<PAGE>
Investment Adviser
LMM, LLC
Baltimore, MD Quarterly Report
September 30, 2000
Board of Directors
John F. Curley, Jr., Chairman
Jennifer W. Murphy, President
Nelson A. Diaz Legg Mason
Richard G. Gilmore Investment
Arnold L. Lehman Trust, Inc.
Dr. Jill E. McGovern
G. Peter O'Brien
T. A. Rodgers Opportunity Trust
Edward A. Taber, III
Transfer and Shareholder Servicing Agent
Boston Financial Data Services
Boston, MA
Primary Class
Custodian
State Street Bank & Trust Company
Boston, MA
[LEGG
Counsel MASON
Kirkpatrick & Lockhart LLP FUNDS
Washington, DC LOGO]
Independent Auditors
Ernst & Young LLP
Philadelphia, PA
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-088
11/00
<PAGE>
To Our Shareholders,
We are pleased to provide you with Legg Mason Investment Trust's quarterly
report for your Fund, the Legg Mason Opportunity Trust. Your Fund was launched
on December 30, 1999, and at this writing has about $1 billion in net assets. As
of September 30, 2000, the net asset value of the Primary Class of shares was
$10.98.
The following table summarizes key statistics for the Primary Class of shares
of your Fund, as well as several market indices for periods ending September 30,
2000:
<TABLE>
<CAPTION>
Total Return
---------------------------------------------------
Since
3 Months 6 Months 9 Months Inception*
-------- -------- -------- ----------
<S> <C> <C> <C> <C>
Opportunity Trust +5.78% +2.91% +9.80% +9.80%
Dow Jones Industrial Average +2.36% -1.72% -6.31% -5.95%
S&P 500 Composite Stock Index -0.97% -3.60% -1.39% -1.07%
Value Line Index +2.94% -2.06% -2.60% -1.60%
</TABLE>
On the following pages, you will find Opportunity Trust portfolio manager Bill
Miller's market commentary for the third calendar quarter. You can also find his
recent market commentaries as well as articles and other useful information on
our website at www.leggmasonfunds.com. As always, we appreciate your support and
welcome your comments.
Sincerely,
/s/ Jennifer W. Murphy
----------------------
Jennifer W. Murphy
President
November 14, 2000
-----------------
*The Fund's inception date is December 30, 1999.
<PAGE>
Portfolio Manager's Comments
Legg Mason Investment Trust, Inc.
Opportunity Trust
Market Commentary
"It's not about calling market bottoms. It's about identifying levels of
---
attractive valuations."
Ed Kerschner
Chief Investment Strategist, Paine Webber
October 13, 2000
Economists have been able to develop greater understanding about how people
make financial decisions by importing insights from psychology, replacing some
of the assumptions of classical economics by descriptions of how people actually
behave. Maybe next the economists can round up some cognitive scientists and
have them investigate the subject of investors' memory, which seems to differ
significantly from the everyday variety.
Our memory provides continuity and context to our daily activities, enabling
us to recognize familiar situations, see their similarities and differences,
integrate experience into a broader context, draw lessons from the past, and so
on. Investment memory, though, seems considerably more short-term, selective,
and sub-optimal. Normal memory, though far from perfect, allows us to function
reasonably effectively; investment memory often fails just when it is most
needed. We don't remember that similar situations have occurred in the recent
past; we don't put current events in perspective. The result is sub-optimal
investment decisions.
When T.S. Eliot said April was the cruelest month, he wasn't thinking about
tech stocks, but during April those stocks collapsed, finally bottoming in early
May. Spring has often been a good time to sell technology, just as fall has
often been a good time to buy. Securities prices seem to have a habit of
dropping in September and October, and the fall has seen many important market
bottoms. The market crash in October 1929 provided a nice trade into the spring
of 1930. More recently, the bear market of 1973-74 ended in the fall, the
October 1987 crash was a low, the bear market of 1990 bottomed in the fall, and
the panic of 1998 saw an October bottom.
We have just finished six straight weeks of decline, beginning on the 1st of
September and carrying the market down over 12%. This is the second correction
of 10% or more this year; the only other years this decade with two 10% drops
were 1990 and 1998. In both years we had external and internal sources of market
angst. In 1990 it was war in the Middle East, high oil prices, recession, and
the impact of Fed tightening. In 1998 it was emerging markets, Russia's default,
Long Term Capital Management's collapse, and Fed tightening. Now it is tensions
in the Middle East, rising oil prices, earnings warnings, and Fed tightening.
There are the rudiments of pattern here. In each case, either the decline in the
market itself, or the causes of the decline, finally made the front page of The
New York Times and other newspapers. By the time market declines (or advances)
are front-page news, they usually have run their course.
