SEC Info - Western Asset Funds Inc - ‘N-30D’ for 12/31/95

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Western Asset Funds Inc – ‘N-30D’ for 12/31/95

As of: Wednesday, 2/28/96 · For: 12/31/95 · Accession #: 950169-96-24 · File #: 811-06110

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/28/96  Western Asset Funds Inc           N-30D      12/31/95    1:24K                                    Donnelley … Baltimore/FA

Annual or Semi-Annual Report Mailed to Shareholders — Rule 30d-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-30D       Legg Mason Western Asset Trust Full Range Duration    17     54K 

N-30D 1st Page of 17 TOC ↑Top Previous Next ↓Bottom Just 1st
 
WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
REPORT TO SHAREHOLDERS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1995 

N-30D 2nd Page of 17 TOC 1st Previous Next ↓Bottom Just 2nd
                                           February 28, 1996

Dear Shareholder:                                                               

         Enclosed are the mid-year  financial  statements  for the Western Asset
Trust Full Range Duration Portfolio.                                            

         Despite the changes in interest  rates  during this period in the fixed
income,  we are happy to report that once again the portfolio  has  outperformed
the broad  market,  with  returns  (net)  equaling  6.5% vs.  6.3% for the broad
market. As of December 31, 1995, assets in the fund reached $398 million with 24
clients participating.                                                          

  Please give us a call if you have any questions on the enclosed.

                                    Sincerely,

                                              W. Curtis Livingston
                                   President

N-30D 3rd Page of 17 TOC 1st Previous Next ↓Bottom Just 3rd
WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS
December 31, 1995 
(Amounts in Thousands)  
(Unaudited) 

                                                                [Download Table]

                                               Principal             
                                                 Amount       Value  
                                                                     
CORPORATE  BONDS AND NOTES - 23.7%                                   
Fixed-rate  Securities  - 20.4%                                      
Banking and Finance - 3.5%                                           
     Equitable Companies Inc.                                        
         Senior Note                                                 
         9%                    12/15/04        $ 4,260        $ 5,007
     Lehman Brothers Holdings                                        
         8.5%                  8/1/15            4,500          5,008
     Paine Webber Group, Inc.                                        
         Senior Note                                                 
         6.5%                  11/1/05           2,300          2,239
         7.625%                2/15/14           1,490          1,531
                                                               13,785
Food and Beverage - 1.6%                                             
     RJR Nabisco, Inc.                                               
         8.75%                 8/15/05             900            922
         8.75%                 7/15/07           5,530          5,640
                                                                6,562
Industrial -  7.7%                                                   
     Disney, Walt Co.                                                
         Senior Note(F)                                              
         2%                    3/1/00            2,700          2,970
     General Motors Corporation                                      
         7.4%                  9/1/25            3,500          3,734
     ITT Corporation (New)                                           
         6.75%                 11/15/05          1,920          1,928
         7.375%                11/15/15          2,670          2,699
     Loews Corporation                                               
         Senior Note                                                 
         7.625%                6/1/23            7,209          7,443
     Nabisco, Inc.                                                   
         7.55%                 6/15/15           1,900          1,978
     TCI Communications Incorporated                                 
         8.75%                 8/1/15            8,090          8,969

2 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                               Principal              
                                                 Amount       Value   
                                                                      
Fixed-rate Securities -  Continued                                    
Industrial - Continued                                                
     Time Warner Inc.                                                 
         9.125%                1/15/13         $  900         $  1,014
                                                                30,735
Media and Entertainment -  3.1%                                       
     News America Holdings Incorporated                               
         7.75%                 12/1/45          6,500            6,584
     Time Warner Entertainment Company, L.P.                          
         8.375%                3/15/23          1,570            1,690
         Senior Note                                                  
         8.375%                7/15/33          3,950            4,216
                                                                12,490
Telecommunications -  2.2%                                            
     Bell Telephone Co. CDA                                           
         9.5%                  10/15/10         6,700            8,571

Transportation -  1.6%                                                
     United Airlines, Inc.                                            
         11.21%                5/1/14           4,900            6,486

Utilities -  0.7%                                                     
     System Energy Resources, Inc.                                    
         7.43%                 1/15/11          2,808            2,796

