NOTES TO FINANCIAL STATEMENTS
LEGG MASON INCOME TRUST , INC.
INVESTMENT GRADE INCOME PORTFOLIO
(Amounts in Thousands) (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Income Trust, Inc. ("Trust"), consisting of the Investment Grade Income Portfolio ("Fund"), the
U.S. Government Intermediate-Term Portfolio, U.S. Government Money Market Portfolio and the High Yield
Portfolio, is registered under the Investment Company Act of 1940, as amended, as an open-end, diversified
investment company. The financial statements of the other portfolios of the Trust are included in separate reports
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.
Investment Income and Dividends to Shareholders
Income and expenses are recorded on the accrual basis. Dividends are declared daily and paid monthly.
Dividends payable are recorded on the dividend record date. Bond premiums are amortized for financial
reporting and tax purposes. Bond discounts, other than original issue and zero-coupon bonds, are not amortized.
At June 30, 1995, the amount of income distribution payable was $203. Security Transactions
Security transactions are recorded on the trade date. Realized gains and losses from security transactions are
reported on an identified cost basis.
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 daily using the closing price on the
principal exchange where the contracts are traded. Payments (variation margin) are made or received daily in
relation to market fluctuations.
All repurchase agr