<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
FINANCIAL REPORT
REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED
JUNE 30, 1995
<PAGE>
(Western Asset Management Company logo)
Dear Shareholder:
Enclosed are the fiscal year end financial statements for the Western Asset
Trust International Securities Portfolio.
As the performance summary details, the volatility experienced in the domestic
fixed-income market was magnified for international investors during the past
year, leaving the portfolio with negative results. The portfolio lagged its
non-dollar hedged benchmark, returning 6.04% vs 11.39% for the period, and
also lagged the broad domestic market, which returned 12.5% for the 12 months
ending June 30, 1995.
Please give us a call if you have any questions on the enclosed.
Sincerely,
W. Curtis Livingston
President
<PAGE>
WESTERN ASSET TRUST
INTERNATIONAL PORTFOLIO
Portfolio Manager:
Paul Abberley, Director and Senior Fixed-Income Manager, Lombard
Odier International Portfolio Management (1994)
Keith Gardner, Senior Portfolio Manager, Western Asset Management (1995)
The Fund's performance was adversely impacted by market conditions in the 12
months ending June 30, 1995. Non-dollar bond markets generally underperformed
the U.S. market as interest rates rose globally in the second half of 1994,
and underperformed as they lagged the rally in the U.S. market in the first
half of 1995. In the belief that interest rates were generally attractive
relative to prospective inflation, the Fund's duration was generally longer
than its benchmark, and this detracted from performance on balance. Country
exposure was generally negative for performance, as the Fund was underweight
the Japanese market, and Japanese bonds turned in a very strong performance.
The Fund was also overweight in the high-yielding European markets, and these
suffered relative to the core markets, particularly in the second half of 1994.
The Fund moved to increase exposure to the core markets of Europe in 1995, and
this subtracted from performance since the high-yielding markets recovered
versus the core markets. Yield curve exposure was generally unfavorable as well,
particularly in the latter half of 1994: the Fund was positioned for a
steepening of yield curves in Europe, while in fact yield curves flattened.
Comparison of $10,000 Investment in WAT International and SB Non-U.S. Gov't.
Index
Plot Points from Graph Listed Below.
Salomon Brothers Western Asset Trust
2/1/93 10000 10000
3/31/93 10154.49 10216
6/30/93 10388.04 10577
9/30/93 10782.79 11171
12/30/93 11222.72 11637
3/31/94 10850.13 10996
6/30/94 10589.73 10457
9/30/94 10592.9 10366
12/31/94 10771.92 10504
3/31/95 11267.43 10862
6/30/95 11795.87 11087
<PAGE>
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
LONG-TERM DEBT SECURITIES(A) - 83.2%
British Pound - 9.3%
U.K. Treasury Stock
7.25% 3/30/98 GBP 2,000 $ 3,130
9.5% 10/25/04 8,000 13,512
16,642
Canadian Dollar - 4.0%
Government of Canada
7.75% 9/1/99 CAD 4,650 3,417
6.5% 6/1/04 5,500 3,638
7,055
Czech Crown - 4.6%
Czech Electric Company
14.375% 1/27/01 CZK 200,000 8,259
Danish Krone - 5.1%
Kingdom of Denmark
9% 11/15/00 DKK 24,500 4,708
8% 3/15/06 24,500 4,314
9,022
French Franc - 5.2%
Government of France (B.T.A.N.)
9% 11/12/95 FRF 45,000 9,337
German Mark - 31.3%
Deutsche Bundesrepublik
8% 7/22/02 DEM 60,000 46,060
6% 6/20/16 16,000 9,716
55,776
Italian Lira - 3.3%
Buoni del Tesoro Poliennali
8.5% 8/1/99 ITL 11,000,000 5,956
Japanese Yen - 20.4%
Credit Foncier de France
4.75% 8/9/02 JPY 650,000 8,590
Government of Japan #145
5.5% 3/20/02 2,000,000 27,758
36,348
Total Long-term Debt Securities
(Identified Cost - $142,644,791) 148,395
</TABLE>
1
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WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
SHORT-TERM INVESTMENTS - 13.7%
Currency Exchange-Linked Securities(s) - 2.2%
Indonesian Rupiah-Linked Note
13.35%(C) 8/10/95 USD 2,000 $ 1,963
Thai Baht-Linked Note
10.3%(C) 8/10/95 2,000 2,012
3,975
U. S. Government Agency Obligation - 8.4%
Federal National Mortgage Association
5.91% 7/5/95 15,000 14,990
Repurchase Agreement - 3.1%
Goldman, Sachs & Company, Inc.
6% dated 6/30/95, to be repurchased
at $5,552,775 on 7/3/95 (Collateral:
$5,634,270 U.S. Treasury Notes,
9.125%, due 5/15/18, value $5,684,742) 5,550 5,550
Total Short-term Investments
(Identified Cost - $24,490,587) 24,515
Total Investments - 96.9%
(Identified Cost - $167,135,378) $172,910
</TABLE>
(A) Listed by currency denomination.