Indexed Security(B) -  3.3%                                           
     Ford Motor Credit Company                                        
         5.33%                 3/14/97         12,995           12,982

Total Corporate Bonds and Notes                                       
     (Identified Cost - $87,234)                                94,407

ASSET-BACKED SECURITIES -  1.2%                                       
Fixed-rate Securities -  0.2%                                         
     Midstate Trust II Class A-4                                      
         9.625%                4/1/03             700              768
     Rural Housing Pass-through Certificate                           
         Series 1987-1                                                
         3.33%                 4/1/26              79               73
                                                                   841

3 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                               Principal                
                                                 Amount          Value  
                                                                        
Variable-rate Security(C) -  1.0%                                       
     Mellon Bank Credit Card Master Trust                               
         Series 1995-A                                                  
         6.1275%               4/15/03         $ 3,700           $ 3,696

Total Asset-backed Securities                                           
     (Identified Cost - $4,524)                                    4,537

MORTGAGE-BACKED SECURITIES -  4.2%                                      
Fixed-rate Security -  0.2%                                             
     Resolution Trust Corporation                                       
         8.15%                 1/25/21             734               749

Variable-rate Securities(C) -  4.0%                                     
     Resolution Trust Corporation                                       
         6.742%                5/25/21           1,963             1,946
         7.1471%               10/25/21          3,303             3,146
         7.1965%               6/25/24           8,000             7,900
         7.5694%               10/25/28            308               297
         8.1372%               9/25/29           2,546             2,630
                                                                  15,919
Stripped Securities(D) - N.M.                                           
     Structured Mortgage Asset Residential Trust                        
         Series 1991-8E                                                 
         0.1501%(1)            1/25/23          38,060               101

Total Mortgage-backed Securities                                        
     (Identified Cost - $16,663)                                  16,769

MUNICIPAL BONDS -  2.3%                                                 
     Intermountain Power Agency Refunding Bond                          
         Series A                                                       
         5%                    7/1/23            5,000             4,634
     Salt River Project (AZ) Agricultural Improvement                   
         and Power District                                             
         Series B                                                       
         5%                    1/1/29            5,000             4,490

Total Municipal Bonds                                                   
     (Identified Cost - $8,449)                                    9,124

4 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                               Principal              
                                                 Amount       Value   
                                                                      
U.S. GOVERNMENT AND AGENCY                                            
     OBLIGATIONS -  25.7%                                             
Fixed-rate Securities -  21.3%                                        
     United States Treasury Bonds                                     
         12%                   8/15/13         $  2,810       $  4,330
         6.25%                 8/15/23           22,830         23,490
         7.625%                2/15/25            7,000          8,560
                                                                36,380
     United States Treasury Notes                                     
         5.375%                11/30/97          25,000         25,082
         5.25%                 7/31/98           11,045         11,048
         5.75%                 8/15/03            1,895          1,918
         6.5%                  8/15/05            4,400          4,687
         5.875%                11/15/05           5,700          5,828
                                                                48,563
Variable-rate Security(C) -  0.1%                                     
     Student Loan Marketing Association                               
         5.4%                  11/20/97             250            250
Stripped Securities(D) -  4.3%                                        
     Federal National Mortgage Association                            
         0%(H, 2)              3/9/02             1,100          1,030

     Resolution Funding Corporation                                   
         0%(E)                 1/15/17            3,222            851
         0%(E)                 4/15/17            2,426            632
         0%(2)                 10/15/19           7,260          1,606
         0%(2)                 7/15/20            6,750          1,424
         0%(2)                 10/15/20          17,650          3,673
                                                                 8,186
     Tennessee Valley Authority                                       
         0%(1)                 11/1/19            3,064            657

     United States Treasury Bonds                                     
         0%(2)                 5/15/17           23,133          6,178
         0%(2)                 8/15/20            4,800          1,045
                                                                 7,223
Total U.S. Government and Agency Obligations                          
     (Identified Cost - $96,278)                               102,289

5 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                               Principal              
                                                 Amount       Value   
                                                                      
