INVESTMENT MANAGER
REPORT TO SHAREHOLDERS
Legg Mason Fund Adviser, Inc. FOR THE YEAR ENDED
Baltimore, MD DECEMBER 31, 1995
INVESTMENT ADVISER
Western Asset Management Company
Pasadena, CA
THE
BOARD OF DIRECTORS
John F. Curley, Jr., Chairman LEGG MASON
Edmund J. Cashman, Jr., Vice Chairman HIGH
YIELD
Edward A. Taber, III, President PORTFOLIO
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 LLP
Washington, D.C.
INDEPENDENT ACCOUNTANTS PUTTING YOUR FUTURE FIRST
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
[RECYCLED LOGO] PRINTED ON RECYCLED PAPER
LMF-056 [LEGG MASON FUNDS LOGO]
<PAGE>
TO OUR SHAREHOLDERS,
The Legg Mason High Yield Portfolio's net assets have grown to
over $108 million as of December 31, 1995. Also as of December 31,
1995, the Portfolio's net asset value was $14.62 per share, the
weighted average maturity of portfolio holdings was 7.35 years and the
Fund's 30-day SEC yield was 10.02%. During the twelve months ended
December 31, 1995, the Portfolio's total return* was 18.01%,
reflecting the rally in the fixed income market during 1995.
The Portfolio 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.
Beginning on page 2, Trudie D. Whitehead, Senior High Yield
Research Analyst and Portfolio Manager, reviews the portfolio's
structure and comments on the investment outlook.
Coopers & Lybrand L.L.P., the High Yield Portfolio's independent
accountants, have completed their annual examination, and audited
financial statements for the fiscal year ended December 31, 1995 are
included in this report.
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 higher current yields and
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 Portfolio 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,
(Edward A. Taber, III Signature)
Edward A. Taber, III
President
February 9, 1996
*Total return measures investment performance in terms of appreciation
or depreciation in the fund's net asset value per share, plus
dividends. It assumes that dividends were reinvested in the fund at
the times they were paid.
<PAGE>
PORTFOLIO MANAGER'S COMMENTS
Due to the significant decline in interest rates in 1995, and the positive
impact this had on the prices of virtually all fixed income securities, the
results of the Legg Mason High Yield Portfolio were excellent in both nominal
and relative terms last year.
In response to declining interest rates early in the year, we undertook
tactical moves to capture more of the benefits of the rate decline by increasing
the fund's exposure to the higher-quality tier of the high-yield universe.
Securities with higher credit ratings tend to have a higher correlation of
returns with the Treasury market. The result was positive for the fund, as this
quality sector outperformed the rest of the high-yield market.
Relative returns were also enhanced by positioning a portion of the fund in
high-coupon, short maturity and improving credit quality securities, as issues
with these characteristics tended to outperform others.
The fund also benefited from an emphasis on "story" bonds -- securities that
trade independently of the market in general since improving operating
fundamentals tend to overwhelm the impact of changes in the level of market
interest rates. These securities enjoyed capital gains in addition to generating
a high level of income, thus enhancing overall performance.
Because we believe that interest rates are likely to decline somewhat, but
not as dramatically as they did last year, we continue to emphasize the
higher-quality sector of the market. In addition, the fund will continue to have
some exposure to high-coupon and undervalued "story" bonds.
Trudie D. Whitehead
Senior High Yield Research
Analyst and Portfolio Manager
February 9, 1996
2
<PAGE>
PERFORMANCE INFORMATION
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
Performance Comparison of a $10,000 Investment as of December 31, 1995
Average Annual Return
1 year Life of Fund*
18.01 +7.39%
(Graph here)
High Yield Portfolio Lehman High Yield Index
02/01/94 10,000 10,000
03/31/94 9,936 9,597
06/30/94 9,812 9,565
09/30/94 9,850 9,716
12/31/94 9,796 9,686
03/31/95 10,149 10,264
06/30/95 10,705 10,892
09/30/95 11,199 11,200
12/31/95 11,561 11,545
* February 1 - December 31, 1995
(1) The Lehman Brothers High Yield Index is comprised of approximately 760
publicly traded below-investment grade U.S. corporate bonds.
The returns shown above are based on historical results and are not
intended to indicate future performance. The investment return and principal
value of an investment in the fund will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
No adjustment has been made for any income taxes payable by shareholders.
3
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C>
CORPORATE BONDS, NOTES AND EQUITY INTERESTS -- 77.4%
Agriculture -- 1.5%
Hines Horticulture, Inc.
11.75% 10/15/05 $ 500 $ 522C,D
Terra Industries, Inc.
