LM INSTITUTIONAL FUND ADVISORS I, INC.
Western Asset Core Portfolio
Western Asset Core Plus Portfolio
Western Asset Intermediate Portfolio
Western Asset Limited Duration Portfolio
Western Asset Non-U.S. Fixed Income Portfolio
Semi-Annual Report
September 30, 1998
<PAGE>
[WESTERN ASSET LOGO APPEARS HERE]
November 19, 1998
Dear Shareholder:
The last six months have been notable ones for the Western Asset mutual funds.
First and foremost, the unprecedented turmoil in the bond market in the third
quarter strongly challenged our skills and courage as investors. With prices in
every fixed income market sector declining relative to U.S. Treasuries, the
Funds' returns were all negatively impacted, with the amount varying according
to the distribution of our non-Treasury holdings. Western Asset's long term
approach has always emphasized "spread product" for its incremental yield and
increased opportunity and, despite its recent under-performance, we continue to
feel strongly that this strategy is best for the long run. Already in the fourth
quarter, yield spreads have begun to return to more rational levels and relative
results are being positively impacted.
Amidst all this, we also completed our program of transitioning the Western
Asset Fund family into the new Legg Mason Institutional Advisors framework.
There is now dedicated staff in Baltimore and Pasadena whose focus is
exclusively on servicing those of you who invest in our funds. Joe Orlando, a
long time senior Western Asset Officer, heads up this group as its President and
has shifted his location to Baltimore. Kristin Benz, who was involved in our
fund efforts throughout her Western Asset tenure, has key responsibilities for
client service and remains here in Pasadena to assure close connections to the
rest of us at Western Asset.
We are very enthusiastic about this new arrangement and the impact it will have
for all of you and appreciate your understanding and support during the
transition. New programs are already underway and currently we are working on
establishing a web page that will provide daily information on each of the funds
and a new system to mail shareholder statements on the third business day of the
following month. If you have any questions or suggestions, please do not
hesitate to contact Kristin Benz at 626-844-9585.
Attached are financial statements for your Western Asset Fund as of September
30, 1998 as well as a brief narrative covering key developments for the year.
Sincerely,
/s/ W. Curtis Livingston
________________________
W. Curtis Livingston
Chairman
Western Asset Management Company
Western Asset Management Company
117 East Colorado Blvd. Pasadena, CA 91105 o Tel: (626) 844-9400 o
Fax: (626) 844-9450
<PAGE>
LM INSTITUTIONAL FUND ADVISORS I, INC.
Market Commentary
The last six months have been a difficult time in the fixed income markets.
Increased risks in overseas markets caused investors to sell mortgage, corporate
and international securities and buy U.S. Treasuries. As a result, the "spread
sectors" suffered relative to Treasuries as demand for Treasuries pushed yields
down to all time lows. Since Western Asset has traditionally focused on the
spread sectors of the market, we have slightly underperformed our benchmarks for
the last six months. While our interest rate strategy helped the Portfolios as
interest rates fell, it was not enough to negate the poor performance in
corporate, mortgage and international securities. Western Asset continues to
look for value in these sectors and we feel that over the market cycle, these
securities will add value to your Portfolio relative to its benchmark.
<PAGE>
STATEMENT OF NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES 18.62%
Banking and Finance 6.10%
BNY Capital Trust 7.97% 12/31/26 $5,000 $5,448
Dryden Investor Trust 7.16% 7/23/08 16,000 16,340
Ford Motor Credit Co. 6.13% 4/28/03 2,735 2,834
General Motors Acceptance Corporation 0.00% 6/15/15 14,900 4,943(B)
Grand Metro Investment 8.63% 8/15/01 150 164
IBJ Preferred Capital Co. LLC 8.79% 12/29/49 7,720 5,627(G)
IBM Credit Corporation 5.68% 7/7/99 5,000 5,020
IBM Credit Corporation 5.79% 3/20/00 4,000 4,047
J.P. Morgan & Company 6.91% 2/15/12 2,000 1,808
PDVSA Finance Limited 7.50% 11/15/28 2,000 1,651(G)
Prudential Securities Financing Corp. 6.30% 4/25/26 91 91
SB Treasury Company LLC 9.40% 12/29/49 6,680 5,676
Socgen Real Estate Co. LLC 7.64% 12/29/49 500 481
-----------
42,586
Food and Beverage 2.11%
Nabisco Incorporated 6.38% 2/1/35 4,250 4,326
Philip Morris Companies, Inc. 8.75% 6/1/01 100 108
Philip Morris Companies, Inc. 7.00% 7/15/05 2,000 2,139
RJR Nabisco, Inc. 8.75% 4/15/04 320 328
RJR Nabisco, Inc. 8.75% 8/15/05 2,100 2,136
RJR Nabisco, Inc. 8.50% 7/1/07 800 804
RJR Nabisco, Inc. 8.75% 7/15/07 4,770 4,868
-----------
14,709
Industrial 3.59%
Ford Motor Company 6.63% 10/1/28 4,730 4,796
Loews Corporation 7.63% 6/1/23 8,459 8,744
-----------
25,084
Media and Entertainment 6.43%
Continental Cablevision Inc. 9.00% 9/1/08 3,200 3,849
GTE Corporation 6.94% 4/15/28 9,190 9,790
News America Holdings Incorporated 8.25% 10/17/96 1,100 1,232
News America Incorporated 7.13% 4/8/28 3,000 2,984
News America Incorporated 6.75% 1/9/38 5,000 5,171
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES
Media and Entertainment (continued)
TCI Communications Inc. 8.75% 8/1/15 $3,110 $3,885
Time Warner Inc. 6.85% 1/15/26 2,000 2,094
Time Warner Inc. 6.95% 1/15/28 6,000 6,236
Worldcom Inc. 6.25% 8/15/03 9,220 9,594
-----------
44,835
Utilities 0.39%
System Energy Resources, Inc. 7.43% 1/15/11 2,542 2,694
TOTAL CORPORATE BONDS AND
NOTES (IDENTIFIED COST $127,379) 129,908
---------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 3.58%
Fixed-rate Securities 2.87%
Chevy Chase 1997 - A 7.65% 12/20/07 7,450 7,479
Chevy Chase Aces 6.85% 8/1/13 4,900 4,915
Commercial Mortgage Acceptance Corporation 5.80% 3/15/06 2,500 2,532
Green Tree Recreational Equipment 6.71% 5/15/29 4,128 4,210
Navistar Financial Corp. Owner Trust 6.35% 1/15/00 828 832
Rural Housing Trust 1987 - 1 3.33% 10/1/28 23 22
-----------
19,990
Indexed Securities 0.64%
Matterhorn One Limited Trust 6.81% 1/21/06 2,500 2,520(F)
Matterhorn One Limited Trust 6.31% 6/21/06 1,966 1,977(F)
-----------
4,497
Stripped Securities 0.07%
Option One CTF Mortgage Loan Trust 3.25% 3/25/01 19,743 495(D1)
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $25,778) 24,982
---------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 6.63%
Fixed-rate Securities 4.60%
Asset Securitization Corporation 6.92% 2/14/29 6,203 6,557
GMAC Commercial Mortgage Security Incorporated 6.15% 11/15/07 5,577 5,731
Macerich SCG Funding Limited Partnership 7.08% 3/15/06 6,000 6,506(G)
</TABLE>
4
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Merrill Lynch Mortgage Investors, Inc. 6.69% 11/21/28 $109 $109
Merrill Lynch Mortgage Investors, Inc. 6.96% 11/21/28 1,358 1,405
Morgan Stanley Capital I Incorporated 6.34% 11/15/07 1,675 1,758
Nomura Asset Securities Corporation 7.07% 4/13/36 2,751 2,894
Nomura Asset Securities Corporation 7.12% 4/13/36 4,500 5,079
Resolution Trust Corporation 9.20% 6/25/24 2,084 2,086
-----------
32,125
Indexed Securities 0.01%
Resolution Trust Corporation 7.25% 9/25/21 69 69(F)
Stripped Securities N.M.
Structured Mortgage Asset Residential Trust 2,500% 8/25/22 N.M. 3(D1)
Structured Mortgage Asset Residential Trust 0.128% 1/25/23 18,423 17(D1)
-----------
20
Variable-rate Securities 2.02%
Resolution Trust Corporation 6.50% 10/25/17 65 66(C)
Resolution Trust Corporation 6.87% 5/25/21 977 979(C)
Resolution Trust Corporation 10.30% 8/25/21 170 178(C)
Resolution Trust Corporation 7.01% 10/25/21 3,303 3,297(C)
Resolution Trust Corporation 6.99% 6/25/24 8,000 7,980(C)
Resolution Trust Corporation 7.38% 10/25/28 152 151(C)
Resolution Trust Corporation 7.89% 9/25/29 1,382 1,421(C)
-----------
14,072
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $43,967) 46,286
---------------------------------------------------------------------------------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 17.03%
Fixed-rate Securities 3.54%
United States Treasury Bonds 6.13% 11/15/27 750 865
United States Treasury Notes 5.38% 7/31/00 700 712
United States Treasury Notes 6.38% 9/30/01 8,100 8,545
United States Treasury Notes 5.75% 10/31/02 4,650 4,888
United States Treasury Notes 5.75% 11/30/02 2,600 2,735
</TABLE>
5
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
Fixed-rate Securities (continued)
United States Treasury Notes 5.63% 12/31/02 $4,300 $4,510
United States Treasury Notes 5.75% 8/15/03 2,310 2,451
-----------
24,706
Indexed Securities 13.36%
United States Treasury Bonds 3.63% 4/15/28 41,113 40,997(E)
United States Treasury Notes 3.38% 1/15/07 24,808 24,436(E)
United States Treasury Notes 3.63% 1/15/08 27,689 27,775(E)
-----------
93,208
Stripped Securities 0.13%
Tennessee Valley Authority 0.00% 11/1/19 3,064 874(D2)
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (IDENTIFIED COST $116,927) 118,788
---------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES 35.31%
Fixed-rate Securities 34.70%
Fannie Mae 7.00% 9/1/07 92 94
Fannie Mae 7.00% 12/1/07 715 735
Fannie Mae 7.00% 1/1/08 477 489
Fannie Mae 7.00% 1/1/08 415 425
Fannie Mae 7.00% 3/1/08 449 460
Fannie Mae 7.00% 5/1/09 307 315
Fannie Mae 7.00% 6/1/09 130 133
Fannie Mae 7.00% 12/1/09 82 84
Fannie Mae 7.00% 12/1/09 73 75
Fannie Mae 7.00% 6/1/10 71 73
Fannie Mae 7.00% 11/1/10 242 248
Fannie Mae 7.00% 1/1/11 60 61
Fannie Mae 7.00% 1/1/11 538 553
Fannie Mae 7.00% 5/1/11 103 105
Fannie Mae 7.00% 7/1/11 50 51
Fannie Mae 7.00% 12/1/11 332 341
Fannie Mae 7.00% 4/1/12 360 369
</TABLE>
6
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Fannie Mae 7.00% 4/1/12 $260 $267
Fannie Mae 7.00% 5/1/12 353 363
Fannie Mae 7.00% 6/1/12 468 481
