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 811-10407
Master Portfolio Trust
(Exact name of registrant as specified in charter)
620 Eighth Avenue, 49th Floor,
New York, NY 10018
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrants telephone number, including area code: 1-877-721-1926
Date of fiscal year end: August 31
Date of reporting period: February 28, 2017
Item 1. | Report to Stockholders. |
The Semi-Annual Report to Stockholders is filed herewith.
Schedule of investments (unaudited)
February 28, 2017
Liquid Reserves Portfolio
Security | Rate | Maturity Date |
Face Amount |
Value | ||||||||||||
Short-Term Investments 100.0% | ||||||||||||||||
Bank Notes 0.4% |
||||||||||||||||
Bank of America N.A. |
1.155 | % | 8/1/17 | $ | 100,000,000 | $ | 99,995,839 | |||||||||
Certificates of Deposit 34.8% |
||||||||||||||||
Abbey National Treasury Services PLC |
0.670 | % | 3/1/17 | 159,000,000 | 158,999,779 | |||||||||||
Abbey National Treasury Services PLC |
0.670 | % | 3/2/17 | 110,000,000 | 109,999,688 | |||||||||||
Abbey National Treasury Services PLC |
0.670 | % | 3/3/17 | 100,000,000 | 99,999,575 | |||||||||||
Bank of Montreal |
1.080 | % | 3/16/17 | 107,500,000 | 107,518,076 | |||||||||||
Bank of Montreal |
1.166 | % | 6/7/17 | 176,000,000 | 176,108,673 | (a) | ||||||||||
Bank of Montreal |
1.216 | % | 8/7/17 | 243,000,000 | 243,091,844 | (a) | ||||||||||
Bank of Montreal |
1.297 | % | 11/22/17 | 22,000,000 | 22,024,343 | (a) | ||||||||||
Bank of Nova Scotia |
1.145 | % | 6/8/17 | 185,000,000 | 185,093,244 | (a) | ||||||||||
Bank of Tokyo-Mitsubishi UFJ NY |
1.398 | % | 4/25/17 | 175,000,000 | 175,159,953 | (a) | ||||||||||
BNP Paribas NY Branch |
1.281 | % | 5/15/17 | 187,900,000 | 188,063,195 | (a) | ||||||||||
BNP Paribas NY Branch |
1.227 | % | 7/6/17 | 254,500,000 | 254,683,324 | (a) | ||||||||||
BNP Paribas NY Branch |
1.397 | % | 11/22/17 | 22,000,000 | 22,039,919 | (a) | ||||||||||
Chase Bank USA N.A. |
1.442 | % | 5/26/17 | 112,366,000 | 112,508,871 | (a) | ||||||||||
Chase Bank USA N.A. |
1.152 | % | 7/10/17 | 100,000,000 | 100,046,682 | (a) | ||||||||||
Credit Suisse NY |
1.480 | % | 3/3/17 | 50,000,000 | 50,003,464 | |||||||||||
Credit Suisse NY |
1.472 | % | 4/10/17 | 82,000,000 | 82,066,873 | (a) | ||||||||||
Credit Suisse NY |
1.478 | % | 5/1/17 | 138,000,000 | 138,154,140 | (a) | ||||||||||
Credit Suisse NY |
1.477 | % | 5/22/17 | 315,000,000 | 315,423,363 | (a) | ||||||||||
Credit Suisse NY |
1.472 | % | 7/10/17 | 168,500,000 | 168,582,252 | (a) | ||||||||||
Credit Suisse NY |
1.792 | % | 11/17/17 | 22,000,000 | 22,041,200 | (a) | ||||||||||
KBC Bank NV |
0.680 | % | 3/1/17 | 240,000,000 | 239,999,719 | |||||||||||
KBC Bank NV |
1.050 | % | 3/2/17 | 97,000,000 | 97,001,747 | |||||||||||
KBC Bank NV |
0.680 | % | 3/7/17 | 239,105,000 | 239,105,000 | |||||||||||
Landesbank Hessen-Thuringen |
0.680 | % | 3/7/17 | 40,105,000 | 40,105,000 | |||||||||||
Landesbank Hessen-Thuringen |
1.070 | % | 3/15/17 | 99,750,000 | 99,765,309 | |||||||||||
Lloyds Bank PLC |
1.253 | % | 7/10/17 | 442,000,000 | 442,368,022 | (a) | ||||||||||
Lloyds Bank PLC |
1.131 | % | 8/14/17 | 140,000,000 | 140,039,042 | (a) | ||||||||||
Mitsubishi UFJ Trust & Banking NY |
1.393 | % | 6/9/17 | 242,000,000 | 242,223,211 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.409 | % | 4/21/17 | 215,000,000 | 215,189,073 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.372 | % | 5/17/17 | 25,000,000 | 25,021,945 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.379 | % | 5/18/17 | 22,000,000 | 22,019,259 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.377 | % | 5/22/17 | 375,000,000 | 375,315,499 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.359 | % | 7/24/17 | 150,000,000 | 150,099,231 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.222 | % | 8/17/17 | 180,000,000 | 180,028,114 | (a) | ||||||||||
Mizuho Bank Ltd. |
1.300 | % | 8/24/17 | 18,450,000 | 18,450,434 |
See Notes to Financial Statements.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 19 |
Schedule of investments (unaudited) (contd)
February 28, 2017
Liquid Reserves Portfolio
Security | Rate | Maturity Date |
Face Amount |
Value | ||||||||||||
Certificates of Deposit continued |
||||||||||||||||
National Australia Bank of NY |
1.257 | % | 12/5/17 | $ | 47,000,000 | $ | 47,036,609 | (a) | ||||||||
Norinchukin Bank |
0.950 | % | 3/10/17 | 172,000,000 | 172,013,158 | |||||||||||
Norinchukin Bank |
1.278 | % | 7/26/17 | 100,000,000 | 100,067,245 | (a) | ||||||||||
Norinchukin Bank |
1.340 | % | 9/5/17 | 12,600,000 | 12,599,790 | |||||||||||
Oversea-Chinese Banking Corp. Ltd. |
0.920 | % | 3/1/17 | 235,000,000 | 235,001,295 | |||||||||||
Oversea-Chinese Banking Corp. Ltd. |
0.950 | % | 3/6/17 | 172,000,000 | 172,006,490 | |||||||||||
Oversea-Chinese Banking Corp. Ltd. |
1.080 | % | 3/15/17 | 149,000,000 | 149,021,931 | |||||||||||