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED                                
     SECURITIES - 21.7%                                               
Fixed-rate Securities - 19.5%                                         
     Federal Home Loan Mortgage Corporation                           
         Pass-through                                                 
         8.25%                 8/1/01          $    130       $    134
         REMIC 1034 Class E                                           
         8.4%                  1/15/05              276            279
         REMIC 1216 Class E                                           
         7%                    3/15/05            2,100          2,156
         REMIC 1197 Class F                                           
         6.75%                 10/15/05           1,000          1,013
         REMIC 170 Class B                                            
         10%                   3/1/21             4,008            969
         Pass-through                                                 
         7%                    1/1/26            21,100         21,291
         Pass-through                                                 
         7.5%                  1/1/26             7,100          7,280
                                                                33,122
     Federal Housing Authority                                        
         USGI #68                                                     
         7.43%                 3/1/21               342            346

     Federal National Mortgage Association                            
         REMIC 1992-94 Class E                                        
         6.5%                  5/25/03            3,200          3,233
         REMIC 1989-55 Class E                                        
         9%                    9/25/04            5,300          5,591
         REMIC 1992-22 Class G                                        
         7%                    4/25/05            1,430          1,468
         REMIC 4 Class 2                                              
         9.5%                  2/1/17               458            117
         REMIC 1989-2 Class D                                         
         8.8%                  1/25/19            2,000          2,159
         REMIC 1990-75 Class M                                        
         9.5%                  7/25/20            3,353          3,750
                                                                16,318

6 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                               Principal             
                                                 Amount       Value  
                                                                     
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED                               
     SECURITIES - Continued                                          
     Government National Mortgage Association                        
         10%                   11/15/09        $      14      $    15
         7.5%                  1/20/25             9,702        9,881
         7%                    4/20/25            12,426       12,729
         7%                    5/20/25             5,117        5,242
                                                               27,867

Indexed Securities(B) -  1.0%                                        
     Federal Home Loan Mortgage Corporation                          
         REMIC 1089 Class C                                          
         Inverse Floater                                             
         504.21%               6/15/21                85        1,105

     Federal National Mortgage Association                           
         REMIC 1993-183 Class FG                                     
         6.216%                10/25/23            1,881        1,812
         REMIC 1993-189 Class S                                      
         Inverse Floater                                             
         6.90%                 10/25/23            1,072          728
                                                                2,540

Stripped Securities(D)-  1.2%                                        
     Federal Home Loan Mortgage Corporation                          
         0%(2)                 7/15/22               695          556

     Federal National Mortgage Association                           
         708.16%(G, 1)         6/25/21                24          421
         0%(2)                 5/25/22             2,869        2,633
         0%(2)                 5/25/22             1,948        1,213
                                                                4,267

Total U.S. Government Agency Mortgage-backed Securities              
     (Identified Cost - $84,706)                               86,121

YANKEE BONDS(A) -  2.2%                                              
     Banque Paribas                                                  
         Subordinated Notes                                          
         8.35%                 6/15/07             2,000        2,255
         6.875%                3/1/09              2,100        2,107

7 

N-30D 9th Page of 17 TOC 1st Previous Next ↓Bottom Just 9th
WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                                Principal                
                                                  Amount      Value      
                                                                         
YANKEE BONDS - Continued                                                 
     Hydro-Quebec                                                        
         8.875%                3/1/26           $    700      $    850   
     YPF Sociedad Anonima                                                
         7.5%                  10/26/02            3,633         3,677   

Total Yankee Bonds                                                       
     (Identified Cost - $8,519)                                  8,889   

SHORT-TERM INVESTMENTS -  25.1%                                          
Notes -  3.2%                                                            
     Fifth Third Bank                                                    
         5.6%                  1/19/96            10,000        10,000   
     Ford Motor Credit Company                                           
         8%                    10/1/96             3,000         3,050   
                                                                13,050   
Commercial Paper -  4.2%                                                 
     General Electric Capital Corporation                                
         5.95%                 1/2/96              8,000         8,000   
     General Motors Acceptance Corporation                               
         5.8%                  2/2/96              8,700         8,655   
                                                                16,655   

U. S. Government and Agency Obligations -  12.6%                         
     Federal National Mortgage Association                               
         5.5%                  1/31/96            24,200        24,089   
     United States Treasury Bills                                        
         5.395%                1/18/96             1,250         1,247(I)
         5.825%                3/7/96             25,000        24,733   
                                                                50,069   