Fannie Mae 7.00% 7/1/12 170 175
Fannie Mae 7.00% 7/1/12 445 456
Fannie Mae 7.00% 7/1/12 415 426
Fannie Mae 7.00% 7/1/12 96 98
Fannie Mae 7.00% 7/1/12 178 183
Fannie Mae 7.00% 7/1/12 439 451
Fannie Mae 7.00% 7/1/12 415 427
Fannie Mae 7.00% 7/1/12 421 432
Fannie Mae 7.00% 8/1/12 111 114
Fannie Mae 7.00% 8/1/12 483 496
Fannie Mae 7.00% 8/1/12 414 425
Fannie Mae 7.00% 9/1/12 442 454
Fannie Mae 7.00% 9/1/12 431 442
Fannie Mae 7.00% 9/1/12 437 448
Fannie Mae 6.50% 10/1/12 35,600 36,345(H)
Fannie Mae 7.00% 10/1/12 149 153
Fannie Mae 7.00% 10/1/12 474 487
Fannie Mae 7.00% 10/1/12 375 385
Fannie Mae 7.00% 10/1/12 1,400 1,437(H)
Fannie Mae 7.00% 11/1/12 57 59
Fannie Mae 7.00% 11/1/12 676 694
Fannie Mae 7.00% 11/1/12 447 459
Fannie Mae 7.00% 11/1/12 404 414
Fannie Mae 7.00% 12/1/12 496 509
Fannie Mae 7.00% 12/1/12 69 70
Fannie Mae 7.00% 12/1/12 72 74
Fannie Mae 7.00% 12/1/12 566 581
Fannie Mae 7.50% 6/1/25 577 595
Fannie Mae 7.50% 6/1/25 519 536
Fannie Mae 7.50% 7/1/25 545 563
</TABLE>
7
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Fannie Mae 7.50% 8/1/25 $105 $108
Fannie Mae 7.50% 8/1/25 110 114
Fannie Mae 7.50% 9/1/25 754 778
Fannie Mae 7.50% 10/1/25 140 145
Fannie Mae 7.50% 10/1/25 412 425
Fannie Mae 7.50% 11/1/25 43 45
Fannie Mae 6.00% 1/1/26 1,779 1,779
Fannie Mae 7.50% 5/1/26 384 396
Fannie Mae 7.50% 5/1/26 48 50
Fannie Mae 7.50% 7/1/26 38 39
Fannie Mae 7.50% 7/1/26 24 25
Fannie Mae 7.50% 7/1/26 404 416
Fannie Mae 7.50% 8/1/26 372 384
Fannie Mae 7.50% 10/1/26 397 410
Fannie Mae 7.50% 11/1/26 559 577
Fannie Mae 7.50% 11/1/26 405 418
Fannie Mae 7.50% 12/1/26 547 564
Fannie Mae 7.00% 1/1/27 967 994
Fannie Mae 7.00% 4/1/27 2,486 2,556
Fannie Mae 7.50% 5/1/27 523 540
Fannie Mae 7.50% 5/1/27 382 394
Fannie Mae 7.50% 6/1/27 374 386
Fannie Mae 7.50% 6/1/27 378 390
Fannie Mae 7.50% 6/1/27 558 576
Fannie Mae 7.50% 6/1/27 566 584
Fannie Mae 7.50% 6/1/27 578 596
Fannie Mae 7.50% 7/1/27 356 367
Fannie Mae 7.50% 7/1/27 137 141
Fannie Mae 7.50% 7/1/27 158 163
Fannie Mae 7.50% 8/1/27 834 860
Fannie Mae 7.50% 8/1/27 461 475
Fannie Mae 7.50% 8/1/27 789 814
Fannie Mae 7.50% 9/1/27 577 595
</TABLE>
8
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Fannie Mae 7.50% 9/1/27 $448 $463
Fannie Mae 7.50% 9/1/27 454 468
Fannie Mae 7.50% 9/1/27 297 307
Fannie Mae 7.50% 9/1/27 91 94
Fannie Mae 7.50% 10/1/27 317 327
Fannie Mae 7.50% 10/1/27 650 671
Fannie Mae 7.50% 10/1/27 601 619
Fannie Mae 7.50% 10/1/27 357 368
Fannie Mae 7.50% 10/1/27 347 358
Fannie Mae 7.50% 10/1/27 399 412
Fannie Mae 7.50% 10/1/27 412 425
Fannie Mae 6.00% 11/1/27 2,949 2,945
Fannie Mae 6.00% 11/1/27 986 984
Fannie Mae 6.00% 11/1/27 492 492
Fannie Mae 7.00% 11/1/27 138 142
Fannie Mae 7.50% 11/1/27 253 261
Fannie Mae 7.50% 11/1/27 584 602
Fannie Mae 7.50% 11/1/27 609 628
Fannie Mae 7.50% 11/1/27 372 384
Fannie Mae 7.50% 11/1/27 557 575
Fannie Mae 7.50% 11/1/27 407 420
Fannie Mae 7.50% 11/1/27 358 369
Fannie Mae 7.50% 11/1/27 558 576
Fannie Mae 7.50% 11/1/27 335 346
Fannie Mae 7.50% 11/1/27 401 413
Fannie Mae 7.50% 12/1/27 637 657
Fannie Mae 7.50% 12/1/27 596 614
Fannie Mae 7.50% 12/1/27 110 114
Fannie Mae 7.50% 12/1/27 353 364
Fannie Mae 7.50% 12/1/27 561 579
Fannie Mae 7.50% 1/1/28 548 566
Fannie Mae 7.50% 2/1/28 400 413
Fannie Mae 6.00% 3/1/28 1,963 1,963
</TABLE>
9
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Fannie Mae 7.50% 3/1/28 $377 $389
Fannie Mae 7.50% 3/1/28 317 327
Fannie Mae 7.50% 4/1/28 558 575
Fannie Mae 7.50% 4/1/28 567 585
Fannie Mae 7.50% 4/1/28 348 360
Fannie Mae 7.50% 4/1/28 520 536
Fannie Mae 7.50% 4/1/28 325 335
Fannie Mae 7.50% 4/1/28 732 755
Fannie Mae 7.50% 4/1/28 599 618
Fannie Mae 7.50% 4/1/28 409 422
Fannie Mae 7.00% 5/1/28 2,889 2,972
Fannie Mae 7.50% 5/1/28 396 409
Fannie Mae 7.50% 5/1/28 384 396
Fannie Mae 7.50% 5/1/28 418 431
Fannie Mae 7.50% 5/1/28 474 489
Fannie Mae 7.50% 5/1/28 670 692
Fannie Mae 7.00% 6/1/28 993 1,021
Fannie Mae 7.00% 6/1/28 596 612
Fannie Mae 7.50% 6/1/28 584 603
Fannie Mae 7.50% 6/1/28 181 187
Fannie Mae 6.50% 7/1/28 2,086 2,121
Fannie Mae 6.50% 7/1/28 7,828 7,960
Fannie Mae 6.50% 7/1/28 9,929 10,096
Fannie Mae 6.50% 7/1/28 15,839 16,106
Fannie Mae 6.50% 7/1/28 15,889 16,157
Fannie Mae 7.00% 7/1/28 2,862 2,942
Fannie Mae 7.50% 7/1/28 441 455
Fannie Mae 6.00% 10/1/28 7,300 7,291(H)
Fannie Mae 6.50% 10/1/28 2,810 2,857(H)
Federal Housing Authority USGI #68 7.43% 3/1/21 265 281
Freddie Mac 8.25% 8/1/01 20 20
Freddie Mac 9.25% 6/1/02 97 102
Freddie Mac 6.75% 5/1/04 139 141
</TABLE>
10
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Freddie Mac 6.75% 10/15/05 $37 $37
Freddie Mac 7.50% 4/1/06 101 103
Freddie Mac 9.75% 7/1/08 283 301
Freddie Mac 7.35% 4/15/19 184 198
Freddie Mac 9.30% 4/15/19 1,811 1,951
Freddie Mac 7.00% 4/1/24 3,360 3,452
Freddie Mac 7.00% 4/1/24 3,002 3,083
Freddie Mac 7.00% 9/1/25 7,301 7,497
Freddie Mac 7.00% 3/1/26 2,349 2,412
Freddie Mac 7.00% 4/1/26 708 727
Freddie Mac 7.00% 4/1/26 2,398 2,463
Freddie Mac 7.00% 4/1/26 3,340 3,429
Freddie Mac 7.00% 1/1/27 8,292 8,513
Freddie Mac 6.00% 2/1/28 1,986 1,986
Freddie Mac 6.00% 2/1/28 2,956 2,956
Freddie Mac 6.00% 2/1/28 1,935 1,935
Freddie Mac 6.00% 3/1/28 1,985 1,985
Freddie Mac 6.00% 3/1/28 1,981 1,981
Freddie Mac 6.00% 3/1/28 2,921 2,921
Freddie Mac 6.00% 7/1/28 467 467
Freddie Mac 6.00% 7/1/28 3,973 3,972
Government National Mortgage Association 9.50% 3/15/03 109 113
Government National Mortgage Association 10.25% 6/15/03 21 23
Government National Mortgage Association 10.00% 11/15/09 7 7
Government National Mortgage Association 1.00% 12/20/21 1,177 1,199
Government National Mortgage Association 7.00% 1/15/24 21 22
Government National Mortgage Association 7.50% 9/15/26 932 966
Government National Mortgage Association 7.50% 7/15/27 980 1,015
Government National Mortgage Association 6.50% 10/1/28 11,700 11,959(H)
Government National Mortgage Association 7.00% 10/1/28 4,900 5,058(H)
Government National Mortgage Association 7.50% 10/1/28 7 7(H)
-----------
242,114
</TABLE>
11
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Stripped Securities 0.46%
Fannie Mae 9.50% 2/1/17 $244 $54(D1)
Fannie Mae 1009.50% 2/25/20 N.M. 4(D1)
Fannie Mae 1609.25% 8/25/21 11 234(D1)
Fannie Mae 0.00% 5/25/22 65 65(B)(D2)
Fannie Mae 0.00% 5/25/22 1,948 1,686(B)(D2)
Freddie Mac 10.00% 3/1/21 2,072 527(D1)
Freddie Mac 0.00% 7/15/22 307 261(B)(D2)
Freddie Mac 0.00% 9/15/22 363 358(B)(D2)
-----------
3,189
Variable-rate Securities 0.15%
Government National Mortgage Association 7.38% 6/20/25 1,032 1,054(C)
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED SECURITIES (IDENTIFIED COST $241,263) 246,357
---------------------------------------------------------------------------------------
YANKEE BONDS(A) 3.36%
Fixed-rate Securities 3.36%
Hydro-Quebec 8.05% 7/7/24 10,200 12,209(G)
Manitoba Province, Canada 9.50% 9/15/18 3,630 5,127
YPF Sociedad Anonima 7.50% 10/26/02 2,454 2,426(G)
YPF Sociedad Anonima 7.75% 8/27/07 4,250 3,708
-----------
TOTAL YANKEE BONDS (IDENTIFIED COST $23,732) 23,470
---------------------------------------------------------------------------------------
COMMON STOCKS AND EQUITY INTERESTS 4.09%
Shares
------
Black Rock 2001 Term Trust, Inc. 2,614 23,526
Black Rock Strategic Term Trust, Inc. 56 518
Home Ownership Funding 4 4,458(G)
-----------
TOTAL COMMON STOCKS AND EQUITY
INTERESTS (IDENTIFIED COST $26,211) 28,502
---------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
---------------------------------------------------------
<S><C>
SHORT-TERM INVESTMENTS 25.87%
U.S. Government and Agency Obligations 0.39%
Fannie Mae 5.20% 2/17/99 $2,750 $2,695
U.S. Government Agency
Mortgage-backed Securities 0.01%
Fannie Mae 8.00% 11/1/98 17 17
Fannie Mae 8.00% 11/1/98 78 78
-----------
95
Repurchase Agreement 25.16%
J.P. Morgan Securities, Inc.
5.5% dated 9/30/98, to be repurchased at
$175,528 on 10/1/98 (Collateral: $74,230
Federal Home Loan Bank Medium-term Notes,
6.03% due 10/1/99, value $78,651 and
$94,665 Fannie Mae Medium-term Notes,
6.22% due 8/5/03, value $102,900) 175,501 175,501
Options Purchased 0.31% Actual Contracts
Eurodollar Future Call, Oct 98, Strike Price $94.50 345 8
Eurodollar Futures Call, Jan 99, Strike price $94.25 358 591
Eurodollar Future Call, Apr 99, Strike Price $94.50 801 1,562
-----------
2,161
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $179,078) 180,452
---------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $784,493) 114.49% $798,745
OTHER ASSETS LESS LIABILITIES (14.49%) (101,068)
-----------
NET ASSETS CONSISTING OF:
Accumulated paid-in-capital applicable
to 59,384 shares outstanding $656,143
Under/(over) distributed net investment income 10,419
Undistributed net realized gain/(loss) on investments 14,724
Unrealized appreciation/(depreciation) on investments 16,391
----------
</TABLE>
13
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
-------------------------------------------------------------
<S><C>
NET ASSETS 100.00% $697,677
-----------
NET ASSET VALUE PER SHARE $11.75
-----------
<CAPTION>
ACTUAL APPRECIATION/
EXPIRATION CONTRACTS (DEPRECIATION)
---------------------------------------
<S><C>
Options Written
U.S. Treasury Bond Future Put, Oct 98, Strike Price $125.00 Oct 98 101 $37
U.S. Treasury Bond Future Put, Dec 98, Strike Price $124.00 Nov 98 293 113
U.S. Treasury Bond Future Call, Mar 99, Strike Price $134.00 Feb 99 202 (244)
Eurodollar Future Call, Mar 99, Strike Price $95.50 Mar 99 176 (2)
-----------
(96)
Futures Contracts Purchased
U.S. Treasury Bond Futures Dec 98 752 3,188
Futures Contracts Written
U.S. Treasury Note Futures Dec 98 238 (938)
U.S. Treasury Bond Futures Dec 98 23 (15)
-----------
(953)
- ---------------------------------------------------------------------------------------------------
</TABLE>
(A) Yankee Bond - Dollar denominated bond issued in the U.S. by foreign
entities.