Rabobank Nederland NY |
1.119 | % | 5/23/17 | 22,000,000 | 22,011,343 | (a) | ||||||||||
Rabobank Nederland NY |
1.125 | % | 9/11/17 | 179,000,000 | 179,017,680 | (a) | ||||||||||
Royal Bank of Canada |
1.151 | % | 6/12/17 | 77,000,000 | 77,043,906 | (a) | ||||||||||
Royal Bank of Canada |
1.179 | % | 6/23/17 | 30,000,000 | 30,017,500 | (a) | ||||||||||
Royal Bank of Canada |
1.217 | % | 8/4/17 | 258,025,000 | 258,211,490 | (a) | ||||||||||
Societe Generale |
1.110 | % | 8/14/17 | 110,000,000 | 110,020,454 | (a) | ||||||||||
Standard Chartered Bank |
1.391 | % | 5/18/17 | 17,000,000 | 17,018,924 | |||||||||||
Standard Chartered Bank |
1.392 | % | 7/10/17 | 132,000,000 | 132,071,209 | (a) | ||||||||||
Sumitomo Mitsui Banking Corp. |
1.369 | % | 5/2/17 | 100,000,000 | 100,082,254 | (a) | ||||||||||
Sumitomo Mitsui Banking Corp. |
1.377 | % | 7/5/17 | 50,000,000 | 50,047,593 | (a) | ||||||||||
Sumitomo Mitsui Banking Corp. |
1.377 | % | 7/6/17 | 95,000,000 | 95,089,725 | (a) | ||||||||||
Sumitomo Mitsui Banking Corp. |
1.278 | % | 7/25/17 | 100,000,000 | 100,036,267 | (a) | ||||||||||
Sumitomo Mitsui Trust & Banking Co., Ltd. |
0.680 | % | 3/1/17 | 70,000,000 | 70,000,169 | |||||||||||
Sumitomo Mitsui Trust & Banking Co., Ltd. |
0.810 | % | 4/17/17 | 100,000,000 | 100,007,965 | |||||||||||
Sumitomo Mitsui Trust & Banking Co., Ltd. |
1.357 | % | 7/6/17 | 447,000,000 | 447,383,745 | (a) | ||||||||||
Toronto Dominion Bank NY |
1.080 | % | 3/15/17 | 190,000,000 | 190,034,314 | |||||||||||
Toronto Dominion Bank NY |
1.161 | % | 7/11/17 | 323,000,000 | 323,167,078 | (a) | ||||||||||
UBS AG |
1.309 | % | 4/21/17 | 342,000,000 | 342,252,714 | (a) | ||||||||||
Wells Fargo Bank N.A. |
0.950 | % | 3/8/17 | 100,000,000 | 100,007,236 | |||||||||||
Wells Fargo Bank N.A. |
1.248 | % | 4/26/17 | 190,000,000 | 190,130,752 | (a) | ||||||||||
Total Certificates of Deposit |
9,079,737,899 | |||||||||||||||
Commercial Paper 30.7% |
||||||||||||||||
ABN AMRO Funding USA LLC |
1.268 | % | 4/3/17 | 119,550,000 | 119,448,721 | (b)(c) | ||||||||||
ABN AMRO Funding USA LLC |
1.278 | % | 4/7/17 | 73,000,000 | 72,930,419 | (b)(c) | ||||||||||
ABN AMRO Funding USA LLC |
1.227 | % | 8/7/17 | 42,390,000 | 42,139,428 | (b)(c) | ||||||||||
ANZ New Zealand International Ltd. |
1.120 | % | 6/1/17 | 17,000,000 | 17,008,522 | (a)(c) | ||||||||||
ANZ New Zealand International Ltd. |
1.147 | % | 6/6/17 | 135,000,000 | 135,076,352 | (a)(c) | ||||||||||
ANZ New Zealand International Ltd. |
1.143 | % | 6/9/17 | 93,000,000 | 93,051,681 | (a)(c) | ||||||||||
ASB Finance Ltd. |
1.390 | % | 3/2/17 | 88,000,000 | 88,003,641 | (a)(c) | ||||||||||
ASB Finance Ltd. |
1.170 | % | 5/16/17 | 130,000,000 | 130,082,863 | (a)(c) | ||||||||||
ASB Finance Ltd. |
1.187 | % | 8/7/17 | 44,250,000 | 44,033,667 | (b)(c) |
See Notes to Financial Statements.
20 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
Liquid Reserves Portfolio
Security | Rate | Maturity Date |
Face Amount |
Value | ||||||||||||
Commercial Paper continued |
||||||||||||||||
ASB Finance Ltd. |
1.187 | % | 8/8/17 | $ | 99,000,000 | $ | 98,512,089 | (b)(c) | ||||||||
Bank of Nova Scotia |
1.350 | % | 11/22/17 | 17,000,000 | 17,025,274 | (a)(c) | ||||||||||
BNP Paribas Fortis SA |
0.550 | % | 3/1/17 | 100,000,000 | 99,998,297 | (b) | ||||||||||
BNZ International Funding Ltd. |
1.390 | % | 3/1/17 | 235,000,000 | 235,004,886 | (a)(c) | ||||||||||
BNZ International Funding Ltd. |
1.143 | % | 6/9/17 | 118,000,000 | 118,065,574 | (a)(c) | ||||||||||
BPCE SA |
1.103 | % | 4/4/17 | 243,000,000 | 242,832,262 | (b)(c) | ||||||||||
Caisse des Depots et Consignations |
0.983 | % | 3/14/17 | 135,000,000 | 134,969,130 | (b)(d) | ||||||||||
Canadian Imperial Bank of Commerce |
1.162 | % | 7/10/17 | 242,000,000 | 242,121,673 | (a)(c) | ||||||||||
Canadian Imperial Bank of Commerce |
1.215 | % | 8/8/17 | 365,000,000 | 365,248,974 | (a)(c) | ||||||||||
Commonwealth Bank of Australia |
1.214 | % | 11/27/17 | 22,000,000 | 22,028,367 | (a)(c) | ||||||||||
Credit Agricole Corporate and Investment Bank |
0.570 | % | 3/1/17 | 13,937,000 | 13,936,755 | (b) | ||||||||||
Credit Suisse NY |
1.133 | % | 3/21/17 | 85,000,000 | 84,964,994 | (b) | ||||||||||
Credit Suisse NY |
1.309 | % | 4/3/17 | 23,000,000 | 22,983,904 | (b) | ||||||||||
Danske Corp. |
1.329 | % | 8/14/17 | 84,250,000 | 83,705,188 | (b)(c) | ||||||||||
DBS Bank Ltd. |
0.952 | % | 3/6/17 | 160,000,000 | 159,982,160 | (b)(c) | ||||||||||
DBS Bank Ltd. |
0.962 | % | 3/14/17 | 185,000,000 | 184,951,365 | (b)(c) | ||||||||||
DBS Bank Ltd. |
1.013 | % | 5/3/17 | 95,000,000 | 94,870,969 | (b)(c) | ||||||||||
DBS Bank Ltd. |
1.013 | % | 5/8/17 | 198,000,000 | 197,698,678 | (b)(c) | ||||||||||
DnB NOR Bank ASA |
1.200 | % | 5/2/17 | 400,000,000 | 400,256,168 | (a)(c) | ||||||||||
General Electric Co. |
0.550 | % | 3/1/17 | 64,879,000 | 64,878,018 | (b) | ||||||||||
HSBC USA Inc. |
