INVESTMENT MANAGER REPORT TO SHAREHOLDERS
Legg Mason Fund Adviser, Inc. FOR THE SIX MONTHS ENDED
Baltimore, MD SEPTEMBER 30, 1995
BOARD OF TRUSTEES
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr.
Richard G. Gilmore
Charles F. Haugh
Arnold L. Lehman THE
Dr. Jill E. McGovern LEGG MASON
T. A. Rodgers TAX-FREE
Edward A. Taber, III INTERMEDIATE-
TERM
TRANSFER AND SHAREHOLDER SERVICING AGENT INCOME TRUST
Boston Financial Data Services
Boston, MA
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
COUNSEL
Kirkpatrick & Lockhart
Washington, D.C.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Baltimore, MD
PUTTING YOUR FUTURE FIRST
(LEGG MASON FUND LOGO)
THIS REPORT IS NOT TO BE DISTRIBUTED UNLESS
PRECEDED OR ACCOMPANIED BY A PROSPECTUS.
LEGG MASON WOOD WALKER, INCORPORATED
111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (Bullet) 539 (Bullet) 0000
(RECYCLE LOGO) PRINTED ON RECYCLED PAPER
LMF-039
<PAGE>
TO OUR SHAREHOLDERS,
On September 30, 1995, the Legg Mason Tax-Free Intermediate-Term Trust
had a 30-day annualized SEC yield of 4.14%, an average weighted maturity of
7.2 years and net assets per share of $15.37.
The Trust continues to seek a high level of current income exempt from
federal income taxes, consistent with prudent investment risk. We purchase
only securities which have received investment grade ratings from Moody's
Investors Service or Standard & Poor's Corporation or which are judged by
the Trust's investment advisor to be of comparable quality. Moody's ratings
of securities we currently own are:
<TABLE>
<S> <C>
Aaa 53.5%
Aa 26.2%
A 15.0%
Short-term securities 5.3%
</TABLE>
During the six months ended September 30, the value of the Trust's
portfolio holdings rose as interest rates on tax-exempt securities
declined. This increase in portfolio value, plus dividends paid from
interest earnings, produced a total return for shareholders of 4.42% (not
annualized) in the six-month period. Total return measures investment
performance in terms of appreciation or depreciation in net asset value per
share plus dividends and any capital gain distributions. It assumes that
dividends and distributions were reinvested at the time they were paid, and
does not reflect the effect of the 2% maximum initial sales charge, which
applied to purchases of Trust shares prior to August 1, 1995. (In this
regard, all shareholders should be aware that the Trust's initial sales
charge has been waived since August 1, and that the waiver will continue at
least through January 31, 1996.)
Normally, the average weighted maturity of the portfolio will be kept
within a range of 2-10 years. Because of the portfolio's intermediate-term
maturity, we expect that in most market periods the Trust will offer higher
yields than shorter-term municipal bond funds and greater price stability
than municipal bond funds with longer maturities. However, shareholders
should keep in mind that net asset value per share will fluctuate -- both
up and down -- in response to changes in interest rates, unlike money
market funds which attempt to maintain a constant net asset value of $1 per
share.
We believe that the Tax-Free Intermediate-Term Trust's emphasis on
portfolio quality, tax-free income, and intermediate-term maturities
continues to be a sensible investment combination for many investors.
Sincerely,
(Signature of John F. Curley, Jr.)
John F. Curley, Jr.
