<PAGE> 1
Investment Manager
Legg Mason Fund Adviser, Inc.
Baltimore, MD
Investment Adviser
Brandywine Asset Management, Inc.
Wilmington, DE
Board of Directors
John F. Curley, Jr., Chairman
Edward A. Taber, III, President
Nelson A. Diaz
Richard G. Gilmore
Arnold L. Lehman
Dr. Jill E. McGovern
G. Peter O'Brien
T. A. Rodgers
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
Custodian
State Street Bank & Trust Company
Boston, MA
Counsel
Kirkpatrick & Lockhart LLP
Washington, D.C.
Independent Accountants
PricewaterhouseCoopers LLP
Baltimore, MD
This report is not to be distributed unless preceded or accompanied by a
prospectus.
LEGG MASON WOOD WALKER, INCORPORATED
-------------------------------------------------------
100 Light Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 - 539 - 0000
LMF-233
12/00
ANNUAL REPORT
OCTOBER 31, 2000
LEGG MASON
LIGHT STREET
TRUST, INC.
CLASSIC VALUATION FUND
PRIMARY CLASS
[LEGG MASON LOGO]
<PAGE> 2
To Our Shareholders,
We are pleased to provide you with Legg Mason Light Street Trust's annual
report covering the period ended October 31, 2000, for the Classic Valuation
Fund.
As this letter is written, the Fund's assets are approaching $13.5 million.
Brandywine Asset Management is responsible for the day-to-day management of the
Fund. The Fund seeks long-term growth of capital by investing in undervalued or
out-of-favor companies that Brandywine believes are likely to return to better
valuations.
On the following pages, the portfolio managers for the Fund review the
portfolio's structure and investment philosophy, and comment on the outlook for
the Fund. As always, historical perfor-mance is not indicative of future
results, and the principal value of our holdings will continue to fluctuate so
that shares, when redeemed, may be worth more or less than their original cost.
PricewaterhouseCoopers LLP, the Fund's independent accountants, has completed
its annual examination, and audited financial statements for the period from
inception to October 31, 2000, are included in this report.
Many of our shareholders regularly add to their Fund holdings by authorizing
automatic, monthly transfers from their bank checking or Legg Mason accounts.
Your Financial Advisor will be happy to help you make these arrangements if you
would like to purchase additional shares in this convenient manner.
Sincerely,
/S/ EDWARD A. TABER, III
Edward A. Taber, III
President
November 27, 2000
<PAGE> 3
Portfolio Managers' Comments
Legg Mason Light Street Trust, Inc.
Classic Valuation Fund
Although the launch of the Legg Mason Classic Valuation Fund in November
1999 came late in a game that was extraordinarily pleasant for most growth
(especially technology) stocks, we had to endure the final moments. For the
first five months of the Fund's existence, we witnessed the NASDAQ orgy's final
phase of a 70% move up on top of the 300% gain of the preceding three years.
Since we found few technology names that would qualify as value stocks in the
early days of the Fund, there was little participation in that perilous but
briefly rewarding period. Actually, we sold some of our technology holdings into
the craze this past spring.
The postmortems on the extreme excesses of the above-mentioned market
phenomenon with articles about dot.com-option millionaires now searching for
employment have surfaced. Just the disappearance of "new economy" from the
popular lexicon is a telling punctuation. We can all point to anecdotal signs of
a top but may conveniently forget that there were frequent "signs" that were
slightly premature. "Irrational exuberance" was offered two years before it
would prove wise caution.
The significant outperformance of the Fund of roughly 1,000 basis points(1)
from its inception (November 8, 1999) to October 31, 2000, can be explained by
the strong results of the last six months, with the final three months
representing the preponderance. The Fund experienced a +13.29% gain for the
three months ending October 31, while the S&P 500 was essentially flat (+0.20%).
In the six-month period, there was an appreciation in the Fund of +16.02% and a
decline in the S&P 500 of -1.01%.
Before examining the specific areas that helped the Fund generate strong
results, we should acknowledge that the sea change in the spring that was
discussed earlier produced the catalyst for appreciation for many of our
holdings. As investors suffered swift and vicious declines in stocks and groups
of stocks that had risen so sharply, some gravitated to parts of the market that
had opposite characteristics. Many of the names in the Fund were not only not up
much in price, but actually down, and all possessed modest rather than sky-high
fundamental valuations. Investors discovered or re-discovered that classic
measures of value had some significance. Money flowed into our segment of the
market and long-ignored stocks rallied.
