UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-2853
Name of Fund: Legg Mason Cash Reserve Trust
Fund Address: 100 Light Street
Baltimore, MD 21202
Name and address of agent for service:
Mark R. Fetting, President, Legg Mason Cash Reserve Trust
100 Light Street
Baltimore, MD 21202.
Registrant's telephone number, including area code: (410) 539-0000
Date of fiscal year end: August 31, 2003
Date of reporting period: August 31, 2003
Item 1 - Report to Shareholders
LEGG MASON
-------------------------------------------------------------------------
CASH RESERVE TRUST
---------------------------------------------------------
ANNUAL REPORT TO SHAREHOLDERS
August 31, 2003
---------------------------------------------------------
[LEGG MASON FUNDS LOGO]
To Our Shareholders,
The Legg Mason Cash Reserve Trust now has $2.3 billion invested in a
diversified portfolio of high quality fixed income securities with relatively
short maturities.
As this letter is written on September 23, the Trust's annualized yield for
the past 7 days is 0.46%(A). The average weighted maturity of our portfolio is
59 days.
A complete listing of the Trust's portfolio holdings at August 31, 2003,
appears in this report. You will note that approximately 92% of the Trust's
portfolio was invested in U.S. government and agency securities and repurchase
agreements(B) fully secured by such securities.
We report with deep sorrow the recent death of our longtime Trustee Richard G.
Gilmore. Dick was an exceptionally bright and talented person who made a
significant contribution to the Trust over many years.
Sincerely,
<Table>
/s/ JOHN F. CURLEY, JR. /S/ MARK R. FETTING
John F. Curley, Jr. Mark R. Fetting
Chairman President
</Table>
September 23, 2003
- ---------------
(A) The yields shown here are for past periods and are not intended to
indicate future performance. An investment in the Trust is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Trust seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Trust.
(B) For a description of repurchase agreements, see Note 2 in the notes to
financial statements.
Statement of Net Assets
August 31, 2003
(Amounts in Thousands)
Legg Mason Cash Reserve Trust
<Table>
<Caption>
Rate Maturity Date Par Value
- ------------------------------------------------------------------------------------------------------
Commercial Paper -- 3.7%
Allied Irish Banks plc 1.025% 10/14/03 $ 9,830 $ 9,818(A)
Bank of Ireland 1.064% 10/20/03 11,500 11,483(A)
Caisse centrale Desjardins 1.035% 9/29/03 5,740 5,735(A)
HBOS Treasury Services plc 1.00% 10/6/03 11,250 11,239(A)
Merck & Co. Inc. 1.025% 10/14/03 12,000 11,985
Royal Bank of Scotland Group
plc 1.02% 9/2/03 13,000 13,000(A)
Societe Generale 1.015% 12/5/03 11,550 11,519(A)
Toyota Motor Credit
Corporation 1.02% 9/5/03 11,500 11,499
----------
Total Commercial Paper
(Identified Cost -- $86,278) 86,278
- ------------------------------------------------------------------------------------------------------
Corporate and Other Bonds -- 2.2%
Abbey National plc 0.99% 9/29/03 11,550 11,541(A)
Credit Agricole Indosuez 1.025% 9/23/03 11,550 11,543(A)
GlaxoSmithKline Finance plc 1.00% 9/4/03 8,505 8,504(A)
Grand Metropolitan Investment
Corporation 1.00% 1/6/04 10,000 9,955
Long Beach Auto Loan Trust
2003-A 1.288% 3/15/04 4,116 4,116(B)
Long Beach Auto Loan Trust
2003-B 0.99% 7/30/04 4,935 4,935(B)
----------
Total Corporate and Other
Bonds (Identified Cost --
$50,594) 50,594
- ------------------------------------------------------------------------------------------------------
Medium-Term Notes -- 0.9%
Caterpillar Financial Services
Corporation 1.45% 11/4/03 10,000 10,003(C)
CIT Group Inc. 2.36% 1/9/04 5,933 5,933(C)
