<PAGE>
INVESTMENT ADVISER
Legg Mason Fund Adviser, Inc.
Baltimore, MD
BOARD OF DIRECTORS
Raymond A. Mason, Chairman
John F. Curley, Jr.
Richard G. Gilmore
Charles F. Haugh
Arnold L. Lehman
Dr. Jill E. McGovern
T. A. Rodgers
Edward A. Taber, III
TRANSFER AND SHAREHOLDER SERVICING AGENT
Boston Financial Data Services
Boston, MA
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
COUNSEL
Kirkpatrick & Lockhart
Washington, DC
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Baltimore, MD
THIS REPORT IS NOT TO BE DISTRIBUTED UNLESS PRECEDED OR ACCOMPANIED BY A
PROSPECTUS.
LEGG MASON WOOD WALKER, INCORPORATED
111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (Bullet) 539 (Bullet) 0000
(recycle logo appears here) PRINTED ON RECYCLED PAPER
LMF-002
REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED
MARCH 31, 1995
THE
LEGG MASON
VALUE
TRUST, INC.
PRIMARY CLASS
PUTTING YOUR FUTURE FIRST
--Legg Mason logo appears here--<PAGE>
<PAGE>
TO OUR SHAREHOLDERS,
The Value Trust's net asset value per share rose 6.1%, from $19.04 to
$20.21, during the quarter ended March 31, 1995. That gain compares to
total returns (appreciation plus reinvested dividends) of 9.7% and 5.9% on
Standard & Poor's 500 stock composite index and the Value Line index of
1700 stocks. In the twelve months ended March 31, the Value Trust's total
return was 9.8% compared to returns of 15.5% and 5.1% on the Standard &
Poor and Value Line indices.
The Trust's long-term investment results are shown in the table and
graph on the next page. We are pleased that, during its thirteen year
history, the Trust has earned an average annual compounded return for
shareholders of 16%.
Beginning on page 4, Bill Miller, the Trust's portfolio manager,
discusses the investment outlook.
Coopers & Lybrand L.L.P., the Value Trust's independent accountants,
have completed their annual examination, and audited financial statements
for the fiscal year ended March 31, 1995 are included in this report.
On June 1, 1995, federal regulations will change to require that
investors complete payment for purchases of mutual fund shares (as well as
other securities) within three business days, down from the current five
business days. Meeting the new payment deadline will be difficult (and in
many cases impossible) if an amount sufficient to cover purchases is not
already in your account when you decide to purchase additional shares.
Therefore, we encourage shareholders who have not already done so to
consider opening a Legg Mason money market fund account or a "Credit
Interest Account" which pays interest on credit balances in your Legg Mason
brokerage account. Funds can then be moved easily from either account to
pay for future mutual fund purchases you may wish to make. Your Investment
Executive will be happy to make the necessary arrangements.
The Board of Directors has approved an ordinary income dividend of
$0.05, a short-term capital gain distribution of $0.21, and a long-term
capital gain distribution of $0.55 per share, payable on May 12 to
shareholders of record on May 9. Most shareholders will receive this
distribution in the form of additional shares credited to their accounts.
Sincerely,
(signature of John F. Curley, Jr. appears here)
John F. Curley, Jr.
President
May 8, 1995
<PAGE>
<PAGE>
PERFORMANCE INFORMATION
LEGG MASON VALUE TRUST, INC.
TOTAL RETURN FOR ONE, FIVE, TEN YEARS AND LIFE OF FUND, AS OF MARCH 31, 1995
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 the fund's return, so they
differ from actual year-to-year results. For comparison purposes, the
fund's total return is compared with total returns of the Value Line
Geometric Average, an index of approximately 1,700 stocks ("Value Line
Index"), and Standard & Poor's 500 Stock Composite Index ("S&P Stock
Index"), two unmanaged indexes of widely held common stocks. No adjustment
has been made for any income taxes payable by shareholders.
The fund has two classes of shares: Primary Class and Navigator Class.
The Navigator Class, offered only to certain institutional investors, pays
fund expenses similar to those paid by the Primary Class, except that
transfer agency fees and shareholder servicing expenses are determined
separately for each class and the Navigator Class does not incur Rule
12b-1 distribution fees.
