Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Western Asset Management Company Report to Shareholders
Pasadena, CA For the Six Months Ended
June 30, 1996
Board of Directors
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr., Vice Chairman
Edward A. Taber, III, President
Richard G. Gilmore THE
Charles F. Haugh LEGG MASON
Arnold L. Lehman U.S.
Dr. Jill E. McGovern GOVERNMENT
T. A. Rodgers MONEY
MARKET
Transfer and Shareholder Servicing Agent PORTFOLIO
Boston Financial Data Services
Boston, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Putting Your Future First
Counsel
Kirkpatrick & Lockhart LLP
Washington, DC
Independent Accountants
Coopers & Lybrand L.L.P. [Legg Mason Logo]
Baltimore, MD FUNDS
The 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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111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (bullet) 539 (bullet) 0000
LMF-020
<PAGE>
To Our Shareholders,
On June 30, 1996, the Legg Mason U.S. Government Money Market Portfolio had
$338 million invested in a diversified portfolio of high quality government
securities with an average weighted maturity of 51 days. Since the fund was
formed in January of 1989, 14,700 investors have become shareholders. The fund's
7-day yield as this letter is written is 4.75%. A 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,
/s/ John F. Curley, Jr.
John F. Curley, Jr.
Chairman
August 8, 1996
<PAGE>
Statement of Net Assets
Legg Mason Income Trust, Inc.
U.S. Government Money Market Portfolio
June 30, 1996 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Par Rate Value Par Rate Value
- ----------------------------------------------------------- -----------------------------------------------------------
<S> <C> Repurchase Agreement -- 11.0%
U.S. Government and Agency Obligations -- 92.4% J.P. Morgan Securities, Inc.
Federal Farm Credit dated 6/28/96, to be
Bank repurchased at $36,141
$75,000 7/1/96 to 1/2/97 5.26 to 5.56% $ 75,000 on 7/1/96
Federal Home Loan (Collateral: $30,000
Bank Federal Home Loan Bank,
90,000 7/1/96 to 6/10/97 5.21 to 5.87 89,830 0% due 9/25/96,
Federal Home Loan value $29,588; $7,290
Mortgage Federal National
Corporation Mortgage Association,
39,415 7/24/96 to 9/16/96 5.28 to 5.34 39,201 6.59% due 5/24/01
Federal National $36,125 value $7,308) 5.47% $ 36,125
Mortgage -----------------------------------------------------------
Association Total Investments, at
46,665 7/24/96 to 9/16/96 5.28 to 5.30 46,466 amortized cost and
Tennesee Valley value -- 103.4% 338,187(A)
Authority Other Assets Less
30,000 8/19/96 5.29 29,784 Liabilities-- (3.4)% (11,176)
United States Treasury Net assets applicable to
Bills 327,026 shares
7,000 4/3/97 5.17 6,723 outstanding-- 100.0% $327,011
United States Treasury Net asset value per
Notes share $1.00
15,000 9/30/96 6.50 15,058
Total U.S. Government
and Agency
Obligations 302,062
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</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, 1996 (Unaudited)
<TABLE>
<CAPTION>
(Amounts in Thousands)
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<S> <C>
Investment Income:
Interest $8,925
Expenses:
Management fee $833
Transfer agent and shareholder servicing expense 139
Custodian fees 43
Registration fees 25
Audit and legal fees 22
Reports to shareholders 22
Directors' fees 4
Other expenses 7
Total expenses 1,095
Net Investment Income 7,830
Net Realized Gain on Investments 46
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Increase in Net Assets Resulting from Operations $7,876
</TABLE>
Statement of Changes in Net Assets
Legg Mason Income Trust, Inc.
U.S. Government Money Market Portfolio
<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
(Amounts in Thousands) June 30, 1996 December 31, 1995
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(Unaudited)
<S> <C>
Change in Net Assets:
Net investment income $ 7,830 $ 14,029
Net realized gain on investments 46 65
Increase in net assets resulting from operations 7,876 14,094
Distributions to shareholders from net investment income (7,830) (14,029)
Contributions from Manager -- 170
Increase in net assets from Fund share transactions 10,319 101,835
Increase in net assets 10,365 102,070
Net Assets:
Beginning of period 316,646 214,576
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End of period $327,011 $316,646
</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, 1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
(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 .04 .03 .03 .05
Net realized gain (loss) on
investments Nil Nil (Nil) -- -- Nil
Total from investment operations .02 .05 .04 .03 .03 .05
- ---------------------------------------------------------------------------------------------------------------------------
Dividends paid from net investment
income (.02) (.05) (.04) (.03) (.03) (.05)
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------
Total return 4.75%(A) 5.31% 3.66% 2.80% 3.49% 5.87%
Ratio/Supplemental Data:
Ratios to average net assets:
Expenses .66%(A) .67% .69% .71% .73% .73%
Net investment income 4.70%(A) 5.17% 3.66% 2.76% 3.45% 5.36%
Net assets, end of period
(in thousands) $327,011 $316,646 $214,576 $172,533 $170,910 $180,733
</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)
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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, 1996, dividends payable of $546 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 June 30, 1996, $10,000 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 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 $15
which expire in 2002.
2. Fund Share Transactions:
At June 30, 1996, there were 1,000,000 shares authorized at $.001 par
value for all portfolios of the Trust (including the Fund). At June 30,
1996 paid-in capital aggregated $327,026 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:
For the Six For the
Months Ended Year Ended
June 30, 1996 December 31, 1995
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Shares sold $ 639,525 $ 1,165,303
Shares reinvested 6,992 13,455
Shares repurchased (636,198) (1,076,923)
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Net increase $ 10,319 $ 101,835
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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 $136 were payable at June 30, 1996.
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 $270 to offset a portion of the Fund's net
realized losses.
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 $43 by the transfer agent for the six months ended June 30, 1996.
