TRANSACTIONS:
At June 30, 1995, there were 1,000,000 shares authorized at $.001 par
value for all portfolios of the Trust (including the Fund). At June 30,
1995 paid-in capital aggregated $266,663 for the Fund. Since the Fund 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:
<TABLE>
<CAPTION>
For the Six
Months Ended For the
June 30, Year Ended
1995 December 31, 1994
<S> <C> <C>
Shares sold $ 554,252 $ 874,097
Shares reinvested 5,383 7,087
Shares repurchased (507,844) (838,845)
Net increase $ 51,791 $ 42,339
</TABLE>
3. TRANSACTIONS WITH AFFILIATES:
The Fund 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 Fund. Under this agreement, the Manager provides
the Fund with management and administrative services for which the Fund
pays a fee at an annual rate of 0.50% of average daily net assets of the
Fund. Management fees of $84 were payable at June 30, 1995.
Western Asset Management Company ("Adviser"), a corporate affiliate of
the Manager and Legg Mason, serves as investment adviser to the Fund. The
Adviser is responsible for the actual investment activity of the Fund, for
which the Manager pays a fee at an annual rate equal to 30% of the fee
received by the Manager.
Legg Mason has contributed $220 to offset a portion of the Fund's net
realized losses and plans to contribute an additional $50 during fiscal
1995.
Legg Mason also has an agreement with the Fund's transfer agent to
assist with certain of its duties. For this assistance, Legg Mason was
paid $38 by the transfer agent for the six months ended June 30, 1995.
5