Total returns as of March 31, 1995 were as follows:
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Cumulative Total Return
Legg Mason
Value Value Line S&P
Trust Index Stock Index
<S> <C> <C> <C>
Primary Class:
One Year +9.77% +5.12% +15.54%
Five Years +54.50 +38.57 +71.50
Ten Years +177.23 +102.99 +284.58
Life of Class(|) +584.27 +244.66 +586.40
Navigator Class:
Life of
Class(||) +8.11% +6.37% +11.37%
</TABLE>
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Average Annual Total Return
Legg Mason
Value Value Line S&P
Trust Index Stock Index
<S> <C> <C> <C>
Primary Class:
One Year +9.77% +5.12% +15.54%
Five Years +9.09 +6.74 +11.39
Ten Years +10.73 +7.34 +14.42
Life of
Class(|) +16.00 +10.02 +16.03
</TABLE>
(|) Primary Class inception -- April 16, 1982.
(||) Navigator Class inception -- December 1, 1994.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
MADE ON APRIL 16, 1982 (INCEPTION OF THE VALUE TRUST
PRIMARY CLASS)
(graph appears here--plot points listed below)
<TABLE>
<CAPTION>
4/16/82 3/31/83 3/31/84 3/31/85 3/31/86 3/31/87 3/31/88 3/31/89 3/31/90 3/31/91 3/31/92 3/31/93 3/31/94 3/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value of 10,000 16,160 18,870 23,583 32,556 35,503 32,268 37,650 39,891 37,701 44,210 50,184 52,789 57,817
original
shares
purchased
plus
shares
acquired
through
reinvestment
of capital
gain
distributions
Value 10,000 16,400 19,425 24,682 34,510 37,924 34,729 41,109 44,290 43,014 51,414 59,003 62,337 68,427
of shares
acquired
through
reinvestment
of income
dividends
</TABLE>
2
<PAGE>
<PAGE>
LEGG MASON VALUE TRUST, INC.
SELECTED PORTFOLIO PERFORMANCE
<TABLE>
<C> <S> <C>
Biggest gainers for the 1st quarter 1995*
1. MBNA Corporation +24.1%
2. Burlington Northern Inc. +23.4%
3. BankAmerica Corporation +22.2%
4. The Bear Stearns Companies Inc. +20.3%
5. Federal Home Loan Mortgage Corporation +19.8%
6. Columbia/HCA Healthcare Corporation +17.8%
7. Philips Electronics N.V. +16.2%
8. Lloyds Bank P.L.C. +15.9%
9. Bank of Boston Corporation +15.0%
10. Amgen Inc. +14.2%
Biggest laggers for the 1st quarter 1995*
1. Grupo Financiero Serfin S.A. de C.V. ADR -36.7%
2. Storage Technology Corporation -34.1%
3. Telefonos de Mexico S.A. ADR -30.5%
4. Chrysler Corporation -14.5%
5. Reebok International Ltd. -9.8%
6. Salomon Inc. -9.7%
7. Apple Computer, Inc. -9.6%
Danaher Corporation -9.6%
9. Lotus Development Corporation -6.7%
10. Orion Capital Corporation -1.4%
</TABLE>
* SECURITIES HELD FOR THE ENTIRE QUARTER.
PORTFOLIO CHANGES
Securities Added
Argentina Floating Rate Bonds
6.50% 3-31-05
Argentina Par Bonds
5.00% 3-31-23
Sears, Roebuck and Co.
Securities Sold
Caesars World, Inc.
Performance Comparison of a $10,000 Investment as of March 31, 1995
(graph appears here--plot points listed below)
<TABLE>
<CAPTION>
Years ended March 31,
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value Trust Primary Class 10,000 13,975 15,358 14,064 16,654 17,942 17,419 20,820 23,894 25,245 27,711
Standard & Poor's 500 Stock
Composite Index(1) 10,000 13,751 17,357 15,921 18,796 22,419 25,600 28,393 32,693 33,157 38,310
Value Line Geometric
Average(2) 10,000 12,916 14,760 12,926 14,309 14,648 14,693 16,471 18,467 19,310 20,299
</TABLE>
(1) An unmanaged index of widely held common stocks.