Repurchase Agreement -  5.1%                                             
     Merrill Lynch Government Securities, Inc.                           
         5.75% dated 12/29/95, to be repurchased                         
         at $20,187 on 1/2/96 (Collateral:                               
         $16,385 United States Treasury                                  
         Bonds, 7.875% due 2/15/21, value                                
         $21,112)                                 20,174        20,174   

8 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
PORTFOLIO OF INVESTMENTS - Continued
(Amounts in Thousands)

                                                                [Download Table]

                                                Actual                
                                               Contracts      Value   
                                                                      
Option Purchased - N.M.                                               
     Eurodollar Future Calls                                          
         Jan. 96 Strike Price $94.50                206     $       88

Total Short-term Investments                                          
     (Identified Cost - $100,020)                              100,036

Total Investments - 106.1%                                            
     (Identified Cost -  $406,393)                          $  422,172

                                                                [Download Table]

                                Expiration   Actual     Appreciation/
                                   Date     Contracts  (Depreciation)
                                                                     
FUTURES CONTRACTS PURCHASED                                          
Treasury Bond Futures            March 96        37      $        53 

FUTURES CONTRACTS SOLD                                               
Ten-year Treasury Note Futures   March 96       103             (126)
                                                         $       (73)

A  Yankee Bond - Dollar-denominated bond issued in the U.S. by foreign    
entities.                                                           
  B  Indexed Security - The rate of interest earned on the security is tied to
an index such as the Cost of Funds Index (COFI),  Constant  Maturity
   Treasury Index (CMT) or  London  Interbank  Offered Rate  (LIBOR).  The
coupon rate shown is the rate at December 31, 1995.                 
C  The coupon  rates shown on variable  rate  securities  are the rates at
   December 31, 1995. These rates vary with the weighted average coupon of
the underlying loans.                                               
D  Stripped  Security - A security with  interest-only  or  principal-only
   payment streams, denoted by the superscript 1 and 2, respectively.  For
   interest-only securities, the amount shown as principal is the notional
balance used to calculate the amount of interest due.               
E  Zero-coupon  Bond - A bond with no periodic  interest  which is sold at
such a discount so as to produce a current yield-to-maturity.       
F  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.                           
G  The coupon rate shown is the rate at December 31, 1995.                
H  This particular  zero-coupon  bond is callable on March 9, 1997. If not
called, interest will accrue at 7.89% until maturity.               
I  Collateral to cover futures sold.                                      
N.M.  Not meaningful.                                                           

See notes to financial statements.                                  

9 

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
STATEMENT OF ASSETS AND LIABILITIES 
December 31, 1995 
(Unaudited) 

                                                                [Download Table]
                                                                                
              Assets                                                            

Investments at value (Identified Cost - $406,392,667)               $422,171,771
Cash                                                                      62,852
Receivable for:                                                                 
     Investments sold                                                 12,165,840
     Fund shares sold                                                      3,054
Interest receivable                                                    4,006,634
Other assets                                                               6,951
         Total assets                                                438,417,102

              Liabilities                                                       

Payable for:                                                                    
     Investments purchased                                            40,272,753
     Futures variation margin                                             16,250
Due to adviser and administrator                                         126,286
         Total liabilities                                            40,415,289
Net assets                                                          $398,001,813

              Analysis of Net Assets                                            

Common stock at par value $.001 per share, authorized                           
     100,000,000 shares; issued and outstanding 3,490,983 shares    $      3,491

Accumulated paid-in capital                                          381,408,088

Undistributed net investment income                                      386,363

Undistributed net realized gain on investments, options and futures      497,942

Unrealized appreciation of investments, options and futures           15,705,929

Net assets                                                          $398,001,813

Net asset value, offering price, and redemption price per share     $     114.01

See notes to financial statements.                                              

10

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
STATEMENT OF OPERATIONS 
For the Six Months Ended December 31, 1995
(Unaudited) 

                                                        [Enlarge/Download Table]
                                                                                          
Investment Income:                                                                        
     Interest                                                                 $ 12,189,852