Chairman
November 10, 1995
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
SEPTEMBER 30, 1995
(AMOUNTS IN THOUSANDS) (UNAUDITED)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS -- 93.7%
Arizona -- 5.6%
Arizona Transportation Board
Subordinated Highway Revenue Series
1992 A
$ 500 6.00% 7/1/00 $ 533
Salt River Project Agricultural
Improvement and Power District,
Electric System Refunding Revenue
1993 Series A
1,000 5.30% 1/1/03 1,033
Scottsdale Street and Highway User
Revenue Refunding Series 1993
1,000 5.00% 7/1/02 1,017
University of Arizona Board of
Regents
7.20% 6/1/01
500 (Pre-refunded 6/1/98(B)) 546
3,129
Connecticut -- 2.0%
State of Connecticut Special Tax
Obligation, Transportation
Infrastructure 1990 Series A
7.10% 6/1/04
1,000 (Pre-refunded 6/1/01(B)) 1,133
Florida -- 1.9%
Northwest Florida Water Management
District Land Acquisition Revenue
Refunding Series 1992 (FGIC
insured)
1,000 5.50% 4/1/02 1,051
Illinois -- 4.1%
State of Illinois, GO
Series April 1986
1,000 6.90% 4/1/01 1,034
State of Illinois Sales Tax Revenue
Series O
1,220 5.90% 6/15/01 1,292
2,326
Indiana -- 0.9%
State of Indiana Toll Finance
Authority Toll Road Revenue
Refunding Series 1987
500 7.00% 7/1/07 522
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Kentucky -- 1.8%
Turnpike Authority of Kentucky,
Economic Development Road Revenue
and Revenue Refunding
(Revitalization Projects) Series
1993
(AMBAC insured)
$ 1,000 5.30% 7/1/04 $ 1,037
Louisiana -- 1.8%
City of New Orleans Audubon Park
Commission Aquarium Series 1993
(FGIC insured)
1,000 6.00% 10/1/08 1,034
Maine -- 1.8%
Maine Municipal Bond Bank Refunding
1993 Series A
1,000 5.20% 11/1/05 1,015
Maryland -- 21.7%
Cecil County, GO Consolidated Public
Improvement and Refunding 1993
(FGIC insured)
850 6.50% 12/1/99 920
Howard County, Consolidated Public
Improvement and Refunding 1993
Series A
1,000 4.80% 8/15/01 1,014
Maryland Department of
Transportation Consolidated
Transportation
Refunding Series 1993
1,000 4.375% 6/15/04 961
Series 1991
1,000 6.00% 9/1/00 1,067
Maryland Health and Higher
Educational Facilities Authority
Refunding Revenue
Francis Scott Key Medical Center
Series 1993 (FGIC insured)
1,000 4.80% 7/1/01 1,009
Johns Hopkins University Issue
Series 1988
1,300 7.50% 7/1/20 1,430
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS -- Continued
Maryland -- Continued
Maryland Transportation Authority
Transportation Facilities Projects
Revenue Series 1992 (FGIC insured)
$ 1,000 5.70% 7/1/05 $ 1,054
Mayor and City Council of Baltimore
GO Consolidated Public Improvement
Refunding 1995 Series A (FGIC
insured)
750 0%(A) 10/15/06 422
Project and Refunding Revenue
(Water Projects) Series 1990-A
(MBIA insured)
6.50% 7/1/20
1,000 (Pre-refunded 7/1/00(B)) 1,085
Montgomery County, GO Consolidated
Public Improvement Series B
1,000 6.80% 11/1/99 1,094
6.80% 11/1/07
1,000 (Pre-refunded 11/1/99(B)) 1,108
Northeast Maryland Waste Disposal
Authority Solid Waste Revenue