National Rural Utilities
Cooperative Finance
Corporation 2.11% 4/26/04 4,500 4,525(C)
----------
Total Medium-Term Notes
(Identified Cost -- $20,461) 20,461
- ------------------------------------------------------------------------------------------------------
</Table>
2
<Table>
<Caption>
Rate Maturity Date Par Value
- ------------------------------------------------------------------------------------------------------
U.S. Government and Agency Obligations -- 73.3%
Fannie Mae 0.95% to 5.125% 9/3/03 to 6/15/04 $607,330 $ 608,031
Federal Home Loan Bank 0.959% to 3.375% 9/17/03 to 6/15/04 192,500 193,060
Freddie Mac 0.98% to 5.25% 9/12/03 to 5/15/04 831,110 833,012
Sallie Mae 1.047% 9/18/03 25,000 25,000(C)
Sallie Mae 1.047% 10/16/03 25,000 25,000(C)
Sallie Mae 1.067% 11/20/03 25,000 25,000(C)
----------
Total U.S. Government and
Agency Obligations
(Identified
Cost -- $1,709,103) 1,709,103
- ------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 18.5%
Deutsche Bank AG
1.04%, dated 8/29/03, to be repurchased at $105,325 on 9/2/03
(Collateral: $107,785 Federal Home Loan Bank bonds, 2.375%, due
2/15/06, value $107,590) 105,313 105,313
Lehman Brothers, Inc.
1.02%, dated 8/29/03, to be repurchased at $121,489 on 9/2/03
(Collateral: $50,000 Resolution Funding Corp. principal-only securities, due
4/15/14, value $28,810; $181,960 Federal Home Loan Bank
zero-coupon bonds, due 9/24/21, value $52,301; $41,450 Fannie Mae
notes, 6.87%, due 10/6/05, value $43,949) 121,475 121,475
Merrill Lynch Government Securities, Inc.
1.02%, dated 8/29/03, to be repurchased at $204,381 on 9/2/03
(Collateral: $594,800 United States Treasury principal-only securities,
due 8/15/19 to 11/15/26, value $208,443) 204,358 204,358
----------
Total Repurchase Agreements (Identified Cost -- $431,146) 431,146
- ------------------------------------------------------------------------------------------------------
Total Investments, at amortized cost and value -- 98.6% 2,297,582(D)
Other Assets Less Liabilities -- 1.4% 33,629
----------
NET ASSETS APPLICABLE TO 2,330,980 SHARES OUTSTANDING -- 100.0% $2,331,211
==========
NET ASSET VALUE PER SHARE $1.00
==========
- ------------------------------------------------------------------------------------------------------
</Table>
(A) Yankee Bond or Certificate of Deposit -- A dollar-denominated bond or
certificate of deposit issued in the U.S. by foreign entities.
(B) Asset-backed securities -- A security secured by a pool of assets such as
property, mortgages or receivables.
(C) Indexed security -- The rates of interest earned on these securities are
tied to the London Interbank Offered Rate ("LIBOR") or the quarterly
Treasury rate. The coupon rates are the rates as of August 31, 2003.
(D) Also represents cost for federal income tax purposes.
See notes to financial statements.
3
Statement of Operations
For the Year Ended August 31, 2003
(Amounts in Thousands)
Legg Mason Cash Reserve Trust
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------
Investment Income:
Interest $32,493
Expenses:
$10,698
Management fee
Distribution fee 3,543(A)
Audit and legal fees 96
Custodian fee 549
Registration fees 81
Reports to shareholders 132
Transfer agent and shareholder servicing expense 2,028
Trustees' fees and expenses 38
Other expenses 544
-------
17,709
Less: fees waived (1,181)(A)
-------
Total expenses, net of waivers 16,528
-------
NET INVESTMENT INCOME 15,965
NET REALIZED GAIN/(LOSS) ON INVESTMENTS (18)
- -------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $15,947
- -------------------------------------------------------------------------------------------------------------
</Table>
(A) See Note 3 to financial statements.
