WESTERN ASSET TRUST, INC.
FULL RANGE DURATION 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 Full Range Duration Portfolio.
As the fund approaches the end of its fifth year of operation, I am pleased to
report that assets now total over $300 million, and investment results have
met our expectations. Despite the unusually high volatility and dramatic
changes in interest rates and sector spreads we have experienced in recent
years, I'm happy to report that once again the portfolio has outperformed the
broad market, with returns (net) equalling 14.1% vs. 12.5% for the broad market.
Please give us a call if you have any questions on the enclosed.
Sincerely,
W. Curtis Livingston
President
<PAGE>
WESTERN ASSET TRUST
FULL RANGE PORTFOLIO
Portfolio Manager: Western Asset Management Investment Strategy Group
The Fund's performance was favorably impacted by market conditions in the
12 months ending June 30, 1995. Though interest rates were unusually
volatile for the period, intermediate- and long-term interest rates fell on
balance, resulting in net price appreciation. Most of the strategies in place in
the portfolio were rewarded, resulting in strong performance relative to the
Fund's benchmark. The portfolio's duration was generally longer throughout
the period, so this contributed to performance. The portfolio's yield curve
exposure shifted several times during the period, correctly anticipating major
shifts in the term structure of interest rates: the portfolio's barbell exposure
in the second half of 1994 added to performance as the yield curve flattened,
and the portfolio's bullet exposure added to performance as the yield curve
steepened in the first quarter of 1995. Sector exposure was a major contributor
to performance as well, as the portfolio was overweighted in mortgages for the
balance of the period, and mortgages were the top-performing sector. The
portfolio shifted to an underweight exposure to mortgages in the second
quarter of 1995, and this was also advantageous, as the mortgage sector lagged
other major sectors. Finally, most corporate holdings contributed to
performance as their spreads narrowed over the course of the period.
Comparison of $10,000 investment in WAT Full Range and Salomon Broad Index:
Plot Points from Graph Listed Below.
Salomon Brothers Western Asset Trust
Sep 30, 90 10000 10000
Dec 31, 90 10507 10510
Mar 31, 91 10783 10855
Jun 30, 91 10977 11049
Sep 30, 91 11602 11710
Dec 31, 91 12184 12405
Mar 31, 92 12043 12274
Jun 30, 92 12532 12774
Sep 30, 92 13072 13374
Dec 31, 92 13109 13378
3/31/93 13654 14010
6/30/93 14032 14629
9/30/93 14403 15191
12/30/93 14406 15232
3/31/94 14002 14837
6/30/94 13867 14500
9/30/94 13941 14583
12/31/94 13997 14573
3/31/95 14705 15476
6/30/95 15605 16545
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS
June 30, 1995
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
CORPORATE BONDS AND NOTES - 31.4%
Fixed-rate Securities - 23.8%
Asset-backed - 0.2%
Resolution Trust Corporation
8.15% 1/25/21 $ 799 $ 812
Banking and Finance - 7.6 %
Associates Corp., N.A.
6% 3/15/00 50 49
Banque Paribas Sub. Nt.
6.875% 3/1/09 2,100 1,983
Capital Auto Receivables Asset Trust
4.2% 11/15/95 16 16
Comerica Bank
7.25% 10/15/02 1,750 1,772
Continental Bank N.A.
12.5% 4/1/01 4,000 5,012
Equitable Companies Inc.
9% 12/15/04 2,300 2,553
First Union Corp., Sub Notes
9.45% 6/15/99 10 11
Ford Capital
10.125% 11/15/00 50 57
General Electric Capital Corp.
7.875% 12/1/06 70 76
Household Finance, Ltd. Gtd. Sr. Nt.
6% 6/30/98 375 370
Lehman Brothers Holdings
8.75% 3/15/05 4,500 4,845
Marine Midland Bank, N.A.
Series 1991-2 A6
8.5% 9/25/22 44 44
NZI Capital Corporation
8.25% 3/15/97 375 385
Paine Webber Group, Inc. Sr. Nt.
6.5% 11/1/05 2,300 2,104
7.625% 2/15/14 1,490 1,381
Salomon, Inc.