(Montgomery County Resource
Recovery Project) Series 1993 A AMT
1,000 5.60% 7/1/02 1,019
12,183
Massachusetts -- 0.9%
Commonwealth of Massachusetts, GO
Refunding 1986 Series A
7.125% 10/1/05
500 (Pre-refunded 10/1/96(B)) 526
Missouri -- 0.9%
Missouri Health and Educational
Facilities Authority Refunding
Revenue, (SSM Health Care)
Series 1992 AA (MBIA insured)
500 4.90% 6/1/98 506
Nebraska -- 1.8%
Nebraska Public Power District
Revenue
1,000 5.70% 1/1/04 1,043
Nevada -- 1.0%
State of Nevada, GO LT (Nevada
Municipal Bond Bank Refunding
Project No. 4) Series 1989 B
500 6.70% 2/1/01 544
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
New Hampshire -- 1.9%
New Hampshire Municipal Bond Bank, GO
Refunding 1991 Series H
$ 1,000 5.70% 2/15/01 $ 1,049
New Jersey -- 3.8%
New Jersey Turnpike Authority,
Turnpike Revenue Series 1991 C
(AMBAC insured)
2,000 6.40% 1/1/07 2,141
North Carolina -- 1.9%
North Carolina Eastern Municipal
Power Agency, Power System Revenue
Refunding Series 1987 A
1,000 7.30% 1/1/04 1,055
Ohio -- 4.5%
City of Franklin Ohio Refunding
Bonds, Series 1993 A (Limited Tax
General Obligation Bonds)
2,000 5.50% 12/1/11 1,983
State of Ohio Higher Education
Facilities Revenue Series 1988 A
500 7.00% 11/1/01 531
2,514
Pennsylvania -- 2.8%
City of Philadelphia Gas Works
Revenue, 10th Series (BIGI insured)
7.20% 7/1/01
500 (Pre-refunded 7/1/96(B)) 522
Pennsylvania Intergovernmental
Cooperation Authority Special Tax
Revenue (City of Philadelphia
Funding Program) Series 1992
(FGIC insured)
1,000 5.75% 6/15/99 1,042
1,564
South Carolina -- 5.8%
Berkeley County Water and Sewer
Revenue Refunding and Improvement
(MBIA insured)
1,000 6.50% 6/1/06 1,086
South Carolina Public Service
Authority Revenue, 1991 Refunding
and Improvement Series B
1,000 6.70% 7/1/02 1,107
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS -- CONTINUED
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
MUNICIPAL BONDS -- Continued
South Carolina -- Continued
State of South Carolina, State
Capital Improvement Series S
6.75% 8/1/01
$ 1,000 (Pre-refunded 8/1/96(B)) $ 1,043
3,236
Tennessee -- 1.9%
State of Tennessee GO, 1994 Series A
1,000 5.25% 3/1/02 1,041
Texas -- 7.1%
City of Austin Combined Utility
Systems Revenue Refunding Series
1992 A (MBIA insured)
1,000 6.00% 11/15/04 1,080
City of Houston Water and Sewer
System Junior Lien Revenue
Refunding Series 1992 C
(MBIA insured)
1,000 5.40% 12/1/01 1,044
Texas Public Finance Authority, GO
Refunding (Superconducting Super
Collider Project) Series 1992 C
(FGIC insured)
1,000 0%(A) 4/1/02 725
United Independent School District
(Webb County Texas) Unlimited Tax
School Building Bonds, Series 1995
(PSFG insured)
1,000 7.10% 8/15/06 1,163
4,012
Utah -- 0.9%
Intermountain Power Agency Power
Supply Revenue Refunding 1988
Series B
500 6.90% 7/1/96 510
Vermont -- 2.8%
State of Vermont, GO 1990 Series A
6.75% 2/1/03
1,400 (Pre-refunded 2/1/00(B)) 1,547
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Virginia -- 13.2%