(2) an unmanaged index of approximately 1,700 common stocks.
3
<PAGE>
PORTFOLIO MANAGER'S COMMENTS
Your fund's results for the first calendar quarter and the twelve months
ending March 31, 1995 are listed below with comparable data for the leading
market indices:
Periods Ended March 31, 1995
<TABLE>
<CAPTION>
Lipper
Lipper General
Value Growth Equity S&P Dow
Trust Funds Funds 500 Jones
<S> <C> <C> <C> <C> <C>
3 months 6.14 % 7.38% 7.16% 9.73% 9.20%
1 year 9.77 % 8.81% 8.96% 15.54% 17.61%
</TABLE>
We trailed the Lipper Growth Fund and General Equity Fund indices in the
quarter and exceeded them for the past twelve months. Money managers in general
have lagged the averages over the past year, due mainly to the outperformance of
the very large capitalization issues that dominate the averages compared to the
generally smaller names that occupy most fund portfolios, and to the way those
averages are computed, a subject we have written about many times over the
years.
The ebb and flow is natural, but the favoring of large companies over small
was particularly pronounced in the first quarter, and was concentrated in the
growth stocks. The Russell 2000, a common measure of smaller stock performance,
rose less than half as much as the Dow or the S&P during the first three months
of this year.
The move in the averages since the November lows was interest rate driven,
and bond funds have performed as well as equity funds this year, recouping most
of the losses they suffered in 1994.
We felt fortunate to have escaped 1994 in the black, considering our heavy
weighting in financials and our position in Mexico. The latter continued to
punish us in the first quarter, as Mexican securities again fell sharply. The
situation there appears to have stabilized and the currency has risen 15% or so
against the dollar in the past few weeks.
We added to our TELMEX position in the quarter and also bought a large
position in Argentine bonds, which have already appreciated smartly as the panic
over Latin America has begun to subside. We bought a position in SEARS, which is
spinning off its Allstate Insurance subsidiary and has made great strides in
turning around its retail group. SEARS had declined due to the market's current
disenchantment with retailers, and we were able to buy it at a single digit
multiple, a very reasonable price for a company of this quality.
Some observers have categorized this as the surprise bull market of 1995,
since it arrived without any evident catalyst and followed a particularly
difficult fourth quarter of 1994. It would be churlish and perhaps too cynical
to note that the first half of 1987 constituted a strongly bullish period as
well, but that year is not characterized by those six months. It is the events
of October that now best describe the dominant features of 1987's investment
landscape. The felt need to characterize and assess the market, the economy,
stocks, company results or strategies in ever more frequent intervals is an
unfortunate by-product of our information saturated age.
The half-life of market commentary is inversely proportional to its
frequency. The accuracy of one's characterization of a landscape is likely to
grow the more time one has to peruse it and to shrink as the frequency of
requests for its interim description grows. Shorter time horizons, shorter
attention spans, greater demand for information, and less patience seem to be an
inevitable consequence of our increasing ability to collect, transmit, and
access data. Reporting, analyzing, and commenting on business and markets has
exploded in the past 20 years, both on Wall Street and on Main Street. In
addition to a plethora of new business programs on the networks and PBS, CNBC
provides real time commentary and analysis on markets all day long.
The number of analysts employed by brokerage firms, banks, insurance
companies, and money managers continues to grow. Almost as many people sit for
the CFA exam (the securities analysts' version of the CPA) each year as have
earned that designation over its entire history.
We have not materially added to the number of firms that supply us with
research in years, yet the cascade of reports, faxes, and analytic detritus of
all types now occupies one of our staff almost full time just in opening,
sorting, and distributing it. This is not progress, and we are exploring ways to
deal with this consequence of the perceived need for instant and voluminous
commentary on virtually every news item on the Dow tape.
We write these letters every 90 days, and comment on our results and
expectations. The papers
4
<PAGE>
<PAGE>
print our results every day, and many of them contain ratings and rankings of
mutual funds covering one week and four week periods. We have lost count of the
number of publications that write about, cover, assess, and purport to analyze
mutual funds, classifying them by ever finer gradations of category, style,
asset group, size, and geographic orientation and slicing their results into
about as many time periods as their database can muster.