5.91% 9/29/95 5,000 4,991
25,649
</TABLE>
1
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Industrial - 10.0%
Abbott Laboratories
5.6% 10/1/03 $ 150 $ 140
Disney, Walt Co. Sr. Part. Nt.(B)
2% 3/1/00 2,700 2,700
General Motors
8.8% 3/1/21 250 283
Litton Industries, Inc.
12.625% 7/1/05 3,000 3,127
Lockheed Corporation
7.875% 3/15/23 2,000 2,025
Loews Corporation
7.625% 6/1/23 7,209 6,958
McDonalds Corp.
6.75% 2/15/03 35 35
RJR Nabisco Inc.
6.85% 6/15/05 1,200 1,183
8.75% 8/15/05 3,430 3,520
7.55 6/15/15 1,900 1,886
Tele-Communications, Inc.
9.8% 2/1/12 3,070 3,376
Time Warner Entertainment
9.15% 2/1/23 700 726
Sr. Deb.
8.375% 3/15/23 2,450 2,414
Sr. Nt.
9.125% 1/15/13 900 935
Sr. Sub. Deb.
8.375% 7/15/33 3,950 3,867
Wal-Mart Stores, Inc.
5.5% 9/15/97 30 30
Waste Management, Inc.
8.75% 5/1/18 350 387
33,592
Miscellaneous - 0.3 %
Midstate Trust II Class A-4
9.625% 4/1/03 700 760
Rural Housing Pass-through Certificate
Series 1987-1
3.33% 4/1/26 88 81
841
</TABLE>
2
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Oil & Gas - 0.6%
Coastal Corporation
9.625% 5/15/12 $ 1,850 $ 2,103
Telecommunications - 0.1%
U.S. West Communications, Inc.
7.5% 6/15/23 450 445
Transportation - 3.0%
AMR Corporation
9% 8/1/12 2,317 2,447
Union Pacific Corp.
6% 9/1/03 400 377
United Airlines
11.21% 5/1/14 4,900 5,951
10.25% 7/15/21 1,105 1,255
10,030
Utilities - 2.0 %
GGIB Funding Corp.
7.43% 1/15/11 2,850 2,756
Niagra Mohawk Power Corp.
7.75% 5/15/06 3,890 3,957
6,713
80,185
Indexed Securities(C)- 7.6%
Advanta Mortgage Loan Trust
Series 1995
6.85% 4/25/26 6,842 7,187
Bank America Corp.
6.26% 12/5/95 100 100
Ford Motor Credit
5.79% 3/14/97 12,995 12,878
Resolution Trust Corporation
5.98% 6/25/21 2,168 2,123
7.68% 9/25/29 2,824 2,889
7.11% 10/25/28 345 332
25,509
Stripped Mortgage-backed Securities(D) - N.M.
Structured Mortgage Asset Residential
Trust 91-8E Interest-only
.152%(E) 1/25/23 45,620(J) 143
Total Corporate Bonds and Notes
(Identified Cost - $102,298) 105,837
</TABLE>
3
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL OBLIGATIONS - 2.5%
Intermountain Power Agency Refunding Bond
Series A
5% 7/1/23 $ 5,000 $ 4,285
Salt River Project (AZ) Agricultural
Improvement & Power District Series B
5% 1/1/29 5,000 4,214
Total Municipal Obligations
(Identified Cost - $8,449) 8,499
U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 53.1%
Fixed-rate Securities - 47.6 %
Federal Home Loan Banks - 0.2%
5.71% 2/1/01 200 193
5.44% 10/15/03 400 374
567
Federal Home Loan Mortgage Corporation - 1.1%
PC# 22-0009
8.25% 8/1/01 133 135
CMO 1034-E PAC
8.4% 1/15/05 380 386
CMO 1216-E PAC
7% 3/15/05 2,100 2,109
REMIC 1197 Series F
6.75% 10/15/05 1,000 1,003
3,633
Federal Housing Authority USGI #68 - 0.1%
7.43% 3/1/21 354 354
Federal National Mortgage Association - 5.6%
7.05% 12/10/98 100 103
0%(F) 11/1/01 760 699
7.5% 2/11/02 150 159
0%(F) 3/9/02 1,100 987
0%(F) 10/9/19 4,000 708
