WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995
February 28, 1996
Dear Shareholder:
Enclosed are the mid-year financial statements for the Western Asset
Trust International Securities Portfolio.
As of December 31, 1995, assets have risen to approximately $220
million, with 22 shareholders.
We are happy to report that the portfolio exceeded its no-dollar hedged
benchmark, returning 7.8% vs. 7.7% for the period, though it lagged the broad
domestic market by a modest amount.
Please give us a call if you have any questions on the enclosed.
Sincerely,
W. Curtis Livingston
President
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS
December 31, 1995
(Amounts in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
LONG-TERM DEBT SECURITIES(A) - 91.8%
Australian Dollar - 1.5%
Government of Australia
9.5% 8/15/03 AUD 4,000 $ 3,213
British Pound - 8.7%
U.K. Treasury Stock
7.25% 3/30/98 GBP 2,000 3,164
9.5% 10/25/04 9,000 15,838
19,002
Canadian Dollar - 3.4%
Government of Canada
7.75% 9/1/99 CAD 4,650 3,559
6.5% 6/1/04 5,500 3,892
7,451
Czech Koruna - 9.6%
ABN Amro Holding N.V.
11% 12/15/97 CZK 149,000 5,629
BV Finance Prague
11% 10/2/97 140,000 5,287
Czech Electric Company
14.375% 1/27/01 250,000 10,027
20,943
Danish Krone - 10.8%
Kingdom of Denmark
9% 11/15/98 DKK 28,000 5,493
7% 12/15/04 100,000 17,938
23,431
Dutch Guilder - 5.2%
Kingdom of Netherlands
8.25% 6/15/02 NLG 16,000 11,432
French Franc - 4.6%
Bons du Tresor a Taux Fixe et Interet Annuel
7.25% 8/12/97 FRF 48,000 10,124
</TABLE>
2
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C> <C>
German Mark - 33.3%
Deutsche Bundesrepublik
6% 6/20/16 DEM 25,000 $ 16,046
German Unity Fund
8% 1/21/02 72,000 56,566
72,612
Italian Lira - 3.3%
Buoni del Tesoro Poliennali
8.5% 8/1/99 ITL 12,000,000 7,171
Japanese Yen - 5.1%
Government of Japan #151
5% 9/20/02 JPY 1,000,000 11,054
Spanish Peseta - 3.5%
Bonos del Estado
11.45% 8/30/98 ESP 450,000 3,898
10.15% 1/31/06 450,000 3,790
7,688
Swedish Krone - 2.4%
Government of Sweden
10.75% 1/23/97 SEK 34,000 5,247
Thai Baht - 0.4%
Deutsche Bank
8.75% 9/19/96 THB 20,000 783(B)
Total Long-term Debt Securities
(Identified Cost - $196,890) 200,151
</TABLE>
3
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
REPURCHASE AGREEMENT - 0.9%
Merrill Lynch Government Securities, Inc.
5.75% dated 12/29/95, to be repurchased
at $1,946 on 1/2/96 (Collateral:
$1,830 Federal National Mortgage
Association Mortgage-backed securities,
7.7% due 8/10/04, value $2,042)
(Identified Cost - $1,945) $1,945 $ 1,945
Total Investments - 92.7% $202,096
(Identified Cost - $198,835)
</TABLE>
_________________
(A) Listed by currency denomination.
(B) Private placement.
See notes to financial statements.
4
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments at value (Identified Cost - $198,835,272) $202,096,470
Receivable for investments sold 19,929,087
Interest receivable 8,108,661
Tax reclaims receivable 306,045
Unrealized appreciation of forward currency contracts 519,235
Other assets 11,291
Total assets 230,970,789
Liabilities
Payable for investments purchased 12,548,812
Accrued expenses 54,621
Due to adviser and administrator 13,671
Unrealized depreciation of forward currency contracts 284,831
Total liabilities 12,901,935
Net assets $218,068,854
Analysis of Net Assets
Common stock at par value $.001 per share, authorized
100,000,000 shares; issued and outstanding
2,323,647 shares $ 2,324
Accumulated paid-in capital 221,281,800
Distributions in excess of net investment income (6,106,484)
Accumulated net realized loss on investments, forward
currency contracts and currency transactions (557,501)
Unrealized appreciation of investments, forward currency
contracts and currency transactions 3,448,715
Net assets $218,068,854
Net asset value, offering price, and redemption price per share $93.85
</TABLE>
______________
See notes to financial statements.
5
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $ 6,176,643
Expenses:
Advisory fee $ 386,760
Administrative fee 72,517
Custodian fee 133,900
Audit fee 14,200
Registration fees 12,481
Directors' fees 7,980
Organization expense 1,811
Reports to shareholders 895
Transfer agent and shareholder servicing expense 862
Other expenses 5,103
636,509
Less fees waived (386,760)
Total expenses, net of waivers 249,749
Net Investment Income 5,926,894
Realized and Unrealized Gain (Loss) on Investments, Forward
Currency Contracts, Futures and Currency Transactions:
Realized gain 10,937,233
Unrealized depreciation (2,074,293)
Net Realized and Unrealized Gain 8,862,940
Increase in Net Assets Resulting from Operations $14,789,834
</TABLE>
_______________
See notes to financial statements.