The Fund had particular success in identifying value in three specific
industries/sectors: defense/aerospace, insurance and energy. Large commitments
to these three and an underweighting in technology provided most of the excess
performance. The spotlight that pointed to these areas was the depressed
valuations -- both relative to the market and to their own histories.
Three of the five largest contributors to performance in the final three-
and six-month periods were defense/aerospace companies: Raytheon, Boeing and
Northrop Grumman all appreciated because of improving fundamentals and an
awakening by investors that the valuation measures were historically low. Most
stocks in this industry had a horrible 1999 and the low prices reached extremes
---------------
(1) 100 basis points = 1%.
2
<PAGE> 4
partly because of the sharp downward reversal of Wall Street opinions after the
companies stumbled. It was also observed that Presidential election years have
normally been good times for these stocks as the nation assessed its priorities.
The weak 1999 performance of insurance stocks set up classic buying
opportunities in the Fund's first year. Generally soft pricing had hurt profits
and the flip side in 2000 provided a healthy backdrop. The incredibly low
valuations of stocks in this industry in early 2000 have been replaced with more
normal levels after substantial upward moves. Everest Reinsurance Group was one
of the Fund's biggest contributors to performance, but it had good company in
MetLife, XL Capital and RenaissanceRe.
The collapse in oil and natural gas prices in 1997 and 1998 took their toll
on the earnings and investor sentiments of companies in the energy sector. The
valuation levels reached their nadir in late 1999 and represented an opportunity
to start building positions in the Fund. Tidewater, one of the top holdings for
the Fund, saw its prospects dramatically improve as higher commodity prices
sparked heightened activity in its service area: offshore drilling. A heavy
concentration in energy was rewarding with Anadarko Petroleum being a standout.
The beginning of the new fiscal year continued the positive trend of the
second half of fiscal year 2000. The validity of the value approach seems to be
most clear after an era of disfavor.
Brandywine Asset Management, Inc.
November 29, 2000
DJIA 10629.1
3
<PAGE> 5
Performance Information
Legg Mason Light Street Trust, Inc.
Performance Comparison of a $10,000 Investment as of October 31, 2000
The returns shown are based on historical results and are not intended to
indicate future performance. The investment return and principal value of an
investment in the Fund will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Average annual
returns tend to smooth out variations in a Fund's return, so that they differ
from actual year-to-year results. No adjustment has been made for any income
taxes payable by shareholders.
The Classic Valuation Fund has two classes of shares: Primary Class and
Navigator Class. The Navigator Class of the Fund has not commenced operations.
Classic Valuation Fund -- Primary Class
Cumulative
Total Return
--------------
Life of Class++ +15.90%
++Inception Date - November 8, 1999
[CLASSIC VALUATION LINE GRAPH]
<TABLE>
<CAPTION>
CLASSIC VALUATION FUND S & P 500 STOCK COMPOSITE INDEX*
---------------------- --------------------------------
<S> <C> <C>
11/8/99 10000.00 0.00
11/30/99 9720.00 10000.00
12/31/99 10090.00 10587.00
1/31/00 9640.00 10055.00
2/29/00 9370.00 9864.00
3/31/00 10140.00 10829.00
4/30/00 9990.00 10504.00
5/31/00 10440.00 10288.00
6/30/00 10090.00 10542.00
7/31/00 10230.00 10377.00
8/31/00 11090.00 11022.00
9/30/00 11210.00 10440.00
10/31/00 11590.00 10396.00
</TABLE>
*An unmanaged index of widely held common stocks. Index returns are for
periods beginning November 30, 1999.
4
<PAGE> 6
Statement of Net Assets
Legg Mason Light Street Trust, Inc.