Expenses:                                                                                 
     Advisory fee                                                $  715,802               
     Administrative fee                                              89,479               
     Custodian fee                                                   55,120               
     Registration fees                                               50,425               
     Legal and audit fees                                            23,200               
     Directors' fees                                                  8,700               
     Reports to shareholders                                          3,655               
     Transfer agent and shareholder servicing expense                 1,713               
     Organization expense                                             1,541               
     Other expenses                                                   7,277               
                                                                    956,912               
         Less fees waived                                           (62,152)              
         Total expenses, net of waivers                                            894,760

Net Investment Income                                                           11,295,092

Net Realized and Unrealized Gain on Investments:                                          
     Realized gain on investments, options and futures            6,780,424               
     Unrealized appreciation of investments options and futures   5,123,174               
Net Realized and Unrealized Gain on Investments                                 11,903,598

Increase in Net Assets Resulting from Operations                              $ 23,198,690

See notes to financial statements.                                              

11

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
STATEMENT OF CHANGES IN NET ASSETS

                                                        [Enlarge/Download Table]

                                                        For the Six     For the Year  
                                                       Months Ended        Ended      
                                                     December 31, 1995  June 30, 1995 
                                                        (Unaudited)                   
                                                                                      
Change in Net Assets:                                                                 
Net investment income                                   $ 11,295,092     $ 16,815,006 
Net realized gain (loss) on investments,                                              
     options and futures                                   6,780,424        1,242,701 
Increase in unrealized appreciation of                                                
     investments, options and futures                      5,123,174       16,617,288 
Change in net assets resulting from operations            23,198,690       34,674,995 

Distributions to shareholders from:                                                   
     Net investment income                               (15,805,036)     (15,198,153)
     Net realized gain on investments                     (1,507,661)          -      
Increase in net assets from Fund share transactions       55,342,140      111,337,423 
     Change in net assets                                 61,228,133      130,814,265 

Net Assets:                                                                           

     Beginning of period                                 336,773,680      205,959,415 

     End of period (including undistributed net                                       
         investment income of $386,363                                                
         and $4,896,307, respectively)                  $398,001,813     $336,773,680 

See notes to financial statements.                                              

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 WESTERN ASSET TRUST, INC.
 FULL RANGE DURATION PORTFOLIO
Financial Highlights

   Contained below is per share operating performance data for a share of common
stock  outstanding,  total investment  return,  ratios to average net assets and
other  supplemental  data. This  information  has been derived from  information
provided in the financial statements.                                           

                                                        [Enlarge/Download Table]

                                        For the                           For the Years Ended June 30,            
                                    Six Months Ended   --------------------------------------------------------   
                                    December 31, 1995     1995       1994        1993       1992       1991(A)    
                                    ---------------------------------------------------------------------------   
                                       (Unaudited)                                                                
                                                                                                                  
Per Share Operating                                                                                               
   Performance:                                                                                                   
Net asset value, beginning of                                                                                     
   period                                $ 112.17      $ 105.02   $ 116.64    $ 112.04    $ 106.28    $ 100.00    
                                      -------------------------------------------------------------------------   

Net investment income(B)                     3.37          6.82       5.64        6.57        6.90        6.66    
Net realized and unrealized                                                                                       
   gain (loss) on investments,                                                                                    
   options and futures contracts             3.80          7.19      (6.28)       8.71        8.72        4.28    
                                      -------------------------------------------------------------------------   
Total from investment operations             7.17         14.01      (0.64)      15.28       15.62       10.94    
                                      -------------------------------------------------------------------------   

Distributions to shareholders from:                                                                               
   Net investment income                    (4.89)        (6.86)     (6.11)      (6.72)      (7.11)      (4.66)   
   Net realized gain on investments         (0.44)          -        (4.87)      (3.96)      (2.75)        -      
                                      -------------------------------------------------------------------------   
Total distributions                         (5.33)        (6.86)    (10.98)     (10.68)      (9.86)      (4.66)   
                                      -------------------------------------------------------------------------   
Net asset value, end of period           $ 114.01      $ 112.17   $ 105.02    $ 116.64    $ 112.04    $ 106.28    
                                      =========================================================================   