1.259 | % | 5/2/17 | 45,000,000 | 45,033,871 | (a)(c) | ||||||||||
HSBC USA Inc. |
1.250 | % | 5/15/17 | 75,000,000 | 75,060,898 | (a)(c) | ||||||||||
HSBC USA Inc. |
1.200 | % | 5/18/17 | 51,425,000 | 51,460,833 | (a)(c) | ||||||||||
ING U.S. Funding LLC |
0.942 | % | 3/3/17 | 243,000,000 | 242,985,298 | (b) | ||||||||||
ING U.S. Funding LLC |
1.350 | % | 5/3/17 | 156,625,000 | 156,767,465 | (a) | ||||||||||
ING U.S. Funding LLC |
1.221 | % | 5/30/17 | 162,000,000 | 162,122,305 | (a) | ||||||||||
ING U.S. Funding LLC |
1.266 | % | 8/7/17 | 125,000,000 | 125,111,365 | (a) | ||||||||||
Johnson & Johnson |
0.530 | % | 3/3/17 | 155,000,000 | 154,992,315 | (b)(c) | ||||||||||
JPMorgan Securities LLC |
0.771 | % | 3/28/17 | 49,000,000 | 48,973,780 | (b) | ||||||||||
JPMorgan Securities LLC |
1.228 | % | 4/26/17 | 385,000,000 | 385,251,293 | (a) | ||||||||||
JPMorgan Securities LLC |
1.197 | % | 7/5/17 | 99,025,000 | 99,086,036 | (a) | ||||||||||
Landesbank Hessen-Thuringen |
0.952 | % | 3/6/17 | 97,000,000 | 96,988,780 | (b)(c) | ||||||||||
Landesbank Hessen-Thuringen |
1.258 | % | 8/8/17 | 95,000,000 | 94,518,632 | (b)(c) | ||||||||||
NRW Bank |
1.053 | % | 3/28/17 | 50,000,000 | 49,971,572 | (b)(c) | ||||||||||
NRW Bank |
1.053 | % | 4/6/17 | 75,000,000 | 74,942,727 | (b)(c) | ||||||||||
NRW Bank |
1.033 | % | 4/25/17 | 117,000,000 | 116,862,954 | (b)(c) | ||||||||||
Oversea-Chinese Banking Corp. Ltd. |
0.952 | % | 3/6/17 | 168,990,000 | 168,970,313 | (b)(c) | ||||||||||
Oversea-Chinese Banking Corp. Ltd. |
1.151 | % | 6/12/17 | 200,000,000 | 200,111,772 | (a) |
See Notes to Financial Statements.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 21 |
Schedule of investments (unaudited) (contd)
February 28, 2017
Liquid Reserves Portfolio
Security | Rate | Maturity Date |
Face Amount |
Value | ||||||||||||
Commercial Paper continued |
||||||||||||||||
Societe Generale |
0.520-0.670 | % | 3/1/17 | $ | 1,107,000,000 | $ | 1,106,980,838 | (b)(c) | ||||||||
Sumitomo Mitsui Trust & Banking Co., Ltd. |
0.972 | % | 3/8/17 | 200,000,000 | 199,972,622 | (b)(c) | ||||||||||
Swedish Export Credit |
1.177 | % | 8/8/17 | 96,000,000 | 95,526,875 | (b) | ||||||||||
Toronto Dominion Holdings USA |
0.932 | % | 3/8/17 | 135,000,000 | 134,981,159 | (b)(c) | ||||||||||
Unilever Capital Corp. |
0.530 | % | 3/1/17 | 55,000,000 | 54,999,050 | (b)(c) | ||||||||||
United Overseas Bank Ltd. |
0.952 | % | 3/3/17 | 155,000,000 | 154,991,397 | (b)(c) | ||||||||||
United Overseas Bank Ltd. |
0.952 | % | 3/7/17 | 170,000,000 | 169,977,852 | (b)(c) | ||||||||||
United Overseas Bank Ltd. |
1.156 | % | 7/28/17 | 28,900,000 | 28,766,338 | (b)(c) | ||||||||||
USAA Capital Corp. |
0.620 | % | 3/16/17 | 45,000,000 | 44,987,040 | (b) | ||||||||||
Westpac Banking Corp. |
1.262 | % | 11/17/17 | 22,000,000 | 22,022,437 | (a)(c) | ||||||||||
Total Commercial Paper |
7,988,227,836 | |||||||||||||||
Corporate Bonds & Notes 0.0% |
||||||||||||||||
UBS AG |
1.415 | % | 6/1/17 | 5,000,000 | 5,004,494 | (a) | ||||||||||
Time Deposits 29.1% |
||||||||||||||||
Bank of Tokyo-Mitsubishi UFJ NY |
0.570 | % | 3/1/17 | 99,000,000 | 99,000,000 | |||||||||||
BNP Paribas NY Branch |
0.550 | % | 3/1/17 | 178,000,000 | 178,000,000 | |||||||||||
CIBC World Markets Corp. |
0.590 | % | 3/1/17 | 288,000,000 | 288,000,000 | |||||||||||
CIBC World Markets Corp. |
0.600 | % | 3/1/17 | 215,000,000 | 215,000,000 | |||||||||||
Credit Agricole CIB |
0.570 | % | 3/1/17 | 1,079,859,000 | 1,079,859,000 | |||||||||||
DNB Bank ASA |
0.570 | % | 3/1/17 | 740,000,000 | 740,000,000 | |||||||||||
National Bank of Canada |
0.550 | % | 3/1/17 | 95,000,000 | 95,000,000 | |||||||||||
Natixis SA |
0.570 | % | 3/1/17 | 849,993,000 | 849,993,000 | |||||||||||
Nordea Bank AB |
0.560 | % | 3/1/17 | 1,040,000,000 | 1,040,000,000 | |||||||||||
Skandinaviska Enskilda Banken AB |
0.570 | % | 3/1/17 | 1,000,000,000 | 1,000,000,000 | |||||||||||
Svenska Handelsbanken AB |
0.550 | % | 3/1/17 | 987,583,000 | 987,583,000 | |||||||||||
Swedbank AB |
0.570 | % | 3/1/17 | 1,000,000,000 | 1,000,000,000 | |||||||||||
Total Time Deposits |
7,572,435,000 | |||||||||||||||
Repurchase Agreements 5.0% |
||||||||||||||||
Bank of America Corp. tri-party repurchase agreement dated 10/17/16; Proceeds at maturity $400,678,444; (Fully collateralized by various U.S. government agency obligations, corporate bonds and money market instruments, 2.723% to 9.000% due 3/15/17 to 5/1/40; Market value $408,000,000) |
0.860 | % | 5/10/17 | 400,000,000 | 400,000,000 | |||||||||||
Bank of America Corp. tri-party repurchase agreement dated 1/26/17; Proceeds at maturity $350,593,639; (Fully collateralized by various U.S. government agency obligations, corporate bonds and money market instruments, 0.000% to 5.550% due 3/06/17 to 2/6/57; Market value $366,588,199) |
0.860 | % | 5/10/17 | 350,000,000 | 350,000,000 |
See Notes to Financial Statements.