REMIC 1992-94E
6.5% 5/25/03 3,200 3,184
REMIC 1989-55E
9% 9/25/04 5,300 5,626
</TABLE>
4
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Federal National Mortgage Association - Continued
REMIC 1992-22G
7% 4/25/05 $ 1,430 $ 1,434
REMIC 1990-26E
8% 1/25/17 286 286
REMIC 1989-2D
8.8% 1/25/19 2,000 2,154
REMIC 1990-75M
9.5% 7/25/20 3,249 3,728
19,068
Government National Mortgage Association - 9.0%
10% 11/15/09 16 17
7.5% 1/20/25 11,022 11,291
7% 4/20/25 13,258 13,484
7% 5/20/25 5,395 5,486
30,278
Private Export Funding Corp. - 0.1%
5.75% 4/30/98 400 396
United States Treasury Bonds - 22.5%
12% 8/15/13 2,810 4,145
7.5 11/15/16 800 871
8.125% 8/15/19 295 343
7.5% 11/15/24 55,020 60,875
7.625% 2/15/25 8,500 9,600
75,834
United States Treasury Notes - 9.0%
7.375% 11/15/97 245 253
5.25% 7/31/98 11,295 11,081
6.375% 1/15/99 500 507
7% 4/15/99 150 155
7.875% 11/15/99 120 129
8.5% 2/15/00 80 88
5.5% 4/15/00 500 490
6.375% 8/15/02 190 192
6.25% 2/15/03 90 90
5.75% 8/15/03 1,895 1,837
7.25% 5/15/04 690 737
</TABLE>
5
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
United States Treasury Notes - Continued
7.25% 8/15/04 $ 90 $ 96
7.875% 11/15/04 970 1,080
7.5% 2/15/05 2,100 2,287
6.5% 5/15/05 10,940 11,173
30,195
160,325
Indexed Securities(C) - 1.2%
Federal Home Loan Mortgage Corporation
REMIC 1500 Class SC Inverse Floater
8.484% 5/15/23 1,812 1,251
REMIC 1993-183F
6.164% 10/25/23 1,881 1,768
REMIC 1993-1895
7.011% 10/25/23 1,073 737
Student Loan Marketing Association
5.86% 11/20/97 250 250
4,006
Stripped Securities(D) - 4.3%
Federal National Mortgage Association REMIC
1991-G15 CL S Interest-only Inverse Floater
690.81%(E) 6/25/21 28(J) 395
Federal National Mortgage Association Strip 240-2
7% 9/1/23 7,922 2,513
Resolution Funding Corporation
0%(F) 1/15/17 3,222 707
0%(F) 4/15/17 2,426 523
0%(F) 10/15/19 7,260 1,315
0%(F) 7/15/20 6,750 1,163
0%(F) 10/15/20 17,650 2,995
United States Treasury Bond
0%(F) 5/15/17 21,483 4,787
14,398
Total U.S. Government and Agency Obligations
(Identified Cost - $172,358) 178,729
<CAPTION>
Shares
<S> <C> <C>
WARRANTS - 0.4%
Bell Telephone Co. CDA
(Identified Cost - $978) 67 1,541(A)
</TABLE>
6
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
YANKEE BONDS(I) - 0.9%
Banque Paribas
8.35% 6/15/07 $ 2,000 $ 2,155
Hydro-Quebec
8.875% 3/1/26 700 790
Total Yankee Bonds
(Identified Cost - $2,968) 2,945
SHORT-TERM INVESTMENTS - 16.5%
United States Treasury Bills - 9.7%
5.51% 7/20/95 1,250 1,246
5.625% 7/20/95 7,559 7,537
5.825% 3/7/96 25,000 23,989
32,772
Repurchase Agreement - 6.8%
Goldman, Sachs & Company, Inc.
6% dated 6/30/95, to be repurchased at $22,690
on 7/3/95 (Collateral: $15,795 U.S. Treasury Bonds,
10.625%, due 8/15/15, value $23,220)
(Identified Cost - $22,679) 22,679 22,679
Total Short-term Investments
(Identified Cost - $55,451) 55,451
<CAPTION>
Actual
Number of
Contracts
<S> <C> <C>
OPTIONS PURCHASED - N.M.
