<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
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-056
REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995
THE
LEGG MASON
HIGH
YIELD
PORTFOLIO
PUTTING YOUR FUTURE FIRST
(Legg Mason logo)
<PAGE>
TO OUR SHAREHOLDERS,
The Legg Mason High Yield Portfolio's assets have grown to over
$70 million as of June 30, 1995. On that date, the Fund's net asset
value was $14.22 per share, the weighted average maturity was 6.76
years and its annualized 30 day yield was 10.43%. For the twelve and
six months ended June 30, the Fund's total returns* (not annualized)
were 8.95% and 5.48%, respectively.
The Fund seeks to provide high current income, and as a secondary
objective, seeks capital appreciation. Under normal circumstances, it
will invest at least 65% of its total assets in high yield fixed
income securities.
The High Yield Portfolio is Legg Mason's highest income, most
total return-oriented taxable bond fund. It is designed for high
income-oriented investors seeking to achieve high current yields and
potentially high total returns who are willing to accept the risks of
investing in bonds with below investment grade credit ratings.
Investments in high yield bonds should be part of a
well-diversified investment portfolio and we hope you will consider
using the High Yield Portfolio for investments of additional funds as
they become available. Some shareholders have chosen to regularly add
to their investment in the Fund by authorizing automatic, monthly
transfers from their bank checking accounts or Legg Mason money market
funds. Your Investment Executive will be happy to help you make these
arrangements if you would like to purchase additional shares in this
convenient manner.
Sincerely,
(signature)
Edward A. Taber, III
President
August 1, 1995
*Total return measures investment performance in terms of appreciation or
depreciation in the fund's net asset value per share, plus capital gain
distributions and dividends. It assumes that capital gain distributions and
dividends were reinvested in the fund at the times they were paid.
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C> <C>
CORPORATE BONDS, NOTES AND EQUITY INTERESTS -- 89.1%
Automotive/Trucking -- 2.2%
Fruehauf Corporation
14.00% 4/30/02 $ 1,000 $ 999
SPX Corporation
11.75% 6/1/02 520 545
1,544
Builders/Building Materials -- 4.9%
MDC Holdings, Inc.
11.125% 12/15/03 500 452
MDC Holdings, Inc. Cv.
8.75% 12/15/05 750 673(D)
Miles Homes Services, Inc.
12.00% 4/1/01 1,000 883
The Forecast Group
11.375% 12/15/00 500 374
Wickes Lumber Company
11.625% 12/15/03 1,250 1,095
3,477
Cable and Media -- 8.0%
Chancellor Broadcasting Company
12.50% 10/1/04 1,000 1,023
Le Groupe Videotron Ltee
10.625% 2/15/05 1,500 1,588
Rogers Cablesystems Limited
10.00% 3/15/05 2,000 2,066
Young Broadcasting Corporation
10.125% 2/15/05 1,000 1,010(D,E)
5,687
Chemicals -- 5.1%
Borden Chemicals & Plastics, L.P.
9.50% 5/1/05 1,000 1,020
Huntsman Corporation
10.625% 4/15/01 1,500 1,588
Terra Industries, Inc.
10.50% 6/15/05 1,000 1,024(D,E)
3,632
Consumer Products -- 3.5%
Revlon Worldwide Corporation
0%(A) 3/15/98 750 520
Roadmaster Industries, Inc.
11.75% 7/15/02 2,000 1,953
2,473
Containers -- 1.6%
Owens Illinois, Inc.
11.00% 12/1/03 1,000 1,104
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C>
Food Services -- 1.4%
Di Giorgio Corporation
12.00% 2/15/03 $ 750 $ 583
White Rose Foods Incorporated
0%(A) 11/1/98 1,250 448
1,031
Forest Products -- 2.9%
Domtar, Inc.
11.25% 9/15/17 1,000 1,071
Repap New Brunswick Incorporated
9.875% 7/15/00 1,000 1,006
2,077
Gaming -- 5.5%
Casino Magic Corporation
11.50% 10/15/01 1,000 771
Trump Castle Funding, Inc.
11.75% 11/15/03 750 556
Trump Hotels & Casino Resorts, Inc.
15.50% 6/15/05 1,000 984
Trump Plaza Funding, Inc.
10.875% 6/15/01 1,750 1,623
3,934
Gas and Pipeline Utilities -- 0.7%
Transtexas Gas Corporation
11.50% 6/15/02 500 512
Industrials -- 9.4%
Acme Holdings, Inc.
11.75% 6/1/00 1,000 480(B)
Calmar Spraying Systems, Inc.
14.00% 2/15/99 2,750 2,829
Haynes International, Inc.
13.50% 8/15/99 500 389
Inter-City Products Corporation
9.75% 3/1/00 500 453
Jordan Industries, Inc.
10.375% 8/1/03 500 474
Sea Containers Ltd., Sr. Nt.