22 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
Liquid Reserves Portfolio
Security | Rate | Maturity Date |
Face Amount |
Value | ||||||||||||
Repurchase Agreements continued |
||||||||||||||||
Mitsubishi UFJ Trust & Banking Corp. tri-party repurchase agreement dated 10/17/16; Proceeds at maturity $200,358,944; (Fully collateralized by various corporate bonds and notes, municipal bonds and money market instruments, 0.000% to 9.750% due 6/15/17 to 10/15/46; Market value $213,771,037) |
0.910 | % | 5/10/17 | $ | 200,000,000 | $ | 200,000,000 | |||||||||
Mitsubishi UFJ Trust & Banking Corp. tri-party repurchase agreement dated 10/17/16; Proceeds at maturity $100,179,472; (Fully collateralized by various municipal bonds, 0.000% to 7.747% due 11/1/22 to 11/15/56; Market value $105,000,004) |
0.910 | % | 5/10/17 | 100,000,000 | 100,000,000 | |||||||||||
RBC Capital Markets; tri-party repurchase agreement dated 2/17/17; Proceeds at maturity $100,179,472; (Fully collateralized by various U.S. government agency obligations, 2.125% to 6.000% due 6/1/22 to 3/1/47; Market value $102,000,000) |
0.910 | % | 5/10/17 | 100,000,000 | 100,000,000 | |||||||||||
RBC Capital Markets; tri-party repurchase agreement dated 2/8/17; Proceeds at maturity$150,284,000; (Fully collateralized by various municipal bonds, 0.000% to 7.250% due 4/14/17 to 5/15/2115; Market value$158,090,190) |
0.960 | % | 5/10/17 | 150,000,000 | 150,000,000 | |||||||||||
Total Repurchase Agreements |
1,300,000,000 | |||||||||||||||
Total Investments 100.0% (Cost $26,038,067,390#) |
|
26,045,401,068 | ||||||||||||||
Other Assets in Excess of Liabilities 0.0% |
|
7,813,479 | ||||||||||||||
Total Net Assets 100.0% |
|
$ | 26,053,214,547 |
(a) | Variable rate security. Interest rate disclosed is as of the most recent information available. |
(b) | Rate shown represents yield-to-maturity. |
(c) | Commercial paper exempt from registration under Section 4(2) of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted. |
(d) | Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Trustees, unless otherwise noted. |
# | Aggregate cost for federal income tax purposes is substantially the same. |
See Notes to Financial Statements.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 23 |
Statement of assets and liabilities (unaudited)
February 28, 2017
Assets: | ||||
Investments, at value (Cost $26,038,067,390) |
$ | 26,045,401,068 | ||
Cash |
419,224 | |||
Interest receivable |
9,019,135 | |||
Receivable for securities sold |
825 | |||
Total Assets |
26,054,840,252 | |||
Liabilities: | ||||
Trustees fees payable |
119,136 | |||
Accrued expenses |
1,506,569 | |||
Total Liabilities |
1,625,705 | |||
Total Net Assets | $ | 26,053,214,547 | ||
Represented by: | ||||
Paid-in capital | $ | 26,053,214,547 |
See Notes to Financial Statements.
24 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
Statement of operations (unaudited)
For the Six Months Ended February 28, 2017
Investment Income: | ||||
Interest |
$ | 119,405,727 | ||
Expenses: | ||||
Investment management fee (Note 2) |
16,138,570 | |||
Fund accounting fees |
1,047,502 | |||
Trustees fees |
445,635 | |||
Legal fees |
363,564 | |||
Custody fees |
175,604 | |||
Audit and tax fees |
22,776 | |||
Miscellaneous expenses |
46,672 | |||
Total Expenses |
18,240,323 | |||
Less: Fee waivers and/or expense reimbursements (Notes 2) |
(16,138,570) | |||
Net Expenses |
2,101,753 | |||
Net Investment Income | 117,303,974 | |||
Realized and Unrealized Gain (Loss) on Investments (Notes 1 and 4): | ||||
Net Realized Gain From Investment Transactions |
4,898,306 | |||
Change in Net Unrealized Appreciation (Depreciation) From Investments |
7,333,678 | |||
Net Gain on Investments | 12,231,984 | |||
Increase in Net Assets From Operations | $ | 129,535,958 |
See Notes to Financial Statements.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 25 |
Statements of changes in net assets
For the Six Months Ended February 28, 2017 (unaudited) and the Year Ended August 31, 2016 |
2017 | 2016 | ||||||
Operations: | ||||||||
Net investment income |
$ | 117,303,974 | $ | 245,409,790 | ||||
Net realized gain |
4,898,306 | 686,995 | ||||||
Change in net unrealized appreciation (depreciation) |
7,333,678 | | ||||||
Increase in Net Assets From Operations |
129,535,958 | 246,096,785 | ||||||
Capital Transactions: | ||||||||
Proceeds from contributions |
35,400,942,370 | 114,933,457,934 | ||||||
Value of withdrawals |
(59,380,435,177) | (138,942,587,255) | ||||||
In-kind capital contributions (Note 3) |
| 10,124,686,062 | ||||||
Decrease in Net Assets From Capital Transaction |
(23,979,492,807) | (13,884,443,259) | ||||||
Decrease in Net Assets |
(23,849,956,849) | (13,638,346,474) | ||||||
Net Assets: | ||||||||
Beginning of period |
49,903,171,396 | 63,541,517,870 | ||||||
End of period* |
$ | 26,053,214,547 | $ | 49,903,171,396 |
See Notes to Financial Statements.