It is far from clear that this information explosion has led to better
decisions about investing. It is quite clear it has led to more decisions, as
the turnover rate of stocks and bonds held in funds and the capital flows among
funds attests. There is evidence that the pressure to react to new information
may be harmful, quite apart from any transaction costs that might result from
changing one's mind about a stock, a fund, or the market.
Professor Richard Thaler, now at the University of Chicago, has studied what
the academics call the equity premium puzzle: a dollar invested in stocks has
returned, after inflation, about 7% per year on average for more than 68 years,
while a dollar invested in bonds has returned less than 1%. The puzzle is why do
any long-term investors own bonds? Not only do they own bonds, investors
typically have a greater percentage of their assets invested in bonds than in
stocks.
The answer, according to Thaler, is myopic loss aversion. People are
risk-averse. Psychological testing has established that for most of us, the pain
of losing an amount of money is greater than the pleasure of winning that same
amount of money. Being risk-averse, we are more likely to act to avoid the pain
of loss the more aware we are of potential losses. The more short-term-oriented
one is (the more "myopic"), the greater one's willingness to react to the risk
of loss. Because stocks go up and down more than bonds, they confront one with
more frequent, and greater, potential losses. The shorter one's time horizon, or
the more often you look at your portfolio, the more you will see losses, the
more psychological discomfort you will feel, and the riskier you will perceive
stocks. The more risk-averse you are, the more you will orient your investments
to bonds, or cash.
Since one's perception of the risk of stocks is a function of how often you
look at your portfolio, the more aware you are of what's going on, the more
likely you are to do the wrong thing. "Where ignorance is bliss, 'tis folly to
be wise" said the bard, who understood myopic loss aversion centuries before the
professors got hold of it.
Suppose you buy a stock on Monday, and on Tuesday, while you are engrossed
in the O.J. Simpson trial, it drops due to bad news. On Wednesday, though, it
recovers to close higher than your purchase price. If you had been glued to CNBC
on Tuesday when the news hit, and had observed the stock falling, you may have
been prompted to act on the news, especially if the stock was reacting to it. If
you missed the news until Wednesday, when the stock had recovered, you are much
less likely to sell it then, even though the fundamentals are the same as the
day before. That is myopic loss aversion at work. Put differently, you are not
worried that IBM dropped overnight in Tokyo while you slept, if it closed up two
points today in New York. You are worried if it drops today in New York, though
it's set to rise two points in Tokyo tonight while you sleep.
This does not do justice to Thaler's work on the subject (done with Shlomo
Benartzi), but you probably get the drift. Professor Thaler is so convinced that
the avalanche of information bombarding investors about how their stocks or
funds are doing is harmful, that he has proposed that universities not give
faculty and employees reports on how their retirement funds are performing. For
most investors, Thaler thinks, the appropriate advice is "don't just do
something, sit there."
It should not be a surprise that his advice has been ignored. The situation
is similar to that of the now forgotten Earnshaw Cook, who applied probability
theory to baseball strategy in his book PERCENTAGE BASEBALL. After exhaustively
studying the statistical history of various baseball strategies -- the sacrifice
bunt, when to bring in relief pitchers, etc. -- he concluded that teams were not
maximizing their chances of winning, they were following conventional wisdom
that was not well suited to their professed objectives. He advocated numerous
changes to the manager's portfolio, such as having your best hitter hit lead off
instead of the usual third or fourth, since the lead off hitter gets the most at
bats and thus hitting lead off will maximize the offensive statistics of the
best hitter. All
5
<PAGE>
<PAGE>
of his recommendations were statistically sound, well documented, and completely
ignored.
Earnshaw Cook was unaware of myopic loss aversion, but its influence extends
well beyond the equity premium puzzle. Warren Buffett captured its essence when
he remarked that in investing it is usually better to fail conventionally than
to succeed unconventionally. Or as one fund manager put it recently when asked
why he wasn't thinking of investing in Mexico, since undoubtedly there were
bargains to be had with many stocks down 70% in the past 6 months, "nobody ever
got fired for not investing in Mexico."