(B) 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.
(C) The coupon rates shown on variable-rate securities are the rates at
September 30, 1998.
(D) Stripped Security - Security with interest-only or principal-only payment
streams, denoted by the superscript 1 or 2, respectively. For
interest-only securities, the amount shown as principal is the notional
balance used to calculate the amount of interest due.
(E) United States Treasury Inflation-Indexed security - U.S. Treasury security
whose principal value is adjusted daily in accordance with changes to the
Consumer Price Index. Interest is calculated on the basis of the current
adjusted principal value.
(F) Indexed Security - The rate of interest on this type of security is tied to
the London Interbank Offer Rate (LIBOR), the Global Telecom Basket (GTB)
Index or the one-year Treasury bill rate. The coupon rate is the rate as of
September 30, 1998.
(G) 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.
(H) When-issued Security - Security purchased on a delayed delivery basis.
Final settlement amount and maturity date have not yet been announced.
N.M. Not Meaningful
See Notes to Financial Statements
14
<PAGE>
STATEMENT OF OPERATIONS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
For the
Six Months Ended
September 30, 1998
------------------
(Unaudited)
<S><C>
INVESTMENT INCOME:
Interest $21,356
Dividends 807
----------------
Total Income 22,163
EXPENSES:
Management fee 1,566
Custodian fees 91
Directors' fees 10
Legal and audit fees 16
Registration fees 36
Reports to shareholders 7
Transfer agent and shareholder servicing expense 12
Other expenses 1
----------------
Total Expenses 1,739
NET INVESTMENT INCOME 20,424
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) on investments, options and futures 16,127
Change in unrealized appreciation/(depreciation) of
investments, options and futures 6,413
----------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 22,540
----------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $42,964
================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
15
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
For the Six For the Nine For the Year
Months Ended Months Ended Ended
September 30, 1998 March 31, 1998(A) June 30, 1997
------------------ ----------------- ---------------
(Unaudited)
<S><C>
CHANGE IN NET ASSETS:
Net investment income $20,424 $26,485 $32,258
Net realized gain/(loss) on investments,
options and futures 16,127 15,613 6,820
Change in unrealized appreciation/(depreciation)
of investments, options and futures 6,413 7,121 2,086
-------------- -------------- ---------------
Change in net assets resulting from operations 42,964 49,219 41,164
Distributions to shareholders from:
Net investment income (17,002) (27,271) (29,354)
Net realized gain on investments (14,963) (6,743) (306)
Change in net assets from
Fund share transactions 69,002 94,118 43,150
-------------- -------------- ---------------
Change in net assets 80,001 109,323 54,654
NET ASSETS:
Beginning of period 617,676 508,353 453,699
-------------- -------------- ---------------
End of period (including undistributed
net investment income of
$10,419, $6,997, and $7,615,
respectively) $697,677 $617,676 $508,353
============== ============== ===============
</TABLE>
- --------------------------------------------------------------------------------
(A) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset Core
Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
16
<PAGE>
FINANCIAL HIGHLIGHTS(A)
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
Contained below is per share operating performance data for a share of
common stock outstanding throughout each period shown, total investment
returns, 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 For the
Six Months Ended Nine Months Ended
September 30, 1998 March 31, 1998(E)
------------------ ------------------
(Unaudited)
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.59 $11.27
----------------- ----------------
Net investment income(B) 0.33 0.49
Net realized and unrealized gain/(loss)
on investments, options and futures 0.37 0.49
-----------------
----------------
Total from investment operations 0.70 0.98
----------------- ----------------
Distributions to shareholders from:
Net investment income (0.28) (0.53)
Net realized gain on investments (0.26) (0.14)
----------------- ----------------
Total distributions (0.54) (0.67)
----------------- ----------------
Net asset value, end of period $11.75 $11.59
================= ================
Total return(B) 2.17%(C) 8.91%(C)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(B) 0.50%(D) 0.50%(D)
Net investment income(B) 5.87%(D) 6.0%(D)
Portfolio turnover rate 575.8%(D) 226.9%(D)
Net assets, end of period (in thousands) $697,677 $617,676
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on
May 29, 1998.
(B) Net of fees waived pursuant to a voluntary expense limitation of 0.50%. In
the absence of this limitation, the ratio of expenses to average net assets
would have been 0.50% for the six months ended September 30, 1998, the nine
months ended March 31, 1998 and the year ended June 30, 1997, and 0.53%,
0.53%, 0.58% and 0.57% for the years ended June 30, 1996, 1995, 1994, and
1993, respectively.
(C) Not annualized
(D) Annualized
(E) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Core Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
17
<PAGE>
FINANCIAL HIGHLIGHTS(A) - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Portfolio
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
For the Years Ended June 30,
---------------------------------------------------------
1997 1996 1995 1994 1993
---------------------------------------------------------
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $11.05 $11.22 $10.50 $11.66 $11.20
--------- --------- --------- --------- ---------
Net investment income(B) 0.70 0.67 0.69 0.57 0.66
Net realized and unrealized gain/(loss)
on investments, options and futures 0.19 (0.14) 0.72 (0.63) 0.87
--------- --------- --------- --------- ---------
Total from investment operations 0.89 0.53 1.41 (0.06) 1.53
--------- --------- --------- --------- ---------
Distributions to shareholders from:
Net investment income (0.65) (0.66) (0.69) (0.61) (0.67)
Net realized gain on investments (0.01) (0.04) -- (0.49) (0.40)
--------- --------- --------- --------- ---------
Total distributions (0.66) (0.71) (0.69) (1.10) (1.07)
--------- --------- --------- --------- ---------
Net asset value, end of period $11.27 $11.05 $11.22 $10.50 $11.66
========= ========= ========= ========= =========
Total return(B) 8.27% 4.86% 14.12% (0.89)% 14.52%
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(B) 0.50% 0.50% 0.50% 0.50% 0.50%
Net investment income(B) 6.4% 6.3% 7.0% 6.0% 6.0%
Portfolio turnover rate 384.8% 266.0% 257.9% 272.5% 313.1%
Net assets, end of period (in thouands) $508,353 $453,699 $336,774 $205,959 $135,886
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on
May 29, 1998.
(B) Net of fees waived pursuant to a voluntary expense limitation of 0.50%. In
the absence of this limitation, the ratio of expenses to average net assets
would have been 0.50% for the six months ended September 30, 1998, the nine
months ended March 31, 1998 and the year ended June 30, 1997, and 0.53%,
0.53%, 0.58% and 0.57% for the years ended June 30, 1996, 1995, 1994, and
1993, respectively.
(C) Not annualized
(D) Annualized
(E) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Core Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
18
<PAGE>
STATEMENT OF NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
------------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES 17.05%
Banking and Finance 4.08%
IBJ Preferred Capital Co. LLC 9.40% 12/29/49 $500 $364(B)
Lehman Brothers Holdings 6.50% 9/25/00 1,000 996
SB Treasury Company LLC 8.79% 12/29/49 500 425(B)
Zurich Capital Trust I 8.38% 6/1/37 500 592(B)
------------
2,377
Industrial 4.73%
Ford Motor Company 6.63% 2/15/28 200 203
Ford Motor Company 6.63% 10/1/28 280 284
General Motors Corporation 6.75% 5/1/28 500 511
Raytheon Company 6.75% 8/15/07 1,150 1,232
West Capital Funding Incorporated 6.88% 7/15/28 500 530
------------
2,760
Media and Entertainment 2.85%
News America Incorporated 6.63% 1/9/08 200 204
TCI Communications Inc. 8.75% 8/1/15 190 237
Time Warner Entertainment Company, L.P. 8.38% 3/15/23 200 241
Time Warner Entertainment Company, L.P. 8.38% 7/15/33 300 366
Worldcom Inc. 6.25% 8/15/03 590 614
------------
1,662
Transportation 4.48%
Burlington Northern Santa Fe Corporation 6.38% 12/15/05 360 378
Consolidated Rail Corporation 7.88% 5/15/43 200 225
CSX Corporation 7.45% 5/1/07 570 632
CSX Corporation 7.90% 5/1/17 500 563
Norfolk Southern Corporation 7.80% 5/15/27 700 817
------------
2,615
Utilities 0.91%
Niagara Mohawk Power Corporation 7.75% 10/1/08 500 533
TOTAL CORPORATE BONDS
AND NOTES (IDENTIFIED COST $9,853) 9,947
-----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
------------------------------------------------------------
<S><C>
ASSET-BACKED SECURITIES 2.80%
Fixed-rate Securities 2.80%
Commercial Mortgage Acceptance Corporation 5.80% 3/15/06 $750 $759
GMAC Commercial Mortgage Security Incorporated 6.15% 11/15/07 299 307
Morgan Stanley Capital I Incorporated 6.34% 11/15/07 542 569
------------
TOTAL ASSET-BACKED
SECURITIES (IDENTIFIED COST $1,613) 1,635
-----------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 2.05%
Fixed-rate Securities 2.05%
Asset Securitization Corporation 7.49% 4/14/29 1,050 1,195
TOTAL MORTGAGE-BACKED
SECURITIES (IDENTIFIED COST $1,137) 1,195
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT
AND AGENCY OBLIGATIONS 24.62%
Fixed-rate Securities 24.26%
United States Treasury Bonds 6.38% 8/15/27 9,170 10,829
United States Treasury Notes 5.38% 6/30/03 1,310 1,370
United States Treasury Notes 5.75% 8/15/03 1,840 1,953
------------
14,152
Indexed Securities 0.36%
United States Treasury Bonds 3.63% 4/15/28 212 211(E)
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (IDENTIFIED COST $13,577) 14,363
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES 22.42%
Fixed-rate Securities 22.42%
Fannie Mae 6.50% 5/1/13 400 408(D)
Fannie Mae 6.50% 7/1/28 1,592 1,619
Government National Mortgage Association 7.50% 3/15/23 457 474
Government National Mortgage Association 7.50% 4/15/23 599 621
Government National Mortgage Association 7.50% 5/15/23 590 612
Government National Mortgage Association 7.50% 5/15/23 679 705
</TABLE>
20
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
------------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Government National Mortgage Association 7.50% 5/15/23 $452 $468
Government National Mortgage Association 7.50% 5/15/23 454 471
Government National Mortgage Association 7.50% 6/15/23 407 422
Government National Mortgage Association 7.00% 7/15/23 45 47
Government National Mortgage Association 7.50% 7/15/23 478 494
Government National Mortgage Association 7.00% 8/15/23 49 51
Government National Mortgage Association 7.00% 9/15/23 561 580
Government National Mortgage Association 7.00% 9/15/23 779 804
Government National Mortgage Association 7.00% 10/15/23 2,875 2,969
Government National Mortgage Association 7.00% 11/15/23 58 60
Government National Mortgage Association 7.50% 7/15/28 494 513
Government National Mortgage Association 7.50% 7/15/28 1,413 1,466
Government National Mortgage Association 7.50% 7/15/28 190 197
Government National Mortgage Association 7.50% 7/15/28 100 103
------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED SECURITIES (IDENTIFIED COST $12,943) 13,084
-----------------------------------------------------------------------------------------
YANKEE BONDS(A) 4.45%
Fixed-rate Securities 2.89%
Manitoba Province, Canada 9.50% 9/15/18 270 381
PDVSA Finance Limited 7.50% 11/15/28 500 413(B)
Petroleos Mexicanos 8.85% 9/15/07 85 66
Republic of Brazil 8.00% 4/15/14 499 293
Republic of South Korea 8.88% 4/15/08 410 353
United Mexican States 11.50% 5/15/26 170 166
Vnesheconombank 6.63% 12/15/20 200 13
------------
1,685
Variable-rate Securities 1.56%
Republic of Argentina 6.63% 3/31/05 817 641(C)
Republic of Brazil 6.63% 4/15/06 475 272(C)
------------
913
TOTAL YANKEE BONDS
(IDENTIFIED COST $3,082) 2,598
-----------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
------------------------------------------------------------
<S><C>
FOREIGN BONDS 2.82%
Foreign Government Obligations 2.82%
United Kingdom Treasury Stock 8.00% 12/7/15 250(F) $582
United Kingdom Treasury Stock 8.00% 6/7/21 30(F) 74
United Kingdom Treasury Stock 6.00% 12/7/28 470(F) 988
------------
TOTAL FOREIGN BONDS
(IDENTIFIED COST $1,497) 1,644
-----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 23.71%
U.S. Government Agency Obligations 0.17%
Fannie Mae 5.20% 2/17/99 $100 98
Repurchase Agreement 23.32%
J.P. Morgan Securities, Inc.