26 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
For the years ended August 31, unless otherwise noted: | ||||||||||||||||||||||||
20171 | 2016 | 2015 | 2014 | 2013 | 2012 | |||||||||||||||||||
Net assets, end of period (millions) | $26,053 | $49,903 | $63,542 | $74,403 | $73,576 | $61,127 | ||||||||||||||||||
Total return2 |
0.43 | % | 0.48 | % | 0.22 | % | 0.10 | % | 0.17 | % | 0.23 | % | ||||||||||||
Ratios to average net assets: | ||||||||||||||||||||||||
Gross expenses |
0.11 | %3 | 0.11 | % | 0.11 | % | 0.11 | % | 0.11 | % | 0.11 | % | ||||||||||||
Net expenses4,5 |
0.01 | 3 | 0.01 | 0.01 | 0.10 | 0.10 | 0.10 | |||||||||||||||||
Net investment income |
0.73 | 3 | 0.46 | 0.21 | 0.10 | 0.17 | 0.23 |
1 | For the six months ended February 28, 2017 (unaudited). |
2 | Performance figures may reflect compensating balance arrangements, fee waivers and/or expense reimbursements. In the absence of compensating balance arrangements, fee waivers and/or expense reimbursements, the total return would have been lower. Past performance is no guarantee of future results. Total returns for periods of less than one year are not annualized. |
3 | Annualized. |
4 | The investment manager has voluntarily agreed to waive and/or reimburse 0.10% of Portfolio expenses. This arrangement may be reduced or terminated under certain circumstances. Additional amounts may be voluntarily waived and/or reimbursed from time to time. Prior to August 18, 2014, as a result of a voluntary expense limitation arrangement, the ratio of total annual fund operating expenses, other than interest, brokerage, taxes, extraordinary expenses and acquired fund fees and expenses, to average net assets of the Portfolio did not exceed 0.10%. |
5 | Reflects fee waivers and/or expense reimbursements. |
See Notes to Financial Statements.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 27 |
Notes to financial statements (unaudited)
1. Organization and significant accounting policies
Liquid Reserves Portfolio (the Portfolio) is a separate diversified investment series of Master Portfolio Trust (the Trust). The Trust, a Maryland statutory trust, is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The Declaration of Trust permits the Trustees to issue beneficial interests in the Portfolio. At February 28, 2017, all investors in the Portfolio were funds advised or administered by the manager of the Portfolio and/or its affiliates.
Effective October 11, 2016, the Portfolio sells and effects withdrawals of its interests at prices based on the current market value of the securities it holds. Therefore, the price of an interest in the Portfolio fluctuates along with changes in the market-based value of the holdings of the Portfolio. Because the price of an interest in the Portfolio fluctuates, it has what is called a floating net asset value or floating NAV. Under Rule 2a-7 of the 1940 Act (Rule 2a-7), the Portfolio must follow strict rules as to the credit quality, liquidity, diversification and maturity of its investments. Effective October 14, 2016, the Portfolio may impose a fee upon the withdrawal of investors interests or may temporarily suspend investors ability to withdraw interests if the Portfolios liquidity falls below required minimums because of market conditions or other factors.
The following are significant accounting policies consistently followed by the Portfolio and are in conformity with U.S. generally accepted accounting principles (GAAP). Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.
(a) Investment valuation. Prior to October 11, 2016, in accordance with Rule 2a-7, money market instruments were valued at amortized cost, which approximated market value. This method involved valuing portfolio securities at their cost and thereafter assuming a constant amortization to maturity of any discount or premium. The Portfolios use of amortized cost was subject to its compliance with certain conditions as specified by Rule 2a-7.
Effective October 11, 2016, the valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. When the Portfolio holds securities or other assets that are denominated in a foreign currency, the Portfolio will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be
28 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Portfolio calculates its net asset value, the Portfolio values these securities as determined in accordance with procedures approved by the Portfolios Board of Trustees.
The Board of Trustees is responsible for the valuation process and has delegated the supervision of the daily valuation process to the Legg Mason North Atlantic Fund Valuation Committee (the Valuation Committee). The Valuation Committee, pursuant to the policies adopted by the Board of Trustees, is responsible for making fair value determinations, evaluating the effectiveness of the Portfolios pricing policies, and reporting to the Board of Trustees. When determining the reliability of third party pricing information for investments owned by the Portfolio, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.
The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuers financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.
For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Trustees, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Trustees quarterly.
The Portfolio uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 29 |
Notes to financial statements (unaudited) (contd)
GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:
| Level 1 quoted prices in active markets for identical investments |
| Level 2 other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| Level 3 significant unobservable inputs (including the Portfolios own assumptions in determining the fair value of investments) |
The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used in valuing the Portfolios assets carried at fair value:
ASSETS | ||||||||||||||||
Description | Quoted Prices (Level 1) |
Other Significant Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | ||||||||||||
Short-term investments | | $ | 26,045,401,068 | | $ | 26,045,401,068 |
| See Schedule of Investments for additional detailed categorizations. |
(b) Repurchase agreements. The Portfolio may enter into repurchase agreements with institutions that its subadviser has determined are creditworthy. Each repurchase agreement is recorded at cost. Under the terms of a typical repurchase agreement, the Portfolio acquires a debt security subject to an obligation of the seller to repurchase, and of the Portfolio to resell, the security at an agreed-upon price and time, thereby determining the yield during the Portfolios holding period. When entering into repurchase agreements, it is the Portfolios policy that its custodian or a third party custodian, acting on the Portfolios behalf, take possession of the underlying collateral securities, the market value of which, at all times, at least equals the principal amount of the repurchase transaction, including accrued interest. To the extent that any repurchase transaction maturity exceeds one business day, the value of the collateral is marked-to-market and measured against the value of the agreement in an effort to ensure the adequacy of the collateral. If the counterparty defaults, the Portfolio generally has the right to use the collateral to satisfy the terms of the repurchase transaction. However, if the market value of the collateral declines during the period in which the Portfolio seeks to assert its rights or if bankruptcy proceedings are commenced with respect to the seller of the security, realization of the collateral by the Portfolio may be delayed or limited.
(c) Interest income and expenses. Interest income consists of interest accrued and discount earned (including both original issue and market discount adjusted for amortization of premium) on the investments of the Portfolio. Expenses of the Portfolio are accrued daily. The Portfolio bears all costs of its operations other than expenses specifically assumed by the manager.
30 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
(d) Method of allocation. Net investment income and net realized/unrealized gains and/or losses of the Portfolio are allocated pro rata, based on respective ownership interests, among the Fund and other investors in the Portfolio (the Holders) at the time of such determination. Prior to October 11, 2016, gross realized gains and/or losses of the Portfolio were allocated to the Holders in a manner such that, the net asset values per share of each Holder, after each such allocation was closer to the total of all Holders net asset values divided by the aggregate number of shares outstanding for all Holders.
(e) Credit and market risk. Investments in securities that are collateralized by real estate mortgages are subject to certain credit and liquidity risks. When market conditions result in an increase in default rates of the underlying mortgages and the foreclosure values of underlying real estate properties are materially below the outstanding amount of these underlying mortgages, collection of the full amount of accrued interest and principal on these investments may be doubtful. Such market conditions may significantly impair the value and liquidity of these investments and may result in a lack of correlation between their credit ratings and values.