2
<PAGE>
In the summer of 1983 we had a technology-driven new issue boom that drove the
NASDAQ to a peak. Over the ensuing 12 months that index fell about 40% before
resuming its advance. In 1987, the S&P 500 peaked in August. It fell 40% in 40
days, bottoming with the crash's 20%, one-day decline. This year the NASDAQ
peaked in the spring at 5,000. By the end of last week, its decline reached 40%
peak to trough.
There are of course differences between this decline and the others. Previous
shifts from decline to advance have often been catalyzed by a change in Fed
policy toward risk. No such change is evident today.
October is also when Institutional Investor magazine releases the results of
its annual survey of Wall Street analysts, highlighting those voted best in
their respective categories. For the first time, Ed Kershner of Paine Webber was
named best strategist, outpolling Abby Joseph Cohen, the justly celebrated
Goldman Sachs strategist who has been correctly bullish on the market for the
past 10 years. I have long admired Ed's work, which is always quantitatively
sound, analytically rigorous, and conceptually interesting. During the tech
frenzy this March, he correctly called the top, just as he correctly called the
bottom in 1998. This past week, he said the stock market was the most attractive
it had been since October 1998. This, like his other market judgments, was not a
psychological assessment, nor was it based on his reading of the charts; it was
a valuation call. Declining stock prices, positive fundamentals, and a benign
macroeconomic environment have combined to produce the best opportunity for
excess returns since 1998.
Of course the market may continue lower, fundamentals may deteriorate, oil may
rise further, tensions may escalate, the macro-environment may darken. There are
always reasons why the market is down, and those reasons dominate investors'
consciousness; but current fears are reflected in current prices. Justice Holmes
once said people need to be reminded more than they need to be instructed. Once
reminded, we remember October has often been a time to be bullish.
Bill Miller, CFA
October 16, 2000
DJIA 10238.8
3
<PAGE>
Performance Information
Legg Mason Investment Trust, Inc.
Total Returns for Three Months, Six Months and Life of Class, as of September
30, 2000
The returns shown are based on historical results and are not intended to
indicate future performance. Total return measures investment performance in
terms of appreciation or depreciation in the Fund's net asset value per
share, plus dividends and any capital gain distributions. It assumes that
dividends and distributions were reinvested at the time they were paid. The
investment return and principal value of an investment in this 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 Fund has two classes of shares: Primary Class and Navigator Class.
Information about the Navigator Class, offered only to certain institutional
and other investors, is contained in a separate report to its shareholders.
Total Return
Primary Class:
Three Months +5.78%
Six Months +2.91%
Life of Class* +9.80%
*Inception date: December 30, 1999.
------------------------------------------
Selected Portfolio Performance
Strong performers for the 3rd quarter 2000(dagger)
--------------------------------------------------
1. Abercrombie & Fitch Co. +56.4%
2. Washington Mutual, Inc. +37.9%
3. UnumProvident Corporation +35.8%
4. Mandalay Resort Group +28.1%
5. U.S. Bancorp +18.2%
(dagger)Securities held for the entire quarter.
Weak performers for the 3rd quarter 2000(dagger)
------------------------------------------------
1. The FINOVA Group Inc. -44.2%
2. Ames Department Stores, Inc. -25.4%
3. Unisys Corporation -22.7%
4. Tupperware Corporation -18.2%
5. Republic Services, Inc. -18.0%
Portfolio Changes
Securities added during the 3rd quarter 2000
--------------------------------------------
Brunswick Corporation
Finova Capital Corp, 7.25%, due 11/8/04
Intermedia Communications Inc.
NOVA Corporation
Omnicare, Inc.
Pentair, Inc.
Tel-Save.com, Inc., 4.50%, due 9/15/02
Securities sold during the 3rd quarter 2000
--------------------------------------------
AmSouth Bancorporation
Young & Rubicam Inc.
4
<PAGE>
Portfolio of Investments
Legg Mason Investment Trust, Inc.