See notes to financial statements.
4
Statement of Changes in Net Assets
(Amounts in Thousands)
Legg Mason Cash Reserve Trust
<Table>
<Caption>
--------------------------------
For the Years Ended August 31,
2003 2002
- ------------------------------------------------------------------------------------
Change in Net Assets:
Net investment income $ 15,965 $ 35,671
Net realized gain/(loss) on investments (18) 17
- ------------------------------------------------------------------------------------
Change in net assets resulting from
operations 15,947 35,688
Distributions to shareholders from net
investment income (16,227) (35,671)
Change in net assets from Trust share
transactions (107,338) 147,493
- ------------------------------------------------------------------------------------
Change in net assets (107,618) 147,510
Net Assets:
Beginning of year 2,438,829 2,291,319
- ------------------------------------------------------------------------------------
End of year $2,331,211 $2,438,829
- ------------------------------------------------------------------------------------
</Table>
See notes to financial statements.
5
Financial Highlights
Legg Mason Cash Reserve Trust
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data. This information has been derived from information
provided in the financial statements.
<Table>
<Caption>
Years Ended August 31,
-------------------------------------------------------------------
2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------
Net asset value,
beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
-------------------------------------------------------------------
Net investment income .01(A) .02(A) .05(A) .05(A) .04(A)
Distributions from net
investment income (.01) (.02) (.05) (.05) (.04)
-------------------------------------------------------------------
Net asset value, end
of year $1.00 $1.00 $1.00 $1.00 $1.00
===================================================================
Ratios/supplemental
data:
Total return .69% 1.56% 4.89% 5.36% 4.46%
Expenses to average
net assets .70%(A) .69%(A) .67%(A) .68%(A) .75%(A)
Net investment
income to average
net assets .68%(A) 1.55%(A) 4.74%(A) 5.25%(A) 4.37%(A)
Net assets, end of
year (in millions) $2,331 $2,439 $2,291 $1,950 $1,777
- ---------------------------------------------------------------------------------------------
</Table>
(A) Net of 12b-1 service fees waived by Legg Mason Wood Walker, Inc. of 0.05% of
average daily net assets. If no fees had been waived by Legg Mason, the
annualized ratio of expenses to average daily net assets would have been as
follows for the years ended August 31, 2003: 0.75%; 2002: 0.74%; 2001:
0.72%; 2000: 0.73%; and 1999: 0.80%.
See notes to financial statements.
6
Notes to Financial Statements
Legg Mason Cash Reserve Trust
(Amounts in Thousands)
- --------------------------------------------------------------------------------
1. Organization and Significant Accounting Policies:
The Legg Mason Cash Reserve Trust ("Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, diversified management
investment company.
Preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America 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. The following is a summary of significant accounting policies
followed by the Trust in the preparation of its financial statements:
Security Valuation
Portfolio securities are valued under the amortized cost method, which
approximates current market value. Under this method, securities are valued at
cost when purchased and, thereafter, a constant proportionate amortization of
any discount or premium is recorded until maturity of the security.
Security Transactions
Security transactions are recorded on the trade date. Realized gains and
losses from security transactions are reported on an identified cost basis for
both financial reporting and federal income tax purposes.
Investment Income and Dividends to Shareholders
Dividends are declared daily and paid monthly. Dividends payable are recorded
on the dividend record date. Net investment income for dividend purposes
consists of interest accrued, plus original issue and market discount earned,
less amortization of market premium and accrued expenses. At August 31, 2003,
dividends payable of $385 were accrued.
Federal Income Taxes
No provision for federal income or excise taxes is required since the Trust
intends to continue to qualify as a regulated investment company and distribute
substantially all of its taxable income and capital gains to its shareholders.