Total return                                 6.54%(C)     14.12%     -0.89%      14.52%      15.61%      11.01%(C)

Ratios/Supplemental Data:                                                                                         
Ratio to average net assets:                                                                                      
   Expenses(B)                               0.50%(D)      0.50%      0.50%       0.50%       0.50%       0.65%(D)
   Net investment income(B)                   6.3%(D)       7.0%       6.0%        6.0%        6.8%        8.0%(D)

Portfolio turnover rate                    215.90%(D)    257.90%    272.49%     313.05%     299.65%     177.25%(D)
Net assets, end of                                                                                                
   period (in thousands)                                                                                          
                                         $398,002      $336,774   $205,959    $135,886     $92,892     $43,076    

A  For the period  September 4, 1990  (commencement of operations) to     
June 30, 1991.                                                      
B  Net of investment  advisory fees waived  pursuant to voluntary expense 
   limitations  of:  0.65%  through  June  30,  1991;  0.50%   thereafter,
including a voluntary administrative expense waiver of 0.05%.       
C  Not annualized                                                         
D  Annualized                                                             

See notes to financial statements.                                  

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WESTERN ASSET TRUST, INC. 
FULL RANGE DURATION PORTFOLIO 
NOTES TO FINANCIAL STATEMENTS 
(Unaudited) 

1.  Significant Accounting Policies:                                            

The Western Asset Trust, Inc. ("Corporation") is registered under the Investment
Company Act of 1940,  as amended.  The Western  Asset Trust Full Range  Duration
Portfolio ("Fund"),  a diversified,  open-end management  investment company, is
one of the portfolios established by the Corporation.  The Fund was organized on
May 16, 1990 and had no operations  prior to September 4, 1990, other than those
related to organizational matters.                                              

Security Valuation                                                              

Portfolio  securities  are valued  based upon  market  quotations.  When  market
quotations  are not readily  available,  securities  are valued  based on prices
received from recognized  broker-dealers in the same or similar securities.  The
amortized cost method of valuation is used for debt  obligations with 60 days or
less remaining to maturity.                                                     

Options and Futures                                                             

The current  market  value of a traded  option is the last sale price or, in the
absence of a sale,  the mean  between the closing bid and asked  price.  Futures
contracts  are  marked-to-market  on  a  daily  basis.  As  a  contract's  value
fluctuates,  payments known as variation margin are made to or received from the
futures commission merchant.                                                    

Dividends to Shareholders                                                       

Net investment income for dividend purposes is recorded on the accrual basis and
consists of interest  income less  expenses.  Bond  premium and  original  issue
discount are  amortized  for  financial  reporting  and tax  purposes  using the
effective  interest  method  over the period to  maturity  of the  security  and
increase or reduce interest income.                                             

Security Transactions                                                           

Security  transactions are recorded on the trade date. Realized gains and losses
from security transactions are reported on an identified cost basis.            

Deferred Organizational Expense                                                 

Deferred   organizational   expenses  of  $45,572  are  being   amortized  on  a
straight-line basis over 5 years beginning on the date operations began.        

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NOTES TO FINANCIAL STATEMENTS - Continued 

Use of Estimates                                                                

The  preparation  of the  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 Fund
intends to continue to qualify as a regulated  investment company and distribute
all of its taxable income to its shareholders.                                  

2.  Financial Instruments:                                                      

As  part  of  the  Fund's  investment  program,  the  Fund  utilizes  repurchase
agreements,  options  and  futures  contracts.  The  nature  and  risk of  these
financial instruments and the reasons for using them are set forth more fully in
the Corporation's Prospectus and Statement of Additional Information.           

Repurchase Agreements                                                           

All repurchase  agreements are fully collateralized by obligations issued by the
U.S.  Government or its agencies and such collateral is in the possession of the
Fund's  custodian.  Risks arise from the possible delay in recovery or potential
loss of rights in the collateral  should the issuer of the repurchase  agreement
fail financially.                                                               

Option Transactions                                                             

A call  option on a bond or bond  future  gives the  option  holder the right to
purchase a bond or bond  future at a  specified  price  until a certain  date in
exchange  for a premium  paid to the writer of the option.  Risks arise from the
possible  illiquidity  of the options  market and from  movements in  underlying
security  values.  During the six months ended December 31, 1995 no call options
on bonds or bond futures were written by the Fund.                              