(B) Total maturity value is linked to the indicated exchange rate.
(C) Yield-to-maturity.
See notes to financial statements.<PAGE>
2
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<TABLE>
<S> <S>
Assets
Investments at value (Identified Cost - $167,135,378) $172,910,340
Interest receivable 5,780,268
Tax reclaims receivable 132,523
Unrealized appreciation of forward currency contracts 103,764
Other assets 13,285
Total assets 178,940,180
Liabilities
Accrued expenses 78,236
Due to adviser and administrator 11,032
Unrealized depreciation of forward currency contracts 516,890
Total liabilities 606,158
Net assets $178,334,022
Analysis of Net Assets
Common stock at par value $.001 per share, authorized
100,000,000 shares; issued and outstanding 1,936,395
shares $ 1,936
Accumulated paid-in capital 184,303,812
Accumulated net realized loss on investments, forward
currency contracts and currency transactions (11,494,734)
Unrealized appreciation of investments, forward currency
contracts and currency transactions 5,523,008
Net assets $178,334,022
Net asset value, offering price, and redemption price per share $92.10
</TABLE>
See notes to financial statements.<PAGE>
3
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 7,152,492
Expenses:
Advisory fee $ 480,824
Administrative fee 90,158
Custodian fee 192,200
Audit fees 23,600
Directors' fees 14,855
Organization expense 3,622
Transfer agent and shareholder servicing expense 1,623
Other expenses 13,838
820,720
Less fees waived (480,824)
Total expenses, net of waivers 339,896
Net Investment Income 6,812,596
Realized and Unrealized Gain (Loss) on Investments, Forward
Currency Contracts and Currency Transactions:
Realized loss (8,516,464)
Unrealized appreciation 9,080,419
Net Realized and Unrealized Gain 563,955
Increase in Net Assets Resulting from Operations $7,376,551
</TABLE>
See notes to financial statements.
4
<PAGE>
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Years Ended June 30,
1995 1994
<S> <C> <C>
Change in Net Assets:
Net investment income $ 6,812,596 $ 7,906,495
Net realized loss on investments, forward
currency contracts and currency
transactions (8,516,464) (14,297,874)
Unrealized appreciation (depreciation) of
investments, forward currency contracts
and currency transactions 9,080,419 (4,403,154)
Change in net assets resulting
from operations 7,376,551 (10,794,533)
Distributions to shareholders from:
Net investment income (1,207,417) (9,752,899)
Net realized gain - (2,636,477)
Tax return of capital (6,818,395) -
Increase in net assets from Fund
share transactions 72,176,929 36,702,376
Increase in net assets 71,527,668 13,518,467
Net Assets:
Beginning of year 106,806,354 93,287,887
End of year (including undistributed net
investment income of $0 and $1,207,417,
respectively) $178,334,022 $106,806,354
</TABLE>
See notes to financial statements.<PAGE>
5
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of common
stock outstanding throughout each period shown, total investment return,
ratios to average net assets and other supplemental data. This information has
been derived from information in the financial statements.
<TABLE>
<CAPTION>
For the Years Ended June 30,
1995 1994 1993(A)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 93.76 $105.53 $100.00
Net investment income 6.29(B) 6.94(B) 3.21(B)
Net realized and unrealized gain (loss) on
investments, forward currency contracts
and currency transactions (1.04)(E) (7.36)(E) 2.59(E)
Total from investment operations 5.25 (.42) 5.80
Distributions paid from:
Net investment income (.63) (8.64) (.27)
Net realized capital gain - (2.71) -
Tax return of capital (6.28) - -
Total distributions (6.91) (11.35) (.27)
Net asset value, end of period $ 92.10 $ 93.76 $105.53
Total return 6.03% (1.14)% 5.81%(D)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 0.28%(B) 0.30%(B) 0.45%(B,C)
Net investment income 5.67%(B) 5.53%(B) 6.08%(B,C)
Portfolio turnover rate 355.03% 571.18% 249.94%(C)
Net assets, end of period (in thousands) $178,334 $106,806 $93,288
</TABLE>
(A) For the period January 7, 1993 (commencement of operations) to June 30,
1993.
(B) Net of voluntary waiver of investment advisory fees.
(C) Annualized.
(D) Not annualized.
(E) The amount presented is calculated pursuant to a methodology prescribed by
the Securities and Exchange Commission for a share outstanding throughout
the year. This amount is inconsistent with the Fund's aggregate gains and
losses because of the timing of sales and redemptions of Fund shares in
relation to fluctuating market values for the investment portfolio.