Eurodollar Future Put
Sept. 95 Strike 93.5
(Identified Cost - $56) 105(G) 5(A)
Total Investments - 104.8%
(Identified Cost - $342,558) $353,007
</TABLE>
7
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Expiration Appreciation/
Date Contracts (Depreciation)
<S> <C> <C> <C>
FUTURES CONTRACTS PURCHASED
Treasury Note Futures - Ten year Sept. 95 162(H) $ (47)
FUTURES CONTRACTS SOLD
Treasury Bond Futures Sept. 95 392(H) 181
$ 134
</TABLE>
(A) Non-income producing.
(B) 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.
(C) Indexed Securities - The rate of interest earned on these securities is
tied to an index such as the Cost of Funds Index (COFI), the London
Interbank Offered Rate (LIBOR) or the three-month U.S. Treasury Bill
Auction rate. The coupon rates shown represent the rates as of June 30,
1995.
(D) Stripped Securities - Securities with interest-only or principal-only
payment streams.
(E) The coupon rate shown is the rate as of June 30, 1995.
(F) 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.
(G) Each Eurodollar option contract represents $2,500 par value.
(H) Each Treasury Note and Bond future contract represents $100,000 par value.
(I) Yankee Bond - A dollar-denominated bond issued in the U.S. by a foreign
entity.
(J) Notional amount upon which interest is based.
N.M Not Meaningful
See notes to financial statements.
8
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<TABLE>
<S> <C>
Assets
Investments at value (Identified Cost - $342,558,084) $ 353,006,807
Cash 808
Receivable for:
Investments sold 34,957,707
Interest 3,961,454
Other assets 80,252
Total assets 392,007,028
Liabilities
Payable for:
Investments purchased 54,886,495
Futures margin 112,875
Accrued expenses 73,010
Due to adviser and administrator 160,968
Total liabilities 55,233,348
Net assets $ 336,773,680
Analysis of Net Assets
Common stock at par value $.001 per share, authorized
100,000,000 shares; issued and outstanding 3,002,217
shares $ 3,002
Accumulated paid-in capital 326,066,437
Undistributed net investment income 4,896,307
Accumulated net realized loss (4,774,821)
Unrealized appreciation of investments 10,582,755
Net assets $ 336,773,680
Net asset value, offering price, and redemption price per share $ 112.17
</TABLE>
See notes to financial statements.
9
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended June 30, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 18,023,023
Expenses:
Advisory fee $ 963,008
Administrative fee 120,376
Custodian fee 101,100
Registration fees 23,850
Audit fee 20,800
Directors' fees 14,130
Legal fees 12,499
Organization expense 9,243
Other expenses 12,453
1,277,459
Less fees waived (69,442)
Total expenses, net of waivers 1,208,017
Net Investment Income 16,815,006
Net Realized and Unrealized Gain on
Investments:
Realized gain on investments 1,242,701
Increase in unrealized appreciation
of investments 16,617,288
Net Realized and Unrealized Gain on
Investments 17,859,989
Increase in Net Assets Resulting from Operations $34,674,995
</TABLE>
See notes to financial statements.
10
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION 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 $ 16,815,006 $ 11,060,518
Net realized gain (loss) on investments 1,242,701 (2,286,640)
Change in unrealized appreciation (depreciation)
of investments 16,617,288 (12,549,292)
Change in net assets resulting from operations 34,674,995 (3,775,414)
Distributions to shareholders from:
Net investment income (15,198,153) (9,691,604)
Net realized gain on investments - (7,248,249)
Increase in net assets from Fund share transactions 111,337,423 90,789,131
Increase in net assets 130,814,265 70,073,864
Net Assets:
Beginning of year 205,959,415 135,885,551
End of year (including undistributed
net investment income of $4,896,307
and $3,279,454, respectively) $ 336,773,680 $ 205,959,415
</TABLE>
See notes to financial statements.