10.50% 6/15/05 1,000 1,102
1,624
Automotive/Trucking -- 0.9%
Fruehauf Trailer Corporation
14.75% 4/30/02 1,000 994
Builders/Building Materials -- 1.6%
Miles Homes Services, Inc.
12.00% 4/1/01 1,000 871
Wickes Lumber Company
11.625% 12/15/03 1,250 925
1,796
Cable and Media -- 9.5%
Busse Broadcasting Corporation
11.625% 10/15/00 2,000 1,992C,D
Chancellor Broadcasting Company
12.50% 10/1/04 1,000 1,068
Comcast Corporation
9.375% 5/15/05 1,000 1,057
Continental Cablevision, Inc.
8.30% 5/15/06 1,000 1,004C,D
EZ Communications, Inc.
9.75% 12/1/05 1,000 942
Granite Broadcasting Corporation
10.375% 5/15/05 1,000 1,025
Paxson Communications Corporation
11.625% 10/1/02 1,500 1,523C,D
Turner Broadcasting System, Inc.
7.40% 2/1/04 590 596
Young Broadcasting Corporation
10.125% 2/15/05 1,000 1,055
10,262
Consumer Products -- 1.8%
Revlon Worldwide Corporation
0%E 3/15/98 750 557
Roadmaster Industries, Inc.
11.75% 7/15/02 2,000 1,360
1,917
Containers -- 1.0%
Owens Illinois, Inc.
11.00% 12/1/03 1,000 1,130
Food Services -- 1.4%
Di Giorgio Corporation
12.00% 2/15/03 750 593
Food Services -- Continued
White Rose Foods Incorporated
0%E 11/1/98 $ 1,250 $ 953
1,546
Forest Products -- 2.4%
Buckeye Cellulose Corporation
8.50% 12/15/05 1,000 1,033
Williamhouse-Regency of
Delaware, Inc.
13.00% 11/15/05 1,500 1,556C,D
2,589
Gaming -- 4.2%
Casino Magic Corporation
11.50% 10/15/01 1,000 855
Grand Casinos, Inc.
10.125% 12/1/03 1,500 1,573
Trump Hotels & Casino Resorts, Inc.
15.50% 6/15/05 1,000 1,070
Trump Plaza Funding, Inc.
10.875% 6/15/01 1,000 1,035
4,533
Gas and Pipeline Utilities -- 1.9%
HarCor Energy, Inc.
14.875% 7/15/02 1,500 1,502
TransTexas Gas Corporation
11.50% 6/15/02 500 516
2,018
Hotels and Restaurants -- 1.4%
John Q Hammons Hotels, L.P.
9.75% 10/1/05 1,500 1,545C,D
Industrials -- 6.7%
Haynes International, Inc., Sr. Nt.,
Series B
11.25% 6/15/98 1,000 984
Haynes International, Inc., Sr. Sub.
Deb.
13.50% 8/15/99 500 312
Howmet Corporation
10.00% 12/1/03 1,000 1,046C,D
Inter-City Products Corporation
9.75% 3/1/00 500 350
Norcal Waste Systems, Inc.
12.50%F 11/15/05 1,500 1,515C,D
Sea Containers Ltd., Sr. Nt.
9.50% 7/1/03 1,000 980
Sea Containers Ltd., Sr. Sub. Deb.
12.50% 12/1/04 1,000 1,080
Thermadyne Industries, Inc.
10.75% 11/1/03 1,000 990
7,257
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal
(Amounts in Thousands) Amount Value
<S> <C> <C> <C>
Leisure and Entertainment -- 5.1%
Act III Broadcasting, Inc.
10.25% 12/15/05 $ 1,000 $ 1,026
Bally's Park Place Funding, Inc.
9.25% 3/15/04 1,500 1,526
Selmer Company Inc.
11.00% 5/15/05 3,000 2,955
5,507
Metals and Mining -- 1.2%
Gulf States Steel Acquisition
Corporation
13.50% 4/15/03 1,500 1,350
Medical Products and Supplies -- 0.9%
McGaw Inc.
10.375% 4/1/99 1,000 1,037
Publishing -- 3.5%
Affiliated Newspapers Investments,
Inc.
13.25%G 7/1/06 2,000 1,230
Garden State Newspapers, Inc.
12.00% 7/1/04 1,500 1,508
Marvel Parent Holdings, Inc.
0%E 4/15/98 1,450 1,033
3,771
Retail Sales -- 2.4%
Cort Furniture Rental Corporation
12.00% 9/1/00 1,400 1,463
County Seat Stores, Inc.