9.50% 7/1/03 1,000 976
Sea Containers Ltd., Sr. Sub. Deb.
12.50% 12/1/04 1,000 1,101
6,702
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C>
Leisure and Entertainment -- 6.1%
Kloster Cruise Ltd
13.00% 5/1/03 $ 1,750 $ 1,372
Selmer Company Inc.
11.00% 5/15/15 3,000 2,955(D,E)
4,327
Metals and Mining -- 2.1%
Gulf States Steel Acquisition
Corporation Units
13.50% 4/15/03 1,500 1,461(D,E)
Publishing -- 5.2%
Affiliated Newspapers Investments,
Inc.(F)
13.25% 7/1/06 2,000 1,153
Garden State Newspapers, Inc.
12.00% 7/1/04 1,500 1,498
Marvel Parent Holdings, Inc.
0%(A) 4/15/98 1,450 1,024
3,675
Retail Sales -- 5.1%
Cort Furniture Rental Corporation
12.00% 9/1/00 2,000 1,978
County Seat Stores, Inc.
12.00% 10/1/01 500 499
General Host Company
11.50% 2/15/02 1,000 988
Wherehouse Entertainment, Inc.
13.00% 8/1/02 500 163
3,628
Services -- 1.0%
La Petite Holdings Corporation
9.625% 8/1/01 750 683
Software/Technology -- 3.3%
Computervision Corporation
11.375% 8/15/99 2,500 2,341
Supermarkets -- 4.6%
Farm Fresh Holdings Corporation(G)
14.25% 10/1/02 2,000 1,245(D)
Ralphs Grocery Company
10.45% 6/15/04 1,250 1,254
Southland Corporation
5.00% 12/15/03 1,000 769
3,268
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C> <C>
Telecommunications -- 2.3%
Mobile Telecommunication
Technologies Corporation
13.50% 12/15/02 $ 1,500 $ 1,614
Textiles and Apparel -- 11.8%
Apparel Ventures, Inc.
12.25% 12/31/00 2,500 2,291
Casablanca Incorporated
14.00% 9/1/01 2,000 2,170(D)
Pour le bebe, Inc.
13.00% 8/15/01 2,750 2,956(D)
Westpoint Stevens, Inc.
9.375% 12/15/05 1,000 969
8,386
Transportation -- 2.4%
United Air Lines Incorporated
10.67% 5/1/04 1,500 1,704
Total Corporate Bonds, Notes and
Equity Interests
(Identified Cost -- $63,544) 63,260
<CAPTION>
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
COMMON STOCK -- 3.5%
America West Airlines, Inc.
Series B
(Identified Cost -- $2,461) 192 2,518(C)
PREFERRED EQUITY REDEMPTION CUMULATIVE STOCK -- 1.5%
Algoma Finance Corporation
Series A 5.5%
(Identified Cost -- $1,035) 64 1,084
PREFERRED STOCKS -- 2.0%
La Petite Holdings Corporation 18 475(C)
Prime Retail, Inc.
Series A 10.5% Sr. 20 460
Series B 8.5% Cv. 20 460
Total Preferred Stocks
(Identified Cost -- $1,490) 1,395
WARRANTS -- 0.3%
Affiliated Newspapers Investments, Inc.
Class B 2 50(C)
Apparel Ventures, Inc. 3 113(C)
Cort Furniture Rental Corporation 25 30(C)
Total Warrants
(Identified Cost -- $74) 193
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS -- CONTINUED
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C>
REPURCHASE AGREEMENT -- 2.8%
Salomon Brothers, Inc.
6.05% dated 6/30/95, to be
repurchased at $2,018 on 7/3/95
(Collateral: $2,010 U.S.
Treasury Note, 6.625% due
3/31/97, value $2,060)
(Identified Cost - $2,017) $ 2,017 $ 2,017
Total Investments -- 99.2%
(Identified Cost -- $70,621) 70,467
Other Assets Less
Liabilities -- 0.8% 571
NET ASSETS -- 100% $71,038
</TABLE>
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
Net assets consisting of:
Accumulated paid-in capital
applicable to 4,996 shares
outstanding $72,510
Undistributed net investment
income 287
Accumulated net realized loss on
investments (1,604)
Unrealized depreciation of
investments (155)
NET ASSETS -- 100.0% $71,038
NET ASSET VALUE PER SHARE $14.22
</TABLE>
(A) ZERO COUPON BOND -- A BOND WITH NO PERIODIC INTEREST PAYMENTS WHICH IS
SOLD AT SUCH A DISCOUNT AS TO PRODUCE A CURRENT YIELD TO MATURITY.
(B) SECURITIES IN ARREARS -- ISSUER FILED FOR PROTECTION UNDER THE FEDERAL
BANKRUPTCY CODE OR IS IN DEFAULT OF INTEREST PAYMENT.
(C) NON-INCOME PRODUCING.
(D) PRIVATE PLACEMENT.