October 31, 2000
(Amounts in Thousands)
Classic Valuation Fund
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock and Equity Interests -- 96.4%
Basic Materials -- 12.1%
Aluminum -- 1.3%
Alcoa Inc. 5 $ 129
-------
Chemicals -- 2.4%
E.I. du Pont de Nemours and Company 3 113
Lyondell Chemical Company 8 113
-------
226
-------
Chemicals (Diversified) -- 3.6%
Air Products and Chemicals, Inc. 3 95
Engelhard Corporation 3 61
The Dow Chemical Company 6 190
-------
346
-------
Containers and Packaging (Paper) -- 0.7%
Sappi Limited - ADR 9 63
-------
Gold and Precious Metals Mining -- 0.8%
Stillwater Mining Company 3 75(A)
-------
Metals and Minerals -- 0.7%
Phelps Dodge Corporation 1 65
-------
Paper and Forest Products -- 2.6%
Georgia-Pacific Group 3 68
International Paper Company 4 141
Smurfit-Stone Container Corporation 3 40(A)
-------
249
-------
Capital Goods -- 7.1%
Aerospace/Defense -- 3.1%
Northrop Grumman Corporation 2 145
The Boeing Company 2 158
-------
303
-------
Containers (Metal and Glass) -- 0.3%
Crown Cork & Seal Company, Inc. 3 26
-------
</TABLE>
5
<PAGE> 7
Statement of Net Assets -- Continued
Legg Mason Light Street Trust, Inc.
Classic Valuation Fund -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Capital Goods -- Continued
Electrical Equipment -- 2.6%
Cooper Industries, Inc. 3 $ 115
Koninklijke (Royal) Philips Electronics N.V. 3 131
-------
246
-------
Machinery (Diversified) -- 1.1%
Deere & Company 3 103
-------
Communications Services -- 7.3%
Computer Services and Systems -- 0.6%
Symantec Corporation 2 58(A)
-------
Telecommunications (Long Distance) -- 4.0%
BCE Inc. 8 216
WorldCom, Inc. 7 162(A)
-------
378
-------
Telephone -- 2.7%
Verizon Communications 5 261
-------
Consumer Cyclicals -- 8.3%
Auto Parts and Equipment -- 0.5%
Genuine Parts Company 2 49
-------
Household Furnishings and Appliances -- 1.6%
Whirlpool Corporation 4 157
-------
Lodging/Hotels -- 2.0%
Carnival Corporation 8 193
-------
Retail (Department Stores) -- 1.9%
Federated Department Stores, Inc. 6 180(A)
-------
Retail (Specialty - Apparel) -- 0.6%
Abercrombie & Fitch Co. 2 54(A)
-------
Services (Commercial and Consumer) -- 1.7%
Reuters Group PLC - ADR 1 152
Service Corporation International 6 14(A)
-------
166
-------
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Staples -- 1.3%
Food -- 1.3%
Sara Lee Corporation 6 $ 120
-------
Energy -- 13.4%
Oil (Domestic Integrated) -- 2.4%
Conoco Inc. - Class B 2 65
USX-Marathon Group 6 168
-------
233
-------
Oil (International Integrated) -- 3.4%
BP Amoco Plc - ADR 1 62
Chevron Corporation 2 123
Texaco Inc. 2 136
-------
321
-------
Oil and Gas (Drilling and Equipment) -- 3.4%
Tidewater Inc. 5 224
Transocean Sedco Forex Inc. 2 102
-------
326
-------
Oil and Gas (Exploration and Production) -- 2.5%
Anadarko Petroleum Corporation 2 123
Burlington Resources Inc. 1 48
Unocal Corporation 2 73
-------
244
-------
Oil and Gas (Refining and Marketing) -- 1.7%
Sunoco, Inc. 3 85
Tosco Corporation 3 75
-------
160
-------
Financials -- 23.0%
Banks (Major Regional) -- 4.2%
FleetBoston Financial Corporation 7 277
U.S. Bancorp 5 128
-------
405
-------
Banks (Money Center) -- 4.0%
Bank of America Corporation 5 227
J.P. Morgan & Co. Incorporated 1 155
-------
382
-------
Consumer Finance -- 2.0%
Countrywide Credit Industries, Inc. 5 195
-------
</TABLE>
7
<PAGE> 9
Statement of Net Assets -- Continued
Legg Mason Light Street Trust, Inc.