12.00% 10/1/02 500 375
General Host Corporation
11.50% 2/15/02 750 750
2,588
Services -- 4.5%
La Petite Holdings Corporation
9.625% 8/1/01 750 683
SC International Services, Inc.
13.00% 10/1/05 2,000 2,070
Tenet Healthcare Corporation
8.625% 12/1/03 2,000 2,100
4,853
Software/Technology -- 2.4%
Computervision Corporation
11.375% 8/15/99 2,500 2,600
Supermarkets -- 4.2%
Bruno's, Inc.
10.50% 8/1/05 1,000 990
Farm Fresh Holdings CorporationH
14.25% 10/1/02 2,143 985C
Farm Fresh, Inc.
12.25% 10/1/00 1,500 1,268
Supermarkets -- Continued
Ralphs Grocery Company
10.45% 6/15/04 $ 1,250 $ 1,269
4,512
Telecommunications -- 11.0%
A+ Network, Inc.
11.875% 11/1/05 2,000 2,020
Communications & Power Industries,
Inc.
12.00% 8/1/05 500 517C,D
Galaxy Telecom L.P.
12.375% 10/1/05 1,250 1,247
Lenfest Communications, Inc.
8.375% 11/1/05 2,000 2,008
Metrocall, Inc.
10.375% 10/1/07 1,000 1,060
Mobile Telecommunication
Technologies Corporation
13.50% 12/15/02 1,500 1,672
MobileMedia Corporation
9.375% 11/1/07 1,250 1,288
Peoples Telephone Company, Inc.
12.25% 7/15/02 1,000 800
Wireless One, Inc. -- Units
13.00% 10/15/03 1,250 1,330
11,942
Textiles and Apparel -- 7.9%
Apparel Ventures, Inc.
12.25% 12/31/00 2,250 2,407
Casablanca Incorporated
14.00% 9/1/01 2,000 2,170C
Pour le bebe, Inc.
13.00% 8/9/01 2,750 3,011C
Westpoint Stevens, Inc.
9.375% 12/15/05 1,000 988
8,576
Total Corporate Bonds, Notes and
Equity Interests
(Identified Cost -- $82,094) 83,947
YANKEE BONDS/A -- 12.4%
Cable and Media -- 6.3%
CF Cable TV, Inc.
9.125% 7/15/07 2,500 2,566
Fundy Cable Ltd.
11.00% 11/15/05 500 527
Le Groupe Videotron Ltee
10.625% 2/15/05 1,500 1,609
Rogers Cablesystems Limited
10.00% 3/15/05 2,000 2,150
6,852
</TABLE>
5
<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> <C>
YANKEE BONDS--Continued
Chemicals--0.5%
Acetex Corporation
9.75% 10/1/03 $ 500 $ 518C,D
Forest Products--2.9%
Domtar, Inc.
11.25% 9/15/17 2,000 2,127
Repap New Brunswick, Inc.
9.875% 7/15/00 1,000 990
3,117
Metals and Mining--0.8%
Algoma Steel, Inc.
12.375% 7/15/05 1,000 900
Real Estate--1.9%
Trizec Finance Ltd.
10.875% 10/15/05 2,000 2,050
Total Yankee Bonds
(Identified Cost--$13,153) 13,437
Shares
COMMON STOCKS--1.9%
Algoma Steel, Inc. 43 168B
America West Airlines, Inc.
Class B 109 1,851B
Total Common Stocks
(Identified Cost--$1,500) 2,019
PREFERRED STOCK--1.1%
La Petite Holdings Corporation 18 475B
Prime Retail, Inc.
Series A 10.5% Sr. Pfd. 20 387
Series B 8.5% Cv. 20 355
Total Preferred Stocks
(Identified Cost--$1,490) 1,217
WARRANTS/B--0.3%
Affiliated Newspapers Investments, Inc.
Class B 2 $ 50
Apparel Ventures, Inc. 2 112
Cort Furniture Rental Corporation 25 30
County Seat Stores, Inc. 1 12
HarCor Energy, Inc. 33 66
Total Warrants
(Identified Cost--$74) 270
Principal
Amount
REPURCHASE AGREEMENT--4.0%
Merrill Lynch Government
Securities, Inc.