6
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
December 31, 1995 June 30,1995
(Unaudited)
<S> <C> <C>
Change in Net Assets:
Net investment income $ 5,926,894 $ 6,812,596
Net realized gain (loss) on investments, forward
currency contracts and currency transactions 10,937,233 8,516,464
Unrealized appreciation (depreciation) of
investments, forward currency contracts
and currency transactions (2,074,293) 9,080,419
Increase in net assets resulting
from operations 14,789,834 7,376,551
Distributions to shareholders:
Net investment income (12,033,378) (1,207,417)
Net realized gain - -
In excess of net investment income - (6,818,395)
Increase in net assets from Fund
share transactions 36,978,376 72,176,929
Increase in net assets 39,734,832 71,527,668
Net Assets:
Beginning of period (including overdistributions
of net investment income of $6,106,484
and $0, respectively) 178,334,022 106,806,354
End of period $218,068,854 $178,334,022
</TABLE>
_______________
See notes to financial statements.
7
<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 Six
Months Ended For the Years Ended June 30,
Dec. 31, 1995 1995 1994 1993(A)
(Unaudited)
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period $92.10 $93.76 $105.53 $100.00
Net investment income(B) 2.79 6.29 6.94 3.21
Net realized and unrealized gain (loss)
on investments, forward currency
contracts and currency transactions(E) 4.38 (1.04) (7.36) 2.59
Total from investment operations 7.17 5.25 (.42) 5.80
Distributions to shareholders:
Net investment income (5.42) (.63) (8.64) (.27)
Net realized capital gain - - (2.71) -
In excess of net investment income - (6.28) - -
Total distributions (5.42) (6.91) (11.35) (.27)
Net asset value, end of period $93.85 $92.10 $93.76 $105.53
Total return 7.86%(D) 6.03% (1.14)% 5.81%(D)
RATIOS/SUPPLEMENTAL DATA:
Ratios to Average Net Assets:
Expenses 0.26%(B,C) 0.28%(B) 0.30%(B) 0.45%(B,C)
Net investment income 6.13%(B,C) 5.67%(B) 5.53%(B) 6.08%(B,C)
Portfolio turnover rate 322.49%(C) 355.03% 571.18% 249.94%(C)
Net assets, end of period
(in thousands) $218,069 $178,334 $106,806 $93,288
</TABLE>
(A) Commencement of operations - January 7, 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 period. 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.
8
<PAGE>
WESTERN ASSET TRUST, INC.
INTERNATIONAL SECURITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Significant Accounting Policies:
The Western Asset Trust, Inc. ("Corporation") is registered under the Investment
Company Act of 1940, as amended. The 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 amounts 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 serves
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 $18,110 are being amortized on a
straight-line basis over 5 years beginning on the date operations began.
9
<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 forward rate.
Outstanding contracts at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Settlement Contract to Appreciation/
Date Receive Deliver (Depreciation)
<S> <C> <C> <C>
2/29/96 USD 3,208,187 AUD 4,300,000 $ 21,378
2/29/96 USD 7,379,257 CAD 10,000,000 56,736
2/29/96 USD 100,069,979 DEM 143,000,000 77,321
2/29/96 USD 4,890,659 DEM 7,000,000 (4,087)
2/29/96 USD 23,069,298 DKK 128,000,000 (18,725)
2/29/96 USD 7,684,841 ESP 950,000,000 (99,173)
2/29/96 USD 10,162,602 FRF 50,000,000 (58,376)
2/29/96 USD 18,873,400 GBP 12,200,000 (44,995)
2/29/96 USD 6,812,411 ITL 11,000,000,000 (59,475)
2/29/96 USD 12,001,200 JPY 1,200,000,000 278,157
2/29/96 USD 5,332,115 SEK 35,000,000 85,643
$234,404
</TABLE>
3. Portfolio Transactions:
Purchases and sales of portfolio securities (excluding short-term and U.S.
government securities) for the six months ended December 31, 1995 aggregated
$318,381,938 and $269,257,400, respectively.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued
At December 31, 1995 the cost of securities for federal income tax purposes was
$198,835,272. Aggregate gross unrealized appreciation for all securities in
which there was an excess of value over tax cost was $3,672,878 and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value was $411,680.
4. Fund Share Transactions:
At December 31, 1995, there were 100,000,000 Fund shares authorized at $.001 par
value. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
For the Six Months Ended For the Year Ended
December 31, 1995 June 30, 1995
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 259,524 $25,000,000 734,420 $66,572,231
Reinvestment of distributions 128,303 12,033,376 90,500 8,025,808
Repurchased (575) (55,000) (27,689) (2,421,110)
Net increase 387,252 $36,978,376 797,231 $72,176,929
</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 $386,760 were waived for the six months ended
December 31, 1995.
11