Because federal income tax regulations differ from accounting principles
generally accepted in the United States of America, income and capital gains
distributions determined in accordance with tax regulations may differ from net
investment income and realized gains recognized for financial reporting
purposes. Accordingly, the character of distributions and composition of net
assets for tax purposes may differ from those reflected in the accompanying
financial statements.
7
Notes to Financial Statements -- Continued
- --------------------------------------------------------------------------------
Distributions during the years ended August 31, 2003 and 2002, were
characterized as follows for tax purposes:
<Table>
<Caption>
2003 2002
------- -------
Ordinary income $16,227 $35,671
------- -------
Total distributions $16,227 $35,671
======= =======
</Table>
The tax basis components of net assets at August 31, 2003, were as follows:
<Table>
Undistributed ordinary income $ 249
Capital loss carryforward (18)
Paid-in capital 2,330,980
----------
$2,331,211
==========
</Table>
The Fund intends to retain realized capital gains that may be offset against
available capital loss carryforwards for federal income tax purposes. As of
August 31, 2003 the fund had a capital loss carryforward of $18, which expires
in 2011.
2. Repurchase Agreements:
The Trust may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, a fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and a fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during a fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the fund's holding
period. The value of the collateral is at all times at least equal to the total
amount of the repurchase obligation, including interest. In the event of
counterparty default, a fund has the right to use the collateral to satisfy the
terms of the repurchase agreement. However, there could be potential loss to the
fund in the event the fund is delayed or prevented from exercising its right to
dispose of the collateral securities, including the risk of a possible decline
in the value of the collateral securities during the period while the fund seeks
to assert its rights. The Trust's investment adviser reviews the value of the
collateral and the creditworthiness of those banks and dealers with which the
Trust enters into repurchase agreements to evaluate potential risks.
3. Transactions With Affiliates:
The Trust has a management agreement with Legg Mason Fund Adviser, Inc.
("LMFA"). Pursuant to this agreement, LMFA provides the Trust with management
and administrative services, for which the Trust pays a fee at an annual rate
ranging from 0.50% of the first $500 million of average daily net assets to
0.40% of average daily net assets in excess of $2 billion. Management fees of
$896 were payable to LMFA at August 31, 2003.
8
- --------------------------------------------------------------------------------
Western Asset Management Company ("Adviser") serves as investment adviser to
the Trust. The Adviser is responsible for the actual investment activity of the
Trust. LMFA (not the Trust) pays the Adviser a fee at an annual rate equal to
30% of the management fee received by LMFA.
Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the New York
Stock Exchange, serves as distributor of the Trust. Legg Mason may receive an
annual distribution fee of up to 0.15% of the Trust's average daily net assets.
However, Legg Mason has agreed to waive 0.05% of the fee indefinitely.
Distribution and service fees of $194 were payable to Legg Mason at August 31,
2003.
LM Fund Services, Inc. ("LMFS"), a registered transfer agent, has an agreement
with the Trust's transfer agent to assist it with some of its duties. For this
assistance, the transfer agent paid LMFS $739 for the year ended August 31,
2003.
The Adviser, LMFA, Legg Mason and LMFS are wholly owned subsidiaries of Legg
Mason, Inc.
4. Trust Share Transactions:
The Trust is authorized to issue an unlimited number of full and fractional
shares of beneficial interest (without par value). At August 31, 2003, net
assets consisted of paid-in capital of $2,330,980 and accumulated net realized
gain of $231. Since the Trust has sold and redeemed shares at a constant net
asset value of $1.00 per share, the number of shares represented by such sales
and redemptions is the same as the amounts shown below for such transactions:
<Table>
<Caption>
Reinvestment Net
Sold of Distributions Repurchased Change
- ----------------------------------------------------------------------------------------------------------------
Year Ended August 31, 2003 $5,554,405 $16,524 $(5,678,267) $(107,338)
Year Ended August 31, 2002 5,878,591 36,627 (5,767,725) 147,493
</Table>
9
Report of Independent Auditors
To the Shareholders and Trustees of
Legg Mason Cash Reserve Trust:
We have audited the accompanying statement of net assets of Legg Mason Cash
Reserve Trust (the "Trust") as of August 31, 2003, and the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our procedures
included confirmation of securities owned as of August 31, 2003, by
correspondence with the Trust's custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Legg
Mason Cash Reserve Trust at August 31, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and its financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
[ERNST & YOUNG LLP]
New York, New York
September 30, 2003
10
Trustees and Officers
The table below provides information about the Trust's trustees and officers,
including biographical information about their business experience and
information about their relationships with Legg Mason, Inc. and its affiliates.