Classic Valuation Fund -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Financials -- Continued
Financial (Diversified) -- 4.1%
Ambac Financial Group, Inc. 1 $ 88
USA Education Inc. 3 194
XL Capital Ltd. 1 115
-------
397
-------
Insurance (Life/Health) -- 4.2%
MetLife, Inc. 7 179
Nationwide Financial Services, Inc. 5 220
-------
399
-------
Insurance (Property/Casualty) -- 2.0%
Everest Reinsurance Group Limited 2 105
RenaissanceRe Holdings Ltd. 1 83
-------
188
-------
Savings and Loan Companies -- 2.5%
Washington Mutual, Inc. 5 239
-------
Health Care -- 3.3%
Health Care (Drugs/Major Pharmaceuticals) -- 1.4%
Novartis AG - ADR 3 133
-------
Health Care (Managed Care) -- 1.1%
Humana Inc. 9 107(A)
-------
Health Care (Specialized Services) -- 0.8%
Quintiles Transnational Corporation 5 72(A)
-------
Technology -- 12.3%
Communications Equipment -- 0.9%
ECI Telecom Limited 4 90
-------
Computers (Hardware) -- 0.8%
Electronics for Imaging, Inc. 5 76(A)
-------
Computers (Networking) -- 0.7%
3Com Corporation 4 62(A)
-------
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Technology -- Continued
Computers (Software/Services) -- 4.6%
Computer Associates International, Inc. 5 $ 161
Exelon Corporation 2 104
Synopsys Inc. 3 97(A)
WebMD Corporation 7 84(A)
-------
446
-------
Electronics (Defense) -- 4.4%
Litton Industries, Inc. 2 96(A)
Raytheon Company - Class B 10 327
-------
423
-------
Services (Computer Systems) -- 0.9%
Sabre Holdings Corporation 3 84(A)
-------
Transportation -- 3.0%
Air Freight -- 1.3%
FedEx Corporation 3 127(A)
-------
Railroads -- 1.7%
CSX Corporation 6 163
-------
Utilities -- 5.3%
Electric Companies -- 3.3%
CMS Energy Corporation 4 108
Edison International 5 122
Niagara Mohawk Holdings, Inc. 5 81(A)
-------
311
-------
Natural Gas -- 2.0%
Kinder Morgan, Inc. 3 108
MCN Energy Group Inc. 3 85
-------
193
-------
Total Common Stock and Equity Interests (Identified
Cost -- $8,196) 9,223
--------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 11
Statement of Net Assets -- Continued
Legg Mason Light Street Trust, Inc.
Classic Valuation Fund -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements -- 12.0%
Goldman, Sachs & Company
6.58%, dated 10/31/00, to be purchased at $1,148 on
11/1/00 (Collateral: $1,260 Freddie Mac mortgage-backed
securities, 6.00%, due 1/1/29, value $1,191) $1,148 $ 1,148
-------
Total Repurchase Agreements (Identified Cost -- $1,148) 1,148
--------------------------------------------------------------------------------------------------
Total Investments -- 108.4% (Identified Cost -- $9,344) 10,371
Other Assets Less Liabilities -- (8.4)% (802)
-------
NET ASSETS CONSISTING OF:
Accumulated paid-in capital applicable to
825 shares outstanding $8,562
Undistributed net investment income/(loss) 10
Accumulated net realized gain/(loss) on investments (30)
Unrealized appreciation/(depreciation) of investments 1,027
--------
NET ASSETS -- 100% $ 9,569
=======
NET ASSET VALUE PER SHARE: $11.59
======
--------------------------------------------------------------------------------------------------
</TABLE>
(A)Non-income producing.
See notes to financial statements.
10
<PAGE> 12
Statement of Operations
Legg Mason Light Street Trust, Inc.
For the Period Ended October 31, 2000 (A)
(Amounts in Thousands)
Classic Valuation Fund
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income:
Dividends(B) $ 88
Interest 11
-----
Total income $ 99
------
Expenses:
Investment advisory fee 34
Distribution and service fees 45
Transfer agent and shareholder servicing expense 8
Audit and legal fees 18
Custodian fee 57
Organizational expense 45
Registration expense 41
Reports to shareholders 10
Directors' fees 8
Other expenses 1
-----
267
Less fees waived and expenses reimbursed (178)
-----
Total expenses, net of waivers and reimbursement 89
------
NET INVESTMENT INCOME 10
------
Net Realized and Unrealized Gain/(Loss) on:
Realized gain/(loss) on investments sold (30)
Change in unrealized appreciation/(depreciation) of
investments 1,027
-----
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS 997
--------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $1,007
--------------------------------------------------------------------------------------------
</TABLE>
(A)For the period November 8, 1999 (commencement of operations) to October 31,
2000.