Our investment approach in the Value Trust has been to use the myopic loss
aversion exhibited by others to our shareholders' long-term benefit. We try to
buy companies whose shares trade at large discounts to our assessment of their
economic value. Bargain prices do not occur when the consensus is cheery, the
news is good, and investors are optimistic. Our research efforts are usually
directed at precisely the area of the market that the news media tells you has
the least promising outlook (right now that includes retailers, autos, Latin
America and anything else on the "New Lows" list) and we are typically selling
those stocks that you are reading have the greatest opportunity for near-term
gain.
This approach does not link up well with results of the major indices, and
we often diverge from them in direction and magnitude. Over the past four
calendar years our results have consistently exceeded those of the S&P 500.
There were periods in the past when we trailed that index, sometimes by a lot.
Our portfolio does not look like the S&P 500 and thus it should not act like the
S&P 500.
It should provide solid returns over the long term, which it has done and we
are confident will continue to do. As always, we appreciate your support and
welcome your comments.
Bill Miller, CFA
May 8, 1995
DJIA 4383.87
MANAGEMENT'S DISCUSSION AND ANALYSIS
The fund performed well in fiscal 1995, outperforming its peer group
although underperforming the S&P 500. The fund benefitted from several of its
technology stocks over this period and from many of its financial holdings, but
was negatively impacted by its Mexican equities. Mexican markets collapsed after
the government unexpectedly devalued the peso in December 1994. The S&P 500 does
not contain Mexican securities and was unaffected by this event.
The fund follows a value-driven approach emphasizing individual securities
analysis. Macroeconomic factors play a secondary role in the analytical process
and in portfolio construction. We believe assessing companies on the basis of
value, not actual or anticipated popularity, will deliver the best results for
shareholders over the longer term.
6
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON VALUE TRUST, INC.
MARCH 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands) Shares Value
<S> <C> <C>
COMMON STOCKS AND EQUITY INTERESTS -- 90.5%
Automotive -- 3.3%
Chrysler Corporation 800 $ 33,500
Banking -- 17.2%
Bank of Boston Corporation 800 23,800
BankAmerica Corporation 400 19,300
Chemical Banking Corporation 525 19,819
Citicorp 800 34,000
Grupo Financiero Serfin S.A. de
C.V. ADR 669 3,178
Lloyds Bank P.L.C. 2,531 25,351
Provident Bankshares Corporation 328 7,790
The Chase Manhattan Corporation 625 22,266
Zions Bancorporation 550 20,762
176,266
Broadcast Media -- 1.7%
Capital Cities/ABC, Inc. 200 17,650
Computer Services and Systems -- 8.9%
Apple Computer, Inc. 625 22,031
Digital Equipment Corporation 300 11,363*
International Business Machines
Corporation 400 32,750
Lotus Development Corporation 450 17,212*
Storage Technology Corporation 404 7,734*
91,090
Electrical Equipment -- 1.9%
Philips Electronics N.V. 575 19,622
Finance -- 16.4%
Federal Home Loan Mortgage
Corporation 500 30,250
Federal National Mortgage
Association 800 65,100
MBNA Corporation 1,258 36,479
Salomon Inc. 415 14,058
The Bear Stearns Companies Inc. 1,201 22,219
168,106
Food, Beverage and Tobacco -- 6.3%
PepsiCo, Inc. 425 16,575
Philip Morris Companies Inc. 450 29,362
RJR Nabisco Holdings Corp. 3,100 18,213
64,150
Food Merchandising -- 3.1%
The Kroger Co. 1,200 31,650*
<CAPTION>
(Amounts in Thousands) Shares Value
<S> <C> <C>
Footwear -- 4.5%
Nike Incorporated 300 $ 22,388
Reebok International Ltd. 650 23,156
45,544
Hospital Management -- 1.7%
Columbia/HCA Healthcare
Corporation 415 17,836
Insurance -- 6.8%
AMBAC Inc. 383 15,559
Humana Inc. 681 17,451*
MBIA, Inc. 255 16,033
Orion Capital Corporation 575 19,981
69,024
Manufacturing -- 3.4%
Danaher Corporation 1,200 34,350
Multi-Industry -- 1.4%
Coltec Industries Inc. 825 14,231*
Pharmaceuticals -- 4.7%
Amgen Inc. 430 28,971*
Warner-Lambert Company 250 19,563
48,534
Retail Sales -- 1.0%
Sears, Roebuck and Co. 200 10,675
Savings and Loan -- 3.0%
Standard Federal Bank 1,150 30,906
Telecommunications -- 3.8%
MCI Communications Corporation 700 14,438
Telefonos de Mexico S. A. ADR 850 24,225
38,663
Transportation -- 1.4%
Burlington Northern Inc. 235 13,953
Total Common Stocks and Equity
Interests
(Identified Cost -- $606,439) 925,750
</TABLE>
PREFERRED EQUITY REDEMPTION CUMULATIVE STOCK -- 0.9%
<TABLE>
<S> <C> <C>
RJR Nabisco Holdings Corp.