5.5% dated 9/30/98, to be repurchased at
$13,610 on 10/01/98 (Collateral: $12,900
Fannie Mae Medium-term Notes, 6.41% due
7/8/02, value $14,068) 13,608 13,608
Options Purchased 0.22% Actual Contracts
----------------
Eurodollar Future Call, Apr 99, Strike Price $94.50 49 95
Eurodollar Future Call, Dec 98, Strike Price $94.50 14 16
Eurodollar Future Call, Jan 99, Strike Price $94.25 12 20
------------
131
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $13,767) 13,837
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $57,469) 99.92% 58,303
OTHER ASSETS LESS LIABILITIES 0.08% 47
------------
NET ASSETS CONSISTING OF:
Accumulated paid-in-capital applicable to 5,678 shares outstanding $56,741
Under/(over) distributed net investment income 558
Undistributed net realized gain/(loss) on investments 347
Unrealized appreciation/(depreciation) on investments 704
------------
</TABLE>
22
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
-----------------------------------------------------------------
<S><C>
NET ASSETS 100.00% $58,350
------------
NET ASSET VALUE PER SHARE $10.28
------------
ACTUAL APPRECIATION/
EXPIRATION CONTRACTS (DEPRECIATION)
--------------------------------------
Options Written
U.S. Treasury Bond Future Put, Oct 98, Strike Price $125.00 Oct 98 8 $3
U.S. Treasury Bond Future Put, Dec 98, Strike Price $124.00 Nov 98 23 9
U.S. Treasury Bond Future Call, Mar 99, Strike Price $134.00 Feb 99 16 (19)
Republic of Brazil Bond Call, Oct 98, Strike Price $60.3125 Oct 98 240 2
Republic of Brazil Bond Call, Oct 98, Strike Price $60.125 Oct 98 190 N.M.
Republic of Argentina Bond Call, Oct 98, Strike Price $81.30 Oct 98 171 N.M.
Eurodollar Future Call, Mar 99, Strike Price $95.50 Mar 99 11 N.M.
------------
(5)
Futures Contracts Purchased
U.S. Treasury Note Futures Dec 98 13 8
Futures Contracts Written
U.S. Treasury Note Futures Dec 98 24 (94)
U.S. Treasury Bond Futures Dec 98 8 (3)
------------
(97)
</TABLE>
- --------------------------------------------------------------------------------
(A) Yankee Bond - Dollar denominated bond issued in the U.S. by foreign
entities.
(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) The coupon rates shown on variable-rate securities are the rates at
September 30, 1998.
(D) When-issued Security - Security purchased on a delayed delivery basis.
Final settlement amount and maturity date have not yet been announced.
(E) United States Treasury Inflation-Indexed Security - U.S. Treasury security
whose principal value is adjusted daily in accordance with changes to the
Consumer Price Index. Interest is calculated on the basis of the current
adjusted principal value.
(F) Denominated in British Pounds
N.M. Not meaningful.
See Notes to Financial Statements
23
<PAGE>
STATEMENT OF OPERATIONS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
July 8, 1998(A)
to
September 30, 1998
------------------
(Unaudited)
<S><C>
INVESTMENT INCOME:
Interest $605
Dividends 0
--------------
Total Income 605
EXPENSES:
Management fee 42
Custodian fees 14
Transfer agent and shareholder servicing expense 5
Legal and audit fees 4
Registration fees 3
Reports to shareholders 4
Directors' fees 2
Other expenses 15
--------------
89
Less fees waived (42)
--------------
Total expenses, net of waivers 47
--------------
NET INVESTMENT INCOME 558
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) on investment options and futures 347
Change in unrealized appreciation/(depreciation) of investments,
options and futures 704
--------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 1,051
--------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $1,609
==============
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
See Notes to Financial Statements
24
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
July 8, 1998(A)
to
September 30, 1998
------------------
(Unaudited)
<S><C>
CHANGE IN NET ASSETS:
Net investment income $558
Net realized gain/(loss) on investments, options and futures 347
Change in unrealized appreciation/(depreciation) of investments, options and futures 704
----------------
Change in net assets resulting from operations 1,609
Distributions to shareholders from:
Net investment income 0
Change in net assets from
Fund share transactions 56,726
----------------
Change in net assets 58,335
NET ASSETS:
Beginning of period 15
----------------
End of period (including undistributed
net investment income of $558) $58,350
================
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
See Notes to Financial Statements
25
<PAGE>
FINANCIAL HIGHLIGHTS
LM Institutional Fund Advisors I, Inc.
Western Asset Core Plus Portfolio
Contained below is per share operating performance data for a share of
common stock outstanding through the period shown, 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>
- ----------------------------------------------------------------------------------------------
July 8, 1998(A)
to
September 30, 1998
------------------
(Unaudited)
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
---------------
Net investment income(B) 0.10
Net realized and unrealized gain/(loss)
on investments, options and futures 0.18
---------------
Total from investment operations 10.28
---------------
Distributions to shareholders from:
Net investment income --
Net realized gain on investments --
---------------
Total distributions --
---------------
Net asset value, end of period $10.28
===============
Total return(B) 2.70%(C)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(B) 0.50%(D)
Net investment income(B) 5.95%(D)
Portfolio turnover rate 1,217.48%(D)
Net assets, end of period (in thousands) $58,350
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
(B) Net of advisory fees waived pursuant to a volunatary expense limitation of
0.50%. In the absence of this limitation, the ratio of expenses to average
net assets would have been 0.95% for the period ended September 30, 1998.
(C) Not Annualized
(D) Annualized
See Notes to Financial Statements
26
<PAGE>
STATEMENT OF NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES 18.74%
Banking and Finance 7.23%
Criimi Mae Trust 1 6.77% 6/30/33 $707 $716
Dryden Investor Trust 7.16% 7/23/08 5,000 5,106(G)
Ford Motor Credit Co. 6.13% 4/28/03 1,580 1,637
Heller Financial, Inc. 6.66% 7/11/02 1,700 1,790
IBJ Preferred Capital Co. LLC 8.79% 12/29/49 3,990 2,908(G)
J.P. Morgan & Company 2.92% 2/15/12 710 642(F)
Lehman Brothers, Inc. 8.63% 2/26/99 400 404
Lehman Brothers, Inc. 7.63% 6/1/06 1,850 1,878
Lehman Brothers, Inc. 6.50% 4/15/08 1,040 989
National Westminster Bancorp 9.38% 11/15/03 290 339
NationsBank Capital Trust III 6.24% 1/15/27 1,300 1,253(C)
Norwest Corporation 5.75% 11/16/98 100 100
SB Treasury Company LLC 9.40% 12/29/49 4,390 3,730(G)
Traveler's Group, Inc. 6.25% 1/15/05 1,300 1,325
United States Leasing International 8.75% 12/1/01 500 550
United States Leasing International 6.63% 5/15/03 1,750 1,833
----------
25,200
Food and Beverage 0.61%
Philip Morris Companies, Inc. 7.00% 7/15/05 2,000 2,138
Gaming 1.43%
Mirage Resorts Incorporated 6.63% 2/1/05 1,500 1,466
Mirage Resorts Incorporated 6.75% 8/1/07 3,640 3,532
----------
4,998
Healthcare 1.57%
Columbia/HCA Healthcare Corporation 8.85% 1/1/07 5,020 5,459
Media and Entertainment 6.09%
Continental Cablevision Inc. 8.30% 5/15/06 5,000 5,656
News America Incorporated 6.70% 5/21/04 3,570 3,718(C,G)
TCI Communications Inc. 8.00% 8/1/05 1,000 1,143
Tele-Communications Incorporated 9.25% 4/15/02 4,000 4,489
</TABLE>
27
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES
Media and Entertainment (continued)
Time Warner, Inc. 9.13% 1/15/13 $2,000 $2,511
Time Warner, Inc. 7.25% 10/15/17 3,440 3,693
----------
21,210
Transportation 1.81%
Norfolk Southern Corporation 7.35% 5/15/07 1,730 1,944
Union Pacific Corporation 7.60% 5/1/05 4,030 4,373
----------
6,317
TOTAL CORPORATE BONDS
AND NOTES (IDENTIFIED COST $65,495) 65,322
-----------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 9.48%
Fixed-rate Securities 8.34%
Bridgestone/Firestone Master Trust 6.17% 7/1/03 3,800 3,859
Chevy Chase 1997 - A 7.65% 12/20/07 2,473 2,483
CS First Boston Mortgage Services 6.62% 9/25/09 4,000 4,064
Fleetwood Credit Corp. Grantor Trust 6.75% 3/15/10 1,765 1,809
Green Tree Financial Corporation 6.90% 2/15/04 2,974 2,994
Guaranteed Export Certificates 6.13% 6/15/04 1,412 1,458
Irwin Home Equity Corporation 6.77% 7/15/06 766 772
Lehman FHA Title 1 Loan Trust 7.71% 8/25/17 1,611 1,662
Long Beach Acceptance Auto Grantor Trust 6.85% 10/15/03 2,871 2,886(G)
Mego Mortgage Home Loan Trust 6.55% 9/25/07 139 139
Mego Mortgage Home Loan Trust 7.28% 9/25/16 880 890
Mego Mortgage Home Loan Trust 7.17% 5/25/23 1,700 1,721
Premier Auto Trust 1996-3 6.50% 3/6/00 2,450 2,455
PSC Grantor Trust 6.29% 6/8/05 1,857 1,876
----------
29,068
Indexed Securities 0.87%
Lehman Home Equity Loan Trust 5.82% 12/15/27 1,082 1,082(F)
Matterhorn One Limited Trust 6.81% 1/21/06 1,100 1,109(F)
Matterhorn One Limited Trust 6.31% 6/21/06 855 859(F)
----------
3,050
</TABLE>
28
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
ASSET-BACKED SECURITIES
Stripped Securities 0.27%
Bay View Auto Trust 3.15% 12/15/04 8,986 149(D1)
Option One CTF Mortgage Loan Trust 3.25% 3/25/01 2,280 57(D1)
Union Acceptance Corp. 2.75% 5/10/04 43,003 718(D1)
----------
924
TOTAL ASSET-BACKED
SECURITIES (IDENTIFIED COST $32,264) 33,042
-----------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 6.30%
Fixed-rate Securities 4.67%
Asset Securitization Corporation 6.72% 11/12/26 2,495 2,568
Chevy Chase Home Loan Trust 7.15% 5/15/15 877 897
Cityscape Home Equity Loan Trust 7.40% 9/25/28 2,331 2,349(G)
CPS Auto Grantor Trust 6.30% 8/15/02 935 939(C)
Donaldson, Lufkin & Jenrette Mortgage
Acceptance Corp. 6.86% 11/12/21 1,709 1,777
Merrill Lynch Mortgage Investors, Inc. 9.70% 6/15/08 678 691
Merrill Lynch Mortgage Investors, Inc. 9.65% 9/15/10 1,750 1,812
Merrill Lynch Mortgage Investors, Inc. 6.69% 11/21/28 1,835 1,842
Metropolitan Asset Funding, Inc. 6.50% 11/20/01 150 150
Metropolitan Asset Funding, Inc. 6.95% 4/20/08 2,034 2,049
Structured Asset Securities Corp. 7.75% 2/25/28 1,193 1,198
----------
16,272
Indexed Securities 0.08%
Resolution Trust Corporation 6.52% 9/25/21 279 278(F)
Stripped Securities 0.18%
CMC Securities Corp. 0.00% 2/25/09 511 401(D2)
Securitized Asset Sales, Inc. 0.00% 12/25/10 269 216(D2)
----------
617
Variable-rate Securities 1.37%
Housing Securities Inc. 5.99% 11/25/26 542 536(C)
Resolution Trust Corporation 6.04% 7/25/20 51 50(C)
Resolution Trust Corporation 8.74% 3/25/21 923 937(C)
Resolution Trust Corporation 6.99% 6/25/24 600 599(C)
Resolution Trust Corporation 6.06% 1/25/27 1,188 1,177(C)
Resolution Trust Corporation 7.89% 9/25/29 92 95(C)
Resolution Trust Corporation 8.10% 9/25/29 601 623(C)
</TABLE>
29
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
MORTGAGE-BACKED SECURITIES
Variable-rate Securities (continued)
Resolution Trust Corporation 7.38% 12/25/29 $700 $700(C)
Securitized Asset Sales, Inc. 7.02% 8/25/33 60 60(C)
----------
4,777
TOTAL MORTGAGE-BACKED
SECURITIES (IDENTIFIED COST $21,527) 21,944
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT
AND AGENCY OBLIGATIONS 30.04%
Fixed-rate Securities 24.20%
United States Treasury Notes 5.88% 9/30/02 6,920 7,301