(f) Compensating balance arrangements. The Portfolio has an arrangement with its custodian bank whereby a portion of the custodians fees is paid indirectly by credits earned on the Portfolios cash on deposit with the bank.
(g) Income taxes. The Portfolio is classified as a partnership for federal income tax purposes. As such, each investor in the Portfolio is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Therefore, no federal income tax provision is required. It is intended that the Portfolios assets will be managed so an investor in the Portfolio can satisfy the requirements of Subchapter M of the Internal Revenue Code.
Management has analyzed the Portfolios tax positions taken on income tax returns for all open tax years and has concluded that as of August 31, 2016, no provision for income tax is required in the Portfolios financial statements. The Portfolios federal and state income tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.
(h) Other. Purchases, maturities and sales of money market instruments are accounted for on the date of the transaction. Realized gains and losses are calculated on the identified cost basis.
2. Investment management agreement and other transactions with affiliates
Legg Mason Partners Fund Advisor, LLC (LMPFA) is the Portfolios investment manager and Western Asset Management Company (Western Asset) is the Portfolios subadviser. LMPFA and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. (Legg Mason).
Under the investment management agreement, the Portfolio pays an investment management fee, calculated daily and paid monthly, at an annual rate of 0.10% of the Portfolios average daily net assets.
Liquid Reserves Portfolio 2017 Semi-Annual Report | 31 |
Notes to financial statements (unaudited) (contd)
LMPFA provides administrative and certain oversight services to the Portfolio. LMPFA delegates to the subadviser the day-to-day portfolio management of the Portfolio. For its services, LMPFA pays Western Asset monthly 70% of the net management fee it receives from the Portfolio.
LMPFA has voluntarily agreed to waive and/or reimburse 0.10% of Portfolio expenses. This arrangement may be reduced or terminated under certain circumstances. Additional amounts may be voluntarily waived and/or reimbursed from time to time.
During the six months ended February 28, 2017, fees waived and/or expenses reimbursed amounted to $16,138,570.
LMPFA is permitted to recapture amounts waived and/or reimbursed to the Portfolio during the same fiscal year under certain circumstances.
All officers and one Trustee of the Trust are employees of Legg Mason or its affiliates and do not receive compensation from the Trust.
3. Investments
At February 28, 2017, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
Gross unrealized appreciation | $ | 7,423,391 | ||
Gross unrealized depreciation | (89,713) | |||
Net unrealized appreciation | $ | 7,333,678 |
On August 29, 2016, Western Asset Institutional Cash Reserves Fund transferred all of its investable assets (including cash and receivables), with a value of $10,124,686,062, to the Portfolio in exchange for an interest in the Portfolio.
4. Derivative instruments and hedging activities
During the six months ended February 28, 2017, the Portfolio did not invest in derivative instruments.
5. Recent accounting pronouncement
In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, the final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the Portfolios financial statements and related disclosures.
32 | Liquid Reserves Portfolio 2017 Semi-Annual Report |
Board approval of management and
subadvisory agreements (unaudited)
At an in-person meeting of the Board of Trustees of Master Portfolio Trust (the Trust) held on November 7-8, 2016, the Board, including the Trustees who are not considered to be interested persons of the Trust (the Independent Trustees) under the Investment Company Act of 1940, as amended (the 1940 Act), approved for an annual period the continuation of the management agreement (the Management Agreement) between the Trust and Legg Mason Partners Fund Advisor, LLC (the Manager) with respect to Liquid Reserves Portfolio, a series of the Trust (the Fund), and the sub-advisory agreement (the Sub-Advisory Agreement) between the Manager and Western Asset Management Company (the Subadviser), an affiliate of the Manager, with respect to the Fund.
Background
The Board received extensive information in advance of the meeting from the Manager to assist it in its consideration of the Management Agreement and the Sub-Advisory Agreement and was given the opportunity to ask questions and request additional information from management. Throughout the prior year the Board had met with representatives of the Manager and the Subadviser, and had received information relevant to the renewal of the Management Agreement and the Sub-Advisory Agreement. In addition, prior to the meeting the Independent Trustees met with their independent legal counsel to discuss and consider the information provided by management and submitted questions to management, and they considered the responses provided. The Board received and considered a variety of information about the Manager and the Subadviser, as well as the management and sub-advisory arrangements for the Fund and other funds overseen by the Board, certain portions of which are discussed below. The information received and considered by the Board both in conjunction with the November meeting and throughout the year was both written and oral. The Board noted that the Fund is a master fund in a master-feeder structure, whereby, each feeder fund has the same investment objective and policies as the Fund and invests substantially all of its assets in the Fund.
The information provided and presentations made to the Board encompassed the Fund and all funds for which the Board has responsibility, including the following feeder funds in the Fund (each a Feeder Fund): Western Asset Liquid Reserves, a series of Legg Mason Partners Money Market Trust, Western Asset Institutional Liquid Reserves, a series of Legg Mason Partners Institutional Trust and Western Asset Premium Liquid Reserves, a series of Legg Mason Partners Premium Money Market Trust. The Board also considered certain information relating to Western Asset Institutional Cash Reserves, a series of Legg Mason Partners Institutional Trust, which had recently become an additional feeder fund in the Fund.
The discussion below covers both the advisory and the administrative functions being rendered by the Manager, both of which functions are encompassed by the Management Agreement, as well as the advisory functions rendered by the Subadviser pursuant to the Sub-Advisory Agreement.
Liquid Reserves Portfolio | 33 |
Board approval of management and
subadvisory agreements (unaudited) (contd)
Board approval of management agreement and sub-advisory agreement
The Independent Trustees were advised by separate independent legal counsel throughout the process. Prior to voting, the Independent Trustees received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Management Agreement and the Sub-Advisory Agreement. The Independent Trustees also reviewed the proposed continuation of the Management Agreement and the Sub-Advisory Agreement in private sessions with their independent legal counsel at which no representatives of the Manager and Subadviser were present. The Independent Trustees considered the Management Agreement and the Sub-Advisory Agreement separately in the course of their review. In doing so, they noted the respective roles of the Manager and the Subadviser in providing services to the Fund.
In approving the Management Agreement and Sub-Advisory Agreement, the Board, including the Independent Trustees, considered a variety of factors, including those factors discussed below. No single factor reviewed by the Board was identified by the Board as the principal factor in determining whether to approve the Management Agreement and the Sub-Advisory Agreement. Each Trustee may have attributed different weight to the various factors in evaluating the Management Agreement and the Sub-Advisory Agreement.
After considering all relevant factors and information, the Board, exercising its business judgment, determined that the continuation of the Management Agreement and Sub-Advisory Agreement was in the best interests of the Funds shareholders and approved the continuation of each such agreement for another year.