11
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION PORTFOLIO
FINANCIAL HIGHLIGHTS
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 Years Ended June 30,
1995 1994 1993 1992 1991(A)
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $105.02 $116.64 $112.04 $106.28 $100.00
Net investment income(B) 6.82 5.64 6.57 6.90 6.66
Net realized and unrealized gain
(loss) on investments(C) 7.19 (6.28) 8.71 8.72 4.28
Total from investment operations 14.01 (.64) 15.28 15.62 10.94
Distributions to shareholders from:
Net investment income (6.86) (6.11) (6.72) (7.11) (4.66)
Net realized gain on investments - (4.87) (3.96) (2.75) -
Total distributions (6.86) (10.98) (10.68) (9.86) (4.66)
Net asset value, end of period $112.17 $105.02 $116.64 $112.04 $106.28
Total return 14.12% (.89%) 14.52% 15.61% 11.01%(D)
RATIOS/SUPPLEMENTAL DATA:
Ratio to average net assets:
Expenses(B) 0.50% 0.50% 0.50% 0.50% 0.65%(E)
Net investment income(B) 6.98% 6.0% 6.0% 6.78% 8.0%(E)
Portfolio turnover rate 257.90% 272.49% 313.05% 299.65% 177.25%(E)
Net assets, end of period
(in thousands) $336,774 $205,959 $135,886 $92,892 $43,076
</TABLE>
(A) For the period September 4, 1990 (commencement of operations) to June
30, 1991.
(B) Net of investment advisory fees waived pursuant to a voluntary expense
limitation as follows: 0.65% through June 30, 1991; thereafter 0.50%
after a voluntary administrative expense waiver of .05%.
(C) 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.
(D) Not annualized
(E) Annualized
See notes to financial statements.
12
<PAGE>
WESTERN ASSET TRUST, INC.
FULL RANGE DURATION 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 Full Range Duration
Portfolio ("Fund"), a 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 September 4, 1990, 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.
Options and Futures
The current market value of a traded option is the last sale price or, in the
absence of a sale, the mean between the closing bid and asked price. Futures
contracts are marked-to-market on a daily basis. As the contract's value
fluctuates, payments known as variation margin are made to or received from
the futures commission merchant.
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 $45,572 are being amortized on a
straight-line basis over 5 years beginning on the date operations began.
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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
2. Financial Instruments:
As part of the Fund's investment program, the Fund utilizes repurchase
agreements, options and futures contracts. 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.
Option Transactions
A call option on a bond or bond future gives the option holder the right to
purchase a bond or bond future at a specified price until a certain date in
exchange for a premium paid to the writer of the option. Risks arise from the
possible illiquidity of the options market and from movements in underlying
security values. Call options on bonds and bond futures written by the Fund
and related premiums received during the year ended June 30, 1995 were as
follows:
<TABLE>
<CAPTION>
Contracts Premiums
<S> <C> <C>
Options outstanding at June 30, 1994 0 $ 0
Options written 978 751,101
Options exercised (219) (181,661)
Options expired (109) (63,901)
Options closed (650) (505,539)
Options outstanding at June 30, 1995 0 $ 0
</TABLE>
Futures
The Fund has entered into futures contracts in connection with its interest
rate management strategy. Risks arise from the possible illiquidity of the
futures market and from the possibility that a change in the value of a
contract may not correlate with changes in interest rates.
3. Portfolio Transactions:
Purchases and sales of portfolio securities (excluding short-term, U.S.
government securities, written and purchased options and futures contracts)
for the year ended June 30, 1995, aggregated $88,647,496 and $62,927,861,
respectively. Purchases and sales of U.S. government securities aggregated
$578,912,321 and $524,604,328, respectively, for the same period.
At June 30, 1995, the cost of securities for federal income tax purposes
was $342,558,084. Aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $12,469,600 and
aggregate gross unrealized depreciation for all securities in which there was
an excess of tax cost over value was $2,020,877.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
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 1,016,478 $109,120,297 767,657 $ 87,548,259
Reinvestment of distributions 147,507 15,198,150 150,446 16,978,549
Repurchased (122,879) (12,981,024) (122,017) (13,737,677)
Net increase 1,041,106 $111,337,423 796,086 $ 90,789,131
</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 0.10% of average daily net assets of the Fund. Effective
July 1, 1991, the Administrator voluntarily agreed to limit its annual fee
to 0.05% of the Fund's average daily net assets.
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. Effective July 1, 1991, the Adviser voluntarily agreed to
waive its fees and reimburse the Fund to the extent necessary to limit the
total expenses to an annual rate of 0.50% of the Fund's average daily net
assets. Pursuant to this agreement, advisory fees of $69,442 were waived for
the year ended June 30, 1995.
15
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
Western Asset Trust Full Range Duration 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 Full Range
Duration 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, Maryland
July 31, 1995
16