The mailing address of each trustee and officer is 100 Light Street, c/o Legal
and Compliance Department, 23rd Floor, Baltimore, Maryland 21202.
<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------
TERM OF
OFFICE
AND
POSITION(S) LENGTH NUMBER OF OTHER
HELD WITH OF TIME LEGG MASON DIRECTORSHIPS PRINCIPAL OCCUPATION(S)
NAME AND AGE FUNDS SERVED(A) FUNDS OVERSEEN HELD DURING THE PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES:
--------------------------------------------------------------------------------------------------------------
Gilmore, Richard Trustee Since Director/Trustee of None Retired. Trustee of Pacor
G.(B) 1990 all Legg Mason Settlement Trust, Inc. since
Age 76 funds (consisting 1990. Formerly: Director of
of 22 portfolios). CSS Industries, Inc.
(diversified holding company
that makes seasonal
decorative products); Senior
Vice President, Chief
Financial Officer and
Director of PECO Energy Co.,
Inc.
--------------------------------------------------------------------------------------------------------------
Lehman, Arnold Trustee Since Director/Trustee of None Director of The Brooklyn
L. 1988 all Legg Mason Museum of Art since 1997;
Age 59 funds (consisting Trustee of American
of 22 portfolios). Federation of Arts since
1998. Formerly: Director of
The Baltimore Museum of Art
(1979-1997).
--------------------------------------------------------------------------------------------------------------
Masters, Robin Trustee Since Director/Trustee of None Retired. Director of Bermuda
J.W. 2002 all Legg Mason SMARTRISK (non-profit) since
Age 47 funds (consisting 2001. Formerly: Chief
of 22 portfolios). Investment Officer of ACE
Limited
(insurance)
(1995-
2000).
--------------------------------------------------------------------------------------------------------------
McGovern, Jill Trustee Since Director/Trustee of None Chief Executive Officer of
E. 1988 all Legg Mason The Marrow Foundation since
Age 59 funds (consisting 1993. Formerly: Executive
of 22 portfolios). Director of the Baltimore
International Festival
(1991-1993); Senior
Assistant to the President
of The Johns Hopkins
University (1986-1990).
--------------------------------------------------------------------------------------------------------------
Mehlman, Arthur Trustee Since Director/Trustee of None Retired. Director of The
S. 2002 all Legg Mason League for People with
Age 61 funds (consisting Disabilities, Inc.; Director
of 22 portfolios). of University of Maryland
Foundation and University of
Maryland College Park
Foundation (non-profits).
Formerly: Partner, KPMG LLP
(international accounting
firm) (1972-2002).
--------------------------------------------------------------------------------------------------------------
</Table>
11
<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------
TERM OF
OFFICE
AND
POSITION(S) LENGTH NUMBER OF OTHER
HELD WITH OF TIME LEGG MASON DIRECTORSHIPS PRINCIPAL OCCUPATION(S)
NAME AND AGE FUNDS SERVED(A) FUNDS OVERSEEN HELD DURING THE PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------------
O'Brien, G. Trustee Since Director/Trustee of Director of the Trustee of Colgate
Peter 1999 all Legg Mason Royce Family of University; President of
Age 57 funds (consisting Funds Hill House, Inc.
of 22 portfolios). (consisting of (residential home care).