Series C Depositary Shares
(Identified Cost -- $9,003) 1,385 8,829
</TABLE>
7
<PAGE>
<PAGE>
STATEMENT OF NET ASSETS -- CONTINUED
LEGG MASON VALUE TRUST, INC.
<TABLE>
<S> <C> <C>
Principal
(Amounts in Thousands) Amount Value
</TABLE>
SOVEREIGN OBLIGATIONS -- 2.3%
<TABLE>
<S> <C> <C>
Argentina Floating Rate Bonds
6.50%(|) 3-31-05 $ 35,000 $ 18,857
Argentina Par Bonds
5.00%(||) 3-31-23 10,000 4,100
Total Sovereign Obligations
(Identified Cost -- $17,275) 22,957
</TABLE>
U.S. GOVERNMENT OBLIGATION -- N.M.
<TABLE>
<S> <C> <C>
United States Treasury Note
8.125% 2-15-98
(Identified Cost -- $228) 230 237
</TABLE>
SHORT-TERM INVESTMENTS -- 6.3%
<TABLE>
<S> <C> <C>
U.S. Government Agency Obligation
-- 0.3%
Federal Farm Credit Banks
5.93% 4-5-95 3,610 3,608
Repurchase Agreement -- 6.0%
Prudential Securities, Inc.
6.30% dated 3-31-95, to be
repurchased at $61,311 on
4-3-95 (Collateral: $45,811
Federal Home Loan Mortgage
Corporation Mortgage-backed
securities, 11% due 8-1-24; and
$12,781 Federal National
Mortgage Association Mortgage-
backed securities, 7.5%
due 3-1-24, total value
$62,579) 61,279 61,279
Total Short-term Investments
(Identified Cost -- $64,887) 64,887
Total Investments -- 100.0%
(Identified Cost -- $697,832) 1,022,660
Other Assets Less Liabilities -- N.M. 184
$1,022,844
</TABLE>
<TABLE>
<S> <C> <C>
(Amounts in Thousands)
Net Assets Consisting of:
Accumulated paid-in-capital
applicable to:
48,811 Primary Class shares
outstanding $607,736
1,802 Navigator Class
shares outstanding 33,779
Undistributed net investment
income 17,911
Undistributed net realized
gain on investments 38,569
Unrealized appreciation of
investments 324,849
NET ASSETS -- 100.0% $1,022,844
NET ASSET VALUE PER SHARE:
PRIMARY SHARES $20.21
NAVIGATOR SHARES $20.27
</TABLE>
* NON-INCOME PRODUCING.
(|) THE RATE OF INTEREST EARNED IS TIED TO THE LONDON INTERBANK OFFERED
RATE (LIBOR) AND THE COUPON RATE SHOWN IS THE RATE AS OF MARCH 31,
1995.
(||) COUPON INCREASES 0.25% ANNUALLY UNTIL MARCH 31, 1999, THEREAFTER
REMAINS FIXED AT 6.0% UNTIL MATURITY.
N.M. NOT MEANINGFUL
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON VALUE TRUST, INC.