Nature, extent and quality of the services under the management agreement and sub-advisory agreement
The Board received and considered information regarding the nature, extent and quality of services provided to the Fund by the Manager and the Subadviser under the Management Agreement and the Sub-Advisory Agreement, respectively, during the past year. The Board noted information received at regular meetings throughout the year related to the services rendered by the Manager in its management of the Funds affairs and the Managers role in coordinating the activities of the Funds other service providers. The Boards evaluation of the services provided by the Manager and the Subadviser took into account the Boards knowledge gained as Trustees of funds in the Legg Mason fund complex, including knowledge gained regarding the scope and quality of the investment management and other capabilities of the Manager and the Subadviser, and the quality of the Managers administrative and other services. The Board observed that the scope of services provided by the Manager and the Subadviser, and of the undertakings required of the Manager and Subadviser in connection with those services, including maintaining and monitoring their own and the Funds compliance programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board also noted that on a regular basis it received and reviewed information from the Manager and the Subadviser regarding the Funds compliance policies and proce-
34 | Liquid Reserves Portfolio |
dures established pursuant to Rule 38a-1 under the 1940 Act. The Board also considered the risks associated with the Fund borne by the Manager and its affiliates (such as entrepreneurial, operational, reputational, litigation and regulatory risk), as well as the Managers and the Subadvisers risk management processes.
The Board reviewed the qualifications, backgrounds and responsibilities of the Managers and the Subadvisers senior personnel and the team of investment professionals primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered, based on its knowledge of the Manager and its affiliates, the financial resources of Legg Mason, Inc., the parent organization of the Manager and the Subadviser. The Board recognized the importance of having a fund manager with significant resources.
The Board considered the division of responsibilities between the Manager and the Subadviser and the oversight provided by the Manager. The Board also considered the policies and practices of the Manager and the Subadviser regarding the selection of brokers and dealers and the execution of portfolio transactions. In addition, management also periodically reported to the Board on, among other things, its business plans and any organizational changes.
In considering the performance of the Fund, the Board received and considered performance information for each Feeder Fund as well as for a group of funds (the Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board noted that the Feeder Funds performance was the same as the performance of the Fund (except for the effect of fees at the Feeder Fund level), and therefore was relevant to the Boards consideration of the Funds performance. The Board was provided with a description of the methodology Broadridge used to determine the similarity of the Feeder Funds with the funds included in the Performance Universe. It was noted that while the Board found the Broadridge data generally useful they recognized its limitations, including in particular that the data may vary depending on the end date selected and that the results of the performance comparisons may vary depending on the selection of a peer group. The Board also noted that it had received and discussed with management information throughout the year at periodic intervals comparing each Feeder Funds performance against its benchmark and against each Feeder Funds peers. In addition, the Board considered each Feeder Funds performance in light of overall financial market conditions.
| The information comparing Western Asset Liquid Reserves performance to that of its Performance Universe, consisting of all funds classified as retail money market instrument funds by Broadridge, showed, among other data, that the Feeder Funds performance for the 1-year period ended June 30, 2016 was approximately equivalent to the median and its performance for the 3- and 5-year periods ended June 30, 2016 was at the median. Additional comparative performance data provided to the Board indicated that the Feeder Funds performance for the 10-year period ended June 30, 2016 was below the median. The Board noted the explanations from the Manager and the Subadviser concerning the Feeder Funds relative performance versus the peer group for the various periods. |
Liquid Reserves Portfolio | 35 |
Board approval of management and
subadvisory agreements (unaudited) (contd)
| The information comparing Western Asset Institutional Liquid Reserves performance to that of its Performance Universe, consisting of all institutional funds classified as money market funds by Broadridge, showed, among other data, that the Feeder Funds performance for the 1-, 3-, 5- and 10-year periods ended June 30, 2016 was above the median. |
| The information comparing Western Asset Premium Liquid Reserves performance to that of its Performance Universe, consisting of all retail funds classified as money market instrument funds by Broadridge, showed, among other data, that the Feeder Funds performance for the 1- and 10-year periods ended June 30, 2016 was above the median, and its performance for the 3- and 5-year periods ended June 30, 2016 was approximately equivalent to the median. |
The Board concluded that, overall, the nature, extent and quality of services provided (and expected to be provided), including performance, under the Management Agreement and the Sub-Advisory Agreement were sufficient for renewal.
Management fees and expense ratios
The Board reviewed and considered the contractual management fee and the actual management fees paid by the Fund to the Manager in light of the nature, extent and quality of the management and sub-advisory services provided by the Manager and the Subadviser. The Board also considered that fee waiver and/or expense reimbursement arrangements are currently in place for the Feeder Funds. The Board also noted that the compensation paid to the Subadviser is the responsibility and expense of the Manager, not the Fund.
In addition, the Board received and considered information provided by Broadridge comparing each Feeder Funds contractual management fee (each, a Contractual Management Fee), the actual management fees paid by each Feeder Fund to the Manager (each, an Actual Management Fee) and each Feeder Funds total actual expenses with those of funds in both the relevant expense group and a broader group of funds, each selected by Broadridge. The Board noted that the Feeder Funds expense information reflected both management fees and total expenses payable by the Feeder Funds as well as management fees and total expenses payable by the Fund, and therefore was relevant to the Boards conclusions regarding the Funds expenses. The Board also reviewed information regarding fees charged by the Manager to other U.S. clients investing primarily in an asset class similar to that of the Fund, including, where applicable, separate accounts.
The Manager reviewed with the Board the differences in services provided to these different types of accounts, noting that the Fund is provided with certain administrative services, office facilities, and Fund officers (including the Funds chief executive, chief financial and chief compliance officers), and that the Manager coordinates and oversees the provision of services to the Fund by other Fund service providers. The Board considered the fee comparisons in light of the differences in management of these different types of accounts.