(B)Net of $1 foreign tax expense.
See notes to financial statements.
11
<PAGE> 13
Statement of Changes in Net Assets
Legg Mason Light Street Trust, Inc.
For the Period Ended October 31, 2000 (A)
(Amounts in Thousands)
Classic Valuation Fund
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
<S> <C>
Change in Net Assets:
Net investment income $ 10
Net realized gain/(loss) on investments sold (30)
Change in unrealized appreciation/(depreciation) of
investments 1,027
----------------------------------------------------------------------------
Change in net assets resulting from operations 1,007
Change in net assets from Fund share transactions 8,512
----------------------------------------------------------------------------
Change in net assets 9,519
Net Assets:
Beginning of period 50
----------------------------------------------------------------------------
End of period $9,569
----------------------------------------------------------------------------
Undistributed net investment income $ 10
----------------------------------------------------------------------------
</TABLE>
(A)For the period November 8, 1999 (commencement of operations) to October 31,
2000.
See notes to financial statements.
12
<PAGE> 14
Financial Highlights
Contained below is per share operating performance data for a Primary Class
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>
Investment Operations Distributions
---------------------------------------- ----------------------------------------
From
Net Asset Net Net Realized Total From Net
Value, Investment and Unrealized From Net Realized
Beginning Income/ Gain/(Loss) on Investment Investment Gain on Total
of Period (Loss) Investments Operations Income Investments Distributions
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Classic Valuation Fund
Period Ended
Oct. 31, 2000(A) $10.00 .$01(B) $1.58 $1.59 $ -- $ -- $ --
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-----------------------------------------------------------------
Net
Net Asset Investment Net Assets,
Value, Expenses Income/(Loss) Portfolio End of
End of Total to Average to Average Turnover Period
Period Return Net Assets Net Assets Rate (in thousands)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Classic Valuation Fund
Period Ended
Oct. 31, 2000(A) $11.59 15.90%(C) 2.00%(B,D) .22%(B,D) 73.02%(D) $9,569
---------------------------------------------------------------------------------------------------------
</TABLE>
(A)For the period November 8, 1999 (commencement of operations) to October 31,
2000.
(B)Net of fees waived pursuant to a contractual expense limitation of 2.00% of
average daily net assets until December 31, 2000. If no fees had been waived
by Legg Mason Fund Adviser, Inc., the annualized ratio of expenses to average
net assets for the period ended October 31, 2000, would have been 5.98%.
(C)Not annualized.
(D)Annualized.
See notes to financial statements.
13
<PAGE> 15
Notes To Financial Statements
Legg Mason Light Street Trust, Inc.
(Amounts in Thousands)
--------------------------------------------------------------------------------
1. Significant Accounting Policies:
The Legg Mason Light Street Trust, Inc. ("Corporation"), consisting of the
Classic Valuation Fund ("Classic Valuation" or "Fund"), is registered under the
Investment Company Act of 1940, as amended, as an open-end, diversified
investment company.
The Fund consists of two classes of shares: Primary Class, offered since
November 8, 1999, and Navigator Class, offered only to certain institutional
investors. The Navigator Class has not commenced operations.
Security Valuation
Securities owned by the Fund for which market quotations are readily
available are valued at current market value. In the absence of readily
available market quotations, securities are valued at fair value under
procedures established by and under the general supervision of the Board of
Directors. Where a security is traded on more than one market, which may include
foreign markets, the securities are generally valued on the market considered by
the Fund's adviser to be the primary market. The Fund will value its foreign
securities in U.S. dollars on the basis of the then-prevailing exchange rates.
Fixed income securities with remaining maturities of 60 days or less are valued
at amortized cost.
Investment Income and Distributions to Shareholders
Interest income and expenses are recorded on the accrual basis. Bond
premiums are amortized for financial reporting and federal income tax purposes.