Futures                                                                         

The Fund has entered into futures contracts in connection with its interest rate
management  strategy.  Risks arise from the possible  illiquidity of the futures
market and from the possibility that a change in the value of a contract may not
correlate  with  changes  in  interest  rates.  The open long and short  futures
positions  and related  appreciation  or  depreciation  at December 31, 1995 are
described at the end of the "Portfolio of Investments", page 9.                 

3.  Portfolio Transactions:                                                     

Purchases  and  sales  of  portfolio  securities  (excluding  short-term,   U.S.
Government securities,  written and purchased options and futures contracts) for
the six months ended December 31, 1995, aggregated                              

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NOTES TO FINANCIAL STATEMENTS - Continued 

$76,170,596  and  $66,103,974,   respectively.   Purchases  and  sales  of  U.S.
Government securities aggregated $251,170,165 and $246,302,645, respectively for
the same period.                                                                

At December 31, 1995, the cost of securities for federal income tax purposes was
$406,392,667.  Aggregate  gross  unrealized  appreciation  for all securities in
which there was an excess of value over tax cost was  $16,327,352  and aggregate
gross unrealized depreciation for all securities in which there was an excess of
tax cost over value was $621,423.                                               

4.  Fund Share Transactions:                                                    

At December 31, 1995, there were 100,000,000 Fund shares authorized at $.001 par
value. Transactions in Fund shares were as follows:                             

                                                        [Enlarge/Download Table]

                                       For the Six Months               For the Year         
                                             Ended                         Ended             
                                        December 31, 1995              June 30, 1995         
                                       Shares       Amount          Shares        Amount     
                                                                                             
Sold                                  405,376    $46,101,873      1,016,478    $109,120,297  
Reinvestment of distributions         150,160     16,808,278        147,507      15,198,150  
Repurchased                           (66,770)    (7,568,011)      (122,879)    (12,981,024) 
---------------------------------------------------------------------------------------------
     Net increase                     488,766    $55,342,140      1,041,106    $111,337,423  
=============================================================================================

5.  Transactions with Affiliates:                                               

The Fund has an  administration  agreement  with Legg Mason Fund  Adviser,  Inc.
("Administrator"),   a   corporate   affiliate   of  Legg  Mason  Wood   Walker,
Incorporated,  ("Legg  Mason") a member of the New York Stock  Exchange  and the
distributor for the Fund. Under this agreement,  the Administrator  provides the
Fund  with  administrative  services  for which the Fund pays a fee at an annual
rate of 0.10% of average daily net assets of the Fund.  Effective  July 1, 1991,
the  Administrator  voluntarily  agreed to indefinitely  limit its annual fee to
0.05% of the Fund's average daily net assets.                                   

Western  Asset  Management  Company  ("Adviser"),  a corporate  affiliate of the
Administrator  and Legg Mason,  serves as  investment  adviser to the Fund.  The
Adviser is responsible for the actual investment activity of the Fund, for which
the Fund pays a fee at an annual  rate of 0.40% of  average  daily net assets of
the Fund. Effective July 1, 1991, the Adviser voluntarily agreed to indefinitely
waive its fees and reimburse the Fund to the extent necessary to limit the total
expenses  to an annual  rate of 0.50% of the Fund's  average  daily net  assets.
Pursuant to this  agreement,  advisory  fees of $62,152  were waived for the six
months ended December 31, 1995.                                                 

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘N-30D’ Filing	Date	First	Last	Other Filings

	3/9/97	10
	2/29/96
Filed on:	2/28/96	2		N-30D, NSAR-A
For Period End:	12/31/95	1	17	N-30D, NSAR-A
	6/30/95	13	17	24F-2NT, 497, N-30D, NSAR-B
				List all Filings

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Filing Submission 0000950169-96-000024 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Western Asset Funds Inc – ‘N-30D’ for 12/31/95

As of: Wednesday, 2/28/96 · For: 12/31/95 · Accession #: 950169-96-24 · File #: 811-06110

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Dates Referenced Herein and Documents Incorporated by Reference

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