Commonwealth of Virginia
Transportation Board,
Transportation Contract Revenue
Refunding Series 1992 (Route 28
Project)
$ 1,000 5.75% 4/1/00 $ 1,053
1,000 6.00% 4/1/06 1,066
Fairfax County Public Improvement
Refunding Series 1992 C
2,000 5.50% 10/1/03 2,077
Henrico County GO Public Improvement
Refunding Series 1993
1,100 5.25% 1/15/09 1,092
Virginia Public Building Authority
State Building Revenue Refunding
Series 1992 B
1,000 5.625% 8/1/02 1,060
Virginia State Public School
Authority Series B
6.75% 1/1/99
1,000 (Pre-refunded 1/1/97(B)) 1,052
7,400
Wisconsin -- 0.9%
State of Wisconsin, GO 1989 Series B
500 6.90% 5/1/96 509
Total Municipal Bonds -- 93.7%
(Identified Cost -- $51,290) 52,627
SHORT-TERM INVESTMENTS -- 5.0%
Variable Rate Demand
Obligations -- 4.6%
Lincoln County Wyoming PCR Bonds
(Exxon Project) Series 1985
400 3.90%(C) 10/3/95 400
Sublette County Wyoming (Exxon
Project) Series 1984
500 3.90%(C) 10/3/95 500
Sweetwater County Wyoming (Pacific
Corp. Projects)
(Exxon Project) Series 1984
300 3.75%(C) 10/3/95 300
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
SHORT-TERM INVESTMENTS -- Continued
Jackson County, Mississippi Port
Facility Refunding Bonds (Chevron
USA, Inc. Projects)
Series 1983
$400 3.75%(C) 10/3/95 $ 400
Emery County Utah PCR Refunding Bonds
(Pacific Corp. Projects)
Series 1994
1,000 3.95%(C) 10/3/95 1,000
2,600
Repurchase Agreement -- 0.4%
State Street Bank & Trust Company
2.50% dated 9/29/95, to be
repurchased at $215 on 10/2/95
(Collateral: $150 U.S. Treasury
Bonds, 12.0% due 8/15/13, value
215 $224) 215
Total Short-term Investments -- 5.0%
(Identified Cost -- $2,815) 2,815
Total Investments -- 98.7%
(Identified Cost -- $54,105) 55,442
Other Assets Less Liabilities -- 1.3% 717
NET ASSETS -- 100.0% $56,159
Net Assets Consisting of:
Accumulated paid-in capital
applicable to 3,654 shares
outstanding $55,052
Accumulated net realized
loss on investments (228)
Unrealized appreciation of
investments 1,335
NET ASSETS $56,159
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE $15.37
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus sales charge
of 2% of offering price) $15.37*
</TABLE>
* SALES CHARGES ARE BEING WAIVED DURING THE PERIOD AUGUST 1, 1995 TO
JANUARY 31, 1996.
(A) 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.
(B) PRE-REFUNDED BOND -- BONDS ARE REFERRED TO AS PRE-REFUNDED WHEN THE ISSUE
HAS BEEN ADVANCE REFUNDED BY A SUBSEQUENT ISSUE. THE ORIGINAL ISSUE IS
USUALLY ESCROWED WITH U.S. TREASURY SECURITIES IN AN AMOUNT SUFFICIENT TO
PAY THE INTEREST, PRINCIPAL AND CALL PREMIUM, IF ANY, TO THE EARLIEST
CALL DATE. ON THAT CALL DATE, THE BOND WILL "MATURE". THE PRE-REFUNDED
DATE IS USED IN DETERMINING WEIGHTED AVERAGE PORTFOLIO MATURITY.
(C) THE RATE SHOWN IS THE RATE AS OF SEPTEMBER 30, 1995, AND THE MATURITY
SHOWN IS THE LONGER OF THE NEXT INTEREST READJUSTMENT DATE OR THE DATE
THE PRINCIPAL AMOUNT OWED CAN BE RECOVERED THROUGH DEMAND.