United States Treasury Notes 5.63% 12/31/02 1,700 1,783
United States Treasury Notes 5.75% 4/30/03 37,261 39,439
United States Treasury Notes 5.50% 5/31/03 6,000 6,294
United States Treasury Notes 5.38% 6/30/03 5,820 6,086
United States Treasury Notes 5.75% 8/15/03 3,140 3,332
United States Treasury Notes 7.88% 11/15/04 3,300 3,906
United States Treasury Notes 7.00% 7/15/06 10,000 11,650
United States Treasury Notes 6.50% 10/15/06 1,610 1,828
United States Treasury Notes 6.63% 5/15/07 2,390 2,753
----------
84,372
Indexed Securities 5.84%
United States Treasury Bonds 3.63% 4/15/28 11,614 11,581(E)
United States Treasury Notes 3.38% 1/15/07 4,326 4,262(E)
United States Treasury Notes 3.63% 1/15/08 4,485 4,499(E)
----------
20,342
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (IDENTIFIED COST $101,145) 104,714
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES 21.64%
Fixed-rate Securities 16.39%
Agricultural Mortgage (Farmer Mac) 7.92% 1/25/12 1,948 2,191
Fannie Mae 7.00% 4/1/08 2,070 2,125
Fannie Mae 7.00% 1/1/11 955 980
Fannie Mae 7.00% 6/1/11 965 991
</TABLE>
30
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Fixed-rate Securities (continued)
Fannie Mae 7.00% 6/1/13 $991 $1,017
Fannie Mae 6.00% 7/1/13 98 99
Fannie Mae 6.50% 6/1/14 1,521 1,557
Fannie Mae 7.00% 9/1/23 10,000 10,266(B)
Fannie Mae 7.00% 1/1/28 1,935 1,989
Fannie Mae 6.00% 4/1/28 496 496
Fannie Mae 7.00% 5/1/28 963 991
Fannie Mae 6.00% 6/1/28 990 989
Fannie Mae 7.00% 6/1/28 3,973 4,084
Fannie Mae 6.00% 7/1/28 3,973 3,968
Fannie Mae 6.50% 7/1/28 4,863 4,945
Fannie Mae 6.50% 7/1/28 792 805
Fannie Mae 6.50% 7/1/28 13,751 13,983
Fannie Mae 7.00% 7/1/28 1,673 1,720
Freddie Mac 8.50% 7/1/06 117 120
Freddie Mac 7.76% 5/1/12 290 321
Freddie Mac 6.50% 6/1/13 412 423
Freddie Mac 6.50% 6/1/14 698 718
Freddie Mac 6.50% 11/1/15 406 412
Freddie Mac 7.50% 4/1/17 353 365
Freddie Mac 9.30% 4/15/19 978 1,054
Government National Mortgage Association 9.50% 9/15/05 232 245
Government National Mortgage Association 9.00% 6/15/06 275 286
Government National Mortgage Association 7.00% 6/15/28 4 4
----------
57,144
Stripped Securities 0.07%
Fannie Mae 0.00% 5/25/22 18 17(D2)
Fannie Mae 0.00% 5/25/22 195 169(D2)
Freddie Mac 10.00% 3/1/21 192 49(D1)
----------
235
Variable-rate Securities 5.18%
Fannie Mae 4.42% 3/13/02 12,720 12,306(C)
Fannie Mae 6.29% 3/1/18 174 175(C)
Freddie Mac 6.68% 1/1/19 86 87(C)
</TABLE>
31
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES
Variable-rate Securities (continued)
Government National Mortgage Association 7.00% 8/20/21 $465 $474(C)
Government National Mortgage Association 6.88% 5/20/22 1,123 1,148(C)
Government National Mortgage Association 6.88% 6/20/22 1,410 1,441(C)
Government National Mortgage Association 6.88% 6/20/22 781 798(C)
Government National Mortgage Association 7.00% 7/20/22 1,264 1,288(C)
Government National Mortgage Association 7.00% 8/20/22 327 333(C)
----------
18,050
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED SECURITIES (IDENTIFIED COST $74,364) 75,429
-----------------------------------------------------------------------------------------
YANKEE BONDS(A) 4.87%
Fixed-rate Securities 4.87%
Cable & Wireless Communications 6.38% 3/6/03 3,920 4,008
Petroliam Nasional Berhad 6.63% 10/18/01 4,000 3,173(G)
Petrozuata Finance, Inc. 7.63% 4/1/09 3,150 3,006(G)
YPF Sociedad Anonima 7.50% 10/26/02 3,228 3,191(G)
YPF Sociedad Anonmia 7.00% 10/26/02 3,688 3,610(G)
----------
TOTAL YANKEE BONDS (IDENTIFIED COST $17,885) 16,988
-----------------------------------------------------------------------------------------
COMMON STOCKS
AND EQUITY INTERESTS 3.54%
Shares
------
Black Rock 1999 Term Trust, Inc. 10 97
Black Rock 2001 Term Trust, Inc. 1,340 12,063
Black Rock Strategic Term Trust, Inc. 20 184
----------
TOTAL COMMON STOCKS AND EQUITY
INTERESTS (IDENTIFIED COST $11,275) 12,344
-----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 6.50%
Corporate Bonds and Notes 0.06%
General Motors Acceptance Corp. 6.00% 12/7/98 $210 $210
U.S. Government and Agency Obligations 0.26%
Fannie Mae 5.00% 2/17/99 200 196
</TABLE>
32
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
SHORT-TERM INVESTMENTS
U.S. Government and Agency Obligations (continued)
Fannie Mae 5.20% 2/17/99 $539 $539
United States Treasury Notes 5.88% 3/31/99 150 151
----------
886
Yankee Bonds(A) 0.10%
Hydro - Quebec 7.74% 2/26/99 350 353
Repurchase Agreement 6.02%
J.P. Morgan Securities, Inc.
5.5% dated 9/30/98, to be repurchased at
$20,995 on 10/01/98 (Collateral: $20,640
Federal Home Loan Bank Medium-term Notes,
6.03% due 10/10/99, value $22,034) 20,992 20,992
Options Purchased 0.06% Actual Contracts
----------------
Eurodollar Future Call, Apr 99, Strike Price $94.50 31 61
Eurodollar Futures Call, Jan 99, Strike Price $94.25 92 152
U.S. Treasury Bonds Futures Put, Dec 98,
Strike Price $118.00 89 1
----------
214
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $22,478) 22,655
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $346,433) 101.11% $352,438
OTHER ASSETS LESS LIABILITIES (1.11)% (3,869)
----------
NET ASSETS CONSISTING OF:
Accumulated paid-in-capital applicable to
31,479 shares outstanding $333,147
Under/(over) distributed net investment income 5,167
Undistributed net realized gain/(loss) on investments 3,887
Unrealized appreciation/(depreciation) on investments 6,368
-----------
NET ASSETS 100.00% $348,569
----------
NET ASSET VALUE PER SHARE $11.07
----------
</TABLE>
33
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ACTUAL APPRECIATION/
EXPIRATION CONTRACTS (DEPRECIATION)
-------------------------------------------
<S><C>
Options Written
U.S. Treasury Bond Future Call, Dec 98, Strike Price $136.00 Nov 98 126 ($18)
Eurodollar Future Call, Mar 99, Strike Price $95.50 Mar 99 7 N.M.
-----------
(18)
Futures Contracts Purchased
U.S. Treasury Note Futures Dec 98 36 82
U.S. Treasury Note Futures Dec 98 201 331
Eurodollar Futures Jun 99 57 47
-----------
460
Futures Contracts Written
U.S. Treasury Bond Futures Dec 98 72 (79)
</TABLE>
- --------------------------------------------------------------------------------
(A) Yankee Bond - Dollar denominated bond issued in the U.S. by foreign
entities.
(B) When-issued Security - Security purchased on a delayed delivery basis.
Final settlement amount and maturity date have not yet been announced.
(C) The coupon rates shown on variable-rate securities are the rates at
September 30, 1998.
(D) Stripped Security - Security with interest-only or principal-only payment
streams, denoted by superscript 1 or 2, respectively. For interest-only
securities, the amount shown as principal is the notional balance used to
calculate the amount of interest due.
(E) United States Treasury Inflation-Indexed Security - U.S. Treasury security
whose principal value is adjusted daily in accordance with changes to the
Consumer Price Index. Interest is calculated on the basis of the current
adjusted principal value.
(F) Indexed Security - The rate of interest on this type of security is tied to
the London Interbank Offer Rate (LIBOR), the Global Telecom Basket (GTB)
Index or the one year Treasury Bill rate. The coupon rate is the rate as of
September 30, 1998.
(G) 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.
N.M. Not meaningful
See Notes to Financial Statements
34
<PAGE>
STATEMENT OF OPERATIONS
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
For the Six
Months Ended
September 30, 1998
------------------
(Unaudited)
<S><C>
INVESTMENT INCOME:
Interest $10,118
Dividends 267
------------------
Total Income 10,385
EXPENSES:
Management fee 678
Custodian fees 56
Registration fees 40
Legal and audit fees 21
Directors' fees 10
Reports to shareholders 9
Organization expense 6
Transfer agent and shareholder servicing expense 2
Other expenses 42
------------------
864
Less fees waived (102)
------------------
Total expenses, net of waivers 762
------------------
NET INVESTMENT INCOME 9,623
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) on investments, options and futures 3,976
Change in unrealized appreciation/(depreciation) of
investments, options and futures 5,279
------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 9,255
------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $18,878
------------------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the Six For the Nine For the Year
Months Ended Months Ended Ended
September 30, 1998 March 31, 1998(A) June 30, 1997
---------------------------------------------------
(Unaudited)
<S><C>
CHANGE IN NET ASSETS:
Net investment income $9,623 $10,959 $10,304
Net realized gain/(loss) on investments,
options and futures 3,976 4,484 1,450
Change in unrealized appreciation/(depreciation)
of investments, options and futures 5,279 266 1,322
---------------- ------------- -------------
Change in net assets resulting
from operations 18,878 15,709 13,076
Distributions to shareholders from:
Net investment income (8,412) (10,136) (8,020)
Net realized gain on investments (3,136) (2,146) (993)
Change in net assets from
Fund share transactions 47,708 65,607 154,355
---------------- ------------- -------------
Change in net assets 55,038 69,034 158,418
NET ASSETS:
Beginning of period 293,531 224,497 66,079
---------------- ------------- -------------
End of period (including
undistributed net investment
income of $5,167, $3,956 and
$3,165, respectively) $348,569 $293,531 $224,497
================ ============= =============
</TABLE>
- --------------------------------------------------------------------------------
(A) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Intermediate Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
36
<PAGE>
FINANCIAL HIGHLIGHTS(A)
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
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 For the Nine
Months Ended Months Ended
September 30, 1998 March 31, 1998(E)
------------------ -----------------
(Unaudited)
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.85 $10.72
---------------- ----------------
Net investment income(B) 0.28 0.46
Net realized and unrealized gain/(loss)
on investments, options and futures 0.32 0.23
---------------- ----------------
Total from investment operations 0.60 0.69
---------------- ----------------
Distributions to shareholders from:
Net investment income (0.27) (0.46)
Net realized gain on investments (0.11) (0.10)
---------------- ----------------
Total distributions (0.38) (0.56)
---------------- ----------------
Net asset value, end of period $11.07 $10.85
================ ================
Total return(B) 5.57%(C) 6.59%(C)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets
Expenses(B) 0.45%(D) 0.45%(D)
Net investment income(B) 6.10%(D) 5.78%(D)
Portfolio turnover rate 527.90%(D) 401.40%(D)
Net assets, end of period (in thousands) $348,569 $293,531
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on May
29, 1998.
(B) Net of fees waived pursuant to a voluntary expense limitation of 0.50% until
August 5, 1996 and 0.45% thereafter. In the absence of this limitation, the
ratio of expenses to average net assets would have been 0.51% for the six
months ended September 30, 1998, 0.52% for the nine months ended March 31,
1998, and 0.55%, 1.03% and 1.60% for the years ended June 30, 1997, 1996 and
1995, respectively.