17 portfolios); Formerly: Managing Director,
Director of Equity Capital Markets Group
Renaissance of Merrill Lynch & Co.
Capital (1971- 1999).
Greenwich
Funds; Director
of Technology
Investment
Capital Corp.
--------------------------------------------------------------------------------------------------------------
Rowan, S. Ford Trustee Since Director/Trustee of None Consultant, Rowan & Blewitt
Age 60 2002 all Legg Mason Inc. (management
funds (consisting consulting); Visiting
of 22 portfolios). Associate Professor, George
Washington University since
2002; Director of Santa Fe
Institute (scientific
research institute) since
1999; Director of Annapolis
Center for Science-Based
Public Policy since 1995.
--------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES:
--------------------------------------------------------------------------------------------------------------
Curley, John F., Chairman Since Chairman and None Director and/or officer of
Jr.(C) and 1988 Director/ Trustee various Legg Mason
Age 64 Trustee of all Legg Mason affiliates. Formerly: Vice
funds (consisting Chairman and Director of
of 22 portfolios). Legg Mason, Inc. and Legg
Mason Wood Walker,
Incorporated; Director of
Legg Mason Fund Adviser,
Inc. and Western Asset
Management Company (each a
registered investment
adviser).
--------------------------------------------------------------------------------------------------------------
Fetting, Mark President President President and Director of the Executive Vice President of
R.(C) and since Director/ Trustee Royce Family of Legg Mason, Inc.; Director
Age 48 Trustee 2001; of all Legg Mason Funds and/or officer of various
Trustee funds (consisting (consisting of Legg Mason affiliates since
since of 22 portfolios). 17 portfolios). 2000. Formerly: Division
2002 President and Senior Officer
of Prudential Financial
Group, Inc. and related
companies, including fund
boards and consulting
services to subsidiary
companies (1991-2000);
Partner, Greenwich
Associates; Vice President,
T. Rowe Price Group, Inc.
--------------------------------------------------------------------------------------------------------------
</Table>
12
<Table>
<Caption>
--------------------------------------------------------------------------------------------------------------
TERM OF
OFFICE
AND
POSITION(S) LENGTH NUMBER OF OTHER
HELD WITH OF TIME LEGG MASON DIRECTORSHIPS PRINCIPAL OCCUPATION(S)
NAME AND AGE FUNDS SERVED(A) FUNDS OVERSEEN HELD DURING THE PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------------
EXECUTIVE OFFICERS:
--------------------------------------------------------------------------------------------------------------
Duffy, Marc Vice Since Vice President and None Vice President and Secretary
R.(D) President 2000 Secretary of all of Legg Mason Fund Adviser,
Age 45 and Legg Mason funds Inc. since 2000; Associate
Secretary (consisting of 22 General Counsel of Legg
portfolios). Mason Wood Walker,
Incorporated since 1999.
Formerly: Senior Associate,
Kirkpatrick & Lockhart LLP
(1996-1999); Senior Counsel,
Securities and Exchange
Commission, Division of
Investment Management
(1989-1995).
--------------------------------------------------------------------------------------------------------------
Karpinski, Marie Vice Since Vice President and None Vice President and Treasurer
K.(D) President 1988 Treasurer of all of Legg Mason Fund Adviser,
Age 54 and Legg Mason funds Inc. and Western Asset
Treasurer (consisting of 22 Funds, Inc.; Treasurer of
portfolios). Pacific American Income
Shares, Inc. and Western
Asset Premier Bond Fund.
--------------------------------------------------------------------------------------------------------------
Merz, Gregory Vice Since Vice President and None Vice President and Deputy
T.(D) President 2003 Chief Legal Officer General Counsel of Legg
Age 44 and Chief of all Legg Mason Mason, Inc. since 2003.
Legal funds (consisting Formerly: Associate General
Officer of 22 portfolios) Counsel, Fidelity
Investments (1993-2002);
Senior Associate, Debevoise
& Plimpton (1985-1993).