5.75% dated 12/29/95, to be
repurchased at $4,379 on 1-2-96
(Collateral: $4,110 Federal
National Mortgage Association
Mortgaged-backed securities,
7.7% due 8-10-04, value $4,586)
(Identified Cost--$4,376) $ 4,376 4,376
Total Investments--97.1%
(Identified Cost--$102,687) 105,266
Other Assets Less Liabilities--2.9% 3,151
Net assets consisting of:
Accumulated paid-in capital
applicable to 7,417 shares
outstanding 107,628
Undistributed net investment
income 9
Accumulated net realized loss on
investments (1,799)
Unrealized appreciation of
investments 2,579
NET ASSETS--100.0% $108,417
NET ASSET VALUE PER SHARE $14.62
</TABLE>
A Yankee Bond--dollar-denominated bond issued in the U.S. by foreign
entities.
B Non-income producing
C Private Placement
D 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.
E 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.
F Coupon increases 0.25% each coupon date (semiannually) until May 15,
1998, thereafter remains fixed at 13.5% until maturity.
G Stepped coupon bond--a bond which amortizes to par by a specified
date at which time it begins to accrue interest.
H 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.
6
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $7,959
Dividends (net of foreign taxes withheld of $6) 125 $ 8,084
EXPENSES:
Management fee 489
Distribution and service fees 376
Custodian fee 67
Transfer agent and shareholder servicing expense 52
Registration fees 43
Legal and audit fees 35
Reports to shareholders 17
Directors' fees 8
Other expenses 17
Total expenses 1,104
NET INVESTMENT INCOME 6,980
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized loss on investments (628)
Change in unrealized appreciation of investments 5,683
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 5,055
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,035
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
<TABLE>
<CAPTION>
For the February 1, 1994+
Year Ended to
(Amounts in Thousands) December 31, 1995 December 31, 1994
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 6,980 $ 3,275
Net realized loss on investments (628) (1,164)
Change in unrealized appreciation of investments 5,683 (3,103)
Change in net assets resulting from operations 12,035 (992)
Distributions to shareholders from net investment income (6,993) (3,261)
Increase in net assets from Fund share transactions 49,951 57,675
Increase in net assets 54,993 53,422
NET ASSETS:
Beginning of period 53,424 2
End of period (including undistributed net investment income of
$9 and $11, respectively) $ 108,417 $53,424
</TABLE>
(dagger) COMMENCEMENT OF OPERATIONS.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<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 February 1, 1994(dagger)
Year Ended to
December 31, 1995 December 31, 1994
<S> <C> <C>
PER SHARE OPERATING PEFORMANCE:
Net asset value, beginning of period $13.57 $15.00
Net investment income 1.29 1.02
Net realized and unrealized gain (loss) on investments 1.05 (1.44)
Total from investment operations 2.34 (0.42)
Distributions to shareholders from net investment income (1.29) (1.01)
Net asset value, end of period $14.62 $13.57
Total return 18.01% (2.90)%A
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 1.5% 1.6%B
Net investment income 9.3% 8.4%B
Portfolio turnover rate 47.4% 67.4%B
Net assets, end of period (in thousands) $108,417 $53,424
</TABLE>
(dagger) 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)
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 upon market quotations. When
market quotations are not readily available, 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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
LEGG MASON INCOME TRUST, INC.
HIGH YIELD PORTFOLIO
(Amounts in Thousands)
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 year ended December 31, 1995
(excluding short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $ 84,145
Proceeds from sales 33,768
</TABLE>
At December 31, 1995, the cost of securities for federal income tax
purposes was $102,718. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $5,429
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $2,881. The Fund has unused
capital loss carryforwards for federal income tax purposes of $1,768 which
expire in 2002.
3. FUND SHARE TRANSACTIONS:
At December 31, 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>
For the February 1, 1994(dagger)
Year Ended to
December 31, 1995 December 31, 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 4,821 $ 69,103 4,615 $ 67,186
Reinvestment of
distributions 413 5,894 203 2,850
Repurchased (1,755) (25,046) (880) (12,361)
Net increase 3,479 $ 49,951 3,938 $ 57,675
</TABLE>
(dagger) 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
December 31, 1995, $106 was due to the Manager 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 $17 by the transfer agent for the year ended December 31, 1995.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF
LEGG MASON INCOME TRUST , INC.:
We have audited the accompanying statement of net assets of the Legg
Mason High Yield Portfolio (one of the portfolios comprising the Legg
Mason Income Trust, Inc.) as of December 31, 1995, and the related
statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for the year then ended
and for the period from February 1, 1994 (commencement of operations) to
December 31, 1994. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence
with the custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Legg Mason High Yield Portfolio of Legg Mason Income Trust,
Inc. as of December 31, 1995, the results of its operations for the year
then ended, and the changes in its net assets and financial highlights for
each of the respective periods stated in the first paragraph, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
February 1, 1996
11