(C) Not annualized
(D) Annualized
(E) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Intermediate Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
37
<PAGE>
FINANCIAL HIGHLIGHTS(A) - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Intermediate Portfolio
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the Years Ended June 30,
-------------------------------------------
1997 1996 1995
-------------------------------------------
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.48 $10.74 $10.00
----------- ----------- -----------
Net investment income(B) 0.55 0.54 0.39
Net realized and unrealized gain/(loss)
on investments, options and futures 0.30 (0.01) 0.60
----------- ----------- -----------
Total from investment operations 0.85 0.53 0.99
----------- ----------- -----------
Distributions to shareholders from:
Net investment income (0.54) (0.54) (0.24)
Net realized gain on investments (0.07) (0.25) (0.01)
----------- ----------- -----------
Total distributions (0.61) (0.79) (0.25)
----------- ----------- -----------
Net asset value, end of period $10.72 $10.48 $10.74
=========== =========== ===========
Total return(B) 8.32% 5.15% 10.08%
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(B) 0.45% 0.50% 0.50%
Net investment income(B) 6.33% 6.28% 6.11%
Portfolio turnover rate 419.26% 841.29% 764.45%
Net assets, end of period (in thousands) $224,497 $66,079 $20,313
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on May
29, 1998.
(B) Net of fees waived pursuant to a voluntary expense limitation of 0.50% until
August 5, 1996 and 0.45% thereafter. In the absence of this limitation, the
ratio of expenses to average net assets would have been 0.51% for the six
months ended September 30, 1998, 0.52% for the nine months ended March 31,
1998, and 0.55%, 1.03% and 1.60% for the years ended June 30, 1997, 1996 and
1995, respectively.
(C) Not annualized
(D) Annualized
(E) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Intermediate Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
38
<PAGE>
STATEMENT OF NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
CORPORATE BONDS AND NOTES 16.13%
Banking and Finance 14.67%
Associates Corporation North America 6.38% 8/15/00 $1,500 $1,532
Bankamerica Capital III 6.26% 1/15/27 500 485(B)
Chase Capital IV 6.31% 8/1/28 600 593(E)
Criimi Mae Trust 1 6.77% 6/30/33 253 256(F)
Dryden Investor Trust 7.16% 7/23/08 800 817(F)
First National Bank 6.50% 1/14/00 500 507
IBJ Preferred Capital Co. LLC 8.79% 12/29/49 270 197(F)
IBM Credit Corporation 5.79% 3/20/00 1,000 1,012
MCN Investment Corporation 6.30% 4/2/01 800 809(B)
SB Treasury Company LLC 9.40% 12/29/49 270 229(F)
-----------
6,437
Food and Beverage 1.46%
Philip Morris Companies, Inc. 6.95% 6/1/06 600 638
TOTAL CORPORATE BONDS AND
NOTES (IDENTIFIED COST $7,042) 7,075
-----------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES 18.53%
Fixed-rate Securities 15.39%
Bridgestone/Firestone Master Trust 6.17% 7/1/03 500 508
FASCO Auto Grantor Trust 1996-1 6.65% 11/15/01 110 111
Fleetwood Credit Corp. Grantor Trust 6.75% 3/15/10 379 389
Global Rated Eligible Asset Trust 7.09% 1/15/02 543 544
Green Tree Financial Corporation 6.90% 2/15/04 472 475
Green Tree Home Improvement Loan Trust 8.10% 10/15/14 1,364 1,366
Irwin Home Equity Corporation 6.65% 4/15/05 62 62
Long Beach Acceptance Auto Grantor Trust 6.69% 9/25/04 650 653(F)
Long Beach Acceptance Auto Grantor Trust 6.85% 10/25/03 478 481(F)
Merrill Lynch Mortgage Investors, Inc. 9.20% 1/15/11 22 22
Onyx Acceptance Grantor Trust 6.35% 10/15/03 292 296
Summit Acceptance Auto Investment LLC 6.11% 7/15/04 918 932(F)
UAF Auto Grantor Trust 6.10% 6/15/04 901 910
-----------
6,749
</TABLE>
39
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
ASSET-BACKED SECURITIES
Indexed Securities 2.13%
Matterhorn One Limited Trust 6.31% 1/21/06 $427 $430(E,F)
Matterhorn One Limited Trust 6.81% 1/21/06 500 504(E,F)
-----------
934
Stripped Securities 1.01%
EquiCreditCorp Home Equity Loan Trust 2.50% 9/15/00 9,000 445(C1)
TOTAL ASSET-BACKED
SECURITIES (IDENTIFIED COST $8,127) 8,128
-----------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES 12.84%
Fixed-rate Securities 7.78%
Chevy Chase Home Loan Trust 6.55% 1/20/18 568 577
Cityscape Home Equity Loan Trust 7.40% 9/25/28 666 671(F)
International Mortgage Acceptance Corporation 12.25% 3/1/14 167 188
J.P. Morgan Commercial Mortgage Finance Corp. 6.94% 12/26/28 397 409
Merrill Lynch Mortgage Investors, Inc. 6.69% 11/21/28 226 227
Metropolitan Asset Funding, Inc. 6.60% 12/20/10 500 507(F)
Morgan Stanley Capital I Incorporated 6.85% 2/15/20 431 438
Structured Asset Securities Corp. 7.75% 2/25/28 398 399
-----------
3,416
Variable-rate Securities 5.06%
CBA Mortgage Corporation 7.76% 12/25/03 500 510(B)
Merrill Lynch Mortgage Investors, Inc. 6.54% 9/15/17 897 919(B,F)
Resolution Trust Corporation 7.04% 5/25/29 783 790(B)
-----------
2,219
TOTAL MORTGAGE-BACKED
SECURITIES (IDENTIFIED COST $5,574) 5,635
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS 25.65%
Fixed-rate Securities 22.18%
United States Treasury Notes 5.38% 2/15/01 3,900 3,989
United States Treasury Notes 6.50% 5/31/02 900 964
United States Treasury Notes 5.63% 12/31/02 200 210
United States Treasury Notes 5.75% 4/30/03 2,990 3,160
United States Treasury Notes 5.75% 8/15/03 1,330 1,411
-----------
9,734
</TABLE>
40
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS
Indexed Securities 3.47%
United States Treasury Bonds 3.63% 4/15/28 $20 $20(D)
United States Treasury Notes 3.38% 1/15/07 1,349 1,329(D)
United States Treasury Notes 3.63% 1/15/08 172 173(D)
-----------
1,522
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (IDENTIFIED COST $11,057) 11,256
-----------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY
MORTGAGE-BACKED SECURITIES 9.00%
Fixed-rate Securities 4.82%
Fannie Mae 7.00% 1/1/13 299 307
Fannie Mae 7.00% 1/1/13 995 1,021
Fannie Mae 7.00% 8/1/13 355 365
Fannie Mae 7.00% 10/1/13 300 308(G)
Freddie Mac 10.15% 4/15/06 62 63
Government National Mortgage Association 9.25% 3/15/01 51 52
-----------
2,116
Indexed Securities 3.21%
Fannie Mae 5.34% 3/13/02 1,220 1,180(E)
Government National Mortgage Association 7.00% 8/20/22 224 229(E)
-----------
1,409
Variable-rate Securities 0.97%
Government National Mortgage Association 7.00% 9/20/20 414 423(B)
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-
BACKED SECURITIES (IDENTIFIED COST $3,941) 3,948
-----------------------------------------------------------------------------------------
YANKEE BONDS(A) 4.93%
Fixed-rate Securities 3.14%
Cable & Wireless Communications 6.38% 3/6/03 420 430
Petroliam Nasional Berhad 6.63% 10/18/01 350 278(F)
Petroliam Nasional Berhad 6.88% 7/1/03 300 224(F)
YPF Sociedad Anonima 7.50% 10/26/02 452 447
-----------
1,379
</TABLE>
41
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
--------------------------------------------------------
<S><C>
YANKEE BONDS(A)
Indexed Securities 1.79%
Nordbanken 6.09% 3/29/49 $800 $783(E)
TOTAL YANKEE BONDS
(IDENTIFIED COST $2,278) $2,162
-----------------------------------------------------------------------------------------
COMMON STOCKS
AND EQUITY INTERESTS 4.81% Shares
------
Black Rock 2001 Term Trust, Inc. 232 2,088
Black Rock Strategic Term Trust, Inc. 3 23
-----------
TOTAL COMMON STOCKS AND EQUITY
INTERESTS (IDENTIFIED COST $2,003) 2,111
-----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 8.32%
Corporate Notes 3.20%
Lehman Brothers Holdings Incorporated 6.40% 12/27/99 $900 905
Time Warner PATS 4.90% 7/29/99 500 498(F)
-----------
1,403
U.S. Government and Agency Obligations 0.45%
Fannie Mae 5.20% 2/17/99 200 196
Repurchase Agreement 4.62%
J.P. Morgan Securities, Inc.
5.5% dated 9/30/98, to be repurchased at $2,026 on
10/1/98 (Collateral: $1,910 Fannie Mae Medium-
term Notes, 6.22% due 3/13/06, value $2,072) 2,026 2,026
Options Purchased 0.05% Actual Contracts
----------------
Eurodollar Future Call, Jan 99, Strike Price $94.25 10 16
Eurodollar Future Call, Apr 99, Strike Price $94.50 4 8
U.S. Treasury Bond Put, Dec 98, Strike Price $118.00 10 N.M.
-----------
24
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,609) 3,649
-----------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
STATEMENT OF NET ASSETS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
% OF MATURITY PAR /
NET ASSETS RATE DATE SHARES VALUE
-------------------------------------------------------------
<S><C>
TOTAL INVESTMENTS
(IDENTIFIED COST $43,631) 100.21% $43,964
OTHER ASSETS LESS LIABILITIES (0.21)% (93)
-----------
NET ASSETS CONSISTING OF:
Accumulated paid-in-capital applicable to
4,232 shares outstanding $42,636
Under/(over) distributed net investment income 674
Undistributed net realized gain/(loss) on investments 255
Unrealized appreciation/(depreciation) on investments 306
-----------
NET ASSETS 100.00% $43,871
-----------
NET ASSET VALUE PER SHARE $10.37
-----------
ACTUAL APPRECIATION/
EXPIRATION CONTRACTS (DEPRECIATION)
-------------------------------------
Options Written
U.S. Treasury Note Future Call, Dec 98, Strike Price $111.50 Nov 98 13 ($43)
U.S. Treasury Bond Future Call, Dec 98, Strike Price $136.00 Nov 98 14 (2)
Eurodollar Futures Call, Mar 99, Strike Price $95.50 Mar 99 1 N.M.
-----------
(45)
Futures Contracts Purchased
U.S. Treasury Note Futures Dec 98 22 22
Eurodollar Futures Jun 99 7 6
-----------
28
Futures Contracts Written
US Treasury Bond Futures Dec 98 9 (10)
</TABLE>
- --------------------------------------------------------------------------------
(A) Yankee Bond - Dollar denominated bond issued in the U.S. by foreign
entities.
(B) The coupon rates shown on variable rate securities are the rates at
September 30, 1998.
(C) Stripped Security - Security with interest-only or principal-only payment
streams, denoted by superscript 1 or 2, respectively. For interest-only
securities, the amount shown as principal is the notional balance used to
calculate the amount of interest due.
(D) United States Treasury Inflation-Indexed Securities - U.S. Treasury
securities whose principal value is adjusted daily in accordance with
changes to the Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.
(E) Indexed Security - The rate of interest on this type of security is tied to
the London Interbank Offer Rate (LIBOR), the Global Telecom Basket (GTB)
Index or the one year Treasury Bill rate. The coupon rate is the rate as of
September 30, 1998.
(F) Rule 144a Security - A security purchased pursuant to Rule 144a under the
Securities Act of 1933 which may not be resold subject to the rule except
to qualified institutional buyers.
(G) When-issued Security - Security purchased on a delayed delivery basis.
Final settlement amount and maturity date have not yet been announced.
N.M. Not Meaningful.