--------------------------------------------------------------------------------------------------------------
</Table>
(A) Trustees of the Trust serve a term of indefinite length until their
resignation or removal and stand for re-election by shareholders only as and
when required by the 1940 Act. Officers of the Trust serve one-year terms,
subject to annual reappointment by the Board of Trustees.
(B) The Board of Trustees regrets to report the death of longtime Trustee
Richard G. Gilmore on September 19, 2003.
(C) Mr. Curley and Mr. Fetting are considered to be interested persons (as
defined in the 1940 Act) of the Trust by virtue of being employees of Legg
Mason Wood Walker, Incorporated, the principal underwriter of the Trust.
(D) Officers of the Trust are interested persons (as defined in the 1940 Act).
ADDITIONAL INFORMATION ABOUT THE TRUST'S TRUSTEES AND OFFICERS
IS CONTAINED IN THE STATEMENT OF ADDITIONAL INFORMATION,
AVAILABLE WITHOUT CHARGE UPON REQUEST BY
CALLING 1-800-822-5544.
13
Investment Manager
Legg Mason Fund
Adviser, Inc.
Baltimore, MD
Investment Adviser
Western Asset
Management Company
Pasadena, CA
Board of Trustees
John F. Curley,
Jr., Chairman
Mark R. Fetting,
President
Arnold L. Lehman
Robin J.W. Masters
Dr. Jill E.
McGovern
Arthur S. Mehlman
G. Peter O'Brien
S. Ford Rowan
Transfer and Shareholder
Servicing Agent
Boston Financial
Data Services
Braintree, MA
Custodian
State Street Bank &
Trust Company
Boston, MA
Counsel
Kirkpatrick &
Lockhart LLP
Washington, DC
Independent Auditors
Ernst & Young LLP
New York, NY
This report is not to be distributed unless preceded or accompanied
by a prospectus.
LEGG MASON WOOD WALKER, INCORPORATED
MEMBER NYSE, INC. - MEMBER SIPC
---------------------------------------
100 Light Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 - 539 - 0000
LMF-018
10/03
Item 2 - Code of Ethics
Did the registrant adopt a code of ethics, as of the end of the period covered
by this report, which applies to the registrant's principal executive officer,
principal financial officer, principle accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party? If not, why not? Briefly
describe any amendments or waivers that occurred during the period. State if the
code of ethics, including amendments and waivers are on a website and provide
the website address. State if the registrant will send a copy of the code of
ethics to shareholders at no charge upon request.
THE REGISTRANT, LEGG MASON CASH RESERVE TRUST, HAS ADOPTED A CODE OF
EHTICS THAT APPLIES TO THE FUND PRESIDENT AND TREASURER, A COPY OF WHICH
IS ATTACHED AS AN EXHIBIT TO THIS FORM N-CSR.
Item 3 - Audit Committee Financial Expert
Did the registrant's board of directors determine that the registrant either:
(a) has at least one audit committee financial expert serving on its audit
committee; or (b) does not
have an audit committee financial expert serving on
its audit committee? If yes, disclose the name of the financial expert and
whether he/she is "independent." If no, explain why not.
THE TRUSTEES OF LEGG MASON CASH RESERVE TRUST DETERMINED THAT THE TRUST
HAS AT LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT
COMMITTEE.
MR. RICHARD G. GILMORE AND MR. ARHTUR S. MEHLMAN, BOTH INDEPENDENT
TRUSTEES, WERE DEEMED QUALIFIED AND AGREED TO SERVE. MR. GILMORE PASSED
AWAY ON SEPTEMBER 19, 2003.