The Board considered the overall management fee, the fees of the Subadviser and the amount of the management fee retained by the Manager after payment of the subadvisory
36 | Liquid Reserves Portfolio |
fee in each case in light of the services rendered for those amounts. The Board also received an analysis of complex-wide management fees provided by the Manager, which, among other things, set out a framework of fees based on asset classes.
| The information comparing Western Asset Liquid Reserves Contractual and Actual Management Fees as well as its actual total expense ratio to its expense group, consisting of a group of retail no-load funds (including the Feeder Fund) classified as money market instrument funds and chosen by Broadridge to be comparable to the Feeder Fund, showed that the Feeder Funds Contractual Management Fee was above the median and the Actual Management Fee was at the median. The Board noted that the Feeder Funds actual total expense ratio was approximately equivalent to the median. The Board also considered that the current limitation on the Feeder Funds expenses is expected to continue through December 2018. |
| The information comparing Western Asset Institutional Liquid Reserves Contractual and Actual Management Fees as well as its actual total expense ratio to its expense group, consisting of a group of funds (including the Feeder Fund) classified as institutional money market funds and chosen by Broadridge to be comparable to the Feeder Fund, showed that the Feeder Funds Contractual Management Fee and Actual Management Fee were each approximately equivalent to the median. The Board noted that the Feeder Funds actual total expense ratio was approximately equivalent to the median. The Board also considered that the current limitation on the Feeder Funds expenses is expected to continue through December 2018. |
| The information comparing Western Asset Premium Liquid Reserves Contractual and Actual Management Fees as well as its actual total expense ratio to its expense group, consisting of a group of retail no-load funds (including the Feeder Fund) classified as money market instrument funds and chosen by Broadridge to be comparable to the Feeder Fund, showed that the Feeder Funds Contractual Management Fee was below the median and the Actual Management Fee was above the median. The Board noted that the Feeder Funds actual total expense ratio was approximately equivalent to the median. The Board also considered that the current limitation on the Feeder Funds expenses is expected to continue through December 2018. |
Taking all of the above into consideration, as well as the factors identified below, the Board determined that the management fee and the subadvisory fee for the Fund were reasonable in light of the nature, extent and quality of the services provided to the Fund under the Management Agreement and the Sub-Advisory Agreement.
Manager profitability
The Board received and considered an analysis of the profitability of the Manager and its affiliates in providing services to the Fund. The Board also received profitability information with respect to the Legg Mason fund complex as a whole. In addition, the Board received information with respect to the Managers allocation methodologies used in preparing this profitability data. It was noted that the allocation methodologies had been reviewed by an
Liquid Reserves Portfolio | 37 |
Board approval of management and
subadvisory agreements (unaudited) (contd)
outside consultant. The profitability of the Manager and its affiliates was considered by the Board not excessive in light of the nature, extent and quality of the services provided to the Fund and the type of fund it represented.
Economies of scale
The Board received and discussed information concerning whether the Manager realizes economies of scale as the Funds assets grow.
| The Board noted that the Manager had previously agreed to institute breakpoints in Western Asset Liquid Reserves Contractual Management Fee, reflecting the potential for reducing the Contractual Management Fee as the Feeder Fund grows. The Board considered whether the breakpoint fee structure was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Feeder Funds asset levels. The Board noted that the Feeder Fund had not reached the specified asset level at which a breakpoint to its Contractual Management Fee would be triggered. In addition, the Board noted the size of the Feeder Fund. |
| The Board noted that the Manager had previously agreed to institute breakpoints in Western Asset Institutional Liquid Reserves Contractual Management Fee, reflecting the potential for reducing the Contractual Management Fee as the Feeder Fund grows. The Board considered whether the breakpoint fee structure was a reasonable means of sharing any economies of scale or other efficiencies that might accrue from increases in the Feeder Funds asset levels. The Board noted that, while the Funds assets were not at the specific asset level at which a breakpoint to its Contractual Management Fee would be triggered, the Funds assets had reached such level during the past year. In addition, the Board considered that the Feeder Funds Contractual Management Fee was approximately equivalent to the asset-weighted average of management fees paid by the other funds in the same Broadridge investment classification/objective at the range of asset levels relevant to the Feeder Fund. |
| The Board noted that Western Asset Premium Liquid Reserves Contractual Management Fee was below the median of the expense group. In addition, the Board noted the size of the Feeder Fund. |
The Board determined that the management fee structure for the Fund, including breakpoints at the Feeder Fund level, where applicable, was reasonable.
Other benefits to the manager and the subadviser
The Board considered other benefits received by the Manager, the Subadviser and their affiliates as a result of their relationship with the Fund, including the opportunity to offer additional products and services to the Feeder Funds shareholders.
In light of the costs of providing investment management and other services to the Fund and the ongoing commitment of the Manager and the Subadviser to the Fund, the Board considered that the ancillary benefits that the Manager and its affiliates received were reasonable.
38 | Liquid Reserves Portfolio |
Item 2. | Code of Ethics. |
Not applicable.
Item 3. | Audit Committee Financial Expert. |
Not applicable.
Item 4. | Principal Accountant Fees and Services. |
Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Schedule of Investments. |
Included herein under Item 1.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-end Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
Not applicable.
Item 11. | Controls and Procedures. |
(a) The registrants principal executive officer and principal financial officer have concluded that the registrants disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the 1940 Act)) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are likely to materially affect the registrants internal control over financial reporting.
Item 12. | Exhibits. |
(a)(1) | Not applicable. |
Exhibit 99.CODE ETH |
(a)(2) | Certifications pursuant to section 302 of the Sarbanes-Oxley Act of 2002 attached hereto. |
Exhibit 99.CERT |
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 attached hereto. |
Exhibit 99.906CERT |
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, there unto duly authorized.
Master Portfolio Trust | ||
By: | /s/ Jane Trust | |
Jane Trust | ||
Chief Executive Officer |
Date: April 21, 2017
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/ Jane Trust | |
Jane Trust | ||
Chief Executive Officer |
Date: April 21, 2017
By: | /s/ Richard F. Sennett | |
Richard F. Sennett | ||
Principal Financial Officer |
Date: April 21, 2017
CERTIFICATIONS PURSUANT TO SECTION 302
EX-99.CERT
CERTIFICATIONS
I, Jane Trust, certify that:
1. | I have reviewed this report on Form N-CSR of Master Portfolio Trust Liquid Reserves Portfolio; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 21, 2017 | /s/ Jane Trust | |||
Jane Trust Chief Executive Officer |
CERTIFICATIONS
I, Richard F. Sennett , certify that:
1. | I have reviewed this report on Form N-CSR of Master Portfolio Trust Liquid Reserves Portfolio; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial information included in this report, and the financial statements on which the financial information is based, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officers and I have disclosed to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: April 21, 2017 | /s/ Richard F. Sennett | |||
Richard F. Sennett Principal Financial Officer |
CERTIFICATIONS PURSUANT TO SECTION 906
EX-99.906CERT
CERTIFICATION
Jane Trust, Chief Executive Officer, and Richard F. Sennett, Principal Financial Officer of Master Portfolio Trust Liquid Reserves Portfolio (the Registrant), each certify to the best of their knowledge that:
1. | The Registrants periodic report on Form N-CSR for the period ended February 28, 2017 (the Form N-CSR) fully complies with the requirements of section 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Chief Executive Officer Master Portfolio Trust Liquid Reserves Portfolio |
Principal Financial Officer Master Portfolio Trust Liquid Reserves Portfolio | |||
/s/ Jane Trust | /s/ Richard F. Sennett | |||
Jane Trust | Richard F. Sennett | |||
Date: April 21, 2017 | Date: April 21, 2017 |
This certification is being furnished to the Securities and Exchange Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR with the Commission.