See Notes to Financial Statements
43
<PAGE>
STATEMENT OF OPERATIONS
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
For the Six
Months Ended
September 30, 1998
------------------
(Unaudited)
<S><C>
INVESTMENT INCOME:
Interest $1,474
Dividends 48
----------------
Total income 1,522
EXPENSES:
Management fee 83
Custodian fees 34
Registration fees 16
Legal and audit fees 15
Organization expense 8
Directors' fees 7
Reports to shareholders 4
Transfer agent and shareholder servicing 1
Other expenses 34
----------------
202
Less fees waived and expenses reimbursed (107)
----------------
Total expenses, net of waivers and reimbursements 95
----------------
NET INVESTMENT INCOME 1,427
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) on investments, options and futures 251
Change in unrealized appreciation/(depreciation)
of investments, options and futures 155
----------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 406
----------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $1,833
================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
44
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
For the Six For the Nine For the Year
Months Ended Months Ended Ended
September 30, 1998 March 31, 1998(A) June 30, 1997
------------------ ----------------- -------------
(Unaudited)
<S><C>
CHANGE IN NET ASSETS:
Net investment income $1,427 $1,472 $1,259
Net realized gain/(loss) on
investments, options and futures 251 132 140
Change in unrealized appreciation/(depreciation)
of investments, options and futures 155 138 26
--------------- ---------------- --------------
Change in net assets resulting
from operations 1,833 1,742 1,425
Distributions to shareholders from:
Net investment income (1,241) (1,337) (1,012)
Net realized gain on investments (121) (103) (60)
Change in net assets from
Fund share transactions (6,971) 23,532 10,074
--------------- ---------------- --------------
Change in net assets (6,500) 23,834 10,427
NET ASSETS:
Beginning of period 50,371 26,537 16,110
--------------- ---------------- --------------
End of period (including
undistributed net investment
income of $674, $488 and
$134, respectively) $43,871 $50,371 $26,537
=============== ================ ==============
</TABLE>
- --------------------------------------------------------------------------------
(A) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Limited Duration Portfolio has been changed from June 30 to March 31.
See Notes to Financial Statements
45
<PAGE>
FINANCIAL HIGHLIGHTS(A)
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfoio
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 For the
Six Months Ended Nine Months Ended
September 30, 1998 March 31, 1998(B)
------------------ -----------------
(Unaudited)
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(D) $10.27 $10.24
------------------ -----------------
Net investment income(D) 0.35 0.43
Net realized and unrealized gain/(loss)
on investments, options and futures 0.07 0.11
------------------ -----------------
Total from investment operations 0.42 0.54
------------------ -----------------
Distributions to shareholders from:
Net investment income (0.29) (0.47)
Net realized gain on investments (0.03) (0.04)
------------------ -----------------
Total distributions (0.32) (0.51)
------------------ -----------------
Net asset value, end of period $10.37 $10.27
================== =================
Total return(D) 4.00%(E) 5.42%(E)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(D) 0.40%(F) 0.40%(F)
Net investment income(D) 6.02%(F) 5.82%(F)
Portfolio turnover rate 262.97%(F) 373.00%(F)
Net assets, end of period (in thousands) $43,871 $50,371
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on May
29, 1998.
(B) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Limited Duration Portfolio has been changed from June 30 to March 31.
(C) Commencement of operations.
(D) Net of fees waived pursuant to a voluntary expense limitation of 0.50%
through August 5, 1996 and 0.40% thereafter. In the absence of this
limitation, the ratio of expenses to average net assets would have been
0.85% for the six months ended September 30, 1998, 0.95% for the nine months
ended March 31, 1998, 1.21% for the year ended June 30, 1997, and 0.80% for
the period ended June 30, 1996.
(E) Not annualized
(F) Annualized
See Notes to Financial Statements
46
<PAGE>
FINANCIAL HIGHLIGHTS(A) - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Limited Duration Portfoio
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
For the May 1, 1996(C)
Year Ended to
June 30, 1997 June 30, 1996
-------------------------- -------------------------
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period(D) $10.08 $10.00
-------------------------- -------------------------
Net investment income(D) 0.60 0.09
Net realized and unrealized gain/(loss)
on investments, options and futures 0.13 (0.01)
-------------------------- -------------------------
Total from investment operations 0.73 0.08
-------------------------- -------------------------
Distributions to shareholders from:
Net investment income (0.53) --
Net realized gain on investments (0.04) --
-------------------------- -------------------------
Total distributions (0.57) --
-------------------------- -------------------------
Net asset value, end of period $10.24 $10.08
========================== =========================
Total return(D) 7.42% 0.76%(E)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(D) 0.41% 0.50%(F)
Net investment income(D) 6.24% 5.58%(F)
Portfolio turnover rate 435.47% 1,042.00%(F)
Net assets, end of period (in thousands) $26,537 $16,110
</TABLE>
- --------------------------------------------------------------------------------
(A) All per share figures reflect the 10 for 1 stock split which occurred on
May 29, 1998.
(B) The year end for LM Institutional Fund Advisors I, Inc. - Western Asset
Limited Duration Portfolio has been changed from June 30 to March 31.
(C) Commencement of operations.
(D) Net of fees waived pursuant to a voluntary expense limitation of 0.50%
through August 5, 1996 and 0.40% thereafter. In the absence of this
limitation, the ratio of expenses to average net assets would have been
0.85% for the six months ended September 30, 1998, 0.95% for the nine
months ended March 31, 1998, 1.21% for the year ended June 30, 1997, and
0.80% for the period ended June 30, 1996.
(E) Not annualized
(F) Annualized
See Notes to Financial Statements
47
<PAGE>
PORTFOLIO OF INVESTMENTS
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY
NET ASSETS RATE DATE CURRENCY PAR VALUE
--------------------------------------------------------------
<S><C>
LONG-TERM DEBT SECURITIES 58.87%
British Sterling 7.29%
Bayerische Hypotheken Bank 7.00% 2/25/00 GBP 350 $596
United Kingdom Treasury Stock 8.00% 12/7/15 GBP 500 1,164
United Kingdom Treasury Stock 7.00% 6/7/02 GBP 950 1,707
Welcome Break Financial, PLC 8.28% 9/1/17 GBP 400 790
-----------
4,257
Danish Krone 7.08%
Kingdom of Denmark 7.00% 11/15/07 DKK 6,750 1,249
Unikredit Realkredit 6.00% 10/1/29 DKK 19,000 2,886
-----------
4,135
Dutch Guilder 3.71%
Netherlands Government 5.50% 1/15/28 NLG 3,700 2,166
German Deutschmark 24.15%
Deutsche Bundesrepublik 4.50% 5/17/02 DEM 1,600 990
Deutsche Bundesrepublik 4.50% 5/19/03 DEM 1,200 746
Deutsche Bundesrepublik 6.75% 7/15/04 DEM 6,700 4,622
Deutsche Bundesrepublik 4.75% 7/4/08 DEM 12,100 7,739
-----------
14,097
Italian Lira 14.65%
Buoni del Tesoro Poliennali 4.75% 5/1/03 ITL 6,300,000 3,945
Buoni del Tesoro Poliennali 6.00% 11/1/07 ITL 4,550,000 3,092
Buoni del Tesoro Poliennali 6.50% 11/1/27 ITL 2,100,000 1,515
-----------
8,552
New Zealand Dollar 1.99%
Government of New Zealand 7.00% 7/15/09 NZD 2,100 1,160
TOTAL LONG-TERM DEBT SECURITIES
(IDENTIFIED COST $32,098) 34,367
------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 47.09%
Foreign Governments 2.94%
Buoni del Tesoro Poliennali 8.50% 8/1/99 ITL 2,750,000 1,718
U.S. Government Agency and
Obligations 35.58%
United States Treasury Bills 4.26% 12/31/98 USD 21,000 20,774
</TABLE>
48
<PAGE>
PORTFOLIO OF INVESTMENTS - CONTINUED
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
% OF MATURITY
NET ASSETS RATE DATE CURRENCY PAR VALUE
-------------------------------------------------------------------
<S><C>
SHORT-TERM INVESTMENTS
Repurchase Agreement 8.57%
State Street Bank & Trust Company
4.25% dated 9/30/98, to be repurchased USD $5,000 $5,000
at $5,001 on 10/1/98 (Collateral: $5,095
Federal Home Loan Bank Bond, 5.56%
due 8/24/00, value $5,181)
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $27,369) 27,492
-------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $59,467) 105.96% $61,859
ACTUAL APPRECIATION/
EXPIRATION CURRENCY CONTRACTS (DEPRECIATION)
-----------------------------------------------
Futures Contracts Purchased
U.K. Long Gilt Government Bond Futures Dec 98 GBP 82 $107
-----------
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
49
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
September 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
- -----------------------------------------------------------------------------------------------
<S><C>
ASSETS
Investments at value (Identified Cost - $32,098) $34,367
Cash and short-term investments, at cost 49,615
Receivable for:
Investments sold 38
Variation margin 121
Interest receivable 700
Unrealized appreciation of forward currency contracts 144
Other assets 39
---------
Total assets 85,024
LIABILITIES
Payable for investments purchased 25,963
Unrealized depreciation of forward currency contracts 628
Due to manager 3
Accrued expenses 48
---------
Total liabilities 26,642
---------
Net assets $58,382
=========
ANALYSIS OF NET ASSETS
Common stock at par value $.001 per share, authorized
1,000,000 shares: issued and outstanding 5,601 shares 6
Accumulated paid-in capital 56,009
Under/(over) distributed net investment income 551
Accumulated net realized gain/(loss) on investments,
forward currency contracts and currency transactions (200)
Unrealized appreciation/(depreciation) of investments,
forward currency contracts and currency translations 2,016
---------
Net assets $58,382
=========
NET ASSET VALUE PER SHARE $10.42
=========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
50
<PAGE>
STATEMENT OF OPERATIONS
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
July 15, 1998(A)
to
September 30, 1998
-------------------
(Unaudited)
<S><C>
INVESTMENT INCOME:
Interest (Net of foreign taxes of $5) $611
----------------
EXPENSES:
Management fee 53
Custodian fees 36
Legal and audit fees 8
Registration fees 6
Directors' fees 3
Reports to shareholders 1
----------------
107
Less fees waived (47)
----------------
Total expenses, net of waivers 60
----------------
NET INVESTMENT INCOME 551
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain/(loss) on:
Investments 1,768
Foreign currency transactions (1,968)
Change in unrealized appreciation/(depreciation) of:
Investments 2,014
Assets and liabilities denominated in foreign currencies 2
----------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 1,816
----------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $2,367
================
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
See Notes to Financial Statements
51
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
(Amounts in Thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
July 15, 1998(A)
to
September 30, 1998
------------------
(Unaudited)
<S><C>
CHANGE IN NET ASSETS:
Net investment income $551
Net realized gain/(loss) on investments and foreign currency transactions (200)
Change in unrealized appreciation of investments and assets
and liabilities denominated in foreign currencies 2,016
---------------
Change in net assets resulting from operations 2,367
Distributions to shareholders from net investment income --
Change in net assets from
Fund share transactions 56,000
---------------
Change in net assets 58,367
NET ASSETS:
Beginning of period 15
---------------
End of period (including undistributed
net investment income of $551) $58,382
===============
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
See Notes to Financial Statements
52
<PAGE>
FINANCIAL HIGHLIGHTS
LM Institutional Fund Advisors I, Inc.
Western Asset Non-U.S. Fixed Income Portfolio
Contained below is per share operating performance data for a share of
common stock outstanding throughout each period shown, total investment
returns, ratios to average net assets and other supplemental data. This
information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
July 15, 1998(A)
to
September 30, 1998
------------------
(Unaudited)
<S><C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $10.00
----------------
Net investment income(B) 0.10
Net realized and unrealized gain/(loss)
on investments, forward currency
contracts, options, futures and
foreign currency contracts 0.32
----------------
Total from investment operations 0.42
----------------
Distributions to shareholders from:
Net investment income -
Net realized gain on investments -
----------------
Total distributions -
----------------
Net asset value, end of period $10.42
================
Total return(B) 4.20%(C)
RATIOS / SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(B) 0.50%(D)
Net investment income(B) 4.65%(D)
Portfolio turnover rate 882.21%(D)
Net assets, end of period (in thousands) $58,382
</TABLE>
- --------------------------------------------------------------------------------
(A) Commencement of operations.
(B) Net of fees waived pursuant to a voluntary expense limitation of 0.50%. In
the absence of this limitation, the ratio of expenses to average net assets
would have been 0.90% for the period ended September 30, 1998.
(C) Not Annualized
(D) Annualized
See Notes to Financial Statements
53
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LM Institutional Fund Advisors I, Inc.
(Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
LM Institutional Fund Advisors I, Inc. (the "Corporation"), consisting of the
Western Asset Core Portfolio ("Core"), the Western Asset Core Plus Portfolio
("Core Plus"), the Western Asset Intermediate Portfolio ("Intermediate"), the
Western Asset Limited Duration Portfolio ("Limited Duration") and the Western
Asset Non-U.S. Fixed Income Portfolio ("Non-U.S.") (each a "Portfolio"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Corporation was
organized on May 16, 1990 and had no operations prior to September 4, 1990,
other than those related to organizational matters. Prior to May 28, 1998, the
Corporation was known as Western Asset Trust, Inc.
Each Portfolio offers two classes of shares: Institutional Class and Financial
Intermediary Class. Shares in the Financial Intermediary Class bear a
distribution fee. At September 30, 1998, the Financial Intermediary Class of
each Portfolio had no shares outstanding.
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.
FOREIGN CURRENCY TRANSACTIONS
The books and records of the Portfolios 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.
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 a contract's value
fluctuates, payments known as variation margin are made to or received from the
futures commission merchant.
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income for dividend purposes is recorded on an accrual basis and
consists of interest and dividend 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 reduce or increase interest income. Distributions are determined on
a tax basis and may differ from net investment income and realized capital gains
for financial reporting purposes.
SECURITY TRANSACTIONS
Security transactions are recorded on the trade date. Realized gains and losses
from security transactions are reported on an identified cost basis.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
FEDERAL INCOME TAXES
No provision for federal income or excise taxes is required since the Portfolios
intend to qualify, or continue to qualify, as regulated investment companies and
distribute all of their taxable income to their shareholders.
54
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
LM Institutional Fund Advisors I, Inc.
(Unaudited)
2. FINANCIAL INSTRUMENTS
REPURCHASE AGREEMENTS
As part of their investment program, the Portfolios utilize 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 Portfolios' 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.
FOREIGN CURRENCY EXCHANGE CONTRACTS
Core Plus and Non-U.S. may enter into forward currency exchange contracts to
help manage 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 September 30, 1998 were as follows:
Core Plus
Contract to
----------------------------- Appreciation/
Settlement Date Receive Deliver (Depreciation)
- ------------------------------------------------------------
10/01/98 USD 1,494 GBP 875 $ 7
11/27/98 GBP 875 USD 1,489 (6)
11/27/98 USD 2,909 GBP 1,736 (34)
-----
$(33)
=====
Non-U.S.
Contract to
------------------------------ Appreciation/
Settlement Date Receive Deliver (Depreciation)
- -------------------------------------------------------------
10/01/98 USD 45 DKK 287 $ (1)
10/01/98 NZD 2,344 USD 1,182 (9)
11/27/98 CAD 5,680 USD 3,699 24
11/27/98 USD 3,734 CAD 5,680 11
11/27/98 DEM 11,875 USD 7,073 60
11/27/98 USD 20,688 DEM 34,876 (259)
11/27/98 USD 4,291 DKK 27,574 (55)
11/27/98 GBP 6,334 USD 10,737 (3)
11/27/98 USD 14,022 GBP 8,370 (163)
11/27/98 USD 10,094 IT 16,761,564 (57)
11/27/98 NLG 4,053 USD 2,143 16
11/27/98 USD 4,199 NLG 7,988 (56)
11/27/98 USD 1,181 NZD 2,344 8
------
$(484)
======
OPTION TRANSACTIONS
A call option gives the option holder the right to purchase the underlying
security at a specified price until a specified date. A put option gives the
option holder the right to sell the underlying security at a specified price
until a specified date. Risks arise from the possible illiquidity of the options
market and from movements in security values. Call and put options written by
the Portfolios and related premiums during the period were as follows:
55
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
LM Institutional Fund Advisors I, Inc.
(Unaudited)
<TABLE>
<CAPTION>
Calls Puts
--------------------------------------------
Core Contracts Premiums Contracts Premiums
- -----------------------------------------------------------------------------------------
<S><C>
Options outstanding at March 31, 1998 461 $279 409 $233
Options written 1,411 778 1,784 1,148
Options closed (1,269) (788) (1,276) (934)
Options expired (58) (19) (523) (263)
Options exercised (167) (111) -- --
--------------------------------------------
Options outstanding at September 30, 1998 378 $139 394 $184
- -----------------------------------------------------------------------------------------
<CAPTION>
Calls Puts
--------------------------------------------
Core Plus Contracts Premiums Contracts Premiums
- -----------------------------------------------------------------------------------------
<S><C>
Options outstanding at March 31, 1998 -- $-- -- $ --
Options written 657 48 65 33
Options closed (22) (17) (34) (19)
Options expired -- -- -- --
Options exercised (7) (3) -- --
--------------------------------------------
Options outstanding at September 30, 1998 628 $28 31 $14
- -----------------------------------------------------------------------------------------
<CAPTION>
Calls Puts
--------------------------------------------
Intermediate Contracts Premiums Contracts Premiums
- -----------------------------------------------------------------------------------------
<S><C>
Options outstanding at March 31, 1998 53 $ 28 -- $ --
Options written 7,818 548 1,009 296
Options closed (1,038) (397) (637) (226)
Options expired (6,700) (134) (372) (70)
Options exercised -- -- -- --
--------------------------------------------
Options outstanding at September 30, 1998 133 $ 45 -- $ --
- -----------------------------------------------------------------------------------------
<CAPTION>
Calls Puts
--------------------------------------------
Limited Duration Contracts Premiums Contracts Premiums
- -----------------------------------------------------------------------------------------
<S><C>
Options outstanding at March 31, 1998 8 $ 4 -- $ --
Options written 107 42 158 49
Options closed (87) (39) (124) (45)
Options expired -- -- (34) (4)
Options exercised -- -- -- --
--------------------------------------------
Options outstanding at September 30, 1998 28 $ 7 -- $ --
- -----------------------------------------------------------------------------------------
</TABLE>
FUTURES
Each Portfolio may enter 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. The open long and short
futures positions and related appreciation or depreciation at September 30, 1998
are described at the end of the "Statement of Net Assets" for each Portfolio.
3. PORTFOLIO TRANSACTIONS
For the six months ended September 30, 1998, investment transactions (excluding
short-term investments) were as follows:
56
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
LM Institutional Fund Advisors I, Inc.
(Unaudited)
<TABLE>
<CAPTION>
Purchases Sales
-----------------------------------------------------------------------------------
U.S. Gov't Securities Other Securities U.S. Gov't Securities Other Securities
-----------------------------------------------------------------------------------
<S><C>
Core $1,750,960 $163,999 $1,806,042 $137,169
Core Plus 90,537 18,893 64,259 1,896
Intermediate 841,143 71,172 844,998 47,802
Limited Duration 42,466 17,026 55,086 8,213
Non-U.S. -- 80,362 -- 48,340
- ----------------------------------------------------------------------------------------------------
</TABLE>
At September 30, 1998, the cost of securities, gross unrealized appreciation and
gross unrealized depreciation for federal income tax purposes were as follows:
Cost Appreciation (Depreciation)
--------------------------------------------
Core $784,493 $19,081 $(4,829)
Core Plus 57,469 1,474 (640)
Intermediate 346,433 9,299 (3,294)
Limited Duration 43,631 661 (328)
Non-U.S. 59,467 2,392 --
- --------------------------------------------------------------
4. FUND SHARE TRANSACTIONS
At September 30, 1998, there were 13.1 billion shares of common stock of the
Corporation authorized at $.001 par value. Transactions in Portfolio shares were
as follows (share amounts reflect the 10 for 1 stock split effective May 29,
1998):
<TABLE>
<CAPTION>
Reinvestment
Sold of Distributions Repurchased Net Change
----------------------------------------------------------------------------------------------------------
Share Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
<S><C>
CORE
Six Months ended
September 30, 1998 13,697 $141,961 2,699 $30,560 (10,306) $(103,519) 6,090 $69,002
Nine Months ended
March 31, 1998(A) 11,375 $130,852 2,790 $31,659 (5,943) $(68,393) 8,222 $94,118
Year ended
June 30, 1997 17,647 $196,333 2,335 $26,038 (15,985) $(179,221) 3,997 $43,150
CORE PLUS
July 8, 1998(B) to
September 30, 1998 5,678 $56,732 -- $-- (1) $(6) 5,677 $56,726
INTERMEDIATE
Six Months ended
September 30, 1998 10,403 $112,439 1,065 $11,434 (7,037) $(76,165) 4,431 $47,708
Nine Months ended
March 31, 1998(A) 7,991 $86,208 1,114 $11,927 (3,001) $(32,528) 6,104 $65,607
Year ended
June 30, 1997 14,920 $157,504 848 $8,937 (1,128) $(12,086) 14,640 $154,355
LIMITED DURATION
Six Months ended
September 30, 1998 193 $2,000 134 $1,362 (999) $(10,333) (672) $(6,971)
Nine Months ended
March 31, 1998(A) 3,815 $39,150 141 $1,440 (1,645) $(17,058) 2,311 $23,532
Year ended
June 30, 1997 1,129 $11,502 106 $1,072 (242) $(2,500) 993 $10,074
NON-U.S.
July 15, 1998(B) to
September 30, 1998 5,600 $56,000 -- $-- -- $-- 5,600 $56,000
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) The year end for these Portfolios was changed from June 30 to March 31.
(B) Commencement of operations.
57
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
LM Institutional Fund Advisors I, Inc.
(Unaudited)
5. SECURITIES LOANED
At September 30, 1998, the market value of the securities on loan to
broker-dealers was $29,998 and $54,764 for Core and Intermediate, respectively.
Cash collateral received was $34,478 and $56,391 for Core and Intermediate,
respectively. Such collateral is in the possession of the Portfolios' custodian.
As with other extensions of credit, the Portfolios may bear the risk of delay in
recovery or even loss of rights to the collateral should the borrower of the
securities fail financially.
6. TRANSACTIONS WITH AFFILIATES
Each Portfolio has a management agreement with LM Institutional Advisors I, Inc.
(the "Manager"). Western Asset Management Company ("Western Asset") is the
investment adviser to Core, Core Plus, Intermediate and Limited Duration.
Western Asset Global Management ("WAGM") is the investment adviser to Non-U.S.
and shares advisory responsibilities with Western Asset for Core Plus. Pursuant
to their respective agreements, the Manager provides the Portfolios with
management and administrative services for which each Portfolio pays a fee,
computed daily and payable monthly at annual rates of each Portfolio's average
daily net assets as follows: 0.45% for Core, Core Plus and Non-U.S.; 0.40% for
Intermediate; and 0.35% for Limited Duration. The Manager pays Western Asset a
fee, computed daily and payable monthly, at annual rates of each Portfolio's
average daily net assets as follows: 0.40% for Core and Core Plus; 0.35% for
Intermediate and 0.30% for Limited Duration. The Manager pays WAGM a fee,
computed daily and payable monthly, at an annual rate of 0.40% of the average
daily net assets of Non-U.S. At September 30, 1998, $288, $114 and $3 was due to
the Manager for Core, Intermediate and Non-U.S., respectively.
The Manager, Western Asset and WAGM have voluntarily agreed to waive their fees
and reimburse the Portfolios to the extent a Portfolio's expenses (exclusive of
taxes, interest, brokerage and extraordinary expenses) exceed during any month
annual rates of that Portfolio's average daily net assets as follows: 0.55% for
Non-U.S.; 0.50% for Core; 0.50% for Core Plus; 0.45% for Intermediate; and 0.40%
for Limited Duration. At September 30, 1998, $38 and $11 was due to Core Plus
and Limited Duration, respectively, from the Manager as reimbursement for
expenses paid above their annual expense limits.
Legg Mason Wood Walker, Incorporated ("LMWW"), a member of the New York Stock
Exchange, and Arroyo Seco, Inc. serve as distributors of the Portfolios. LMWW
will receive from each Portfolio an annual distribution fee of 0.25% of the
average daily net assets of the Financial Intermediary Class of each Portfolio,
computed daily and payable monthly. Arroyo Seco, Inc. receives no payments from
the Portfolios in connection with the offer or sale of their shares.
The Manager, Western Asset, WAGM, LMWW and Arroyo Seco, Inc. are corporate
affiliates and wholly owned subsidiaries of Legg Mason, Inc.
58
<PAGE>
LM INSTITUTIONAL FUND ADVISORS I, INC.
Investment Manager
LM Institutional Advisors, Inc.
P.O. Box 17635
Baltimore, Maryland 21297-1635
1-888-425-6432
Investment Adviser
Western Asset Management Company
117 East Colorado Boulevard
Pasadena, California 91105
This report is not to be distributed unless preceded or
accompanied by a prospectus.