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $135) $20,123
Interest 2,651
Total investment income $ 22,774
EXPENSES:
Investment advisory fee 7,519
Distribution and service fees 8,918
Transfer agent and shareholder servicing expense 738
Custodian fee 171
Reports to shareholders 144
Legal and audit fees 87
Registration fees 40
Directors' fees 18
Other expenses 60
17,695
Less expenses reimbursed (83)
Total expenses, net of reimbursement 17,612
NET INVESTMENT INCOME 5,162
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain (loss) on investments:
Affiliated companies (2,083)
Other securities 40,770
Increase in unrealized appreciation of investments 47,164
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 85,851
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 91,013
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON VALUE TRUST, INC.
<TABLE>
<CAPTION>
For the Years Ended March
(Amounts in Thousands) 1995 31, 1994
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 5,162 $ 4,827
Net realized gain on investments 38,687 26,047
Increase in unrealized appreciation of investments 47,164 16,402
Increase in net assets resulting from operations 91,013 47,276
Net equalization debits (313) (423)
Distributions to shareholders from:
Net investment income:
Primary Class (2,527) (5,619)
Navigator Class (18) --
Net realized gain on investments:
Primary Class (1,999) (9,382)
Change in net assets from Fund share transactions:
Primary Class (9,509) 2,172
Navigator Class 33,779 --
Increase in net assets 110,426 34,024
NET ASSETS:
Beginning of year 912,418 878,394
End of year (including undistributed net investment income of $17,911
and $15,554, respectively) $1,022,844 $912,418
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS (|)
LEGG MASON VALUE TRUST, INC.
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net
assets and other supplemental data. This information has been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
Navigator Primary Class
Class For the Years Ended March 31,
1995* 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $18.76 $18.50 $17.81 $15.69 $13.38 $14.19
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net investment income 0.12 0.10 0.08 0.18 0.25 0.32
Net realized and unrealized gain (loss) on
investments 1.40 1.70 0.92 2.12 2.34 (0.74)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Total from investment operations 1.52 1.80 1.00 2.30 2.59 (0.42)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Distributions to shareholders from:
Net investment income (0.01) (0.05) (0.11) (0.18) (0.28) (0.36)
Net realized gain on investments -- (0.04) (0.20) -- -- (0.03)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Net asset value, end of period $20.27 $20.21 $18.50 $17.81 $15.69 $13.38
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Total return 8.11%(2) 9.77% 5.65% 14.76% 19.53% (2.88)%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses 0.82%(1) 1.81% 1.82% 1.86% 1.90% 1.90%
Net investment income 1.8%(1) 0.5% 0.5% 1.1% 1.7% 2.5%
Portfolio turnover rate 20.1% 20.1% 25.5% 21.8% 39.4% 38.8%
Net assets, end of period (in thousands) $36,519 $986,325 $912,418 $878,394 $745,833 $690,053
<CAPTION>
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period
<S> <C>
Net investment income
Net realized and unrealized gain (loss) on
investments
<S> <C>
Total from investment operations
<S> <C>
Distributions to shareholders from:
Net investment income
Net realized gain on investments
<S> <C>
Net asset value, end of period
<S> <C>
Total return
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Expenses
Net investment income
Portfolio turnover rate
Net assets, end of period (in thousands)
</TABLE>
(|) ALL SHARE AND PER SHARE FIGURES REFLECT THE 2-FOR-1 STOCK SPLIT
EFFECTIVE JULY 29, 1991.
* FOR THE PERIOD DECEMBER 1, 1994 (COMMENCEMENT OF NAVIGATOR CLASS) TO
MARCH 31, 1995.
(1) ANNUALIZED.
(2) NOT ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON VALUE TRUST, INC.
(Amounts in Thousands)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Value Trust, Inc. ("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 1982, and Navigator Class, offered to certain institutional
investors since December 1, 1994. Expenses of the Fund are allocated
proportionately to the two classes of shares except for 12b-1 distribution
fees, which are charged only on the Primary shares, and transfer agent and
shareholder servicing expenses, which are determined separately for each
class.
Security Valuation
Securities traded on national securities exchanges are valued at the
last quoted sales price. Over-the-counter securities, and listed
securities for which no sales price is available, are valued at the mean
between the latest bid and asked prices. Short-term securities are valued
at cost which, when combined with accrued interest receivable,
approximates current value.