September 30, 2000 (Unaudited)
(Amounts in Thousands)
Opportunity Trust
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock and Equity Interests -- 86.1%
Capital Goods -- 8.6%
Manufacturing (Diversified) -- 3.5%
Pentair, Inc. 1,300 $ 34,775
--------
Waste Management -- 5.1%
Republic Services, Inc. 3,800 49,875/A/
--------
Communications Services -- 3.0%
Telephone -- 3.0%
Intermedia Communications Inc. 1,000 29,500/A/
--------
Consumer Cyclicals -- 27.3%
Gaming, Lottery and Parimutuel Companies -- 5.2%
Mandalay Resort Group 2,000 51,250/A/
--------
Leisure Time (Products) -- 0.9%
Brunswick Corporation 504 9,203
--------
Retail (Discounters) -- 1.7%
Ames Department Stores, Inc. 2,800 16,188/A,B/
--------
Retail (Specialty - Apparel) -- 6.2%
Abercrombie & Fitch Co. 3,200 61,000/A/
--------
Retail (Specialty) -- 2.7%
Toys "R" Us, Inc. 1,600 26,000/A/
--------
Services (Advertising/Marketing) -- 5.1%
Acxiom Corporation 1,297 41,164/A/
Acxiom Corporation (private placement) 304 9,169/A,C/
--------
50,333
--------
Services (Commercial and Consumer) -- 2.7%
Viad Corp 1,000 26,563
--------
Textiles (Home Furnishings) -- 2.8%
WestPoint Stevens Inc. 2,200 26,950
--------
Consumer Staples -- 9.7%
Beverages (Non-Alcoholic) -- 3.7%
Cott Corporation 6,000 36,000/A,B/
--------
</TABLE>
5
<PAGE>
Portfolio of Investments -- Continued
Opportunity Trust -- Continued
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumer Staples -- (continued)
Housewares -- 2.9%
Tupperware Corporation 1,550 $ 27,900
--------
Restaurants -- 3.1%
Tricon Global Restaurants, Inc. 1,000 30,625/A/
--------
Financials -- 18.1%
Banks (International) -- 1.7%
Lloyds TSB Group plc 1,750 16,331
--------
Banks (Major Regional) -- 4.2%
U.S. Bancorp 1,800 40,950
--------
Financial (Diversified) -- 2.6%
The FINOVA Group Inc. 3,550 25,738/B/
--------
Insurance (Life/Health) -- 5.5%
UnumProvident Corporation 2,000 54,500
--------
Savings and Loan Companies -- 4.1%
Washington Mutual, Inc. 1,000 39,812
--------
Health Care -- 2.2%
Health Care (Specialized Services) -- 2.2%
Omnicare, Inc. 1,320 21,285
--------
Technology -- 17.2%
Computers (Hardware) -- 5.5%
Gateway, Inc. 1,150 53,762/A,D/
--------
Computers (Software/Services) -- 7.7%
America Online, Inc. 725 38,969/A/
Unisys Corporation 3,250 36,562/A/
--------
75,531
--------
Services (Data Processing) -- 4.0%
NOVA Corporation 2,300 39,388/A/
--------
Total Common Stock and Equity Interests (Identified Cost -- $810,686) 843,459
----------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Shares/Par Value
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock and Equity Interests Sold Short -- (3.6)%
Nasdaq 100 Trust (400) $(35,475)
--------
Total Common Stock and Equity Interests
Sold Short (Identified Cost -- $(37,799)) (35,475)
----------------------------------------------------------------------------------------------------------
Corporate and Other Bonds -- 6.9%
Amazon.com, Inc., 4.75%, due 2/1/09 $60,000 39,975
Finova Capital Corp, 7.25%, due 11/8/04 20,000 15,000
Tel-Save.com, Inc., 4.50%, due 9/15/02 27,008 12,153
--------
Total Corporate and Other Bonds (Identified Cost -- $65,242) 67,128
----------------------------------------------------------------------------------------------------------
Repurchase Agreements -- 7.1%
Goldman, Sachs & Company
6.60%, dated 9/29/00, to be repurchased at $34,859 on 10/2/00
(Collateral: $38,415 Fannie Mae mortgage-backed securities,
6%, due 1/1/29, value $36,085) 34,840 34,840
Morgan Stanley Dean Witter
6.58%, dated 9/29/00, to be repurchased at $34,859 on 10/2/00
(Collateral: $34,273 Ginnie Mae mortgage-backed securities,
9%, due 11/15/18, value $35,777) 34,840 34,840
--------
Total Repurchase Agreements (Identified Cost -- $69,680) 69,680
----------------------------------------------------------------------------------------------------------
Total Investments -- 96.5% (Identified Cost -- $907,809) 944,792
Other Assets Less Liabilities -- 3.5% 34,723
--------
Net assets -- 100.0% $979,515
========
Net asset value per share
Primary Class $10.98
======
Navigator Class $11.00
======
----------------------------------------------------------------------------------------------------------
</TABLE>
/A/Non-income producing.
/B/Affiliated Company -- As defined in the Investment Company Act of 1940, an
"Affiliated Company" represents Fund ownership of at least 5% of the
outstanding voting securities of an issuer. At September 30, 2000, the
total market value of Affiliated Companies was $77,926 and the identified
cost was $123,850.
/C/Private placement and illiquid securities valued at fair value under
procedures adopted by the Board of Directors. These securities represent
0.9% of net assets.
/D/Pledged as collateral for securities sold short are 625 shares with a
market value of $29,219 as of September 30, 2000.
7