(E) 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 INSTITUTIONAL BUYERS.
(F) STEPPED COUPON BOND -- A BOND WHICH AMORTIZES TO PAR BY A SPECIFIED DATE
AT WHICH TIME IT BEGINS TO ACCRUE INTEREST.
(G) PAYMENT-IN-KIND BOND ("PIK") -- A BOND IN WHICH INTEREST DURING THE
INITIAL FEW YEARS IS PAID IN ADDITIONAL PIK BONDS RATHER THAN IN CASH.
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
FOR THE SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $3,119
Dividends (net of foreign taxes withheld of $3) 63
$3,182
EXPENSES:
Management fee 192
Distribution and service fees 148
Custodian fee 26
Transfer agent and shareholder servicing expense 24
Legal and audit fees 17
Registration fees 13
Reports to shareholders 6
Directors' fees 4
Other expenses 8
Total expenses 438
NET INVESTMENT INCOME 2,744
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss on investments (441)
Change in unrealized depreciation of investment 2,949
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 2,508
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,252
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
For the Six February 1,
Months Ended 1994(|)
June 30, to
(Amounts in Thousands) 1995 December 31, 1994
(Unaudited)
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 2,744 $ 3,275
Net realized loss on investments (441) (1,164)
Change in unrealized depreciation of investments 2,949 (3,103)
Change in net assets resulting from operations 5,252 (992)
Distributions to shareholders from net investment income (2,471) (3,261)
Increase in net assets from Fund share transactions 14,833 57,675
Increase in net assets 17,614 53,422
NET ASSETS:
Beginning of period 53,424 2
End of period (including undistributed net investment income of $287 and $11,
respectively) $ 71,038 $53,424
</TABLE>
(|) COMMENCEMENT OF OPERATIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD 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 February 1,
Months Ended 1994(|)
June 30, to
1995 December 31, 1994
(Unaudited)
<S> <C> <C>
PER SHARE OPERATING PEFORMANCE:
Net asset value, beginning of period $13.57 $15.00
Net investment income .63 1.02
Net realized and unrealized gain (loss) on investments .59 (1.44)
Total from investment operations 1.22 (.42)
Distributions to shareholders from net investment income (.57) (1.01)
Net asset value, end of period $14.22 $13.57
Total return(A) 9.28% (2.90)%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 1.5%(B) 1.6%(B)
Net investment income 9.3%(B) 8.4%(B)
Portfolio turnover rate 29.9%(B) 67.4%(B)
Net assets, end of period (in thousands) $ 71,038 $53,424
</TABLE>
(|) COMMENCEMENT OF OPERATIONS.
(A) NOT ANNUALIZED.
(B) ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
(Amounts in Thousands) (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Income Trust, Inc. ("Trust"), consisting of the High
Yield Portfolio ("Fund"), Investment Grade Income Portfolio, the U.S.
Government Intermediate-Term Portfolio and the U.S. Government Money
Market 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 based on prices received from
recognized broker-dealers in the same or similar securities. The amortized
cost method of valuation is used for debt obligations with 60 days or less
remaining to maturity.
6
<PAGE>
Investment Income and Dividends to Shareholders
Income and expenses are recorded on the accrual basis. Dividends are
declared and paid monthly. Dividends payable are recorded on the dividend
record date. Bond premiums are amortized for financial reporting and tax
purposes. Bond discounts, other than original issue and zero-coupon bonds,
are not amortized.
Security Transactions
Security transactions are recorded on the trade date. Realized gains
and losses from security transactions are reported on an identified cost
basis.
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 of 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.
2. INVESTMENT TRANSACTIONS:
Investment transactions for the six months ended June 30, 1995
(excluding short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $ 26,894
Proceeds from sales 8,348
</TABLE>
At June 30, 1995, the cost of securities for federal income tax
purposes was $70,621. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $2,852
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $3,006. The Fund has unused
capital loss carryforwards for federal income tax purposes of $1,120 which
expire in 2002.
3. 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). Transactions
in Fund shares were as follows:
<TABLE>
<CAPTION>
February 1,
For the 1994(|)
Six Months Ended to
June 30, 1995 December 31, 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 1,579 $ 22,060 4,615 $ 67,186
Reinvestment of
distributions 152 2,103 203 2,850
Repurchased (673) (9,330) (880) (12,361)
Net increase 1,058 $ 14,833 3,938 $ 57,675
<CAPTION>
</TABLE>
(|)Commencement of operations.
4. 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 0.65% of average daily net assets of the Fund.
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. The
Manager pays the Adviser a fee for its services at an annual rate equal to
77% of the fee received by the Manager.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.25% and an annual service fee of 0.25% of the Fund's
average daily net assets, calculated daily and payable monthly. At June
30, 1995, $66 was due to the Advisor and distributor.
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 $7 by the transfer agent for the six months ended June 30, 1995.
7