Bond discounts, other than original issue and zero-coupon bonds, are not
amortized. Dividend income and distributions to shareholders are allocated at
the class level and are recorded on the ex-dividend date. Dividends from net
investment income, if available, will be paid annually. Net capital gain
distributions, which are calculated at the Fund level, are declared and paid
after the end of the tax year in which the gain is realized. Distributions are
determined in accordance with federal income tax regulations, which may differ
from those determined in accordance with accounting principles generally
accepted in the United States; accordingly, reclassifications are made within
the Fund's capital accounts to reflect income and gains available for
distribution under federal income tax regulations.
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. At October 31, 2000,
receivables for securities sold and payables for securities purchased for the
Fund were as follows:
<TABLE>
<CAPTION>
Receivable for Payable for
Securities Sold Securities Purchased
--------------------------------------
<S> <C>
$ -- $1,154
</TABLE>
14
<PAGE> 16
--------------------------------------------------------------------------------
Deferred Offering and Organizational Costs
Deferred offering costs of $25 are being expensed over the twelve-month
period beginning November 8, 1999 (commencement of operations). Organization
costs of the Fund have been expensed as incurred.
Federal Income Taxes
No provision for federal income or excise taxes is required since the Fund
intends to qualify as a regulated investment company and distribute
substantially all of its taxable income to its shareholders.
Use of Estimates
Preparation of the financial statements in accordance with accounting
principles generally accepted in the United States 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.
2. Investment Transactions:
For the period ended October 31, 2000, investment transactions (excluding
short-term investments) were as follows:
<TABLE>
<CAPTION>
Proceeds From
Purchases Sales
-------------------------
<S> <C>
$11,442 $3,216
</TABLE>
At October 31, 2000, cost, aggregate gross unrealized appreciation and
gross unrealized depreciation based on the cost of securities for federal income
tax purposes for the Fund were as follows:
<TABLE>
<CAPTION>
Net Appreciation/
Cost Appreciation Depreciation (Depreciation)
----------------------------------------------------------
<S> <C> <C> <C>
$9,344 $1,270 $(243) $1,027
</TABLE>
At October 31, 2000, the Fund had a capital loss carryforward for federal
income tax purposes of $27, which will expire in 2008.
3. Repurchase Agreements:
All repurchase agreements are fully collateralized by obligations issued by
the U.S. Government or its agencies, and such collateral is in the possession of
the Fund's custodian. The value of such collateral includes accrued interest.
Risks arise from the possible delay in recovery or potential loss of rights in
the collateral should the issuer of the repurchase agreement fail financially.
The Fund's investment adviser reviews the value of the collateral and the
creditworthiness of those banks and dealers with which the Fund enters into
repurchase agreements to evaluate potential risks.
4. Transactions With Affiliates:
The Fund has a management agreement with Legg Mason Fund Adviser, Inc.
("LMFA"). Pursuant to the agreement, LMFA provides the Fund with investment
management and administrative services for which the Fund pays a fee, computed
daily and payable monthly, at an annual rate of the Fund's daily net assets.
Under the terms of the investment management agreement, LMFA is required to bear
any expenses, including organization costs, through the expiration date set
forth below, which would cause the Fund's ratio of expenses to average net
assets to exceed a certain set percentage as described below ("percentage").
Thereafter, the Fund is required to reimburse LMFA for such expenses, provided
that average net assets have grown or expenses have declined sufficiently to
allow reimbursement without causing the Fund's ratio of expenses to average net
assets to exceed the percentage.
15
<PAGE> 17
Notes to Financial Statements -- Continued
--------------------------------------------------------------------------------
LMFA has agreed to waive its fees in any month (exclusive of taxes,
interest, brokerage and extraordinary expenses) as shown in the following chart:
<TABLE>
<CAPTION>
Period Ended October 31, 2000(A) At October 31, 2000
-------------------------------- -------------------
Management Expense Expense Limitation Management Expenses Management
Fee Limitation Expiration Date Fees Waived(B) Reimbursed(B) Fees Payable
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0.75% 2.00% December 31, 2000 $34 $99 $ --
</TABLE>
Any amounts waived or reimbursed in a particular fiscal year will be
subject to repayment by the Fund to LMFA to the extent that, from time to time
during the next three fiscal years, the repayment will not cause the Fund's
expenses to exceed the limit, if any, imposed by LMFA at that time.
Brandywine Asset Management, Inc. ("Brandywine") serves as investment
advisor to the Fund and is responsible for the actual investment activity of the
Fund. LMFA pays Brandywine a fee, computed and payable monthly, at an annual
rate of 60% of the fee it receives from the Fund. Fees paid to Brandywine are
net of any waivers.