Item 4 - Principal Accounting Fees and Services
(a) Audit Fees - Disclose the aggregate fees billed for each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal
years. N/A
(b) Audit-Related Fees - Disclose the aggregate fees billed in each of the
last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported
under paragraph (a) of this Item. Describe the nature of the services
comprising the fees disclosed under this category. N/A
(c) Tax Fees - Disclose the aggregate fees billed in each of the last two
fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Describe
the nature of the services comprising the fees disclosed under this
category. N/A
(d) All Other Fees - Disclose the aggregate fees billed in each of the last
two fiscal years for products or services provided by the principal
accountant, other than the services reporting in paragraphs (a) through
(c) of this Item. Describe the nature of the services comprising the
fees disclosed under this category. N/A
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. N/A (2)
Disclose the percentage of services described in each of paragraphs (a)
through (d) of this Item that were approved by the audit committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. N/A
(f) If greater than 50%, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time,
permanent employees. N/A
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the registrant for each of the last two fiscal years of the
registrant. N/A
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of non-audit services
that were rendered to the registrant's investment adviser (not including
any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X is compatible with maintaining the principal accountant's
independence.
(NOT REQUIRED UNTIL ANNUAL REPORT AFTER DECEMBER 15, 2003)
Item 5 - Reserved
Item 6 - Reserved
Item 7 - Disclosure of Proxy Voting Policies and Procedures For closed-end
management investment companies, describe the policies and procedures that it
uses to determine how to vote proxies relating to portfolio securities,
including the procedures that the company uses when a vote presents a conflict
between the interests of its shareholders, and those of the company's investment
adviser; principal underwriter; or any affiliated person of the company, its
investment adviser, or its principal underwriter.
(NOT APPLICABLE)
Item 8 - Reserved
Item 9 - Controls and Procedures
(a) Disclose the conclusions of the registrant's principal executive officer
or officers and principal financial officer or officers, or persons
performing similar functions, regarding the effectiveness of the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90
days of the filing date of the report that includes the disclosure
required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act
(17 CFR 240-13a-15(b) or 240.15d-15(b)).
WITHIN 90 DAYS OF THE FILING DATE OF THIS FORM N-CSR, THE REGISTRANT'S
PRESIDENT AND TREASURER REVIEWED THE REGISTRANT'S DISCLOSURE CONTROLS
AND PROCEDURES ("THE PROCEDURES") AND EVALUATED THEIR EFFECTIVENESS.
BASED ON THEIR REVIEW, SUCH OFFICERS DETERMINED THAT THE PROCEDURES
ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON
FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE
TIME PERIODS REQUIRED BY
THE SECURITIES AND EXCHANGE COMMISSION'S RULES AND REGULATIONS.
(b) Disclose any change in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER
FINANCIAL REPORTING DURING THE REGISTRANT'S LAST HALF-YEAR THAT HAVE
MATERIALLY AFFECTED, OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE
INTERNAL CONTROL OVER FINANCIAL REPORTING.
Item 10 - Exhibits
(a) File the exhibits listed below as part of this Form.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the
registrant intends to satisfy the Item requirements through
filing of an exhibit.
(ATTACHED)
(a)(2) A separate certification for each principal execute officer and
principal financial officer of the registrant as required by
Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)), exactly as
set forth below:
(ATTACHED)
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17
CFR 270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange
Act (17 CFR 240.13a-14(b) or 240.15d-14(b)), and Section 1350 of Chapter
63 of Title 18 of the United States Code (18 U.S.C. 1350) as an exhibit.
A certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C.
78r), or other wise subject to the liability of that section. Such
certification will not be deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Exchange Act, except
to the extent that the registrant specifically incorporates it by
reference.
(ATTACHED)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Legg Mason Cash Reserve Trust
By: /s/ Mark R. Fetting
- --------------------------
Mark R. Fetting
President, Legg Mason Cash Reserve Trust
Date: 10/21/03
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Mark R. Fetting
- --------------------------
Mark R. Fetting
President, Legg Mason Cash Reserve Trust
Date: 10/21/03
By: /s/ Marie K. Karpinski
- --------------------------
Marie K. Karpinski
Treasurer, Legg Mason Cash Reserve Trust
Date: 10/21/03