A GUIDE TO ABBREVIATIONS APPEARS ON THE NEXT PAGE.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
% of Market
Net Assets Value
(000)
<S> <C> <C>
SECTOR DIVERSIFICATION
General Obligation -- Local 21.8% $12,244
Ground Transportation Revenue 18.6 10,453
Pre-refunded Bonds 15.3 8,562
Public Utilities 10.4 5,829
General Obligation -- State 5.9 3,309
Water and Sewer Revenue 5.6 3,180
Education Revenue 5.6 3,124
Hospital Revenue 2.7 1,515
Sales Tax Revenue 2.3 1,292
Lease Revenue 1.9 1,059
Special Tax Revenue 1.8 1,042
Solid Waste Revenue 1.8 1,018
Short-term Investments 5.0 2,815
Other Assets Less Liabilities 1.3 717
100.0% $56,159
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
AMBAC AMBAC Indemnity Corporation
AMT Alternative Minimum Tax
BIGI Bond Investors Guaranty Insurance
FGIC Financial Guaranty Insurance Company
GO General Obligation
LT Limited Tax
MBIA Municipal Bond Insurance Association
PCR Pollution Control Revenue
PSFG Permanent School Fund Guaranty
</TABLE>
6
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $1,309
EXPENSES:
Investment advisory fee $140
Distribution and service fees 64
Custodian fee 24
Legal and audit fees 11
Transfer agent and shareholder servicing expense 10
Registration fees 9
Organization expense 7
Reports to shareholders 3
Trustees' fees 2
Other expenses 2
272
Less fees waived (156)
Total expenses, net of waivers 116
NET INVESTMENT INCOME 1,193
INCREASE IN UNREALIZED APPRECIATION OF INVESTMENTS 1,035
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,228
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
<TABLE>
<CAPTION> For the For the
Six Months Ended Year Ended
(Amounts in Thousands) September 30, 1995 March 31, 1995
(Unaudited)
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 1,193 $ 2,456
Net realized loss on investments -- (221)
Change in unrealized appreciation of investments 1,035 450
Increase in net assets resulting from operations 2,228 2,685
Distributions to shareholders from net investment income (1,193) (2,456)
Change in net assets from Fund share transactions 6,287 (5,424)
Change in net assets 7,322 (5,195)
NET ASSETS:
Beginning of period 48,837 54,032
End of period $ 56,159 $ 48,837
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON TAX FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
Contained below is per share operating performance data for a share of
beneficial interest outstanding, total investment return, ratios to average
net assets and other supplemental data. This information has been derived
from information provided in the financial statements.
<TABLE>
<CAPTION>
For the
Six Months Ended For the Years Ended March 31,
September 30, 1995 1995 1994
(Unaudited)
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $15.06 $14.96 $15.06
Net investment income(A) 0.33 0.72 0.70
Net realized and unrealized gain (loss)
on investments 0.31 0.10 (0.09)
Total from investment operations 0.64 0.82 0.61
Distributions to shareholders from:
Net investment income (0.33) (0.72) (0.70)
Net realized gain -- -- (0.01)
Total distributions (0.33) (0.72) (0.71)
Net asset value, end of period $15.37 $15.06 $14.96
Total return(D) 4.42%(C) 5.65% 3.99%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(A) 0.46%(B) 0.34% 0.30%
Net investment income(A) 4.68%(B) 4.83% 4.44%
Portfolio turnover rate 16.4%(B) 24.8% 6.6%
Net assets, end of period
(in thousands) $56,159 $48,837 $54,032
<CAPTION>
November 9, 1992*
to
March 31, 1993
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $14.70
Net investment income(A) 0.28
Net realized and unrealized gain (loss)
on investments 0.36
Total from investment operations 0.64
Distributions to shareholders from:
Net investment income (0.28)
Net realized gain --
Total distributions (0.28)
Net asset value, end of period $15.06
Total return(D) 4.35%(C)
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses(A) 0.20%(B)
Net investment income(A) 4.71%(B)
Portfolio turnover rate --
Net assets, end of period
(in thousands) $37,138
</TABLE>
* COMMENCEMENT OF OPERATIONS.
(A) NET OF FEES WAIVED AND EXPENSES REIMBURSED BY THE ADVISER IN EXCESS OF
VOLUNTARY EXPENSE LIMITATIONS AS FOLLOWS: 0.20% OF AVERAGE DAILY NET
ASSETS UNTIL MARCH 31, 1993; 0.30% UNTIL JUNE 30, 1994; 0.35% UNTIL JULY
31, 1995; AND 0.65% THROUGH JANUARY 31, 1996.
(B) ANNUALIZED.
(C) NOT ANNUALIZED.