Legg Mason Wood Walker, Incorporated ("Legg Mason"), a member of the New
York Stock Exchange, serves as distributor for the Fund. Legg Mason receives an
annual distribution fee and an annual service fee based on the Fund's Primary
Class's average daily net assets, computed daily and payable monthly as follows:
<TABLE>
<CAPTION>
Period Ended
October 31, 2000(A) At October 31, 2000
------------------------ ------------------------
Distribution Service Distribution and Service Distribution and Service
Fee Fee Fees Waived(B) Fees Payable
----------------------------------------------------------------------------
<S> <C> <C> <C>
0.75% 0.25% $45 $ --
</TABLE>
No brokerage commissions were paid by the Fund to Legg Mason or its
affiliates during the period ended October 31, 2000.
Legg Mason also has an agreement with the Fund's transfer agent to assist
it with some of its duties. For this assistance, the transfer agent paid Legg
Mason $1 for the period ended October 31, 2000.
LMFA, Legg Mason and Brandywine are corporate affiliates and wholly owned
subsidiaries of Legg Mason, Inc.
5. Line of Credit:
The Fund, along with certain other Legg Mason Funds, participates in a $200
million line of credit ("Credit Agreement") to be utilized as an emergency
source of cash in the event of unanticipated, large redemption requests by
shareholders. Pursuant to the Credit Agreement, each participating Fund is
liable only for principal and interest payments related to borrowings made by
that Fund. Borrowings under the Credit Agreement bear interest at prevailing
short-term interest rates. For the period ended October 31, 2000, the Fund had
no borrowings under the Credit Agreement.
6. Fund Share Transactions:
At October 31, 2000, there were 200,000 shares authorized at $.001 par
value for the Fund. Share transactions were as follows:
<TABLE>
<CAPTION>
Reinvestment
Sold of Distributions Repurchased Net Change
--------------- ----------------- ---------------- ---------------
Shares Amount Shares Amount Shares Amount Shares Amount
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period Ended October 31,
2000(A) 939 $9,716 -- $ -- (119) $(1,204) 820 $8,512
</TABLE>
---------------
(A)For the period November 8, 1999 (commencement of operations) to October 31,
2000.
(B)Subject to recapture.
16
<PAGE> 18
Report of Independent Accountants
To the Board of Directors of Light Street Trust, Inc. and Shareholders of
Classic Valuation Fund:
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Classic Valuation Fund (comprising the Light Street Trust, Inc., hereafter
referred to as the "Fund") at October 31, 2000, and the results of its
operations, the changes in its net assets and the financial highlights for the
fiscal period presented, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit, which included confirmation of securities at October 31,
2000 by correspondence with the custodian and brokers, provides a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Baltimore, Maryland
December 6, 2000
17
<PAGE> 19
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<PAGE> 20
Legg Mason offers a wide range of mutual funds to meet investors' varying
financial needs and investment goals. The funds are listed below:
<TABLE>
EQUITY FUNDS: SPECIALTY FUNDS:
<S> <C>
Value Trust Balanced Trust
Special Investment Trust Financial Services Fund
Total Return Trust Opportunity Trust
American Leading Companies Trust
Classic Valuation Fund
Focus Trust
U.S. Small-Capitalization Value Trust
</TABLE>
<TABLE>
<CAPTION>
GLOBAL FUNDS: TAXABLE BOND FUNDS:
<S> <C>
Global Income Trust U.S. Government Intermediate-Term Portfolio
Europe Fund Investment Grade Income Portfolio
International Equity Trust High Yield Portfolio
Emerging Markets Trust
</TABLE>
<TABLE>
<CAPTION>
TAX-FREE BOND FUNDS: MONEY MARKET FUNDS:
<S> <C>
Tax-Free Intermediate-Term Income Trust U.S. Government Money Market Portfolio
Maryland Tax-Free Income Trust Cash Reserve Trust
Pennsylvania Tax-Free Income Trust Tax Exempt Trust
</TABLE>
For information on the specific risks, charges, and expenses associated with any
Legg Mason fund, please consult a Legg Mason Financial Advisor for a prospectus.
Read it carefully before investing or sending money.
[LEGG MASON LOGO]