Dividends and Distributions to Shareholders
Net investment income for dividend purposes consists of dividends and
interest earned, less expenses. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income and
expenses are recorded on the accrual basis. Net capital gain distributions
are declared and paid after the end of the tax year in which the gains are
realized.
Security Transactions
Security transactions are recorded on the trade date. Realized gains
and losses from security transactions are reported on an identified cost
basis.
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.
Federal Income Taxes
No provision for federal income or excise taxes is
required since the Fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income to its share-
holders.
Equalization
The Fund follows the accounting practice of equalization by which a
portion of proceeds from sales and cost of redemptions of Fund shares is
credited or charged to undistributed net investment income, so that income
per share available for distribution is not affected by sales or
redemptions of shares.
2. INVESTMENT TRANSACTIONS:
Investment transactions for the year ended March 31, 1995 (excluding
short-term securities) were as follows:
<TABLE>
<S> <C>
Purchases $ 185,510
Proceeds from sales 197,313
</TABLE>
At March 31, 1995, the cost of securities for federal income tax
purposes was $697,832. Aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was
$361,008 and aggregate gross unrealized depreciation for all securities in
which there was an excess of tax cost over value was $36,180.
12
<PAGE>
<PAGE>
(Amounts in Thousands)
3. FUND SHARE TRANSACTIONS:
At March 31, 1995, there were 100,000 shares authorized at $.001 par
value for all classes of the Fund. On December 1, 1994, when the Navigator
Class became effective, 1,828 shares held in Legg Mason Profit Sharing
Plan accounts, with a value of $34,288, were transferred from Primary
Class to Navigator Class. Transactions in Fund shares were as follows:
<TABLE>
<S> <C> <C> <C> <C>
For the Years Ended March 31,
1995 1994
Primary Class Shares Amount Shares Amount
Sold 15,630 $293,717 9,324 $169,495
Reinvestment of
distributions 240 4,423 811 14,703
Repurchased (16,377) (307,649) (10,134) (182,026)
Net change (507) $ (9,509) 1 $ 2,172
</TABLE>
<TABLE>
<S> <C> <C>
December 1, 1994(|)
to
March 31, 1995
Navigator Class Shares Amount
Sold 1,896 $35,606
Reinvestment of distributions 1 18
Repurchased (95) (1,845)
Net increase 1,802 $33,779
</TABLE>
(|) COMMENCEMENT OF NAVIGATOR CLASS.
4. TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management agreement with Legg
Mason Fund Adviser, Inc. ("Adviser"), a corporate affiliate of Legg Mason
Wood Walker, Incorporated ("Legg Mason"), a member of the New York Stock
Exchange and the distributor for the Fund. Under this agreement, the
Advisor provides the Fund with investment advisory, management and
administrative services for which the Fund pays a fee at an annual rate of
1% of average daily net assets of the Fund for the first $100 million of
average daily net assets, 0.75% of assets between $100 million and $1
billion and 0.65% of assets in excess of $1 billion, calculated daily and
payable monthly. At March 31, 1995, $599 was due to the Adviser. The
agreement with the Adviser provides that an expense reimbursement be made
to the Fund for audit fees and compensation of the Fund's independent
directors.
Legg Mason, as distributor of the Fund, receives an annual
distribution fee of 0.70% and an annual service fee of 0.25% of the
Primary Class' average daily net assets, calculated daily and payable
monthly. At March 31, 1995, $784 was due to the distributor. Legg Mason
also has an agreement with the Fund's transfer agent to assist with
certain of its duties. For this assistance, Legg Mason was paid $222 by
the transfer agent for the year ended March 31, 1995. No brokerage
commissions were paid to Legg Mason or its affiliates during the year
ended March 31, 1995.
13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF LEGG MASON VALUE TRUST, INC.:
We have audited the accompanying statement of net assets of the Legg
Mason Value Trust, Inc., as of March 31, 1995, and the related statement
of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and financial
highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at March 31, 1995, by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of the Legg Mason Value Trust, Inc. as of March 31, 1995, and the
results of its operations, changes in its net assets, and financial
highlights for each of the respective periods stated in the first
paragraph, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
April 28, 1995
14