See notes to financial statements.<PAGE>
6
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Western Asset Trust, Inc. ("Corporation") is registered under the Investment
Company Act of 1940, as amended. Western Asset Trust International Securities
Portfolio ("Fund"), a non-diversified, open-end management investment company,
is one of the portfolios established by the Corporation. The Fund was
organized on May 16, 1990 and had no operations prior to January 7, 1993,
other than those related to organizational matters.
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. The difference between cost and market
value is reflected separately as unrealized appreciation or depreciation
on investments.
Currency Transactions
The books and records of the Fund are maintained in U.S. dollars. Foreign
currency transactions are translated into U.S. dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
closing daily rate of exchange, and
(ii) purchases and sales of investment securities, interest income and
expenses at the rate of exchange prevailing on the respective date of
such transactions.
Dividends to Shareholders
Net investment income for dividend purposes is recorded on the accrual basis
and consists of interest income less expenses. Bond premium and original
issue discount are amortized for financial reporting and tax purposes using
the effective interest method over the period to maturity of the security and
serve to increase or reduce interest income.
Security Transactions
Security transactions are recorded on the trade date. Realized gains and
losses from security transactions are reported on an identified cost basis.
Deferred Organizational Expense
Deferred organizational expenses of $18,111 are being amortized on a
straight-line basis over 5 years beginning on the date operations began.<PAGE>
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
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. Financial Instruments:
As part of its investment program, the Fund utilizes forward currency
exchange contracts and repurchase agreements. The nature and risk of these
financial instruments and the reasons for using them are set forth more
fully in the Corporation's Prospectus and Statement of Additional Information.
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. 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.
Forward Currency Exchange Contracts
The Fund may enter into foreign forward currency exchange contracts to help
manage its currency exposure. Risks arise from the possible inability of
counterparties to meet the terms of their contracts and from movements in
currency values. Forward currency contracts are valued using the appropriate
forward rate. Outstanding contracts at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
Settlement Contract to Appreciation/
Date Receive Deliver (Depreciation)
<S> <C> <C> <C> <C> <C>
7/31/95 USD 6,386,646 CAD 8,800,000 $ (14,983)
7/31/95 USD 60,811,298 DEM 84,400,000 (302,066)
7/31/95 USD 8,957,969 DKK 48,700,000 (54,958)
7/31/95 USD 9,212,439 FRF 45,000,000 (55,115)
7/31/95 USD 16,602,600 GBP 10,500,000 (89,768)
7/31/95 USD 5,909,229 ITL 9,700,000,000 6,203
7/31/95 USD 36,834,601 JPY 3,100,000,000 97,561
$ (413,126)
</TABLE>
3. Portfolio Transactions:
Purchases and sales of portfolio securities (excluding short-term and U.S.
government securities) for the year ended June 30, 1995 aggregated
$387,850,659 and $341,372,632, respectively.
At June 30, 1995 the cost of securities for federal income tax purposes was
$167,135,378. Aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost was $6,316,824 and aggregate
gross unrealized depreciation for all securities in which there was an excess
of tax cost over value was $541,862.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
The Fund has unused realized capital loss carryforwards for federal income tax
purposes of $12,033,130 which expire in 2001-2003. The Fund intends to retain
gains realized in future periods that may be offset by available capital loss
carryforwards.
4. Fund Share Transactions:
At June 30, 1995, there were 100,000,000 Fund shares authorized at $.001 par
value. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
1995 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 734,420 $66,572,231 1,293,480 $ 134,691,900
Reinvestment of distributions 90,500 8,025,808 119,566 12,389,370
Repurchased (27,689) (2,421,110) (1,157,891) (110,378,894)
Net increase 797,231 $72,176,929 255,155 $ 36,702,376
</TABLE>
5. Transactions with Affiliates:
The Fund has an administration agreement with Legg Mason Fund Adviser, Inc.
("Administrator"), 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 Administrator provides
the Fund with administrative services for which the Fund pays a fee at an
annual rate of 0.075% of average daily net assets of the Fund.
Western Asset Management Company ("Adviser"), a corporate affiliate of the
Administrator 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 Fund pays a fee at an annual rate of 0.40% of average daily net
assets of the Fund. WLO Global Management, a partnership of Western Asset
Management International and Lombard Odier International Fixed Income
Management ("LOIFIM"), served as subadviser to the Fund until December 31,
1994 and was paid by the Advisor. Beginning January 7, 1993, the Fund's
commencement of operations, the Adviser voluntarily agreed to waive its fees.
Pursuant to this agreement, advisory fees of $480,824 were waived for the
year ended June 30, 1995.
9
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Western Asset Trust International Securities Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and financial highlights present fairly, in all material
respects, the financial position of Western Asset Trust International Securities
Portfolio (the "Fund") (one of the portfolios constituting Western Asset Trust,
Inc.) at June 30, 1995, the results of its operations, the changes in its net
assets and the financial highlights for each of the fiscal periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at June 30, 1995 by
correspondence with the custodian and the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, MD
July 31, 1995
10