(D) EXCLUDING SALES CHARGE.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON TAX-FREE INCOME FUND
TAX-FREE INTERMEDIATE-TERM INCOME TRUST
(Amounts in Thousands) (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Tax-Free Income Fund ("Trust"), consisting of the
Maryland Tax-Free Income Trust ("Maryland Fund"), the Pennsylvania
Tax-Free Income Trust ("Pennsylvania Fund") and the Tax-Free
Intermediate-Term Income Trust ("Fund"), is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. All series of the Trust are non-diversified. The
financial statements of the Maryland Fund and the Pennsylvania Fund are
included in separate reports to shareholders.
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.
Dividends and Distributions to Shareholders
Dividends are declared daily and paid monthly. Net capital gain
distributions are declared and paid after the end of the tax year in which
the gain is realized. Dividends payable are recorded on the dividend
record date. At September 30, 1995, dividends payable of $105 were
accrued. Net income for dividend purposes consists of interest accrued and
accrued expenses. Bond premium is amortized for financial reporting and
tax purposes. Bond discount, other than original issue, is not amortized.
Security Transactions and Investment Income
Security transactions are recorded on the trade date. Realized gains
and losses from security transactions are reported on an identified cost
basis. Interest income and expenses are recorded on the accrual basis.
Repurchase Agreements
All repurchase agreements are fully collateralized by obligations
issued by the U.S. government or its agencies and such collateral is in
the possession of the Fund's custodian. The value of such collateral
includes accrued interest. Risks arise from the possible delay in recovery
or potential loss of rights in the collateral should the issuer of the
repurchase agreement fail financially.
Federal Income Taxes
No provision for federal income or excise taxes is required since the
Fund intends to continue to qualify as a regulated investment company and
distribute all of its taxable income to its shareholders. The Fund has
unused capital loss carryforwards for federal income tax purposes of $161
which expire in 2003.
2. INVESTMENT TRANSACTIONS:
Investment transactions for the six months ended September 30, 1995
(excluding short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $ 4,216
Proceeds from sales --
</TABLE>
At September 30, 1995, the cost of securities for federal income tax
purposes was $54,105. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $1,389
and aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $54.
3. FUND SHARE TRANSACTIONS:
At September 30, 1995, there were unlimited shares authorized at $.001
par value for the Trust and the Fund. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
For the For the
Six Months Ended Year Ended
September 30, 1995 March 31, 1995
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Sold 659 $ 10,099 347 $ 5,151
Reinvestment of
distributions 58 886 123 1,820
Repurchased (307) (4,698) (839) (12,395)
Net change 410 $ 6,287 (369) $ (5,424)
</TABLE>
4. TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management agreement with Legg
Mason Fund Adviser, Inc. ("Adviser"), a corporate affiliate of Legg Mason
10
<PAGE>
(Amounts in Thousands)
Wood Walker, Incorporated ("Legg Mason"), a member of the New York Stock
Exchange and the distributor for the Fund. Under this agreement, the
Adviser provides the Fund with investment advisory, management and
administrative services for which the Fund pays a fee at an annual rate of
0.55% of average daily net assets of the Fund, calculated daily and
payable monthly. The agreement with the Adviser provides that expense
reimbursements be made to the Fund for expenses (exclusive of taxes,
interest, brokerage and extraordinary expenses) which in any month are in
excess of annual rates, based on average daily net assets, according to
the following schedule: 0.20% until March 31, 1993; 0.30% until June 30,
1994; 0.35% until July 31, 1995, and 0.65% through January 31, 1996 or
until the Fund's net assets reach $100 million, whichever occurs first.
For the six months ended September 30, 1995, advisory fees of $140 were
waived.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.125% and an annual service fee of 0.125% of the
Fund's average daily net assets, calculated daily and payable monthly. For
the six months ended September 30, 1995, distribution and service fees
totalling $16 were waived and $18 was due to the distributor. Legg Mason
also has an agreement with the Fund's transfer agent to assist with
certain of its duties. For this assistance, Legg Mason was paid $3 by the
transfer agent for the six months ended September 30, 1995.
11
